Blueprint
Filed
Pursuant to Rule 424(b)(3)
Registration
Statement No. 333-213732
PROSPECTUS
TORCHLIGHT ENERGY RESOURCES, INC.
2,818,491
SHARES OF COMMON STOCK
This
prospectus relates to the offering for resale by the selling
stockholders of up to 2,818,491 shares of our common stock, $0.001
par value. In June 2016, we offered to all existing warrant holders
(excluding officers, directors and certain consultants) who are
accredited investors a limited time right to exercise any warrants
they held at the reduced exercise price of $0.50 per share,
regardless of the exercise price of the subject warrant. This
private offering (the “$0.50 Exercise Offering”)
terminated on July 15, 2016, and we completed the issuance of a
total of 2,864,005 shares of common stock in connection with the
exercise of the warrants. Any warrants that warrant holders did not
exercise in the $0.50 Exercise Offering remained in full force and
effect under their previous terms and conditions, including their
previous exercise price (as opposed to the $0.50 exercise price
which was available only through the offering). All 2,818,491
shares offered for resale pursuant to this prospectus were
purchased in the $0.50 Exercise Offering. We are required to file a
registration statement pursuant to the purchase agreements entered
into with the selling stockholders who exercised warrants and
purchased shares of common stock through the $0.50 Exercise
Offering.
For a
list of the selling stockholders, please see “Selling
Stockholders” section herein. We are not selling
any shares of our common stock in this offering and therefore will
not receive any proceeds from the sale thereof. We did,
however, previously receive proceeds from the shares purchased by
the selling stockholders in connection with the exercise of their
warrants. We will bear all expenses, other than selling
commissions and fees of the selling stockholders, in connection
with the registration and sale of the shares being offered by this
prospectus.
These
shares may be sold by the selling stockholders from time to time in
the over-the-counter market or other national securities exchange
or automated interdealer quotation system on which our common stock
is then listed or quoted, through negotiated transactions or
otherwise at market prices prevailing at the time of sale or at
negotiated prices.
Our
common stock is listed on the NASDAQ Capital Market under the
symbol “TRCH.” On September 19, 2016, the last
reported sales price of our common stock was $1.19 per
share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH
DEGREE OF RISK. PLEASE REFER TO THE “RISK FACTORS”
BEGINNING ON PAGE
4.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE
DATE OF THIS PROSPECTUS IS OCTOBER 3, 2016.
TABLE OF CONTENTS
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ABOUT
THIS PROSPECTUS
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WHERE
YOU CAN FIND ADDITIONAL INFORMATION
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INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
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CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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THE
COMPANY
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RISK
FACTORS
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USE OF
PROCEEDS
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DETERMINATION
OF OFFERING PRICE
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SELLING
STOCKHOLDERS
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PLAN OF
DISTRIBUTION
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DESCRIPTION
OF SECURITIES TO BE REGISTERED
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EXPERTS
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LEGAL
MATTERS
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MATERIAL
CHANGES
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COMMISSION
POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
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ABOUT THIS PROSPECTUS
In this
prospectus, unless the context otherwise requires,
“Torchlight,” “Torchlight Energy,” the
“Company,” “we,” “us” and
“our” refer to Torchlight Energy Resources, Inc., a
Nevada corporation, and its subsidiaries.
You
should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to
provide you with different information. The shares of common stock
are not being offered in any state where the offer is not
permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the
front of this prospectus, and you should assume that any
information incorporated by reference is accurate only as of the
date of the document incorporated by reference, regardless of the
time of delivery of this prospectus or of any sale of the common
stock.
As
permitted under the rules of the Securities and Exchange Commission
(the “SEC”), this prospectus incorporates important
business information about us that is contained in documents that
we file with the SEC but that are not included in or delivered with
this prospectus. You may obtain copies of these documents, without
charge, from the website maintained by the SEC at www.sec.gov, as well as from us. See
“Where You Can Find Additional Information” and
“Incorporation of Certain Information by Reference” in
this prospectus.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file
annual, quarterly and current reports, proxy statements and other
documents with the SEC. You may read and copy, at prescribed rates,
any documents we have filed with the SEC at its Public Reference
Room located at 100 F Street, N.E., Washington, DC 20549. You may
obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. We also file these documents
with the SEC electronically. You can access the electronic versions
of these filings on the SEC’s website found
at www.sec.gov.
We have
filed with the SEC a registration statement on Form S-1 relating to
the securities covered by this prospectus. This prospectus is a
part of the registration statement and does not contain all the
information in the registration statement. Whenever a reference is
made in this prospectus to a contract, agreement or other document,
the reference is only a summary and you should refer to the
exhibits that are filed with, or incorporated by reference into,
the registration statement for a copy of the contract, agreement or
other document. You may review a copy of the registration statement
at the SEC’s Public Reference Room in Washington, D.C., as
well as on the SEC’s website.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The
SEC’s rules allow us to “incorporate by
reference” into this prospectus certain information that we
file with the SEC. This means that we can include in this
prospectus information by referring you to another document already
on file with the SEC that contains that information. Any
information incorporated by reference into this prospectus is
considered to be part of this prospectus.
We
incorporate by reference the following documents filed with the
SEC:
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Annual
Report on Form 10-K for the year ended December 31, 2015, as
filed by us with the SEC on March 30, 2016;
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Quarterly
Reports on Form 10-Q for the quarter ended March 31, 2016, as filed
by us with the SEC on May 16, 2016, and the quarter ended June 30,
2016, as filed with the SEC on August 15, 2016; and
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Current
Reports on Form 8-K, as filed by us with the SEC on February 26,
2016, May 6, 2016, June 16, 2016, July 11, 2016, July 14, 2016,
July 21, 2016 and July 25, 2016.
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Additionally, all
reports and other documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the
date of this prospectus and prior to the termination of this
offering shall be deemed to be incorporated by reference in this
prospectus and to be part hereof from the date of filing of such
reports and other documents.
Notwithstanding the
foregoing, we are not incorporating by reference any information
furnished and not filed with the SEC, including information
furnished under Item 2.02 or Item 7.01 of any Current
Report on Form 8-K, including the related exhibits under
Item 9.01, unless, and to the extent, expressly specified
otherwise. Any statement contained in a document incorporated in
this prospectus shall be deemed to be modified or superseded to the
extent that a statement contained in this prospectus modifies or
supersedes such statement. Any such statement so modified or
superseded shall only be deemed to be a part of this prospectus as
so modified or superseded.
We will
provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, upon his or her
written or oral request, a copy of any or all of the reports or
documents referred to above that have been incorporated by
reference into this prospectus, excluding exhibits to those
documents unless they are specifically incorporated by reference
into those documents. You may request a copy of these filings, at
no cost, by contacting:
John A.
Brda, President
Torchlight
Energy Resources, Inc.
5700 W.
Plano Parkway, Suite 3600
Plano,
Texas 75093
Telephone:
(214) 432-8002
Email:
john@torchlightenergy.com
You
also may access these filings on our website at www.torchlightenergy.com. We do not
incorporate the information on our website into this prospectus or
any supplement to this prospectus and you should not consider any
information on, or that can be accessed through, our website as
part of this prospectus or any supplement to this prospectus (other
than those filings with the SEC that we specifically incorporate by
reference into this prospectus or any supplement to this
prospectus).
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, including information included or incorporated by
reference in this prospectus or any supplement to this prospectus,
may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to,
statements about our plans, objectives, expectations and intentions
that are not historical facts, and other statements identified by
words such as “may,” “will,”
“expects,” believes,” “plans,”
“estimates,” “potential,” or
“continue,” or the negative thereof or other and
similar expressions are forward-looking statements. In addition, in
some cases, you can identify forward-looking statements by words of
phrases such as “trend,” “potential,”
“opportunity,” “believe,”
“comfortable,” “expect,”
“anticipate,” “current,”
“intention,” “estimate,”
“position,” “assume,”
“outlook,” “continue,”
“remain,” “maintain,”
“sustain,” “seek,” “achieve,”
and similar expressions. These forward looking statements are based
on current beliefs and expectations of management and are
inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are
beyond our control. In addition, these forward-looking statements
are subject to assumptions with respect to future business
strategies and decisions that are subject to change. In addition to
the factors set forth in this prospectus and the documents
incorporated by reference in this prospectus, including under the
section entitled “Risk Factors” in this prospectus and
in our Annual Report on Form 10-K, as amended, for the year ended
December 31, 2015 and in any other reports that we file with
the SEC, the following factors, among others, could cause actual
results to differ materially from the anticipated results: oil and
natural gas prices; our ability to raise or access capital; general
economic or industry conditions, nationally and/or in the
communities in which our company conducts business; changes in the
interest rate environment; legislation or regulatory requirements;
conditions of the securities markets; changes in accounting
principles, policies or guidelines; financial or political
instability; acts of war or terrorism; and other economic,
competitive, governmental, regulatory and technical factors
affecting our operations, products and prices.
