Meta Materials (MMATQ) 10-K 15 Apr 15 2014 FY Annual report Financial data

Document_and_Entity_Informatio

Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2014	Apr. 07, 2015	Jun. 30, 2014
Document and Entity Information
Entity Registrant Name	TORCHLIGHT ENERGY RESOURCES INC
Document Type	10-K
Document Period End Date	31-Dec-14
Amendment Flag	FALSE
Entity Central Index Key	1431959
Current Fiscal Year End Date	-19
Entity Common Stock, Shares Outstanding		23,478,441
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
Entity Public Float			$59,737,837

CONSOLIDATED_BALANCE_SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2014	Dec. 31, 2013
Current assets:
Cash	$179,787	$1,811,713
Accounts receivable	223,371	429,699
Production revenue receivable	210,435	0
Note receivable	515,748	0
Prepayments - development costs	20,602	0
Prepaid expenses	29,634	9,144
Total current assets	1,179,577	2,250,556
Investment in oil and gas properties, net	34,498,681	13,038,751
Office equipment	55,150	11,604
Debt issuance costs, net	353,733	920,947
Goodwill,	0	447,084
Other Assets	63,223	74,379
TOTAL ASSETS	36,150,364	16,743,321
Current liabilities:
Accounts payable	4,018,306	985,123
Accrued liabilities	240,000	0
Related party payables	90,000	90,000
Convertible promissory notes, net of discount of $700,178	7,417,420	0
Notes payable within one year	829,719	753,904
Due to working interest owners	73,439	580,484
Interest payable	383,741	309,498
Total current liabilities	13,052,625	2,719,009
Convertible promissory notes, net of discount of $625,457 and $5,500,462 at December 31, 2013 and December 31, 2012, respectively	3,944,043	4,802,711
Asset retirement obligation	35,951	24,382
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.001, 10,000,000 shares authorized, no shares issued or outstanding	0	0
Common stock, par value $0.001 per share; 75,000,000 shares authorized; 23,235,441 issued and outstanding at December 31, 2014 16,141,765 issued and outstanding at December 31, 2013	23,235	16,142
Additional paid-in capital	43,108,752	21,978,616
Warrants outstanding	7,636,320	3,043,420
Accumulated deficit	-31,650,561	-15,840,959
Total stockholders' equity	19,117,745	9,197,210
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$36,150,364	$16,743,321

CONSOLIDATED_BALANCE_SHEETS_Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Assets [Abstract]
Discount of Promissory notes	$625,457	$5,500,462
Preferred Stock, no par value	$0.00	$0.00
Preferred Stock, shares authorized	10,000,000	10,000,000
Preferred Stock, shares issued	0	0
Preferred Stock, shares outstanding	0	0
Common Stock, par or stated value	$0.00	$0.00
Common Stock, shares authorized	75,000,000	75,000,000
Common Stock, shares issued	23,235,441	16,141,765
Common Stock, shares outstanding	23,235,441	16,141,765

CONSOLIDATED_STATEMENTS_OF_OPE

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Revenues [Abstract]
Oil and gas sales	$5,455,555	$1,243,998
SWD and Royalties	85,529	51,501
Cost of revenue	-1,253,090	-434,119
Gross income	4,287,994	861,380
Operating expenses:
General and administrative expense	10,156,307	6,682,377
Depreciation, depletion and amortization	2,736,562	652,179
Total operating expenses	12,892,869	7,334,556
Other income (expense)
Income - Cancellation of Debt	22,748	660,000
Impairment expense	-447,084	0
Interest income	69	59
Interest and accretion expense	-6,780,461	-4,605,545
Total other income (expense)	-7,204,728	-3,945,486
Net loss before taxes	-15,809,603	-10,418,662
Provision for income taxes	0	0
Net (loss)	($15,809,603)	($10,418,662)
Loss per share:
Basic and Diluted	($1.01)	($0.74)
Weighted average shares outstanding:
Basic and Diluted	15,728,621	14,016,240

CONSOLIDATED_STATEMENT_OF_STOC

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (USD $)	Common Stock Shares	Common Stock Amount	Additional Paid In Capital	Accumulated Deficit	Warrants Outstanding	Total
Amount, ending at Dec. 31, 2012		$13,565	$8,380,992	($5,422,296)	$0	$2,972,260
Shares, beginning at Dec. 31, 2012	13,564,815
Issuance of common stock for services	735,752	735	1,438,245			1,438,980
Shares issued in conversion with promissory notes	968,628	969	1,694,123			1,695,092
Warrants issued in connection with CV promissory notes			3,332,649			3,332,649
Beneficial conversion feature on convertible notes			4,969,326			4,969,326
Issuance of common stock in warrant exercise	101,714	102	203,326			203,428
Warrants issued for services					2,920,170	2,920,170
Issuance of Common Stock for cash	212,500	213	849,787			850,000
Common stock issued for mineral leases	558,356	558	1,233,409			1,233,967
Warrants issued in private placement			-123,250		123,250
Net loss				-10,418,662		-10,418,662
Amount, ending at Dec. 31, 2013		16,142	21,978,607	-15,840,959	3,043,420	9,197,210
Shares, ending at Dec. 31, 2013	16,141,765
Issuance of common stock for cash, shares	2,989,655	2,989	10,629,802			10,632,791
Warrants issued in connection with promissory notes			562,354		72,000	634,354
Warrants issued for services					4,637,600	4,637,600
Issuance of common stock for services	450,180	451	933,977			934,428
Beneficial conversion feature on convertible notes			195,466			195,466
Issuance of common stock in warrant exercise	617,500	618	1,276,882			1,277,500
Warrants issued for services			78,765			78,765
Common stock issued for mineral leases	1,781,595	1,782	5,135,097			5,136,879
Issuance of common stock for note interest	5,869	5	10,265			10,270
Warrants issued in private placement			123,250		-116,700	6,550
Common stock issued in conversion of notes	1,248,877	1,248	2,184,287			2,185,535
Net loss				-15,809,603		-15,809,603
Amount, ending at Dec. 31, 2014		$23,235	$43,108,752	($31,650,561)	$7,636,320	$19,117,745
Shares, ending at Dec. 31, 2014	23,235,441

CONSOLIDATED_STATEMENTS_OF_CAS

CONSOLIDATED STATEMENTS OF CASH FLOW (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Cash Flows From Operating Activities
Net (loss),	($15,809,603)	($10,418,662)
Adjustments to reconcile net loss to net cash from operating activities:
Stock based compensation	5,644,028	4,331,143
Accretion of convertible note discounts	5,771,050	3,894,389
Income - Cancellation of Debt	-22,748	-660,000
Impairment expense	447,084	0
Depreciation, depletion and amortization,	2,736,562	652,179
Change in:
Accounts receivable,	133,851	-336,803
Note receivable	-515,748	0
Production revenue receivable	-210,435	0
Prepayment of development costs	-20,602	0
Prepaid expenses,	-20,490	-798
Debt issuance costs,	-185,875	-967,020
Other assets,	-3,506	-74,379
Accounts payable and accrued liabilities,	3,180,467	833,820
Related party payable,	0	-18,648
Due to working interest owners,	-507,045	255,484
Asset retirement obligation	11,170	1,360
Interest payable,	84,513	245,299
Capitalized interest	-371,116	0
Net cash used in operating activities	341,557	-2,262,636
Cash Flows From Investing Activities
Investment in oil and gas properties,	-18,591,329	-9,663,504
Acquisition of office equipment	-53,960	0
Proceeds from sale of leases	0	1,076,400
Net cash used in investing activities	-18,645,289	-8,587,104
Cash Flows From Financing Activities
Proceeds from sale of common stock	10,632,791	850,000
Proceeds from issuance of convertible notes	4,569,500	10,855,773
Proceeds from warrant exercise	744,282	203,428
Proceeds from promissory notes	815,491	750,000
Repayment of promissory notes	-90,258	-61,000
Net cash provided by financing activities	16,671,806	12,598,201
Net increase (decrease) in cash	-1,631,926	1,748,461
Cash - beginning of period	1,811,713	63,252
Cash - end of period	179,787	1,811,713
Non cash transactions:
Warrants issued in connection with promissory notes	634,354	2,531,321
Warrants issued for services	4,716,365	0
Beneficial conversion feature on promissory notes	195,466	5,770,654
Liabilities assumed in purchase of oil and gas properties	0	1,809,572
Promissory note issued for debt issuance	0	40,000
Sale of properties for note receivable	0	990,000
Common stock issued for mineral interests	5,136,879	1,233,967
Capitalized interest cost	371,116	56,347
Common stock issued in connection with promissory notes	2,185,535	1,695,100
Common stock issued in warrant exercises	1,277,500	0
Asset retirement obligation	11,170	10,407
Cash paid for interest	$1,243,816	$468,841

