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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
FORM 10-Q
 
     
 
ý
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For The Quarterly Period Ended June 30, 2013
 
or
 
o
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from                        to                       
 
Commission file number- 333-182737
 
 
DIRECT LED, INC.
(Exact name of registrant as specified in the charter)
 
     
Delaware
(State or other jurisdiction of
incorporation or organization)
 
 
45-5290376
(I.R.S. Employer
Identification Number)
231 W. 39th Street, Suite 726
New York, New York 10018
(Address of principal executive office)
 
75068
(Zip Code)

(201) 289-0991
(Registrant's telephone number including area code)
 
        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ý    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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    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 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 G
 
Non-accelerated filer o
(Do not check if a
smaller reporting company)
 
Smaller reporting company x
 
        Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). YES x    NO o
 
        As of August 14, 2013, there were 8,535,000 shares of the Registrant's common stock, $.0001 par value outstanding.
 
 
 
 

 
 
Table of Contents 
 
 
Direct LED, Inc.
 
Index
 
             
       
Page No.
 
PART I—FINANCIAL INFORMATION
 
Item 1.
 
Financial Statements
      3  
             
   
Balance Sheets (unaudited) at June 30, 2013 and December 31, 2012
      4  
             
   
Statements of Operations (unaudited) for the six months ended June 30, 2013 and for the period beginning May 14, 2012 (Date of inception) to June 30, 2013
      5  
             
   
Statement of Stockholders Equity for the period from May 14, 2012 (Date of inception) toJune 30, 2013
      6  
             
   
Statements of Cash Flows (unaudited) for the three and six  months ended June 30, 2013 and June 30, 2012 and for the period beginning May14, 2012 (Date of inception) to June 30, 2013
     7  
             
   
Notes to Financial Statements
      8  
             
Item 2.
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
      13  
             
Item 3.
 
Quantitative and Qualitative Disclosures About Market Risk
      17  
             
Item 4.
 
Controls and Procedures
      17  
   
PART II—OTHER INFORMATION
 
             
Item 1.
 
Legal Proceedings
      18  
             
Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
      18  
             
Item 3.
 
Default Upon Senior Securities
      18  
             
Item 4.
 
Submission of Matters to a Vote of Security Shareholders
      18  
             
Item 5.
 
Other Information
      18  
             
Item 6.
 
Exhibits
      19  
         
Signature
      20  
 
 
 
2

 
 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
 
        This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve substantial risks and uncertainties. In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the Securities and Exchange Commission, or SEC, or in connection with oral statements made to the press, potential investors or others. All statements, other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "expect," "estimate," "anticipate," "predict," "believe," "think," "plan," "will," "should," "intend," "seek," "potential" and similar expressions and variations are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
 
        Forward-looking statements in this report are subject to a number of known and unknown risks and uncertainties that could cause our actual results, performance or achievements to differ materially from those described in the forward-looking statements, in this report as well as in the other documents we file with the SEC from time to time, and such risks and uncertainties are specifically incorporated herein by reference.
 
Forward-looking statements speak only as of the date the statements are made. Except as required under the federal securities laws and rules and regulations of the SEC, we undertake no obligation to update or revise forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. We caution you not to unduly rely on the forward-looking statements when evaluating the information presented in this report.

 
 
PART I—FINANCIAL INFORMATION
 
 
ITEM 1.    FINANCIAL STATEMENTS
 
        The financial statements of Direct LED, Inc. ("Direct Led, Inc." or the "Company") as of June 30, 2013 and December 31, 2012 and for the six months ended June 30, 2013 and June 30, 2012 included herein have been prepared by the Company, without audit, pursuant to U.S. generally accepted accounting principles and the rules and regulations of the SEC. In addition, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the results for the interim periods. The results of operations for such interim periods are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K filed with the SEC, on April 2, 2013.
 
 
 
 
3

 
 
DIRECT LED, INC.
 