All
forward-looking statements speak only as of the date of this
prospectus or, in the case of any documents incorporated by
reference in this prospectus, the date of such document, in each
case based on information available to us as of such date, and we
assume no obligation to update any forward-looking statements,
except as required by law.
THE COMPANY
We are
an energy company engaged in the acquisition, exploration,
exploitation and/or development of oil and natural gas properties
in the United States. We have been in business since
2010.
As of
the quarter ended June 30, 2016, our primary focus is on the
development of interests in oil and gas projects we hold in West
Texas, including the Orogrande Project in Hudspeth County, Texas
and the Hazel Project in the Midland Basin. We are in the process
of divesting our interests in all other oil and gas projects other
than the Orogrande Project and the Hazel Project. We may be
involved in other oil and gas projects moving forward, pending
adequate funding.
Torchlight Energy
Resources, Inc. is a Nevada corporation. We operate our
business through three wholly owned subsidiaries, Torchlight
Energy, Inc., also a Nevada corporation, Torchlight Energy
Operating, LLC, a Texas limited liability company, and Hudspeth Oil
Corporation, a Texas corporation. We currently have five
full time employees.
Our
principal executive offices are located at 5700 W. Plano Parkway,
Suite 3600, Plano, Texas 75093. The telephone number of our
principal executive offices is (214) 432-8002.
RISK FACTORS
Ownership of the
common stock involves certain risks. You should consider carefully
the risks and uncertainties described in, or incorporated by
reference in, this prospectus, including the risks described below
and under the captions “Business” and “Risk
Factors” in our Annual Report on Form 10-K, as amended, for
the year ended December 31, 2015 and in any other reports that
we file with the SEC, along with the other information included or
incorporated by reference in this prospectus, in evaluating an
investment in the common stock. The information included or
incorporated by reference in this prospectus may be amended,
supplemented or superseded from time to time by other reports we
file with the SEC in the future. For a description of these reports
and documents, and information about where you can find them, see
the sections entitled “Where You Can Find Additional
Information” and “Incorporation of Certain Information
by Reference” in this prospectus.
The
risks and uncertainties described in this prospectus and the
documents incorporated by reference in this prospectus are not the
only ones facing us. Additional risks and uncertainties that we do
not presently know about or that we currently believe are not
material may also adversely affect our business. If any of the
risks and uncertainties described in this prospectus or the
documents incorporated by reference herein actually occur, our
business, financial condition and results of operations could be
adversely affected in a material way. This could cause the trading
price of the common stock to decline, perhaps significantly, and
you may lose part or all of your investment.
Risks Related to the Company and the Industry
We have a limited operating history, and may not be successful in
developing profitable business operations.
We have
a limited operating history. Our business operations must be
considered in light of the risks, expenses and difficulties
frequently encountered in establishing a business in the oil and
natural gas industries. As of the date of this prospectus, we
have generated limited revenues and have limited assets. We
have an insufficient history at this time on which to base an
assumption that our business operations will prove to be successful
in the long-term. Our future operating results will depend on
many factors, including:
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our
ability to raise adequate working capital;
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the
success of our development and exploration;
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the
demand for natural gas and oil;
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the
volatility of oil and natural gas prices;
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the
level of our competition;
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our
ability to attract and maintain key management and employees;
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our
ability to efficiently explore, develop, produce or acquire
sufficient quantities of marketable natural gas or oil in a highly
competitive and speculative environment while maintaining quality
and controlling costs.
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To
achieve profitable operations in the future, we must, alone or with
others, successfully manage the factors stated above, as well as
continue to develop ways to enhance our production efforts.
Despite our best efforts, we may not be successful in our
exploration or development efforts, or obtain required regulatory
approvals. There is a possibility that some, or all, of the
wells in which we obtain interests may never produce oil or natural
gas.
We have limited capital and will need to raise additional capital
in the future.
We do
not currently have sufficient capital to fund both our continuing
operations and our planned growth. We will require additional
capital to continue to grow our business via acquisitions and to
further expand our exploration and development programs. We
may be unable to obtain additional capital when required.
Future acquisitions and future exploration, development,
production and marketing activities, as well as our administrative
requirements (such as salaries, insurance expenses and general
overhead expenses, as well as legal compliance costs and accounting
expenses) will require a substantial amount of additional capital
and cash flow.
We may
pursue sources of additional capital through various financing
transactions or arrangements, including joint venturing of
projects, debt financing, equity financing or other means. We
may not be successful in identifying suitable financing
transactions in the time period required or at all, and we may not
obtain the capital we require by other means. If we do not
succeed in raising additional capital, our resources may not be
sufficient to fund our planned operations.
Our
ability to obtain financing, if and when necessary, may be impaired
by such factors as the capital markets (both generally and in the
oil and gas industry in particular), our limited operating history,
the location of our oil and natural gas properties and prices of
oil and natural gas on the commodities markets (which will impact
the amount of asset-based financing available to us, if any) and
the departure of key employees. Further, if oil or natural
gas prices on the commodities markets decline, our future revenues,
if any, will likely decrease and such decreased revenues may
increase our requirements for capital. If the amount of
capital we are able to raise from financing activities, together
with our revenues from operations, is not sufficient to satisfy our
capital needs (even to the extent that we reduce our operations),
we may be required to cease our operations, divest our assets at
unattractive prices or obtain financing on unattractive
terms.
Any
additional capital raised through the sale of equity may dilute the
ownership percentage of our stockholders. Raising any such
capital could also result in a decrease in the fair market value of
our equity securities because our assets would be owned by a
larger pool of outstanding equity. The terms of securities we
issue in future capital transactions may be more favorable to our
new investors, and may include preferences, superior voting rights
and the issuance of other derivative securities, and issuances of
incentive awards under equity employee incentive plans, which may
have a further dilutive effect.
We may
incur substantial costs in pursuing future capital financing,
including investment banking fees, legal fees, accounting fees,
securities law compliance fees, printing and distribution expenses
and other costs. We may also be required to recognize
non-cash expenses in connection with certain securities we may
issue, which may adversely impact our financial
condition.
Our auditor has indicated that certain factors raise substantial
doubt about our ability to continue as a going
concern.
The
financial statements included with our Form 10-K for the year ended
December 31, 2015 were presented under the assumption that we will
continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business over a reasonable length of time. We had a net loss of
approximately $43.2 million for the year ended December 31, 2015
and an accumulated deficit in aggregate of approximately $74.9
million at year end. We are not generating sufficient operating
cash flows to support continuing operations, and expect to incur
further losses in the development of our business.
In our
financial statements for the year ended December 31, 2015, our
auditor indicated that certain factors raised substantial doubt
about our ability to continue as a going concern. These factors
included our accumulated deficit, as well as the fact that we were
not generating sufficient cash flows to meet our regular working
capital requirements. Our ability to continue as a going concern is
dependent upon our ability to generate future profitable operations
and/or to obtain the necessary financing to meet our obligations
and repay our liabilities arising from normal business operations
when they come due. Management's plan to address our ability to
continue as a going concern includes: (1) obtaining debt or equity
funding from private placement or institutional sources; (2)
obtaining loans from financial institutions, where possible, or (3)
participating in joint venture transactions with third parties.
Although management believes that it will be able to obtain the
necessary funding to allow us to remain a going concern through the
methods discussed above, there can be no assurances that such
methods will prove successful. The accompanying financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
As a non-operator, our development of successful operations relies
extensively on third-parties who, if not successful, could have a
material adverse effect on our results of operation.
We
expect to primarily participate in wells operated by third-parties.
As a result, we will not control the timing of the
development, exploitation, production and exploration activities
relating to leasehold interests we acquire. We do, however,
have certain rights as granted in our Joint Operating Agreements
that allow us a certain degree of freedom such as, but not limited
to, the ability to propose the drilling of wells.
If our drilling partners are not successful in
such activities relating to our leasehold interests, or are unable
or unwilling to perform, our financial condition and results of
operation could have an adverse material effect.
Further, financial
risks are inherent in any operation where the cost of drilling,
equipping, completing and operating wells is shared by more than
one person. We could be held liable for the joint activity
obligations of the operator or other working interest owners such
as nonpayment of costs and liabilities arising from the actions of
the working interest owners. In the event the operator or
other working interest owners do not pay their share of such costs,
we would likely have to pay those costs. In such situations,
if we were unable to pay those costs, there could be a material
adverse effect to our financial position.
Because of the speculative nature of oil and gas exploration, there
is risk that we will not find commercially exploitable oil and gas
and that our business will fail.
The
search for commercial quantities of oil and natural gas as a
business is extremely risky. We cannot provide investors with any
assurance that any properties in which we obtain a mineral interest
will contain commercially exploitable quantities of oil and/or gas.
The exploration expenditures to be made by us may not result
in the discovery of commercial quantities of oil and/or gas.
