UNITED
STATES OF AMERICA

SECURITIES
AND EXCHANGE COMMISSION

Washington,
DC 20549



FORM
10-Q/A



Amendment No. 1



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



FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016



or



|[
    ] | 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: 333-179460



Aspirity
Holdings, LLC

(Exact
name of registrant as specified in its charter)



|Minnesota                  |  | 4931
    – Electric & Other Services Combined               |  | 27-1658449                             
|-------------------------- |  | ----------------------------------------------------------- |  | ---------------------------------------
|(State
    oforganization) |  | (Primary
    Standard IndustrialClassification Code Number) |  | (IRS
    EmployerIdentification Number)



|701
                                         Xenia Avenue South, Suite 475
        Minneapolis,
        MN 55416
|----------------------------------------------------------------------------------------------------------------
|(Address
    of principal executive offices, zip code)                                                          
|                                                                                                                
|(763)
    432-1500                                                                                              
|(Registrant’s
    telephone number, including area code)                                                        










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



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation ST (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x]
No [  ]



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting
company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] 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 [  ] No
[x]


















EXPLANATORY NOTE



This Amendment No. 1 on Form 10-Q/A is being
provided for the sole purpose of including conformed signature pages for the signature page and certifications inadvertently omitted
from our Form 10-Q for the period ending September 30, 2016, as filed on November 14, 2016. No other changes have been made to
the Form 10-Q.















TABLE
OF CONTENTS



|Definitions                        | 3                                                                                               
|---------------------------------- | ------------------------------------------------------------------------------------------------
|                                   | Terms
    Specific to the Company                                                               
|                                   | Industry
    Terms                                                                              
|                                   | Finance
    & Accounting Terms                                                                  
|Forward
    Looking Statements     | 8                                                                                               
|Part
    I – Financial Information | 9                                                                                               
|                                   | Item
    1 - Financial Statements (Unaudited)                                                   
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   | Item
    2 - Management’s Discussion & Analysis of Financial Condition and Results of Operations
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   |                                                                                                 
|                                   | Item
    3 - Quantitative & Qualitative Disclosures about Market Risk                           
|                                   | Item
    4 - Controls & Procedures                                                              
|Part
    II – Other Information    | 55                                                                                              
|                                   | Item
    1 - Legal Proceedings                                                                  
|                                   | Item
    1A - Risk Factors                                                                      
|                                   | Item
    2 - Unregistered Sales of Equity Securities & Use of Proceeds                          
|                                   | Item
    3 - Defaults Upon Senior Securities                                                    
|                                   | Item
    4 - Mine Safety Disclosures                                                            
|                                   | Item
    5 - Other Information                                                                  
|                                   | Item
    6 - Exhibits                                                                           
|Signatures                         | 60                                                                                              



2







Definitions



|Terms
    Specific to the Company
|---------------------------------
|Abbreviation
    or acronym      
|Aspirity
    or the Company      
|Aspirity
    Energy              
|AES                              
|Aspirity
    Financial           
|                                 
|Enterprises                      
|Apollo                           
|TCP                              
|SUM                              
|MEF                              
|CTG                              
|Cygnus                           
|CEF                              
|TCE                              
|TCPC                             
|REH                              
|TSE                              
|TSEE                             
|TSEC                             
|Cyclone                          



3







|Terms
    Specific to the Company
|---------------------------------
|Abbreviation
    or acronym      
|Distribution                     
|Exelon;
    PSA                  
|Legacy
    Businesses            
|Notes;
    Notes Offering        
|Operating
    Agreement          
|Restructuring                    
|S-1;
    Old and New             
|Term
    Loan                    
|Term
    Loan Notes              



4







|Industry
    Terms         
|---------------------------
|Abbreviation
    or acronym
|ABACCUS                    
|Btu;
    therm; MMBtu      
|EDC;
    LDC               
|EDI
    compliant          
|EEI                        
|EIA                        
|Electric
    utility       
|ERCOT                      
|FERC                       
|ISO;
    RTO               





5







|Industry
    Terms         
|---------------------------
|Abbreviation
    or acronym
|ISO-NE                     
|MISO                       
|MCF                        
|NERC                       
|NYISO                      
|PJM                        
|POR;
    non-POR           
|PURPA                      
|RECs                       



6







|Finance
    & Accounting Terms
|------------------------------
|Abbreviation
    or acronym   
|AOCI                          
|ASC                           
|ASU                           
|CFTC                          
|CME                           
|FASB                          
|GAAP                          
|ICE                           
|NGX                           
|SEC                           



7







Forward
Looking Statements



Readers
are urged to carefully review and consider the various disclosures made by us in this Form 10-Q and in our other reports filed
with the SEC that attempt to advise interested parties of the factors that may affect our business.



Statements
in this report that are not statements of historical facts are considered “forward-looking” and, accordingly, involve
risks and uncertainties that could cause actual results to differ materially from those discussed. Although such forward-looking
statements have been made in good faith and are based on reasonable assumptions, there is no assurance that the expected results
will be achieved. Any statements that express, or involve discussions as to, future expectations, risks, beliefs, plans, objectives,
assumptions, events, uncertainties, financial performance, or growth strategies, often, but not always, through the use of words
or phrases such as “anticipates”, “believes”, “estimates”, “expects”, “intends”,
“plans”, “projects”, “likely”, “will continue”, “could”, “may”,
“potential”, “target”, “outlook”, or words of similar meaning are not statements of historical
facts and may be forward-looking.



In
connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, we are providing this cautionary
statement to identify important factors that could cause our actual results to differ materially from those indicated in forward-looking
statements made by or on behalf of the Company in this Form 10-Q, in presentations, on our website, in response to questions,
or otherwise. You should not place undue reliance on any forward-looking statement. Examples of forward-looking statements include,
among others, statements we make regarding:



|● | Expected
    operating results, such as revenue growth, earnings, and numbers of enrollees and customers;                       
|- | --------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                 
|● | Statements
    regarding anticipated geographic expansion and obtaining necessary regulatory approvals;                         
|  |                                                                                                                                 
|● | Our
    belief that we have sufficient liquidity to fund our operations during the next 12 months; and                          
|  |                                                                                                                                 
|● | Any
    other risk factors listed from time to time by the Company in reports filed with the Securities and Exchange Commission.



Any
forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update
any forward-looking statement to reflect events or circumstances after the date on which that statement is made or to reflect
the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict
these events, nor can it assess the impact of each of these factors on the businesses of the Company or the extent to which any
factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.



Additional
disclosures regarding factors that could cause our results and performance to differ from results or performance anticipated by
this report are discussed under the heading “Item 1A – Risk Factors” of our Form 10-K/A for 2015, Item 1A –
Risk Factors” of our Form 10-K for 2015, and the “Risk Factors” section beginning on page 10 of our Form S-1,
and any assumptions and other factors referred to specifically in connection with such forward-looking statements that could cause
our actual results to differ materially from those indicated in the forward-looking statements.



8







Part
I – Financial Information



Item
1 - Financial Statements (Unaudited)



Aspirity
Holdings, LLC and Subsidiaries



Consolidated
Balance Sheets

As
of September 30, 2016 and December 31, 2015



|                                                                                  |  | September
    30, |             |   | December
    31, |  
|--------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ---------------- | -
|                                                                                  |  | 2016              |             |   | 2015             |  
|                                                                                  |  |                   |             |   |                  |  
|Assets                                                                            |  |                   |             |   |                  |  
|Current
    assets                                                                |  |                   |             |   |                  |  
|Unrestricted
    cash                                                             |  | $                 | 859,189     |   |                  | $
|Cash
    in trading accounts                                                      |  |                   | -           |   |                  |  
|Cash
    in collateral accounts                                                   |  |                   | 15,000      |   |                  |  
|Accounts
    receivable                                                           |  |                   | 505,549     |   |                  |  
|Term
    Loan - current (Related party - Note 13)                                 |  |                   | 7,541,364   |   |                  |  
|Prepaid
    expenses and other current assets                                     |  |                   | 44,340      |   |                  |  
|Assets
    of discontinued operations - current (see Note 4)                      |  |                   | -           |   |                  |  
|Total
    current assets                                                          |  |                   | 8,965,442   |   |                  |  
|                                                                                  |  |                   |             |   |                  |  
|Property,
    equipment and furniture, net                                        |  |                   | 82,151      |   |                  |  
|                                                                                  |  |                   |             |   |                  |  
|Other
    assets                                                                  |  |                   |             |   |                  |  
|Term
    Loan - non-current (Related party - Note 13)                             |  |                   | 9,814,025   |   |                  |  
|Accrued
    financial services revenue (Related party - Note 13)                  |  |                   | 428,555     |   |                  |  
|Assets
    of discontinued operations - non-current                               |  |                   | -           |   |                  |  
|Total
    assets                                                                  |  | $                 | 19,290,173  |   |                  | $
|                                                                                  |  |                   |             |   |                  |  
|Liabilities
    and Members’ Equity (Deficit)                                     |  |                   |             |   |                  |  
|Current
    liabilities                                                           |  |                   |             |   |                  |  
|Current
    portions of debt                                                      |  |                   |             |   |                  |  
|Revolver
    and short term debt (Related party - Note 13)                        |  | $                 | -           |   |                  | $
|Renewable
    unsecured subordinated notes                                        |  |                   | 11,244,165  |   |                  |  
|Accounts
    payable                                                              |  |                   | 2,178,183   |   |                  |  
|Accrued
    expenses                                                              |  |                   | -           |   |                  |  
|Accrued
    compensation                                                          |  |                   | 211,638     |   |                  |  
|Accrued
    interest                                                              |  |                   | 1,995,234   |   |                  |  
|Liabilities
    of discontinued operations - current (see Note 4)                 |  |                   | -           |   |                  |  
|Total
    current liabilities                                                     |  |                   | 15,629,220  |   |                  |  
|                                                                                  |  |                   |             |   |                  |  
|Long-term
    liabilities                                                         |  |                   |             |   |                  |  
|Renewable
    unsecured subordinated notes .                                      |  |                   | 16,004,913  |   |                  |  
|Liabilities
    of discontinued operations - non-current (see Note 4)             |  |                   | -           |   |                  |  
|Total
    long term liabilities                                                   |  |                   | 16,004,913  |   |                  |  
|Total
    liabilities                                                             |  |                   | 31,634,133  |   |                  |  
|                                                                                  |  |                   |             |   |                  |  
|Commitments
    and contingencies (see Note 14)                                   |  |                   |             |   |                  |  
|                                                                                  |  |                   |             |   |                  |  
|Members’
    equity (deficit)                                                     |  |                   |             |   |                  |  
|Series
    A preferred equity .                                                   |  |                   | 2,745,000   |   |                  |  
|Common
    equity                                                                 |  |                   | (15,088,960 | ) |                  |  
|Total
    members’ equity (deficit)                                               |  |                   | (12,343,960 | ) |                  |  
|Non-controlling
    interest                                                      |  |                   | -           |   |                  |  
|Accumulated
    other comprehensive income attributed to non-controlling interest |  |                   | -           |   |                  |  
|Total
    equity (deficit)                                                        |  |                   | (12,343,960 | ) |                  |  
|Total
    liabilities and equity (deficit)                                        |  | $                 | 19,290,173  |   |                  | $



See
notes to consolidated financial statements.



9







Aspirity
Holdings, LLC and Subsidiaries



Consolidated
Statements of Comprehensive Loss

Three
and Nine Months ended September 30, 2016 and 2015



|                                                        |  | Three
    Months        |            |   | Nine
    Months         |  
|------------------------------------------------------- |  | ----------------------- | ---------- | - | ----------------------- | -
|                                                        |  | Ended
    September 30, |            |   | Ended
    September 30, |  
|                                                        |  | 2016                    |            |   | 2015                    |  
|Revenue                                                 |  |                         |            |   |                         |  
|Retail
    energy services                              |  |                         | 928,204    |   |                         |  
|Financial
    services (Related party - Note 13)        |  |                         | 711,306    |   |                         |  
|Total
    revenue                                       |  |                         | 1,639,510  |   |                         |  
|                                                        |  |                         |            |   |                         |  
|Costs
    of sales and services                         |  |                         |            |   |                         |  
|Cost
    of retail energy sold                          |  |                         | 745,374    |   |                         |  
|Gross
    profit on sales and services                  |  |                         | 894,136    |   |                         |  
|Operating
    expenses                                  |  |                         |            |   |                         |  
|Sales,
    marketing, and customer service              |  |                         | 1,065,341  |   |                         |  
|Other
    general and administrative                    |  |                         | 1,355,168  |   |                         |  
|Total
    operating expenses                            |  |                         | 2,420,509  |   |                         |  
|Operating
    loss                                      |  |                         | (1,526,373 | ) |                         |  
|                                                        |  |                         |            |   |                         |  
|Other
    income (expense)                              |  |                         |            |   |                         |  
|Interest
    expense                                    |  |                         | (1,068,776 | ) |                         |  
|Other
    income, net                                   |  |                         | 73         |   |                         |  
|Other
    expense, net                                  |  |                         | (1,068,703 | ) |                         |  
|                                                        |  |                         |            |   |                         |  
|Loss
    from continuing operations before income taxes |  |                         | (2,595,076 | ) |                         |  
|Income
    tax benefit                                  |  |                         | -          |   |                         |  
|Net
    loss from continuing operations                 |  |                         | (2,595,076 | ) |                         |  
|Discontinued
    operations (Note 4)                    |  |                         |            |   |                         |  
|Net
    income (loss) from discontinued operations      |  |                         | -          |   |                         |  
|Net
    loss                                            |  |                         | (2,595,076 | ) |                         |  
|Net
    income (loss) from non-controlling interest     |  |                         | -          |   |                         |  
|Net
    loss attributable to Company                    |  |                         | (2,595,076 | ) |                         |  
|Preferred
    distributions                             |  |                         | 137,268    |   |                         |  
|Net
    loss attributable to common                     |  | $                       | (2,732,344 | ) |                         | $
|                                                        |  |                         |            |   |                         |  
|Other
    comprehensive loss:                           |  |                         |            |   |                         |  
|Net
    income (loss) from non-controlling interest     |  | $                       | -          |   |                         | $
|Foreign
    currency translation adjustment             |  |                         | -          |   |                         |  
|Attributable
    to non-controlling interest            |  |                         | -          |   |                         |  
|Net
    loss attributable to Company                    |  |                         | (2,595,076 | ) |                         |  
|Foreign
    currency translation adjustment             |  |                         | -          |   |                         |  
|Change
    in fair value of cash flow hedges            |  |                         | -          |   |                         |  
|Unrealized
    gain on marketable securities            |  |                         | -          |   |                         |  
|Attributable
    to the Company                         |  |                         | (2,595,076 | ) |                         |  
|Preferred
    distributions                             |  |                         | 137,268    |   |                         |  
|Attributable
    to common                              |  | $                       | (2,732,344 | ) |                         | $



See
notes to consolidated financial statements.



10







Aspirity
Holdings, LLC and Subsidiaries



Consolidated
Statements of Cash Flows

Nine
Months Ended September 30, 2016 and 2015



|                                                                                             |  | Nine
    Months         |           
|-------------------------------------------------------------------------------------------- |  | ----------------------- | ----------
|                                                                                             |  | Ended
    September 30, |           
|                                                                                             |  | 2016                    |           
|                                                                                             |  |                         |           
|Cash
    flows from operating activities                                                     |  |                         |           
|Net
    loss                                                                                 |  | $                       | (8,437,216
|Remove
    net income from discontinued operations                                           |  |                         | 712,364   
|Net
    loss from continuing operations                                                      |  |                         | (9,149,580
|                                                                                             |  |                         |           
|Adjustments
    to reconcile net (loss) income to net cash provided by operating activities: |  |                         |           
|Depreciation
    and amortization                                                            |  |                         | 77,801    
|Unit
    based compensation                                                                  |  |                         | 636,523   
|Gain
    on sale of marketable securities                                                    |  |                         | -         
|Change
    in operating assets and liabilities:                                              |  |                         |           
|Trading
    accounts                                                                         |  |                         | 291,104   
|Collateral
    deposits                                                                      |  |                         | 48,500    
|Accounts
    receivable                                                                      |  |                         | (1,344,206
|Prepaid
    expenses and other current assets                                                |  |                         | 99,719    
|Accrued
    revenue                                                                          |  |                         | (428,555  
|Accounts
    payable                                                                         |  |                         | 1,510,189 
|Accrued
    expenses                                                                         |  |                         | 85,277    
|Accrued
    compensation                                                                     |  |                         | 211,638   
|Accrued
    interest                                                                         |  |                         | 553,440   
|Net
    cash used for continuing operations                                                  |  |                         | (7,408,150
|Net
    cash provided by discontinued operations                                             |  |                         | 1,747,833 
|Net
    cash provided by (used for) operating activites                                      |  |                         | (5,660,317
|                                                                                             |  |                         |           
|Cash
    flows from investing activities                                                     |  |                         |           
|Purchases
    of property, equipment, and furniture                                          |  |                         | (20,392   
|Purchases
    of marketable securities                                                       |  |                         | -         
|Proceeds
    from sale of marketable securities                                              |  |                         | -         
|Proceeds
    from Term Loan                                                                  |  |                         | 2,892,797 
|Net
    cash provided by (used for) continuing operations                                    |  |                         | 2,872,405 
|Net
    cash used for discontinued operations                                                |  |                         | (162,852  
|Net
    cash provided by (used for) investing activities                                     |  |                         | 2,709,553 
|                                                                                             |  |                         |           
|Cash
    flows from financing activities                                                     |  |                         |           
|Deferred
    financing costs                                                                 |  |                         | (239,401  
|Proceeds
    from revolver and short term debt                                               |  |                         | 4,345,420 
|Proceeds
    from bridge loan                                                                |  |                         | 500,000   
|Payments
    on revolver and short term debt                                                 |  |                         | (3,496,586
|Issuances
    of renewable unsecured subordinated notes                                      |  |                         | 6,275,780 
|Redmptions
    of renewable unsecured subordinated notes                                     |  |                         | (3,016,863
|Preferred
    distributions                                                                  |  |                         | (411,804  
|Net
    cash provided by continuing operations                                               |  |                         | 3,956,546 
|Net
    cash used for discontinued operations                                                |  |                         | (1,103,898
|Net
    cash provided by financing activities                                                |  |                         | 2,852,648 
|Net
    increase (decrease) in cash                                                          |  |                         | (98,116   
|Effect
    of exchange rate changes on cash                                                  |  |                         | 87,104    
|                                                                                             |  |                         |           
|Unrestricted
    cash                                                                        |  |                         |           
|Beginning
    of period                                                                      |  |                         | 2,331,401 
|Adjustment
    for deconsolidation of VIE                                                    |  |                         | (1,461,200
|End
    of period                                                                            |  | $                       | 859,189   



See
notes to consolidated financial statements.



