(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –

Basis of Presentation

In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of Comstock Resources, Inc. and its subsidiaries (collectively, "Comstock" or the "Company") as of June 30, 2018, and the related results of operations and cash flows for the three months and six months ended June 30, 2018 and 2017. Net loss and comprehensive loss are the same in all periods presented. All adjustments are of a normal recurring nature unless otherwise disclosed.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to those rules and regulations, although Comstock believes that the disclosures made are adequate to make the information presented not misleading. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in Comstock's Annual Report on Form 10-K for the year ended December 31, 2017.

The results of operations for the three months and six months ended June 30, 2018 are not necessarily an indication of the results expected for the full year.

These unaudited consolidated financial statements include the accounts of Comstock and its wholly-owned subsidiaries.

Property and Equipment

The Company follows the successful efforts method of accounting for its oil and gas properties. Costs incurred to acquire oil and gas leasehold are capitalized.

On April 27 2018, Comstock completed the sale of its producing Eagle Ford shale oil and gas properties in McMullen, LaSalle, Frio, Atascosa, Wilson, and Karnes counties, Texas for $125.0 million. The sale was effective November 1, 2017 and the estimated net cash flow from the properties from November 2017 to April 2018 was paid to the buyer at closing. After the sale, Comstock has approximately 8,400 net undeveloped acres that are prospective for Eagle Ford shale development. During the three months and six months ended June 30, 2018, the Company recognized a loss on sale of oil and gas properties of $4.1 million and $32.7 million, respectively, to reduce the carrying value of its assets held for sale to their fair value less costs to sell and to adjust the carrying value of the undeveloped acreage retained to their fair value of $55.0 million which has been included in proved oil and gas properties. The fair value of the oil and gas properties retained, a Level 3 measurement, was determined using the discounted cash flow valuation methodology applied by the Company in assessing oil and gas properties for impairment. Key inputs to the valuation included average oil prices of $72.03 per barrel, average natural gas prices of $4.31 per thousand cubic feet and discount factors of 20% - 25%. Also included in loss on sale of oil and gas properties for the three and six months ended June 30, 2018 is a loss of $2.7 million resulting from a final settlement for a property sale completed in 2012.

Results of operations for properties that were sold were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(In thousands)
Total oil and gas sales	$	4,535		$	11,881		$	17,747		$	25,416
Total operating expenses⁽¹⁾		(1,743	)		(12,293	)		(6,134	)		(26,598	)
Operating income (loss)	$	2,792		$	(412	)	$	11,613		$	(1,182	)

(1)

Includes direct operating expenses, depreciation, depletion and amortization and exploration expense and excludes interest and general and administrative expense. No depreciation, depletion and amortization expense has been provided for subsequent to the date the assets were designated as held for sale.

Unproved oil and gas properties are periodically assessed and any impairment in value is charged to exploration expense. The costs of unproved properties which are determined to be productive are transferred to oil and gas properties and amortized on an equivalent unit-of-production basis. The Company also assesses the need for an impairment of the capitalized costs for its proved oil and gas properties on a property basis. No impairments were recognized to adjust the carrying value of the Company’s proved oil and gas properties during the three months and six months ended June 30, 2018 and 2017.

The Company determines the fair values of its oil and gas properties using a discounted cash flow model and proved and risk-adjusted probable oil and natural gas reserves. Undrilled acreage can also be valued based on sales transactions in comparable areas. Significant Level 3 assumptions associated with the calculation of discounted future cash flows included in the cash flow model include management's outlook for oil and natural gas prices, production costs, capital expenditures, and future production as well as estimated proved oil and gas reserves and risk-adjusted probable oil and natural gas reserves. Management's oil and natural gas price outlook is developed based on third-party longer-term price forecasts as of each measurement date. The expected future net cash flows are discounted using an appropriate discount rate in determining a property's fair value.