Problems such as unusual or unexpected formations or
pressures, premature declines of reservoirs, invasion of water into
producing formations and other conditions involved in oil and gas
exploration often result in unsuccessful exploration efforts. If we
are unable to find commercially exploitable quantities of oil and
gas, and/or we are unable to commercially extract such quantities,
we may be forced to abandon or curtail our business plan, and as a
result, any investment in us may become worthless.
Strategic relationships upon which we may rely are subject to
change, which may diminish our ability to conduct our
operations.
Our
ability to successfully acquire oil and gas interests, to build our
reserves, to participate in drilling opportunities and to identify
and enter into commercial arrangements with customers will depend
on developing and maintaining close working relationships with
industry participants and our ability to select and evaluate
suitable properties and to consummate transactions in a highly
competitive environment. These realities are subject to
change and our inability to maintain close working relationships
with industry participants or continue to acquire suitable property
may impair our ability to execute our business plan.
To
continue to develop our business, we will endeavor to use the
business relationships of our management to enter into strategic
relationships, which may take the form of joint ventures with other
private parties and contractual arrangements with other oil and gas
companies, including those that supply equipment and other
resources that we will use in our business. We may not be
able to establish these strategic relationships, or if established,
we may not be able to maintain them. In addition, the
dynamics of our relationships with strategic partners may require
us to incur expenses or undertake activities we would not otherwise
be inclined to in order to fulfill our obligations to these
partners or maintain our relationships. If our strategic
relationships are not established or maintained, our business
prospects may be limited, which could diminish our ability to
conduct our operations.
The price of oil and natural gas has historically been volatile.
If it were to decrease substantially, our projections,
budgets and revenues would be adversely affected, potentially
forcing us to make changes in our operations.
Our
future financial condition, results of operations and the carrying
value of any oil and natural gas interests we acquire will depend
primarily upon the prices paid for oil and natural gas production.
Oil and natural gas prices historically have been volatile and
likely will continue to be volatile in the future, especially given
current world geopolitical conditions. Our cash flows from
operations are highly dependent on the prices that we receive for
oil and natural gas. This price volatility also affects the amount
of our cash flows available for capital expenditures and our
ability to borrow money or raise additional capital. The prices for
oil and natural gas are subject to a variety of additional factors
that are beyond our control. These factors include:
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the
level of consumer demand for oil and natural gas;
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the
domestic and foreign supply of oil and natural gas;
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the
ability of the members of the Organization of Petroleum Exporting
Countries ("OPEC") to agree to and maintain oil price and
production controls;
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the
price of foreign oil and natural gas;
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domestic
governmental regulations and taxes;
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the
price and availability of alternative fuel sources;
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weather
conditions;
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market
uncertainty due to political conditions in oil and natural gas
producing regions, including the Middle East; and
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worldwide
economic conditions.
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These
factors as well as the volatility of the energy markets generally
make it extremely difficult to predict future oil and natural gas
price movements with any certainty. Declines in oil and natural gas
prices affect our revenues, and could reduce the amount of oil and
natural gas that we can produce economically. Accordingly,
such declines could have a material adverse effect on our financial
condition, results of operations, oil and natural gas reserves and
the carrying values of our oil and natural gas properties. If the
oil and natural gas industry experiences significant price
declines, we may be unable to make planned expenditures, among
other things. If this were to happen, we may be forced to abandon
or curtail our business operations, which would cause the value of
an investment in us to decline in value, or become
worthless.
If oil or natural gas prices remain depressed or drilling efforts
are unsuccessful, we may be required to record additional write
downs of our oil and natural gas properties.
If oil
or natural gas prices remain depressed or drilling efforts are
unsuccessful, we could be required to write down the carrying value
of certain of our oil and natural gas properties. Write downs may
occur when oil and natural gas prices are low, or if we have
downward adjustments to our estimated proved reserves, increases in
our estimates of operating or development costs, deterioration in
drilling results or mechanical problems with wells where the cost
to re drill or repair is not supported by the expected
economics.
Under
the full cost method of accounting, capitalized oil and gas
property costs less accumulated depletion and net of deferred
income taxes may not exceed an amount equal to the present value,
discounted at 10%, of estimated future net revenues from proved oil
and gas reserves plus the cost of unproved properties not subject
to amortization (without regard to estimates of fair value), or
estimated fair value, if lower, of unproved properties that are
subject to amortization. Should capitalized costs exceed this
ceiling, an impairment would be recognized.
At
December 31, 2014, we performed an impairment review using prices
that reflect an average of 2014’s monthly prices as
prescribed pursuant to the SEC’s guidelines. These average
prices used in the December 31, 2014 impairment review were
significantly higher than the actual and currently forecasted
prices in 2015. As lower average monthly pricing is reflected in
the trailing 12-month average pricing calculation, the present
value of our future net revenues would decline and impairment would
be recognized. Since this significantly lower pricing environment
persisted into 2015 we were required to write down the value of our
oil and gas properties.
We
recognized impairment of $22,438,114 on our oil and gas properties
at June 30, 2015 and an additional impairment adjustment of
$3,236,009 was made at December 31, 2015 for a total impairment
adjustment of $25,674,123 for the year 2015.
Because of the inherent dangers involved in oil and gas operations,
there is a risk that we may incur liability or damages as we
conduct our business operations, which could force us to expend a
substantial amount of money in connection with litigation and/or a
settlement.
The oil
and natural gas business involves a variety of operating hazards
and risks such as well blowouts, pipe failures, casing collapse,
explosions, uncontrollable flows of oil, natural gas or well
fluids, fires, spills, pollution, releases of toxic gas and other
environmental hazards and risks. These hazards and risks could
result in substantial losses to us from, among other things, injury
or loss of life, severe damage to or destruction of property,
natural resources and equipment, pollution or other environmental
damage, cleanup responsibilities, regulatory investigation and
penalties and suspension of operations. In addition, we may be
liable for environmental damages caused by previous owners of
property purchased and leased by us. In recent years, there has
also been increased scrutiny on the environmental risk associated
with hydraulic fracturing, such as underground migration and
surface spillage or mishandling of fracturing fluids including
chemical additives. As a result, substantial liabilities to third
parties or governmental entities may be incurred, the payment of
which could reduce or eliminate the funds available for
exploration, development or acquisitions or result in the loss of
our properties and/or force us to expend substantial monies in
connection with litigation or settlements. We currently have no
insurance to cover such losses and liabilities, and even if
insurance is obtained, there can be no assurance that it will be
adequate to cover any losses or liabilities. We cannot predict the
availability of insurance or the availability of insurance at
premium levels that justify our purchase. The occurrence of a
significant event not fully insured or indemnified against could
materially and adversely affect our financial condition and
operations. We may elect to self-insure if management believes that
the cost of insurance, although available, is excessive relative to
the risks presented. In addition, pollution and environmental risks
generally are not fully insurable. The occurrence of an event not
fully covered by insurance could have a material adverse effect on
our financial condition and results of operations, which could lead
to any investment in us becoming worthless.
The market for oil and gas is intensely competitive, and
competition pressures could force us to abandon or curtail our
business plan.
The
market for oil and gas exploration services is highly competitive,
and we only expect competition to intensify in the future. Numerous
well-established companies are focusing significant resources on
exploration and are currently competing with us for oil and gas
opportunities. Other oil and gas companies may seek to
acquire oil and gas leases and properties that we have targeted.
Additionally, other companies engaged in our line of business
may compete with us from time to time in obtaining capital from
investors. Competitors include larger companies which, in
particular, may have access to greater resources, may be more
successful in the recruitment and retention of qualified employees
and may conduct their own refining and petroleum marketing
operations, which may give them a competitive advantage.
Actual or potential competitors may be strengthened through
the acquisition of additional assets and interests.
Additionally, there are numerous companies focusing their
resources on creating fuels and/or materials which serve the same
purpose as oil and gas, but are manufactured from renewable
resources.
As a
result, there can be no assurance that we will be able to compete
successfully or that competitive pressures will not adversely
affect our business, results of operations and financial condition.
If we are not able to successfully compete in the marketplace, we
could be forced to curtail or even abandon our current business
plan, which could cause any investment in us to become
worthless.
We may not be able to successfully manage our growth, which could
lead to our inability to implement our business plan.
Our
growth may place a significant strain on our managerial,
operational and financial resources, especially considering that we
currently only have a small number of executive officers, employees
and advisors. Further, as we enter into additional contracts, we
will be required to manage multiple relationships with various
consultants, businesses and other third parties. These requirements
will be exacerbated in the event of our further growth or in the
event that the number of our drilling and/or extraction operations
increases. There can be no assurance that our systems, procedures
and/or controls will be adequate to support our operations or that
our management will be able to achieve the rapid execution
necessary to successfully implement our business plan. If we are
unable to manage our growth effectively, our business, results of
operations and financial condition will be adversely affected,
which could lead to us being forced to abandon or curtail our
business plan and operations.
Our operations are heavily dependent on current environmental
regulation, changes in which we cannot predict.