(A Development Stage Company)
 
BALANCE SHEET
 
             
             
             
   
(Unaudited)
       
   
June 30,
   
December 31,
 
ASSETS
 
2013
   
2012
 
CURRENT ASSETS:
           
  Cash
  $ 100     $ 100  
 Accounts receivable
    96,000       96,000  
 TOTAL CURRENT ASSETS
    96,100       96,100  
                 
 TOTAL ASSETS
    96,100       96,100  
                 
 LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
 CURRENT LIABILITIES:
               
 Accounts payable
    76,800       76,800  
 TOTAL CURRENT LIABILITIES
    76,800       76,800  
                 
 COMMITMENTS AND CONTINGENCIES
               
                 
 STOCKHOLDERS' EQUITY
               
 Common stock,100,000,000 shares authorized, par value $0.0001
               
  8,535,000 shares issued and outstanding as of
               
  June 30, 2013 and December 31, 2012
    855       855  
 Additional paid-in capital
    320,099       320,099  
 Retained earnings
    (301,654 )     (301,654 )
 TOTAL STOCKHOLDERS' EQUITY
    19,300       19,300  
                 
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 96,100     $ 96,100  
 
 The accompanying notes are an integral part of these financial statements.
 
 
 
4

 
 
DIRECT LED, INC.
 
(A Development Stage Company)
 
STATEMENT OF OPERATIONS
 
(Unaudited)
 
                               
                               
                           
Cumulative
 
   
Three Months Ended
   
Six Months Ended
   
From May 14, 2012
 
   
June 30,
   
June 30,
   
(Date of Inception) To
 
   
2013
   
2012
   
2013
   
2012
   
June 30, 2013
 
                           
 
 
                               
Net revenue
  $ -     $ -     $ -     $ 96,000     $ 96,000  
                                         
Cost of goods sold
    -       -       -       76,800       76,800  
                                         
Income from operations
    -       -       -       19,200       19,200  
                                         
General and administrative expenses
                                       
Research and development
    -       -       -       320,000       320,000  
Consulting and other services
    -       -       -       854       854  
                                         
Total general and administrative expenses
    -       -       -       320,854       320,854  
                                         
Loss before income taxes (benefit)
    -       -       -       (301,654 )     (301,654 )
                                         
Income taxes
                            --       --  
                                         
Net income (loss)
  $ -     $ -     $ -     $ (301,654 )   $ (301,654 )
                                         
                                         
Net loss per common share - basic and diluted
  $ -     $ -     $ -     $ (0.05 )   $ (0.05 )
                                         
Weighted average common equivalent
                                       
shares outstanding - basic and diluted
    -       -       -       6,034,291       6,034,291  
                                         
                                         
The accompanying notes are an integral part of these financial statements.
 
 
 
 
5

 
 
DIRECT LED, INC.
 
(A Development Stage Company)
 
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
 
FOR THE PERIOD FROM MAY 14, 2012 (DATE OF INCEPTION) TO JUNE 30, 2013
 
(Unaudited)
 
                               
                               
                               
               
Additional
         
Total
 
   
Common Stock
         
Paid-In
   
Retained
   
Stockholders'
 
   
Shares
   
Amount
   
Capital
   
Earnings
   
Equity
 
Balance May 14, 2012
    -     $ -     $ -     $ -  
                                       
Issue 1,000 shares of common stock for cash
    1,000       1       99               100  
                                         
Issue 8,534,000 shares of common stock to
                                       
founders at par value
    8,534,000       854       -       -       854  
                                         
Direct payment by  majority shareholder for
                                       
research and development costs
    -       -       320,000       -       320,000  
                                         
Net loss for the period beginning May 14, 2012
                                       
(date of inception) through December 31, 2012
    -       -       -       (301,654 )     (301,654 )
                                         
Balance December 31, 2012
    8,535,000       855       320,099       (301,654 )     19,300  
                                         
Net loss for the six months period ending
                                       
June 30, 2013
    -       -       -       -       -  
                                         
Balance June 30, 2013
    8,535,000     $ 855     $ 320,099     $ (301,654 )   $ 19,300  
 
 
The accompanying notes are an integral part of these financial statements.
 