1_NATURE_OF_BUSINESS

1. NATURE OF BUSINESS	12 Months Ended
	Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]
NATURE OF BUSINESS	Torchlight Energy Resources, Inc. was incorporated in October 2007 under the laws of the State of Nevada as Pole Perfect Studios, Inc. (“PPS”).  From its incorporation to November 2010, the company was primarily engaged in business start-up activities.
	On November 23, 2010, we entered into and closed a Share Exchange Agreement (the “Exchange Agreement”) between the major shareholders of PPS and the shareholders of Torchlight Energy, Inc. (“TEI”).  As a result of the transactions effected by the Exchange Agreement, at closing TEI became our wholly-owned subsidiary, and the business of TEI became our sole business.  TEI was incorporated under the laws of the State of Nevada in June 2010.  We are engaged in the acquisition, exploitation and/or development of oil and natural gas properties in the United States.  In addition to TEI, we also operate our business through Torchlight Energy Operating, LLC, a Texas limited liability company and wholly-owned subsidiary.
	On December 10, 2010, we effected a 4-for-1 forward split of our shares of common stock outstanding.  All owners of record at the close of business on December 10, 2010 (record date) received three additional shares for every one share they owned.  All share amounts reflected throughout this report take into account the 4-for-1 forward split.
	Effective February 8, 2011, we changed our name to “Torchlight Energy Resources, Inc.”  In connection with the name change, our ticker symbol changed from “PPFT” to “TRCH.”
	The Company is engaged in the acquisition, exploration, development and production of oil and gas properties within the United States. The Company’s success will depend in large part on its ability to obtain and develop profitable oil and gas interests.

2_GOING_CONCERN

2. GOING CONCERN	12 Months Ended
	Dec. 31, 2014
GOING CONCERN
GOING CONCERN	These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year.
	At December 31, 2014, the Company had not yet achieved profitable operations,. We had a net loss of approximately $15.8 million for the year ended December 31, 2014 and had accumulated losses of $31,650,561 since its inception and expects to incur further losses in the development of its business. Working Capital as of December 31, 2014 was negative $11,873,048 including the March 31, 2015 maturity of our Series A Secured Convertible Notes. The Company’s ability to continue as a going concern is dependent on its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management’s plan to address the Company’s ability to continue as a going concern includes: (1) obtaining debt or equity funding from private placement or institutional sources; (2) obtain 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 the Company to remain a going concern through the methods discussed above, there can be no assurances that such methods will prove successful. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
	On March 31, 2015, the maturity date for our issued and outstanding 12% Series A Secured Convertible Promissory Notes (“Series A Notes”) occurred, and we did not make any payment to these note holders of the principal and interest due thereunder. This is an event of default under the terms and conditions of the Series A Notes, and the Agent for the Series A Note holders may exercise on behalf of such holders all rights and remedies available under the terms and conditions of the Series A Notes or applicable laws.
	Additionally, our default in payment of the Series A Notes triggered a cross-default provision in our 12% Series B Convertible Unsecured Promissory Notes (“Series B Notes”), and any holder of a Series B Note may declare any an all of the obligations under such note due and payable and/or exercise any other rights and remedies available to such holder under the terms and conditions of the Series B Notes. Planned Divestiture of Hunton Project On April 8, 2015, management announced that they are seeking to divest certain of our Hunton assets located in Logan and Kingfisher Counties, Oklahoma. The Company is actively marketing these assets to potential buyers. These assets include lease rights and current production, which are being marketed separately. There has been discussions with interested parties and management expects to have a buyer identified shortly. The proceeds from a sale of all or a portion of the assets will be used to satisfy obligations to our Series A Note holders.
	Planned Divestiture of Hunton Project
	On April 8, 2015, management announced that they are seeking to divest certain of our Hunton assets located in Logan and Kingfisher Counties, Oklahoma.  The Company is actively marketing these assets to potential buyers. These assets include lease rights and current production, which are being marketed separately. There has been discussions with interested parties and management expects to have a buyer identified shortly. The proceeds from a sale of all or a portion of the assets will be used to satisfy obligations to our Series A Note holders.