It is reasonably possible that the Company's estimates of undiscounted future net cash flows attributable to its oil and gas properties may change in the future. The primary factors that may affect estimates of future cash flows include future adjustments, both positive and negative, to proved and appropriate risk-adjusted probable oil and gas reserves, results of future drilling activities, future prices for oil and natural gas, and increases or decreases in production and capital costs. As a result of these changes, there may be future impairments in the carrying values of these or other properties.

Accrued Expenses

Accrued expenses at June 30, 2018 and December 31, 2017 consist of the following:

	As of June 30, 2018		As of December 31, 2017
	(In thousands)
Accrued drilling costs	$	6,028	$	5,874
Accrued interest payable		20,937		21,277
Accrued transportation costs		2,882		3,269
Accrued employee compensation		2,561		6,449
Asset retirement obligation – assets held for sale		—		4,557
Accrued ad valorem taxes		1,200		—
Other		1,848		1,029
	$	35,456	$	42,455

Reserve for Future Abandonment Costs

Comstock's asset retirement obligations relate to future plugging and abandonment expenses on its oil and gas properties and related facilities disposal. The following table summarizes the changes in Comstock's total estimated liability for such obligations during the six months ended June 30, 2018 and 2017:

	Six Months Ended June 30,
	2018			2017
	(In thousands)
Future abandonment costs — beginning of period	$	10,407		$	15,804
Accretion expense		280			431
New wells placed on production		4			4
Liabilities settled and assets disposed of		(69	)		(36	)
Future abandonment costs — end of period	$	10,622		$	16,203

Derivative Financial Instruments and Hedging Activities

All of the Company's derivative financial instruments are used for risk management purposes and, by policy, none are held for trading or speculative purposes. Comstock minimizes credit risk to counterparties of its derivative financial instruments through formal credit policies, monitoring procedures, and diversification. The Company is not required to provide any credit support to its counterparties other than cross collateralization with the assets securing its bank credit facility. None of the Company's derivative financial instruments involve payment or receipt of premiums. The Company classifies the fair value amounts of derivative financial instruments as net current or noncurrent assets or liabilities, whichever the case may be, by commodity and counterparty.

All of Comstock's natural gas derivative financial instruments are tied to the Henry Hub-NYMEX price index. The Company had the following outstanding derivative financial instruments used for natural gas price risk management at June 30, 2018:


	Future Production Period
	Three Months Ending September 30, 2018		Three Months Ending December 31, 2018		Six Months Ending December 31, 2018		Year Ending December 31, 2019		Total
Swap contracts:
Volume (MMbtu)		5,400,000		5,400,000		10,800,000		4,200,000		15,000,000
Price per MMbtu	$	3.00	$	3.00	$	3.00	$	3.00	$	3.00
Collar contracts:
Volume (MMbtu)		2,700,000		2,700,000		5,400,000		5,400,000		10,800,000
Price per MMbtu
Ceiling	$	3.30	$	3.30	$	3.30	$	3.30	$	3.30
Floor	$	2.50	$	2.50	$	2.50	$	2.50	$	2.50

Volume (MMbtu)		2,700,000		2,700,000		5,400,000		5,400,000		10,800,000
Price per MMbtu
Ceiling	$	3.50	$	3.50	$	3.50	$	3.50	$	3.50
Floor	$	2.50	$	2.50	$	2.50	$	2.50	$	2.50

None of the Company's derivative contracts were designated as cash flow hedges. The aggregate fair value of the Company's derivative instruments reported in the accompanying consolidated balance sheets by type, including the classification between assets and liabilities, consists of the following:

Type	Consolidated Balance Sheet Location	Fair Value		Gross Amounts Offset in the Consolidated Balance Sheet			Net Fair Value Presented in the Consolidated Balance Sheet
				(in thousands)
Fair Value of Derivative Instruments as of June 30, 2018
Asset Derivatives:
Natural gas price derivatives	Derivative Financial Instruments – current	$	79	$	(79	)	$	—
Liability Derivatives:
Natural gas price derivatives	Derivative Financial Instruments – current	$	309	$	(79	)	$	230

