| Colorado(State or other jurisdiction of incorporation or organization) |   | 46-1454523(I.R.S. EmployerIdentification No.) |
|------------------------------------------------------------------------|--------|-----------------------------------------------|

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|   | Large accelerated filer ☐ | Accelerated filer ☐         |
|--------|---------------------------------|-----------------------------------|
|   | Non-accelerated filer ☐   | Smaller reporting company ☒ |
|   |                            |                              |
|   |                            |                              |

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|                                                                                         |   | Page   |
|----------------------------------------------------------------------------------------------|--------|--------|
|                                                                                         |   |   |
| Glossary of Terms                                                                            | 1      |
|                                                                                         |   |
| Report of Independent Registered Public Accounting Firm                                      | 3      |
|                                                                                         |   |   |
| Balance Sheets at December 31, 2014 and 2013                                                 | 4      |
|                                                                                         |   |   |
| Statements of Operations for the years ended December 31, 2014 and 2013                      | 5      |
|                                                                                         |   |   |
| Statements of Changes in Shareholders' Equity for the years ended December 31, 2014 and 2013 | 6      |
|                                                                                         |   |   |
| Statements of Cash Flows for the years ended December 31, 2014 and 2013                      | 7      |
|                                                                                         |   |   |
| Notes to Financial Statements                                                                | 8      |
|                                                                                         |        |
| Signatures                                                                                   | 24     |
|                                                                                         |   |
| Exhibits                                                                                     | 25     |

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| /s/ StarkSchenkein, LLP |
|-------------------------|
| StarkSchenkein, LLP     |

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| PetroShare Corp.                                                                                                                          |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Balance SheetsDecember 31,                                                                                                                |   |
|                                                                                                                                           |   |
|                                                                                                                                      |   | 2014 |   |   | 2013 |   |
|                                                                                                                                      |   |  |   |   |  |   |
| ASSETS                                                                                                                                    |   |  |   |   |  |   |
| Current Assets:                                                                                                                           |   |  |   |   |  |   |
| Cash and cash equivalents                                                                                                                 |   | $ | 425,358 |   |   | $ | 2,689,011 |   |
| Accounts receivable – Crude oil and natural gas                                                                                     |   |   | 1,004 |   |   |   | - |   |
| Accounts receivable – Joint interest billing                                                                                        |   |   | 43,873 |   |   |   | 981,575 |   |
| Deferred offering costs                                                                                                                   |   |   | 109,965 |   |   |   | - |   |
| Prepaid expenses and other assets                                                                                                         |   |   | 26,413 |   |   |   | 12,187 |   |
| Total current assets                                                                                                                      |   |   | 606,613 |   |   |   | 3,682,773 |   |
|                                                                                                                                      |   |   |   |   |   |   |   |   |
| Crude Oil and Natural Gas Properties-using successful efforts method                                                                      |   |   |   |   |   |   |   |   |
| Unproven crude oil and natural gas properties                                                                                             |   |   | - |   |   |   | 250,474 |   |
| Proven crude oil and natural gas properties                                                                                               |   |   | 718,861 |   |   |   | - |   |
| Wells in progress                                                                                                                         |   |   | 23,352 |   |   |   | 439,873 |   |
| Less: accumulated depletion and depreciation                                                                                              |   |   | (714,160 | ) |   |   | - |   |
| Crude oil and natural gas properties, net                                                                                                 |   |   | 28,053 |   |   |   | 690,347 |   |
|                                                                                                                                      |   |   |   |   |   |   |   |   |
| Property, plant and equipment, net                                                                                                        |   |   | 2,791 |   |   |   | 3,754 |   |
| Other assets                                                                                                                              |   |   | 3,851 |   |   |   | 3,850 |   |
| Total Assets                                                                                                                              |   | $ | 641,308 |   |   | $ | 4,380,724 |   |
|                                                                                                                                      |   |   |   |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                      |   |   |   |   |   |   |   |   |
| Current Liabilities:                                                                                                                      |   |   |   |   |   |   |   |   |
| Accounts payable and accrued liabilities                                                                                                  |   | $ | 86,826 |   |   | $ | 1,894,091 |   |
| Accounts payable – working interest owners                                                                                          |   |   | 26,458 |   |   |   | - |   |
| Accounts payable – related parties                                                                                                  |   |   | - |   |   |   | 2,966 |   |
| Drilling advances                                                                                                                         |   |   | 221,834 |   |   |   | 663,560 |   |
| Total current liabilities                                                                                                                 |   |   | 335,118 |   |   |   | 2,560,617 |   |
|                                                                                                                                      |   |   |   |   |   |   |   |   |
| Asset retirement obligation                                                                                                               |   |   | 31,715 |   |   |   | - |   |
| Total Liabilities                                                                                                                         |   |   | 366,833 |   |   |   | 2,560,617 |   |
|                                                                                                                                      |   |   |   |   |   |   |   |   |
| Shareholders' Equity:                                                                                                                     |   |   |   |   |   |   |   |   |
| Preferred stock-$.01 par value: 10,000,000 shares authorized; no shares issued and outstanding                                            |   |   | - |   |   |   | - |   |
| Common stock-$.001 par value: 100,000,000 shares authorized; 17,008,191 shares and 14,764,750 shares issued and outstanding, respectively |   |   | 17,008 |   |   |   | 14,765 |   |
| Additional paid in capital                                                                                                                |   |   | 4,103,862 |   |   |   | 3,009,075 |   |
| Accumulated deficit                                                                                                                       |   |   | (3,846,395 | ) |   |   | (1,203,733 | ) |
| Total Shareholders' Equity                                                                                                                |   | $ | 274,475 |   |   | $ | 1,820,107 |   |
|                                                                                                                                      |   |   |   |   |   |   |   |   |
| Total Liabilities and Shareholders' Equity                                                                                                |   | $ | 641,308 |   |   | $ | 4,380,724 |   |
|                                                                                                                                      |   |   |   |   |   |   |   |   |

