Here is my version of events. This may factually be incorrect.
I first ran across HDS on the web, looking for LED flashlights and such. Originally, HDS made the Action Light. A headlamp for caving. It had a hexagonal array of discreet LEDs. The Luxeon was still in a lab somewhere.
Later, after the introduction of the Luxeon, I ran across Arc flashlight. The first Arcs were the AAA keychain light. Then they made some of the first flashlights to have the luxeon in them, the Arc LS. The LS is pretty basic, a simple twisty "switch" and a regulator circuit.
I believe at sometime later, Arc collaborated with HDS on the Arc 4. At the time, HDS didn't make anything like the Arc LS, but HDS had experience with LED lighting and had some things to contribute (I believe that the Action light had variable light levels, and was designed for reliability).
Arc Flashlight LLC, then ceased to exist. I believe that HDS retained most of the circuit IP, and proceeded to make their own version of the Arc 4. The EDC series of lights.
I'm assuming that Peter (of Arc flashlight) had also run across HDS the same way I did, and collaborated with HDS, but this is speculation on my part.
edit: HDS predates Arc Flashlight. Also, if you hunt enough, you will see on the HDS website, that HDS did some consulting for Arc.