Fair Value of Derivative Instruments as of December 31, 2017
Asset Derivatives:
Natural gas price derivatives	Derivative Financial Instruments – current	$	1,318	$	—		$	1,318

The Company recognized cash settlements and changes in the fair value of its derivative financial instruments as a single component of other income (expenses). Gains and losses related to the change in the fair value recognized on the Company's derivative contracts recognized in the consolidated statement of operations were as follows:

Location of Gain/(Loss) Recognized in Earnings on Derivatives	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018		2017
	(in thousands)
Gain (loss) from derivative financial instruments	$	(1,638	)	$	5,295	$	964	$	13,155

Stock-Based Compensation

Comstock accounts for employee stock-based compensation under the fair value method. Compensation cost is measured at the grant date based on the fair value of the award and is recognized over the award vesting period. The Company recognized $1.5 million of stock-based compensation expense within general and administrative expenses related to awards of restricted stock and performance stock units ("PSUs") to its employees and directors in each of the three months ended June 30, 2018 and 2017, respectively. For the six months ended June 30, 2018 and 2017, the Company recognized $3.1 million and $2.8 million, respectively, of stock-based compensation expense within general and administrative expenses.

During the six months ended June 30, 2018, the Company granted 445,801 shares of restricted stock with a grant date fair value of $3.8 million, or $8.46 per share, to its employees. The fair value of each restricted share on the date of grant was equal to its market price. As of June 30, 2018, Comstock had 803,955 shares of unvested restricted stock outstanding at a weighted average grant date fair value of $8.43 per share. Total unrecognized compensation cost related to unvested restricted stock grants of $5.7 million as of June 30, 2018 is expected to be recognized over a period of 2.2 years.

During the six months ended June 30, 2018, the Company granted 360,801 PSUs with a grant date fair value of $4.5 million, or $12.52 per unit, to its employees. As of June 30, 2018, Comstock had 514,336 PSUs outstanding at a weighted average grant date fair value of $13.83 per unit. The number of shares of common stock to be issued related to the PSUs is based on the Company's stock price performance as compared to its peers which could result in the issuance of anywhere from zero to 1,028,672 shares of common stock. Total unrecognized compensation cost related to these grants of $6.2 million as of June 30, 2018 is expected to be recognized over a period of 2.3 years.

Revenue Recognition

On January 1, 2018, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). Comstock adopted this standard using the modified retrospective method of adoption, and it applied the ASU only to contracts that were not completed as of January 1, 2018. Upon adoption, there were no adjustments to the opening balance of equity.

Comstock produces oil and natural gas and reports revenues separately for each of these two primary products in its statements of operations. Revenues are recognized upon the transfer of produced volumes to the Company's customers, who take control of the volumes and receive all the benefits of ownership upon delivery at designated sales points. Payment is reasonably assured upon delivery of production. All sales are subject to contracts that have commercial substance, contain specific pricing terms, and define the enforceable rights and obligations of both parties. These contracts typically provide for cash settlement within 25 days following each production month and are cancellable upon 30 days' notice by either party. Prices for sales of oil and natural gas are generally based upon terms that are common in the oil and gas industry, including index or spot prices, location and quality differentials, as well as market supply and demand conditions. As a result, prices for oil and natural gas routinely fluctuate based on changes in these factors. Each unit of production (barrel of crude oil and thousand cubic feet of natural gas) represents a separate performance obligation under the Company's contracts since each unit has economic benefit on its own and each is priced separately according to the terms of the contracts.

