UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Amendment No. 1
FORM 10-Q

x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

OR

o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________to _______________.

Commission File Number 000-53590 
 
EVOLUCIA INC.
(Exact name of small business issuer as specified in its charter)
 
Nevada 
 
98-0550703
(State or other jurisdiction of incorporation or
organization) 
 
(I.R.S. Employer Identification No.)
 
4920 Lena Road, Unit #106
Bradenton, Florida 34211
 (Address of principal executive offices)
941-755-0444
(Issuer’s telephone number)
(Former name, former address and former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes   x   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x   No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o   
Accelerated filer o
Smaller reporting
company x
Non-accelerated filer  o (Do not check
if a smaller reporting company)  
   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   o    No x
 
The number of shares of the Registrant’s Common Stock outstanding as of July 27, 2015 was 1,355,269,085.
 


 
1

 
 
EXPLANATORY NOTE
 
This Amendment No. 1 to our Quarterly Report on Form 10-Q/A (the Form 10-Q/A) amends the Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, as originally filed with the Securities and Exchange Commission (the “SEC”) on November 14, 2014 (the “Original Form 10-Q”). .
 
The purpose of this Form 10-Q/A is to disclose the default of certain Callable Promissory Notes, and events of default as to certain of these Notes, which default was not disclosed in the Original Form 10-Q.  This Form 10-Q/A continues to speak as of the date of the Original Form 10-Q, and we have not updated the disclosure herein to reflect any events that occurred at a later date.
 
 
 

 
 
 FORM 10-Q
 
INDEX
   
   
PART I: FINANCIAL INFORMATION
 3
   
ITEM 1. FINANCIAL STATEMENTS
3
   
     CONSOLIDATED BALANCE SHEETS
3
   
     CONSOLIDATED STATEMENTS OF OPERATIONS
4
   
    CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
5
   
     CONSOLIDATED STATEMENTS OF CASH FLOWS
6
   
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
   
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
19
   
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
29
   
ITEM 4. CONTROLS AND PROCEDURES
29
   
PART II. OTHER INFORMATION
30
   
ITEM 1. LEGAL PROCEEDINGS
30
   
ITEM 1A. RISK FACTORS
31
   
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
31
   
ITEM 3. EVENTS OF DEFAULT UPON SENIOR SECURITIES
32
   
ITEM 4. MINE SAFETY DISCLOSURES
32
   
ITEM 5. OTHER INFORMATION
32
   
ITEM 6. EXHIBITS
33
   
SIGNATURES
38
 
 
2

 
   
Part I Financial Information

Item 1. Financial Statements

The Company’s unaudited financial statements as of September 30, 2014 and for the three and nine months ended September 30, 2014 and for comparable periods in the prior year are included below. The financial statements should be read in conjunction with the notes to financial statements that follow.
 
Evolucia, Inc.
Consolidated Balance Sheets

ASSETS
         
Current assets:
September 30, 2014
   
December 31, 2013
 
 
(Unaudited)
       
   Cash and cash equivalents
  $ 6,974     $ 16,120  
   Accounts receivable, net
    548,195       338,361  
   Inventory
    554,891       732,145  
   Prepaid expenses and other current assets
    10,437       38,198  
       Total current assets
    1,120,497       1,124,824  
                 
Property and equipment, at cost, net of
               
    accumulated depreciation of $66,968 and $126,719
    74,062       137,395  
                 
Other assets:
               
   Deposits and other assets
    75,218       89,013  
                 
    $ 1,269,777     $ 1,351,232  
                 
 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
                 
Current liabilities:
               
   Accounts payable and accruals
  $ 3,538,485     $ 2,843,402  
   Convertible notes payable
    -       50,000  
   Share repurchase liability
    1,000,000       1,000,000  
   Liability for over commitment of common shares
    230,000       840,000  
   Current portion of notes payable
    936,474       664,642  
      Total current liabilities
    5,704,959       5,398,044  
                 
   Derivative liabilities
    136,890       1,305,298  
   Convertible notes payable, long term portion, net of debt discount
    1,963,553       450,000  
   Notes payable, long term portion, net of debt discount
    2,529,409       1,344,431  
   Lines of credit, affiliates, long term portion
    2,659,810       2,757,952  
      12,994,621       11,255,725  
                 
Commitments and contingencies
               
                 
Stockholders' equity (deficit):
               
Common stock, $0.001 par value, 1,500,000,000 shares authorized,
      1,355,269,085 and
       1,266,457,952 shares issued and outstanding
    1,355,269       1,266,458  
 Additional paid-in capital
    93,170,303       90,922,742  
 Accumulated (deficit)
    (106,215,941 )     (102,059,218 )
      (11,690,369 )     (9,870,018 )
Less: Treasury stock, at cost, 313,400 shares
    (34,475 )     (34,475 )
      (11,724,844 )     (9,904,493 )
    $ 1,269,777     $ 1,351,232  
 
See the accompanying notes to the consolidated financial statements.
 
 
3

 
  
Evolucia, Inc.
Consolidated Statements of Operations
For the Three Months and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
   
Three Months
    Nine Months  
   
2014
   
2013
   
2014
   
2013
 
                         
Sales
  $ 61,114     $ 725,278     $ 1,204,093     $ 1,588,875  
                                 
Cost of sales
    (187,043 )     563,542       691,367       1,284,777  
Gross profit
    248,157       161,736       512,726       304,098  
                                 
Selling, general and administrative expenses
    1,439,796       3,055,479       4,610,746       6,531,084  
                                 
Loss from operations
    (1,191,639 )     (2,893,743 )     (4,098,020 )     (6,226,986 )
                                 
Other income (expenses):
                               
 Other expense
    -       18,529       -       -  
 Change in fair value of derivative instruments,
net
    -       303,009       487,761       39,215  
 Interest expense and debt conversion expense,
net
    (406,367 )     (860,588 )     (546,464 )     (2,663,386 )
 Total other income (expenses)
    (406,367 )     (539,050 )     (58,703 )     (2,624,171 )
                                 
Loss before income taxes
    (1,598,006 )     (3,432,793 )     (4,156,723 )     (8,851,157 )
Income taxes
    -       -       -       -  
Net loss
  $ (1,598,006 )   $ (3,432,793 )   $ (4,156,723 )   $ (8,851,157 )
                                 
Per share information basic and diluted:
                               
Loss per share, basic and diluted
  $ (0.00 )   $ (0.00   $ (0.00 )   $ (0.00 )
Weighted average shares outstanding
    1,355,269,085       1,237,422,713       1,342,571,858       1,216,154,683  
 
See the accompanying notes to the consolidated financial statements.
 
 
4

 
  
Evolucia, Inc.
Consolidated Statement of Stockholders' Equity (Deficit)
For the Nine Months Ended September 30, 2014
 (Unaudited)
               
Additional
                   
   
Common Stock
   
Paid-in
   
Accumulated
   
Treasury
       
   
Shares
   
Amount
   
Capital
   
(Deficit)
   
Stock
   
Total
 
                                     
Balance December 31, 2013
   
1,266,457,952
    $
1,266,458
    $
90,922,742
    $
( 102,059,218
)
  $
(34,475
)
  $
(9,904,493
)
Shares issued for debenture
conversion
   
2,020,000
     
2,020
     
8,080
     
-
     
-
     
10,100
 
Shares issued for services
   
96,491,133
     
96,491
     
849,815
     
-
     
-
     
946,306
 
Stock options issued for
services and expenses
   
-
     
-
     
757,996
     
-
     
-
     
757,996
 
Stock options exercised
   
300,000
     
300
     
11,670
     
-
     
-
     
11,970
 
Reduction in liability for
over commitment of
common shares
   
-
     
-
     
610,000
     
-
     
-
     
610,000
 
Shares cancelled
   
(10,000,000)
     
(10,000)
     
10,000
     
-
     
-
     
-
 
Net (loss) for the period
   
-
     
-
     
-
     
(4,156,723
)
   
-
     
(4,156,723
)
Balance September 30, 2014
   
1,355,269,085
   
$
1,355,269
   
$
93,170,303
   
$
(106,215,941
)
 
$
(34,475
)
 
$
(11,724,844
)
                                                 
 
See the accompanying notes to the consolidated financial statements.

 
5

 
  
Evolucia, Inc.
Statements of Cash Flows
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
   
2014
   
2013
 
Cash flows from operating activities:
           
  Net cash (used in) operating activities
 
$
(925,919
)
 
$
(4,856,080
)
                 
Cash flows from investing activities:
               
   Acquisition of property and equipment
 
 
(77,585
)
 
 
(188,864
)
  Net cash (used in) investing activities
 
 
(77,585
)
 
 
(188,864
)
                 
Cash flows from financing activities:
               
                 
  Proceeds (repayments) of loans from affiliates
   
897,500
     
-
 
  Proceeds from lines of credit, net
   
1,858
     
-
 
  Proceeds from notes payable and convertible debentures
   
95,000
     
3,446,814
 
                 
 Net cash provided by financing activities
   
994,358
     
3,446,814
 
                 
Increase (decrease) in cash and cash equivalents
 
 
(9,146
)
 
 
(1,598,130
)
Cash and cash equivalents, beginning
   
16,120
     
1,642,464
 
Cash and cash equivalents, ending
 
$
6,974
   
$
44,334
 
                 
Cash paid for interest   
 
$
12,120
   
$
72,828
 
Cash paid for income taxes   
 
$
-
   
$
-
 
                                                                                                                                
See the accompanying notes to the consolidated financial statements.
 
 
6

 
   
EVOLUCIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(UNAUDITED)

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Evolucia Inc. (“Evolucia”, the “Company”, “we”, “our”, “us”) was formed in 2007 through a reverse merger whereby the Company acquired Sun Energy Solar, Inc., our accounting predecessor, which developed energy-efficient technologies in solar energy and infrared. The Company has exited the solar and infrared businesses. The Company’s solar subsidiary, Sunovia Solar, Inc. has not had operations since June 2010 and is not anticipated to have operations in the foreseeable future.

Evolucia is in the business of designing, manufacturing, marketing and distributing light emitting diode (LED) lighting fixtures.  Evolucia also maintains a portfolio of various LED lighting patents.  Our business focuses primarily on the design and development of our patented Aimed LED Lighting™ technology that demonstrates that less overall light is needed if the light is correctly focused on the target area.

We have identified an immediate opportunity, particularly in the outdoor lighting market, to supply high quality energy-efficient lighting solutions through our patented technology.  We have developed several LED lighting products, primarily for the outdoor lighting industry, that utilize our Aimed Optics™ technology that we sell directly to customers and through a network of manufacturer’s representatives in the U.S. and other countries. In addition, the Company has other lighting products that do not utilize the Aimed Optics™ technology that complement the Company’s portfolio and provide lighting solutions for other areas, such as parking garages. We continue to develop and refine our products to serve the market and are actively pursuing alliances and strategies that will allow us to drive down the production cost of our products.

We also continue developing and reengineering our patents.  We have identified the need to continue to reduce costs to be able to offer a competitive product to our customers.  This requires an ongoing review of our patents and how to improve the technology and costs associated with the product.  We have also recently engaged DLA Piper to assist the Company in maximizing our potential licensing revenues as well as protecting our intellectual property.

U
Basis of Consolidation
 
The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All material inter-company accounts, transactions and profits have been eliminated.   In the opinion of management, these consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the results for and as of the periods shown.  

Basis of Presentation
 
The accompanying consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles.  However, certain information or footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations for such periods are not necessarily indicative of the results expected for 2014 or for any future period. These financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission.
 