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| PetroShare Corp.Statements of OperationsFor the years ended December 31, |   |
|--------------------------------------------------------------------------|--------|
|                                                                     |   | 2014 |   |   | 2013 |   |
|                                                                     |   |  |   |   |  |   |
| Revenues                                                                 |   |  |   |   |  |   |
| Crude oil and natural gas revenue                                        |   | $ | 7,394 |   |   | $ | - |   |
|                                                                     |   |   |   |   |   |   |   |   |
| Costs and Expenses                                                       |   |   |   |   |   |   |   |   |
| Lease operating expense                                                  |   |   | 20,595 |   |   |   | 253 |   |
| General and administrative expense                                       |   |   | 676,698 |   |   |   | 473,668 |   |
| Depreciation, depletion, amortization and accretion                      |   |   | 715,958 |   |   |   | 631 |   |
| Exploration costs                                                        |   |   | - |   |   |   | 29,537 |   |
| Loss on impairment of crude oil and natural gas properties               |   |   | 1,236,842 |   |   |   | - |   |
| Total Costs and Expenses                                                 |   |   | 2,650,093 |   |   |   | 504,089 |   |
|                                                                     |   |   |   |   |   |   |   |   |
| Operating (Loss)                                                         |   |   | (2,642,699 | ) |   |   | (504,089 | ) |
|                                                                     |   |   |   |   |   |   |   |   |
| Other Income                                                             |   |   |   |   |   |   |   |   |
| Interest income                                                          |   |   | 37 |   |   |   | 14 |   |
|                                                                     |   |   |   |   |   |   |   |   |
| Net (Loss)                                                               |   | $ | (2,642,662 | ) |   | $ | (504,075 | ) |
|                                                                     |   |   |   |   |   |   |   |   |
| Net (Loss) per Common Share                                              |   |   |   |   |   |   |   |   |
| Basic and Diluted                                                        |   | $ | (0.17 | ) |   | $ | (0.04 | ) |
| Weighted Average Number of Common Shares Outstanding                     |   |   |   |   |   |   |   |   |
| Basic and Diluted                                                        |   |   | 15,985,228 |   |   |   | 13,888,332 |   |
|                                                                     |   |   |   |   |   |   |   |   |