3_SIGNIFICANT_ACCOUNTING_POLIC

3. SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
	Dec. 31, 2014
Accounting Policies [Abstract]
Significant Accounting Policies	The Company maintains its accounts on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America. Accounting principles followed and the methods of applying those principles, which materially affect the determination of financial position, results of operations and cash flows are summarized below:
	Use of estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and certain assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from these estimates.
	Basis of presentation—The financial statements are presented on a consolidated basis and include all of the accounts of Torchlight Energy Resources Inc. and its wholly owned subsidiary, Torchlight Energy, Inc. All significant intercompany balances and transactions have been eliminated.
	Risks and uncertainties – The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating an emerging business, including the potential risk of business failure.
	Concentration of risks – The Company’s cash is placed with a highly rated financial institution, and the Company periodically reviews the credit worthiness of the financial institutions with which it does business. At times the Company’s cash balances are in excess of amounts guaranteed by the Federal Deposit Insurance Corporation.
	Fair value of financial instruments – Financial instruments consist of cash, accounts receivable, accounts payable, notes payable to related party, and convertible promissory notes. The estimated fair values of cash, accounts receivable, accounts payable, and related party payables approximate the carrying amount due to the relatively short maturity of these instruments. The carrying amounts of the convertible promissory notes approximate their fair value giving affect for the term of the note and the effective interest rates.
	For assets and liabilities that require re-measurement to fair value the Company categorizes them in a three-level fair value hierarchy as follows:
		·	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
		·	Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration.
		·	Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value.
	A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
	Accounts receivable – Accounts receivable consist of uncollateralized oil and natural gas revenues due under normal trade terms, as well as amounts due from working interest owners of oil and gas properties for their share of expenses paid on their behalf by the Company. Management reviews receivables periodically and reduces the carrying amount by a valuation allowance that reflects management’s best estimate of the amount that may not be collectible. As of December 31, 2014 and December 31, 2013 no valuation allowance was considered necessary.
	Investment in oil and gas properties – The Company uses the full cost method of accounting for exploration and development activities as defined by the Securities and Exchange Commission (“SEC”). Under this method of accounting, the costs of unsuccessful, as well as successful, exploration and development activities are capitalized as properties and equipment. This includes any internal costs that are directly related to property acquisition, exploration and development activities but does not include any costs related to production, general corporate overhead or similar activities. Gain or loss on the sale or other disposition of oil and gas properties is not recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves.
	Oil and gas properties include costs that are excluded from costs being depleted or amortized. Oil and natural gas property costs excluded represent investments in unevaluated properties and include non-producing leasehold, geological, and geophysical costs associated with leasehold or drilling interests and exploration drilling costs. The Company allocates a portion of its acquisition costs to unevaluated properties based on relative value. Costs are transferred to the full cost pool as the properties are evaluated over the life of the reservoir.
	Capitalized interest – The Company capitalizes interest on unevaluated properties during the periods in which they are excluded from costs being depleted or amortized.  During years ended December 31, 2014 and 2013, the Company capitalized $371,116 and $104,821, respectively, of interest on unevaluated properties.
	Depreciation, depletion, and amortization – The depreciable base for oil and natural gas properties includes the sum of all capitalized costs net of accumulated depreciation, depletion, and amortization (“DD&A”), estimated future development costs and asset retirement costs not included in oil and natural gas properties, less costs excluded from amortization. The depreciable base of oil and natural gas properties is amortized on a unit-of-production method.
	Ceiling test – Future production volumes from oil and gas properties are a significant factor in determining the full cost ceiling limitation of capitalized costs. Under the full cost method of accounting, the Company is required to periodically perform a “ceiling test” that determines a limit on the book value of oil and gas properties. If the net capitalized cost of proved oil and gas properties, net of related deferred income taxes, plus the cost of unproved oil and gas properties, exceeds the present value of estimated future net cash flows discounted at 10 percent, net of related tax affects, plus the cost of unproved oil and gas properties, the excess is charged to expense and reflected as additional accumulated DD&A. The ceiling test calculation uses a commodity price assumption which is based on the un weighted arithmetic average of the price on the first day of each month for each month within the prior 12 month period and excludes future cash outflows related to estimated abandonment costs. The Company did not recognize impairment on its oil and gas properties during the years ended December 31, 2014 and 2013. Due to the volatility of commodity prices, should oil and natural gas prices decline in the future, it is possible that a write-down could occur. Proved reserves are estimated quantities of crude oil, natural gas, and natural gas liquids, which geological and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs under existing economic and operating conditions. The independent engineering estimates include only those amounts considered to be proved reserves and do not include additional amounts which may result from new discoveries in the future, or from application of secondary and tertiary recovery processes where facilities are not in place or for which transportation and/or marketing contracts are not in place. Estimated reserves to be developed through secondary or tertiary recovery processes are classified as unevaluated properties.
	The determination of oil and gas reserves is a subjective process, and the accuracy of any reserve estimate depends on the quality of available data and the application of engineering and geological interpretation and judgment. Estimates of economically recoverable reserves and future net cash flows depend on a number of variable factors and assumptions that are difficult to predict and may vary considerably from actual results. In particular, reserve estimates for wells with limited or no production history are less reliable than those based on actual production. Subsequent re-evaluation of reserves and cost estimates related to future development of proved oil and gas reserves could result in significant revisions to proved reserves.  Other issues, such as changes in regulatory requirements, technological advances, and other factors which are difficult to predict could also affect estimates of proved reserves in the future.
	Gains and losses on the sale of oil and gas properties are not generally reflected in income. Sales of less than 100% of the Company’s interest in the oil and gas property are treated as a reduction of the capital cost of the field, with no gain or loss recognized, as long as doing so does not significantly affect the unit-of-production depletion rate. Costs of retired equipment, net of salvage value, are usually charged to accumulated depreciation.
	Goodwill – Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets of acquired companies. Goodwill is not amortized; instead, it is tested for impairment annually or more frequently if indicators of impairment exist.
	Goodwill was $447,084 as of December 31, 2013 and was acquired on November 23, 2010 in connection with the Company’s reverse acquisition (Note 1). The Goodwill was tested for impairment at December 31, 2014 by comparison of the fair value of the Company measured by its market cap versus its book value and as a result was written off to Impairment expense.
	Asset retirement obligations – Accounting principles require that the fair value of a liability for an asset’s retirement obligation (“ARO”) be recorded in the period in which it is incurred if a reasonable estimate of fair value can be made, and that the corresponding cost be capitalized as part of the carrying amount of the related long-lived asset. The liability is accreted to its then-present value each subsequent period, and the capitalized cost is depleted over the useful life of the related asset. Abandonment cost incurred is recorded as a reduction to the ARO liability.
	Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.
	Asset retirement obligation activity is disclosed in Note 10.
	Share-based compensation – Compensation cost for equity awards is based on the fair value of the equity instrument on the date of grant and is recognized over the period during which an employee is required to provide service in exchange for the award. Compensation cost for liability awards is based on the fair value of the vested award at the end of each period.
	Revenue recognition – The Company recognizes oil and gas revenues when production is sold at a fixed or determinable price, persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, and collectability is reasonably assured.
	Basic and diluted earnings (loss) per share – Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed in the same way as basic earnings (loss) per common share except that the denominator is increased to include the number of additional common shares that would be outstanding if all potential common shares had been issued and if the additional common shares were dilutive.  The Company has not included potentially dilutive securities in the calculation of loss per share for any periods presented as the effects would be anti-dilutive.
	Environmental laws and regulations – The Company is subject to extensive federal, state, and local environmental laws and regulations. Environmental expenditures are expensed or capitalized depending on their future economic benefit. The Company believes that it is in compliance with existing laws and regulations.
	Recent accounting pronouncements –
	On August 27, 2014, the FASB issued ASU 2014-15, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of the Company’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted.
	In May 2014, the FASB issued ASU 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.
	In April 2014, the FASB issued ASU 2014-08, which includes amendments that change the requirements for reporting discontinued operations and require additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations - that is, a major effect on the organization’s operations and financial results should be presented as discontinued operations. Additionally, the ASU requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new standard is effective in the first quarter of 2015 for public organizations with calendar year ends. Early adoption would be permitted for any annual or interim period for which an entity’s financial statements have not yet been made available for issuance. The adoption of this guidance is not expected to have an impact on the Company’s consolidated financial statements.
	Other recently issued or adopted accounting pronouncements are not expected to have, or did not have, a material impact on the Company’s financial position or results from operations.
	Subsequent events – The Company evaluated subsequent events through April 15, 2015, the date of issuance of the financial statements. Subsequent events are disclosed in Note 11.

4_RELATED_PARTY_PAYABLES

4. RELATED PARTY PAYABLES.	12 Months Ended
	Dec. 31, 2014
RELATED PARTY PAYABLES.
RELATED PARTY PAYABLES.	As of December 31, 2014, related party payables consisted of accrued and unpaid compensation to two of our executive officers totaling $90,000. The related party payables at December 31, 2012 included $660,000 of accrued compensation due to our executive officers and directors. The officers forgave the $660,000 of related party debt during third quarter, 2013.
	A Director and a principal shareholder have advanced funds to the Company as short term loans totaling $607,808 as of December 31, 2014.

5_COMMITMENTS_AND_CONTINGENCIE

5. COMMITMENTS AND CONTINGENCIES	12 Months Ended
	Dec. 31, 2014
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES	The Company is subject to contingencies as a result of environmental laws and regulations.  Present and future environmental laws and regulations applicable to the Company’s operations could require substantial capital expenditures or could adversely affect its operations in other ways that cannot be predicted at this time.  As of December 31, 2014 and 2013, no amounts had been recorded because no specific liability has been identified that is reasonably probable of requiring the Company to fund any future material amounts.