Reclassifications
 
Certain amounts for the period ended September 30, 2013, have been reclassified in the comparative financial statements to be comparable to the presentation for the period ended September 30, 2014. These reclassifications had no effect on net loss as previously reported.
 
 
7

 
   
Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. The reported amounts of revenues and expenses during the reporting period may be affected by the estimates and assumptions we are required to make. Estimates that are critical to the accompanying consolidated financial statements relate principally to the adequacy of our bad debt allowance, inventory allowances, our deferred income tax assets, derivative financial instruments and stock based compensation.  Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary. It is at least reasonably possible that the Company’s estimates could change in the near term with respect to these matters.

Accounts Receivable

The Company extends credit to its customers based upon a written credit policy.  Accounts receivable are recorded at the invoiced amount and do not bear interest.  The allowance for doubtful accounts is the Company’s best estimate for the amount of probable credit losses in the Company’s existing accounts receivable.  The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information.  Receivable balances are reviewed on an aged basis and account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not require collateral on accounts receivable.

The Company determined an allowance for uncollectible accounts was not required at September 30, 2014 and December 31, 2013.  

Inventory

Inventory consists of various electronic and other components used in the assembly of LED lighting fixtures.  Inventory is stated at the lower of cost or market.  Cost is determined by the first-in, first-out method.

Inventory consists of the following:
 
   
September 30, 2014
   
December 31, 2013
 
Materials and components
  $ 1,714,644     $ 2,107,145  
Inventory reserve
    (1,159,753 )     (1,375,000 )
    $ 554,891     $ 732,145  
 
At December 31, 2013, the Company established a reserve of $1,375,000 for the possible effects of the Company’s restructuring of its operations. Management continues to evaluate current stock levels and utilizes current inventories to generate sales to customers while minimizing new purchases as the Company focuses on product development. Management evaluated the reserve at September 30, 2014 and because of a direct write off of inventory a reduction of $215,247 in the reserve was needed as of September 30, 2014 which was charged to cost of goods.

Accounts Payable and Accruals

Accounts Payable and accruals consist of amounts owed during the normal course of business to vendors, accrued interest to note holders and litigation settlements. Accounts Payable and accruals consist of the following:

   
September 30, 2014
   
December 31, 2013
 
Amounts owed to vendors
 
$
1,938,654
   
$
1,903,193
 
Accrued interest to note holders
   
1,152,458
     
683,346
 
Litigation settlement – lease
   
237,138
     
-
 
Other Accruals
   
210,235
     
256,863
 
Total
 
$
3,538,485
   
$
2,843,402
 
  
 
8

 
Share-Based Payments

ASC 718, Stock Compensation requires that all stock-based compensation be recognized as an expense in the financial statements and that such cost be measured at the grant date fair value of the award.
 
We record the grant date fair value of stock-based compensation awards as an expense over the vesting period of the related stock options.  In order to determine the fair value of the stock options on the date of grant, we use the Black-Scholes option-pricing model.  Inherent in this model are assumptions related to expected stock-price volatility, option life, risk-free interest rate and dividend yield.  Although the risk-free interest rates and dividend yield are less subjective assumptions, typically based on factual data derived from public sources, the expected stock-price volatility, forfeiture rate and option life assumptions require a greater level of judgment which makes them critical accounting estimates.
  
We use an expected stock price volatility assumption that is based on historical volatilities of our common stock and we estimate the forfeiture rate and option life based on historical data related to prior option grants, as we believe such historical data will be similar to future results.

Loss Per Share
   
Basic loss per share is calculated by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding for the period.   Diluted loss per share is calculated by dividing net loss by the weighted average number of shares of common stock outstanding for the period, adjusted for the dilutive effect of common stock equivalents, using the treasury stock method.  Common stock equivalents that are anti-dilutive are excluded. The total number of shares not included in the calculation at September 30, 2014 and 2013, because they were anti-dilutive, was approximately 359,586,669 and 506,074,266, respectively.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The standard describes three levels of inputs that may be used to measure fair value:
 
Level 1:  Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:  Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable.  Valuations may be obtained from, or corroborated by, third-party pricing services.

Level 3:  Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.
 
 
9

 

The Warrants issued in our 2013 private placement and in conjunction with our October 28, 2013 financing are classified within Level 3 of the fair value hierarchy as they are valued using unobservable inputs including significant assumptions of the Company and other market participants.  Significant unobservable inputs used in the fair value measurement of the Warrants included the probability that the Warrant holders will exercise their put option and require the Company to redeem the Warrants for cash and an estimate of the put price if the Warrant holder exercises their put option.  Generally an increase (decrease) in the probability of the put option being exercised or the estimated put price would result in a higher (lower) fair value measurement. Changes in the fair value of derivative warrants are reported as “Change in fair value of derivative instruments, net" in the accompanying consolidated statements of operations.

The reconciliation of our derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of September 30, 2014 is as follows:

Beginning balance, January 1, 2014
  $ 1,305,298  
Cancelled derivative warrants
    (680,648 )
Total (gains) or losses included in earnings
    (487,760 )
Ending balance, September 30, 2014
  $ 136,890  

Fair Value of Financial Instruments

The Company’s financial instruments, including cash and cash equivalents, receivables, accounts payable and accrued liabilities and notes and debentures payable, are carried at cost, which approximates their fair value due to the relatively short maturity of these instruments.

The carrying value of the Company’s long-term debt approximates fair value based on borrowing rates currently available to the Company for loans with similar terms.

NOTE B – LIQUIDITY AND GOING CONCERN
 
Our consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have incurred net losses of $4,156,723 during the nine months ended September 30, 2014, and have working capital and stockholder deficits of $4,584,462 and $11,724,844 at September 30, 2014.

Management intends to continue to finance operations through debt and equity as well as to seek potential acquisitions that have positive cash flows; however, there can be no assurance of successful financing or acquisition activity in the future.

The Company may incur operating losses for the foreseeable future and there can be no guarantee that we will be successful in securing funding. In the event we are unable to fund our operations by positive operating cash flows or additional funding, we will be forced to reduce our expenses and may have to cease operations. During the period ended June 30, 2014, the Company’s Chief Executive Officer, who was also the Chief Financial Officer, resigned. In addition, the company is restructuring its organization for greater efficiencies, and is aggressively pursuing sales opportunities, which continue to present themselves to the company. The company is working with distributors and end users in order to maximize potential sales. As a result of the Company scaling back current operations, substantially all of the Company’s employees were terminated.  The Company will continue to rely on its relationship with its partner, Leader Electronics, Inc., and optimize its industry relationship as it continues to concentrate on its legacy Aimed Optics™ products.  It will also continue to support its development, reengineering, and building its current patent portfolio, which includes the continuing effort to reduce costs in an effort to become a more affordable option in the industry.
 
Our consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
 
 
10

 

NOTE C - STOCKHOLDERS' EQUITY (DEFICIT)

Common Stock

During the period ended March 31, 2014, the Company issued 7,412,057 shares to employees as compensation.  The fair value of the shares based on the trading price of the Company’s common stock was $66,052, which was charged to operations.
 
During the period ended March 31, 2014, the Company issued 8,016,541 shares to former employees to settle unpaid compensation. The fair value of the shares based on the trading price of the Company’s common stock was $69,629, which was charged to operations.

During the period ended March 31, 2014, the Company issued 81,062,535 shares to several consultants for services. The fair value of the shares based on the trading price of the Company’s common stock was $810,625, which was charged to operations.

During the period ended March 31, 2014, the Company issued 2,020,000 shares to a note holder to satisfy the outstanding debt.
 
During the period ended March 31, 2014, 10,000,000 shares were returned to the Company for no consideration and were cancelled.
   
During the period ended June 30, 2014, the Company issued 300,000 shares for $11,970 to a former employee that exercised stock options.
 
As of September 30, 2014, the Company’s outstanding common shares and its commitment to issue common shares, excluding warrants valued as derivative obligations, exceeded the authorized number of common shares by 126,162,048 shares. The fair value of these shares of $230,000 has been reclassified as a liability at September 30, 2014.

NOTE D - COMMITMENTS AND CONTINGENCIES

Manufacturing, development and investment agreement

LEI

On July 12, 2012 (the “Effective Date”), the Company entered into a manufacturing, development and investment agreement with Leader Electronics, Inc. (“LEI”).
 
Pursuant to the agreement, LEI will (i) collaborate in the next generation design of the Company’s Products, (ii) design and implement LEI power supplies into the Products as provided in the Specifications, (iii) invest $1,000,000 in the Company, (iv) lease for the Company’s use equipment representing a value of $2,000,000 which will include manufacturing, test and product equipment and tooling mentioned below to be more specifically identified by the parties, (v) manufacture the Products (A) at a 10% discount to the market rate against non-cancellable purchase orders from the Company for one year following the initial purchase orders and thereafter at a 5% discount to the market rate until $8,000,000 in discounts have been earned by the Company and (B) provide working capital to manufacture all Products with net payment terms of 45 days, (vi) LEI will acquire all needed tooling, and (vii) serve as an exclusive distributor for the Asia Territory.

In addition, the Company will (i) appoint LEI as the exclusive manufacturer for the Products sold in the Asia Territory, (ii) appoint LEI as an exclusive distributor for the Asia Territory and (iii) provide non-cancellable and irrevocable stand-by Letters of Credit for the benefit of LEI prior to the shipment of Product or provide payment for the Product prior to shipment.
 
 
11

 

LEI purchased 12,500,000 shares of common stock (the “Shares”) of the Company for an aggregate purchase price of $1,000,000.  In the event the Company does not place orders for the Products within five years from the Effective Date (the “Order Date”), then LEI will be entitled to sell to the Company the lesser of (i) Shares it has not resold as of the Order Date or (ii) the portion of Shares representing the amount of Products that the Company has not ordered.  For example, in the event the Company has placed orders for 80% of the Products, then LEI will be entitled to sell back to the Company as of the Order Date the lesser of the number of Shares that have not been resold by LEI or 20% of the Shares. The per share price will be $0.08.  LEI invested the $1,000,000 on July 20, 2012 and this investment has been classified as a liability in the Company’s financial statements because of the contingency related to the share repurchase agreement.

SETE

On March 20, 2013, the Company entered into a joint venture with Sunovia Energy Technologies Europe Sp. z o.o. (SETE), a Polish corporation which is unaffiliated with the Company. The agreement called for the payment of $11 million to Evolucia by August 31, 2013, which has not been received, in exchange for the manufacture and distribution rights to specified European markets.  Under the joint venture agreement, a new entity called Evolucia Europe Sp. z o.o. will be created, with Evolucia Inc. holding a 51% ownership share and SETE holding the remaining 49% ownership.  The joint venture agreement provides exclusive manufacturing rights to Evolucia Europe for the European markets. We have had no recent correspondence and expect to formally terminate the relationship in the near future. 

Landlord

We previously leased an operating facility at 106 Cattlemen Road Sarasota, FL 34232. This facility is under a five year and six months lease. The lease required monthly rent, including sales tax, of approximately $10,445. The building consisted of 17,252 square feet of laboratory, warehouse and office space. On October 28, 2012, the Company completely vacated its operations from its former headquarters at 106 Cattlemen Road, Sarasota, FL, 34232 due to the presence of mold. The Company was responsible for an aggregate of approximately $280,000 in future rent payments at the time it vacated the property. The company received a judgment in August 2014 in favor of the landlord, BKOP1, LLC, in the amount of $237,138. The company has accrued this amount at June 30, 2014.