Oil and
natural gas activities that we will engage in, including
production, processing, handling and disposal of hazardous
materials, such as hydrocarbons and naturally occurring radioactive
materials (if any), are subject to stringent regulation. We could
incur significant costs, including cleanup costs resulting from a
release of hazardous material, third-party claims for property
damage and personal injuries fines and sanctions, as a result of
any violations or liabilities under environmental or other laws.
Changes in or more stringent enforcement of environmental laws
could force us to expend additional operating costs
and capital expenditures to stay in compliance.
Various
federal, state and local laws regulating the discharge of materials
into the environment, or otherwise relating to the protection of
the environment, directly impact oil and gas exploration,
development and production operations, and consequently may impact
our operations and costs. These regulations include, among others,
(i) regulations by the Environmental Protection Agency and various
state agencies regarding approved methods of disposal for certain
hazardous and non-hazardous wastes; (ii) the Comprehensive
Environmental Response, Compensation, and Liability Act, Federal
Resource Conservation and Recovery Act and analogous state laws
which regulate the removal or remediation of previously disposed
wastes (including wastes disposed of or released by prior owners or
operators), property contamination (including groundwater
contamination), and remedial plugging operations to prevent future
contamination; (iii) the Clean Air Act and comparable state and
local requirements which may result in the gradual imposition of
certain pollution control requirements with respect to air
emissions from our operations; (iv) the Oil Pollution Act of 1990
which contains numerous requirements relating to the prevention of
and response to oil spills into waters of the United States; (v)
the Resource Conservation and Recovery Act which is the principal
federal statute governing the treatment, storage and disposal of
hazardous wastes; and (vi) state regulations and statutes governing
the handling, treatment, storage and disposal of naturally
occurring radioactive material.
Management believes
that we will be in substantial compliance with applicable
environmental laws and regulations. To date, we have not expended
any amounts to comply with such regulations, and management does
not currently anticipate that future compliance will have a
materially adverse effect on our consolidated financial position,
results of operations or cash flows. However, if we are deemed to
not be in compliance with applicable environmental laws, we could
be forced to expend substantial amounts to be in compliance, which
would have a materially adverse effect on our financial condition.
If this were to happen, any investment in us could be
lost.
Government regulatory initiatives relating to hydraulic fracturing
could result in increased costs and additional operating
restrictions or delays.
Vast
quantities of natural gas, natural gas liquids and oil deposits
exist in deep shale and other unconventional formations. It is
customary in our industry to recover these resources through the
use of hydraulic fracturing, combined with horizontal drilling.
Hydraulic fracturing is the process of creating or expanding
cracks, or fractures, in deep underground formations using water,
sand and other additives pumped under high pressure into the
formation. As with the rest of the industry, our third-party
operating partners use hydraulic fracturing as a means to increase
the productivity of most of the wells they drill and complete.
These formations are generally geologically separated and isolated
from fresh ground water supplies by thousands of feet of
impermeable rock layers.
We
believe our third-party operating partners follow applicable legal
requirements for groundwater protection in their operations that
are subject to supervision by state and federal
regulators. Furthermore, we believe our third-party
operating partners’ well construction practices are
specifically designed to protect freshwater aquifers by preventing
the migration of fracturing fluids into aquifers.
Hydraulic
fracturing is typically regulated by state oil and gas commissions.
Some states have adopted, and other states are considering
adopting, regulations that could impose more stringent permitting,
public disclosure, and/or well construction requirements on
hydraulic fracturing operations. For example,
Pennsylvania is currently considering proposed regulations
applicable to surface use at oil and gas well sites, including new
secondary containment requirements and an abandoned and orphaned
well identification program that would require operators to
remediate any such wells that are damaged during current hydraulic
fracturing operations. New York has placed a permit
moratorium on high volume fracturing activities combined with
horizontal drilling pending the results of a study regarding the
safety of hydraulic fracturing. And certain communities in Colorado
have also enacted bans on hydraulic fracturing.
In
addition to state laws, some local municipalities have adopted or
are considering adopting land use restrictions, such as city
ordinances, that may restrict or prohibit the performance of well
drilling in general and/or hydraulic fracturing in particular.
There are also certain governmental reviews either underway or
being proposed that focus on deep shale and other formation
completion and production practices, including hydraulic
fracturing. Depending on the outcome of these studies, federal and
state legislatures and agencies may seek to further regulate such
activities. Certain environmental and other groups have also
suggested that additional federal, state and local laws and
regulations may be needed to more closely regulate the hydraulic
fracturing process.
Further, the EPA
has asserted federal regulatory authority over hydraulic fracturing
involving “diesel fuels” under the SWDA’s UIC
Program. In February 2014, the EPA released its final guidance on
the use of diesel additives in hydraulic fracturing operations. The
EPA is also engaged in a study of the potential impacts of
hydraulic fracturing activities on drinking water resources in
these states where the EPA is the permitted authority, including
Pennsylvania, with a progress report released in late 2012 and a
draft report released in June 2015. It concluded that hydraulic
fracturing activities have not led to widespread systematic impacts
on drinking water resources in the U.S., but there are above and
below ground mechanisms by which hydraulic fracturing could affect
drinking water resources. In addition, in March 2015, the Bureau of
Land Management (“BLM”) issued a final rule to regulate
hydraulic fracturing on federal and Indian land; however,
enforcement of the rule has been delayed pending a decision in a
legal challenge in the U.S. District Court of Wyoming. Further, the
EPA issued an Advanced Notice of Proposed Rulemaking in May 2014
seeking comments relating to the information that should be
reported or disclosed for hydraulic fracturing chemical substances
and mixtures and mechanisms for obtaining this information. These
actions, in conjunction with other analyses by federal and state
agencies to assess the impacts of hydraulic fracturing could spur
further action toward federal and/or state legislation and
regulation of hydraulic fracturing activities.
We
cannot predict whether additional federal, state or local laws or
regulations applicable to hydraulic fracturing will be enacted in
the future and, if so, what actions any such laws or regulations
would require or prohibit. Restrictions on hydraulic
fracturing could make it prohibitive for our third-party operating
partners to conduct operations, and also reduce the amount of oil,
natural gas liquids and natural gas that we are ultimately able to
produce in commercial quantities from our properties. If
additional levels of regulation or permitting requirements were
imposed on hydraulic fracturing operations, our business and
operations could be subject to delays, increased operating and
compliance costs and process prohibitions.
Our estimates of the volume of reserves could have flaws, or such
reserves could turn out not to be commercially extractable. As a
result, our future revenues and projections could be
incorrect.
Estimates of
reserves and of future net revenues prepared by different petroleum
engineers may vary substantially depending, in part, on the
assumptions made and may be subject to adjustment either up or down
in the future. Our actual amounts of production, revenue, taxes,
development expenditures, operating expenses, and quantities of
recoverable oil and gas reserves may vary substantially from the
estimates. Oil and gas reserve estimates are necessarily
inexact and involve matters of subjective engineering judgment. In
addition, any estimates of our future net revenues and the present
value thereof are based on assumptions derived in part from
historical price and cost information, which may not reflect
current and future values, and/or other assumptions made by us that
only represent our best estimates. If these estimates of
quantities, prices and costs prove inaccurate, we may be
unsuccessful in expanding our oil and gas reserves base with our
acquisitions. Additionally, if declines in and instability of oil
and gas prices occur, then write downs in the capitalized costs
associated with any oil and gas assets we obtain may be required.
Because of the nature of the estimates of our reserves and
estimates in general, we can provide no assurance that reductions
to our estimated proved oil and gas reserves and estimated future
net revenues will not be required in the future, and/or that our
estimated reserves will be present and/or commercially extractable.
If our reserve estimates are incorrect, the value of our common
stock could decrease and we may be forced to write down the
capitalized costs of our oil and gas properties.
Decommissioning costs are unknown and may be substantial.
Unplanned costs could divert resources from other
projects.
We may
become responsible for costs associated with abandoning and
reclaiming wells, facilities and pipelines which we use for
production of oil and natural gas reserves. Abandonment and
reclamation of these facilities and the costs associated therewith
is often referred to as “decommissioning.” We
accrue a liability for decommissioning costs associated with our
wells, but have not established any cash reserve account for these
potential costs in respect of any of our properties. If
decommissioning is required before economic depletion of our
properties or if our estimates of the costs of decommissioning
exceed the value of the reserves remaining at any particular time
to cover such decommissioning costs, we may have to draw on funds
from other sources to satisfy such costs. The use of other
funds to satisfy such decommissioning costs could impair our
ability to focus capital investment in other areas of our
business.
We may have difficulty distributing production, which could harm
our financial condition.
In
order to sell the oil and natural gas that we are able to produce,
if any, the operators of the wells we obtain interests in may have
to make arrangements for storage and distribution to the market.
We will rely on local infrastructure and the availability of
transportation for storage and shipment of our products, but
infrastructure development and storage and transportation
facilities may be insufficient for our needs at commercially
acceptable terms in the localities in which we operate. This
situation could be particularly problematic to the extent that our
operations are conducted in remote areas that are difficult to
access, such as areas that are distant from shipping and/or
pipeline facilities. These factors may affect our and
potential partners’ ability to explore and develop properties
and to store and transport oil and natural gas production,
increasing our expenses.