11







Aspirity
Holdings, LLC and Subsidiaries



Consolidated
Statements of Cash Flows (continued)

Nine
Months Ended September 30, 2016 and 2015





|                                                       |  | Nine
    Months         |          
|------------------------------------------------------ |  | ----------------------- | ---------
|                                                       |  | Ended
    September 30, |          
|                                                       |  | 2016                    |          
|Non-cash
    financing activities:                     |  |                         |          
|Extinguishment
    of bridge loan                      |  | $                       | 500,000  
|                                                       |  |                         |          
|Renewable
    unsecured subordinated notes             |  |                         |          
|Capitalized
    interest                               |  | $                       | 289,475  
|Renewals                                               |  | $                       | 6,222,763
|                                                       |  |                         |          
|Supplemental
    disclosures of cash flow information: |  |                         |          
|Cash
    payments for interest                         |  | $                       | 2,165,903



See
notes to consolidated financial statements.



12







Aspirity
Holdings, LLC and Subsidiaries



Consolidated
Statements of Changes in Members’ Equity (Deficit)

Nine
Months Ended September 30, 2016 and 2015





|                              |  | Series A Preferred Equity |           |  | Common Equity |   |             | Accumulated Other Comprehensive
    Income |  |   | Non- Controlling Interest |  |  | Total Members’ Equity |         |  | Non- Controlling Interest |   |             | Accumulated Other Comprehensive
    Income Attributed to Non- Controlling Interest |  |   | Total Equity |  
|----------------------------- |  | ------------------------- | --------- |  | ------------- | - | ----------- | ------------------------------------------ |  | - | ------------------------- |  |  | --------------------- | ------- |  | ------------------------- | - | ----------- | ---------------------------------------------------------------------------------- |  | - | ------------ | -
|Balance- December 31, 2014    |  | $                         | 2,745,000 |  |               | $ | (193,624    | )                                          |  | $ | 146,749                   |  |  | $                     | -       |  |                           | $ | 2,698,125   |                                                                                    |  | $ | -            |  
|Net income                    |  |                           | -         |  |               |   | (2,746,644  | )                                          |  |   | -                         |  |  |                       | 522,716 |  |                           |   | (2,223,928  | )                                                                                  |  |   | -            |  
|Other comprehensive  income   |  |                           | -         |  |               |   | -           |                                            |  |   | 297,105                   |  |  |                       | -       |  |                           |   | 297,105     |                                                                                    |  |   | -            |  
|Preferred distributions       |  |                           | -         |  |               |   | (411,804    | )                                          |  |   | -                         |  |  |                       | -       |  |                           |   | (411,804    | )                                                                                  |  |   | -            |  
|Common distributions          |  |                           | -         |  |               |   | (5,671,599  | )                                          |  |   | -                         |  |  |                       | -       |  |                           |   | (5,671,599  | )                                                                                  |  |   | -            |  
|Balance- September 30, 2015   |  | $                         | 2,745,000 |  |               | $ | (9,023,671  | )                                          |  | $ | 443,854                   |  |  | $                     | 522,716 |  |                           | $ | (5,312,101  | )                                                                                  |  | $ | -            |  
|Balance- December 31, 2015    |  | $                         | 2,745,000 |  |               | $ | (7,499,580  | )                                          |  | $ | -                         |  |  | $                     | -       |  |                           | $ | (4,754,580  | )                                                                                  |  | $ | (3,955,159   | )
|Net loss                      |  |                           | -         |  |               |   | (8,327,578  | )                                          |  |   | -                         |  |  |                       | -       |  |                           |   | (8,327,578  | )                                                                                  |  |   | (109,638     | )
|Other comprehensive income    |  |                           | -         |  |               |   | -           |                                            |  |   | -                         |  |  |                       | -       |  |                           |   | -           |                                                                                    |  |   | -            |  
|Preferred distributions       |  |                           | -         |  |               |   | (411,804    | )                                          |  |   | -                         |  |  |                       | -       |  |                           |   | (411,804    | )                                                                                  |  |   | -            |  
|Unit based compensation       |  |                           | -         |  |               |   | 636,523     |                                            |  |   | -                         |  |  |                       | -       |  |                           |   | 636,523     |                                                                                    |  |   | -            |  
|Extinguishment of bridge loan |  |                           |           |  |               |   |             |                                            |  |   |                           |  |  |                       |         |  |                           |   |             |                                                                                    |  |   |              |  
|and accrued interest with     |  |                           |           |  |               |   |             |                                            |  |   |                           |  |  |                       |         |  |                           |   |             |                                                                                    |  |   |              |  
|issuance of common units      |  |                           | -         |  |               |   | 513,479     |                                            |  |   | -                         |  |  |                       | -       |  |                           |   | 513,479     |                                                                                    |  |   | -            |  
|Adjustment due to             |  |                           |           |  |               |   |             |                                            |  |   |                           |  |  |                       |         |  |                           |   |             |                                                                                    |  |   |              |  
|deconsolidation of VIE        |  |                           | -         |  |               |   | -           |                                            |  |   | -                         |  |  |                       | -       |  |                           |   | -           |                                                                                    |  |   | 4,064,797    |  
|Balance- September 30, 2016   |  | $                         | 2,745,000 |  |               | $ | (15,088,960 | )                                          |  | $ | -                         |  |  | $                     | -       |  |                           | $ | (12,343,960 | )                                                                                  |  | $ | -            |  



See
notes to consolidated financial statements.



13







Aspirity
Holdings, LLC and Subsidiaries

Notes
to Consolidated Financial Statements



| | 1. | Basis
                                         of Presentation and Description of Business
| | -- | ------------------------------------------------------------------------------------------



Basis
of Presentation



Aspirity
Holdings, LLC (“we, “Aspirity”, or the “Company”) has prepared the foregoing unaudited consolidated
financial statements in accordance with GAAP and the requirements of the SEC with respect to interim reporting. As permitted under
these rules, certain footnotes and other financial information required by GAAP for complete financial statements have been condensed
or omitted. The interim consolidated financial statements include all normal and recurring adjustments that are necessary for
a fair presentation of our financial position and operating results and include the accounts of the Company and its subsidiaries.
All intercompany balances and transactions have been eliminated in consolidation.



For
additional information, please refer to our audited consolidated financial statements and the accompanying notes for the years
ended December 31, 2015 and 2014 included in our 2015 Form 10-K/A.



The
Restructuring



Effective
with the Distribution on November 1, 2015, we exited all wholesale trading and diversified investment activity and have no plans
to engage in such in the future, therefore these operations are reported as discontinued operations. Although, due to the Distribution
we no longer own REH, its retail energy services operations remain in continuing operations through March 30, 2016 due to not
being considered a strategic shift from future operations. After the Distribution but prior to March 30, 2016, the financial results
of Enterprises were consolidated with those of the Company as a variable interest entity or VIE. Historically, these segments
constituted significant parts of our business, and consequently, our future financial statements will be significantly different
from those of the past.



Consistent
with the goal of recasting the business preparatory to an initial public offering of equity, the Company now has start-up operations
in two business segments - financial services and retail energy. Our intention is to expand our retail energy operations as we
receive the necessary licenses and establish the necessary relationships with utilities and expect that we will begin to structure
financial services offerings in 2017.



See
also “Note 3 – Variable Interest Entities”, “Note 4 - Summary Consolidating Financial Information”,
and “Note 5 - Discontinued Operations”.



Liquidity,
Financial Condition, and Management’s Plans



The
accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern.
The Company has financed its operations to date principally through cash on hand, Note sales, and Term Loan receipts. For the
nine months ended September 30, 2016, the Company on a consolidated basis reported a net loss of $8,437,000 and cash used for
continuing operations of $7,408,000. As of September 30, 2016, the Company had unrestricted cash, negative working capital, and
total members’ deficit of $859,000, $6,6640,000, and $12,344,000, respectively.



Aspirity
Energy and Aspirity Financial are start-up companies in the retail energy and financial services industries, respectively. While
revenues from Aspirity Energy are expected to continue to increase throughout the remainder of the year as customers are signed
up, overall we do not expect such to be significant until 2017. Further, the Company does not expect to report positive cash flow
from operations or profitability on a regular basis until early 2018 at the earliest.



14







Prior
to that time, the Company will rely on the timely payment of the Term Loan, deferral of energy payables, and its ability to sell
Notes to fund operations for the year through September 30, 2016. Enterprises’ ability to make timely payments on the Term
Loan depends in part on the operations of its Legacy Businesses which were not profitable. In the event amounts owed to us are
paid late or not paid, our ability to fund operations, sell new Notes and renew or redeem existing Notes will be negatively impacted.



Historically,
sales and renewals of Notes have exceeded redemptions, although there can be no assurance that such will be the case in the future.
If redemptions exceed cash from operations, Term Loan payments, renewals, and new Note sales, then the Company will need additional
financing from other sources.



While
the Company believes that payments from Enterprises on the Term Loan, anticipated cash generated from operating activities, availability
of trade credit with respect to power purchases, and anticipated proceeds from our Notes Offering will be sufficient to meet operating
cash requirements and obligations under the Notes for the next twelve months, there can be no assurance that this will prove to
be the case.



The
Company regularly evaluates sources of debt financing other than the Notes and is also seeking additional equity capital to meet
its funding needs. However, there can be no assurance that these efforts will prove to be successful.



| | 2. | Summary
                                         of Significant Accounting Policies
| | -- | -----------------------------------------------------------------------------------



A
description of our significant accounting policies is included in the 2015 Forms 10-K/A and 10-K and our interim consolidated
financial statements should be read in conjunction with the financial statements and accompanying notes included in those reports.



Results
for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the results expected for the year
ending December 31, 2016.



Principles
of Consolidation



The
Company evaluates the need to consolidate affiliates based on standards set forth in ASC 810 Consolidation. In determining
whether we have a controlling interest in an affiliate and the requirement to consolidate the accounts of an entity, management
considers factors such as our ownership interest, our authority to make decisions, contractual and substantive participating rights
of owners, as well as whether the entity is a variable interest entity or “VIE”.



A
VIE is an entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial
support from other parties or whose equity investors lack any of the characteristics of a controlling financial interest. A variable
interest is an investment or other interest that will absorb portions of a VIE’s expected losses or receive portions
of the entity’s expected residual returns. Variable interests are contractual, ownership, or other pecuniary interests that
change with changes in the fair value of the entity’s net assets. A party is the primary beneficiary of a VIE and
must consolidate it when that party has a variable interest, or combination of variable interests, that provides it with a controlling
financial interest. A party is deemed to have a controlling financial interest if it meets both the power and losses/benefitscriteria. The power criterion is the ability to direct the activities of the VIE that most significantly impact its economic
performance. The losses/benefits criterion is the obligation to absorb losses from, or right to receive benefits from, the VIE
that could potentially be significant to the VIE. The VIE model requires an ongoing reconsideration of whether a reporting entity
is the primary beneficiary of a VIE due to changes in facts and circumstances.



15







Revenue
Recognition



Revenue
from the retail sale of electricity to customers is recorded in the period in which the commodity is consumed, net of any applicable
sales tax. The Company follows the accrual method of accounting for revenues whereby electricity consumed by customers but not
yet billed under the cycle billing method is estimated and accrued along with the related costs. Changes in estimates are reflected
in operations in the period in which they are refined.



Financial
Instruments



From
time to time, the Company may hold various financial instruments. The nature of these instruments and the Company’s operations
expose it to credit risk and fair value risk.



Financial
instruments that subject the Company to concentrations of credit risk consist principally of accounts receivable, deposits in
collateral accounts, and the Term Loan.



Financial
instruments that may expose the Company to fair value risk from time to time include asset categories such as cash equivalents
and marketable securities and liabilities such as borrowings under various credit agreements.



Management
believes the carrying values of the Company’s financial instruments, including its Notes, reasonably approximated their
fair values at September 30, 2016 and December 31, 2015 due to the relatively new age of these instruments.



Accounts
Receivable



Receivables
are reported at the amount management expects to collect from outstanding balances. Differences between amounts due and expected
collections are reported in the results of operations for the period in which those differences are determined. Receivables are
written off only after collection efforts have failed, and the Company typically does not charge interest on past due accounts.
There was no allowance for doubtful accounts as of September 30, 2016 and December 31, 2015.



Income
Taxes



The
Company is organized as a limited liability company under the laws of Minnesota and has elected to be taxed as a partnership.
As such, it is not a taxable entity and no provision for federal or state income taxes has been made on the financial statements.
However, holders of preferred units report distributions received on their individual tax returns while members holding common
units report their proportionate shares of taxable income or loss (which may vary substantially from the income or loss reported
in our consolidated statements of comprehensive income) on theirs. The Company files income tax returns in U.S. federal and state
jurisdictions. The years 2012 through 2015 remain open for examination by the IRS and state agencies.



The
Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would
more likely than not sustain the position following an audit. The Company has no unrecognized tax positions.



16







Unit-Based
Compensation



The
Company expenses unit-based awards pursuant to ASC Topic 718 Compensation - Stock Compensation which requires that compensation
cost at the grant date fair value of unit-based awards be recognized over the requisite service period. The Company estimates
the grant date fair value of unit-based awards issued based on a discounted cash flow model as the Company’s units are not
publicly traded. The discounted cash flow model requires the input of highly subjective assumptions, including projected growth
and costs of capital. See “Note 12 – Ownership”.



New
Accounting Pronouncements



In
May 2014, the FASB issued a new revenue recognition standard, ASU 2014-09 Revenue from Contracts with Customers (Topic 606),
that eliminated all industry-specific provisions and replaced all current U.S. GAAP guidance on the topic. The new standard provides
a unified model to determine when and how revenue is recognized based on the core principle that recognition should depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the seller expects to
be entitled. The Company was originally required to adopt the standard on January 1, 2017. In April 2015, the FASB proposed a
one-year deferral of the effective date for the standard and the deferral was adopted in August 2015. The Company is now required
to adopt the standard on January 1, 2018. The update may be applied using one of two methods, either retrospective application
to each prior reporting period presented or retrospective application with the cumulative effect of initially applying the update
recognized at the date of initial application. In addition, the FASB issued ASU 2016-08, ASU 2016-10, and ASU 2016-12 in March
2016, April 2016, and May 2016, respectively, to provide interpretive clarifications on the new guidance in ASC Topic 606. We
are currently assessing the impact of the standard on the Company’s consolidated financial statements.



In
August 2014, the FASB issued ASU 2014-15 Presentation of Financial Statements – Going Concern (Subtopic 205-40) regarding
disclosures of uncertainties about an entity’s ability to continue as a going concern. Under GAAP, continuation of a reporting
entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity’s liquidation
becomes imminent. Currently, there is no guidance in GAAP about management’s responsibility to evaluate whether there is
substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures and
the update provides such. The update applies to all entities, and is effective for the annual period ending after December 15,
2016 and for annual periods and interim periods thereafter. Early application is permitted. The Company is currently evaluating
the impact of ASU 2014-15 on the Company’s disclosures.



In
February 2015, the FASB issued ASU 2015-02 Amendments to the Consolidation Analysis(“ASU 2015-02”), amending
ASC 810 to improve the guidance by simplifying the requirements for consolidation and placing more emphasis on risk of loss when
determining a controlling financial interest. ASU 2015-02 is effective for the annual period ending after December 15, 2015 and
subsequent interim and annual periods with early adoption permitted. The adoption of ASU 2015-02 did not have a material impact
on the Company’s consolidated financial statements.



In
April 2015, the FASB issued ASU 2015-03 Interest – Imputation of Interest (Topic 835) simplifying the presentation
of debt issuance costs. The new guidance requires that debt issuance costs related to a recognized debt liability be presented
in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement guidance
for debt issuance costs are not affected by the new guidance. This guidance is effective for annual and interim periods beginning
after December 15, 2015, and early adoption is permitted for financial statements that have not been previously issued. The Company
retrospectively adopted ASU 2015-03 in the first quarter of 2016. As a result, the Company reclassified net deferred financing
costs of $298,000 and $314,000 to long term debt at March 31, 2016 and December 31, 2015, respectively.



17







In
February 2016, the FASB issued ASU 2016-02 Leases (“ASU 2016-02”) which increases transparency and comparability
among organizations by recognizing all lease transactions with terms of more than 12 months on the balance sheet as a lease liability
and a right-of-use asset, as defined. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years, with early application permitted. Upon adoption, the lessee will apply the new standard retrospectively
to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently
evaluating the impact of its pending adoption of ASU 2016-02 on its consolidated financial statements.



In
March 2016, the FASB issued ASU 2016-09 Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”),
which amends ASC Topic 718. ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments
are accounted for and presented in the financial statements. ASU 2016-09 will allow entities to make an accounting policy election
for the impact of most types of forfeitures on the recognition of expense for share-based payment awards by allowing the forfeitures
to be either estimated, as is currently required, or recognized when they occur. If elected, the change to recognize forfeitures
when they occur will be adopted using a modified retrospective approach, with a cumulative effect adjustment recorded to retained
earnings. ASU 2016-09 will be effective for the Company at the beginning of fiscal 2017, including interim periods in the year
of adoption. Early adoption is permitted in any interim or annual period. The Company is still evaluating the potential impacts
of ASU 2016-09 on its consolidated financial statements.