6_STOCKHOLDERS_EQUITY

6. STOCKHOLDERS' EQUITY	12 Months Ended
	Dec. 31, 2014
Stockholders' equity:
STOCKHOLDERS' EQUITY	During the years ended December 31, 2014 and 2013, the Company issued 450,180 and 735,752 shares of common stock, respectively, as compensation for services, with total values of $934,428 and $1,438,977.
	During the years ended December 31, 2014 and 2013, the Company issued 1,847,500 and 2,403,174 warrants, respectively, as compensation for services, with a total values of $4,637,600 and $2,920,170.
	During the year ended December 31, 2014 and 2013, the Company issued -0- and 1,308,124 warrants, respectively, in connection with financing transactions discussed in Note 9, including -0- and 552,057 warrants issued to the placement agent.
	During the year ended December 31, 2014 and 2013, the Company issued 1,781,595 and 558,356 shares of Common Stock, respectively, as acquisition of lease interests valued at $5,136,879 and $1,233,967.
	During the year ended December 31, 2014 and 2013 the Company issued 1,248,877 and 968,628 shares of Common Stock, respectively, in conversions of 12% Convertible Notes Payable valued at $2,185,535 and $1,695,100.
	During the year ended December 31, 2014 and 2013 the Company issued 623,369 and 101,714 shares of Common Stock, respectively, resulting from Warrant exercises for  consideration totaling $1,287,770 and $203,428.
	During December 2013 and early January 2014, we sold to investors in a private offering an aggregate of 350,000 shares of restricted common stock and 87,500 warrants to purchase shares of restricted common stock.  Each warrant has an exercise price of $6.00 per share and expires on December 31, 2018.  We received aggregate consideration of $1,400,000 for the securities, $850,000 in December and $550,000 in January, 2014.
	A summary of stock options and warrants outstanding as of December 31, 2014 by exercise price and year of expiration is presented below:
	Exercise		Expiration Date In
	Price			2,015	2,016	2,017	2,018	2,019	Total
	$	1		0	0	150,000	0	0		150,000
	$	1.75		855,000	1,135,714	0	0			1,990,714
	$	2		0	1,035,271	126,000	1,696,380			2,857,651
	$	2.09					2,800,000			2,800,000
	$	2.5		15,000	100,000	0	0			115,000
	$	2.75			0					0
	$	2.82					38,174			38,174
	$	3			100,000					100,000
	$	4.5						700,000		700,000
	$	5		0	8,391	95,000				103,391
	$	6					577,501	330,341		907,842
	$	7						700,000		700,000
				870,000	2,379,376	371,000	5,112,055	1,730,341		10,462,772
	As of the date of this filing, 165,000 of the warrants exercisable in 2015 have expired.
	At December 31, 2014 the Company had reserved 10,462,772 shares for future exercise of warrants.
	Warrants issued in relation to the promissory notes issued (see note 9) were valued using the Black Scholes Option Pricing Model. The assumptions used in calculating the fair value of the warrants issued are as follows:
	Risk-free interest rate	0.78%
	Expected volatility of common stock	191% - 253%
	Dividend yield	0.00%
	Discount due to lack of marketability	20-30%
	Expected life of warrant	3 years - 5 years

7_CAPITALIZED_COSTS

7. CAPITALIZED COSTS	12 Months Ended
	Dec. 31, 2014
CAPITALIZED COSTS
CAPITALIZED COSTS	The following table presents the capitalized costs of the Company as of December 31, 2014 and December 31, 2013:
		2014			2013
	Evaluated costs subject to amortization	$	24,276,483		$	9,484,014
	Unevaluated costs		14,152,415			4,758,806
	Total capitalized costs		38,428,898			14,242,820
	Less accumulated depreciation, depletion  and amortization		(3,930,217	)		(1,204,069	)
	Net capitalized costs	$	34,498,681		$	13,038,751
	Unevaluated costs as of December 31, 2014 consisted of $710,139 associated with the Company’s interest in the Coulter #1 well. The Coulter is a non-core, non-producing asset which we will attempt to monetize by sale of the lease. We presently have approximately 940 acres.

8_INCOME_TAXES

8. INCOME TAXES	12 Months Ended
	Dec. 31, 2014
Income Taxes
Income Tax Disclosure	Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.  The Company has placed a 100% valuation allowance against the net deferred tax asset because future realization of these assets is not assured.
	Authoritative guidance for uncertainty in income taxes requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an examination.  Management has reviewed the Company’s tax positions and determined there were no uncertain tax positions requiring recognition in the consolidated financial statements.  The Company’s tax returns remain subject to Federal and State tax examinations for all tax years since inception as none of the statutes have expired.  Generally, the applicable statutes of limitation are three to four years from their respective filings.
	Estimated interest and penalties related to potential underpayment on any unrecognized tax benefits are classified as a component of tax expense in the statement of operation.  The Company has not recorded any interest or penalties associated with unrecognized tax benefits for any periods covered by these financial statements.
	The following is a reconciliation between the federal income tax benefit computed at the statutory federal income tax rate of 34% and actual income tax provision for the years ended December 31, 2014 and December 31, 2013:
		Year ended			Year ended
		Dec. 31, 2014			Dec. 31, 2013
	Federal income tax benefit at statutory rate	$	(5,626,540	)	$	(3,542,345	)
	Permanent Differences		511,184			696,631
	Other		894,181			(470,413	)
	Change in valuation allowance		4,221,175			3,316,127
	Provision for income taxes	$	-		$	-
	The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, 2014 and December 31, 2013 are as follows:
		Dec. 31, 2014			Dec. 31, 2013
	Deferred tax assets:
	Net operating loss carryforward	$	8,190,580		$	4,229,034
	Accruals		30,600			30,600
	Reserves		2,952,364			1,132,778
	Deferred tax liabilities:
	Intangible drilling and other costs for oil and gas properties		(1,865,259	)		(318,039	)
	Net deferred tax assets and liabilities		9,308,285			5,074,373
	Less valuation allowance		(9,308,285	)		(5,074,373	)
	Total deferred tax assets and liabilities	$	-		$	-
	The Company had a net deferred tax asset related to federal net operating loss carry forwards of $8,190,580 and $4,229,034 at December 31, 2014 and December 31, 2013, respectively.  The federal net operating loss carry forward will begin to expire in 2030.  Realization of the deferred tax asset is dependent, in part, on generating sufficient taxable income prior to expiration of the loss carry forwards.  The Company has placed a 100% valuation allowance against the net deferred tax asset because future realization of these assets is not assured.

9_PROMISSORY_NOTES

9. PROMISSORY NOTES	12 Months Ended
	Dec. 31, 2014
PROMISSORY NOTES
Promissory Notes	On December 18, 2012, the Company exchanged $412,500 of outstanding convertible promissory notes for new 12% Series A Secured Convertible Promissory Notes (“12% Notes”) described below.  The 12% Notes were issued as part of a larger offering with senior liens on the Company’s oil and gas properties.  In order to induce the holders of the previously outstanding convertible promissory notes to exchange such promissory notes and to relinquish their priority liens on the Company’s oil and gas properties in favor of all 12% Convertible Promissory Note Holders, the Company agreed to grant the note holders a total of 235,714 four year warrants to purchase common stock at $1.75 per share, valued at $240,428, and 235,714 four year warrants to purchase common stock at $2.00 per share, valued at $233,357.  The total of these warrants, $473,785, is reflected as debt issuance costs on the balance sheet as of December 31, 2012, as these costs relate to the larger offering of 12% Convertible Promissory Notes.
	On December 18, 2012, the Company issued $690,000 of 12% Notes to new investors.  Together with the conversion described above, there was $1,102,500 of principal amount outstanding as of December 31, 2012.  The 12% Notes are due and payable on March 31, 2015 and provide for conversion into common stock at a price of $1.75 per share and include the issuance of 8,000 warrants for each $70,000 of principal amount purchase.  The warrants carry a five year term and have an exercise price of $2.00 per share.  They were valued at $137,340, which is reflected as a discount on the 12% Notes, to be amortized over the life of the debt under the effective interest method.  Since the conversion price on the 12% Notes was below the market price of the Company’s common stock on the date of issuance, this constitutes a beneficial conversion feature.  The amount is calculated as the difference between the market price of the common stock on the date of closing and the effective conversion price as adjusted by the discount for the warrants issued.  The amount of the beneficial conversion feature was $390,600, and is also reflected as a discount on the 12% Notes.  The fair value of the Convertible Promissory Notes is determined utilizing Level 2 measurements in the fair value hierarchy.
	During the year ended December 31, 2013, the Company issued an additional $10,895,773 in principal value of 12% Notes.  Such notes carry the same terms as described above.  In connection therewith, the Company also issued a total of 1,308,082 five-year warrants to purchase common stock at an exercise price of $2.00 per share.  The value of the warrant shares was $1,917,158 and the amount recorded for the beneficial conversion feature was $5,770,654.  These amounts were recorded as a discount on the 12% Notes.  In addition, the Company engaged a placement agent to source investors for the majority of these additional notes.  This placement agent was paid a fee of 10% of the principal amount of the notes plus a non-accountable expense reimbursement of up to 2% of the principal raised by the agent.  The placement agent also received 552,057 warrants to purchase common shares at $2.00 per share for a period of three years, valued at $614,163.  All the amounts paid to the placement agent have been included in debt issuance costs and will be amortized into interest expense over the life of the 12% Notes.
	The 12% Notes have a first priority lien on all of the assets of the Company.
	The Series “A” Convertible Notes total outstanding principal balance of $8,117,598 plus interest, was due in full at their maturity date of March 31, 2015. As of the date of this filing, the principal and interest are unpaid resulting in the Company being in default.
	During the quarter ended June 30, 2014, the Company issued an additional $3,197,500 in principal value of 12% Series B Convertible Unsecured Promissory Notes. The 12% Notes are due and payable on June 30, 2017 and provide for conversion into common stock at a price of $4.50 per share and included the issuance of one warrant for each $22.50 of principal amount purchased.  The Company issued a total of 142,111 of these five-year warrants to purchase common stock at an exercise price of $6.00 per share.  The value of the warrant shares was $405,016 and the amount recorded for the beneficial conversion feature was $195,466.  These amounts were recorded as a discount on the 12% Notes.
	During the quarter ended September 30, 2014, the Company issued an additional $1,372,000 in principal value of 12% Series B Convertible Unsecured Promissory Notes. The 12% Notes are due and payable on June 30, 2017 and provide for conversion into common stock at a price of $4.50 per share and included the issuance of one warrant for each $22.50 of principal amount purchased.  The Company issued a total of 60,974 of these five-year warrants to purchase common stock at an exercise price of $6.00 per share.  The value of the warrant shares was $157,388 and the amount recorded for the beneficial conversion feature was $-0-.  These amounts were recorded as a discount on the 12% Notes.
	As of the date of this filing, we have not made the interest payment due to Series B Note holders on March 31, 2015.
	The Company is obligated on a short term note payable for $221,910 as of December 31, 2014 which was due December 12, 2014 with 10% interest.