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|                                                                                      |   |              |       |   |                                 |   |
|-------------------------------------------------------------------------------------------|--------|--------------|------------|--------|---------------------------------|--------|
|                                                                                      |   | Common Stock |       |   | Additional Paid in Capital |   |   | Accumulated Deficit |   |   | Total |   |
|                                                                                      |   | Shares       |       |   | Amount                          |   |
| Balance, December 31, 2012                                                                |   |         | 12,000,000 |   |                            | $      | 12,000 |   |   | $ | 692,840 |   |   | $ | (699,658 | ) |   | $ | 5,182 |   |
| Issuance of Common Shares for cash at $0.50 per share                                     |   |         | 4,504,000  |   |                            |   | 4,504 |   |   |   | 2,247,496 |   |   |   | - |   |   |   | 2,252,000 |   |
| Issuance of Common Shares in association with Asset Purchase Agreement at $1.00 per share |   |         | 67,000     |   |                            |   | 67 |   |   |   | 66,933 |   |   |   | - |   |   |   | 67,000 |   |
| Cancellation of certain Founders Shares in association with Separation Agreement          |   |         | (1,806,250 | )      |                            |   | (1,806 | ) |   |   | 1,806 |   |   |   | - |   |   |   | - |   |
| Net Loss                                                                                  |   |         | -          |   |                            |   | - |   |   |   | - |   |   |   | (504,075 | ) |   |   | (504,075 | ) |
| Balance, December 31, 2013                                                                |   |         | 14,764,750 |   |                            | $      | 14,765 |   |   | $ | 3,009,075 |   |   | $ | (1,203,733 | ) |   | $ | 1,820,107 |   |
|                                                                                      |   |         |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of Common Shares for cash at $0.50 per share, net of offering costs              |   |         | 2,220,003  |   |                            |   | 2,220 |   |   |   | 1,094,810 |   |   |   | - |   |   |   | 1,097,030 |   |
| Issuance of Common Shares in connection with Separation Agreement                         |   |         | 23,438     |   |                            |   | 23 |   |   |   | (23 | ) |   |   | - |   |   |   | - |   |
| Net Loss                                                                                  |   |         | -          |   |                            |   | - |   |   |   | - |   |   |   | (2,642,662 | ) |   |   | (2,642,662 | ) |
| Balance, December 31, 2014                                                                |   |         | 17,008,191 |   |                            | $      | 17,008 |   |   | $ | 4,103,862 |   |   | $ | (3,846,395 | ) |   | $ | 274,475 |   |
|                                                                                      |   |         |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| PetroShare Corp.Statements of Cash FlowsFor the years ended December 31,                 |   |
|------------------------------------------------------------------------------------------|--------|
|                                                                           |   | 2014 |   |   | 2013 |   |
| Cash flows from operating activities                                                     |   |  |   |   |  |   |
| Net (loss) for the period                                                                |   | $ | (2,642,662 | ) |   | $ | (504,075 | ) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities |   |   |   |   |   |   |   |   |
|     Depreciation expense                                             |   |   | 715,123 |   |   |   | 631 |   |
|     Accretion of asset retirement obligation                         |   |   | 835 |   |   |   | - |   |
|     Loss on impairment of crude oil and natural gas properties       |   |   | 1,236,842 |   |   |   | - |   |
|     Bad debt (recovery)                                              |   |   | (424,951 | ) |   |   | - |   |
| Changes in operating assets and liabilities                                              |   |   |   |   |   |   |   |   |
|     Accounts receivable – Joint interest billing               |   |   | 945,605 |   |   |   | (981,575 | ) |
|     Deferred offering costs                                          |   |   | (109,965 | ) |   |   | - |   |
|     Prepaid expenses and other assets                                |   |   | (14,227 | ) |   |   | (16,037 | ) |
|     Accounts payable and accrued liabilities                         |   |   | (1,707,264 | ) |   |   | 1,876,094 |   |
|     Accounts payable – related parties                         |   |   | (2,966 | ) |   |   | 2,966 |   |
|     Accounts payable – working interest partners               |   |   | 26,458 |   |   |   | - |   |
|     Drilling advances, net                                           |   |   | (441,726 | ) |   |   | 663,560 |   |
| Net cash (used in) provided by operating activities                                      |   |   | (2,418,898 | ) |   |   | 1,041,564 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Cash flows from investing activities                                                     |   |   |   |   |   |   |   |   |
|     Additions of furniture, fixtures and equipment                   |   |   | - |   |   |   | (4,385 | ) |
|     Development of crude oil and natural gas properties              |   |   | (532,779 | ) |   |   | (40,040 | ) |
|     Acquisitions of crude oil and natural gas properties             |   |   | (202,306 | ) |   |   | (565,310 | ) |
|     Buyout of working interest partner                               |   |   | (1,142,237 | ) |   |   | - |   |
|     Proceeds from working interest partners                          |   |   | 935,537 |   |   |   | - |   |
| Net cash (used in) investing activities                                                  |   |   | (941,785 | ) |   |   | (609,735 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |
| Cash flows from financing activities                                                     |   |   |   |   |   |   |   |   |
|     Common stock issued for cash, net of offering costs              |   |   | 1,097,030 |   |   |   | 2,252,000 |   |
| Net cash provided by financing activities                                                |   |   | 1,097,030 |   |   |   | 2,252,000 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Net (decrease) increase in cash                                                          |   |   | (2,263,653 | ) |   |   | 2,683,829 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Cash                                                                                     |   |   |   |   |   |   |   |   |
| Beginning of period                                                                      |   |   | 2,689,011 |   |   |   | 5,182 |   |
| End of period                                                                            |   | $ | 425,358 |   |   | $ | 2,689,011 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Non-cash investing and financing transactions                                            |   |   |   |   |   |   |   |   |
| Exchange of information for lease interests                                              |   | $ | - |   |   | $ | 17,997 |   |
| Issuance of common stock for asset purchase                                              |   | $ | - |   |   | $ | 67,000 |   |
| Cancellation of shares                                                                   |   | $ | - |   |   | $ | 1,806 |   |
|                                                                                     |   |   |   |   |   |   |   |   |
| Supplemental Disclosures of Cash Flow Information                                        |   |   |   |   |   |   |   |   |
| Cash paid for interest                                                                   |   | $ | - |   |   | $ | - |   |
| Cash paid for income taxes                                                               |   | $ | - |   |   | $ | - |   |