In
June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial
Instruments. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology
that reflects expected credit losses. This update is intended to provide financial statement users with more decision-useful information
about expected credit losses. This ASU is effective for annual periods and interim periods for annual periods beginning after
December 15, 2019. Entities may early adopt beginning after December 15, 2018. The Company is currently evaluating the impact
of the adoption of ASU 2016-13 on its consolidated financial statements.



| | 3. | Variable
                                         Interest Entities
| | -- | -------------------------------------------------------------------



On
March 18, 2016, FERC approved the change in control of the Company per Docket No. EC16-60-000. This allowed the Company to adopt
an amended and re-stated Operating Agreement which converted Class B units to Class A units on March 30, 2016. This constituted
a reconsideration event and as such, a reassessment of the VIE relationship between the Company and Enterprises and the consolidation
decision was performed as of this date.



While
Enterprises is still a VIE due to lack of sufficient equity investment to finance its activities without additional subordinated
financial support and Aspirity continues to hold a variable interest in the form of the Term Loan, for Aspirity to consolidate,
it must be either the primary beneficiary of, or hold a controlling financial interest in, Enterprises, either by contract or
via related party considerations. After March 30, 2016, Aspirity meets neither of these requirements.



18









Specifically,
Timothy Krieger as an individual is the primary beneficiary of Enterprises as he meets both the power and losses/benefits criteria.
With respect to the power criterion, Mr. Krieger owns 99.50% and controls 100.00% of the outstanding common equity interests of
Enterprises and directs all of Enterprises’ day-to-day activity as its CEO. As far as the losses/benefits criterion is concerned,
the Term Loan under normal circumstances, though a variable interest, does not incorporate any rights to any economic benefits
beyond interest earned as all such are held by Mr. Krieger. The loan has been in effect since July 1, 2015, Enterprises has never
missed a payment, and management believes that Enterprises likely has sufficient liquidity and operating success to service the
debt going forward. Finally, due to the conversion of the Class B units to Class A common, examination of the related party considerations
between the Company, Enterprises, and Mr. Krieger indicate that Aspirity does not have a controlling financial interest in Enterprises.
Further, the Company has not provided Enterprises with any financial support that it was not contractually obligated to per the
terms and conditions of the Term Loan.



See
“Note 9 – Term Loan” for a discussion of the nature of the Term Loan.



As
a result of the above facts and circumstances, it was concluded that Aspirity should consolidate Enterprises as a VIE through
March 30, 2016. Therefore, the statements of operations and cash flows for fiscal 2016 include the activity of Enterprises through
March 30, 2016, but balance sheets presented on and after March 31, 2016 are for Aspirity only. As this was a distribution of
the equity interest to the owners of the entity, the deconsolidation was recorded at book value and as such there was no gain
or loss recognized on the transaction.



| | 4. | Discontinued
                                         Operations
| | -- | ----------------------------------------------------------------



For
the period ending March 30, 2016, the Company accounted for the Legacy Businesses operated by Enterprises except for its retail
energy services segment (REH) as discontinued operations pursuant to ASU 2014-08. This update changed the discontinued operations
reporting requirements of Presentation of Financial Statements (Topic 205), Subtopic 205-20 by changing the definition
of a discontinued operation to include “only those disposals of components of an entity that represent a strategic
shift that has (or will have) a major effect on an entity’s operations and financial results “.



The
major line items constituting discontinued operations for the Company are presented below for the periods and as of the dates
indicated. The segments of Enterprises’ business included in discontinued operations for the Company are wholesale trading
and diversified investments. For additional disclosures related to the amounts shown below, see the Company’s Forms 10-K/A
and 10-K for 2015.



19







|                                                                |  | Nine
    Months Ended  |          
|--------------------------------------------------------------- |  | ---------------------- | ---------
|                                                                |  | September
    30, 2016 |          
|                                                                |  |                        |          
|Revenues,
    expenses, and earnings of discontinued operations |  |                        |          
|Revenues,
    net                                               |  | $                      | 2,778,016
|                                                                |  |                        |          
|Costs
    of sales and services                                 |  |                        | 657,556  
|Other
    general and administrative                            |  |                        | 2,431,268
|Other
    income (expense), net                                 |  |                        | 1,023,172
|                                                                |  |                        |          
|Total
    expenses                                              |  |                        | 2,065,652
|                                                                |  |                        |          
|Income
    before taxes                                         |  |                        | 712,364  
|                                                                |  |                        |          
|Income
    tax provision                                        |  |                        | -        
|                                                                |  |                        |          
|Net
    income (loss)                                           |  | $                      | 712,364  



|                                                      |  | As
    of             |           
|----------------------------------------------------- |  | --------------------- | ----------
|                                                      |  | December
    31, 2015 |           
|                                                      |  |                       |           
|Assets
    and liabilities of discontinued operations |  |                       |           
|Unrestricted
    cash                                 |  | $                     | 960,234   
|Cash
    in trading accounts                          |  |                       | 6,247,059 
|Accounts
    receivable, net                          |  |                       | 2,329,868 
|Prepaid
    expenses & other current assets           |  |                       | 1,547,103 
|                                                      |  |                       |           
|Total
    current assets                              |  |                       | 11,084,264
|                                                      |  |                       |           
|Property,
    equipment & furniture, net              |  |                       | 1,130,686 
|Goodwill
    & intangible assets, net                 |  |                       | 2,000,786 
|Restricted
    cash                                   |  |                       | 1,319,371 
|Real
    estate held for development                  |  |                       | 2,714,297 
|Notes
    receivable, net of deferred gain            |  |                       | 2,586,616 
|Other
    assets                                      |  |                       | 573,576   
|                                                      |  |                       |           
|Total
    non-current assets                          |  |                       | 10,325,332
|                                                      |  |                       |           
|Total
    assets                                      |  | $                     | 21,409,596
|                                                      |  |                       |           
|Revolver                                              |  | $                     | 475,700   
|Senior
    notes                                      |  |                       | 1,214,762 
|Accounts
    payable                                  |  |                       | 1,905,628 
|Accrued
    expenses                                  |  |                       | 739,526   
|Billings
    in excess of costs & earnings            |  |                       | 710,827   
|                                                      |  |                       |           
|Total
    current liabilities                         |  |                       | 5,046,443 
|                                                      |  |                       |           
|Senior
    notes                                      |  |                       | 242,232   
|                                                      |  |                       |           
|Total
    non-current liabilities                     |  |                       | 242,232   
|                                                      |  |                       |           
|Total
    liabilities                                 |  | $                     | 5,288,675 



20







| | 5. | Summary
                                         Consolidating Financial Data
| | -- | -----------------------------------------------------------------------------



The
consolidating statement of comprehensive income presented below includes the results of operations for Aspirity for the first
nine months ended September 30, 2016 and for the retail energy services segment of Enterprises for the first quarter ended March
31, 2016.





|                                            |  | For
    the nine months ended September 30, 2016 |           
|------------------------------------------- |  | ------------------------------------------------ | ----------
|                                            |  | Aspirity
    Holdings and Subsidiaries           |           
|Revenue                                     |  |                                                  |           
|Retail
    energy services                  |  |                                                  | 1,299,728 
|Financial
    services (Note 13)            |  |                                                  | 2,327,660 
|Total
    revenue                           |  |                                                  | 3,627,388 
|Costs
    of sales and services             |  |                                                  |           
|Cost
    of retail energy sold              |  |                                                  | 1,047,238 
|Gross
    profit on sales and services      |  |                                                  | 2,580,150 
|Operating
    expenses                      |  |                                                  |           
|Sales,
    marketing, and customer service  |  |                                                  | 3,162,497 
|Other
    general and administrative        |  |                                                  | 4,678,865 
|Total
    operating expenses                |  |                                                  | 7,841,362 
|Operating
    loss                          |  |                                                  | (5,261,212
|Other
    income (expense)                  |  |                                                  |           
|Interest
    expense                        |  |                                                  | (3,066,674
|Other
    income, net                       |  |                                                  | 308       
|Other
    income (expense), net             |  |                                                  | (3,066,366
|Net
    loss from continuing operations     |  |                                                  | (8,327,578
|Discontinued
    operations (Note 4)        |  |                                                  |           
|Net
    income from discontinued operations |  |                                                  | -         
|Net
    loss                                |  |                                                  | (8,327,578
|Net
    loss from non-controlling interest  |  |                                                  | -         
|Net
    loss attributable to Company        |  |                                                  | (8,327,578
|Preferred
    distributions                 |  |                                                  | 411,804   
|Net
    loss attributable to common         |  | $                                                | (8,739,382



21







The
consolidating statement of comprehensive income presented below includes the results of operations for Aspirity and Enterprises
for the first nine months ended September 30, 2015.





|                                             |  | For
    the nine months ended September 30, 2015 |           
|-------------------------------------------- |  | ------------------------------------------------ | ----------
|                                             |  | Aspirity
    Holdings and Subsidiaries           |           
|Revenue                                      |  |                                                  |           
|Retail
    energy services                   |  |                                                  | -         
|Financial
    services (Note 13)             |  |                                                  | 2,224,411 
|Total
    revenue                            |  |                                                  | 2,224,411 
|Costs
    of sales and services              |  |                                                  |           
|Cost
    of retail energy sold               |  |                                                  | -         
|Gross
    profit on sales and services       |  |                                                  | 2,224,411 
|Operating
    expenses                       |  |                                                  |           
|Sales,
    marketing, and customer service   |  |                                                  | -         
|Other
    general and administrative         |  |                                                  | 2,524,664 
|Total
    operating expenses                 |  |                                                  | 2,524,664 
|Operating
    loss                           |  |                                                  | (300,253  
|Other
    income (expense)                   |  |                                                  |           
|Interest
    expense                         |  |                                                  | (1,343,783
|Other
    income, net                        |  |                                                  | -         
|Other
    income (expense), net              |  |                                                  | (1,343,783
|Net
    loss from continuing operations      |  |                                                  | (1,644,036
|Discontinued
    operations (Note 4)         |  |                                                  |           
|Net
    income from discontinued operations  |  |                                                  | -         
|Net
    loss                                 |  |                                                  | (1,644,036
|Net
    income from non-controlling interest |  |                                                  | -         
|Net
    loss attributable to Company         |  |                                                  | (1,644,036
|Preferred
    distributions                  |  |                                                  | 411,804   
|Net
    loss attributable to common          |  | $                                                | (2,055,840



| | 6. | Cash
| | -- | ----



The
Company deposits its unrestricted cash in financial institutions. Balances, at times, may exceed federally insured limits. Cash
deposited in trading and collateral accounts may be unavailable at times for immediate withdrawal depending upon business activity.
Cash as of the dates indicated was as follows:





|                                |  | September
    30,2016 |         |  | December
    31,2015 |  
|------------------------------- |  | --------------------- | ------- |  | -------------------- | -
|Continuing
    operations       |  |                       |         |  |                      |  
|Aspirity                        |  | $                     | 859,189 |  |                      | $
|REH                             |  |                       | -       |  |                      |  
|Unrestricted
    cash           |  | $                     | 859,189 |  |                      | $
|                                |  |                       |         |  |                      |  
|REH                             |  |                       |         |  |                      |  
|Credit
    requirements         |  |                       | -       |  |                      |  
|Available
    for withdrawal    |  |                       | -       |  |                      |  
|Cash
    in trading accounts    |  | $                     | -       |  |                      | $
|                                |  |                       |         |  |                      |  
|Aspirity                        |  | $                     | 15,000  |  |                      | $
|REH                             |  |                       | -       |  |                      |  
|Cash
    in collateral accounts |  | $                     | 15,000  |  |                      | $



22







| | 7. | Accounts
                                         Receivable
| | -- | ------------------------------------------------------------



Accounts
receivable resulting from both sales to end-use customers and billing related to the Term Loan were as follows as of the dates
indicated:



|                          |  | September
    30, |         |  | December
    31, |  
|------------------------- |  | ----------------- | ------- |  | ---------------- | -
|                          |  | 2016              |         |  | 2015             |  
|Continuing
    operations |  |                   |         |  |                  |  
|Aspirity                  |  |                   |         |  |                  |  
|Energy
    sales          |  |                   |         |  |                  |  
|Billed                    |  |                   | 327,101 |  |                  |  
|Unbilled                  |  |                   | 178,448 |  |                  |  
|                          |  |                   |         |  |                  |  
|REH                       |  |                   |         |  |                  |  
|Billed                    |  |                   | -       |  |                  |  
|Unbilled                  |  |                   | -       |  |                  |  
|Accounts
    receivable   |  | $                 | 505,549 |  |                  | $



As
of September 30, 2016, there were no accounts representing a significant percentage or concentration of receivables.



As
of December 31, 2015, REH had one account with a balance greater than 10% of the total. Such amount was owed by a utility with
an investment-grade credit rating.



23







| | 8. | Property,
                                         Equipment, and Furniture
| | -- | ---------------------------------------------------------------------------



Property,
equipment, software, furniture, and leasehold improvements consisted of the following at the dates indicated:



|                                             |  | September
    30, |         |   | December
    31, |  
|-------------------------------------------- |  | ----------------- | ------- | - | ---------------- | -
|                                             |  | 2016              |         |   | 2015             |  
|Continuing
    operations                    |  |                   |         |   |                  |  
|Aspirity                                     |  |                   |         |   |                  |  
|Equipment
    and software                   |  | $                 | 23,435  |   |                  | $
|Furniture                                    |  |                   | 45,966  |   |                  |  
|Leasehold
    improvements                   |  |                   | 32,968  |   |                  |  
|Property,
    equipment and furniture, gross |  |                   | 102,369 |   |                  |  
|Less
    accumulated depreciation            |  |                   | (20,218 | ) |                  |  
|Property,
    equipment, and furniture, net  |  | $                 | 82,151  |   |                  | $
|                                             |  |                   |         |   |                  |  
|REH                                          |  |                   |         |   |                  |  
|Equipment
    and software                   |  | $                 | -       |   |                  | $
|Furniture                                    |  |                   | -       |   |                  |  
|Leasehold
    improvements                   |  |                   | -       |   |                  |  
|Property,
    equipment and furniture, gross |  |                   | -       |   |                  |  
|Less
    accumulated depreciation            |  |                   | -       |   |                  |  
|Property,
    equipment, and furniture, net  |  | $                 | -       |   |                  | $



Depreciation
expense was $5,000 and $33,000 and $11,000 and $30,000 for the three and nine months ended September 30, 2016 and 2015, respectively.



| | 9. | Term
                                         Loan
| | -- | --------------------------------------------------



Effective
July 1, 2015, Aspirity Financial lent Enterprises an aggregate principal amount of $22,206,000 with a weighted average interest
rate of 14.08% and a maturity date of December 30, 2019.



The
loan agreement contains customary protective provisions for the lender, including certain guarantees, collateral, and covenants,
and ensures that the cash flows generated by the Legacy Businesses continue to be used to pay the interest and principal on the
Term Loan Notes.



On
November 1, 2015, the loan agreement was amended with respect to the definition of “actual redemptions” and certain
of the borrower’s financial reporting provisions. On January 27, 2016, it was amended to eliminate reimbursement of certain
costs incurred by Aspirity as a publicly reporting entity.



The
following table summarizes the amounts owed to the Company by Enterprises pursuant to the Term Loan as of the dates indicated.



|            |  | September
    30, |            |  | December
    31, |  
|----------- |  | ----------------- | ---------- |  | ---------------- | -
|            |  | 2016              |            |  | 2015             |  
|Current     |  | $                 | 7,541,364  |  |                  | $
|Non-current |  |                   | 9,814,025  |  |                  |  
|Total       |  | $                 | 17,355,389 |  |                  | $





Note
that so long as Enterprises and Aspirity were consolidated, the Term Loan was eliminated. Consequently, while it is presented
on the September 30, 2016 balance sheet, it does not appear on the December 31, 2015 statement.

24







As
of September 30, 2016, Enterprises was in compliance with the terms and conditions of the Term Loan.



Effective
November 1, 2016, the Term Loan was amended. See “Note 16 – Subsequent Events”.



10.
Debt



Notes
payable by instrument are summarized as follows:



|                                           |  | September
    30, |            |  | December
    31, |  
|------------------------------------------ |  | ----------------- | ---------- |  | ---------------- | -
|                                           |  | 2016              |            |  | 2015             |  
|Aspirity                                   |  |                   |            |  |                  |  
|Renewable
    unsecured subordinated notes |  | $                 | 27,743,415 |  |                  | $
|REH                                        |  |                   |            |  |                  |  
|Revolver                                   |  |                   | -          |  |                  |  
|Consolidated
    total, gross              |  |                   | 27,743,415 |  |                  |  
|                                           |  |                   |            |  |                  |  
|Deferred
    financing costs               |  |                   |            |  |                  |  
|Deferred
    financing costs, net          |  |                   | 494,337    |  |                  |  
|Consolidated
    total, net                |  | $                 | 27,249,078 |  |                  | $



Notes
payable by maturity are summarized as follows:



|                                    |  | September
    30, |            |   | December
    31, |  
|----------------------------------- |  | ----------------- | ---------- | - | ---------------- | -
|                                    |  | 2016              |            |   | 2015             |  
|Aspirity                            |  |                   |            |   |                  |  
|2016                                |  | $                 | 3,050,889  |   |                  | $
|2017
    to September 30            |  |                   | 8,193,276  |   |                  |  
|                                    |  |                   |            |   |                  |  
|REH                                 |  |                   |            |   |                  |  
|2016                                |  |                   | -          |   |                  |  
|Current
    maturities              |  |                   | 11,244,165 |   |                  |  
|                                    |  |                   |            |   |                  |  
|Aspirity                            |  |                   |            |   |                  |  
|2017
    after September 30         |  |                   | 1,198,290  |   |                  |  
|2017                                |  |                   | -          |   |                  |  
|2018                                |  |                   | 5,354,431  |   |                  |  
|2019                                |  |                   | 4,957,183  |   |                  |  
|2020                                |  |                   | 1,248,000  |   |                  |  
|2021                                |  |                   | 666,447    |   |                  |  
|2022
    & thereafter               |  |                   | 3,074,898  |   |                  |  
|Long
    term debt, gross           |  |                   | 16,499,249 |   |                  |  
|                                    |  |                   |            |   |                  |  
|Deferred
    Financing Costs        |  |                   |            |   |                  |  
|Deferred
    financing costs, gross |  |                   | 934,182    |   |                  |  
|Less
    accumulated amortization   |  |                   | (439,846   | ) |                  |  
|Deferred
    financing costs, net   |  |                   | 494,336    |   |                  |  
|Long
    term debt, net             |  |                   | 16,004,913 |   |                  |  
|Consolidated
    total, net         |  | $                 | 27,249,078 |   |                  | $



Deferred
financing cost amortization expense was $23,000 and $55,000 and $45,000 and $149,000 for the three and nine months ended September
30, 2016 and 2015, respectively.