10_ASSET_RETIREMENT_OBLIGATION

10. ASSET RETIREMENT OBLIGATIONS	12 Months Ended
	Dec. 31, 2014
ASSET RETIREMENT OBLIGATIONS
ASSET RETIREMENT OBLIGATIONS	The following is a reconciliation of the asset retirement obligation liability through December 31, 2014:
	Asset retirement obligation – December 31, 2012	$	12,614
	Estimated liabilities recorded		10,407
	Accretion Expense		1,361
	Asset retirement obligation – December 31, 2013	$	24,382
	Estimated liabilities recorded		7,789
	Accretion Expense		3,780
	Asset retirement obligation – December 31, 2014	$	35,951

11_SUBSEQUENT_EVENTS

11. SUBSEQUENT EVENTS	12 Months Ended
	Dec. 31, 2014
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS	Promissory Notes
	On March 31, 2015, the maturity date for our issued and outstanding 12% Series A Secured Convertible Promissory Notes (“Series A Notes”) occurred, and we did not make any payment to these note holders of the principal and interest due thereunder.  This is an event of default under the terms and conditions of the Series A Notes, and the Agent for the Series A Note holders may exercise on behalf of such holders all rights and remedies available under the terms and conditions of the Series A Notes or applicable laws.  All obligations under the Series A Notes will bear interest at a default rate of 18% per annum until such time that they are paid in full.  The total principal amount outstanding on the Series A Notes is $8,117,598, exclusive of interest.  We are having ongoing discussions with the Agent regarding various possible solutions for the payment of this obligation.
	Additionally, our default in payment of the Series A Notes triggered a cross-default provision in our 12% Series B Convertible Unsecured Promissory Notes (“Series B Notes”), and any holder of a Series B Note may declare any an all of the obligations under such note due and payable and/or exercise any other rights and remedies available to such holder under the terms and conditions of the Series B Notes.  All obligations under the Series B Notes will bear interest at a default rate of 16% per annum.  We have not made the interest payment due to Series B Note holders on March 31, 2015.  The total principal amount outstanding on the Series B Notes is $4,569,500, exclusive of interest.
	Planned Divestiture of Hunton Project
	On April 8, 2015, we announced that we are seeking to divest certain of our Hunton assets located in Logan and Kingfisher Counties, Oklahoma.  We are actively marketing these assets to potential buyers. These assets include lease rights and current production, which are being marketed separately. We have been in discussions with interested parties and expect to have a buyer identified shortly. The proceeds from a sale of all or a portion of the assets will be used to satisfy obligations to our Series A Note holders.
	Restructure of JIB with Husky Ventures
	During February, 2015, the Company entered into an agreement with Husky Ventures Inc. to restructure the amounts due under Husky’s Joint Interest Billing (“JIB”) to the Company. During the fourth quarter, 2014, Husky presented a series of cash calls to the Company for participation in drilling projects in Oklahoma. The Company did not fund the prepayments requested.  However, as drilling began, Husky carried the Company’s share of development expenses on the JIB account. It was determined in the first quarter, 2015 that the Company would be unable to fund the requested prepayments and an agreement was reached to reverse the development cost charges on the JIB in exchange for Torchlight relinquishing any claims that it might have had for an interest in the fourteen wells covered by the agreement. The adjustments to account for the reversal were made effective December 31, 2014. No development cost, revenue, or operating expenses with respect to those wells have been recorded in the records of the Company as of December 31, 2014 since the Company did not pay for any participation in those wells.