Furthermore,
weather conditions or natural disasters, actions by companies doing
business in one or more of the areas in which we will operate, or
labor disputes may impair the distribution of oil and/or natural
gas and in turn diminish our financial condition or ability to
maintain our operations.
Our business will suffer if we cannot obtain or maintain necessary
licenses.
Our
operations will require licenses, permits and in some cases
renewals of licenses and permits from various governmental
authorities. Our ability to obtain, sustain or renew such
licenses and permits on acceptable terms is subject to change in
regulations and policies and to the discretion of the applicable
governments, among other factors. Our inability to obtain, or
our loss of or denial of extension of, any of these licenses or
permits could hamper our ability to produce revenues from our
operations.
Challenges to our properties may impact our financial
condition.
Title
to oil and gas interests is often not capable of conclusive
determination without incurring substantial expense. While we
intend to make appropriate inquiries into the title of properties
and other development rights we acquire, title defects may exist.
In addition, we may be unable to obtain adequate insurance
for title defects, on a commercially reasonable basis or at all.
If title defects do exist, it is possible that we may lose
all or a portion of our right, title and interests in and to the
properties to which the title defects relate. If our
property rights are reduced, our ability to conduct our
exploration, development and production activities may be impaired.
To mitigate title problems, common industry practice is to
obtain a title opinion from a qualified oil and gas attorney prior
to the drilling operations of a well.
We rely on technology to conduct our business, and our technology
could become ineffective or obsolete.
We rely
on technology, including geographic and seismic analysis techniques
and economic models, to develop our reserve estimates and to guide
our exploration, development and production activities. We
and our operator partners will be required to continually enhance
and update our technology to maintain its efficacy and to avoid
obsolescence. The costs of doing so may be substantial and
may be higher than the costs that we anticipate for technology
maintenance and development. If we are unable to maintain the
efficacy of our technology, our ability to manage our business and
to compete may be impaired. Further, even if we are able to
maintain technical effectiveness, our technology may not be the
most efficient means of reaching our objectives, in which case we
may incur higher operating costs than we would were our technology
more efficient.
The loss of key personnel would directly affect our efficiency and
profitability.
Our
future success is dependent, in a large part, on retaining the
services of our current management team. Our executive
officers possess a unique and comprehensive knowledge of our
industry and related matters that are vital to our success within
the industry. The knowledge, leadership and technical
expertise of these individuals would be difficult to replace.
The loss of one or more of our officers could have a material
adverse effect on our operating and financial performance,
including our ability to develop and execute our long term business
strategy. We do not maintain key-man life insurance with
respect to any employees. We do have employment agreements
with each of our executive officers. There can be no
assurance, however, that any of our officers will continue to be
employed by us.
Our officers and directors control a significant percentage of our
current outstanding common stock and their interests may conflict
with those of our stockholders.
As of
the date of this prospectus, our executive officers and directors
collectively and beneficially own approximately 33% of our
outstanding common stock. This concentration of voting control
gives these affiliates substantial influence over any matters which
require a stockholder vote, including without limitation the
election of directors and approval of merger and/or acquisition
transactions, even if their interests may conflict with those of
other stockholders. It could have the effect of delaying or
preventing a change in control or otherwise discouraging a
potential acquirer from attempting to obtain control of us. This
could have a material adverse effect on the market price of our
common stock or prevent our stockholders from realizing a premium
over the then prevailing market prices for their shares of common
stock.
In the future, we may incur significant increased costs as a result
of operating as a public company, and our management may be
required to devote substantial time to new compliance
initiatives.
In the
future, we may incur significant legal, accounting, and other
expenses as a result of operating as a public company. The
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”),
as well as new rules subsequently implemented by the SEC, have
imposed various requirements on public companies, including
requiring changes in corporate governance practices. Our management
and other personnel will need to devote a substantial amount of
time to these new compliance initiatives. Moreover, these rules and
regulations will increase our legal and financial compliance costs
and will make some activities more time-consuming and costly. For
example, we expect these new rules and regulations to make it more
difficult and more expensive for us to obtain director and officer
liability insurance, and we may be required to incur substantial
costs to maintain the same or similar coverage.
In
addition, the Sarbanes-Oxley Act requires, among other things, that
we maintain effective internal controls for financial reporting and
disclosure controls and procedures. In particular, we are required
to perform system and process evaluation and testing on the
effectiveness of our internal controls over financial reporting, as
required by Section 404 of the Sarbanes-Oxley Act. In performing
this evaluation and testing, management concluded that our internal
control over financial reporting is effective as of December 31,
2015. We are performing ongoing updates of our policies and
procedures in an effort to ensure our internal control remains
effective. Our compliance with Section 404, will require that we
incur substantial accounting expense and expend significant
management efforts. We currently do not have an internal audit
group, and we will need to engage independent professional
assistance. Moreover, if we are not able to comply with the
requirements of Section 404 in a timely manner, or if in the future
we or our independent registered public accounting firm identifies
deficiencies in our internal controls over financial reporting that
are deemed to be material weaknesses, the market price of our stock
could decline, and we could be subject to sanctions or
investigations by the SEC or other regulatory authorities, which
would require additional financial and management
resources.
Certain Factors Related to Our Common Stock
There presently is a limited market for our common stock, and the
price of our common stock may be volatile.
Our
common stock is currently quoted on The NASDAQ Stock Market LLC.
Our shares, however, are very thinly traded, and we have a
very limited trading history. There could be volatility in
the volume and market price of our common stock moving forward.
This volatility may be caused by a variety of factors,
including the lack of readily available quotations, the absence of
consistent administrative supervision of “bid” and
“ask” quotations and generally lower trading volume. In
addition, factors such as quarterly variations in our operating
results, changes in financial estimates by securities analysts or
our failure to meet our or their projected financial and operating
results, litigation involving us, factors relating to the oil and
gas industry, actions by governmental agencies, national economic
and stock market considerations as well as other events and
circumstances beyond our control could have a significant impact on
the future market price of our common stock and the relative
volatility of such market price.
Offers or availability for sale of a substantial number of shares
of our common stock may cause the price of our common stock to
decline.
Our
stockholders could sell substantial amounts of common stock in the
public market, including shares sold upon the filing of a
registration statement that registers such shares and/or upon the
expiration of any statutory holding period under Rule 144 of the
Securities Act of 1933 (the “Securities Act”), if
available, or upon the expiration of trading limitation periods.
Such volume could create a circumstance commonly referred to as a
market “overhang” and in anticipation of which the
market price of our common stock could fall. Additionally, we have
a large number of warrants that are presently exercisable, and in
September of 2016 a large number of shares of preferred stock will
mandatorily convert into shares of common stock. The conversion or
exercise of a large amount of these securities followed by the
subsequent sale of the underlying stock in the market would likely
have a negative effect on our common stock’s market price.
The existence of an overhang, whether or not sales have occurred or
are occurring, also could make it more difficult for us to secure
additional financing through the sale of equity or equity-related
securities in the future at a time and price that we deem
reasonable or appropriate.
Our directors and officers have rights to
indemnification.
Our
Bylaws provide, as permitted by governing Nevada law, that we will
indemnify our directors, officers and employees whether or not then
in service as such, against all reasonable expenses actually and
necessarily incurred by him or her in connection with the defense
of any litigation to which the individual may have been made a
party because he or she is or was a director, officer or employee
of the company. The inclusion of these provisions in the
Bylaws may have the effect of reducing the likelihood of derivative
litigation against directors and officers, and may discourage or
deter stockholders or management from bringing a lawsuit against
directors and officers for breach of their duty of care, even
though such an action, if successful, might otherwise have
benefited us and our stockholders.
We do not anticipate paying any cash dividends on our common
stock.
We do
not anticipate paying cash dividends on our common stock for the
foreseeable future. The payment of dividends, if any, would
be contingent upon our revenues and earnings, if any, capital
requirements, and general financial condition. The payment of
any dividends will be within the discretion of our Board of
Directors. We presently intend to retain all earnings, if
any, to implement our business strategy; accordingly, we do not
anticipate the declaration of any dividends in the foreseeable
future.
USE OF PROCEEDS
We are not selling
any shares of our common stock in this offering and therefore will
not receive any proceeds from the sale thereof. We did,
however, receive proceeds from the warrants exercised in the $0.50
Exercise Offering, which were exercisable for cash. All proceeds
received from warrants exercised in that offering are being used
for working capital and general corporate purposes. The selling
stockholders will pay any underwriting discounts and commissions
and expenses incurred by the selling stockholders for brokerage,
accounting, tax or legal services or any other expenses incurred by
the selling stockholders in disposing of the shares. We will
bear all other costs, fees and expenses incurred in effecting the
registration of the shares covered by this prospectus, including,
without limitation, all registration and filing fees, NASDAQ
listing fees, and fees and expenses of our counsel and our
accountants.