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|  | ● | On April 9, 2013, PetroShare acquired 463.29 net acres from the unaffiliated entity for cash consideration of $341,430. |
|--|---------|-------------------------------------------------------------------------------------------------------------------------|

|  | ● | On April 18, 2013, PetroShare acquired 623.65 net acres from Premier Energy, LLC for a total purchase price of $223,880 in cash and 67,000 shares of common stock valued at $1.00 per share. (See Notes 9 and 12). |
|--|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                          |   | December 31, 2014 |   |   | December 31, 2013 |   |
|-------------------------------|--------|-------------------|--------|--------|-------------------|--------|
| Property, Plant and Equipment |   | $                 | 4,385  |   |              | $      | 4,385 |   |
| Accumulated Depreciation      |   |              | (1,594 | )      |              |   | (631 | ) |
| Total                         |   | $                 | 2,791  |   |              | $      | 3,754 |   |
|                                                           |   | December 31, 2014 |       |   | December 31, 2013 |   |
|----------------------------------------------------------------|--------|-------------------|------------|--------|-------------------|--------|
|                                                           |   |                   |       |   |                   |   |
| Proved                                                         |   | $                 | 1,955,703  |   |              | $      | - |   |
| Wells in progress                                              |   |              | 23,352     |   |              |   | 439,873 |   |
| Unproved                                                       |   |              | -          |   |              |   | 250,474 |   |
| Less:  Accumulated depletion, depreciation and impairment |   |              | (1,951,002 | )      |              |   | - |   |
| Total                                                          |   | $                 | 28,053     |   |              | $      | 690,347 |   |
|                             |   | December 31, 2014 |    |   | December 31, 2013 |   |
|----------------------------------|--------|-------------------|---------|--------|-------------------|--------|
| Exploration costs                |   | $                 | -       |   |              | $      | 29,537 |   |
| Development costs                |   |              | 532,279 |   |              |   | 439,873 |   |
| Acquisition of properties        |   |              |    |   |              |   |   |   |
|     Proved   |   |              | 202,306 |   |              |   | - |   |
|     Unproved |   |              | -       |   |              |   | 250,474 |   |
| Total                            |   | $                 | 734,585 |   |              | $      | 719,884 |   |

