PART I.  FINANCIAL INFORMATION

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

PetroShare Corp.

Capitalized Interest Costs

The Company has capitalized certain interest costs related to unproved properties that are currently undergoing activities necessary to prepare them for their intended use. These costs have been capitalized to oil and gas properties.

Deferred Equity Issuance Costs

The Company defers as other current assets the direct incremental costs of raising capital through equity offerings until such time as the offering is completed. At the time of the completion of an offering, the costs are offset against the proceeds received. Should an offering be terminated, deferred equity issuance costs are charged to operations during the period in which an offering is terminated. As of June 30, 2017, the Company’s deferred equity issuance costs totaled  $186,312  ( Note 10) .

Debt Discount Costs

On January 30, 2017, the Company completed the third and final closing of a private placement of units consisting of common stock purchase warrants and convertible promissory notes with a total aggregate face value of $10,000,000 (Note 7). The convertible promissory notes contain an embedded beneficial conversion feature.   The proceeds from the sale of the securities were allocated between the convertible notes and the warrants based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The fair value of the beneficial conversion feature, limited to the gross proceeds, has been recorded as a reduction of the carrying value of the convertible promissory notes and is being amortized to interest expense using the effective interest method over the term of the notes. The fair value of warrants issued has been recorded as a reduction to the carrying value of the convertible promissory notes, limited to the gross proceeds, and is being amortized over the term of the notes using the effective interest method.  Origination fees paid in cash have been recorded as a reduction in the carrying value of the convertible notes and are being amortized over the term of the notes using the effective interest method. The fair value of warrants issued to the placement agent in connection with the offering have been recorded as a charge to additional paid-in capital.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), which establishes a comprehensive new lease standard designed to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous U.S. GAAP. ASU 2016-02 is effective for public businesses for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its financial statements.

In March 2016, the FASB issued Accounting Standards Update ("ASU") 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”), which intends to improve the accounting for share-based payment transactions. ASU 2016-09 changes several aspects of the accounting for share-based payment award transactions, including: (1) Accounting and Cash Flow Classification for Excess Tax Benefits and Deficiencies, (2) Forfeitures, and (3) Tax Withholding Requirements and Cash Flow Classification. ASU 2016-09 is effective for public businesses for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. We adopted this pronouncement effective January 1, 2017. Upon adoption of this standard, we no longer estimate the total number of awards for which the requisite service period will not be rendered, and effective January 1, 2017, we will began accounting for forfeitures when they occur.  The adoption of these provisions did not materially impact the condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which establishes a comprehensive new revenue recognition standard designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In doing so, companies may need to use more judgment and make more estimates than under current revenue recognition guidance. In March 2016, the FASB released certain implementation guidance through ASU 2016‑08 (collectively with ASU 2014-09, the "Revenue ASUs") to clarify principal versus agent considerations. The Revenue ASUs allow for the use of either the full or modified retrospective transition method, and the standard will be effective for annual reporting periods beginning after December 15, 2017 including interim periods within that period, with early adoption permitted for annual reporting periods beginning after December 15, 2016. Currently, the Company has not identified any contracts that would require a change from the entitlements method, historically used for certain domestic crude oil and natural gas sales, to the sales method of accounting. The Company is continuing to evaluate the provisions of these ASUs as pertinent to certain sales contracts and in particular as they relates to disclosure requirements.

There were various updates recently issued by the FASB, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s reported financial position, results of operations, or cash flows.

NOTE 3—REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

In connection with the preparation of its condensed financial statements for the quarter ended March 31, 2017, the Company identified an error related to the manner in which it accounted for the fair value of convertible promissory notes and warrants issued in the Company’s private placement during December 2016 (Note 7). Specifically, the Company was required to apply the guidance of FASB ASC 470, and more specifically, ASC 470-20-25-2 and ASC 470-20-25-3. On the balance sheet at December 31, 2016, the Company recorded the face value of convertible notes payable issued in connection with the private placement under liabilities, discounted by (i) the value of the original issue discount and (ii) the value of the warrants issued to the placement agent. The Company did not, however, discount the value of the convertible notes payable by the fair value of the warrants issued to individual investors.