On September 11, 2014, the Company and the Landlord entered into a Settlement Agreement (the "7040 Agreement") pursuant to which the Company and the Landlord settled all past due amounts and amounts owed for the term of the Lease in consideration for the Company issuing the Landlord an 8% Secured Promissory Note in the amount of $1,100,000 (the “7040 Note”).  The Landlord agreed to return to the Company the Common Stock Option to acquire 12,000,000 shares of common stock of the Company (the “7040 Option”) which was previously issued to the Landlord in conjunction with the Lease.  In addition, the parties released each other from any and all future legal claims.  The 7040 Note is a debt obligation arising other than in the ordinary course of business which constitutes a direct financial obligation of the Company. The company has recorded this financial obligation as a Note Payable at September 30, 2014.
  
Litigation   
 
The Company is defending a lawsuit brought by a supplier of a component part of its LED lighting fixtures. The suit alleges that the Company owes a re-stocking fee of approximately $100,000 for the return of certain parts. The Company believes it has substantial defenses to this suit and intends to vigorously defend it. The lawsuit is in the early stages of pleadings, and the outcome is uncertain. No significant legal fees have been incurred in this case to date.
 
 
12

 
 
Through December 31, 2013, the Company made advances to Affineon Lighting aggregating $636,000 for Affineon to purchase inventory. These advances were to be repaid upon sale of Affineon’s products. However no amounts were repaid. The Company is attempting to collect the advances but has reserved the entire balance at December 31, 2013, and June 30, 2014. In addition, the Company’s former Principal Accounting Officer has been appointed as the Principal Executive Officer at Affineon subsequent to his terminating his employment with the Company. The Company is uncertain as to what additional actions, if any, it will take against Affineon or its former Principal Accounting Officer.

The Company’s Board is reviewing certain vendors, financial obligations, stock based compensation arrangements and contractual obligations committed to by its former Principal Accounting Officer, former Chief Executive Officer and other former employees. The Company’s Board is uncertain as to what additional actions, if any, it will take.

The Company has determined that there may be instances where certain shares of common stock issued pursuant to a Form S-8 were issued in violation of certain provisions of the use of Form S-8. In addition, the Company has been informed by one of its note holders that $50,000 of proceeds received pursuant to a private placement were not authorized by the note holder to be released from escrow. The Company’s Board is investigating these items.
 
Certain note holders are alleging that the Company has not acted in good faith regarding said note holders. No formal action has been initiated regarding these allegations.

NOTE E - RISKS AND UNCERTAINTIES

Our operating results may be affected by a number of factors.  The Company depends upon a number of major inventory and intellectual property suppliers.  Presently, the Company does not have formal arrangements with any supplier.  In the future, if the Company is unable to obtain satisfactory supplier relationships, or a critical supplier has operational problems, or cease making material available, operations could be adversely affected.

Concentrations

During the nine months ended September 30, 2014 and 2013, the Company had 42% and 25% of sales to two customer and 46% to one customers, respectively, which sales individually represented in excess of 10% of the Company’s total sales.

At September 30, 2014, approximately 92% of net accounts receivable was due from one customers and, at December 31, 2013, 63% of net accounts receivable was due from one customer.
 
NOTE F – STOCK OPTIONS
 
During the three months ended March 31, 2014, the Company granted options to employees, consultants and officers to purchase 31,175,000 common shares at exercise prices of $0.01 to $0.04 per share for a period of five years and which vest immediately. The fair value of the options was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: risk-free interest rates of 1.0% to 2.0%, expected volatility of 120% and expected lives of five years.  No dividends were assumed in the calculations. The fair value of the options aggregated $265,827 which was charged to operations during the three months ended March 31, 2014. During the three months ended March 31, 2014, an aggregate of $326,462 was charged to operations related to options granted during prior years.
 
 
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During the three months ended June 30, 2014, the Company granted no options to employees, consultants and officers to purchase common shares. During the three months ended June 30, 2014, an aggregate of $96,387 was charged to operations related to options granted during prior years.

During the three months ended September 30, 2014, the Company granted no options to employees, consultants and officers to purchase common shares. During the three months ended September 30, 2014, an aggregate of $69,320 was charged to operations related to options granted during prior years.

At September 30, 2014, there was an aggregate of $1,102,376 of unrecognized expense related to stock options that vest in future periods. A summary of stock options is as follows:
   
Shares
 
Options outstanding at January 1, 2014
   
327,351,660
 
Options granted
   
31,175,000
 
Options exercised
 
 
(300,000
Options cancelled
 
 
(90,241,748
)
Outstanding at September 30, 2014
   
267,984,912
 
         
Exercisable at September 30, 2014
   
  207,224,495
 
 
NOTE G – CONVERTIBLE NOTES PAYABLE

 
Interest Rate
Maturity Date 
September 30, 2014
   
December 31, 2013
 
Convertible Note
9.0%
July 2013
$
-
   
$
50,000
 
Convertible Notes (“PPM#2”)
8.0%
December 2016
 
3,169,526
     
450,000
 
Less: Unamortized Portion of Discount
     
(1,205,973
)
   
  -
 
       
1,963,553
     
500,000
 
Less current portion
     
-
     
(50,000
)
     
$
1,963,553
   
$
450,000
 
 
Convertible Note

During the period ended March 31, 2014, the remaining $50,000 of the Notes, together with accrued interest of $20,041, was converted into the Convertible Notes (“PPM#2”) described below.

Convertible Notes (“PPM#2”)

The Company sold an aggregate of $500,000 pursuant to this private placement; $450,000 in 2013 and $50,000 in 2014. 

In February 2014, holders of 12% notes payable (Note H) with an outstanding principal balance totaling $290,642 chose to roll their outstanding balances into Private Placement Memorandum #2 (“PPM #2”).  The restructuring was within the scope of ASC 470-60-55 Accounting for Troubled Debt Restructuring, which states that if a Company is experiencing financial difficulties and a concession is granted, troubled debt restructuring accounting should be applied. The Company has concluded that it is experiencing financial difficulties and the creditor has granted a concession as the effective borrowing rate for the restructured debt is less than the effective rate of the 10% notes payable prior to the restructuring. No gain or loss was recognized because the total cash outflows required under the restructured debt were greater than the carrying amount of the debt prior to the restructuring. Accordingly, the carrying amount of the debt was used to calculate interest expense over the remaining term of the restructured debt.

During the quarter ended March 31, 2014, a portion of the accredited investors that participated in the Private Placement Memorandum #1 (“PPM#1”) offering agreed to exchange their PPM #1 securities (Note H), representing an aggregate of $2,308,843 in principal and accrued interest, and PPM #1 Warrants to acquire an aggregate of 99,665,910 shares of common stock, for 8% Secured Convertible Promissory Notes (the "Replacement Notes") with a face value of $2,308,843.  The Replacement Notes mature three years from the date of issuance and the Notes are convertible into shares of common stock at a conversion price of $0.01 per share subject to the Company increasing its authorized shares of common stock.  Interest is due and payable on the maturity date.  The Replacement Notes are secured by the assets of the Company and can be prepaid in whole or in part at any time without the consent of the holder.  
 
 
14

 

The Company considered whether the exchange of the PPM #1 Notes and PPM #1 Warrants was within the scope of ASC 470-60-55 Accounting for Troubled Debt Restructuring, which states that if a Company is experiencing financial difficulties and a concession is granted, troubled debt restructuring accounting should be applied. The Company has concluded that it is experiencing financial difficulties and the creditor has granted a concession as the effective borrowing rate for the restructured debt is less than the effective rate of the PPM #1 Notes prior to restructuring. ASC 470 requires that the effects of any sweeteners be considered when determining the cash flows for the restructured debt.  As such, the fair value of the cancelled PPM #1 Warrants of approximately $681,700 was considered when determining whether a concession had been granted.  Because the total cash outflows required under the restructured debt were greater than the carrying amount of the debt prior to the restructuring, no gain or loss was recognized and there was no adjustment to the carrying amount of the debt. Rather, the carrying amount of the debt will be used to calculate interest expense over the remaining term of the restructured debt so that any unamortized deferred costs from the original debt financing continue to be recognized as interest expense over the remaining term of the restructured debt. Subsequent to the restructurings, the effective interest rates on the debt ranged from approximately 32% to 47%.

Interest accrued on these notes at September 30, 2014 is $192,383.

NOTE H – NOTES PAYABLE
 
Interest
Rate
Warrants
 
Maturity Date
 
September 30,
2014
   
December 31,
2013
 
                     
Note Payable, former officer
9.0%
-
 
April 2014 (in default)
 
359,537
   
 $
359,537
 
Notes Payable
(“PPM#1”)            
14.0%
51,501,757
 
April, May and August 2016 (in default)
 
   
1,074,950
     
3,155,187
 
Less: Unamortized Portion of Discount
           
(1,016,139
)
   
(2,671,398
Notes Payable, affiliates
12.5%
40,000,000
 
February 2015
   
1,261,709
     
560,000
 
Non-interest bearing advances,
affiliates
n/a
   
Demand
   
222,500
     
10,000
 
Notes Payable, affiliate company
15.0%
   
Demand
   
100,000
     
96,779
 
Notes Payable
12.0%
   
July 2013 (in default)
   
193,326
     
498,968
 
Note Payable
10.0%
   
February 2015
   
40,000
       
-
Note Payable, former officer
12.5%
   
February 2015
   
5,000
     
-
 
Callable Notes Payable,
affiliates
14.0%
   
Callable
   
125,000
 
     
-
 
 
Note Payable, 7040 Note
8.0%
   
July 2018
   
1,100,000
     
-
 
             
3,465,883
     
2,009,073
 
Less: current portion
           
(936,474
)
   
(664,642
)
   
91,601,757
     
$
2,529,409
   
$
1,344,431
 

Note payable, former officer

During March 2013, the Company settled a dispute related to an employment contract with a former officer by issuing a note payable for $359,537, bearing interest at 9% per annum and due in April 2014.

Interest accrued on this note at September 30, 2014, 2014 was $48,537.

Notes payable (“PPM#1”)
 
As of September 30, 2014, the total balance outstanding related to PPM #1 is $1,074,950. During the quarter ended March 31, 2014, a portion of the accredited investors that participated in the PPM #1 offering agreed to exchange their PPM #1 securities, representing an aggregate of $2,080,237 in principal and $228,606 in accrued interest, and PPM #1 Warrants to acquire an aggregate of 99,665,910 shares of common stock, for 8% Secured Convertible Promissory Notes (the "Replacement Notes") with a face value of $2,308,843 (See Note G).  The PPM#1 notes are presently in default due to the Company suspending interest payments associated with the notes.
 
On April 22, 2013, as part of PPM #1, the Company issued Jennifer Laurent (“Laurent”) a 14% Callable Promissory Note (the “”Laurent Note”) and related common stock purchase warrant to acquire 14,373,252 shares of common stock in consideration of $300,000.  The Laurent Note is secured by all of the assets of the Company.  On July 25, 2014, Laurent provided the Company with a default notice advising that the Company is in default and demanding payment.  As a result, in accordance with its terms, an event of default occurred as to the Laurent Note effective on or about September 23, 2014, and the Company is obligated to pay the outstanding principal of $300,000 and accrued interest.  Accrued interest on the Laurent Note is $103,482 as of June 30, 2015.  On May 1, 2015, Laurent filed a complaint against the Company and its subsidiary in the U.S. District Court for the Middle District of Florida (Civil Action No. 8:15-cv-1061-T-27-AEP) claiming breach of Laurent Note and security agreement and is seeking to foreclose on the Company’s assets.
     