25







Bridge
Loan



On
July 13, 2016 the $500,000 outstanding under the Bridge Loan was extinguished as part of the consideration for 10,000 Class A
common units issued to Mr. Krieger.



See
“Note 13 – Related Party Transactions” and “Note 16 – Subsequent Events”.



Renewable
Unsecured Subordinated Notes



On
May 10, 2012, our first Form S-1 registration statement relating to the offer and sale of our Notes was declared effective by
the SEC, and the offering commenced on May 15, 2012. This Old S-1 covered up to $50,000,000 in principal amount of 3-and 6-month
and 1, 2, 3, 4, 5, and 10 year Notes.



On
May 8, 2015, we filed a new registration statement with respect to the Notes to continue our Notes Offering under the Old S-1
until the date that the New S-1 was declared effective. The new registration replaces the original statement and covers up to
$75,000,000 in principal amount of 3-and 6-month and 1, 2, 3, 4, 5, and 10 year Notes. The New S-1 was declared effective by the
SEC on November 12, 2015.



The
Company made cash interest payments during the three and nine months ended September 30, 2016 and 2015 of $879,000, $296,000,
$2,166,000, $1,155,000 respectively.



For
the nine months ended September 30, 2016 and 2015, we incurred $1,703,000 and $1,655,000, respectively, of offering-related expenses,
including marketing and certain printing expenses, legal and accounting fees, filing fees, and trustee fees but excluding amounts
capitalized as deferred financing costs and amortized as Notes are sold.



Total
accrued interest on the Notes at September 30, 2016 and December 31, 2015 was $1,995,000 and $1,503,000, respectively.



As
of September 30, 2016, the Company had $27,743,000 of Notes outstanding as follows:



|Initial
    Term          |  | Principal
    Amount |                                                   |  | Weighted
    Average Interest Rate | 
|------------------------- |  | -------------------- | ------------------------------------------------- |  | ---------------------------------- | 
|3
    months              |  | $                    | 459,232                                           |  |                                    | 
|6
    months              |  |                      | 494,807                                           |  |                                    | 
|1
    year                |  |                      | 6,117,185                                         |  |                                    | 
|2
    years               |  |                      | 3,652,442                                         |  |                                    | 
|3
    years               |  |                      | 5,026,940                                         |  |                                    | 
|4
    years               |  |                      | 4,676,059                                         |  |                                    | 
|5
    years               |  |                      | 4,241,852                                         |  |                                    | 
|10
    years              |  |                      | 3,074,898                                         |  |                                    | 
|Total                     |  | $                    | 27,743,415                                        |  |                                    | 
|                          |  |                      |                                                   |  |                                    | 
|Weighted
    average term |  |                      | 43.0
                                         mos |  |                                    | 





26







11.
Leases



The
Company sub-leases its offices under an agreement that expires on May 31, 2017, with an option to extend until 2019. The option
expired unexercised and the Company is currently exploring its options with respect to new space.



For
the nine months ended September 30, 2016 and 2015 lease expense was $117,000 and $108,000, respectively.



12.
Ownership



Effective
November 1, 2015, concurrently with the Distribution, a new Operating Agreement was adopted pursuant to which the Company issued
6,064 new Class B common units, constituting 55.00% of the total common units outstanding. The Class B units represented profits
interests only and incorporated no governance or voting rights, but were automatically convertible into Class A units, each of
which has full financial and voting rights, effective upon FERC approval of the change of control of the Company.



On
March 30, 2016, the 6,064 Class B units converted to Class A units pursuant to the adoption of an amended and re-stated Operating
Agreement, following the March 18, 2016 approval by FERC of the change in control of the Company per Docket No. EC16-60-000. As
of September 30, 2016, 734 Class A units held by an employee are subject to redemption at a price of $1.00 per unit should he
leave the employment of the Company before March 31, 2017. If such departure occurred after April 1, 2017 but before March 31,
2018, 366 units are subject to redemption.



On
May 11, 2016, the Company granted 114 Class A common units to each of its three independent directors (342 units in total). The
342 Class A units held by the independent directors are subject to redemption at a price of $1.00 per unit should they leave the
Company. On June 19, 2016, one of the independent directors died, and 76 of his units were redeemed.



On
July 13, 2016, the Company granted 10,000 Class A common units to Mr. Krieger for consideration of both the extinguishment of
the $500,000 bridge loan outstanding at the time of conversion and his service as interim CEO.



The
ownership of the Company’s equity as of September 30, 2016 and December 31, 2015 is as presented below:



|                       |  | September
    30, |        |  | December
    31, | 
|---------------------- |  | ----------------- | ------ |  | ---------------- | 
|                       |  | 2016              |        |  | 2015             | 
|Non-Voting
    Units   |  |                   |        |  |                  | 
|Series
    A Preferred |  |                   | 496    |  |                  | 
|Class
    B Common     |  |                   | -      |  |                  | 
|Total                  |  |                   | 496    |  |                  | 
|                       |  |                   |        |  |                  | 
|Voting
    Units       |  |                   |        |  |                  | 
|Class
    A Common     |  |                   | 21,290 |  |                  | 
|Total                  |  |                   | 21,290 |  |                  | 



For
the nine months ended September 30, 2016 and 2015, total preferred distributions paid were $412,000 and $412,000, respectively.



For
the nine months ended September 30, 2016 and 2015, total common distributions paid were $0 and $5,732,215, respectively.



27







Unit
Based Compensation



Unit
based compensation expense for the nine months ended September 30, 2016 and 2015 was $637,000 and $0, respectively. Unit based
compensation is recognized on a straight-line basis over the terms of the respective awards and is included in general and administrative
expense. The Company has assumed a zero percent forfeiture rate.



As
of September 30, 2016 and December 31, 2015, unrecognized compensation cost related to non-vested, unit-based compensation was
$68,000 and $0, respectively. As of September 30, 2016, the weighted average years outstanding for unvested awards was 0.6 years.



On
March 30, 2016, 4,410 Class A common units were issued to three officers of the Company pursuant to the adoption of the amended
and re-stated Operating Agreement. Approximately 83% of the units vested immediately, while the remaining 17% will vest as described
above.



On
May 11, 2016, 114 units each or 342 Class A common units in total were issued to the Company’s three independent directors.
33% of the units vested immediately, while the remaining 67% will vest as described above.



On
July 13, 2016, the Company granted 10,000 Class A common units to Mr. Krieger, all of which vested immediately. This grant was
in consideration of both the extinguishment of the bridge loan and associate accrued interest, as well as compensation for Mr.
Krieger having served as interim CEO. See “Note 13 – Related Party Transactions”.



13.
Related Party Transactions



The
Company and Enterprises are related parties due to ownership by Mr. Krieger. At September 30, 2016, Mr. Krieger directly owned
100% of the Company’s Series A preferred units and 70.15% of its Class A common and controlled an additional 0.12% of its
Class A common owned by an entity formed by him for the benefit of his children. Mr. Krieger controls 100.00% of the common units
of Enterprises.



On
May 27, 2016, the Company and Mr. Krieger entered into a bridge loan agreement for borrowings of up to $500,000. Effective July
13, 2016, all borrowings under such agreement were extinguished and the agreement was canceled, in partial exchange for the issuance
of 10,000 Class A common units. See also “Note 12 – Ownership”.



For
the nine months ended September 30, 2016, the Company recognized $2,328,000 of financial services revenue related to the Term
Loan, of which $715,000 was eliminated upon consolidation. As of September 30, 2016, the principal balance of the Term Loan was
$17,355,000 and the Company had recorded $429,000 of accrued financial services revenue. See also “Note 9 - Term Loan”
and “Note 16 – Subsequent Events”.



14.
Commitments and Contingencies



On
March 30, 2016 Aspirity Energy entered into a full requirements preferred supply agreement with Exelon to provide all the power
and ancillary services needed to serve retail customers for an initial term expiring on March 30, 2019. Concurrently, the Company
entered into a guaranty to provide assurance to Exelon regarding the performance of Aspirity Energy’s obligations with respect
to payment for electricity purchased pursuant to the agreement.



28







As
of September 30, 2016, the Company is in compliance with all covenants in the agreement with Exelon.





As
of September 30, 2016, under the PSA, the Company had deferred payables for power purchases of $857,000, which are included in
our accounts payable balance. The Company can continue to defer payments up to the deferral capacity as defined in the PSA. The
deferral capacity is calculated based on several components, primarily the value of receivables from customers and the forward
value of customer contracts.



Legal
fees, if any, related to commitments and contingencies are expensed as incurred.



15.
Segment Information



As
of September 30, 2016, due to the Restructuring and Distribution, the Company had limited operations and assets, but established
two segments used to measure business activity – retail energy services and financial services. For the nine months ended
September 30, 2016, the Company accounted for the Legacy Businesses operated by Enterprises except for the retail energy services
segment as discontinued operations. Certain amounts reported in prior periods have been reclassified to conform to the current
period’s presentation. See “Note 3 – Variable Interest Entities”, “Note 4 - Discontinued Operations”,
and Note 5 – Summary Consolidated Financial Information”.



29







Information
on segments for and at the three and nine months ended September 30, 2016 is as follows:





|                                                 |  | Aspirity  |            |  | Enterprises |   |            |        |  |   |              |  
|------------------------------------------------ |  | --------- | ---------- |  | ----------- | - | ---------- | ------ |  | - | ------------ | -
|                                                 |  |           |            |  |             |   |            |        |  |   | Corporate,   |  
|                                                 |  | Financial |            |  | Retail      |   |            | Retail |  |   | Net
    of   |  
|                                                 |  | Services  |            |  | Energy      |   |            | Energy |  |   | Eliminations |  
|Three
    Months Ended September 30, 2016        |  |           |            |  |             |   |            |        |  |   |              |  
|Retail
    energy services                       |  | $         | -          |  |             | $ | 928,204    |        |  | $ | -            |  
|Financial
    services (Note 13)                 |  |           | 711,306    |  |             |   | -          |        |  |   | -            |  
|Revenues,
    net                                |  |           | 711,306    |  |             |   | 928,204    |        |  |   | -            |  
|Cost
    of retail energy sold                   |  |           | -          |  |             |   | 745,374    |        |  |   | -            |  
|Sales,
    marketing, and customer service       |  |           | -          |  |             |   | 994,157    |        |  |   | -            |  
|Other
    general and administrative             |  |           | -          |  |             |   | 44,239     |        |  |   | -            |  
|Operating
    costs and expenses                 |  |           | -          |  |             |   | 1,783,770  |        |  |   | -            |  
|Operating
    income (loss)                      |  | $         | 711,306    |  |             | $ | (855,566   | )      |  | $ | -            |  
|Capital
    expenditures                         |  | $         | -          |  |             | $ | 4,628      |        |  | $ | -            |  
|                                                 |  |           |            |  |             |   |            |        |  |   |              |  
|Nine
    Months Ended September 30, 2016         |  |           |            |  |             |   |            |        |  |   |              |  
|Retail
    energy services                       |  | $         | -          |  |             | $ | 1,299,728  |        |  | $ | 9,583,434    |  
|Financial
    services (Note 13)                 |  |           | 2,327,660  |  |             |   | -          |        |  |   | -            |  
|Revenues,
    net                                |  |           | 2,327,660  |  |             |   | 1,299,728  |        |  |   | 9,583,434    |  
|Cost
    of retail energy sold                   |  |           | -          |  |             |   | 1,047,238  |        |  |   | 8,243,461    |  
|Sales,
    marketing, and customer service       |  |           | -          |  |             |   | 2,995,217  |        |  |   | 341,209      |  
|Other
    general and administrative             |  |           | -          |  |             |   | 110,321    |        |  |   | 1,157,808    |  
|Operating
    costs and expenses                 |  |           | -          |  |             |   | 4,152,776  |        |  |   | 9,742,478    |  
|Operating
    income (loss)                      |  | $         | 2,327,660  |  |             | $ | (2,853,048 | )      |  | $ | (159,044     | )
|Capital
    expenditures                         |  | $         | -          |  |             | $ | 8,824      |        |  | $ | 11,568       |  
|                                                 |  |           |            |  |             |   |            |        |  |   |              |  
|At
    September 30, 2016                        |  |           |            |  |             |   |            |        |  |   |              |  
|Unrestricted
    cash                            |  | $         | -          |  |             | $ | 340,019    |        |  | $ | -            |  
|Cash
    in collateral accounts                  |  |           | -          |  |             |   | 15,000     |        |  |   | -            |  
|Accounts
    receivable                          |  |           | -          |  |             |   | 505,549    |        |  |   |              |  
|Term
    Loan - current (Note 13)                |  |           | 7,541,364  |  |             |   | -          |        |  |   | -            |  
|Prepaid
    expenses and other assets            |  |           | -          |  |             |   | 12,370     |        |  |   | -            |  
|Total
    current assets                         |  |           | 7,541,364  |  |             |   | 872,938    |        |  |   | -            |  
|Property,
    equipment and furniture, net       |  |           | -          |  |             |   | -          |        |  |   | -            |  
|Term
    Loan - non-current (Note 13)            |  |           | 9,814,025  |  |             |   | -          |        |  |   | -            |  
|Accrued
    financial services revenue (Note 13) |  |           | 428,555    |  |             |   | -          |        |  |   | -            |  
|Total
    assets                                 |  | $         | 17,783,944 |  |             | $ | 872,938    |        |  | $ | -            |  
|                                                 |  |           |            |  |             |   |            |        |  |   |              |  
|Accounts
    payable                             |  | $         | 269,312    |  |             | $ | 1,345,953  |        |  | $ | -            |  
|Accrued
    expenses                             |  |           | -          |  |             |   | -          |        |  |   | -            |  
|Accrued
    compensation                         |  |           | -          |  |             |   | -          |        |  |   | -            |  
|Accrued
    interest                             |  |           | -          |  |             |   | -          |        |  |   | -            |  
|Revolver                                         |  |           | -          |  |             |   | -          |        |  |   | -            |  
|Renewable
    unsecured subordinated notes       |  |           | -          |  |             |   | -          |        |  |   | -            |  
|Total
    liabilities                            |  |           | 269,312    |  |             |   | 1,345,953  |        |  |   | -            |  
|Series
    A preferred equity                    |  |           | -          |  |             |   | -          |        |  |   | -            |  
|Common
    equity                                |  |           | 17,514,632 |  |             |   | (473,015   | )      |  |   | -            |  
|Total
    members’ equity (deficit)              |  |           | 17,514,632 |  |             |   | (473,015   | )      |  |   | -            |  
|Total
    liabilities and equity                 |  | $         | 17,783,944 |  |             | $ | 872,938    |        |  | $ | -            |  



30







Information
on segments for and at the three and nine months ended September 30, 2015 is as follows:





|                                           |  | Aspirity  |           |  | Enterprises |   |   |        |  |   |              |  
|------------------------------------------ |  | --------- | --------- |  | ----------- | - | - | ------ |  | - | ------------ | -
|                                           |  |           |           |  |             |   |   |        |  |   | Corporate,   |  
|                                           |  | Financial |           |  | Retail      |   |   | Retail |  |   | Net
    of   |  
|                                           |  | Services  |           |  | Energy      |   |   | Energy |  |   | Eliminations |  
|Three
    Months Ended September 30, 2015  |  |           |           |  |             |   |   |        |  |   |              |  
|Retail
    energy services                 |  | $         | -         |  |             | $ | - |        |  | $ | 10,173,244   |  
|Financial
    services (Note 13)           |  |           | 778,472   |  |             |   | - |        |  |   | -            |  
|Revenues,
    net                          |  |           | 778,472   |  |             |   | - |        |  |   | 10,173,244   |  
|Cost
    of retail energy sold             |  |           | -         |  |             |   | - |        |  |   | 8,031,489    |  
|Sales,
    marketing, and customer service |  |           | -         |  |             |   | - |        |  |   | 414,868      |  
|Other
    general and administrative       |  |           | -         |  |             |   | - |        |  |   | 1,292,613    |  
|Operating
    costs and expenses           |  |           | -         |  |             |   | - |        |  |   | 9,738,970    |  
|Operating
    income (loss)                |  | $         | 778,472   |  |             | $ | - |        |  | $ | 434,274      |  
|Capital
    expenditures                   |  | $         | -         |  |             | $ | - |        |  | $ | 22,798       |  
|                                           |  |           |           |  |             |   |   |        |  |   |              |  
|Nine
    Months Ended September 30, 2015   |  |           |           |  |             |   |   |        |  |   |              |  
|Retail
    energy services                 |  | $         | -         |  |             | $ | - |        |  | $ | 23,284,748   |  
|Financial
    services (Note 13)           |  |           | 1,844,906 |  |             |   | - |        |  |   | -            |  
|Revenues,
    net                          |  |           | 1,844,906 |  |             |   | - |        |  |   | 23,284,748   |  
|Cost
    of retail energy sold             |  |           | -         |  |             |   | - |        |  |   | 20,350,365   |  
|Sales,
    marketing, and customer service |  |           | -         |  |             |   | - |        |  |   | 1,017,775    |  
|Other
    general and administrative       |  |           | -         |  |             |   | - |        |  |   | 3,716,037    |  
|Operating
    costs and expenses           |  |           | -         |  |             |   | - |        |  |   | 25,084,177   |  
|Operating
    income (loss)                |  | $         | 1,844,906 |  |             | $ | - |        |  | $ | (1,799,429   | )
|Capital
    expenditures                   |  | $         | -         |  |             | $ | - |        |  | $ | 48,100       |  