In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the error and determined that the related impact was not material to the Company’s results of operations or financial position for any prior annual or interim period. Accordingly, the Company has corrected these errors as of and for the year ended December 31, 2016 by revising the condensed financial statements. Periods not presented herein will be revised, as applicable, in future filings.

The following tables present the revisions to the balance sheet as of, and the statement of operations for the year ended, December 31, 2016:

NOTE 4—GOING CONCERN

Pursuant to the FASB ASU 2014-15, the Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these financial statements. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. As shown in the accompanying financial statements, the Company incurred a net loss of $2.9 million during the six months ended June 30, 2017, and as of that date, the Company’s current liabilities exceeded its current assets by $14.3 million.

At June 30, 2017, the Company had a cash balance of approximately $4.7 million and other current assets of approximately $5.8 million. Subsequent to June 30, 2017, the Company’s cash balance has decreased as it has paid  development costs, including costs previously accrued, and general and administrative expenses. 

As of June 30, 2017, the Company has insufficient working capital and revenues from operations to meet its debt obligations and other liabilities incurred in connection with the Company’s development activities. The Company will need to generate sufficient cash flow from operations and sell equity or debt to fund further drilling activities and acquisition activity. If sufficient cash flow and additional financing is not available, the Company may be compelled to reduce the scope of its business activities and/or sell a portion of the Company’s interests in its oil and gas properties. This, in turn, may have an adverse effect on the Company’s ability to realize the value of its assets. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s financial statements do not include any adjustments related to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Management believes that it can be successful in obtaining equity and/or debt financing which will enable the Company to continue as a going concern.

NOTE 5—ACQUISITIONS

On April 3, 2017, the Company completed the acquisition of oil and gas leases covering approximately 5,874 gross (1,462 net) acres in Adams and Weld Counties, Colorado. The seller reserved to itself all rights in the leases that exist below 50 feet above the top of the uppermost J Sand formation for those lands located in Township 7 North, Range 63 West in Weld County, Colorado. The acquisition was effective January 1, 2017. The net purchase price to the Company’s retained interest in the assets following the Company’s working interest partner’s 50% participation in the transaction and a reduction in purchase price due to title defects was $1,284,589. The Company paid a deposit of $258,250 at the time it entered into the purchase agreement, which was credited against the net purchase price at closing. The Company paid the remainder of the net purchase price using cash in the amount of $216,339 and the issuance to the seller of 450,000 shares of the Company’s common stock, valued at $1.80 per share.

On April 21, 2017, the Company acquired a 9.37% royalty interest covering approximately 145 net acres located in Adams County, Colorado for a net purchase price of $569,400 following the Company’s working interest partner’s 50% participation in the transaction. The acquisition was effective April 1, 2017. In connection with the acquisition, the Company paid a finders’ fee of 20,555 shares of common stock valued at $1.80 per share to a lease broker.

On May 9, 2017, the Company acquired 200 gross (70 net) acres in Adams County, Colorado for a net purchase price of $350,000 following the Company’s working interest partner’s 50% participation in the transaction. The transaction was effective April 1, 2017.

NOTE 6—CRUDE OIL AND NATURAL GAS PROPERTIES

The Company’s oil and gas properties are located entirely within the United States. The net capitalized costs related to the Company’s oil and gas producing activities were as follows:

Costs Incurred in Crude Oil and Natural Gas Activities .  Costs incurred in connection with the Company's crude oil and natural gas acquisition, exploration and development activities for each of the periods are shown below:

During the three months ended June 30, 2017 and 2016, depletion expense was $1,536,174 and $nil, respectively, and $1,982,341 and $nil for the six months ended June 30, 2017 and 2016, respectively.