On May 22, 2013, as part of PPM #1, the Company issued Willem Malestein (“Malestein”) a 14% Callable Promissory Note (the “”Malestein Note”) and related common stock purchase warrant to acquire 2,395,542 shares of common stock in consideration of $50,000.  The Malestein Note is secured by all of the assets of the Company.  On July 16, 2014, Malestein provided the Company with a default notice advising that the Company is in default and demanding payment.  As a result, in accordance with its terms, an event of default occurred as to the Malestein Note is in default effective on or about September 15, 2014, and the Company is obligated to pay the outstanding principal of $50,000 and accrued interest.  Accrued interest on the Malestein Note is $16,912 as of June 30, 2015.
 
 
15

 
   
Interest accrued on these notes at September 30, 2014 is $245,014.

Notes payable, affiliates

Notes payable, affiliates consist of two private investors, shareholders and directors which consist of five Promissory Notes totaling $1,216,109 for one private investor, shareholder and director and $45,000 for the other totaling $1,261,709.

During the quarter ended March 31, 2014, a private investor, shareholder and director provided additional advances of $523,648 and converted $100,000 of the outstanding balance of the line of credit (Note I) for a total additional advances of $623,648. The Company entered into two Promissory Notes on January 7, 2014 for $593,061 and $500,000; a third Promissory Note was agreed to on March 18, 2014 in the amount of $60,000; and a fourth Promissory Note was agreed to on March 31, 2014 in the amount of $63,648. Each of these Promissory Notes bear interest at 12.5% and mature one year from date of agreement.

During the three months ended March 31, 2014, a second private investor, shareholder and director provided advances of $35,000 in addition to the $10,000 non-interest bearing advance provided in 2013. The Company entered into a Promissory note related these advances on March 14, 2014 in the amount of $45,000. The Promissory Note bears interest at 12.5% and mature one year from date of agreement.

Interest accrued on these notes at September 30, 2014 is $112,209.

Non-interest bearing advances, affiliates

Through the quarter ended June 30, 2014, the Company received a total of $222,500 non-interest bearing advances. These advances consisted of a private investor, shareholder and director providing $100,000 non-interest bearing advances to the Company; a second private investor, shareholder and director providing $102,500 non-interest bearing advances to the Company; and a third private investor and shareholder providing $20,000 non-interest bearing advances to the Company.

Callable Notes Payable, affiliates

Callable notes payable, affiliates consist of two private investors, shareholders and directors which consist of six Callable Promissory Notes totaling $62,500 for one private investor, shareholder and director and $62,500 for the other totaling $125,000.

During the quarter ended September 30, 2014, a private investor, shareholder and director provided additional advances of $62,500. The Company entered into three Callable Promissory Notes on August 1, 2014 for $20,000; a second Callable Promissory Note on August 18, 2014 for $12,500; and a third Callable Promissory Note was agreed to on September 5, 2014 in the amount of $30,000. Each of these Callable Promissory Notes bear interest at 14.0% and is callable upon the completion of a minimum of a $1,000,000 capital investment in the Company.

During the quarter ended September 30, 2014, a second private investor, shareholder and director provided additional advances of $62,500. The Company entered into three Callable Promissory Notes on August 1, 2014 for $20,000; a second Callable Promissory Note on August 18, 2014 for $12,500; and a third Callable Promissory Note was agreed to on September 5, 2014 in the amount of $30,000. Each of these Callable Promissory Notes bear interest at 14.0% and is callable upon the completion of a minimum of a $1,000,000 capital investment in the Company.

Interest accrued on these notes at September 30, 2014 is $1,746.
 
 
16

 

Note Payable, 7040 Note

Note Payable, 7040 Note relates to a Settlement Agreement (the “7040 Agreement”) entered into on September 11, 2014, between the Company and the previous Landlord. According to this Settlement Agreement (the "7040 Agreement"), the Company and the Landlord settled all past due amounts and amounts owed for the term of the Lease in consideration for the Company issuing the Landlord an 8% Secured Promissory Note in the amount of $1,100,000 (the “7040 Note”). The Landlord agreed to return to the Company the Common Stock Option to acquire 12,000,000 shares of common stock of the Company (the “7040 Option”) which was previously issued to the Landlord in conjunction with the Lease.  In addition, the parties released each other from any and all future legal claims.  The 7040 Note is a debt obligation arising other than in the ordinary course of business which constitutes a direct financial obligation of the Company. The company has recorded this amount as a Note Payable matures July 31, 2018.
 

NOTE I – LINES OF CREDIT 
 
Interest
Rate
Maturity Date
 
September 30, 2014
   
December 31, 2013
 
Line of credit, affiliate
14.0%
October 2015
$
2,011,100
   
$
2,011,100
 
Line of credit, affiliate
12.5%
October 2015
 
648,710
     
746,852
 
       
2,659,810
     
2,757,952
 
Less current portion
     
(                -
)
   
(                 -
)
     
$
2,659,810
   
$
2,757,952
 

During the three months ending March 31, 2014, $100,000 of the line of credit, affiliate, was converted into a Note Payable, affiliate as described in Note H.

The lines of credits as noted in Note L above have been extended one year to October 2015 with all other terms remaining the same.

Interest accrued on these lines of credit at September 30, 2014 is $532,050.

NOTE J – DERIVATIVE INSTRUMENTS

Due to the put features embedded in the PPM #1 Warrants, the Company concluded that the PPM #1 Warrants did not meet the conditions set forth in current accounting standards for equity classification. Accordingly, the Warrants are subject to the classification and measurement standards for derivative financial instruments and require liability classification at fair value. Also, the Warrants issued in conjunction with the October 28, 2013 financing did not meet the conditions for equity classification and require liability classification at fair value.

The PPM #1 Warrants and the October 28, 2013 Warrants were valued using a binomial lattice model which included certain assumptions, including the closing price of the underlying common stock, risk-free interest rates, volatility, expected dividend yield, expected life and, for the PPM #1 Warrants, the probability that the investors will require redemption of the PPM #1 Warrants due to the put provisions and the put price the Company would be required to pay upon exercise of the put. The option to put the PPM #1 Warrants back to the Company for cash is only available if the Company does not have sufficient authorized shares for the investors to exercise all their warrants and the Company enters into a capital transaction during the term of the Warrants. Management believes there is a minimal probability of this occurring and have assigned a probability of 5% that the Warrant holders will have the ability to exercise their put option. The put provisions associated with the PPM #1 Warrants were valued using a probability-weighting of put values based on management’s estimate of expected purchase prices.
 
 
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Significant inputs and results arising from the lattice model are as follows for the Warrants classified in liabilities as of September 30, 2014:
 
PPM
 
October 2013
 
Warrants
 
Warrants
Quoted market price on valuation date
$0.002
 
$0.002
Contractual exercise price
$0.02500
 
$0.01
Expected term to maturity
3.81- 4.11 Years
 
4.33 Years
Dividend yield
0%
 
0%
Market volatility:
     
   Range of volatilities
136% - 211%
 
133% - 207%
   Equivalent volatility
163%- 166%
 
162%
Risk free interest:
     
   Range of risk free interest rates
0.05% - 1.13%
 
0.05% - 1.54%
   Equivalent risk free interest rates
0.38% - 0.44%
 
0.56%
Probability of put occurring
5%
 
n/a
Estimated value of put per share
De minimis
 
n/a
 
 
Equivalent amounts are an output from the lattice model which reflects the net results of multiple modeling iterations that the lattice model applies to underlying assumptions.  For the risk-free rates of return, the Company used the published yields on zero-coupon Treasury Securities with maturities consistent with the remaining term of the warrants and volatility is based upon the Company’s expected stock price volatility over the remaining term.  Option-based techniques (such as lattice models) are highly volatile and sensitive to changes in the assumptions underlying the valuation of the derivative financial instruments. The principal assumptions that have, in the Company’s view, the most significant effects are the Company’s trading market prices, volatilities, the probability the investors will have the ability to exercise their put option and the put value if the option is exercised. Because derivative financial instruments are initially and subsequently carried at fair value, our (income) loss will reflect the volatility in these estimate and assumption changes.
 
The following table reflects the changes in fair value of the PPM and October 2013 Warrants:

Beginning balance, January 1, 2014
  $ 1,305,298  
Cancellation of Warrants upon rollover of PPM#1 Units into
PPM#2
    (680,648 )
Fair value adjustments
    (487,760 )
Ending balance, September 30, 2014
  $ 136,890  

The decrease in the fair value of the Warrants from December 31, 2013 to September 30, 2014 was predominantly due to a decrease in the Company’s stock price.
 
 
NOTE K - RECENT ACCOUNTING PRONOUNCEMENTS

The Company does not believe that recently issued accounting pronouncements will have a material impact on its financial statements.


NOTE L – SUBSEQUENT EVENTS

 
On November 5, 2014, a private investor, shareholder and director provided additional advances of $40,000. The Company entered into a Callable Promissory Note on November 5, 2014 for $40,000. The Callable Promissory Note bears interest at 14.0% and is callable upon the completion of a minimum of a $1,000,000 capital investment in the Company.
 
 
18

 
  
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 
The following information should be read in conjunction with the consolidated financial statements and the notes thereto contained elsewhere in this report. Statements made in this Item 2, "Management's Discussion and Analysis or Plan of Operation," and elsewhere in this 10-Q that do not consist of historical facts, are "forward-looking statements." Statements accompanied or qualified by, or containing words such as "may," "will," "should," "believes," "expects," "intends," "plans," "projects," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume," and "assume" constitute forward-looking statements, and as such, are not a guarantee of future performance. The statements involve factors, risks and uncertainties, the impact or occurrence of which can cause actual results to differ materially from the expected results described in such statements. Risks and uncertainties can include, among others, fluctuations in general business cycles and changing economic conditions; changing product demand and industry capacity; increased competition and pricing pressures; advances in technology that can reduce the demand for the Company's products, as well as other factors, many or all of which may be beyond the Company's control. Consequently, investors should not place undue reliance upon forward-looking statements as predictive of future results. The Company disclaims any obligation to update the forward-looking statements in this report.

You should read the following information in conjunction with our financial statements and related notes contained elsewhere in this report. You should consider the risks and difficulties frequently encountered by early-stage companies, particularly those engaged in new and rapidly evolving markets and technologies. Our limited operating history provides only a limited historical basis to assess the impact that critical accounting policies may have on our business and our financial performance.

We encourage you to review our periodic reports filed with the SEC and included in the SEC’s Edgar database, including the annual report on Form 10-K filed for the year ended December 31, 2013.

Evolucia, Inc. (“Evolucia”, the “Company”, “we”, “our, “us”) is in the business of designing, manufacturing, marketing and distributing light emitting diode (LED) lighting fixtures.  Evolucia also maintains a portfolio of various LED lighting patents.  Our business focuses primarily on the design and development of our patented Aimed LED Lighting™ technology that demonstrates that less overall light is needed if the light is correctly focused on the target area.

We have identified an immediate opportunity, particularly in the outdoor lighting market, to supply high quality energy-efficient lighting solutions through our patented technology.  We have developed several LED lighting products, primarily for the outdoor lighting industry, that utilize our Aimed Optics™ technology that we sell directly to customers and through a network of manufacturer’s representatives in the U.S. and other countries. In addition, the Company has other lighting products that do not utilize the Aimed Optics™ technology that complement the Company’s portfolio and provide lighting solutions for other areas, such as parking garages. We continue to develop and refine our products to serve the market and are actively pursuing alliances and strategies that will allow us to drive down the production cost of our products.