31







Information
on segments at December 31, 2015 is as follows:





|                                           |  | Aspirity               |            |  | Enterprises       |   |         |                   |  |   |                         |  
|------------------------------------------ |  | ---------------------- | ---------- |  | ----------------- | - | ------- | ----------------- |  | - | ----------------------- | -
|                                           |  |                        |            |  |                   |   |         |                   |  |   | Corporate,              |  
|                                           |  | Financial
    Services |            |  | Retail
    Energy |   |         | Retail
    Energy |  |   | Net
    of Eliminations |  
|At
    December 31, 2015                   |  |                        |            |  |                   |   |         |                   |  |   |                         |  
|Unrestricted
    cash                      |  | $                      | -          |  |                   | $ | 100,965 |                   |  | $ | 652,670                 |  
|Cash
    in trading accounts               |  |                        | -          |  |                   |   | -       |                   |  |   | 1,800,272               |  
|Accounts
    receivable                    |  |                        | 258,569    |  |                   |   | -       |                   |  |   | 3,558,316               |  
|Term
    Loan - current (Note 13)          |  |                        | 8,461,853  |  |                   |   | -       |                   |  |   | -                       |  
|Prepaid
    expenses and other assets      |  |                        | -          |  |                   |   | 75,793  |                   |  |   | 456,129                 |  
|Discontinued
    operations - current      |  |                        | -          |  |                   |   | -       |                   |  |   | -                       |  
|Total
    current assets                   |  |                        | 8,720,422  |  |                   |   | 176,758 |                   |  |   | 6,467,387               |  
|Property,
    equipment and furniture, net |  |                        | -          |  |                   |   | -       |                   |  |   | 129,453                 |  
|Term
    Loan - non-current (Note 13)      |  |                        | 11,786,333 |  |                   |   | -       |                   |  |   | -                       |  
|Other
    assets                           |  |                        | -          |  |                   |   | -       |                   |  |   | 13,854                  |  
|Discontinued
    operations - non-current  |  |                        | -          |  |                   |   | -       |                   |  |   | -                       |  
|Total
    assets                           |  | $                      | 20,506,755 |  |                   | $ | 176,758 |                   |  | $ | 6,610,694               |  
|                                           |  |                        |            |  |                   |   |         |                   |  |   |                         |  
|Accounts
    payable                       |  | $                      | 269,312    |  |                   | $ | 2,925   |                   |  | $ | 2,457,144               |  
|Accrued
    expenses                       |  |                        | -          |  |                   |   | -       |                   |  |   | 2,090,227               |  
|Accrued
    interest and distributions     |  |                        | -          |  |                   |   | -       |                   |  |   | 19,741                  |  
|Revolver                                   |  |                        | -          |  |                   |   | -       |                   |  |   | 1,212,705               |  
|Renewable
    unsecured subordinated notes |  |                        | -          |  |                   |   | -       |                   |  |   | -                       |  
|Liabilities
    of discontinued operations |  |                        | -          |  |                   |   | -       |                   |  |   | -                       |  
|Total
    liabilities                      |  |                        | 269,312    |  |                   |   | 2,925   |                   |  |   | 5,779,817               |  
|Series
    A preferred equity              |  |                        | -          |  |                   |   | -       |                   |  |   | -                       |  
|Common
    equity                          |  |                        | 20,237,443 |  |                   |   | 173,833 |                   |  |   | 893,734                 |  
|Non-controlling
    interest               |  |                        | -          |  |                   |   | -       |                   |  |   | (62,857                 | )
|Total
    equity (deficit)                 |  |                        | 20,237,443 |  |                   |   | 173,833 |                   |  |   | 830,877                 |  
|Total
    liabilities and equity           |  | $                      | 20,506,755 |  |                   | $ | 176,758 |                   |  | $ | 6,610,694               |  



32







16.
Subsequent Events



From
October 1 to November 9, 2016, the Company sold Notes totaling $1,775,000 with a weighted average term of 29.3 months and bearing
a weighted average interest rate of 13.20%.



On
November 1, 2016, Aspirity Financial (the “Lender”) and Enterprises (the “Borrower”) executed Amendment
No. 3 to the Term Loan Agreement (the “Amendment”).



Among
other things, the Amendment revises certain definitions and incorporates a new amortization schedule for the Term Loan calling
for fixed monthly payments of principal and interest (at a fixed annual rate of 15.12%) with a balloon payment on the maturity
date as compared to the variable payment structure in place prior to the amendment. The principal amount of the loan was adjusted
to $18,237,829 as of October 1, 2016, including $1,591,684 of accrued interest income and costs that were capitalized.



The
Amendment also revises the accounting treatment of the mandatory prepayments owed the Lender as the result of the sale by the
Borrower of REH, which closed on November 2, 2016, and further provides for certain additional optional prepayments by the Borrower.
Pursuant to the Amendment, both the mandatory prepayments due to the REH sale and the optional prepayments provided for in the
Amendment will be treated as “prepayments of installments” rather than as “prepayments of principal”.
On November 4, 2016, the Company received $2,008,000 of prepayments.



The
Amendment also specifies the conditions under which the Lender will release its security interest in the equity interests of the
Borrower and provides for adjustments in certain of the covenants and agreements of the Borrower with respect to monthly reporting,
minimum liquidity, liens, and defaults.



The
Amendment provides that Mr. Krieger, the Company’s Chairman and controlling shareholder, will assist Aspirity Energy in
obtaining certain surety bonds required by its geographic expansion plans and provides that the Company and its subsidiaries have
no explicit obligation to lend funds to the Borrower, Mr. Krieger, or their affiliates, but that any such request will be considered
based on the facts and circumstances existing at the time.



33







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



The
following discussion should be read in conjunction with our consolidated financial statements, notes to those statements, Management’s
Discussion and Analysis of Financial Condition and Results of Operations from our 2015 Form 10-K, and the other financial information
appearing elsewhere in this report. In addition to historical information, the following discussion and other parts of this Form
10-Q contain forward-looking information that involves risks and uncertainties. Readers are cautioned that forward-looking statements
should be read in conjunction with our disclosures in this Form 10-Q under the heading “Forward-Looking Statements”
located on page 8, “Item 1A – Risk Factors” of this Form 10-Q and our 2015 Forms 10-K/A and 10-K, and the “Risk
Factors” section beginning on page 10 of our Form S-1.



The
risks and uncertainties described in this Form 10-Q, our 2015 Forms 10-K/A and 10-K, and our Form S-1 are not the only risks facing
our Company. Additional risks and uncertainties that we are not presently aware of, or that we currently consider immaterial,
may also affect our business operations. Our business, financial condition, or results of operations could suffer if the risks
set forth are realized.



Company
Overview & Business Update



Aspirity
is a holding company that conducts its operations principally through wholly-owned subsidiaries. We currently have two direct
operating subsidiaries, Aspirity Energy, which houses a start-up retail energy business, and Aspirity Financial, which was formed
to provide energy-related financial services to businesses and households.



In
2015, we restructured. The Restructuring included the sale of two wholesale trading businesses and the Enterprises spin-off incorporating
the three legacy business segments of wholesale trading, diversified investments, and the retail business operated by REH. As
a result, while we are developing our new retail energy business through Aspirity Energy, we currently have limited operations
and assets.



As
we have previously disclosed, through the end of the first quarter of 2016, our financial results were consolidated with those
of Enterprises. Enterprises is the parent company of REH, a company in the same business as us - the sale of electricity to retail
customers. Accordingly, our financial results included revenues generated by REH through the end of the first quarter of 2016,
which were significant. As we are no longer required to consolidate, our second and third quarter numbers include only our financial
results and, consequently, period-to-period comparisons would not be comparable. We are a start-up company and our financial results
reflect that status.



In
any case, it is important to note that Aspirity Energy is pursuing different marketing and operating strategies than those deployed
by REH. For example, with respect to marketing, we compete on factors other than price alone, hence our slogan, Power + More,
with the goal of serving our target customer, the Home CEO, and building a brand characterized by long term relationships.
Operationally, we have chosen to procure the energy required by our customers using a full requirements arrangement rather than
tie up capital in the ISO-managed markets.



Since
the sale of electricity is a regulated business, we can only market in areas where we have been licensed by the appropriate state
authorities and have established electronic connections or “EDI compliance” with relevant investor-owned utilities
to exchange customer usage and billing information. The regulatory compliance and EDI qualification processes we started in 2015
are on-going and have taken longer than we expected when planning for Aspirity Energy began about a year ago. As of November 11,
2016, we were members of ISO-NE and PJM, were licensed in the full choice jurisdictions of Illinois, Maryland, New York, Ohio,
Pennsylvania, and Rhode Island, and were EDI compliant with nine utilities serving over 10 million residential accounts. By the
end of 2017, our goal is to be able to market power to the approximately 32 million residential customers located in the service
areas of 44 investor-owned utilities in 14 full choice jurisdictions.



34







Our
market rollout plan as of November 11, 2016 is summarized in the table below.



Note
that Q2 2017 in the table includes New York. While we intend to join NYISO, become a licensed energy service company in New York,
and qualify to do business with the 6 IOUs serving the state’s 5.8 million residential accounts, we currently do not anticipate
entering those markets due to regulatory uncertainty with respect to the contracts that may be sold there.



It
is important to note that delays to this schedule may occur and such may have a material impact on our business.



Market
Rollout Plan

Last
updated November 11, 2016

|            |  | ISOs                    |   |  | States                         |  |    | EDI
    Ready IOUService Areas |  |  | AccessableCustomers (000s)     | 
|----------- |  | ----------------------- | - |  | ------------------------------ |  | -- | ------------------------------ |  |  | ------------------------------ | 
|Period      |  | Added
    during period |   |  | Available
    at end of period |  |    | Added
    during period        |  |  | Available
    at end of period | 
|YE
    2015 |  |                         | 1 |  |                                |  | 1  |                                |  |  | 3                              | 
|            |  |                         |   |  |                                |  |    |                                |  |  |                                | 
|Q1
    2016 |  |                         | - |  |                                |  | 1  |                                |  |  | 1                              | 
|Q2
    2016 |  |                         | - |  |                                |  | 1  |                                |  |  | 1                              | 
|Q3
    2016 |  |                         | - |  |                                |  | 1  |                                |  |  | 1                              | 
|Q4
    2016 |  |                         | 2 |  |                                |  | 3  |                                |  |  | 2                              | 
|            |  |                         |   |  |                                |  |    |                                |  |  |                                | 
|Q1
    2017 |  |                         | 2 |  |                                |  | 5  |                                |  |  | 6                              | 
|Q2
    2017 |  |                         | - |  |                                |  | 5  |                                |  |  | -                              | 
|Q3
    2017 |  |                         | - |  |                                |  | 5  |                                |  |  | -                              | 
|Q4
    2017 |  |                         | - |  |                                |  | 5  |                                |  |  | -                              | 
|            |  |                         |   |  |                                |  |    |                                |  |  |                                | 
|Totals      |  |                         | 5 |  |                                |  | -- |                                |  |  | 14                             | 



We
only began to acquire customers in January 2016 and as of September 30, 2016, we were providing electricity to 5,159 customers.
We expect that by the end of 2016 more households will have enrolled with us. Not all of these accounts will be receiving electricity
from us as of the end of the year due to the time lag between sign-up on day 1 and when they actually begin receiving electricity
about day 30. There is additional time between the end of the customer’s first billing cycle with us on about day 60, billing
on day 61, payment to the utility on or about day 81, and payment by the utility to us about day 90 or so. Once this start-up
period has been completed, we expect to collect cash from a customer every 30 days or so. All payments go to a lockbox operated
by our energy supplier, Exelon, with funds collected during a given month released to us during the first week of the next month.



During
our start-up phase, the delay between signup and first cash collection puts stress on our cash flow. While our agreement with
Exelon allows us to defer payment for energy sold, we are still required to pay our marketing vendors for the enrollees they sign,
typically twice a month.



Despite
the delays and difficulties we have encountered, which are not unusual for a start-up company, we believe that our marketing approach
and the advantages of our power supply agreement with Exelon provide positive indications for our future development. Until our
retail energy business has gained scale, we expect that our primary sources of cash flow will be Note sales and payments on the
Term Loan received by Aspirity Financial from Enterprises, our first financial services customer.



35









Sales
& Marketing



Our
services are made available to customers under fixed price contracts as well as some that may provide for renewable energy percentages
greater than state requirements. All contracts regardless of price, term, and renewable energy percentage are subject to standard
terms and conditions as filed from time to time with state regulatory authorities.



Retail
customers make purchase decisions based on a variety of factors, including price, customer service, brand, product choices, bundles,
or value-added features. On average, only about 36% of the 32.2 million residential customers (in a range of 7% to 81%) in our
44 target markets as described above have ever switched away from the utility as the supplier of their generation services. Our
target customer is not necessarily one who has switched before, rather our goal is to reach the un-switched Home CEO with a compelling
offer.



The
prices we offer customers are determined by us and are not subject to regulation. The terms we offer are also determined by us,
and we develop such to align with regulatory requirements within each state where we do business. The electricity we sell is generally
metered and delivered to our customers by local utilities. As such, we do not have a maintenance or service staff for customer
locations. With certain limited exceptions, these utilities also provide customer billing and collection services on our behalf,
generally under the utility consolidated billing structure.



Although
our marketing efforts just began in the first quarter of 2016, we plan to reach residential prospects utilizing offline and online
marketing channels. The offline channel includes vehicles such as outbound telemarketing, door-to-door, and direct mail. The online
channel includes paid search, display ads, retargeting ads, affiliate, email, state-run comparison-shopping engines, and the like.
Our goal is to invest an optimal amount in new customer acquisition, and focus on customer retention and the lifetime value inherent
in satisfied customer relationships.



To
date, most of our customers have come from the outbound telemarketing and door-to-door channels. We are also re-designing our
web site and in the fourth quarter of 2016, we expect to begin testing online paid search and direct mail.



The
table below summarizes certain areas of our intended marketing and brand-building strategies:



|Target
    Consumer   | The
    Home CEO Each household has someone in charge of managing all the activities related to their home. While the role may
    be shared, it is largely a thankless task but still an important job that needs to be handled. Ideally we will reach un-switched
    Home CEO’s.                                                             
|--------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                      |                                                                                                                                                                                                                                                                                                                                                 
|Relevant
    Insights | Fear
    of making a regrettable decisionThe Home CEO is bombarded with life-related events that have resulted in an overall stress
    level that makes them “fear making a bad decision,” such that they avoid making any decision. We believe this
    has contributed significantly to many potential customers NOT making an energy choice.
|                      |                                                                                                                                                                                                                                                                                                                                                 
|Key
    Selling Point | Aspirity
    simplifies choice This statement is what makes Aspirity better than the competition. We will use this simple, single-minded
    benefit to motivate customers to choose us over their current provider or other potential options.                                                                                                 



36







|Value
    Proposition        | Aspirity
    turns the chaos of data into actionable information The ability to turn a chaos of data into useful information will take
    customers from a place of stress to one of calm. As a result, the fear of making decisions they may regret will diminish.
|---------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                             |                                                                                                                                                                                                                                                                     
|Point
    of Differentiation | Aspirity
    organizes complex issues simply Our 4-step approach turns information into knowledge:                                                                                                                                                                  



| | ● | Un-confuse– People cannot begin to learn something new if they are confused.                                                
| | - | ----------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                             
| | ● | Organize– Eliminate irrelevant information, then organize the remainder.                                                    
| |   |                                                                                                                             
| | ● | Compare– Provide opportunities to test the impact of different factors; our goal is to help customers make their
    choice.
| |   |                                                                                                                             
| | ● | Choose– Making knowledgeable choices make one feel confident and minimizes fear.                                            



|Reason
    to Believe | Aspirity
                                         is significantly different than the competition Until our brand is more widely known,
                                         we will need to do two things to support the decision to choose Aspirity:
|--------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | The
    user experience must be simple and intuitive – Our brand promises of Advocacy, Clarity, Information, Anticipation,
    Customization, and Transparency must be clear.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                              
| | ● | We
    will not be confusing or misleading – In contrast to the competition, we will avoid behaviors that don’t put
    customers first.                                     



|Brand
    Character           | We
    serve our customers and always put them first Our customers must always feel that we put them first and are fully empathetic
    to their needs. We will use humility, enthusiasm, and intelligence to consistently anticipate customer needs.
|----------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                              |                                                                                                                                                                                                                                                      
|Desired
    Consumer Response | Aspirity
                                         helps me make great decisions We will earn our customers respect and they will reward
                                         us with their loyalty and sincere testimonials like:                



| | ● | “Prior
    to Aspirity, decisions about my home were confusing, time-consuming, and very stressful to work through”.         
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                              
| | ● | “Aspirity
    simplifies complex problems into relevant learnings, clear trade-offs, and personalized plans to fit my needs”.



Energy
Supply



The
retail energy business involves the purchase of electricity in wholesale markets and the virtually simultaneous resale of such
to retail customers. In general, ISOs require payment for energy purchased on a weekly or twice-weekly basis. In some markets,
retailers are also required to buy capacity and certain ancillary services and pay for it every month. In all cases, retailers
are required to provide market operators with financial assurance also known as collateral, typically in the form of cash
or a letter of credit in an amount equal to 60 to 75 days’ worth of such purchases. However, retailers typically only receive
payment from customers once a month. Consequently, a substantial amount of liquidity and capital may be required to both satisfy
payables and carry receivables. We do not own any generation, transmission, or distribution facilities and utilize wholesale suppliers
for our supply requirements and utilities for our transmission and distribution needs.



On
March 30, 2016, we entered into a full requirements preferred supply agreement with Exelon to provide us with all the power and
ancillary services we need to serve our customers for an initial term expiring on March 30, 2019. As of December 31, 2015, Exelon
was the operator of the second largest generation fleet in the U.S. and its long-term S&P credit rating was BBB.



Under
the terms of the PSA, on a daily or weekly basis as we request, Exelon provides us with firm, fixed price quotes for power for
terms of 1, 3, 6, 9, 12, 15, 18, 24, 30, and 36 months out for each of the service areas in which we operate. Exelon’s prices
to us include all costs of energy, capacity, and ancillary services necessary to serve residential and small commercial customers.
We may also meet state minimum green or renewable energy supply criteria by acquiring renewable energy certificates or
RECs from Exelon via the PSA. If necessary, we may also buy additional RECs to satisfy the requirements of customers selecting
a product with a percentage of renewable power higher than state minimums. We then mark up these costs to obtain selling prices.
In addition, under the PSA, Exelon absorbs all volumetric risk or deviations between forecasted and actual customer usage. Finally,
the PSA provides that Exelon will post any collateral required of us by an ISO or EDC.