NOTE 7—DEBT

Line of credit

On May 13, 2015, the Company entered into a Revolving Line of Credit Facility Agreement (“initial line of credit”) with Providence Energy Operators, LLC (“PEO”), which provides to the Company a revolving line of credit of up to $5,000,000 at 8% per annum, maturing June 30, 2018. As of June 30, 2017 and December 31, 2016, the outstanding balance on the initial line of credit was $5,000,000 plus accrued interest of $500,833 and $302,477,  

respectively. During the three and six months ended June 30, 2017, the Company recorded interest expense of $89,285 and $187,915, respectively, which excluded $10,441 of interest that was capitalized to wells in progress during the quarter.  During the three and six months ended June 30, 2016, the Company recorded interest expense of $34,950 and $56,896, respectively, related to the initial line of credit. 

Supplemental line of credit

On October 13, 2016, the Company entered into a revolving line of credit facility agreement (the “supplemental line of credit”) with Providence Energy Partners III, LP (“PEP III”). PEP III is an affiliate of PEO by virtue of having some common management personnel. The supplemental line of credit permitted the Company to borrow up to $10.0 million to pay costs associated with its acquisition and development of oil and gas properties in the Wattenberg Field. Interest on the supplemental line initially accrued at the rate of 8% per year.  

The supplemental line of credit was amended on March 30, 2017, pursuant to which the Company agreed not to borrow additional amounts against the supplemental line of credit and to repay $3,552,500 in outstanding principal not later than April 13, 2017, in exchange for PEP III extending the maturity date of the supplemental line of credit until June 13, 2017. On April 12, 2017, the Company paid $3,552,500 in accordance with the amendment.

On June 8, 2017, the Company entered into a letter agreement (“PEP III Agreement”) with PEP III and PEO, pursuant to which PEP III agreed to modify the Company’s supplemental line of credit. The PEP III Agreement extended the maturity date of the supplemental line of credit, including approximately $3.8 million in outstanding principal and accrued interest, from June 13, 2017 until December 27, 2017, and increased the interest rate on the supplemental line from 8% to 10%, effective June 8, 2017.The Company and PEO also agreed to amend the participation agreement between the Company and PEO, dated May 13, 2015 (“Participation Agreement”), in order to expand the area of mutual interest (“AMI”) established and to grant PEP III an option to participate under the Participation Agreement.  As amended, the Participation Agreement grants PEO the option to acquire up to a 45%, and, so long as the supplemental line of credit remains outstanding, PEP III the option to acquire up to a 10% interest in and participate in any oil and gas development on acreage acquired by the Company within the expanded AMI. The expanded AMI covers a total of four and one-half townships in Adams and Weld Counties, Colorado.

As of June 30, 2017 and December 31, 2016, the outstanding balance on the supplemental line of credit was $3,552,500 and $7,088,698, plus accrued interest of $275,057 and $50,422, respectively. During the three and six months ended June 30, 2017, the Company recorded interest expense of $84,481 and $224,635, respectively, related to the supplemental line of credit. No interest expense was recorded in the corresponding prior year periods.

Convertible notes

On December 30, 2016, January 20, 2017 and January 30, 2017, the Company completed the private placement of units consisting of convertible promissory notes with an aggregate face value of $10.0 million and common stock purchase warrants. The Company received net proceeds of approximately $9.0 million from the private placement, after placement agent fees and other associated expenses.

Debt issuance costs related to origination fees paid in cash have been recorded as a discount to the convertible notes and are being amortized to interest expense utilizing the effective interest method over the term of the notes. As of June 30, 2017 and December 31, 2016, the unamortized portion of debt issuance costs amounted to $793,644 and $204,703, respectively. The Company recorded interest expense of $116,822 and $233,101 related to the accretion of the discount for the three and six months ended June 30, 2017, respectively.