Comstock has elected to exclude all taxes from the measurement of transaction prices, and its revenues are reported net of royalties and exclude revenue interests owned by others because the Company acts as an agent when selling crude oil and natural gas, on behalf of royalty owners and working interest owners. Revenue is recorded in the month of production based on an estimate of the Company's share of volumes produced and prices realized. The Company recognizes any differences between estimates and actual amounts received in the month when payment is received. Historically differences between estimated revenues and actual revenue received have not been significant. The amount of oil or natural gas sold may differ from the amount to which the Company is entitled based on its revenue interests in the properties. The Company did not have any significant imbalance positions at December 31, 2017 or June 30, 2018. Sales of oil and natural gas generally occur at or near the wellhead. When sales of oil and gas occur at locations other than the wellhead, the Company accounts for costs incurred to transport the production to the delivery point as gathering and transportation expenses. The Company has recognized accounts receivable of $21.5 million as of June 30, 2018 from customers for contracts where performance obligations have been satisfied and an unconditional right to consideration exists.

Income Taxes

Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates. The deferred tax provision in the first three months and six months ended June 30, 2018 and 2017 related to adjustments to the valuation allowances on federal and state net operating loss carryforwards. In recording deferred income tax assets, the Company considers whether it is more likely than not that some portion or all of its deferred income tax assets will be realized in the future. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those deferred income tax assets would be deductible. The Company believes that, after considering all the available objective evidence, historical and prospective, with greater weight given to historical evidence, management is not able to determine that it is more likely than not that all of its deferred tax assets will be realized. As a result, the Company established valuation allowances for its deferred tax assets and U.S. federal and state net operating loss carryforwards that are not expected to be utilized due to the uncertainty of generating taxable income prior to the expiration of the carryforward periods.

The following is an analysis of consolidated income tax provision (benefit):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
	(In thousands)
Current - State	$	24		$	21	$	34		$	97
- Federal		—			—		—			—

Deferred - State		(597	)		496		(1,051	)		855
- Federal		451			—		1,477			—
	$	(122	)	$	517	$	460		$	952

The difference between the Company's effective tax rate and the 21% federal statutory rate in effect in 2018 and the 35% rate in effect in 2017 is caused by valuation allowances on deferred taxes and state taxes. The impact of these items varies based upon the Company's projected full year loss and the jurisdictions that are expected to generate the projected losses.

The difference between the federal statutory rate and the effective tax rate is due to the following:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(In thousands)
Tax at statutory rate		21.0	%		35.0	%		21.0	%		35.0	%
Tax effect of:
Valuation allowance on deferred tax assets		(24.1	)		(42.1	)		(24.3	)		(40.1	)
State income taxes, net of federal benefit		3.9			5.0			3.5			4.3
Nondeductible stock-based compensation		(0.4	)		(0.4	)		(0.7	)		(1.4	)
Effective tax rate		0.4	%		(2.5	)%		(0.5	)%		(2.2	)%

The Tax Cuts and Jobs Act, which was enacted on December 22, 2017, reduced the corporate income tax rate effective January 1, 2018 from 35% to 21%. Among the other significant tax law changes that potentially affect the Company are the elimination of the corporate alternative minimum tax ("AMT"), changes that require operating losses incurred in 2018 and beyond be carried forward indefinitely with no carryback up to 80% of taxable income in a given year, and limitations on the deduction for interest expense incurred in 2018 or later for amounts in excess of 30% of its adjusted taxable income (defined as taxable income before interest and net operating losses). For tax years beginning before January 1, 2022, the adjusted taxable income for these purposes is also adjusted to exclude the impact of depreciation, depletion and amortization. The Tax Cuts and Jobs Act preserved deductibility of intangible drilling costs for federal income tax purposes, which allows the Company to deduct a portion of drilling costs in the year incurred and minimizes current taxes payable in periods of taxable income. At June 30, 2018, the Company has not completed its accounting for the tax effects of enactment of the Tax Cuts and Jobs Act; however, it has made reasonable estimates of the effects on its existing deferred tax balances. The Company has remeasured certain deferred federal tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The provisional amount recognized at December 31, 2017 related to the remeasurement of its deferred federal tax balance was $140.4 million, which was subject to a valuation allowance. The Tax Cuts and Jobs Act also repealed the AMT for tax years beginning on or after January 1, 2018 and provides that existing AMT credit carryforwards can be utilized to offset federal taxes for any taxable year. In addition, 50% of any unused AMT credit carryforwards can be refunded during tax years 2018 through 2020. The Company reclassified $19.1 million to a non-current receivable at December 31, 2017 representing the amount of AMT that is now refundable through 2021. The Company is still analyzing certain aspects of the Tax Cuts and Jobs Act, and refining its calculations, which could potentially affect the measurement of those balances or potentially give rise to new deferred tax amounts. Comstock's estimates may also be affected in the future as the Company gains a more thorough understanding of the Tax Cuts and Jobs Act, and how the individual states are implementing this new law.