DETERMINATION OF OFFERING PRICE
This
offering is being made solely to allow the selling stockholders to
offer and sell shares of common stock to the public. The selling
stockholders may offer for resale some or all of their shares at
the time and price that they choose. On any given day, the price
per share is likely to be based on the market price for the common
stock on NASDAQ on the date of sale, unless shares are sold in
private transactions. Consequently, we cannot currently make a
determination of the price at which shares offered for resale
pursuant to this prospectus may be sold.
SELLING STOCKHOLDERS
The
following is a table of the selling stockholders. The
shares of common stock being offered by the selling stockholders
include shares of common stock issuable upon the conversion of
shares of Series B Convertible Preferred Stock and shares of common
stock issuable to the selling stockholders upon exercise of
warrants held by the selling stockholders. Beneficial
ownership in the table below is determined in accordance with Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) promulgated by the SEC, and generally
includes voting or investment power with respect to
securities. The inclusion of any shares in this table
does not constitute an admission of beneficial
ownership.
The
shares of common stock being offered under this prospectus may be
offered for sale from time to time during the period the
registration statement of which this prospectus is a part remains
effective, by or for the account of the selling stockholders.
After the date of effectiveness of the registration statement of
which this prospectus is a part, a selling stockholder may sell or
transfer, in transactions covered by this prospectus or in
transactions exempt from the registration requirements of the
Securities Act, some or all of its common stock. At the
time of the acquisition of the shares of Series B Convertible
Preferred Stock and the warrants, the selling stockholders had no
agreements, understandings or arrangements with any other persons,
either directly or indirectly, to distribute any
securities.
The
information in the table below is based on the information provided
to us by the selling stockholders and as of the date the same was
provided to us. The information set forth concerning the
selling stockholders includes the number of shares currently held
and the number of shares offered by each selling stockholder.
The ownership percentages in the table are based on
the47,519,173shares of common stock we had outstanding as of August
10, 2016. Shares of common stock subject to warrants,
options and other convertible securities that are currently
exercisable or exercisable within 60 days are considered
outstanding and beneficially owned by a selling stockholder who
holds those warrants, options or other convertible securities for
the purpose of computing the percentage ownership of that selling
stockholder, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other selling
stockholder. Unless otherwise footnoted, share amounts
represent shares of common stock. None of the selling
security holders below is a registered broker-dealer.
|
|
|
|
|
Shares Beneficially Owned After the
Offering
|
|
Selling Stockholders
|
Shares of Common Stock Beneficially Owned Prior to the
Offering
|
|
Number of Shares Being
Offered
|
Number (1)
|
|
Percentage (%)*
|
|
Andy
Cardwell
|
4,875
|
|
|
4,875
|
0
|
|
*
|
|
Powell Investments
LLC
|
14,625
|
(2)
|
|
14,625
|
0
|
|
*
|
|
Black Hills
Properties LLP (3)
|
706,738
|
(4)
|
|
60,000
|
646,738
|
(5)
|
1.36
|
|
Brenden
Morrow
|
19,500
|
(5)
|
|
19,500
|
0
|
|
*
|
|
Bret
Griffin
|
3,125
|
|
|
3,125
|
0
|
|
*
|
|
Brian
Skillern
|
7,813
|
|
|
1,563
|
6,250
|
|
*
|
|
Bruce
Keaster
|
2,438
|
|
|
2,438
|
0
|
|
*
|
|
Carl V.
Karnes
|
55,119
|
|
|
8,696
|
46,423
|
|
*
|
|
C. Barney
Investments (6)
|
103,255
|
|
|
20,000
|
123,255
|
|
*
|
|
Daniel
Tulbovich
|
20,114
|
(7)
|
|
5,714
|
14,440
|
(8)
|
*
|
|
Edward
Ajootian
|
16,000
|
|
|
16,000
|
0
|
|
*
|
|
Gene
Eckel
|
4,875
|
|
|
4,875
|
0
|
|
*
|
|
Gordon
Holmes
|
8,750
|
|
|
8,750
|
0
|
|
*
|
|
Grace Rose
Advisors
|
131,117
|
|
|
131,117
|
0
|
|
*
|
|
Gregory
Hurley
|
5,000
|
|
|
5,000
|
0
|
|
*
|
|
Heartland Bank
(9)
|
45,568
|
|
|
45,568
|
0
|
|
*
|
|
Petrobridge Johnson
4H Investments, LLC (10)
|
39,000
|
|
|
39,000
|
0
|
|
*
|
|
Jason
Jacobs
|
15,625
|
|
|
3,125
|
12,500
|
|
*
|
|
Joseph G.
Roth
|
1,563
|
|
|
1,563
|
0
|
|
*
|
|
KBK Ventures Inc.
(11)
|
2,069,636
|
(12)
|
|
750,000
|
1,319,636
|
(13)
|
2.75
|
|
Korbel Trust
(14)
|
37,500
|
|
|
18,750
|
18,750
|
|
*
|
|
Lewis M. Edelstein
Trust (15)
|
7,813
|
|
|
1,563
|
6,250
|
|
*
|
|
Mark
Abrams
|
7,813
|
|
|
1,563
|
6,250
|
|
*
|
|
Mark
Visosky
|
31,907
|
|
|
4,348
|
27,559
|
|
*
|
|
Matthew
Hayden
|
28,571
|
|
|
28,571
|
0
|
|
*
|
|
Maxwell M. E.
Diffey
|
4,571
|
|
|
4,571
|
0
|
|
*
|
|
Michael
Schwartz
|
9,750
|
|
|
9,750
|
0
|
|
*
|
|
Kingsley Family
Trust
|
8,696
|
|
|
8,696
|
0
|
|
*
|
|
Neville
Govender
|
9,750
|
|
|
9,750
|
0
|
|
*
|
|
Pandora Energy LP
(16)
|
750,000
|
(17)
|
|
500,000
|
250,000
|
(18)
|
*
|
|
Patrick
Lucas
|
4,875
|
|
|
4,875
|
0
|
|
*
|
|
Pescadero Energy
LLLP (19)
|
773,189
|
|
|
205,714
|
567,475
|
|
*
|
|
Peter
Beale
|
1,563
|
|
|
1,563
|
0
|
|
*
|
|
Tim
Burroughs
|
8,392
|
|
|
8,392
|
0
|
|
*
|
|
Jay
Holstine
|
8,391
|
|
|
8,391
|
0
|
|
|
|
Pine River Ranch
LLC (21)
|
1,056,148
|
(22)
|
|
205,714
|
850,434
|
(23)
|
1.74
|
|
Randy
Perillo
|
6,250
|
|
|
6,250
|
0
|
|
*
|
|
Reggie
Headrick
|
2,438
|
|
|
2,438
|
0
|
|
*
|
|
Richard
Frish
|
52,602
|
(24)
|
|
4,348
|
48,254
|
(25)
|
*
|
|
John Rick
Shand
|
90,426
|
(26)
|
|
8,696
|
81,730
|
(27)
|
*
|
|
Robert W. Cheves,
Jr.
|
9,750
|
|
|
9,750
|
0
|
|
*
|
|
Roman
Shteynshlyuger
|
81,730
|
(28)
|
|
26,857
|
54,873
|
(29)
|
*
|
|
Rosemary
Atwood
|
97,815
|
(30)
|
|
8,696
|
89,119
|
(31)
|
*
|
|
Sergey
Gogin
|
14,133
|
|
|
14,133
|
0
|
|
*
|
|
Steve
Dunning
|
1,044,444
|
(32)
|
|
44,444
|
1,000,000
|
(33)
|
2.06
|
|
Three Rivers
Business Consulting (34)
|
100,000
|
|
|
100,000
|
0
|
|
*
|
|
Tom
Sudbeck
|
4,875
|
|
|
4,875
|
0
|
|
*
|
|
Umbrella Research
(35)
|
450,000
|
(36)
|
|
200,000
|
250,000
|
(37)
|
*
|
|
William
Huff
|
9,813
|
|
|
1,563
|
8,250
|
|
*
|
|
YENRAB Investing
Club (38)
|
135,814
|
(39)
|
|
10,000
|
125,814
|
(40)
|
*
|
|
Tom
Lapinski
|
3,095,000
|
(41)
|
|
200,000
|
2,895,000
|
(42)
|
6.09
|
|
Daniel
Root
|
235,288
|
|
|
8,696
|
226,592
|
|
*
|
_________________________
|
*
|
Less
than 1%
|
|
(1)
|
Assumes
all shares offered by the selling stockholders are
sold.
|
|
(2)
|
Phillip
Ray Powell, a member of this entity, has voting and investment
power.
|
|
(3)
|
Robert
Kenneth Dulin, the Managing Partner of this entity, has voting and
investment power.
|
|
(4)
|
Represents
619,782 shares of common stock and warrants that are exercisable
into 86,956 shares of common stock. The warrants are presently
exercisable.
|
|
(5)
|
Represents
559,782 shares of common stock and warrants that are exercisable
into 86,956 shares of common stock. The warrants are presently
exercisable.
|
|
(6)
|
Kevin
Kennedy, the Chairman of this entity, has voting and investment
power.
|
|
(7)
|
Represents
8,114 shares of common stock and 12,000 shares of common stock
issuable upon the conversion of a 12% Series B Unsecured
Convertible Promissory Note. The promissory note is presently
convertible.
|
|
(8)
|
Represents
2,400 shares of common stock and 12,000 shares of common stock
issuable upon the conversion of a 12% Series B Unsecured
Convertible Promissory Note. The promissory note is presently
convertible.
|
|
(9)
|
Judy
Lawton, the President and COO of this entity, has voting and
investment power.
|
|
(10)
|
Tess M.