In accordance with ASC 470, the proceeds from the sale of the convertible notes was allocated between the conversion feature and the warrants based on the fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The fair value of the beneficial conversion feature of $5,306,456, has been recorded as a reduction of the carrying value of the convertible promissory notes and is being amortized to interest expense using the effective interest method over the term of the notes. The fair value of the warrants of $3,682,544, has been recorded as a reduction to the carrying value of the convertible promissory notes and is being amortized to interest

expense using the effective interest method over the term of the notes. The fair value of the warrants issued to the placement agent in connection with the offering of $1,001,471 has been recorded as a charge to additional paid-in capital.

As of June 30, 2017, the Company recorded accrued interest of $nil and recognized interest expense of $nil and $191,669 for the three and six months ended June 30, 2017, respectively, related to the convertible notes. Interest on the convertible notes during the second quarter 2017 of $249,315 was capitalized to oil and gas properties.

The following table reflects the net amounts recorded as debt at June 30, 2017 and December 31, 2016:

NOTE 8—ASSET RETIREMENT OBLIGATION

For the purpose of determining the fair value of the asset retirement obligation incurred during the six months ended June 30, 2017, the Company assumed an inflation rate of 2.0%, an estimated average asset life of between 30.0 and 33.0 years, and a credit-adjusted risk free interest rate between 11.26% and 11.84%.

The following reconciles the activity of the asset retirement obligation for the periods presented:

Accretion expense recorded for the three months ended June 30, 2017 and 2016 was $24,245 and $966, respectively, and for the six months ended June 30, 2017 and 2016 was $46,912 and $1,807,  respectively.

NOTE 10—SHAREHOLDERS’ EQUITY

Public Offering

On May 19, 2017, the Company filed a registration statement on Form S-1 (File No. 333-218096), pursuant to which the Company seeks to raise up to $50 million in a public offering of its common stock. Closing of the offering is subject to a number of conditions, including an effective date for its registration statement from the SEC and execution of a definitive underwriting agreement with the underwriters.

Activity for the six months ended June 30, 2017 included the following.

In connection with the completion of a private placement (Note 7), the Company received $7,251,662 in net proceeds from the sale of 161.15 units consisting of convertible promissory notes and warrants during the first quarter of 2017. The convertible notes payable are convertible into shares of common stock at $1.50 per share. Immediately following the closing, and including units sold during 2016, the outstanding convertible notes are convertible into 6,666,666 shares of common stock.

On various dates, in connection with the execution of four employment agreements (Note 13) and the employment of additional employees, the Company issued 219,700 shares of restricted stock. The shares are subject to certain vesting restrictions, but all 219,700 shares have full voting rights and are eligible to receive dividends during the vesting period.

For the three and six months ended June 30, 2017, the Company recorded share-based compensation of $52,399 related to the grant and vesting of the restricted shares. As of June 30, 2017, unvested share-based compensation amounted to $356,347 related to the restricted shares.

On April 3, 2017, the Company issued 470,555 shares valued at $1.80 per share in connection with the acquisitions of oil and gas assets (Note 5).

Activity for the six months ended June 30, 2016 included the following.

In January 2016, the Company sold 95,000 shares of common stock at $1.00 per share to one accredited investor pursuant to a private placement. 

On April 8, 2016, the Company issued 50,000 shares of common stock valued at $0.73 per share to an investor relations company in connection with the certain services to be provided pursuant to an investor relations agreement.

On May 4, 2016, the Company issued an aggregate 50,000 shares of common stock valued at $1.01 per share to two of the Company's Directors in connection with their appointment to the Board.

Activity for the six months ended June 30, 2017 included the following.

On January 20, 2017 and January 30, 2017, in connection with the closings of a private placement, the Company issued 2,216,978 and 3,154,601 warrants to the purchasers of convertible promissory notes, respectively. The warrants are exercisable at $3.00 per share and expire on December 31, 2019 (Note 7).

On January 20, 2017 and January 30, 2017, in connection with the closings of a private placement, the Company issued 221,744 and 315,526 warrants to the placement agent, respectively. The warrants are exercisable at $1.50 per share and expire on December 31, 2021 (Note 7).