 
 
6

 
 
DIRECT LED, INC.
 
(A Development Stage Company)
 
STATEMENT OF CASH FLOWS
 
(Unaudited)
 
             
         
Cumulative
 
   
Six Months
   
From May 14, 2012
 
   
Ended
   
(Date of Inception)
 
   
June 30, 2013
   
To June 30, 2013
 
         
 
 
CASH FLOWS (TO) FROM OPERATING ACTIVITIES:
           
Net income (loss)
  $ -     $ (301,654 )
Change in operating assets and liabilities:
               
Accounts receivable
    -       (96,000 )
Accounts payable
    -       76,800  
Common stock issued to founders
    -       854  
             Common stock issued for research and development expenses
    -       320,000  
Accrued income taxes
    -       -  
Net cash used in operating activities
    -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Issuance of common stock for cash
    -       100  
Net cash provided by financing activities
    -       100  
                 
NET INCREASE IN CASH & CASH EQUIVALENTS
    -       100  
                 
CASH & CASH EQUIVALENTS, BEGINNING BALANCE
    -       -  
                 
CASH & CASH EQUIVALENTS, ENDING BALANCE
  $ -     $ 100  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Interest paid
  $ -     $ -  
Income taxes paid
  $ -     $ -  
                 
NON-CASH FINANCING SOURCES
               
Founders shares issued in exchange for consulting and other services
  $ -     $ 854  
Direct payment by  majority shareholder for
               
research and development costs
    -       320,000  
 
 
The accompanying notes are an integral part of these financial statements.
 
 
 
7

 
 
Direct LED, Inc.
(A Development Stage Company)
Notes To Financial Statements
June 30, 2013



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Direct LED, Inc. (the Company) is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

History

Direct LED, Inc. (the “Company”), a development stage company, was organized in Delaware on May 14, 2012. The Company is in the development stage as defined in Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 915, “Development Stage Entities.” The Company is in the LED consumer lighting technology business. The Company’s Board of Directors have chosen a December 31 year end for reporting purposes.

Interim financial statements

The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the Company’s audited financial statements and footnotes thereto for the year ended December 31, 2013, included in the Company’s Form 10-K filed for the period beginning May 14, 2012 (Date of inception) through December 31, 2012. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The financial statements reflect all adjustments (consisting primarily of normal recurring adjustments) that are, in the opinion of management necessary for a fair presentation of the Company’s financial position and results of operations. The operating results for the three and six months ended June 30, 2013 are not necessarily indicative of the results to be expected for any other interim period of an future year.

Development Stage Company and Going-Concern

The Company is in the development stage since planned principal activities have not commenced and the Company has generated limited revenue. In a development stage company, management devotes most of its activities to developing a market for its products and services.  These financial statements have been prepared on a going-concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.

The continuation of the Company as a going-concern and the ability of the Company to emerge from the development stage is dependent upon, the ability of the Company to obtain necessary equity and debt financings to continue operations and to generate sustainable revenue. There is no guarantee that the Company will be able to raise adequate equity or debt financings or generate profitable operations.
 
 
 
8

 
 
Use of Estimates in the Preparation of Financial Statements

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, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.

Concentration of Credit Risk

Financial instruments, which will potentially subject the Company to concentrations of credit risk, consist of cash and accounts receivable. The Company places its cash with high quality financial institutions and at times may exceed the FDIC insurance limit. The Company will extend credit based on an evaluation of the customer’s financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. The Company will monitor its exposure for credit losses and will maintain an allowance for anticipated losses as required.

Cash and Cash Equivalents

For purposes of the statements of cash flows, Direct LED, Inc. considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Inventories

Inventories are comprised of LED light bulbs, which are stated at lower of cost or market. Cost is determined on a first-in, first-out (FIFO) basis. A valuation allowance is provided for obsolete and slow-moving inventory to write cost down to market if necessary. As of June 30, 2013 and December 31, 2012 the Company determined that no valuation allowance was required.

Revenue Recognition

Direct LED, Inc. recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.