Future use of the Company's federal and state net operating loss carryforwards may be limited in the event that a cumulative change in the ownership of Comstock's common stock by more than 50% occurs within a three-year period. Such a change in ownership could result in a substantial portion of the Company's net operating loss carryforwards being eliminated or becoming restricted. It is highly likely that a change in ownership due to future conversion of the Company's convertible notes would result in limits on the future use of its net operating loss carryforwards. In addition, the Company expects that the transaction discussed in Footnote (5) – Jones Contribution and Refinancing Plans involving the contribution of oil and gas properties for common stock will result in a change of control which will result in limits on the future use of its net operating loss carryforwards.

The Company's federal income tax returns for the years subsequent to December 31, 2013 remain subject to examination. The Company's income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2012. The Company currently believes that all other significant filing positions are highly certain and that all of its other significant income tax positions and deductions would be sustained under audit or the final resolution would not have a material effect on the consolidated financial statements. Therefore, the Company has not established any significant reserves for uncertain tax positions.

Fair Value Measurements

The Company holds or has held certain financial assets and liabilities that are required to be measured at fair value. These include cash and cash equivalents held in bank accounts and derivative financial instruments in the form of oil and natural gas price swap agreements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level hierarchy is followed for disclosure to show the extent and level of judgment used to estimate fair value measurements:

Level 1 — Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Level 2 — Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 3 — Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions.

The Company's cash and cash equivalents valuation is based on Level 1 measurements. The Company's oil and natural gas price swap agreements and its natural gas price collars were not traded on a public exchange, and their value is determined utilizing a discounted cash flow model based on inputs that are readily available in public markets and, accordingly, the valuation of these swap agreements, is categorized as a Level 2 measurement. There are no financial assets or liabilities accounted for at fair value as of June 30, 2018 that are a Level 3 measurement.

At June 30, 2018 the Company had a liability of $0.2 million recorded for the fair value of its natural gas swaps and collars. At December 31, 2017, the Company had assets recorded for the fair value of its natural gas price swap agreements of $1.3 million. There were no offsetting swap positions in 2018 or 2017. The change in fair value of these natural gas swaps and collars was recognized as a gain or loss and included as a component of other income (expense).

As of June 30, 2018, the Company's other financial instruments, comprised solely of its fixed rate debt, had a carrying value of $1.2 billion and a fair value of $1.2 billion. The fair market value of the Company's fixed rate debt was based on quoted prices as of June 30, 2018, a Level 2 measurement.

Earnings Per Share

Unvested share-based payment awards containing nonforfeitable rights to dividends are considered to be participating securities and included in the computation of basic and diluted earnings per share pursuant to the two-class method. PSUs represent the right to receive a number of shares of the Company's common stock that may range from zero to up to two times the number of PSUs granted on the award date based on the achievement of certain performance measures during a performance period. The number of potentially dilutive shares related to PSUs is based on the number of shares, if any, which would be issuable at the end of the respective period, assuming that date was the end of the contingency period. The treasury stock method is used to measure the dilutive effect of PSUs. Unexercised common stock warrants represent the right to convert the warrants into common stock at an exercise price of $0.01 per share. The treasury stock method is used to measure the dilutive effect of unexercised common stock warrants. The shares that would be issuable upon exercise of the conversion rights contains in the Company's convertible debt for each period are based on the if-converted method for computing potentially dilutive shares of common stock that could be issued upon conversion. None of the Company's participating securities participate in losses and as such are excluded from the computation of basic earnings per share during periods of net losses.