37







Exelon
invoices us for all purchases under the agreement every month. The PSA also incorporates the ability for us to defer payment of
all or a portion of these invoices based on certain financial criteria as defined in the agreement. With respect to the agreement,
if Exelon fails to deliver or if we default and are unable to cure such, we would then be forced to pledge collateral and buy
the required power from either an ISO or another wholesale supplier and the costs of such may be higher or lower than those embodied
in the PSA.



Industry
Background



By
virtually any measure, the electric power industry in the U.S. is substantial. Per preliminary EIA data, in 2015, the industry
sold 3,725 TWh (down 1.1% from 2014) for more than $368.1 billion (down 6.4%) to over 148.5 million residential, commercial, and
industrial customers (up 0.8%) for an average price of 10.42 cents/kWh.



Electric
power in commercial quantities, unlike other energy commodities such as coal or natural gas, cannot be stored, i.e., the supply
must be produced or generated exactly when used or demanded by customers. Further, the laws of physics dictate that power flows
within a network along the lines of least resistance, not necessarily where we may want it to go. These facts, coupled with the
essential nature of the service to modern life, have obvious implications for electricity market structures and regulations.



Today,
the industry includes any entity producing, distributing, trading, or selling electricity. Physically, the nation’s power
system includes generation, transmission, and distribution systems. Participants in the generation segment include investor owned,
publicly owned, cooperative, and federal utilities, and non-utility power producers, including independent power producers and
commercial and industrial entities that operate co-generation facilities. As of the end of 2015, these entities operated over
20,000 generating units with net summer capacity of 1,069 GW incorporated into over 7,400 power plants. In addition to generation,
the nation’s bulk power system also includes about 200,000 miles of high-voltage (over 144kV) transmission lines. The retail
distribution network includes substations, wires, poles, metering, billing, and related support systems. Power marketers and retail
energy providers do not own any generation, transmission, or distribution assets, but buy and sell in wholesale and retail markets.
Finally, participants in wholesale power markets include banks, hedge funds, private equity firms, and trading houses.



The
investor-owned portion of the industry, including utilities, competitive retail energy providers, and non-utility generators,
constitutes over 70% of the industry’s revenues, unit sales, and customers. Since the passage of the Public Utilities Regulatory
Policy Act of 1978, the industry has been undergoing a massive restructuring process that has had particular impact on investor-owned
utilities.



Since
PURPA, the nation has moved from a system of vertically integrated monopolies providing retail service at state-determined, cost-based
rates to one where the ownership of generation assets is no longer regulated and many the nation’s bulk power systems are
operated under the supervision of the Federal Energy Regulatory Commission, an independent agency within the U.S. Department of
Energy. Furthermore, while some states have restructured their markets such that individual consumers may choose their electricity
supplier, most state public utility commissions continue to regulate their utilities under the traditional cost-based framework.



38









Today,
wholesale prices are subject to a federal regulatory framework focused on ensuring fair competition and reliability of supply.
At the state level, under the traditional system which most states continue to employ, a vertically integrated utility is responsible
for serving all consumers in a defined territory and customers are obligated to pay the regulated rate for their class of service.
However, in a state with a restructured or deregulated market, that is, one with retail choice, the generation,
transmission, distribution, and retail marketing functions of the business are legally separated and pricing of energy is unbundled
from delivery services to bring the benefits of competition to retail customers[1]. The regulated portions of these
formerly vertically-integrated utilities, now generally known as EDCs or LDCs, are responsible for delivering power, billing consumers,
and resolving any service issues, but customers can shop around and buy power from any licensed supplier or broker doing business
in the state, hence “retail choice”.







Restructuring
created new business opportunities in an established industry. In general, there are two types of non-utility businesses participating
in the deregulated retail energy marketing function in the U.S. today – brokers and suppliers – but
each state licenses these businesses in a different way. For example, not every jurisdiction makes a broker/supplier distinction
and some divide licenses based on potential customer categories such as “residential” or “non-residential”
while other states divide their markets based on historical utility service territories and license an entity to only provide
services in a specific area. Overall, as of January 2014, there were about 700 of these licensed retail energy businesses in the
U.S.








|1 | Generally,
    only customers of investor-owned utilities are eligible to choose their electric supplier while those served by a municipal,
    cooperative, or other type of non-investor owned utility are ineligible. However, there are certain areas where customers
    of specific cooperatives and public utilities may have choice but these instances are rare.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



39







Brokers,
also known as aggregators, negotiate supply agreements between retail customers, typically large commercial or industrial
entities, and wholesale suppliers. Brokers collect commissions from the supplier that wins a piece of business. Brokers do not
bill customers directly and never take title to energy; they work for the customer. Their major expense is signing up new customers.
As a result, brokers generally have relatively limited margins but high quality cash flows and comparatively small balance sheets.



Suppliers,
also known as retail energy providers (each, a “REP”), energy service companies (each, an “ESCO”), competitive
energy providers (each, a “CEP”), or the like depending upon the state, are also licensed to deal with retail customers.
They have an up-stream supply arrangement which may include purchasing directly from an ISO like PJM or NYISO or bilaterally from
large energy companies or independent power producers. In contrast to brokers, suppliers potentially have higher margins on the
energy sold but require larger amounts of capital to acquire energy and carry receivables and payables for some period.



Today,
years after Massachusetts and Rhode Island became the first states to effectively implement choice in 1998, 14 jurisdictions (13
states plus the District of Columbia) allow all residential, commercial, and industrial customers served by investor-owned
utilities to choose their energy provider.



Per
analysis of EIA data for states with restructured markets, on average between 2002 and 2014, energy and delivery costs accounted
for about 67% and 33%, respectively, of the average retail electricity price. Of course, these percentages fluctuate from year
to year and state to state, primarily due to wholesale energy market conditions, weather, and state rules.



40







Results
of Operations



Three
Months Ended September 30, 2016 & 2015



The
following table sets forth selected financial data for the periods indicated, which has been derived from the consolidated financial
statements included in this report:





|                                                     |  | For
    the Three Months Ended September 30, |       
|---------------------------------------------------- |  | -------------------------------------------- | ------
|Dollars
    in thousands;may not add due to rounding |  | 2016                                         |       
|                                                     |  | Dollars                                      |       
|Revenue                                              |  |                                              |       
|Retail
    energy services                           |  | $                                            | 928   
|Financial
    services (Note 13)                     |  |                                              | 711   
|Net
    revenue                                      |  |                                              | 1,640 
|                                                     |  |                                              |       
|Costs
    of sales & services                        |  |                                              |       
|Cost
    of retail electricity sold                  |  |                                              | 745   
|Gross
    profit (loss)                              |  |                                              | 894   
|                                                     |  |                                              |       
|Operating
    expenses                               |  |                                              |       
|Sales,
    marketing, and customer service           |  |                                              | 1,065 
|Other
    general & administrative                   |  |                                              | 1,355 
|Total
    operating expenses                         |  |                                              | 2,421 
|Operating
    income (loss)                          |  |                                              | (1,526
|                                                     |  |                                              |       
|Other
    income (expense)                           |  |                                              |       
|Interest
    expense                                 |  |                                              | (1,069
|Other
    income                                     |  |                                              | 0     
|Other
    income (expense), net                      |  |                                              | (1,069
|                                                     |  |                                              |       
|Loss
    from continuing                             |  |                                              |       
|operations
    before income taxes                   |  |                                              | (2,595
|Income
    tax provision                             |  |                                              | -     
|Net
    loss from continuing operations              |  |                                              | (2,595
|Net
    loss from discontinued operations            |  |                                              | -     
|Net
    loss                                         |  |                                              | (2,595
|Net
    loss from non-controlling interest           |  |                                              | -     
|Net
    loss attributable to Company                 |  |                                              | (2,595
|Preferred
    distributions                          |  |                                              | 137   
|Net
    loss attributable to common                  |  | $                                            | (2,732



Revenue:For the three months ended September 30, 2016 and 2015, retail energy revenue was $928,000 and $10,173,000, respectively.
For the 2016 quarter, this revenue was generated by Aspirity Energy only, while that for the 2015 period was produced solely by
REH. The remainder of 2016’s third quarter revenue total revenue of $1,640,000 or $711,000, is financial services revenue
(interest income) related to the Term Loan between the Company and Enterprises earned by Aspirity Financial. REH is no longer
consolidated with the Company as of March 30, 2016.



41







The
following table details key retail energy operating statistics for the periods indicated.





|                                                                                 |  | For/At
    Three Months Ended September 30, |       
|-------------------------------------------------------------------------------- |  | ------------------------------------------- | ------
|Key
    Retail Energy Operating Statistics (in units unless otherwise indicated) |  |                                             |       
|                                                                                 |  | 2016                                        |       
|Aspirity                                                                         |  |                                             |       
|Retail
    electricity sales ($000s)                                             |  |                                             | 928   
|Unit
    sales (MWh)                                                             |  |                                             | 11,849
|Weighted
    average retail price (¢/kWh)                                        |  |                                             | 7.83  
|Customers
    receiving service, end of period                                   |  |                                             | 5,159 
|                                                                                 |  |                                             |       
|REH                                                                              |  |                                             |       
|Retail
    electricity sales ($000s)                                             |  |                                             | na    
|Unit
    sales (MWh)                                                             |  |                                             | na    
|Weighted
    average retail price (¢/kWh)                                        |  |                                             | na    
|Customers
    receiving service, end of period                                   |  |                                             | na    
|                                                                                 |  |                                             |       
|Consolidated                                                                     |  |                                             |       
|Retail
    electricity sales ($000s)                                             |  |                                             | 928   
|Unit
    sales (MWh)                                                             |  |                                             | 11,849
|Weighted
    average retail price (¢/kWh)                                        |  |                                             | 7.83  
|Customers
    receiving service, end of period                                   |  |                                             | 5,159 



Costs
of retail electricity sold: In general, the Company’s costs of electricity sold include the cost of purchased power,
EDC service fees, renewable energy certificates, bad debt expense, and hedge gains net of losses, if any. Wholesale electricity
buyers are typically required to maintain cash deposits in separate accounts to meet vendors’ financial assurance requirements
to purchase power which amount is included in “cash in trading accounts” or “cash in collateral accounts”.



Electricity
buyers that do not use full requirements preferred supply agreements are exposed to volatility in the cost of energy acquired
for sale to customers, and consequently, from time to time they may use derivatives to hedge or reduce this variability using
hedge accounting guidance as permitted by GAAP. For example, under GAAP, certain derivatives contracts may be designated
as cash flow hedges and the effective portion of any change in the derivative or hedging instrument’s fair value
is recorded as other comprehensive income and deferred until the change in value of the hedged item is recognized in earnings.
An entity’s risk management policies may also permit the use of undesignated derivatives as economic hedges. For
an undesignated economic hedge, all changes in the derivative financial instrument’s fair value are recognized currently
in revenues.



During
the third quarter of 2016, Aspirity Energy purchased 11,849 MWh of electricity from Exelon for $745,000 for a weighted average
cost of $62.91/MWh. Due to the deconsolidation of REH at the end of the first quarter of 2016, its results are not included in
the third quarter of 2016.



In
the comparable 2015 period, Aspirity Energy was not yet operational, but REH acquired 120,649 MWh in ISO-NE, PJM, and from certain
other wholesale suppliers for $8,031,000 which resulted in a cost of $66.56/MWh. During the third quarter of 2015, REH hedged
the cost of 58,720 MWh or 49% of the of electricity sold to retail customers. For the 2015 period, these designated hedges had
the effect of decreasing the cost of retail electricity sold by $50,000.



Sales,
marketing, and customer service costs: Retail sales and marketing costs and expenses include offline and online marketing
costs related to retail customer acquisition and retention. Major offline marketing channels may include out-bound telemarketing,
direct mail, door-to-door, mass media (radio, television, print, and outdoor), and affiliates. Online marketing channels may include
paid search, affiliates, comparison shopping engines, banner or display advertising, search engine optimization, and e-mail marketing.
Customer service costs include all variable costs associated with serving customers such as software, mailing, data aggregation,
and reporting.



42







During
the three months ended September 30, 2016 and 2015, the Company spent $1,065,000 and $415,000, respectively on sales and marketing,
with the increase driven primarily by Aspirity’s entry into new markets as well as a larger emphasis on marketing spend
for the Aspirity business. During the third quarter of 2016, we also spent $335,000 on customer service.



General
and administrative expenses: Other general and administrative expenses include salaries, wages, incentive compensation,
and related costs such as employee benefits and payroll taxes, legal fees and expenses, audit fees, tax compliance reporting service
fees, other fees paid for outside consulting services, expenses associated with marketing our Notes such as advertising, printing,
and servicing costs as well as items such as trading tools and subscriptions, rent, depreciation and amortization, insurance,
travel, and all other indirect support expenses.



For
the third quarter of 2016, general and administrative expenses decreased by $718,000 to $1,355,000 compared to $2,073,000 for
2015, primarily due to Enterprises not being consolidated, which resulted in a lower headcount and overhead as the third quarter
represents the Company’s operations only in 2016.



Other
income (expense): In the third quarter of 2016, we recorded net other expense of $1,069,000 compared to net other expense
of $287,000 in 2015.



Interest
expense is the principal component of other expense and it increased by $736,000 to $1,069,000 for the period from $332,000 during
the comparable 2015 period, primarily due to an increase in outstanding debt as well as a change in the intercompany interest
allocation in Enterprises in 2015.



Discontinued
operations: In the first quarter of 2016, the Company moved two segments, diversified investments and wholesale trading,
into discontinued operations. Both segments are owned and operated by Enterprises. Due to the deconsolidation of Enterprises as
of March 30, 2016, there was no income from discontinued operations in the third quarter of 2016, compared to a loss of $130,000
for the same quarter in 2015.



Preferred
distributions: During the third quarters of both 2016 and 2015, we distributed $137,000 to our preferred unit holder.



43







Nine
Months Ended September 30, 2016 & 2015



The
following table sets forth selected financial data for the periods indicated, which has been derived from the consolidated financial
statements included in this report:





|                                                                 |  | For
    the Nine Months Ended September 30, |       
|---------------------------------------------------------------- |  | ------------------------------------------- | ------
|Dollars
    in thousands;may not add due to rounding             |  | 2016                                        |       
|                                                                 |  | Dollars                                     |       
|Revenue                                                          |  |                                             |       
|Retail
    energy services                                       |  | $                                           | 10,883
|Financial
    services (Note 13)                                 |  |                                             | 1,613 
|Net
    revenue                                                  |  |                                             | 12,496
|Costs
    of sales & services                                    |  |                                             |       
|Cost
    of retail electricity sold                              |  |                                             | 9,291 
|Gross
    profit (loss)                                          |  |                                             | 3,206 
|Operating
    expenses                                           |  |                                             |       
|Sales,
    marketing, and customer service                       |  |                                             | 3,504 
|Other
    general & administrative                               |  |                                             | 5,837 
|Total
    operating expenses                                     |  |                                             | 9,340 
|Operating
    income (loss)                                      |  |                                             | (6,135
|Other
    income (expense)                                       |  |                                             |       
|Interest
    expense                                             |  |                                             | (3,134
|Other
    income                                                 |  |                                             | 119   
|Other
    income (expense), net                                  |  |                                             | (3,015
|Income
    (loss) from continuing operations before income taxes |  |                                             | (9,150
|Income
    tax provision                                         |  |                                             | -     
|Net
    income (loss) from continuing operations                 |  |                                             | (9,150
|Net
    income (loss) from discontinued operations               |  |                                             | 712   
|Net
    income (loss)                                            |  |                                             | (8,437
|Net
    income (loss) from non-controlling interest              |  |                                             | (110  
|Net
    income (loss)                                            |  |                                             |       
|attributable
    to Company                                      |  |                                             | (8,328
|Preferred
    distributions                                      |  |                                             | 412   
|Net
    income (loss) attributable to common                     |  | $                                           | (8,739



Revenue:For the nine months ended September 30, 2016 and 2015, net revenues were $12,496,000 and $23,285,000, respectively. Revenue
in the first nine months of 2016 was produced by both Aspirity and REH, the results of which were consolidated through March 30,
2016, whereas that for the comparable period in 2015 was generated solely by REH. The 2016 total included $10,173,000 of retail
energy sales which was generated by REH in the first quarter. The remainder of the 2016 revenue is interest income of $1,613,000
earned on the Term Loan. REH is no longer consolidated with the Company as of March 30, 2016.



44







The
following table details key retail energy operating statistics for the periods indicated.



|                                                                                                                                                                                                                                               |  | For/At
    Nine Months Ended September 30, |        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | -------
|Key
                                         Retail Energy Operating Statistics
                                                                                (in
                                         units unless otherwise indicated) |  |                                            |        
|                                                                                                                                                                                                                                               |  | 2016                                       |        
|Aspirity                                                                                                                                                                                                                                       |  |                                            |        
|Retail
    electricity sales ($000s)                                                                                                                                                                                                           |  |                                            | 1,299  
|Unit
    sales (MWh)                                                                                                                                                                                                                           |  |                                            | 16,572 
|Weighted
    average retail price (¢/kWh)                                                                                                                                                                                                      |  |                                            | 7.84   
|Customers
    receiving service, end of period                                                                                                                                                                                                 |  |                                            | 5,159  
|                                                                                                                                                                                                                                               |  |                                            |        
|REH                                                                                                                                                                                                                                            |  |                                            |        
|Retail
    electricity sales ($000s)                                                                                                                                                                                                           |  |                                            | 9,584  
|Unit
    sales (MWh)                                                                                                                                                                                                                           |  |                                            | 115,092
|Weighted
    average retail price (¢/kWh)                                                                                                                                                                                                      |  |                                            | 8.33   
|Customers
    receiving service, end of period                                                                                                                                                                                                 |  |                                            | --     
|                                                                                                                                                                                                                                               |  |                                            |        
|Consolidated                                                                                                                                                                                                                                   |  |                                            |        
|Retail
    electricity sales ($000s)                                                                                                                                                                                                           |  |                                            | 10,883 
|Unit
    sales (MWh)                                                                                                                                                                                                                           |  |                                            | 131,664
|Weighted
    average retail price (¢/kWh)                                                                                                                                                                                                      |  |                                            | 8.27   
|Customers
    receiving service, end of period                                                                                                                                                                                                 |  |                                            | 5,159  



Costs
of retail electricity sold: During the first nine months of 2016, Aspirity purchased electricity for sale to retail customers
in PJM and from Exelon and in the 2016 and 2015 periods, REH acquired power in ISO-NE, PJM, and from certain other wholesale suppliers.