Cost of sales

The Company includes all costs directly related to the production and acquisition of goods for sale in cost of goods sold. The Company will classify direct material, direct labor, production related overheads, freight and distribution costs, and the depreciation and amortization of assets directly used in the production of goods for sale as cost of sales in the statement of operations.

Research and development expenses

Research and development costs are charged to operations when incurred and are included in operating expenses. The amounts charged for the period May 14, 2012 to June 20, 2013 was $320,000.


 
9

 

Selling, general and administrative expenses

The Company will include all costs not directly related to the production or acquisition of goods for sale in selling, general and administrative expenses. These costs will include mainly administrative and selling labor, related support materials and the depreciation and amortization of assets used in the administrative and selling functions.

Shipping and Handling Costs

Freight billed to customers will be considered sales revenue and the related freight cost as a cost of sales.

Allowance for Doubtful Accounts

We will provide an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable. As of June 30, 2013 and December 31, 2012 the Company’s accounts receivable balance is $96,000, and management has determined that no allowance is necessary..

Advertising

The Company expenses advertising costs as incurred. The Company incurred $-0- in advertising costs for the period May 14, 2012 (Date of inception) through June 30, 2013.

Income Taxes

The Company uses the liability method of accounting for income taxes pursuant to ASC Topic 740, “Income Taxes.” Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year-end. The Company adopted the provisions of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes - An interpretation of FASB Statement 109, (formerly FASB issued Interpretation 48 - FIN 48), on May 14, 2012. FASB ASC 740-10-65 clarifies the accounting and disclosure requirements for uncertainty in tax positions, as defined.  It required a two-step approach to evaluate tax positions and determine if they should be recognized in the financial statements. The two-step approach involves recognizing any tax positions that are “more likely than not” to occur and then measuring those positions to determine if they are recognizable in the financial statements. Management regularly reviews and analyzes all tax positions and has determined that no aggressive tax positions have been taken.

Basic and Diluted Net Loss per Share

Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period.  Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive.



 
10

 

Stockholder’s Equity

The Company records shares as issued when the obligation to issue has occurred and the subscriber has all the rights and duties of a stockholder.

Fair Value of Financial Instruments

ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

The three levels of valuation hierarchy are defined as follows:

● Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Stock-based compensation

The Company will record compensation expense associated with stock options and other forms of employee and non-employee equity compensation in accordance with FASB ASC 718, “Compensation – Stock Compensation”, formerly referenced as SFAS 123R, “Share-Based Payment”. The Company will estimate the fair value of stock options granted using the Black-Scholes-Merton option-pricing formula and a single option approach. This fair value will then be amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

During the period May 14, 2012 (Date of inception) through June 30, 2013, the Company incurred $-0- in stock-based compensation expense.

Recently Issued Accounting Pronouncements

Direct LED, Inc. does not expect the adoption of recently issued accounting pronouncements to have a material effect on its results of operations, financial position, or cash flows.



 
11

 
 
NOTE 2 - STOCKHOLDER'S EQUITY

The Company is authorized to issue 100,000,000 shares of common stock having a $0.0001 par value. As of June 30, 2013 and December 31, 2012 there were 8,535,000 shares of common stock issued and outstanding.

On May 14, 2012 the Company issued 1,000 shares of common stock for cash of $100.

On July 21, 2012 the Company issued 8,534,000 shares of common stock to its founders at par value.

The Company recorded a capital contribution by it’s majority shareholder of $320,000 in exchange for research and development expenditures paid by the majority shareholder directly to the vendor.
 
NOTE 3 – INCOME TAXES

The reconciliation of the effective income tax rate to the federal statutory rate for the period May 14, 2012 (inception) to December 31, 2012 is as follows:
 
 
Federal income tax rate
    34 %
 
Effect of net operating loss
    (34.0 )%
 
Effective income tax rate
    0.0 %
 
Deferred tax assets and liabilities reflect the net effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2012 are as follows:
 
 
 
Net operating losscarryforwards
  $ 102,562  
 
Less – Valuation allowance
    (102,562

The Company has a net operating loss of approximately $301,500 which will expire starting in 2027. The Company has provided a valuation allowance for the deferred tax asset since management has not been able to determine that the realization of that asset is more likely than not.