NOTE 11—STOCK-BASED COMPENSATION

On August 18, 2016, the Company’s Board of Directors adopted the Amended and Restated PetroShare Corp. Equity Incentive Plan (the “Plan”), which replaced and restated the Company’s original equity incentive plan. The Plan terminates by its terms on August 17, 2026. Among other things, the Plan increased the number of shares of common stock reserved for issuance thereunder from 5,000,000 to 10,000,000. The Company’s shareholders approved the Plan at the Company’s annual meeting of shareholders on September 8, 2016.

Activity for the six months ended June 30, 2017 included the following.

On April 1, 2017, the Company accelerated and changed the vesting terms related to an option to purchase 700,000 shares of the Company’s stock that was initially issued on August 19, 2016. As amended, the option as to 100,000 shares was immediately exercisable and the vesting terms of the option as to the remaining 600,000 shares were accelerated. As amended, the entire option is exercisable at $1.83 per share. The option is subject to the terms and conditions of the Plan and a stock option agreement.

On April 3, 2017, the Company issued an option to purchase 200,000 shares of the Company’s common stock, which option is exercisable at $1.83 per share. The option was issued in connection with the execution of an employment agreement (Note 13). The option is subject to the terms and conditions of the Plan and a stock option agreement.

On May 22, 2017, the Company issued an option to purchase 22,000 shares of the Company’s common stock, which option is exercisable at $1.92 per share. The option was issued in connection with the hiring of a new employee. The option is subject to the terms and conditions of the Plan and a stock option agreement.

On June 1, 2017 the Company issued an option to purchase 200,000 shares of the Company's common stock, which option is exercisable at $1.89 per share. The option was issued in connection with the execution of an employment agreement (Note 13). The option is subject to the terms and conditions of the Plan and a stock option agreement.

Activity for the six months ended June 30, 2016 included the following.

On January 1, 2016, the Company issued an option to purchase 250,000 shares of its common stock in connection with the appointment of its Chief Financial Officer. The option is exercisable at a price of $1.00 per share and expires on November 23, 2018. The option vested one-half on January 1, 2016 and the remainder on January 1, 2017. The option is subject to the terms and conditions of the Plan and a stock option agreement.

On January 28, 2016, the Company issued an option to purchase 875,000 shares of its common stock in connection with the appointment of its Chief Operating Officer. The option is exercisable at a price of $1.00 per share and expires on December 31, 2022. The option vested as follows: (i) 125,000 on January 28, 2016, the date of grant, and (ii) 750,000 on January 1, 2017. The option is subject to the terms and conditions of the Plan and a stock option agreement.

On April 12, 2016, the Company issued an option to purchase 250,000 shares of its common stock in connection with the hiring of the Company's Vice President of Land. The option vests as follows: (i) 50,000 on the date of grant; (ii) 100,000 on April 15, 2017; and (iii) 100,000 on April 15, 2018, provided that the optionee has been continuously employed by the Company up to each vesting date. The option is exercisable at a price of $0.80 per share and expires on April 15, 2021. The option is subject to the terms and conditions of the Plan and a stock option agreement.

On May 4, 2016, the Company issued an option to purchase 50,000 shares of its common stock in connection with the addition and appointment of two members of the Company's Board of Directors. The options vested on the date of grant. The options are exercisable at a price of $1.10 per share and expire on December 31, 2022. The options are subject to the terms and conditions of the Plan and a stock option agreement.

A summary of activity under the Plan for the six months ended June 30, 2017 is as follows:

The fair value of each share-based award was estimated on the date of the grant using the Black-Scholes pricing model that incorporates key assumptions including volatility, dividend yield and risk-free interest rates. As the Company’s common stock has limited historical trading data, the expected stock price volatility is based primarily on the historical volatility of a group of publicly-traded companies that share similar operating metrics and histories.  The expected term of the awards represents the period of time that management anticipates awards will be outstanding. As there was insufficient historical data available to ascertain a forfeiture rate, the plain vanilla method was applied in calculating the expected term of the options. The risk-free rates for the periods within the contractual life of the options are based on the US Treasury bond rate in effect at the time of the grant for bonds with maturity dates at the expected term of the options. The Company has never paid dividends on its common stock and currently does not intend to do so, and as such, the expected dividend yield is zero. Compensation expense related to stock options was recorded net of estimated forfeitures, which for options remaining at June 30, 2017, was $nil.