During
the first nine months of 2016, the Company sold 131,644 MWh purchased for $9,291,000, resulting in a weighted average cost of
$70.58/MWh, down from $20,350,000 spent on 268,797 MWh at a cost of $75.71/MWh in the third quarter of 2015. The reduction in
cost is primarily due to the elimination of REH from the Company’s consolidated financial results after the first quarter
of 2016.



REH
did not hedge any power costs during the first nine months of 2016, but during the first nine months of 2015, it hedged the cost
of 92,355 MWh or 34% of the electricity sold to retail customers. For the 2015 period, these designated hedges had the effect
of increasing the cost of retail electricity sold by $861,000.



Sales,
marketing, and customer service costs: During the first nine months of 2016 and 2015, we spent $3,504,000 and $1,018,000,
respectively on sales and marketing, with the increase driven primarily by Aspirity’s entry into new markets and initiatives
to establish the brand of the Company. REH utilized minimal marketing to gain new customers in 2015. During the first three quarters
of 2016, we also spent $983,000 on customer service.



General
and administrative expenses: For the first nine months of 2016, general and administrative expenses decreased by $404,000
to $5,837,000 compared to $6,241,000 for 2015, primarily due to expenses associated with REH such as trading tools and subscriptions
in association with their hedging activities, partially offset by including general and administrative expenses for two companies
through March 30,2016.



Other
income (expense): In the first nine months of 2016, we recorded net other expense of $3,015,000 compared to net other
expense of $1,345,000 in 2015. As the principal component of other expense, interest expense increased by $1,660,000 to $3,134,000
for the year to date from $1,475,000 during the comparable 2015 period, primarily due to an increase in outstanding debt as well
as a higher weighted average interest rate in 2016.



45







Discontinued
operations: In the first quarter of 2016, the Company moved two segments, diversified investments and wholesale trading,
into discontinued operations. Both segments are owned and operated by Enterprises. Discontinued operations contributed $712,000
of income to the net loss of the Company in the first nine months of 2016, compared to $2,923,000 of income for the same three
quarters in 2015. This is primarily due to the profitable first nine months for wholesale trading in 2015.



Preferred
distributions: During the first nine months of both 2016 and 2015, we distributed $412,000 to our preferred unit holder.



Liquidity,
Capital Resources & Cash Flow



The
accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern.
The Company has financed its operations to date principally through cash on hand, Note sales, and Term Loan receipts. For the
nine months ended September 30, 2016, the Company on a consolidated basis reported a net loss of $8,437,000 and cash used for
operations of $7,408,000. As of September 30, 2016, the Company had unrestricted cash, negative working capital, and total members’
deficit of $859,000, $6,664,000, and $12,344,000, respectively.



Aspirity
Energy and Aspirity Financial are start-up companies in the retail energy and financial services industries, respectively. While
revenues from Aspirity Energy are expected to continue to increase throughout the remainder of the year as customers are signed
up, overall we do not expect such to be significant until 2017. Further, the Company does not expect to report positive cash flow
from operations or profitability on a regular basis until the last part of 2017 at the earliest.



On
July 1, 2015, as part of the Restructuring, Aspirity Financial entered into a Term Loan with Enterprises, pursuant to which the
Company agreed to loan Enterprises an aggregate principal amount of $22,206,000 with a weighted average interest rate of 14.08%
and a maturity date of December 30, 2019. Up until October 31, 2016, the cash flow required to service the Term Loan Notes (those
that were outstanding as of June 30, 2015, including any renewals thereof) was directly tied to the monthly invoices sent by the
Company to Enterprises.



On
November 1, 2016, the Company and Enterprises executed Amendment No. 3 to the Term Loan Agreement. Among other things, the Amendment
revises certain definitions and incorporates a new amortization schedule calling for fixed monthly payments of principal and interest
at a fixed annual rate of 15.12% with a balloon payment on the maturity date. The principal amount of the loan was adjusted up
to $18,238,000 to include $1,592,000 of accrued interest income and costs that were capitalized.



The
Amendment also revises the accounting treatment of the mandatory prepayments owed the Company as the result of the sale by Enterprises
of REH, which closed on November 2, 2016, and further provides for certain additional optional prepayments. Pursuant to the Amendment,
both the mandatory prepayments due to the REH sale and the optional prepayments provided for in the Amendment will be treated
as “prepayments of installments” rather than as “prepayments of principal”. Such mandatory and optional
prepayments are expected to total at least $3,000,000 and may be as much as $4,000,000 between November 1, 2016 and January 31,
2017. On November 4, 2016, the Company received $2,008,000, consisting of $1,508,000 of mandatory and $500,000 of optional prepayments.
The Amendment also specifies the conditions under which the Company will release its security interest in the equity interests
of Enterprises and provides for adjustments to certain of the covenants and agreements of the borrower with respect to monthly
reporting, minimum liquidity, permitted liens, and defaults.



46







The
Amendment also provides that Mr. Krieger, the Company’s Chairman and controlling shareholder, will assist Aspirity Energy
in obtaining certain surety bonds required by its geographic expansion plans and provides that the Company and its subsidiaries
have no explicit obligation to lend funds to the Borrower, Mr. Krieger, or their affiliates, but that any such request will be
considered based on the facts and circumstances existing at the time.



Prior
to the time that Aspirity Energy is generating sustained positive cash flow from operations and profits, the Company will rely
on the timely payment of the Term Loan and its ability to sell Notes to fund Note redemptions and operations. Enterprises’
ability to make timely payments on the Term Loan depends in part on the operations of its Legacy Businesses which were not profitable
in 2015. In the event amounts owed to us are paid late or not paid, our ability to fund operations, sell new Notes, renew existing
Notes, and redeem existing Notes will be negatively impacted.



Historically,
sales and renewals of Notes have exceeded redemptions, although there can be no assurance that such will be the case in the future.
If redemptions exceed cash from operations, Term Loan payments, renewals, and new Note sales, then the Company will need additional
financing from other sources.



Historically,
capital requirements have been funded by cash flow positive operations and additional financing, principally in the form of the
Notes. Should sustained significant negative cash flow from operations occur or additional financing not materialize, such events
might have a detrimental effect on the Company.



47







The
following table is presented as a measure of our liquidity and capital resources as of the dates indicated, including “Total
liquid assets”, which is a non-GAAP measure:





|                                                     |  | At                     |        
|---------------------------------------------------- |  | ---------------------- | -------
|Dollars
    in thousands;may not add due to rounding |  | September
    30, 2016 |        
|                                                     |  | Dollars                |        
|Liquidity                                            |  |                        |        
|Unrestricted
    cash                                |  | $                      | 859    
|Cash
    in trading accounts                         |  |                        | -      
|Cash
    in collateral accounts                      |  |                        | 15     
|Accounts
    receivable                              |  |                        | 506    
|Total
    liquid assets                              |  |                        | 1,380  
|Prepaid
    expenses and other assets                |  |                        | 44     
|Term
    Loan - current                              |  |                        | 7,541  
|Assets
    of discontinued operations - current      |  |                        | -      
|Total
    current assets                             |  |                        | 8,965  
|Other
    assets                                     |  |                        | 10,325 
|Total
    assets                                     |  | $                      | 19,290 
|                                                     |  |                        |        
|Capital
    Resources                                |  |                        |        
|Current
    debt                                     |  | $                      | 11,244 
|Long
    term debt                                   |  |                        | 16,005 
|Total
    debt                                       |  |                        | 27,249 
|Preferred
    equity                                 |  |                        | 2,745  
|Common
    equity                                    |  |                        | (15,089
|Non-controlling
    interest                         |  |                        | -      
|Total
    equity                                     |  |                        | (12,344
|Total
    capitalization                             |  | $                      | 14,905 



For
income tax purposes, we are taxed as a partnership which means that we do not pay any income taxes. Our income or loss for each
year is allocated among holders of our common units who are then personally responsible for the tax liability associated with
such income. Our Operating Agreement provides for distributions of cash to members based upon their respective ownership interests
in the amount necessary to permit the member who is in the highest income tax bracket to pay all state and federal taxes on our
net income allocated to such member.



The
decision to make distributions other than tax distributions to holders of our common units and required distributions to holders
of preferred units is at the discretion of our Board and depends on various factors, including our results of operations, financial
condition, capital requirements, contractual restrictions, outstanding indebtedness, investment opportunities, and other factors
considered by the Board to be relevant. The indenture governing our Notes prohibits us from paying distributions to our members
if there is an event of default with respect to the Notes or if payment of the distribution would result in an event of default.
The indenture also prohibits our Board from declaring or paying any distributions other than tax distributions if, in the reasonable
determination of the Board, the Company would have insufficient cash to meet anticipated Note redemption or repayment obligations.



While
we believe that payments from Enterprises on the Term Loan, anticipated cash generated from operating activities, availability
of trade credit with respect to power purchases, and anticipated proceeds from our Notes Offering will be sufficient to meet operating
cash requirements and obligations under the Notes for the next twelve months, there can be no assurance that this will prove to
be the case.



48







The
Company regularly evaluates sources of debt financing other than the Notes and additional equity capital to meet its funding needs.
However, there can be no assurance that these efforts will prove to be successful.



The
table below summarizes our primary sources and uses of cash for the nine months ended September 30, 2016 and 2015 as derived from
the statements of cash flows included in this Form 10-Q.



|                                                     |  | For
    the Nine Months Ended September 30, |       
|---------------------------------------------------- |  | ------------------------------------------- | ------
|Dollars
    in thousands;may not add due to rounding |  |                                             |       
|                                                     |  | 2016                                        |       
|Net
    cash provided by (used in)                   |  |                                             |       
|Operating
    activities                             |  | $                                           | (7,408
|Investing
    activities                             |  |                                             | 2,872 
|Financing
    activities                             |  |                                             | 3,957 
|Net
    cash flow, continuing operations             |  |                                             | (579  
|Net
    cash flow, discontinued operations           |  |                                             | 481   
|Net
    cash flow                                    |  |                                             | (98   
|Effect
    of exchange rate changes on cash          |  |                                             | 87    
|                                                     |  |                                             |       
|Unrestricted
    cash                                |  |                                             |       
|Beginning
    of period                              |  |                                             | 2,331 
|Adjustment
    for deconsolidation                   |  |                                             | (1,461
|End
    of period                                    |  | $                                           | 859   





Continuing
operations for the nine months ended September 30, 2016 used $7,408,000 of cash for operating activities. The largest uses were
the net loss of $8,437,000, an increase in accounts receivable of $1,344,000, and an increase in accrued revenue of $429,000 while
the largest source of cash was an increase in accounts payable of $1,510,000. The net loss for the period was primarily driven
by customer acquisition costs of $3,162,000, general and administrative expenses of $5,837,000, and interest expense of $3,134,000.
During the first three quarters of 2016, we generated $2,872,000 of cash from investing activities, principally due to proceeds
from the Term Loan, and $3,957,000 of cash from financing activity, principally due to sales of Notes, net of redemptions and
distributions of $412,000 paid to the holder of our preferred units. Overall, for the first nine months of 2016, net cash flow
used in continuing operations totaled $578,000, largely offset by net cash flow provided by discontinued operations of $481,000.
At September 30, 2016, our cash totaled $860,000 and our debt totaled $27,249,000 compared to $25,383,000 as of as of December
31, 2015.



Continuing
operations for the nine months ended September 30, 2015 used $5,723,000 of cash for operating activities. The largest uses were
the net loss of $2,747,000 and an increase in accounts receivable of $2,698,000, while the largest sources of cash were increases
in accounts payable of $976,000 and accrued expenses of $1,044,000. During the first three quarters of 2016, we used $304,000
of cash for investing activities, and generated $5,873,000 of cash from financing activity, principally due to borrowings under
the REH revolver, sales of Notes net of redemptions, and distributions of $412,000 paid to the holder of our preferred units.
Overall, for the first nine months of 2015, net cash flow used in continuing operations totaled $154,000, while that from discontinued
operations used $557,000. At September 30, 2015, our cash totaled $2,347,000 and our debt totaled $25,383,000 compared to $19,288,000
as of as of December 31, 2014.



49







Financing



Exelon



On
March 30, 2016, we entered into a full requirements preferred supply agreement with Exelon to provide us with all the power and
ancillary services we need to serve our customers for an initial term expiring on March 30, 2019.



Under
the terms of the PSA, on a daily or weekly basis as we request, Exelon will provide firm, fixed quotes for power for terms from
1 to 36 months out for each of the service areas in which we operate. Such quotes will include all costs of energy, capacity,
ancillary services, and RECs necessary to meet state minimum renewable energy requirements to serve residential and small commercial
customers. In addition, Exelon absorbs all deviations between forecasted and actual customer usage. Finally, the PSA provides
that Exelon will post any collateral required of us by an ISO or EDC.



In
addition to eliminating commodity price and volumetric risk, the PSA also incorporates the ability for us to defer payment of
all or a portion of Exelon’s invoices to us based on certain criteria as defined in the agreement, including an asset pledge
and certain financial covenants. The criteria used to determine the amount of deferral are not limited to, but include the amount
of receivables, both billed and unbilled, as well as a portion of the forward value of customer contracts. As of September 30,
2016, we have deferred $857,000 of payments to Exelon.



Notes
Offering



On
May 10, 2012, our first Form S-1 registration statement relating to the offer and sale of our Notes (File No. 333-179460) was
declared effective by the SEC, and the offering commenced on May 15, 2012. This Old S-1 covered up to $50,000,000 in principal
amount of 3-and 6-month and 1, 2, 3, 4, 5, and 10 year Notes.



On
May 8, 2015, we filed a new registration statement with respect to the Notes (File No. 333-203994) to continue our Notes Offering
under the Old S-1 until the effective date of the New S-1. The new registration replaces the original statement and covers up
to $75,000,000 in principal amount of 3-and 6-month and 1, 2, 3, 4, 5, and 10 year Notes. The New S-1 was declared effective by
the SEC on November 12, 2015.



For
the first nine months ended September 30, 2016 and 2015, we incurred $1,139,000 and $1,103,000, respectively, of offering-related
expenses, including marketing and certain printing expenses, legal and accounting fees, filing fees, and trustee fees but excluding
amounts capitalized as deferred financing costs and amortized as Notes are sold. Deferred financing cost amortization totaled
$22,000 and $94,000 for the nine months ended September 30, 2016 and 2015, respectively. At September 30, 2016, net deferred financing
costs related to the Notes totaled $498,000.



From
the effective date of May 10, 2012 through September 30, 2016, we issued a total of $57,835,000 of Notes, of which $37,430,000
were initial sales for cash and $20,405,000 were renewals for which we did not receive any additional proceeds, and we redeemed
$9,687,000 for a net principal outstanding as of September 30, 2016 of $27,743,000.



50







Non-GAAP
Financial Measures



The
Company’s communications may include certain non- GAAP financial measures. A “non-GAAP financial measure” is
defined as a numerical measure of a company’s financial performance, financial position, or cash flows that excludes, or
includes, amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance
with GAAP in the company’s financial statements.



Non-GAAP
financial measures utilized by the Company include “total liquid assets”. The most comparable GAAP measure is total
current assets. The Company’s management believes that this non-GAAP financial measure provides useful information to investors
and enable investors and analysts to more accurately compare the Company’s ongoing financial performance over the periods
presented since the Company uses its liquid assets to fund ongoing operations.



Critical
Accounting Policies & Estimates



Variable
Interest Entities - Principles of Consolidation



Generally,
we consolidate only business enterprises that we control by ownership of a majority voting interest. However, there are situations
in which consolidation is required even though the usual condition of consolidation (ownership of a majority voting interest)
does not apply. Generally, this occurs when an entity holds an interest in another business enterprise that was achieved through
arrangements that do not involve voting interests, which results in a disproportionate relationship between such entity’s
voting interests in, and its exposure to the economic risks and potential rewards of, the other business enterprise. This disproportionate
relationship results in what is known as a variable interest, and the entity in which we have the variable interest is referred
to as a “VIE.”



The
Company follows ASC 810-10-15 guidance with respect to accounting for VIEs. A VIE is an entity that does not have sufficient equity
at risk to finance its activities without additional subordinated financial support from other parties, or whose equity investors
lack any of the characteristics of a controlling financial interest. A variable interest is an investment or other interest that
will absorb portions of a VIE’s expected losses or receive portions of the entity’s expected residual returns. Variable
interests are contractual, ownership, or other pecuniary interests that change with changes in the fair value of the entity’s
net assets. A party is the primary beneficiary of a VIE and must consolidate it when that party has a variable interest, or combination
of variable interests, that provides the party with a controlling financial interest. A party is deemed to have a controlling
financial interest if it meets both of the power and losses/benefits criteria. The power criterion is the ability to direct the
activities of the VIE that most significantly impact its economic performance. The losses/benefits criterion is the obligation
to absorb losses from, or right to receive benefits from, the VIE that could potentially be significant to the VIE. The VIE model
requires an ongoing reconsideration of whether a reporting entity is the primary beneficiary of a VIE due to changes in facts
and circumstances.



Discontinued
Operations



ASU
2014-08 provided an update to ASC 205 when determining if a component of a business should be accounted for as a discontinued
operation, with the primary consideration being whether the disposal represented a strategic shift that has or will have a major
effect on an entity’s operations and financial results.



For
the Company, each of the three segments of Enterprises was evaluated individually. It was concluded that the results of all three
segments have a major effect on the entity’s operations given their size and fact that they are separate reportable segments.
However, it was determined that the disposal of wholesale trading and diversified investments would represent a strategic shift
for the Company. Therefore, wholesale trading and diversified investments are reported as discontinued operations up to and as
of December 31, 2015, while the retail energy services business of REH was accounted for in continuing operations up to and until
March 30, 2016. Thereafter, no part of Enterprises’ business is consolidated with the Company.