NOTE 4 - SEGMENT REPORTING

As of June 30, 2013, the Company had one operating segment, consumer lighting products. For the period from May 14, 2012 (inception) through December 31, 2012 the Company had one customer which accounted for 100% of the revenue. The customer was located in the United States.

NOTE 5 – SUBSEQUENT EVENTS

The Company has evaluated all subsequent events that occurred up to the time of the Company's issuance of its financial statements.

 
 
12

 
 
ITEM 2:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
  The following discussion should be read in conjunction with (i) our financial statements for the year ended December 31, 2012 together with the notes to these financial statements; and (ii) the section entitled “Business” that appears elsewhere in this report.  The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this report. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report.  Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

The statements in this report include forward-looking statements.  These forward-looking statements are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations.  You should not rely upon these forward-looking statements as predictions of future events because we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur.  You can identify a forward-looking statement by the use of the forward-terminology, including words such as “may”, “will”, “believes”, “anticipates”, “estimates”, “expects”, “continues”, “should”, “seeks”, “intends”, “plans”, and/or words of similar import, or the negative of these words and phrases or other variations of these words and phrases or comparable terminology.  These forward-looking statements relate to, among other things: our sales, results of operations and anticipated cash flows; capital expenditures; depreciation and amortization expenses; sales, general and administrative expenses; our ability to maintain and develop relationship with our existing and potential future customers;  and, our ability to maintain a level of investment that is required to remain competitive.  Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including, but not limited to: variability of our revenues and financial performance; risks associated with technological changes; the acceptance of our products in the marketplace by existing and potential customers; disruption of operations or increases in expenses due to our involvement with litigation or caused by civil or political unrest or other catastrophic events; general economic conditions, government mandates and conditions in the lighting industry in particular; and, the continued employment of our key personnel and other risks associated with competition.

For a discussion of the factors that could cause actual results to differ materially from the forward-looking statements see the “Liquidity and Capital Resources” section under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this item of this report and the other risks and uncertainties that are set forth elsewhere in this report or detailed in our other Securities and Exchange Commission reports and filings.  We believe it is important to communicate our expectations. However, our management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We are a development stage company incorporated on May 14, 2012 under the laws of the state of Delaware.  We have generated limited revenues and expect to generate increased revenues in the foreseeable future.  
 
Our Officers and Directors are responsible for our managerial and organizational structure which will include preparation of disclosure and accounting controls under the Sarbanes Oxley Act of 2002. When these controls are implemented, they will be responsible for the administration of the controls. Should they not have sufficient experience, they may be incapable of creating and implementing the controls which may cause us to be subject to sanctions and fines by the Securities and Exchange Commission which ultimately could cause you to lose your investment.
 
Since incorporation, the Company has financed its operations through private investment and shareholders loans.  We will continue to raise expansion capital through private placement or debt financing.  As of June 30, 2013, we had revenues of $0 and had total expenses of $0.  As of June 30, 2013 we had net income of $0.

Plan of Operations

We are a development stage company, incorporated on May 14, 2012 and have generated revenues of $96,000 from our business operations. We intend to enter into the LED lighting and display industry.
 
We have received approximately $320,000 in funding which was utilized for molds and manufacturing our LED light products. In addition, we also expect to have an exclusive license to sell a higher end more expensive decorative LED bulb once we have completed the agreement with ITRI which we anticipate will be completed once the final product design is complete. There is no assurance the ITRI agreement will be finalized. Expenses of issuance and distribution have been funded by issuance of shares of our common stock for services with the exception of our auditing fees which were paid in cash.