Basic and diluted loss per share for the three months and six months ended June 30, 2018 and 2017 were determined as follows:

	Three Months Ended June 30,
	2018								2017
	Loss			Shares		Per Share			Loss			Shares		Per Share
	(In thousands, except per share amounts)

Basic and diluted net loss attributable to common stock	$	(34,003	)		15,340	$	(2.22	)	$	(21,442	)		14,749	$	(1.45	)

	Six Months Ended June 30,
	2018								2017
	Loss			Shares		Per Share			Loss			Shares		Per Share
	(In thousands, except per share amounts)

Basic and diluted net loss attributable to common stock	$	(75,889	)		15,212	$	(4.99	)	$	(44,373	)		14,488	$	(3.06	)

Basic and diluted per share amounts are the same for the three months and six months ended June 30, 2018 and 2017 due to the net loss reported during each of those periods.

At June 30, 2018 and December 31, 2017, 803,955 and 619,867 shares of restricted stock, respectively, are included in common stock outstanding as such shares have a nonforfeitable right to participate in any dividends that might be declared and have the right to vote on matters submitted to the Company's stockholders.

Weighted average shares of unvested restricted stock outstanding during the three months and six months ended June 30, 2018 and 2017 which were excluded from the computation of the loss per share were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(In thousands)
Unvested restricted stock		857		659		846		582

All stock options, unvested PSUs, warrants exercisable into common stock and contingently issuable shares related to the convertible debt that were anti-dilutive to earnings and excluded from weighted average shares used in the computation of earnings per share due to the net loss in each period were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(In thousands except per share/unit data)
Weighted average warrants for common stock		116		433		167		511
Weighted average exercise price per share	$	0.01	$	0.01	$	0.01	$	0.01

Weighted average PSUs		514		313		466		273
Weighted average grant date fair value per unit	$	13.83	$	17.12	$	13.83	$	17.12

Weighted average contingently convertible shares		40,017		36,181		39,617		36,331
Weighted average conversion price per share	$	12.32	$	12.32	$	12.32	$	12.32

Supplementary Information With Respect to the Consolidated Statements of Cash Flows

For the purpose of the consolidated statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Cash payments made for interest and income taxes for the six months ended June 30, 2018 and 2017, respectively, were as follows:

	Six Months Ended June 30,
	2018		2017
	(In thousands)
Interest payments	$	36,122	$	37,846
Income tax payments	$	2	$	3

Interest paid in-kind related to the Company's convertible notes was $20.0 million and $18.6 million during the six months ended June 30, 2018 and 2017, respectively.

Recent Accounting Pronouncements

On January 1, 2018, the Company adopted ASU 2014-09, which supersedes nearly all existing revenue recognition guidance under existing generally accepted accounting principles. This new standard is based upon the principal that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Comstock adopted this standard using the modified retrospective method of adoption and it applied the ASU only to contracts that were not completed as of January 1, 2018. Upon adoption, there were no adjustments to the opening balance of equity and the Company does not expect the standard to have a significant effect on its results of operations, liquidity or financial position.

In February 2016, the FASB issued ASU No. 2016-02, Leases ("ASU 2016-02"). ASU 2016-02 requires lessees to include most leases on their balance sheets, but recognize lease costs in their financial statements in a manner similar to accounting for leases prior to ASC 2016-02. ASU 2016-02 is effective for annual periods ending after December 15, 2018 and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the new guidance and anticipates that certain operating leases that it has in place will be reflected as an asset and a liability in its consolidated balance sheet. The Company has not yet determined which method of adoption it will apply for this new standard.