GulfSlope Energy, Inc. (the "Company," "GulfSlope," "our" and words of similar import), a Delaware corporation, is an independent crudeoil and natural gas exploration and production company whose interests are concentrated in the United States Gulf of Mexico ("GOM") federal waters offshore Louisiana. The Company currently has under lease twelve federal Outer Continental Shelf blocks (referred to as "prospect," "portfolio" or "leases" in this Report). Since March 2013, we have been singularly focused on identifying high-potential oil and gas prospects located on the shelf in the U.S. GOM. We have licensed 3-D seismic data covering approximately 2.2 million acres and have evaluated this data using advanced interpretation technologies. As a result of these analyses, we have identified and acquired leases on multiple prospects that we believe may contain economically recoverable hydrocarbon deposits, and we plan to continue to conduct more refined analyses of our prospects as well as target additional lease and property acquisitions. We have given preference to areas with water depths of 450 feet or less whereproduction infrastructure already exists, which will allow for any discoveries to be developed rapidly and cost effectively with the goal to reduce economic risk while increasing returns. We have nine prospects currently under lease that we deem technically complete and ready to drill. Recent actions of the Bureau of Ocean Energy Management ("BOEM") have reduced the royalty rate for leases acquired in future lease sales in water depths of less than 200 meters (approximately 656 feet) from 18.75% to 12.5%, which further enhances the economicsfor the drilling of any leases acquired after August 2017 in these water depths. We currently hold one lease to which this reduced rate applies. We expect that drilling activities on two of our prospects will commence in mid-2018.