 
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We also intend to sell and distribute a higher end more expensive A-19 LED bulb to be developed by ITRI with patented technology to create a wide angle “Light & Light” product. A-19 is an industry classification of a typical light bulb. The “A” refers to the bulbous shape seen in traditional incandescent light bulbs for general use. The 19 refers to the diameter in eights of an inch, or 2 3/8”. Traditional 60W incandescent bulbs are usually A-19s. The Company is currently in discussions with ITRI for the purpose of obtaining an exclusive U.S. license to sell the product. We expect to enter into an agreement upon completion of the design of our exclusive bulb which is decorative and will be a higher price point to be sold in more specialty stores. There is no definitive agreement; however, we anticipate a final agreement in the first quarter of 2013. In addition, the Company is seeking a joint venture relationship with a manufacturing partner who will be responsible for production, quality control, UL and other certifications and product development. The Company will be responsible for sales, marketing, product specifications, reliability and customer relations. New product development and specifications will be shared between the partners. No joint venture agreement has been entered into as of this date. The “Light & Light” LED bulb is the world’s first all-plastic LED bulb. The bulb is lightweight with high luminous efficiency and has an illumination angle of 330 degrees. The product also boasts good heat dissipation and will not break when dropped. It is highly reliable and has a 50,000 hour life.
 
Our Officers and Directors are responsible for our managerial and organizational structure which will include preparation of disclosure and accounting controls under the Sarbanes Oxley Act of 2002. When these controls are implemented, they will be responsible for the administration of the controls. Should they not have sufficient experience, they may be incapable of creating and implementing the controls which may cause us to be subject to sanctions and fines by the Securities and Exchange Commission which ultimately could cause you to lose your investment.
 
Since incorporation, the Company has financed its operations through private placement capital. As of May 22, 2012, we had $100 cash on hand and accounts receivable of $96,000. We had accounts payable of $76,800.We had total sales of $96,000, costs of sales of $76,800, and operating expenses totaling $85,000, which were related to start-up costs. Cash on hand on May 31, 2012 was $100; however, the board has determined that December 31 will be the Company’s fiscal year end. The notes to the financials have been changed accordingly. To date, the Company has not fully implemented its planned principal operations or strategic business plan.  We are attempting to secure sufficient monetary assets to increase operations. We cannot assure any investor that we will be able to enter into sufficient business operations adequate enough to insure continued operations.
 
To date, the Company has not fully implemented its planned principal operations or strategic business plan. We are attempting to secure sufficient monetary assets to increase operations. We cannot assure any investor that we will be able to enter into sufficient business operations adequate enough to insure continued operations.
 
We currently do not own any significant plant or equipment that we would seek to sell in the near future.  
 
Our management anticipates hiring employees over the next twelve (12) months as needed. Currently, the Company believes the services provided by its officers and directors appear sufficient at this time.
 
The Company has not paid for expenses on behalf of any directors.  Additionally we believe that this policy shall not materially change within the next twelve months.
 
Our current business consists of sales of our own LED lights. We have received a capital contribution from our majority shareholder Chun Pao Leng in the form of cash payment. These funds were paid directly to vendors Alpha Plus Epi, Co. and Chang Technology Corp. Chun Pao Leng directed us to record the investment as a capital contribution as additional paid in capital. These funds enabled the Company to build molds for its light products and to purchase inventory.
 
 
 
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We are also planning to order additional pieces if we can turn over our initial 8000 unit order. This product is intended to be sold through online sales through Costco, Sam’s Wholesale, and a few smaller furniture stores. We expect to finalize an exclusive agreement whereby we intend to sell the LED light headboard product with a metal bed set, which pursuant to a license agreement, will reflect Disney images. We intend to sell this product trough Wal-Mart and Target at a retail price of $99.99. This price should be confirmed once we have submitted our final designs and samples to the Wal-Mart buyer we are currently in discussions with. We expect Wal-Mart to approve a substantial order.
 
We also intend to continue the development of the A-19 bulb. We have successfully sold a floor program to Shop Rite, which is a 35 store super market chain in New Jersey. This represents our first display project and we are continuing to develop a changing color light bulb with a remote control system. In June, we expect to begin delivery of an A-19 dimmer able bulb to retail at $9.99 per bulb.
 