----

|  | ● | On April 9, 2013, PetroShare acquired 463.29 net acres from the unaffiliated entity for cash consideration of $341,430. |
|--|---------|-------------------------------------------------------------------------------------------------------------------------|

|  | ● | On April 18, 2013, PetroShare acquired 623.65 net acres from Premier Energy, LLC for a total purchase price of $223,880 in cash and 67,000 shares of common stock valued at $1.00 per share (Note 9). |
|--|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ● | On August 1, 2013, PetroShare entered into a participation agreement whereby it granted a 10% working interest in certain of its wells in exchange for a prospect fee of $75,000 and the participant's agreement to pay its proportionate share of the costs of the wells. |
|--|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ● | On September 30, 2013, PetroShare entered into a participation agreement whereby it granted a 25% working interest in certain of its wells in exchange for a prospect fee of $187,500 and the participant's agreement to pay its proportionate share of the costs of the wells. |
|--|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ● | On September 30, 2013, PetroShare, in association with a proposed business combination, entered into a participation agreement whereby the Counterparty agreed to pay 30% of the total cost and expense of at least one and up to two wells for a 30% working interest thereafter having a net revenue interest of not less than 23.509% in the wells. In the event that the proposed acquisition was not completed, the Counterparty's interests in the wells would be reduced to 25% and the net revenue interest would be proportionately reduced. On March 10, 2014, the Company notified the Counterparty that it owed certain funds for its share of the drilling and/or completion costs of the two wells. On March 12, 2014, the Company notified the Counterparty in writing that it terminated the Letter of Intent and all negotiations for the proposed business combination. On May 5, 2014, the parties entered into a settlement agreement. (See full discussion in Note 3 "Proposed Business Combination"). |
|--|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ● | On November 1, 2013, PetroShare entered into a participation agreement whereby it granted a 25% working interest in certain of its wells in exchange for a prospect fee of $187,500 and the participant's agreement to pay its proportionate share of the costs of the wells. |
|--|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | ● | Concurrently with and after the performance of the Settlement Agreement (Note 4), three of the Company's working interest partners collectively acquired an additional 15% working interest in the wells.  The Company received $935,537 from these three partners for the purchase of the additional working interests as well as their additional pro-rata share of drilling and completion costs. |
|--|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                           |   | December 31, 2014 |   |   | December 31, 2013 |   |
|------------------------------------------------|--------|-------------------|--------|--------|-------------------|--------|
|                                           |   |                   |   |   |                   |   |
| Asset retirement obligation, beginning of year |   | $                 | -      |   |              | $      | - |   |
| Liabilities settled                            |   |              | -      |   |              |   | - |   |
| Liabilities incurred                           |   |              | 30,880 |   |              |   |   |   |
| Revisions in estimated liabilities             |   |              | -      |   |              |   | - |   |
| Accretion                                      |   |              | 835    |   |              |   | - |   |
| Asset retirement obligation, end of year       |   | $                 | 31,715 |   |              | $      | - |   |
|                                                 |   | December 31, 2014 |    |   | December 31, 2013 |   |
|------------------------------------------------------|--------|-------------------|---------|--------|-------------------|--------|
| Trade payables                                       |   | $                 | 86,826  |   |              | $      | 1,876,094 |   |
| Drilling advances                                    |   |              | 221,834 |   |              |   | 663,560 |   |
| Deferred exploration expenses (1)                    |   |              | -       |   |              |   | 17,997 |   |
| Accounts payable – related parties             |   |              | -       |   |              |   | 2,966 |   |
| Crude oil and natural gas distributions payable      |   |              | 26,458  |   |              |   | - |   |
| Total                                                |   | $                 | 335,118 |   |              | $      | 2,560,617 |   |
| __________                                           |        |                   |         |        |                   |        |  |  |
| (1) See Note 4 for discussion of the Asset Exchange. |        |                   |         |        |                   |        |  |  |