UNAUDITED_SUPPLEMENTARY_INFORM

UNAUDITED SUPPLEMENTARY INFORMATION	12 Months Ended
	Dec. 31, 2014
Unaudited Supplementary Information
Unaudited supplementary information	December 31, 2014 and 2013
	Investment in oil and gas properties for 2014 is detailed as follows:
		2014			2013
	Property acquisition costs	$	7,222,793		$	6,274,154
	Development costs		11,368,536			3,885,730
	Exploratory costs	$	-0-		$	-0-
	Oil and Natural Gas Reserves
	Reserve Estimates
	SEC Case. The following tables sets forth, as of December 31, 2014, our estimated net proved oil and natural gas reserves, the estimated present value (discounted at an annual rate of 10%) of estimated future net revenues before future income taxes (PV-10) and after future income taxes (Standardized Measure) of our proved reserves and our estimated net probable oil and natural gas reserves, each prepared using standard geological and engineering methods generally accepted by the petroleum industry and in accordance with assumptions prescribed by the Securities and Exchange Commission (“SEC”).  All of our reserves are located in the United States.
	The PV-10 value is a widely used measure of value of oil and natural gas assets and represents a pre-tax present value of estimated cash flows discounted at ten percent. PV-10 is considered a non-GAAP financial measure as defined by the SEC. We believe that our PV-10 presentation is relevant and useful to our investors because it presents the estimated discounted future net cash flows attributable to our proved reserves before taking into account the related future income taxes, as such taxes may differ among various companies.  We believe investors and creditors use PV-10 as a basis for comparison of the relative size and value of our proved reserves to the reserve estimates of other companies. PV-10 is not a measure of financial or operating performance under GAAP and neither it nor the Standardized Measure is intended to represent the current market value of our estimated oil and natural gas reserves. PV-10 should not be considered in isolation or as a substitute for the standardized measure of discounted future net cash flows as defined under GAAP.
	Our PV-10 at December 31, 2014 and 2013 is materially reconciled to our Standardized Measure of discounted cash flows at those dates by reducing the PV-10 by the discounted future income taxes associated with such reserves. The discounted future income taxes at December 31, 2014 and 2013, respectively, were $678,904 and $7,093,985.
	The estimates of our proved reserves and the PV-10 set forth herein reflect estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development costs, using prices and costs under existing economic conditions at December 31, 2014. For purposes of determining prices, we used the average of prices received for each month within the 12-month period ended December 31, 2014, adjusted for quality and location differences, which was $91.48 per barrel of oil and $4.35 per MCF of gas.  This average historical price is not a prediction of future prices. The amounts shown do not give effect to non-property related expenses, such as corporate general administrative expenses and debt service, future income taxes or to depreciation, depletion and amortization.
		31-Dec-14									31-Dec-14
		Reserves									Future Net Revenue (M$)
														Present Value Discounted
	Category	Oil (Bbls)			Gas (Mcf)			Total (BOE)			Total			at 10%
	Proved Developed		120,000			687,000			234,500		$	9,909		$	7,670
	Proved Undeveloped		794,400			3,104,000			1,311,733		$	32,585		$	16,026
	Total Proved		914,400			3,791,000			1,546,233			42,494			23,696
	Standardized Measure of Future Net Cash Flows Related to Proved Oil and Gas Properties													$	23,019
	Probable Undeveloped		912.4			0			912,400		$	22,779		$	8,558
		31-Dec-13									31-Dec-13
		Reserves									Future Net Revenue (M$)
														Present Value Discounted
	Category	Oil (Bbls)			Gas (Mcf)			Total (BOE)			Total			at 10%
	Proved Developed		113,092			313,251			165,301		$	8,861		$	6,117
	Proved Undeveloped		930,069			2,826,344			1,401,126		$	44,699		$	20,408
	Total Proved		1,043,161			3,139,595			1,566,427		$	53,560		$	26,525
	Standardized Measure of Future Net Cash Flows Related to Proved Oil and Gas Properties													$	19,691
	Probable Undeveloped		657,800			0			657,800		$	33,571		$	16,253
	BOE equivalents are determined by combining barrels of oil with MCF of gas divided by six.
	The decrease of 89,393 BOE (89,285 for our Hunton Project and 108 for our Marcelina Project) in proved undeveloped reserves comes from the third party engineering studies of the Cimarron and Chisholm Trail AMI's in Oklahoma which were acquired by the Company in 2013 and engineering studies for our Marcelina Project.
	No reserve value for the Ring Project is included in 2014 reserve tables presented above since the company believes this project is still considered to be in the testing phase.
	Standardized Measure of Oil & Gas Quantities - Volume Rollforward
	Years Ended December 31, 2014 and 2013
	The following table sets forth the Company’s net proved reserves, including the changes therein, and proved developed reserves:
		2014						2013
		Oil (Bbls)			Gas (Mcf)			Oil (Bbls)			Gas (Mcf)
	TOTAL PROVED RESERVES:
	Beginning of period		1,043,161			3,139,594			417,549			-
	Acquisition		-			-			572,461			3,139,595
	Extensions and discoveries		312,579			-			101,180			-
	Revisions of previous estimates		(388,485	)		821,150			(34,743	)		3,539
	Production		(52,855	)		(170,094	)		(13,286	)		(3,540	)
	End of period		914,400			3,790,650			1,043,161			3,139,594
	PROVED DEVELOPED RESERVES
	Proved developed producing		102,479			488,410			64,858			108,001
	Proved developed nonproducing		17,521			198,710			48,234			205,250
	Total		120,000			687,120			113,092			313,251
	Total PUD		794,400			3,103,530			930,069			2,826,344
	The preceding table shows significant decrease in the Acquisition category for 2014 as compared to 2013. The 2013 Acquisition increase is all related to the working interest acquired in the Cimarron and the Chisholm Trail AMI's with Husky Ventures in Oklahoma during 2013. During 2014 the company focused on expanding its participation in the Chisholm Trail and Cimarron AMI’S in Oklahoma which accounts for the increase in Extensions and Discoveries for 2014.
	The 2013 Revisions of Previous Estimates are composed of revisions to the proved producing and proved undeveloped reserves.
	The downward revision of 388,485 BO results primarily from eliminating two Eagle Ford wells (which are now considered uneconomic at current prices) from reserve report calculations for the Company’s properties in the Marcelina Creek Project in Texas. This reflects a reduction of 366,366 BO offset directly by an increase in reserves of 60,159 BO from the currently producing wells. The Johnson #1 is the largest contributor, with an increase of reserves of 56,783 BO. The Johnson #2 and #4 account for an additional increase of 3,376 BO. The remaining difference comes from reserve adjustments in the well data for the Oklahoma Properties reserve calculations for 2014.
	The positive revision of 821,150 MCF of gas is attributable to gas production increase from the development activity in the Chisholm Trail and Cimarron AMI’s in Oklahoma where the Company focused on expanding its participation in 2014 drilling and development. Gas reserves can be fully attributable to our Oklahoma joint venture operations.  Most of our wells in the program are horizontally drilled wells that produce from the Hunton rock which requires a fracking stimulation to achieve the maximum production rates.  Typically these wells have a relatively high initial production rates, but decline rapidly.  Three wells in our Oklahoma ventures contribute 244.8 MMcf of the total improvement.  As a result of the PDP wells success the offsetting PUD wells are expected to be significant contributors as well.  Our other producing wells in Oklahoma are evenly spread.
	Standardized Measure of Oil & Gas Quantities
	Year Ended December 31, 2014 & 2013
	The standardized measure of discounted future net cash flows relating
	to proved oil and natural gas reserves is as follows :	2014			2013
	Future cash inflows	$	106,027,440		$	119,629,906
	Future production costs		(30,383,390	)		(31,656,853	)
	Future development costs		(33,148,780	)		(34,152,898	)
	Future income tax expense		(978,776	)		(11,264,101	)
	Future net cash flows		41,516,494			42,556,054
	10% annual discount for estimated
timing of cash flows		(18,497,528	)		(22,865,456	)
Standardized measure of discounted future
net cash flows related to proved reserves	$	23,018,966		$	19,690,598
A summary of the changes in the standardized measure of discounted
future net cash flows applicable to proved oil and natural gas reserves
is as follows :
Balance, beginning of year	$	19,690,598		$	2,909,000
Sales and transfers of oil and gas produced during the period		(4,310,813	)		(905,125	)
Net change in sales and transfer prices and in production (lifting) costs related to future production		(9,497,301	)		(1,647,568	)
Net change due to purchases of minerals in place		-			30,474,988
Net change due to extensions and discoveries		14,340,815			22,411,372
Changes in estimated future development costs		(13,990,412	)		(17,355,723	)
Previously estimated development costs incurred during the period		15,980,816			(3,181,356	)
Net change due to revisions in quantity estimates		(12,814,002	)		(4,633,853	)
Other		2,487,713			(1,468,500	)
Accretion of discount		4,715,661			(318,085	)
Net change in income taxes		6,415,891			(6,594,552	)
Balance, end of year	$	23,018,966		$	19,690,598
Due to the inherent uncertainties and the limited nature of reservoir data, both proved and probable reserves are subject to change as additional information becomes available. The estimates of reserves, future cash flows, and present value are based on various assumptions, including those prescribed by the SEC, and are inherently imprecise. Although we believe these estimates are reasonable, actual future production, cash flows, taxes, development expenditures, operating expenses, and quantities of recoverable oil and natural gas reserves may vary substantially from these estimates.
In estimating probable reserves, it should be noted that those reserve estimates inherently involve greater risk and uncertainty than estimates of proved reserves. While analysis of geoscience and engineering data provides reasonable certainty that proved reserves can be economically producible from known formations under existing conditions and within a reasonable time, probable reserves involve less certainty than reserves with a higher classification due to less data to support their ultimate recovery. Probable reserves have not been discounted for the additional risk associated with future recovery.  Prospective investors should be aware that as the categories of reserves decrease with certainty, the risk of recovering reserves at the PV-10 calculation increases.  The reserves and net present worth discounted at 10% relating to the different categories of proved and probable have not been adjusted for risk due to their uncertainty of recovery and thus are not comparable and should not be summed into total amounts.
Reserve Estimation Process, Controls and Technologies
The reserve estimates, including PV-10 estimates, set forth above were prepared by Netherland, Sewell & Associates, Inc. with respect to the Company’s Marcelina Creek Project in Texas, and PeTech Enterprises, Inc. for the Company’s properties in Oklahoma.  A copy of their full reports with regard to our reserves is attached as Exhibit 99.1 to this annual report on Form 10-K.  These calculations were prepared using standard geological and engineering methods generally accepted by the petroleum industry and in accordance with SEC financial accounting and reporting standards.
Our Chairman of our Board of Directors is an experienced and qualified geoscience professional with a degree in geophysical science, but we do not have any employees with specific reservoir engineering qualifications in the company.  Our Chairman and Chief Executive Officer worked closely with Netherland, Sewell & Associates, Inc. and PeTech Enterprises Inc. in connection with their preparation of our reserve estimates, including assessing the integrity, accuracy, and timeliness of the methods and assumptions used in this process.
The reserves estimates for the Marcelina Creek Project included herein have been independently evaluated by Netherland, Sewell & Associates, Inc. (NSAI), a worldwide leader of petroleum property analysis for industry and financial organizations and government agencies.  NSAI was founded in 1961 and performs consulting petroleum engineering services under Texas Board of Professional Engineers Registration No. F-2699.  Within NSAI, the technical person primarily responsible for preparing the estimates set forth in the NSAI reserves report incorporated herein is Mr. Neil H. Little.  Mr. Little, a Licensed Professional Engineer in the State of Texas (No. 117966), has been practicing consulting petroleum engineering at NSAI since 2011 and has over 9 years of prior industry experience.  He graduated from Rice University in 2002 with a Bachelor of Science Degree in Chemical Engineering and from the University of Houston in 2007 with a Master of Business Administration Degree.   Mr. Little meets or exceeds the education, training, and experience requirements set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers; Mr. Little is proficient in judiciously applying industry standard practices to engineering and geoscience evaluations as well as applying SEC and other industry reserves definitions and guidelines.
PeTech Enterprises, Inc. (“PeTech”), who provided reserve estimates for our Oklahoma Properties, is a Texas based profitable, family owned oil and gas production and Investment Company that provides reservoir engineering, economics and valuation support to energy banks, energy companies and law firms as an expert witness.  The company has been in business since 1982.  Amiel David is the President of PeTech and the primary technical person in charge of the estimates of reserves and associated cash flow and economics on behalf of the company for the results presented in its reserves report to us.  He has a PhD in Petroleum Engineering from Stanford University.   He is a registered Professional Engineer in the state of Texas (PE #50970), granted in 1982, a member of the Society of Petroleum Engineers and a member of the Society of Petroleum Evaluation Engineers.
Results of Operations for Oil and Gas Producing Activities
For the Year Ended December 31, 2014	Total			Texas			Oklahoma			Kansas
Oil and Gas revenue	$	5,455,555		$	1,136,373		$	3,997,379		$	321,803
Production costs		1,253,090			516,451			634,739			101,900
Depreciation, depletion, and amortization		2,736,562			709,533			1,995,531			31,498
Exploration expenses		-			-			-			-
		3,989,652			1,225,984			2,630,270			133,398
Income tax expense		-			-			-			-
Results of Operations (excluding corporate overhead
and interest costs)	$	1,465,903		$	(89,611	)	$	1,367,109		$	188,405