Kinsler, the President of this entity, has voting and investment
power.
|
|
(11)
|
David
Bromberg, the President of this entity, has voting and investment
power.
|
|
(12)
|
Represents
1,526,158 shares of common stock and warrants that are exercisable
into 543,478 shares of common stock. The warrants are presently
exercisable.
|
|
(13)
|
Represents
776,158 shares of common stock and warrants that are exercisable
into 543,478 shares of common stock. The warrants are presently
exercisable.
|
|
14)
|
Frances
Sullivan, the Trustee of this entity, has voting and investment
power.
|
|
(15)
|
Lewis
M. Edelstein, the Trustee of this entity, has voting and investment
power.
|
|
(16)
|
Robert
Kenneth Dulin, the General Partner of this entity, has voting and
investment power.
|
|
(17)
|
Represents
500,000 shares of common stock and warrants that are exercisable
into 250,000 shares of common stock. The warrants are presently
exercisable.
|
|
(18)
|
Represents
warrants that are exercisable into 250,000 shares of common stock.
The warrants are presently exercisable.
|
|
(19)
|
John T.
Borst, the General Partner of this entity, has voting and
investment power.
|
|
(21)
|
Robert
Kenneth Dulin, the Managing Member of this entity, has voting and
investment power.
|
|
(22)
|
Represents
934,409 shares of common stock and warrants that are exercisable
into 121,739 shares of common stock. The warrants are presently
exercisable.
|
|
(23)
|
Represents
728,695 shares of common stock and warrants that are exercisable
into 121,739 shares of common stock. The warrants are presently
exercisable.
|
|
(24)
|
Represents
37,824 shares of common stock and 14,778 shares of common stock
issuable upon the conversion of shares of Series B Convertible
Preferred Stock. The preferred stock is presently
convertible.
|
|
(25)
|
Represents
33,476 shares of common stock and 14,778 shares of common stock
issuable upon the conversion of shares of Series B Convertible
Preferred Stock. The preferred stock is presently
convertible.
|
|
(26)
|
Represents
70,722 shares of common stock and 19,704 shares of common stock
issuable upon the conversion of shares of Series B Convertible
Preferred Stock. The preferred stock is presently
convertible.
|
|
(27)
|
Represents
62,026 shares of common stock and 19,704 shares of common stock
issuable upon the conversion of shares of Series B Convertible
Preferred Stock. The preferred stock is presently
convertible.
|
|
(28)
|
Represents
62,026 shares of common stock and 19,704 shares of common stock
issuable upon the conversion of shares of Series B Convertible
Preferred Stock. The preferred stock is presently convertible
..
|
|
(29)
|
Represents
35,169 shares of common stock and 19,704 shares of common stock
issuable upon the conversion of shares of Series B Convertible
Preferred Stock. The preferred stock is presently
convertible.
|
|
(30)
|
Represents
73,185 shares of common stock and 24,630 shares of common stock
issuable upon the conversion of shares of Series B Convertible
Preferred Stock. The preferred stock is presently
convertible.
|
|
(31)
|
Represents
64,489 shares of common stock and 24,630 shares of common stock
issuable upon the conversion of shares of Series B Convertible
Preferred Stock. The preferred stock is presently
convertible
|
|
(32)
|
Represents
44,444 shares of common stock and a convertible promissory note
that is convertible into 1,000,000 shares of common stock. The note
is presently convertible.
|
|
(33)
|
Represents
a convertible promissory note that is convertible into 1,000,000
shares of common stock. The note is presently
convertible.
|
|
(34)
|
Brian
Jacobelli, the sole member, has voting and investment
power.
|
|
(35)
|
Dmitriy
Shapiro and Joe Giamichael are the partners of this entity and
share voting and investment power.
|
|
(36)
|
Represents
250,000 shares of common stock underlying warrants to purchase
shares of common stock, and 200,000 shares of common
stock. The warrants are presently
exercisable
|
|
(37)
|
Represents
250,000 shares of common stock underlying warrants to purchase
shares of common stock. The warrants are presently
exercisable
|
|
(38)
|
There
are approximately 12 members of this club, all of whom share voting
and investment power.
|
|
(39)
|
Represents
131,528 shares of common stock and warrants that are exercisable
into 4,286 shares of common stock. The warrants are presently
exercisable.
|
|
(40)
|
Represents
121,528 shares of common stock and warrants that are exercisable
into 4,286 shares of common stock. The warrants are presently
exercisable.
|
|
(41)
|
Represents
3,050,000 shares of common stock and options that are exercisable
into 45,000 shares of common stock. The options are presently
exercisable.
|
|
(42)
|
Represents
2,850,000 shares of common stock and warrants that are exercisable
into 45,000 shares of common stock. The options are presently
exercisable.
|
PLAN OF DISTRIBUTION
We are
registering the shares of common stock issuable to the selling
stockholders to permit the resale of these shares of common stock
by the holders of the shares of common stock from time to time
after the date of this prospectus. We will not receive any of the
proceeds from the sale by the selling stockholders of the shares of
common stock. We will bear all fees and expenses incident to our
obligation to register the shares of common stock.
The
selling stockholders may sell all or a portion of the shares of
common stock beneficially owned by them and offered hereby from
time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of common stock are sold
through underwriters or broker-dealers, the selling stockholders
will be responsible for underwriting discounts or commissions or
agent’s commissions. The shares of common stock may be sold
on any national securities exchange or quotation service on which
the securities may be listed or quoted at the time of sale, in the
over-the-counter market or in transactions otherwise than on these
exchanges or systems or in the over-the-counter market and in one
or more transactions at fixed prices, at prevailing market prices
at the time of the sale, at varying prices determined at the time
of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions. The
selling stockholders may use any one or more of the following
methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its account;
|
|
·
|
an
exchange distribution in accordance with the rules of the
applicable exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the effective date of the
registration statement of which this prospectus is a
part;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such shares at a stipulated price per share;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether such options are listed on an options exchange or
otherwise;
|
|
·
|
a
combination of any such methods of sale; and
|
|
·
|
any
other method permitted pursuant to applicable law.
|
The
selling stockholders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the
Securities Act, as permitted by that rule, or Section 4(1) under
the Securities Act, if available, rather than under this
prospectus, provided that they meet the criteria and conform to the
requirements of those provisions.
Broker-dealers
engaged by the selling stockholders may arrange for other
broker-dealers to participate in sales. If the selling stockholders
effect such transactions by selling shares of common stock to or
through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders
or commissions from purchasers of the shares of common stock for
whom they may act as agent or to whom they may sell as principal.
Such commissions will be in amounts to be negotiated, but, except
as set forth in a supplement to this Prospectus, in the case of an
agency transaction will not be in excess of a customary brokerage
commission in compliance with FINRA Rule 5110.
In
connection with sales of the shares of common stock or otherwise,
the selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the shares of common stock in the
course of hedging in positions they assume. The selling
stockholders may also sell shares of common stock short and if such
short sale shall take place after the date that this Registration
Statement is declared effective by the SEC, the selling
stockholders may deliver shares of common stock covered by this
prospectus to close out short positions and to return borrowed
shares in connection with such short sales. The selling
stockholders may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares, to the extent
permitted by applicable law. The selling stockholders may also
enter into option or other transactions with broker-dealers or
other financial institutions or the creation of one or more
derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by
this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented
or amended to reflect such transaction). Notwithstanding the
foregoing, the selling stockholders have been advised that they may
not use shares registered on this registration statement to cover
short sales of our common stock made prior to the date the
registration statement, of which this prospectus forms a part, has
been declared effective by the SEC.
The
selling stockholders may, from time to time, pledge or grant a
security interest in some or all of the shares of common stock
owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and
sell the shares of common stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders
to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling
stockholders also may transfer and donate the shares of common
stock in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
The
selling stockholders and any broker-dealer or agents participating
in the distribution of the shares of common stock may be deemed to
be “underwriters” within the meaning of Section 2(11)
of the Securities Act in connection with such sales. In such event,
any commissions paid, or any discounts or concessions allowed to,
any such broker-dealer or agent and any profit on the resale of the
shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Selling
Stockholders who are “underwriters” within the meaning
of Section 2(11) of the Securities Act will be subject to the
prospectus delivery requirements of the Securities Act and may be
subject to certain statutory liabilities of, including but not
limited to, Sections 11, 12 and 17 of the Securities Act and Rule
10b-5 under the Securities Exchange Act of 1934, as amended, or the
Exchange Act.