The table below summarizes assumptions utilized in the Black-Scholes pricing model for the six months ended June 30, 2017:

During the three and six months ended June 30, 2017, the Company recorded share-based compensation of $611,000   and $678,346, respectively, related to options issued through the plan. During the three and six months ended June 30, 2016, the Company recorded share-based compensation of  $336,728   and $681,188, respectively, related to options issued through the Plan. Unvested share-based compensation related to the options at June 30, 2017 and December 31, 2016 amounted to $1,196,732 and $1,025,391, respectively.  

NOTE 12—RELATED PARTY TRANSACTIONS

At June 30, 2017, the Company had drawn $5,000,000 on the initial line of credit with PEO and recorded related accrued interest of $500,833.  PEO currently beneficially owns 13.2% of the Company’s common stock. Interest expense related to the initial line of credit for the three and six months ended June 30, 2017 amounted to $89,285 and $187,915, respectively, and for the three and six months ended June 30, 2016 was $34,950 and $56,896, respectively.

At June 30, 2017, the Company has recorded $447,237 in Accounts receivable – joint interest billing – related party. This amount relates to amounts billed to PEO related to its participation in the Company’s operated Shook drilling program and PEO’s ownership interest in the vertical wells that the Company operates.

At June 30, 2017, the Company has recorded $5,236,212 in Drilling advances – related party. This amount relates to unapplied cash advances received from PEO in connection with the Company’s operated Shook drilling program.

NOTE 13—COMMITMENTS AND CONTINGENCIES

Operating leases and agreements

The Company leases its office facility under a four year non-cancelable operating lease expiring in March 2021. The following is a schedule by year of future minimum rental payments required under the lease agreement:

Lease expense totaled $31,596 and $52,660 for the three  and six months ended June 30, 2017, respectively, and $15,622 and $22,034 for the three and six months ended June 30, 2016, respectively.

Employment agreements

On April 1, 2017, the Company entered an employment agreement with its Manager of Production and Completion Operations. The agreement provides for a base salary of $130,000 per year, an initial term expiring on

March 31, 2018 with an automatic renewal for successive one-year periods unless terminated in accordance with its terms, and provisions for termination and payment of severance under various circumstances. In connection with the execution of the agreement, the employee was granted 50,000 shares of restricted stock and an option to purchase up to 200,000 shares of common stock at an exercise price of $1.83 per share.

On April 1, 2017, the Company entered into an employment agreement with its Executive Vice President for Capital Markets and Investor Relations. The agreement provides for a base salary of $156,000 per year, an initial term expiring on December 31, 2018 with an automatic renewal for successive one-year periods unless terminated in accordance with its terms, and provisions for termination and payment of severance under various circumstances. In connection with the execution of the agreement, the employee was granted 66,700 shares of restricted stock and the vesting of 200,000 previously issued stock options were accelerated.

On June 1, 2017, the Company entered into an employment agreement with its Senior Landman. The agreement provides for a base salary of $130,000 per year, an initial term expiring on May 31, 2018 with an automatic renewal for successive one-month periods unless terminated in accordance with its terms, and provisions for termination. In connection with the execution of the agreement, the employee was granted 50,000 shares of restricted stock and an option to purchase 200,000 shares of common stock at $1.89 per share.

On June 1, 2017 the Company entered into an employment agreement with its Chief Financial Officer. The agreement provides for a base salary of $150,000 per year, an initial term expiring on December 31, 2018 with an automatic renewal for successive one-year periods unless terminated in accordance with its terms, and provisions for termination and payment of severance under various circumstances. In connection with the execution of the agreement, the employee was granted 50,000 shares of restricted stock.