51







Revenue
Recognition



Revenue
from the retail sale of electricity, including estimates of unbilled revenues for power consumed by customers but not yet billed
under the cycle billing method, is recorded in the period in which customers consume the commodity, net of any applicable sales
tax.



Revenue
for financial services pertains to the Term Loan with Enterprises. Revenue is recognized as interest expense is incurred on the
underlying notes. All interest that is incurred for the underlying notes will be paid by Enterprises. As such, an interest expense
that is not paid out is accrued as revenue as well as accrued expense. The maturity of the Term Loan is December 31, 2019 when
all notes and all accrued interest will be paid.



Unit
Based Compensation



The
Company used a discounted cash flow model to value the units granted in the third quarter of 2016. This model includes highly
subjective inputs including cost of capital and growth projections. The Company used the discounted cash flow model due to limited
operations of the Company as well as the lack of publicly traded equity.



52







Item
3 - Quantitative & Qualitative Disclosures about Market Risk



We
are exposed to market risk in our normal business activities. Market risk is the potential loss that may result from changes associated
with an existing or forecasted financial or commodity transaction. The types of market risk we are exposed to are interest rate
risk, liquidity risk, and credit risk.



Commodity
Price Risk



One
of the largest risks that a retail electricity provider faces is commodity risk from fluctuating energy prices. The Company has
mitigated this risk by entering into the PSA with Exelon. The PSA agreement is a full requirements contract which means that Exelon
provides electricity at a stated price that will not change for the duration of the customer’s contract. This allows the
Company to avoid risk from fluctuating prices in the energy market.



Interest
Rate Risk



As
of September 30, 2016, and December 31, 2015, we had $0 and $3,101,000 of variable rate debt outstanding. The interest rates charged
on such are based in part on changes in certain market indices plus a credit margin, but are subject to “floors”,
which may have the effect of converting variable rates to fixed rates and such was the case at December 31, 2015. Consequently,
at December 31, 2015, we had no variable rate debt, although in the future we may be exposed to fluctuations in interest rates.
Exposures to interest rate fluctuations may be mitigated by derivative contracts known as interest rate swaps, caps, collars,
and put or call options. These contracts reduce exposure to interest rate volatility and result in primarily fixed rate debt obligations
when considering the combination of the variable rate debt and the interest rate derivative instrument.



Liquidity
Risk



Liquidity
risk arises from our general funding needs and the management of our assets and liabilities.



Credit
Risk



Credit
risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their
contractual obligations.



In
our retail business, we may be exposed to certain customer credit risks. Although we are currently not exposed to retail customer
credit risk to a large degree due to our participation in POR programs, we expect that this situation will change as we grow our
retail business and expand into non-POR areas.



In
our financial services business, we are exposed to the credit risk represented by the Enterprises Term Loan. The agreement governing
the loan includes certain provisions and covenants that allow us to monitor this risk monthly.



Furthermore,
economic and market conditions may affect the willingness and ability of our retail customers and Enterprises to pay their bills
in a timely manner, which could lead to an increase in bad debt expense above and beyond the allowance for uncollectible accounts
charged to us by utilities and any bad debt provision we may make directly.



53







Item
4 - Controls & Procedures



Disclosure
Controls & Procedures



The
Company maintains a system of disclosure controls and procedures that is designed to ensure that information required to be disclosed
in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities
and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures.



Under
the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,
the Company conducted an evaluation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e).
The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer
and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s
disclosure controls and procedures as of September 30, 2016. Based on that evaluation, the Company’s Chief Executive Officer
and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) of the Exchange Act) were not effective as of September 30, 2016 due to the material weaknesses in internal control
over financial reporting described below.



Material
Weakness in Internal Control over Financial Reporting



The
Company concluded that its internal control over financial reporting was not effective due to the material weaknesses previously
disclosed in Management’s Report on Internal Control Over Financial Reporting (As Revised) in Item 9A of our Form 10-K/A,
for the year ended December 31, 2015, dated May 23, 2016. The Company’s internal control regarding the reliability of financial
reporting and the preparation of financial statements for external purposes was not designed or operating effectively to produce
timely and accurate financial statements. A misstatement related to the classification of non-controlling interest within the
members’ equity section of the balance sheet occurred due to this material weakness. Additionally, management’s control
related to the preparation and review of estimates of fair value of investments in convertible notes securities failed to identify
a material impairment for the year ended December 31, 2015. The control did not operate effectively to evaluate the fair value
of investments and ensure there was supportable evidence to substantiate key valuation assumptions. In addition, as disclosed
in our Form 10-Q for the period ended March 31, 2016, dated June 9, 2016, the Company concluded that its internal control over
financial reporting was not effective due to a material weakness in the design and operating effectiveness of accounting for the
issuance of units in the Company’s equity. The material weaknesses included above have not been remediated as of September
30, 2016.



A
material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there
is reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not
be prevented or detected on a timely basis.



Notwithstanding
the identified material weaknesses, management believes the interim consolidated financial statements included in this Quarterly
Report on Form 10-Q fairly represent in all material respects our financial condition, results of operations, and cash flows at
and for the periods presented in accordance with accounting principles generally accepted in the US.





Changes
in Internal Control over Financial Reporting



There
no changes in the Company’s internal control over financial reporting that occurred during the three months ended September
30, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over
financial reporting, except for the material weaknesses discussed above.



Plan
for Remediation of Material Weaknesses



With
oversight from the Audit Committee, the Company’s management is in the process of developing and implementing remediation
plans to address the material weaknesses. Once all remedial actions have been implemented and in operation for a sufficient period
of time, these actions will be fully tested to determine whether they are operating effectively.



54







Part
II – Other Information



Item
1 - Legal Proceedings



None.



Item
1A - Risk Factors



The
risks and uncertainties described below and in this Form 10-Q under the heading “Forward-Looking Statements” located
on page 8, “Item 1A – Risk Factors” of our 2015 Forms 10-K/A and 10-K, and the “Risk Factors” section
beginning on page 10 of our Form S-1 are not the only risks facing our Company.



Additional
risks and uncertainties that we are not presently aware of, or that we currently consider immaterial, may also affect our business
operations. Our business, financial condition, or results of operations could suffer if the risks set forth are realized.



We
may not be able to expand geographically as quickly as planned.



Our
marketing efforts depend on obtaining licenses from state regulatory authorities and becoming qualified by relevant investor-owned
utilities in the geographic areas in which we plan to target customers. To date, these efforts have taken substantially more time
than expected. We may incur further delays, which will significantly hinder our marketing efforts and prevent us from reaching
our goal for enrollees.



Although
we expect most of these pre-market processes and procedures to be completed by the end of the first quarter of 2017, there can
be no assurance that we will be able to achieve all the arrangements we seek on a timely basis or at all or at an acceptable cost.
Consequently, we may not be able to offer service in all our target markets and failure to do so will adversely affect our ability
to grow our business. Loss of licenses or failure to maintain EDI compliance could cause a negative impact on our results of operations,
financial condition, and cash flow.



Our
marketing efforts may not be successful.



Our
marketing strategy recognizes that we will not be the lowest cost provider of electricity to households; instead, we emphasize
our value proposition, our brand-building strategy, and other points of differentiation. There is no assurance that our marketing
efforts will be successful and, if they are not, we will not be able to build a viable business.



Our
cash flow may not be sufficient to sustain our business.



We
currently rely on the sale of our Notes, payments on the Term Loan, and capital infusions from our principal owner to meet our
cash needs. There can be no assurance that cash from these sources will continue in sufficient amounts to meet our needs. If we
do not have sufficient cash flow, our marketing efforts, assuming they are successful, will be severely constrained and we will
not be able to achieve a sufficiently large customer base to sustain our business.



55







Due
to our recent restructuring, our primary sources of cash flow are payments from Enterprises on the Term Loan and sales of Notes.



Aspirity
Energy and Aspirity Financial are start-up companies in the retail energy and financial services industries, respectively. While
revenues from Aspirity Energy are expected to continue to increase throughout the remainder of the year as customers are signed
up, overall we do not expect such to be significant until 2017. Further, the Company does not expect to report positive cash flow
from operations or profitability on a regular basis until the last part of 2017 at the earliest. Prior to that time, the Company
will rely on the timely payment of the Term Loan and its ability to sell Notes to fund Note redemptions and operations. Enterprises’
ability to make timely payments on the Term Loan depends in part on the operations of its Legacy Businesses which were not profitable
in 2015. In the event amounts owed to us are paid late or not paid, our ability to fund operations, sell new Notes, renew existing
Notes, and redeem existing Notes will be negatively impacted.



Historically,
Note sales and renewals have exceeded redemptions, although there can be no assurance that such will be the case in the future.
If redemptions exceed cash from operations, Term Loan payments, renewals, and new Note sales, then the Company will need additional
financing from other sources.



While
the Company believes that payments from Enterprises on the Term Loan, anticipated cash generated from operating activities, availability
of trade credit with respect to power purchases, and anticipated proceeds from our Notes Offering will be sufficient to meet operating
cash requirements and obligations under the Notes for the next twelve months, there can be no assurance that this will prove to
be the case.



The
Company regularly evaluates sources of debt financing other than the Notes and additional equity capital to meet its funding needs.
However, there can be no assurance that these efforts will prove to be successful.



We
need substantial liquidity to operate our business.



Historically,
we have funded our operations through borrowings from related and unrelated parties and internally generated cash flows. Beginning
in May 2012, we began a direct public offering of our Notes. From the effective date of May 10, 2012 through September 30, 2016,
we issued a total of $52,460,000 of Notes, of which $34,532,000 were initial sales for cash and $17,928,000 were renewals for
which we did not receive any additional proceeds, and we redeemed $8,275,000 for a net principal outstanding as of September 30,
2016 of $26,257,000. The Notes Offering supplies us with liquidity to operate. However, we may not be able to obtain sufficient
funding for our future operations from such source to provide us with necessary liquidity. Difficulty in obtaining adequate credit
and liquidity on commercially reasonable terms may adversely affect our business, prospects, and financial condition.



We
have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not
effective which could adversely affect our ability to accurately report our financial results.



Under
the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an evaluation of the effectiveness of the design and operation of our internal controls. Because of deficiencies
related to financial reporting of and the accounting for non-routine or complex transactions, we concluded that as of September
30, 2016, our disclosure controls and procedures were not effective. Until we have been able to test the operating effectiveness
of our remediated internal controls and ensure the effectiveness of our disclosure controls and procedures, any material weaknesses
may materially adversely affect our ability to report accurately our financial condition and results of operations in the future
in a timely and reliable manner. In addition, although we continually review and evaluate internal control systems to allow management
to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional weaknesses in
our internal control over financial reporting. Any such additional weakness or failure to remediate the existing weakness could
materially adversely affect our ability to comply with applicable financial reporting requirements. If that were to occur, purchasers
of our Notes could be using inaccurate financial information with which to make their investment decision.



56







Shortcomings
or failures in our internal control processes could lead to disruption of our business, financial loss, or regulatory intervention.



We
rely on our internal control systems to protect our operations from, among other things, improper activities by individuals within
our organization. Shortcomings or failures in our systems, internal control processes, or people could lead to disruption of our
business, financial loss, or regulatory intervention.



Our
business depends on the continuing efforts of our management team and personnel and our efforts may be severely disrupted if we
lose their services.



Our
success depends on key members of our management team, the loss of whom could disrupt our business operations. Our business also
requires a capable, well-trained workforce to operate effectively. There can be no assurance that we will be able to retain our
qualified personnel, the loss of which may adversely affect our business, prospects, and financial condition.



We
are dependent on the services of our senior management because of their knowledge of the industry and our business. The loss of
one or more of these key employees could seriously harm our business. It may be difficult to find a replacement with the same
or similar level of knowledge. Competition for these types of personnel is high, and we may not be able to attract and retain
qualified personnel on acceptable terms. Failure to recruit and retain such personnel could adversely affect our business, financial
condition, results of operations and planned growth.



Item
2 - Unregistered Sales of Equity Securities & Use of Proceeds



None.



Item
3 - Defaults Upon Senior Securities



None.



Item
4 - Mine Safety Disclosures



None.



Item
5 - Other Information



None.



57







Item
6 - Exhibits



|Exhibit
    Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1                |  | Agreement
    and Plan of Reorganization, dated November 14, 2011, as amended December 20, 2011 (incorporated by reference to Exhibit 2.1
    to the Registrant’s Form S-1 filed February 10, 2012)                                                                                                                                                                                                                                                                                                                                                                                                         
|3.1(i)             |  | Articles
    of Organization (incorporated by reference to Exhibit 3.1 to the Registrant’s Form S-1 filed February 10, 2012)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3.1(ii)            |  | Form
    of Amended and Restated Operating Agreement (incorporated by reference to Exhibit 3.1(ii) to the Registrant’s Form 10-K
    filed April 15, 2016)                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4.1                |  | First
    Supplemental Indenture (incorporated by reference to Exhibit 4.1 to Registrant’s Form S-1/A filed September 16, 2015)                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.2                |  | Form
    of Indenture (incorporated by reference to Exhibit 4.2 to the Registrant’s Form S-1/A filed March 30, 2012)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4.3                |  | Form
    of Note Confirmation (incorporated by reference to Exhibit 4.3 to the Registrant’s Form S-1/A filed September 16, 2015)                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4.4                |  | Form
    of Subscription Agreement (incorporated by reference to Exhibit 4.4 to the Registrant’s Form S-1/A filed September 16,
    2015)                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4.5                |  | Paying
    Agent Agreement (incorporated by reference to Exhibit 4.5 to the Registrant’s Form S-1/A filed March 30, 2012)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.1               |  | Form
    of Amended and Restated Outsourcing Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form S-1/A
    filed September 16, 2015)                                                                                                                                                                                                                                                                                                                                                                                                                                              
|10.2               |  | Term
    Loan Agreement between Aspirity Financial and Enterprises (incorporated by reference to Exhibit 10.2 to the Registrant’s
    Form S-1/A filed September 16, 2015), as amended by Amendment No. 1 to Term Loan Agreement dated November 1, 2015 and Amendment
    No. 2 dated January 27, 2016 (both incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-K filed April
    15, 2016), and as further amended by Amendment No. 3 to Term Loan Agreement dated November 1, 2016 (incorporated by reference
    to Exhibit 10.1 to the Registrant’s Form 8-K filed November 4, 2016).
|10.3               |  | Employment
    Agreement between the Company and Mark A. Cohn (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K
    filed January 6, 2016)                                                                                                                                                                                                                                                                                                                                                                                                                                            
|10.4               |  | Employment
    Agreement between the Company and Wiley H. Sharp III (incorporated by reference to Exhibit 10.4 to the Registrant’s
    Form 8-K filed January 6, 2016)                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.5               |  | Employment
    Agreement between the Company and Scott C. Lutz (incorporated by reference to Exhibit 10.6 to the Registrant’s Form
    8-K filed January 6, 2016)                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.6               |  | Springing
    Equity Pledge Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s Form S-1/A filed September 16,
    2015)                                                                                                                                                                                                                                                                                                                                                                                                                                                               



58







|Exhibit
    Number |  | Description                                                                                                                                                                                                  
|------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.7               |  | Secured
    Promissory Note given by Enterprises to Aspirity Financial (incorporated by reference to Exhibit 10.8 to the Registrant’s
    Form S-1/A filed September 16, 2015)                               
|10.8               |  | Form
    of Indemnification Agreement between the Company and each of its directors and officers (incorporated by reference to Exhibit
    10.5 to the Registrant’s Form S-1 filed February 10, 2012)        
|10.9               |  | Office
    Sublease Agreement, dated June 1, 2015 between the Company and Bell State Bank & Trust (incorporated by reference to Exhibit
    10.10 to the Registrant’s Form 8-K filed July 20, 2015)          
|10.10              |  | Guaranty
    Agreement dated March 30, 2016 by and between the Company and Exelon Generation Company, LLC (incorporated by reference to
    Exhibit 10.11 to the Registrant’s Form 10-K filed April 15, 2016)
|10.11              |  | Pledge
    Agreement dated March 30, 2016 by and between the Company and Exelon Generation Company, LLC (incorporated by reference to
    Exhibit 10.12 to the Registrant’s Form 10-K filed April 15, 2016)  
|31.1               |  | Certification
    of Chief Executive Officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934.                                                                                     
|31.2               |  | Certification
    of Chief Financial Officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934.                                                                                     
|32.1               |  | Certification
    of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
    906 of the Sarbanes-Oxley Act of 2002.                      
|101.INS            |  | XBRL
    Instance Document                                                                                                                                                                                   
|101.SCH            |  | XBRL
    Schema Document                                                                                                                                                                                     
|101.CAL            |  | XBRL
    Calculation Linkbase Document                                                                                                                                                                       
|101.DEF            |  | XBRL
    Definition Linkbase Document                                                                                                                                                                        
|101.LAB            |  | XBRL
    Labels Linkbase Document                                                                                                                                                                            
|101.PRE            |  | XBRL
    Presentation Linkbase Document                                                                                                                                                                      



59







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 thereto duly authorized.



|                             |     | ASPIRITY
    HOLDINGS, LLC                                                                           
|---------------------------- | --- | -----------------------------------------------------------------------------------------------------
|                             |     |                                                                                                      
|                             | By: | /s/ Scott
    C. Lutz                                                                                
|Dated:
    November 17, 2016 |     | Scott
    C. Lutz                                                                                    
|                             |     | President
    and Chief Executive Officer (principal executive officer)                              
|                             |     |                                                                                                      
|                             | By: | /s/ Wiley
    H. Sharp III                                                                           
|Dated:
    November 17, 2016 |     | Wiley
    H. Sharp III                                                                               
|                             |     | Vice
    President – Finance and Chief Financial Officer (principal accounting and financial officer)



60







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page left blank intentionally.



61













ASPIRITY
HOLDINGS LLC



QUARTERLY
REPORT



FORM
10-Q/A

Amendment
No. 1



FOR
THE QUARTERLY PERIOD ENDED



SEPTEMBER
30, 2016



62