Each
selling stockholder has informed us that it is not a registered
broker-dealer and does not have any written or oral agreement or
understanding, directly or indirectly, with any person to
distribute the common stock. Upon the company being notified in
writing by a selling stockholder that any material arrangement has
been entered into with a broker-dealer for the sale of common stock
through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a
supplement to this prospectus will be filed, if required, pursuant
to Rule 424(b) under the Securities Act, disclosing (i) the name of
each such selling stockholder and of the participating
broker-dealer(s), (ii) the number of shares involved, (iii) the
price at which such the shares of common stock were sold, (iv) the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s)
did not conduct any investigation to verify the information set out
or incorporated by reference in this prospectus, and (vi) other
facts material to the transaction. In no event shall any
broker-dealer receive fees, commissions and markups, which, in the
aggregate, would exceed eight percent (8%).
Under
the securities laws of some states, the shares of common stock may
be sold in such states only through registered or licensed brokers
or dealers. In addition, in some states the shares of common stock
may not be sold unless such shares have been registered or
qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.
There
can be no assurance that any selling stockholder will sell any or
all of the shares of common stock registered pursuant to the
registration statement, of which this prospectus forms a
part.
Each
selling stockholder and any other person participating in such
distribution will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, including, without limitation, Regulation M
of the Exchange Act, which may limit the timing of purchases and
sales of any of the shares of common stock by the selling
stockholder and any other participating person. Regulation M may
also restrict the ability of any person engaged in the distribution
of the shares of common stock to engage in market-making activities
with respect to the shares of common stock. All of the foregoing
may affect the marketability of the shares of common stock and the
ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.
We will
pay all expenses of the registration of the shares of common stock,
including, without limitation, Securities and Exchange Commission
filing fees and expenses of compliance with state securities or
“blue sky” laws; provided, however, that each selling
stockholder will pay all underwriting discounts and selling
commissions, if any, and any legal expenses incurred by it. We may
be indemnified by the selling stockholders against civil
liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the
selling stockholders specifically for use in this prospectus, in
accordance with documentation and agreements with the selling
stockholders, or we may be entitled to contribution.
DESCRIPTION OF SECURITIES TO BE REGISTERED
The
following is a description of certain provisions relating to our
capital stock. For additional information regarding our stock,
please refer to our Articles of Incorporation (as amended), our
Amended and Restated Bylaws, and the certificates of designation
for each of our two outstanding series of preferred stock, all of
which have previously been filed with the SEC.
General
Our
authorized capital stock consists of 100,000,000 shares of common
stock, par value $0.001 per share, and 10,000,000 shares of
preferred stock, par value $0.001 per share. The Board
of Directors has authorized three different series of preferred
stock, 120,000 shares of Series A Convertible Preferred Stock,
40,000 shares of Series B Convertible Preferred Stock and 10,000
shares of Series C Convertible Preferred Stock. Presently, the only
series of preferred stock that we have outstanding are the Series B
Convertible Preferred Stock and the Series C Convertible Preferred
Stock. All outstanding shares of Series A Convertible Preferred
Stock automatically converted into shares of common stock in June
of 2016.
Common Stock
As of August 10,
2016, there were approximately 47,519,173 shares of common stock
outstanding. We are registering 2,818,491 shares of our common
stock, in aggregate.
The
rights of all holders of the common stock are identical in all
respects. Each stockholder is entitled to one vote for
each share of common stock held on all matters submitted to a vote
of the stockholders. The holders of the common stock are
entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors out of legally available funds.
The current policy of the Board of Directors, however, is to retain
earnings, if any, for reinvestment.
Upon
liquidation, dissolution or winding up of the Company, the holders
of the common stock are entitled to share ratably in all aspects of
the Company that are legally available for distribution, after
payment of or provision for all debts and liabilities and after
payment to the holders of preferred stock, if any. The
holders of the common stock do not have preemptive subscription,
redemption or conversion rights under our Articles of
Incorporation. Cumulative voting in the election of Directors is
not permitted. There are no sinking fund provisions applicable to
the common stock. The outstanding shares of common stock are
validly issued, fully paid and nonassessable.
Our
common stock is listed on the NASDAQ Capital Market under the
symbol “TRCH.”
Series B Convertible Preferred Stock
As of September 9,
2016, there were 37,000 shares of Series B Convertible Preferred
Stock (the “Series B Preferred”)
outstanding. We sold these shares to investors on
September 28, 2015 at a purchase price of $100 per share for total
consideration of $3,700,000 (the designation for the Series B
Preferred is described below). Under the terms of the
sale, we provided each investor 50% warrant coverage (see
“Preferred Warrants” subsection
below). Additionally, under the terms of the
transaction, we provided the investors registration rights under
which a registration statement covering the shares of common stock
underlying the Series B Preferred and warrants is to be
filed.
We
filed the Certificate of Designation for the Series B Preferred
with the Secretary of State of Nevada on September 25,
2015. The designations, preferences, limitations,
restrictions and relative rights of the Series B Preferred are as
follows: (i) a stated value of $100 per share; (ii) mandatory
conversion one year after issuance, with each holder having the
right to convert at its election any time before that; (iii) a
conversion price of $2.03 per shares of common stock; (iv) a
dividend in an annual amount equal to 12% on the outstanding stated
value of each share payable in common stock or cash at the
holder’s election; (v) each holder shall be entitled to the
number of votes equal to the number of shares of common stock into
which such shares of Series B Preferred could be converted; and
(vi) in the event of any voluntary or involuntary liquidation,
dissolution or winding up, the holders will be entitled to be paid
out of the assets available for distribution to our stockholders,
before any payment is made to the holders of common stock
.
Series C Convertible Preferred Stock
As of
September 9, 2016, there were 10,000 shares of Series C Convertible
Preferred Stock (the “Series C Preferred”)
outstanding. On July 8, 2016, we sold a total of 10,000
shares of Series C Preferred to certain investors at a purchase
price of $100 per share for total consideration of $1,000,000. We
filed the Certificate of Designation for the Series C Preferred
with the Secretary of State of Nevada on July 8, 2016. The
designations, preferences, limitations, restrictions and relative
rights of the Series C Preferred are as follows: (i) a stated value
of $100 per share; (ii) mandatory conversion on the earlier of 92
days after the spud date of Hazel Prospect or October 13, 2016,
with each holder having the right to convert at its election any
time before that; (iii) a conversion price of $1.01 per share of
common stock; (iv) each holder has the right to convert its shares
into a proportionate heads up working interest in the Hazel
Prospect, provided such election is made prior to the mandatory
stock conversion date described in “(ii)” above, which
working interest will be determined by dividing the number of
shares the holder is converting by 10,000 and multiplying the
result by one-third; (v) no rights to dividends; (vi) no voting
rights; and (vii) in the event of any voluntary or involuntary
liquidation, dissolution or winding up, the holders will be
entitled to be paid out of the assets available for distribution to
our stockholders, before any payment is be made to the holders of
common stock, but after the payment to the holders of Series B
Preferred.
EXPERTS
The
consolidated financial statements incorporated in this prospectus
by reference from Torchlight Energy Resources, Inc.’s Annual
Report on Form l0-K for the year ended December 31, 2015 have been
audited by Calvetti Ferguson, independent registered public
accounting firm, as stated in their reports included in such
consolidated financial statements, and have been so incorporated in
reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
Certain
information contained in the documents we incorporate by reference
in this prospectus with respect to the oil and natural gas reserves
associated with our oil and natural gas prospects is derived from
the reports of CREST Engineering Services, Inc. and PeTech
Enterprises, Inc., each an independent petroleum and natural gas
consulting firm, and has been incorporated by reference in this
prospectus upon the authority of said firms as experts with respect
to the matters covered by such reports and in giving such
reports.
LEGAL MATTERS
The
validity of the issuance of the common stock offered under this
prospectus has been passed upon for us by Axelrod, Smith &
Kirshbaum, Houston, Texas.
MATERIAL CHANGES
There
have been no material changes in the registrant’s affairs
that have occurred since the end of the last fiscal year and that
have not been described in a Form 10-Q or Form 8-K filed under the
Exchange Act.
COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
As
permitted by Nevada law, our Bylaws provide that we shall indemnify
a person in connection with an action, suit or proceeding, whether
civil, criminal, administrative or investigative, including without
limitation an action in our right to procure a judgment in our
favor, by reason of the fact that the person is or was our
director, officer, employee or agent, including attorneys’
fees, judgments, fines and amounts paid in settlement, if the
person acted in good faith and did not breach his or her fiduciary
duties to the company through intentional misconduct, fraud or a
knowing violation of law.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, we have been advised that in
the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.