We also continue developing and reengineering our patents.  We have identified the need to continue to reduce costs to be able to offer a competitive product to our customers.  This requires an ongoing review of our patents and an analysis with respect to improvements regarding the technology and costs associated with the product.  
 
The Company and its subsidiaries and affiliates have applied for and obtained a number of patents in various technologies, particularly LED lighting and solar technologies.
 
 
19

 

On May 1, 2014, we engaged DLA Piper LLP to represent the Company in connection with its Intellectual Property.  The purpose of the engagement is to evaluate our patents, provide advice on portfolio development, identify potential litigation and licensing targets and protect the Company’s Intellectual Property.  A successful outcome would create an ongoing source of additional revenue stream through potential long term licensing agreements.
  
The Company had cash of $16,120 as of December 31, 2013 and $6,974 as of September 30, 2014. The Company may incur operating losses for the foreseeable future and there can be no guarantee that we will be successful securing funding. In the event we are unable to fund our operations by positive operating cash flows or additional funding, we will be forced to reduce our expenses and may have to cease operations. During the period ended June 30, 2014, the Company’s Chief Executive Officer, who was also the Chief Financial Officer, resigned. In addition, the company is restructuring its organization for greater efficiencies, and is aggressively pursuing sale opportunities, which continue to present themselves to the company. The company is working with distributors and end users in order to maximize potential sales. As a result of the Company scaling back current operations, substantially all of the Company’s employees were terminated.  The Company will continue to rely on its relationship with its partner, Leader Electronics, Inc., and optimize its strong industry relationship as it continues to concentrate on its legacy Aimed Optics™ products.  It will also continue to supports its development, reengineering, and building its current patent portfolio, which includes the continuing effort to reduce costs in an effort to become a more affordable option in the industry.
 
Corporate Information
 
Evolucia was formed in 2007 through a reverse merger whereby the Company acquired Sun Energy Solar, Inc., our accounting predecessor, which developed energy-efficient technologies in solar energy and infrared. The Company has exited the solar and infrared businesses. The Company’s solar subsidiary, Sunovia Solar, Inc. has not had operations since June 2010 and is not anticipated to have operations in the foreseeable future.

LED Lighting
 
LED lights are the most energy-efficient lighting source on the market today. Our LED lighting products are currently focused on (i) the roadway / walkway lighting market (“cobra head,” “shoebox”, “dusk-to-dawn”) (ii) the area lighting market (utility lights, wall packs, canopy lights and parking garage lights) and (iii), commercial indoor market (“high-bay”, “volumetric troffer”, and “lensed troffer” products). A report issued in January 2011 by Navigant Consulting, Inc. prepared for the Building Technologies Program of the Office of Energy Efficiency and Renewable Energy (EERE) of the Department of Energy estimates that there are 56.2 million roadway lights in the United States, including 26.5 million street lights and 26.1 million highway lights. The same report estimates approximately 36.4 million parking garage lights and 15.8 million parking lot light fixtures installed in the United States. It is estimated that fewer than 5% of the parking light totals and fewer than 1% of the roadway and highway lights utilized LED technology. We believe traditional lighting companies have been somewhat slow to develop LED technologies; however, the large lighting companies have acquired the technology either through acquisition or OEM and licensing arrangements with smaller LED lighting companies. There are currently over 200 competitors in the outdoor LED lighting market. Our Aimed Optics™ technology potentially provides a competitive advantage in this market, as it uses less energy to put more light on the ground, although high product costs have hampered sales of the cobra head and shoebox products in certain markets.
 
The Company completed the basic design for most of its products in 2009. Improvements in LED performance and the competitive pressures in the lighting industry have driven the need to update product designs and performance to remain competitive and viable. Also, in order for LED lighting to be fully competitive with traditional lighting, the cost of the fixture, is more expensive than comparable legacy lighting fixtures, which must remain viable as well. This will require reductions in final costs through component reductions and increasing manufacturing efficiencies. We anticipate these cost reductions in the product designs to continue and the timeframe to develop new products will be shortened as competition grows.
 
 
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The three most significant challenges facing the Company in the LED lighting market are (a) developing a recognizable brand name, (b) expanding our distribution network, and (c) lowering the cost of manufacturing and the expense of selling our products thru traditional channels. Each of these issues is an ongoing concern for the Company. In addition, as LED lighting markets continue to expand, the distribution proficiencies of the lighting market are likely to drive consolidation in product lines and expansion as fixture companies compete for new business across various product lines.
 
Results of Operations for the Quarter ended September 30, 2014

For the three months ended September 30, 2014, the Company had a net loss of ($1,598,006), as compared to a net loss ($3,432,793) for the three months ended September 30, 2013, or a decrease of $1,834,787. The significant factors contributing to this decrease are discussed in more detail below.
 
Revenues

Revenues for the three months ended September 30, 2014 were $61,114, as compared to $725,278 for the three-month period ending September 30, 2013, which represented a decrease of $664,164 or approximately 92%. The decrease was the result of decrease in customers.
  
Gross Profit

The Company had a gross profit (loss) of $248,157, and a gross profit margin of 406% for the three months ended September 30, 2014, as compared to a gross profit of $161,736 or a gross profit margin of 22.3% for the three months ended September 30, 2013. The gross margin increased as a result of a decrease in the inventory reserve, changing product mix and decrease in product costs.
 
Expenses

Total operating expenses decreased to $1,439,796 for the three month period ending September 30, 2014 from $3,055,479 for the three month period ending September 30, 2013, a decrease of $1,615,683 or 53%. The major components are discussed below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for 2014 and 2013 were equal to total operating expenses, as the Company had no research and development expense in that period. The major components of Selling, General and Administrative Expenses are discussed below.

Product Development

Product development costs were $52,379 for the three months ended September 30, 2014, compared to $37,473, for the three months ending September 30, 2013, an increase of $14,906 or 40%. Product development expenses in 2014 represented continuing the refining of existing designs and development of aimed optics, the next generation cobra head and shoebox products.

Management expects to continue to review and support the development, reengineering, and building its current patent portfolio. As management expected product development costs will continue to decrease until the Company formalizes the product development plan as a result of the restructuring. Management expects this to be completed by the end of the year.
 
 
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Compensation & Benefits

Compensation and benefit expenses were $97,620 for the three months ended September 30, 2014, compared to $1,021,304 for the three months ended September 30, 2013, a decrease of $923,684 or approximately 90%. The decrease is related to a decrease in non-cash expenses associated with stock options awarded to Board members and employees and a decrease related to reduction in cash compensation and benefits due to less employees.

Marketing & Sales

Marketing & Sales expenses totaled $22,506 for the three months ended September 30, 2014, as compared to $292,099 for the three months ended September 30, 2013, representing a decrease of $269,593 or 92%. The decrease reflects the decline in the company’s efforts to continue to support the brand of the company and position it more effectively in the marketplace. Included in this category are tradeshow expenses and related travel, lodging, meals and entertainment expenses to market the product both domestically in the United States and Internationally.
   
With the relationships developed, as management expected, marketing and sales expenses continue to reduce through 2014. Due to the restructuring of the company and continued focus on developing and supporting the Company’s patents, management expects to minimize expenses related to tradeshows and related travel expenses. Management continues to support the branding of its products, Company and marketing of its patents to the marketplace.
 
General and Administrative

General and administrative expenses are the expenses of operating the business on a daily basis that are not related directly to cost of goods and include legal and professional fees, consultants and occupancy and office expenses. For the three months ended September 30, 2014 the Company incurred aggregate expense of $1,267,291 in this area, compared to $2,014,495 for the three months ended September 30, 2013, a decrease of $747,204 or 37%. A one time charge during the three months ending September 30, 2014 of $1,100,000 related to the settlement agreement with a former landlord combined with the decreases in use of consultants, including stock based compensation paid to consultants, occupancy and office and legal and professional fees led to the net decrease.

Research and Development

The Company did not incur any research and development expenses in the three months ended September 30, 2014 nor the three months ended September 30, 2013.

Other Income and Expenses

Other income and expense reflects interest expense (net of interest income) as discussed below:
 
Total interest expense for the three months ended September 30, 2014 was $406,367 compared to $860,588 for the three months ended September 30, 2013, a decrease of $454,221 or 53%. $139,606 of interest expense for the three months ended September 30, 2014 is attributable to the accretion of the discount related to the convertible notes which did not occur during the three months ended September 30, 2013. $303,009 expense for the three months ended September 30, 2013 is attributable to warrants which did not occur for the three months ended September 30, 2014. The remaining amount is related to an increase in total company borrowings.  
 
 
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Results of Operations for the Nine Months ended September 30, 2014

For the nine months ended September 30, 2014, the Company had a net loss of ($4,156,723), as compared to a net loss ($8,851,157) for the nine months ended September 30, 2013, or a decrease of $4,694,434 or approximately 53%. The significant factors contributing to this decrease are discussed in more detail below.
 
Revenues

Revenues for the nine months ended September 30, 2014 were $1,204,093, as compared to $1,588,875 for the nine month period ending September 30, 2013, which represented a decrease of $384,782 or approximately 24%. The decrease was the result of sales to fewer customers.
  
Gross Profit

The Company had a gross profit of $512,726, and a gross profit margin of 43% for the nine months ended September 30, 2014, as compared to a gross profit of $304,098 or a gross profit margin of 19.1% for the nine months ended September 30, 2013. The gross profit increased as a result of a decrease in the inventory reserve, changing product mix to newer product versions, which are more profitable than legacy products and decrease in product costs.
 
Expenses

Total operating expenses decreased to $4,610,746 for the nine month period ending September 30, 2014 from $6,531,084 for the nine month period ending September 30, 2013, a decrease of $1,920,338, or 29%. The major components are discussed below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for 2014 and 2013 were equal to total operating expenses, as the Company had no research and development expense in that period. The major components of Selling, General and Administrative Expenses are discussed below.

Product Development

Product development costs were $110,503 for the nine months ended September 30, 2014, compared to $106,320, for the nine months ending September 30, 2013, an increase of $4,183 or 4%. Product development expenses in 2014 represented continuing the refining of existing designs and development of aimed optics, the next generation cobra head and shoebox products.

Management expects to continue to review and support the development, reengineering, and building its current patent portfolio. Management expects product development costs to continue to decrease until the Company formalizes the product development plan as a result of the restructuring. Management expects this to be completed by the end of the year.

Compensation & Benefits

Compensation & Benefits expenses were $1,041,781 for the nine months ended September 30, 2014, compared to $2,268,268 for the nine months ended September 30, 2013, a decrease of $1,226,487 or approximately 54%. The decrease is related to a decrease in non-cash expenses associated with stock options awarded to Board members and employees and a decrease related to reduction in cash compensation and benefits due to less employees.

Marketing & Sales

Marketing & Sales expenses totaled $321,813 for the nine months ended September 30, 2014, as compared to $783,674 for the nine months ended September 30, 2013, representing a decrease of $461,861 or 59%. The decrease reflects the company’s decreased efforts to continue to support the brand of the company and position it more effectively in the marketplace. Included in this category are tradeshow expenses and related travel, lodging, meals and entertainment expenses to market the product both domestically in the United States and Internationally.
 
