Energie Holdings, Inc.

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

F – Cash draw agreements – Under these agreements, the lender advances us the principal balance and then automatically withdraws a stated amount each business day. Accordingly, there is no stated interest rate. The total remaining daily payments of principal and interest due under these arrangements was $717,590 as of September 30, 2018. The maturity dates of the agreements range from November 2018 to January 2019. During 2018, judgment was entered against us and in favor of ML Factors Funding, Green Capital Funding, and Queen Funding, whereby we are required to pay the outstanding principal and interest balance on the agreements. In addition, ML Factors Funding, Green Capital Funding, and Queen Funding also claim that they are to be paid additional interest, attorney’s fees, and other ancillary expenses. While we are vigorously defending ourselves in these matters and believe that we will not be required to pay more than the total principal and interest outstanding on the agreements, we have recorded the entire amount of all judgments into our financial statements as of September 30, 2018. We recorded the entire requested amount from ML Factors Funding of $240,480, the entire requested amount from Green Capital Funding of $312,056, and the entire requested amount from Queen Funding of $304,826. In addition, we have reclassified these amounts to accrued liabilities.

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

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

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