3_SIGNIFICANT_ACCOUNTING_POLIC1

3. SIGNIFICANT ACCOUNTING POLICIES (POLICIES)	12 Months Ended
	Dec. 31, 2014
Significant Accounting Policies {1}
Use of estimates	The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and certain assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results could differ from these estimates.
Basis of presentation	The financial statements are presented on a consolidated basis and include all of the accounts of Torchlight Energy Resources Inc. and its wholly owned subsidiary, Torchlight Energy, Inc. All significant intercompany balances and transactions have been eliminated.
Risks and uncertainties	The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological, and other risks associated with operating an emerging business, including the potential risk of business failure.
Concentration of risks	The Company’s cash is placed with a highly rated financial institution, and the Company periodically reviews the credit worthiness of the financial institutions with which it does business. At times the Company’s cash balances are in excess of amounts guaranteed by the Federal Deposit Insurance Corporation.
Fair value of financial instruments	Financial instruments consist of cash, accounts receivable, accounts payable, notes payable to related party, and convertible promissory notes. The estimated fair values of cash, accounts receivable, accounts payable, and related party payables approximate the carrying amount due to the relatively short maturity of these instruments. The carrying amounts of the convertible promissory notes approximate their fair value giving affect for the term of the note and the effective interest rates.
	For assets and liabilities that require re-measurement to fair value the Company categorizes them in a three-level fair value hierarchy as follows:
		·	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
		·	Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration.
		·	Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value.
	A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Accounts receivable Policy	Accounts receivable consist of uncollateralized oil and natural gas revenues due under normal trade terms, as well as amounts due from working interest owners of oil and gas properties for their share of expenses paid on their behalf by the Company. Management reviews receivables periodically and reduces the carrying amount by a valuation allowance that reflects management’s best estimate of the amount that may not be collectible. As of December 31, 2014 and December 31, 2013 no valuation allowance was considered necessary.
Investment in oil and gas properties Policy	The Company uses the full cost method of accounting for exploration and development activities as defined by the Securities and Exchange Commission (“SEC”). Under this method of accounting, the costs of unsuccessful, as well as successful, exploration and development activities are capitalized as properties and equipment. This includes any internal costs that are directly related to property acquisition, exploration and development activities but does not include any costs related to production, general corporate overhead or similar activities. Gain or loss on the sale or other disposition of oil and gas properties is not recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves.
	Oil and gas properties include costs that are excluded from costs being depleted or amortized. Oil and natural gas property costs excluded represent investments in unevaluated properties and include non-producing leasehold, geological, and geophysical costs associated with leasehold or drilling interests and exploration drilling costs. The Company allocates a portion of its acquisition costs to unevaluated properties based on relative value. Costs are transferred to the full cost pool as the properties are evaluated over the life of the reservoir.
Capitalized interest	The Company capitalizes interest on unevaluated properties during the periods in which they are excluded from costs being depleted or amortized.  During years ended December 31, 2014 and 2013, the Company capitalized $371,116 and $104,821, respectively, of interest on unevaluated properties.
Depreciation, depletion and amortization Policy	The depreciable base for oil and natural gas properties includes the sum of all capitalized costs net of accumulated depreciation, depletion, and amortization (“DD&A”), estimated future development costs and asset retirement costs not included in oil and natural gas properties, less costs excluded from amortization. The depreciable base of oil and natural gas properties is amortized on a unit-of-production method.
Ceiling test	Future production volumes from oil and gas properties are a significant factor in determining the full cost ceiling limitation of capitalized costs. Under the full cost method of accounting, the Company is required to periodically perform a “ceiling test” that determines a limit on the book value of oil and gas properties. If the net capitalized cost of proved oil and gas properties, net of related deferred income taxes, plus the cost of unproved oil and gas properties, exceeds the present value of estimated future net cash flows discounted at 10 percent, net of related tax affects, plus the cost of unproved oil and gas properties, the excess is charged to expense and reflected as additional accumulated DD&A. The ceiling test calculation uses a commodity price assumption which is based on the un weighted arithmetic average of the price on the first day of each month for each month within the prior 12 month period and excludes future cash outflows related to estimated abandonment costs. The Company did not recognize impairment on its oil and gas properties during the years ended December 31, 2014 and 2013. Due to the volatility of commodity prices, should oil and natural gas prices decline in the future, it is possible that a write-down could occur. Proved reserves are estimated quantities of crude oil, natural gas, and natural gas liquids, which geological and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs under existing economic and operating conditions. The independent engineering estimates include only those amounts considered to be proved reserves and do not include additional amounts which may result from new discoveries in the future, or from application of secondary and tertiary recovery processes where facilities are not in place or for which transportation and/or marketing contracts are not in place. Estimated reserves to be developed through secondary or tertiary recovery processes are classified as unevaluated properties.
	The determination of oil and gas reserves is a subjective process, and the accuracy of any reserve estimate depends on the quality of available data and the application of engineering and geological interpretation and judgment. Estimates of economically recoverable reserves and future net cash flows depend on a number of variable factors and assumptions that are difficult to predict and may vary considerably from actual results. In particular, reserve estimates for wells with limited or no production history are less reliable than those based on actual production. Subsequent re-evaluation of reserves and cost estimates related to future development of proved oil and gas reserves could result in significant revisions to proved reserves.  Other issues, such as changes in regulatory requirements, technological advances, and other factors which are difficult to predict could also affect estimates of proved reserves in the future.
	Gains and losses on the sale of oil and gas properties are not generally reflected in income. Sales of less than 100% of the Company’s interest in the oil and gas property are treated as a reduction of the capital cost of the field, with no gain or loss recognized, as long as doing so does not significantly affect the unit-of-production depletion rate. Costs of retired equipment, net of salvage value, are usually charged to accumulated depreciation.
Goodwill	Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets of acquired companies. Goodwill is not amortized; instead, it is tested for impairment annually or more frequently if indicators of impairment exist.
	Goodwill was $447,084 as of December 31, 2013 and was acquired on November 23, 2010 in connection with the Company’s reverse acquisition (Note 1). The Goodwill was tested for impairment at December 31, 2014 by comparison of the fair value of the Company measured by its market cap versus its book value and as a result was written off to Impairment expense.
Asset retirement obligations Policy	Accounting principles require that the fair value of a liability for an asset’s retirement obligation (“ARO”) be recorded in the period in which it is incurred if a reasonable estimate of fair value can be made, and that the corresponding cost be capitalized as part of the carrying amount of the related long-lived asset. The liability is accreted to its then-present value each subsequent period, and the capitalized cost is depleted over the useful life of the related asset. Abandonment cost incurred is recorded as a reduction to the ARO liability.
	Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.
	Asset retirement obligation activity is disclosed in Note 10.
Share-Based Compensation Policy	Compensation cost for equity awards is based on the fair value of the equity instrument on the date of grant and is recognized over the period during which an employee is required to provide service in exchange for the award. Compensation cost for liability awards is based on the fair value of the vested award at the end of each period.
Revenue Recognition	The Company recognizes oil and gas revenues when production is sold at a fixed or determinable price, persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, and collectability is reasonably assured.
Basic and Diluted Earnings (Loss) Per Share	Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed in the same way as basic earnings (loss) per common share except that the denominator is increased to include the number of additional common shares that would be outstanding if all potential common shares had been issued and if the additional common shares were dilutive.  The Company has not included potentially dilutive securities in the calculation of loss per share for any periods presented as the effects would be anti-dilutive.
Environmental laws and regulations	The Company is subject to extensive federal, state, and local environmental laws and regulations. Environmental expenditures are expensed or capitalized depending on their future economic benefit. The Company believes that it is in compliance with existing laws and regulations.
Recent accounting pronouncements	On August 27, 2014, the FASB issued ASU 2014-15, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of the Company’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted.
	In May 2014, the FASB issued ASU 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.
	In April 2014, the FASB issued ASU 2014-08, which includes amendments that change the requirements for reporting discontinued operations and require additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations - that is, a major effect on the organization’s operations and financial results should be presented as discontinued operations. Additionally, the ASU requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new standard is effective in the first quarter of 2015 for public organizations with calendar year ends. Early adoption would be permitted for any annual or interim period for which an entity’s financial statements have not yet been made available for issuance. The adoption of this guidance is not expected to have an impact on the Company’s consolidated financial statements.
	Other recently issued or adopted accounting pronouncements are not expected to have, or did not have, a material impact on the Company’s financial position or results from operations.
Subsequent Events Policy	The Company evaluated subsequent events through April 15, 2015, the date of issuance of the financial statements. Subsequent events are disclosed in Note 11.