Impact of Inflation
 
We believe that the rate of inflation has had negligible effect on us.  We believe we can absorb most, if not all, increased non-controlled operating costs by operating our Company in the most efficient manner possible.

Liquidity and Capital Resources
 
Cash Flows from Operating Activities
 
Although we have generated limited revenues, we have negative cash flows from operating activities for the period ended June 30, 2013.  Operating expenditures during the period covered by this report include general and administrative costs (See “Financial Statements). 

Cash Flows from Investing Activities
 
We made no investments as of June 30, 2013.
 
Cash Flows from Financing Activities
 
We have financed our operations from the issuance of equity securities and shareholder loans. The Company has received no cash from the sale of its equity securities for the quarter ended June 30, 2013

Intangible Assets

There were no intangible assets during the period from inception through June 30, 2013.
 
 
 
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Material Commitments
 
There were no material commitments for the period May 14, 2012 (inception) through June 30, 2013.

Off-Balance Sheet Arrangements
 
We do not 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 investors.
  
Critical Accounting Policies
 
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
 
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Cash and Cash Equivalents

We consider all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. We have no cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Intangible Assets

We evaluate the recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. There was no impairment loss for the period from May 14, 2012 (inception) through June 30, 2013.

Income Taxes

The Company accounts for income taxes as outlined in ASC 740 “Income Taxes”, which was previously Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

Fair Value of Financial Instruments

The Company considers that the carrying amount of financial instruments, including accounts payable, approximates fair value because of the short maturity of these instruments.


 
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Share Based Payments
(included in ASC 718 “Compensation-Stock Compensation”)

In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R), companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees or independent contractors are required to provide services. Share-based compensation arrangements include stock options and warrants, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or “SAB 107”. SAB 107 expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods. On April 14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS 123(R). Companies may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods under SFAS 123.

The Company has fully adopted the provisions of SFAS No. 123(R) and related interpretations as provided by SAB 107. As such, compensation cost is measured on the date of grant as the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the share-based payments.

Recent Accounting Pronouncements

The Company has adopted all recently issued accounting pronouncements.  The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.
 
ITEM 3:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Market risk represents the risk of changes in value of a financial instrument, derivative or non-derivative, caused by fluctuations in interest rates, foreign exchange rates and equity prices. Changes in these factors could cause fluctuations in results of our operations and cash flows. In the ordinary course of business, we are exposed to interest rate and foreign currency exchange rate risks.
 
ITEM 4.    CONTROLS AND PROCEDURES.
 
        Based upon the required evaluation of our disclosure controls and procedures, our President and Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2013 our disclosure controls and procedures were adequate and effective to ensure that information was gathered, analyzed and disclosed on a timely basis.
 
        There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended June 30, 2013, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 
 
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PART II—OTHER INFORMATION
 
 
ITEM 1.    LEGAL PROCEEDINGS.
  
Not applicable.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There have been no sales of unregistered securities during this quarter ended June 30, 2013.

ITEM 3.   DEFAULT UPON SENIOR SECURITIES
 
Not applicable.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY SHAREHOLDERS

There have been no matters submitted to a vote of the Company’s shareholders.

ITEM 5.   OTHER INFORMATION
 
None.


 
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ITEM 6.   EXHIBITS

 
No.
Exhibit
31.1
Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101  Interactive data files pursuant to Rule 405 of Regulation S-T. 
 
 
 
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SIGNATURES
 
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
      DIRECT LED, INC.
 
       
 August 19, 2013
By:
/s/ John Morris
 
   
CEO, CTO and Principal Executive Officer
 
       
       
 
Pursuant to the requirements of the Securities Act of 1933, this report has been signed by the following persons in the capacities and on the dates indicated.
 
Signature
Title
Date
 
/s/  John Morris  CEO, CTO and  August 19, 2013 
John Morris                         Principal Executive Officer   
     
     
/s/ Randall Gruber CFO  August 19, 2013 
Randall Gruber  Principal Accounting Officer   
 
 
 
 
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INDEX TO EXHIBITS
 
No.
Exhibit
31.1
Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 




 
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