| · | In May 2014, the Board of Directors authorized the sale of the Company's common stock in a private placement which closed in July 2014.  Pursuant to the private placement, the Company sold 2,220,003 shares of common stock at $0.50 per share for gross proceeds of $1,110,002 and recognized $12,972 in offering costs for net proceeds of $1,097,030. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | In October 2014, the Board of Directors authorized the issuance of 23,438 shares of common stock in connection with the execution of a separation agreement with a former employee of the Company. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| · | 2,254,000 shares of common stock were issued at $0.50 per share in connection with a private placement. The cash proceeds received by PetroShare and related to the sale of the shares in this private placement amounted to $1,127,000. The private placement was completed in March 2013. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | 67,000 shares of common stock valued at $1.00 per share were issued as partial consideration for the Buck Peak Prospect acquisition (See Note 4). |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| · | 2,250,000 shares of common stock were issued at $0.50 per share in connection with a second private placement. The cash proceeds received by the Company related to the sale of the shares in this private placement amounted to $1,125,000. The private placement was completed in December 2013. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | 1,806,250 shares of common stock were cancelled in connection with the resignation and separation agreements with two of the former members of the Board of Directors. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                           |   | Number of Shares |      |   | Weighted Average Exercise Price |   |   | Remaining ContractualTerm |   |
|--------------------------------|--------|------------------|-----------|--------|---------------------------------|--------|--------|---------------------------|--------|
| Outstanding, December 31, 2012 |   |             | 3,000,000 |   |                            | $      | 0.25   |                      |   |   | 9.96 |   |
| Granted                        |   |             | -         |   |                            |   | -      |                      |   |   | - |   |
| Exercised                      |   |             | -         |   |                            |   | -      |                      |   |   | - |   |
| Forfeited                      |   |             | 1,000,000 |   |                            | $      | 0.25   |                      |   |   | 9.35 |   |
| Outstanding, December 31, 2013 |   |             | 2,000,000 |   |                            | $      | 0.25   |                      |   |   | 8.96 |   |
| Exercisable, December 31, 2013 |   |             | 2,000,000 |   |                            | $      | 0.25   |                      |   |   | 8.96 |   |
|                           |   |             |      |   |                            |   |   |                      |   |   |   |   |
| Outstanding, December 31, 2013 |   |             | 2,000,000 |   |                            | $      | 0.25   |                      |   |   | 8.96 |   |
| Granted                        |   |             | -         |   |                            |   | -      |                      |   |   | - |   |
| Exercised                      |   |             | -         |   |                            |   | -      |                      |   |   | - |   |
| Forfeited                      |   |             | -         |   |                            | $      | 0.00   |                      |   |   | 0.00 |   |
| Outstanding, December 31, 2014 |   |             | 2,000,000 |   |                            | $      | 0.25   |                      |   |   | 7.96 |   |
| Exercisable, December 31, 2014 |   |             | 2,000,000 |   |                            | $      | 0.25   |                      |   |   | 7.96 |   |

----

|                                |   | 2014   |       |   | 2013   |   |
|-------------------------------------|--------|--------|------------|--------|--------|--------|
| Deferred tax assets - current:      |   |        |       |   |        |   |
| Exploration costs                   |   | $      | -          |   |   | $      | 4,210 |   |
| Deferred tax assets - noncurrent:   |   |   |       |   |   |   |   |   |
| NOL carryover                       |   |   | 1,165,903  |   |   |   | 349,382 |   |
| Stock based compensation            |   |   | 175,546    |   |   |   | 175,546 |   |
| Exploration costs                   |   |   | -          |   |   |   | 4,210 |   |
| Asset retirement obligation         |   |   | 11,752     |   |   |   | - |   |
| Total deferred tax assets           |   |   | 1,353,201  |   |   |   | 533,348 |   |
|                                |   |   |       |   |   |   |   |   |
| Deferred tax liabilities - current: |   |   |       |   |   |   |   |   |
| Prepaids                            |   |   | (4,185     | )      |   |   | - |   |
| Intangible drilling costs           |   |   | (10,395    | )      |   |   | (163,614 | ) |
| Total deferred tax liabilities      |   |   | (14,580    | )      |   |   | (163,614 | ) |
| Valuation allowance                 |   |   | (1,338,621 | )      |   |   | (369,784 | ) |
| Net deferred tax assets             |   | $      | -          |   |   | $      | - |   |