 
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With the relationships developed, as management expected, marketing and sales expenses continue to reduce through the second quarter of 2014. Due to the restructuring of the company and continued focus on developing and supporting the Company’s patents, management expects to minimize expenses related to tradeshows and related travel expenses. Management continues to support the branding of its products, Company and marketing of its patents to the marketplace.
 
General and Administrative

General and administrative expenses are the expenses of operating the business on a daily basis that are not related directly to cost of goods and include legal and professional fees, consultants and occupancy and office expenses. For the nine months ended September 30, 2014 the Company incurred aggregate expense of $3,136,649 in this area, compared to $3,372,822 for the nine months ended September 30, 2013, a decrease of $236,173 or 7%. During the nine months ending September 30, 2014, the company incurred one time charges totaling $1,337,138 consisting of $237,138 and $1,100,000 related to a judgment and settlement agreement with former landlords, respectively. The decrease relates to significant decrease in use of consultants, including stock based compensation paid to consultants, occupancy and office and legal and professional fees.

Research and Development

The Company did not incur any research and development expenses in the nine months ended September 30, 2014 nor the nine months ended September 30, 2013.

Other Income and Expenses

Other income and expense reflects interest expense (net of interest income) and change in fair value of derivative liabilities as discussed below:
 
Total interest expense for the nine months ended September 30, 2014 was $546,464 compared to $2,663,386 for the nine months ended September 30, 2013, a decrease of $2,116,922 or 80%. ($244,319) of this decrease is attributable to the accretion of the discount related to the convertible notes which did not occur during the six months ended September 30, 2013. A significant amount of the decrease is attributable to expense for the nine months ended September 30, 2014 associated with warrants in the amount of ($487,761) which was ($39,215) for the nine months ended September 30, 2013. The remaining amount is related to an increase in total company borrowings.    

Liquidity and Capital Resources

The Company’s cash flow from operations is insufficient to meet its current obligations. In fiscal year 2014, the Company relied upon additional investment through sales of common stock, lines of credit, and debentures in order to fund its operations.

Cash Flows and Working Capital

To date, we have financed our operations primarily through the sale of equity and debt. As of September 30, 2014, we had $6,974 in cash and cash equivalents. We had receivables, net of allowances, of $548,195 and inventory, net of reserves, of $554,891. Our current liabilities as of that date were $5,704,959.

Our business cycle is working capital intensive. The sales cycle can be several months or longer and sales are not invoiced until the product has been built and shipped, requiring all cost of goods, and in some cases sales commissions, to be incurred prior to payment on an order. Also, because we build our products based upon a specific order, it can take up to 90 days to fulfill an order, followed by a period of time in which to collect our receivables. As discussed in “Lines of Credit” in Note I to the Financial Statements, we have two lines of credit with a total borrowing capacity of $2.75 million, $2 million of which was provided in cash to the Company and can be used for working capital purposes while the other $750,000 facility is available upon request for specific customer purchase orders pursuant to certain conditions. As of September 30, 2014, the Company had drawn an aggregate of $2,659,810 and had no remaining available balance.
 
 
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Management intends to continue to finance operations through debt and equity as well as to seek potential acquisitions that have positive cash flows; however, there can be no assurance of successful financing or acquisition activity in the future.

The Company may incur operating losses for the foreseeable future and there can be no guarantee that we will be successful securing funding. In the event we are unable to fund our operations by positive operating cash flows or additional funding, we will be forced to reduce our expenses and may have to cease operations. During the period ended June 30, 2014, the Company’s Chief Executive Officer, who was also the Chief Financial Officer, resigned. In addition, the company is restructuring its organization for greater efficiencies, and is aggressively pursuing sale opportunities, which continue to present themselves to the company. The company is working with distributors and end users in order to maximize potential sales. As a result of the Company scaling back current operations, substantially all of the Company’s employees were terminated.  The Company will continue to rely on its relationship with its partner, Leader Electronics, Inc., and optimize its strong industry relationship as it continues to concentrate on its legacy Aimed Optics™ products.  It will also continue to supports its development, reengineering, and building its current patent portfolio, which includes the continuing effort to reduce costs in an effort to become a more affordable option in the industry.
 
The Company uses contract manufacturers to produce its products and therefore does not have significant capital expenditures at this time.
 
For the Nine Month Period Ended
 
   
September 30,
2014
   
September 30,
2013
 
Cash flows used in Operations
 
$
(925,919
 
(4,856,080)
 
                 
Investing Activities
 
$
(77,585
)
 
$
(188,864)
 
                 
Financing Activities
 
$
994,358
   
3,446,814
 
                 
Cash at end of period
 
$
6,974
   
 $
44,334
 
 
Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2014 totaled ($925,919) as compared to ($4,856,080) for the nine months ended September 30, 2013.  During the nine month period ended September 30, 2014, the cash used in operating activities consisted principally of the net loss from operations, stock based compensation, change in fair value of debt instruments, increase in accounts receivable, decrease in inventory, decrease in inventory reserve and increase in accounts payable and accrued liabilities.
 
 
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Investing Activities

Net cash used in investing for the nine months ended September 30, 2014 was ($77,585) as compared to ($188,864) for the nine months ended September 30, 2013. The represents capital expenditures primarily associated with the purchase of computer equipment and software.

Financing Activities

Our net cash provided by financing activities for the nine months ended September 30, 2014 was $994,358 as compared to $3,446,814 for the nine months ended September 30, 2013, which primarily consisted of proceeds from notes payable and lines of credit in 2014 and private placements in 2013.
 
Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
 
Our company has not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have
 
o
an obligation under a guarantee contract, although we do have obligations under certain sales arrangements including purchase obligations to vendors
o
a retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets,
o
any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument, or
o
any obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by us and material to us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research  and development services with us.

Plan of Operation
 
We have identified an immediate opportunity, particularly in the outdoor lighting market, to supply high quality energy-efficient lighting solutions through our patented technology.  We have developed several LED lighting products, primarily for the outdoor lighting industry, that utilize our Aimed Optics™ technology that we sell directly to customers and through a network of manufacturer’s representatives in the U.S. and other countries. In addition, the Company has other lighting products that do not utilize the Aimed Optics™ technology that complement the Company’s portfolio and provide lighting solutions for other areas, such as parking garages. We continue to develop and refine our products to serve the market and are actively pursuing alliances and strategies that will allow us to drive down the production cost of our products.

We also continue developing and reengineering our patents.  We have identified the need to continue to reduce costs to be able to offer a competitive product to our customers.  This requires an ongoing review of our patents and an analysis with respect to improvements regarding the technology and costs associated with the product.  We have also recently engaged DLA Piper to assist the Company in developing our licensing revenues as well as protecting our intellectual property.

The Company and its subsidiaries and affiliates have applied for and obtained a number of patents in various technologies, particularly LED lighting and solar technologies.

On May 1, 2014, we engaged DLA Piper LLP to represent the Company in connection with its Intellectual Property.  The purpose of the engagement is to evaluate our patents, provide advice on portfolio development, identify potential litigation and licensing targets and protect the Company’s Intellectual Property.  A successful outcome would create an ongoing source of additional revenue stream through potential long term licensing agreements.
 
 
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The Company had cash of $6,974 as of September 30, 2014. The Company may incur operating losses for the foreseeable future and there can be no guarantee that we will be successful securing funding. In the event we are unable to fund our operations by positive operating cash flows or additional funding, we will be forced to reduce our expenses and may have to cease operations. During the period ended June 30, 2014, the Company’s Chief Executive Officer, who was also the Chief Financial Officer, resigned. In addition, the company is restructuring its organization for greater efficiencies, and is aggressively pursuing sale opportunities, which continue to present themselves to the company. The company is working with distributors and end users in order to maximize potential sales. As a result of the Company scaling back current operations, substantially all of the Company’s employees were terminated.  The Company will continue to rely on its relationship with its partner, Leader Electronics, Inc., and optimize its strong industry relationship as it continues to concentrate on its legacy Aimed Optics™ products.  It will also continue to supports its development, reengineering, and building its current patent portfolio, which includes the continuing effort to reduce costs in an effort to become a more affordable option in the industry.
  
We previously leased an operating facility at 106 Cattlemen Road Sarasota, FL 34232. This facility is under a five year and six months lease. The lease required monthly rent, including sales tax, of approximately $10,445. The building consisted of 17,252 square feet of laboratory, warehouse and office space. On October 28, 2012, the Company completely vacated its operations from its former headquarters at 106 Cattlemen Road, Sarasota, FL, 34232 due to the presence of mold. The Company was responsible for an aggregate of approximately $280,000 in future rent payments at the time it vacated the property. The Company received a judgment in August 2014 in favor of the landlord, BKOP1, in the amount of $237,138. The Company has accrued this amount at June 30, 2014.

Headquarters office operations were moved temporarily to 6151 Lake Osprey Drive, Sarasota, FL 34240 while the manufacturing division, which also includes its warehouse, was moved temporarily to 6225 21st Street, Bradenton, FL  34203. These temporary facilities were rented on a month to month basis for approximately $15,622 per month.

Effective July 1, 2013, we moved to our operating facility located at 7040 Professional Parkway East, Sarasota, Florida 34240. The lease is under a six year lease and requires monthly rent, including sales tax, of approximately $16,000 for the first 18 months and escalates to $60,000 for the remainder of the term. In conjunction with the lease, we issued 12,000,000 options at the trading price the day of the agreement to the landlord.

In April 2014, we restructured our organization for greater efficiencies, and is aggressively pursuing sale opportunities, which continue to present themselves to the company. The company is working with distributors and end users in order to maximize potential sales. As a result of the Company scaling back current operations, substantially all of the Company’s employees were released. We have received a notice of violation from our landlord related to our facility located at 7040 Professional Parkway East, Sarasota, Florida 34240.

On September 11, 2014, the Company and the Landlord entered into a Settlement Agreement (the "7040 Agreement") pursuant to which the Company and the Landlord settled all past due amounts and amounts owed for the term of the Lease in consideration for the Company issuing the Landlord an 8% Secured Promissory Note in the amount of $1,100,000 (the “7040 Note”).  The Landlord agreed to return to the Company the Common Stock Option to acquire 12,000,000 shares of common stock of the Company (the “7040 Option”) which was previously issued to the Landlord in conjunction with the Lease.  In addition, the parties released each other from any and all future legal claims.  The 7040 Note is a debt obligation arising other than in the ordinary course of business which constitutes a direct financial obligation of the Company. The company has recorded this financial obligation as a Note Payable at September 30, 2014.
 
 
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Effective July 9, 2014, we entered into a lease located at 4920 Lena Road, Unit #106, Bradenton, Florida 34211. The lease is under a one year lease and requires monthly rent, plus sales tax, of approximately $1,200.

As of November 14, 2014, we have 3 full-time employees. At present, Evolucia has reduced its personnel and staff in order to eliminate excess overhead and to refocus on the business’ core fundamentals: the protection and monetization of the Aimed Optics intellectual property and the commercialization and sale of the company’s core products that are manufactured through the partnership with Leader Electronics.  The Board accepted Mel Interiano’s resignation in April 2014; and the company has employed Thomas Seifert as Interim CEO and Interim CFO.
  
Effect of Changes in Prices

In the lighting industry, prices of equivalent incandescent lighting products are lower than the Company’s prices. In addition, some competing LED lighting fixtures are priced lower than the Company’s products. Reducing the cost of our products is a primary focus at this time and will be necessary in order for our LED lighting products to be competitive in the marketplace in the future.

Critical Accounting Policies and Estimates
 
Critical accounting estimates are those that management deems to be most important to the portrayal of our financial condition and results of operations, and that require management’s most difficult, subjective or complex judgments, due to the need to make estimates about the effects of matters that are inherently uncertain. We have identified our critical accounting estimates which are discussed below.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include the valuation of stock based charges, the valuation of derivatives and the valuation of inventory reserves.

Accounts Receivable

The Company extends credit to its customers based upon a written credit policy.  Accounts receivable are recorded at the invoiced amount and do not bear interest.  The allowance for doubtful accounts is the Company’s best estimate for the amount of probable credit losses in the Company’s existing accounts receivable.  The Company establishes an allowance of doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information.  Receivable balances are reviewed on an aged basis and account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not require collateral on accounts receivable.

Accounting for Derivative Instruments

Derivatives are required to be recorded on the balance sheet at fair value. These derivatives, including embedded derivatives in the Company’s structured borrowings, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates
 
 
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Research and Development

Research and Development ("R&D") expenses are charged to expense when incurred. The Company has consulting arrangements which are typically based upon a fee paid monthly or quarterly. Samples are purchased that are used in testing, and are expensed when purchased. R&D costs also include salaries and related personnel expenses, direct materials, laboratory supplies, equipment expenses and administrative expenses that are allocated to R&D based upon personnel costs.

Revenue Recognition

The Company recognizes revenue when the following conditions have been met: there is persuasive evidence an arrangement exists which includes a fixed price, there is reasonable assurance of collection, the services or products have been provided and delivered to the customer, no additional performance is required, and title and risk of loss has passed to the customer. Products may be placed on consignment to a limited number of resellers. Revenue for these consignment transactions will also be recognized as noted above.
  
Share-Based Payments
 
Compensation cost relating to share based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).
 
Going Concern
 
Our consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Although we have incurred losses from operations and have a significant accumulated deficit at September 30, 2014, we believe we have adequate resources, such as our credit facilities and the potential proceeds from a private placement during 2014 to meet our operating commitments in 2014. In the event these resources and operating cash flows are not sufficient to fully fund our operating commitments or our growth, we would look to secure additional debt or equity financing. There can be no guarantee that we will be successful securing funding. In the event we are unable to fund our operations by positive operating cash flows or additional funding, we may be forced to reduce our expenses and slow down our growth rate. Accordingly, our consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
 
Recent Accounting Pronouncements
 
The Company does not believe that any recently issued accounting pronouncements will have a material impact on its financial statements.

ITEM 3. QUANTITATIVE AND QUALITIATIVE DISCLOSURES ABOUT MARKET RISK
 
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
 
ITEM 4. CONTROLS AND PROCEDURES.
 
Management Report on Disclosure Controls

Under the supervision and with the participation of management, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this by this Report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of the end of the period covered by this Report, our disclosure controls and procedures were not effective due to lack of segregation of duties and the need for an updated accounting system, which is in process.
 
 
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 Remediation of Material Weaknesses in Internal Control over Financial Reporting

The Company has not established adequate financial reporting monitoring activities to mitigate the risk of management override, specifically because there are few employees and only one officer with management functions there is lack of segregation of duties.   The Company intends to continue to evaluate potentially engaging additional management personnel to alleviate this weakness.
  
Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2014, there were no changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
 
PART II: OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results, other than as described below. However, we are currently evaluating several consulting agreements and strategic relationships that the company entered into during the year ended December 2013. We may commence litigation against such parties if it is determined that such agreements were breached.
 
On April 22, 2013, as part of PPM #1, the Company issued Jennifer Laurent (“Laurent”) a 14% Callable Promissory Note (the “Laurent Note”) and related common stock purchase warrant to acquire 14,373,252 shares of common stock for consideration of $300,000.  The Laurent Note is supported by a Security Agreement identifying substantially all of the assets of the Company.  On July 25, 2014, Laurent provided notice to the Company of its failure to make scheduled interest payments as required by the Note.  After receiving this notice, the Company did not make such interest payments within the 60-day cure period provided for under the Note.  As a result, in accordance with the terms of the Laurent Note, effective on or about September 23, 2014, the Company became obligated to pay the outstanding principal of $300,000 and the accrued interest, which was $103,482 as of June 30, 2015.  On May 1, 2015, Laurent filed a complaint against the Company and its subsidiary in the U.S. District Court for the Middle District of Florida (Civil Action No. 8:15-cv-1061-T-27-AEP) claiming breach of the Laurent Note and the related security agreement and seeking to foreclose on the Company’s assets.  The Company moved to dismiss portions of the Complaint and Laurent ultimately amended her Complaint.  The lawsuit brought by Laurent is set for trial in July 2016.
 
On May 22, 2013, as part of PPM #1, the Company issued Willem Malestein (“Malestein”) a 14% Callable Promissory Note (the “Malestein Note”) and related common stock purchase warrant to acquire 2,395,542 shares of common stock in consideration of $50,000.  The Malestein Note is supported by a Security Agreement identifying substantially all of the assets of the Company.  On July 16, 2014, Malestein provided notice to the Company of its failure to make scheduled interest payments as required by the Note.  After receiving this notice, the Company did not make such interest payments within the 60-day cure period provided for under the Note.  As a result, in accordance with the terms of the Malestein Note, effective on or about September 14, 2014, the Company became obligated to pay the outstanding principal of $50,000 and the accrued interest, which was $16,912 as of June 30, 2015.  On September 22 2014, Malestein filed a complaint against the Company in the Circuit Court of the 12th Judicial Circuit in Sarasota County, Florida (Case No.2014 005537 NC) seeking damages from the Company as a result of the Company’s failure to make payment on the Malestein Note.  In connection with the litigation, a default judgment in the amount of $63,056.09, bearing interest at the rate of 4.75%, was entered against the Company in favor of Malestein on May 29, 2015.
 
Litigation with Supplier

The Company is defending a lawsuit brought by a supplier of a component part of the Evolucia LED light fixtures. The suit alleges that the Company owes a re-stocking fee for the return of certain inventory. The plaintiff has alleged damages in excess of $100,000. The Company believes it has substantial defenses to this lawsuit and intends to vigorously defend it. The lawsuit is in the early stages of pleadings, and the outcome of this case is uncertain at this time. The Company has incurred no significant legal fees to date in this case.
 
Potential Litigation   
 
Through December 31, 2013, the Company made advances to Affineon Lighting aggregating $636,000 for Affineon to purchase inventory. These advances were to be repaid upon sale of Affineon’s products, however no amounts were repaid. The Company is attempting to collect the advances but has reserved the entire balance at December 31, 2013, and March 31, 2014. In addition, the Company’s former Principal Accounting Officer has been appointed as the Principal Executive Officer at Affineon subsequent to his terminating his employment with the Company. The Company is uncertain as to what additional actions, if any, it will take against Affineon or its former Principal Accounting Officer.
 
 
30

 

The Company’s Board is reviewing certain vendors, financial obligations, stock based compensation arrangements and contractual obligations committed to by its former Principal Accounting Officer, former Chief Executive Officer and other former employees. The Company’s Board is uncertain as to what additional actions, if any, it will take.

The Company has determined that there may be instances where certain shares of common stock issued pursuant to a Form S-8 were issued in violation of certain provisions of the use of Form S-8. In addition, the Company has been informed by one of its note holders that $50,000 of proceeds received pursuant to a private placement were not authorized by the note holder to be released from escrow. The Company’s board is investigating these items.
 
None of our directors, officers or affiliates are involved in a proceeding adverse to our business or have a material interest adverse to our business.

ITEM 1A. RISK FACTORS

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
 
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
On January 1, 2014, a portion of the accredited investors that participated in the PPM #1 offering agreed to exchange their PPM #1 securities representing an aggregate of $2,308,842 in principal and accrued interest, and PPM Warrants to acquire an aggregate of 99,665,910 shares of common stock for 8% Secured Convertible Promissory Notes (the "PPM #2") with a face value of $2,308,842. The PPM #2 securities mature three years from the date of issuance and are convertible into shares of common stock at a conversion price of $0.01 per share subject to the Company increasing its authorized shares of common stock.  Interest is due and payable on the maturity date.  The PPM #2 securities are secured by assets of the Company and can be prepaid in whole or in part at any time without the consent of the holder.

The Company considered whether the exchange of the PPM #1 Notes and PPM Warrants was within the scope of ASC 470-60-55 Accounting for Troubled Debt Restructuring, which states that if a Company is experiencing financial difficulties and a concession is granted, troubled debt restructuring accounting should be applied. The Company has concluded that it is experiencing financial difficulties and the creditor has granted a concession as the effective borrowing rate for the restructured debt is less than the effective rate of the PPM #1 Notes prior to restructuring. ASC 470 requires that the effects of any sweeteners be considered when determining the cash flows for the restructured debt.  As such, the fair value of the cancelled PPM Warrants of approximately $681,700 was considered when determining whether a concession had been granted.  Because the total cash outflows required under the restructured debt were greater than the carrying amount of the debt prior to the restructuring, no gain or loss was recognized and there was no adjustment to the carrying amount of the debt. Rather, the carrying amount of the debt will be used to calculate interest expense over the remaining term of the restructured debt so that any unamortized deferred costs from the original debt financing continue to be recognized as interest expense over the remaining term of the restructured debt. Subsequent to the restructuring, the effective interest rate on the debt is approximately 47%.
 
On January 1, 2014 the holders of two Convertible Promissory Notes issued in 2013 agreed to roll-over their principal and accrued interest of $170,042 into PPM #2 described above in Note G. The transaction was not considered a troubled debt restructuring because the borrower’s effective interest rate before the roll-over was less than the effective interest rate after the rollover. As such, the transaction was treated as a modification and the difference between the carrying amount of the original Convertible Promissory Notes of $170,042 and the fair value of the newly issued PPM #2 Notes was recorded as a gain on extinguishment of approximately $13,000.
 
 
31

 
 
On February 18, 2014, holders of 10% notes payable with an outstanding principal balance totaling $290,642 chose to roll their outstanding balances into PPM #2. The Company has concluded that it is experiencing financial difficulties and the creditor has granted a concession as the effective borrowing rate for the restructured debt is less than the effective rate of the 10% notes payable prior to the restructuring. No gain or loss was recognized because the total cash outflows required under the restructured debt were greater than the carrying amount of the debt prior to the restructuring.

During the period ended March 31, 2014, the Company issued 7,412,057 shares to employees as compensation.
 
During the period ended March 31, 2014, the Company issued 8,016,541 shares to former employees to settle unpaid compensation.
 
During the period ended March 31, 2014, the Company issued 81,062,535 shares to several consultants for services.
 
During the period ended March 31, 2014, the Company issued 2,020,000 shares to a note holder to satisfy the outstanding debt.
 
During the period ended March 31, 2014, 10,000,000 shares were returned to the Company for no consideration and were cancelled.
             
During the period ended March 31, 2014, the Company issued 18,500,000 stock options to two consultants. The options have exercise price of $0.01, vest immediately and expire five years from the date of issuance.
 
During the period ended March 31, 2014, the Company issued 12,675,000 stock options to one employee. The options have exercise prices of $0.004, vest immediately and expire five years from the date of issuance.
 
During the period ended March 31, 2014, the Company received $50,000 proceeds from PPM#2.

During the period ended June 30, 2014, the Company issued 300,000 shares of stock in exchange for $11,970 related to a former employee exercising the stock options.

The above issuances were made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and/or Rule 506 promulgated under Regulation D there under. The holders of the above securities are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.
 