|                                 |   | 2014   |     |   | 2013   |   |
|--------------------------------------|--------|--------|----------|--------|--------|--------|
|                                 |   |        |     |   |        |   |
| Tax at statutory federal rate        |   | $      | (898,505 | )      |   | $      | (168,258 | ) |
| Permanent difference                 |   |   | 801      |   |   |   | - |   |
| State taxes, net of federal          |   |   | (80,754  | )      |   |   | (23,339 | ) |
| Stock options cancelled              |   |   | -        |   |   |   | 87,799 |   |
| Change in valuation allowance        |   |   | 968,837  |   |   |   | 191,596 |   |
| Other                                |   |   | 9,621    |   |   |   | - |   |
| Provision (benefit) for income taxes |   | $      | -        |   |   | $      | - |   |

----

| · | In April 2013, PetroShare acquired working interests in the Buck Peak Prospect from two entities: (1) Premier Energy LLC, an entity affiliated with Frederick J. Witsell, the Company's President and Director of Operations/Geosciences and (2) an unaffiliated entity. As consideration for the purchase from Premier Energy LLC, PetroShare paid cash totaling $223,880 and 67,000 shares of common stock valued at $1.00 per share. Pursuant to the Asset Purchase Agreement, the total Purchase Price was allocated among the four members of Premier Energy LLC, including Mr. Witsell, who received $50,480 in cash and no shares of common stock (See Note 4). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | During the year ended December 31, 2013, the Company recognized $3,850 in rent expense associated with certain office facilities managed by Compass Capital, LLC, an entity controlled by the Company's board member Bill Conrad. As of December 31, 2013, the Company no longer utilizes these office facilities. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Year ending December 31, |   | Amount |   |
|--------------------------|--------|--------|--------|
| 2015                     |   | $      | 24,254 |   |
| 2016                     |   |   | 12,303 |   |
|                     |   | $      | 36,557 |   |

----

----

|                            |   | December 31, 2014 |   |
|---------------------------------|--------|-------------------|--------|
|                            |   | Crude Oil         |   |   | Natural Gas |   |
|                            |   | (Bbls)            |   |   | (Mcf) |   |
| Proved Reserves:                |   |                   |   |   |  |   |
| Balance, beginning of year1     |   |              | -      |   |   |   | - |   |
| Revisions of previous estimates |   |              | -      |   |   |   | - |   |
| Extensions and discoveries2     |   |              | 250    |   |   |   | - |   |
| Sales of reserves in place      |   |              | -      |   |   |   | - |   |
| Improved recovery               |   |              | -      |   |   |   | - |   |
| Purchase of reserves            |   |              | -      |   |   |   | - |   |
| Production                      |   |              | 91     |   |   |   | - |   |
| Balance, end of year            |   |              | 159    |   |   |   | - |   |
|                            |   |              |   |   |   |   |   |   |
| Proved developed reserves:      |   |              |   |   |   |   |   |   |
| Balance, beginning of year3     |   |              | -      |   |   |   | - |   |
| Balance, end of year            |   |              | -      |   |   |   | - |   |
|                            |   |              |   |   |   |   |   |   |
| Proved undeveloped reserves:    |   |              |   |   |   |   |   |   |
| Balance, beginning of year3     |   |              | -      |   |   |   | - |   |
| Balance, end of year            |   |              | -      |   |   |   | - |   |

| (1) | The Company had no reserves in place during the years ended December 31, 2013 or 2012 as described further below. |
|-----|-------------------------------------------------------------------------------------------------------------------|

| (2) | Extensions and discoveries – Reflect the drilling and ultimate completion of two wells in November and December 2014. |
|-----|-----------------------------------------------------------------------------------------------------------------------------|

| (3) | The Company had no proved developed or proved undeveloped reserves as of December 31, 2014 and December 31, 2013. |
|-----|-------------------------------------------------------------------------------------------------------------------|

----

|                                                       |   | 2014   |   |
|------------------------------------------------------------|--------|--------|--------|
|                                                       |   |        |   |
| Future cash inflows                                        |   | $      | 13,361 |   |
| Future cash outflows:                                      |   |   |   |   |
| Production cost                                            |   |   | (7,782 | ) |
| Development cost                                           |   |   | -      |   |
| Future income tax                                          |   |   | -      |   |
| Future net cash flows                                      |   |   | 5,579  |   |
|                                                       |   |   |   |   |
| Adjustment to discount future annual net cash flows at 10% |   |   | (878   | ) |
|                                                       |   |   |   |   |
| Standardized measure of discounted future net cash flows   |   | $      | 4,701  |   |
|                                                                              |   | 2014   |   |
|-----------------------------------------------------------------------------------|--------|--------|--------|
|                                                                              |   |        |   |
| Standardized measure, beginning of year                                           |   | $      | -      |   |
| Sales of crude oil and natural gas, net of production cost                        |   |   | -      |   |
| Net change in sales prices, net of production cost                                |   |   | -      |   |
| Discoveries, extensions and improved recoveries, net of future development cost   |   |   | 4,701  |   |
| Change in future development costs                                                |   |   | -      |   |
| Development costs incurred during the period that reduced future development cost |   |   | -      |   |
| Sales of reserves in place                                                        |   |   | -      |   |
| Revisions of quantity estimates                                                   |   |   | -      |   |
| Accretion of discount                                                             |   |   | -      |   |
| Net change in income tax                                                          |   |   | -      |   |
| Purchase of reserves                                                              |   |   | -      |   |
| Changes in timing of rates of production                                          |   |   | -      |   |
|                                                                              |   |   |   |   |
| Standardized measure, end of year                                                 |   | $      | 4,701  |   |

----

|                           |   | PetroShare Corp.                          |   |
|--------------------------------|--------|-------------------------------------------|--------|
|                           |   |                                      |   |
|                           |   |                                      |   |
| Date: April  ·, 2015 |   | By:    /s/ Stephen J. Foley     |   |
|                           |   | Stephen J. Foley, Chief Executive Officer |   |
|                     |   |                                                                                  |               |
|--------------------------|--------|---------------------------------------------------------------------------------------|--------------------|
|                     |   |                                                                                  |               |
| /s/ BILL M. CONRAD       |   | Chairman of the Board of Directors                                                    | April ·, 2015 |
| Bill M. Conrad           |   |                                                                                  |               |
|                     |   |                                                                                  |               |
|                     |   |                                                                                  |               |
| /s/ STEPHEN J. FOLEY     |   | Director and Chief Executive Officer (Principal                                       | April ·, 2015 |
| Stephen J. Foley         |   | Executive Officer, Principal Financial Officer and Principal Accounting Officer) |               |
|                     |   |                                                                                  |               |
|                     |   |                                                                                  |               |
| /s/ FREDERICK J. WITSELL |   | Director and President                                                                | April ·, 2015 |
| Frederick J. Witsell     |   |                                                                                  |               |

----

| Exhibit Number |   | Description                                                                                                                                                                             |
|----------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 23.1           |   | Consent of Independent Petroleum Engineers.                                                                                                                                             |
|           |   |                                                                                                                                                                                    |
| 31.1           |   | Certification of the Principal Executive Officer and the Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).                                                              |
|           |   |                                                                                                                                                                                    |
| 32.1           |   | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|           |   |                                                                                                                                                                                    |
| 99.1           |   | Report of Cawley, Gillespie & Associates, Inc., Independent Petroleum Engineers relating to Proved Developed Producing Reserves, dated March 3, 2015.                               |

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