ITEM 3. EVENTS OF DEFAULT UPON SENIOR SECURITIES
 
On April 22, 2013, as part of PPM #1, the Company issued Jennifer Laurent (“Laurent”) a 14% Callable Promissory Note (the “”Laurent Note”) and related common stock purchase warrant to acquire 14,373,252 shares of common stock in consideration of $300,000.  The Laurent Note is secured by all of the assets of the Company.  On July 25, 2014, Laurent provided the Company with a default notice advising that the Company is in default and demanding payment.  As a result, in accordance with its terms, an event of default occurred as to the Laurent Note effective on or about September 23, 2014, and the Company is obligated to pay the outstanding principal of $300,000 and accrued interest.  Accrued interest on the Laurent Note is $103,482 as of June 30, 2015.  On May 1, 2015, Laurent filed a complaint against the Company and its subsidiary in the U.S. District Court for the Middle District of Florida (Civil Action No. 8:15-cv-1061-T-27-AEP) claiming breach of Laurent Note and security agreement and is seeking to foreclose on the Company’s assets.
 
On May 22, 2013, as part of PPM #1, the Company issued Willem Malestein (“Malestein”) a 14% Callable Promissory Note (the “”Malestein Note”) and related common stock purchase warrant to acquire 2,395,542 shares of common stock in consideration of $50,000.  The Malestein Note is secured by all of the assets of the Company.  On July 16, 2014, Malestein provided the Company with a default notice advising that the Company is in default and demanding payment.  As a result, in accordance with its terms, an event of default occurred as to the Malestein Note effective on or about September 15, 2014, and the Company is obligated to pay the outstanding principal of $50,000 and accrued interest.  Accrued interest on the Malestein Note is $16,912 as of June 30, 2015.
 
ITEM 4.  MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5. OTHER INFORMATION

Subsequent Events

The lines of credit affiliates (Note I) have been extended to October 2015 with all other terms remaining the same.

On November 5, 2014, a private investor, shareholder and director provided additional advances of $40,000. The Company entered into a Callable Promissory Note on November 5, 2014 for $40,000. The Callable Promissory Note bears interest at 14.0% and is callable upon the completion of a minimum of a $1,000,000 capital investment in the Company.
    
 
32

 
 
ITEM 6. EXHIBITS
 
Exhibit
No. 
 
Description of Exhibit
     
3.1
 
Certificate of Change (1)
     
3.2
 
Agreement and Plan of Merger between Acadia Resources, Inc. and Sunovia Solar, Inc.(2)
     
3.3
 
Certificate of Merger between Sun Energy Solar, Inc. and Sunovia Solar, Inc. (2)
     
3.4
 
Certificate of Merger between Acadia Resources, Inc. and Sunovia Energy Technologies, Inc. (2)
     
3.5
 
Articles of Incorporation (3)
     
3.6
 
ByLaws (3)
     
3.7
 
Articles of Merger Pursuant to NRS 92.A.200 (18)
     
4.1
 
Form of Subscription Agreement (4)
     
4.2
 
Nonstatutory Stock Option Agreement between Evolucia Inc. and Charles B. Rockwood (19)
     
4.3
 
Common Stock Purchase Warrant issued to Thomas Siegfried (20)
     
4.4
 
Common Stock Purchase Warrant issued to Burton "Skip" Sack (20)
     
4.5
 
Common Stock Purchase Warrant issued to Burton "Skip" Sack (20)
     
4.6
 
Form of Subscription Agreement by and between Evolucia Inc. and Accredited Investors (23)
     
4.7
 
Form of 14% Callable Promissory Note (23)
     
4.8
 
Form of Warrant (23)
     
4.9
 
Form of Security Agreement (23)
     
4.10
 
Promissory Note dated November 26, 2013 issued to Sack Family Investment Fund, LLC (25)
     
4.11
 
Common Stock Purchase Warrant dated November 26, 2013 issued to Sack Family Investment Fund, LLC (25)
     
4.12
 
2013 Flexible Incentive Stock Plan (26)
     
4.13
 
Form of Conversion Agreement – Replacement Notes (27)
     
4.14
 
Form of Convertible Promissory Note – Replacement Notes(27)
     
4.15
 
Form of Security Agreement – Replacement Notes(27)
     
4.16
 
Form of Securities Purchase Agreement – New Notes(27)
     
4.17
 
Form of Convertible Promissory Note – New Notes(27)
 
 
33

 
 
4.18
 
Form of Security Agreement – New Notes(27)
     
10.1
 
Cancellation of Royalty Agreement (5)
     
10.2
 
Agreement between the Registrant and Carl Smith dated February 2, 2011(5)
     
10.3
 
Agreement between Sun Energy Solar, Inc. (predecessor in interest to Sunovia Solar, Inc.) and EPIR Technologies, Inc. dated November 1, 2007 (2)
     
10.4
 
Amended and Restated Research, Development and Supply Agreement, dated January 24, 2008, between EPIR Technologies, Inc. and the Registrant (6)
     
10.5
 
Stock Purchase Agreement between EPIR Technologies, Inc. and the Registrant dated January 24, 2008 (6)
     
10.6
 
Sunovia Energy Technologies, Inc. 2008 Incentive Stock Plan dated May 1, 2008 (7)
     
10.7
 
Common Stock Purchase Warrant between the Registrant and EPIR Technologies, Inc. dated April 15, 2009 (8)
     
10.8
 
Amendment No. 1 to the Amended and Restated Research, Development, and Supply Agreement dated April 15, 2009 (8)
 
10.9
 
Form of Secured Convertible Debenture dated September 15, 2009 (9)
     
10.10
 
Form of Security Agreement dated September 15, 2009(9)
     
10.11
 
Form of Subsidiary Guarantee dated September 15, 2009 (9)
     
10.12
 
Form of Securities Purchase Agreement dated September 15, 2009(9)
     
10.13
 
Form of Promissory Note December, 2009 and January, 2010 (10)
     
10.14
 
Form of Promissory Note February, 2010 (10)
     
10.15
 
Form of Subscription Agreement dated August 24, 2010 ($.02 per share) (11)
     
10.16
 
Executive Employment Agreement between Arthur Buckland and the Registrant effective September 7, 2010 (12)
     
10.17
 
Settlement Agreement between the Registrant and EPIR Technologies, Inc. (13)
     
10.18
 
Form of 9% Convertible Promissory Note (14)
     
10.19
 
Form of 10% Promissory Note (15)
     
10.20
 
Form of 10% Convertible Secured Promissory Note Due July 1, 2013(15)
     
10.21
 
Consulting Agreement with VM5 Ventures, LLC (15)
     
10.22
 
Employment Agreement by and between the Company and Mel Interiano dated June 4, 2012 (16)
     
10.23
 
Termination and Settlement Agreement by and between the Company and VM5 Ventures LLC dated June 4, 2012 (16)
     
10.24
 
Manufacturing, Development and Investment Agreement, dated July 16, 2012, by and between Sunovia Energy Technologies, Inc. and Leader Electronics, Inc. (17)
 
 
34

 
  
10.25
 
Sales Representation Agreement, dated July 16, 2012, by and between Evolucia, Inc. and Leader r Electronics, Inc. (17)
     
10.26
 
Securities Purchase Agreement, dated July 16, 2012, by and between Sunovia Energy Technologies, Inc. and Jiangsu Leader Electronics, Inc. (17)
     
10.27
 
Executive Employment Agreement by and between Evolucia Inc. and Charles B. Rockwood dated September 13, 2012 (19)
     
10.28
 
Master Agreement by and between Evolucia Inc. and Sunovia Energy Technologies Europe Sp. z o.o., a Polish Corporation, dated March 19, 2013 (21)
     
10.29
 
Settlement Agreement and General Release by and between Evolucia Inc., on one hand, and Arthur Buckland, individually, and as custodian for Marc Buckland and Eunice Buckland on the other hand
     
10.30
 
Evolucia, Inc. 2013 Incentive Stock Plan (22)
     
10.31
 
Evolucia, Inc. 2013 Incentive Stock Plan (22)
     
10.32
 
Employment Agreement by and between Evolucia Inc. and Thomas Seifert dated April 24, 2014 (28)
     
31.1
 
Certification of Interim Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(b) and 18 U.S. C. Section 1350
     
32.1
 
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
     
EX-101.INS
 
XBRL INSTANCE DOCUMENT
     
EX-101.SCH
 
XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
     
EX-101.CAL
 
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
     
EX-101.DEF
 
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
     
EX-101.LAB
 
XBRL TAXONOMY EXTENSION LABELS LINKBASE
     
EX-101.PRE
 
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
 
(1)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 14, 2007

(2)
Incorporated by reference to the Quarterly Report on Form 10QSB filed with the Securities and Exchange Commission on December 21, 2007

(3)
Incorporated by reference to the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on January 1, 2007

(4)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2008.

(5)
Incorporated by reference to the Annual Report on Form 10-K for the Transition Period ended December 31, 2010 filed with the Securities and Exchange Commission on April 20, 2011.
 
 
35

 
  
(6)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 30, 2008.

(7)
Incorporated by reference to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 15, 2008

(8)
Incorporated by reference to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on March 16, 2009

(9)
Incorporated by reference to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 13, 2009

(10)
Incorporated by reference to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on March 22, 2010.

(11)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 24, 2010.

(12)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission in August 27, 2010.

(13)
Incorporated by reference to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2011.

(14)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 10, 2011.

(15)
Incorporated by reference to the Annual Report on Form 10-K for the Transition Period ended December 31, 2011 filed with the Securities and Exchange Commission on March 30, 2012.

(16)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 8, 2012

(17)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 19, 2012.

(18)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 16, 2012.

(19)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 17, 2012.

(20)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 28, 2013.

(21)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 26, 2013

(22)
Incorporated by reference to the Current Report on Form S-8 Registration Statement filed with the Securities and Exchange Commission on April 25, 2013.
 
 
36

 
 
(23)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2013.

(24)
Incorporated by reference to the Current Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2013.

(25)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 27, 2013.

(26)
Incorporated by reference to the Form S-8 Registration Statement filed with the Securities and Exchange Commission on January 30, 2014.

(27)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 5, 2014.
 
(28)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2014.
 
(29)
Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 15, 2014.
 
 
37

 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EVOLUCIA, INC.
 
 Signature
 
Title
 
Date
         
         
 /s/THOMAS SEIFERT
 
Chief Executive Officer and Chief
Financial Officer
 
October 15, 2015
Thomas Seifert
 
(Principal Executive Officer,
Principal Financial
Officer and Principal Accounting
Officer)
   
 
 
 
38



EXHIBIT 31.1
 
 
CERTIFICATION
  
I, Thomas Seifert, certify that:
 
1.
I have reviewed this Form 10-Q/A for the quarter ended September 30, 2014 of Evolucia Inc.;
 
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 Exchange 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.
 
 
October 15, 2015
/s/ Thomas Seifert
 
 
Thomas Seifert
 
 
Interim Chief Executive and Financial
Officer (Principal Executive, Financial and
Accounting Officer)
 
 
 
 



EXHIBIT 32.1
 
 
CERTIFICATION PURSUANT TO
 
18 U.S.C. SECTION 1350,
 
AS ADOPTED PURSUANT TO
 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
 
In connection with the Quarterly Report of Evolucia Inc. (the "Company") on Form 10-Q/A for the quarter ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas Seifert, Interim Chief Executive and Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
 
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
 
October 15, 2015
/s/ Thomas Seifert
   
 
Thomas Seifert
   
 
Interim Chief Executive and Financial
Officer (Principal Executive, Financial and
Accounting Officer)