6_STOCKHOLDERS_EQUITY_TABLES

6. STOCKHOLDERS' EQUITY (TABLES)	12 Months Ended
	Dec. 31, 2014
STOCKHOLDERS' EQUITY (TABLES)
Summary of warrant activity	Exercise		Expiration Date In
	Price			2,015	2,016	2,017	2,018	2,019	Total
	$	1		0	0	150,000	0	0		150,000
	$	1.75		855,000	1,135,714	0	0			1,990,714
	$	2		0	1,035,271	126,000	1,696,380			2,857,651
	$	2.09					2,800,000			2,800,000
	$	2.5		15,000	100,000	0	0			115,000
	$	2.75			0					0
	$	2.82					38,174			38,174
	$	3			100,000					100,000
	$	4.5						700,000		700,000
	$	5		0	8,391	95,000				103,391
	$	6					577,501	330,341		907,842
	$	7						700,000		700,000
				870,000	2,379,376	371,000	5,112,055	1,730,341		10,462,772
Assumptions used in calculating the fair value of the warrants	Risk-free interest rate	0.78%
	Expected volatility of common stock	191% - 253%
	Dividend yield	0.00%
	Discount due to lack of marketability	20-30%
	Expected life of warrant	3 years - 5 years

7_Capitalized_Costs_Tables

7. Capitalized Costs (Tables)	12 Months Ended
	Dec. 31, 2014
Capitalized Costs (Table):
Capitalized Costs (Table)		2014			2013
	Evaluated costs subject to amortization	$	24,276,483		$	9,484,014
	Unevaluated costs		14,152,415			4,758,806
	Total capitalized costs		38,428,898			14,242,820
	Less accumulated depreciation, depletion  and amortization		(3,930,217	)		(1,204,069	)
	Net capitalized costs	$	34,498,681		$	13,038,751

8_Income_Taxes_Tables

8. Income Taxes (Tables)	12 Months Ended
	Dec. 31, 2014
Schedule of Income Taxes:
Schedule of Effective Income Tax Rate Reconciliation		Year ended			Year ended
		Dec. 31, 2014			Dec. 31, 2013
	Federal income tax benefit at statutory rate	$	(5,626,540	)	$	(3,542,345	)
	Permanent Differences		511,184			696,631
	Other		894,181			(470,413	)
	Change in valuation allowance		4,221,175			3,316,127
	Provision for income taxes	$	-		$	-
Schedule of Deferred Tax Assets and Liabilities		Dec. 31, 2014			Dec. 31, 2013
	Deferred tax assets:
	Net operating loss carryforward	$	8,190,580		$	4,229,034
	Accruals		30,600			30,600
	Reserves		2,952,364			1,132,778
	Deferred tax liabilities:
	Intangible drilling and other costs for oil and gas properties		(1,865,259	)		(318,039	)
	Net deferred tax assets and liabilities		9,308,285			5,074,373
	Less valuation allowance		(9,308,285	)		(5,074,373	)
	Total deferred tax assets and liabilities	$	-		$	-

10_ASSET_RETIREMENT_OBLIGATION1

10. ASSET RETIREMENT OBLIGATIONS (Tables)	12 Months Ended
	Dec. 31, 2014
ASSET RETIREMENT OBLIGATIONS (Tables)
Reconciliation of the asset retirement obligation liability	Asset retirement obligation – December 31, 2012	$	12,614
	Estimated liabilities recorded		10,407
	Accretion Expense		1,361
	Asset retirement obligation – December 31, 2013	$	24,382
	Estimated liabilities recorded		7,789
	Accretion Expense		3,780
	Asset retirement obligation – December 31, 2014	$	35,951

2_Going_Concern_Details_Narrat

2. Going Concern (Details Narrative) (USD $)	Dec. 31, 2014
Going Concern Accumulated Losses
Accumulated Losses since inception	$31,650,561

Recovered_Sheet1

3. Significant Accounting Policies (Details Narrative) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Significant Accounting Policies {1}
Capitalized interest on unevaluated properties	$371,116	$104,821
Balance Goodwill		$447,084

4_Related_Party_Payables_Detai

4. Related Party Payables (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Related Party Transactions payments due to related party
Related party payable accrued and unpaid compensation to two of the executive officers	$90,000
Related party debt forgiven by the officers		$660,000

6_Stockholders_Equity_Details

6. Stockholders' Equity (Details)	Dec. 31, 2014
Assumptions used in calculating the fair value of the warrants issued are as follows:
Risk-free interest rate.	0.78%
Expected volatility of common stock Minimum	191.00%
Expected volatility of common stock Maximum	253.00%
Dividend yield	0.00%
Discount due to lack of marketability Minimum	20.00%
Discount due to lack of marketability Maximum	30.00%
Expected life of warrant in years Minimum	3
Expected life of warrant in years Maximum	5

7_Capitalized_Costs_Details

7. Capitalized Costs (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
The following table presents the capitalized costs of the Company as of December 31, 2013 and December 31, 2012:
Evaluated costs subject to amortization	$24,276,483	$9,484,014
Unevaluated costs	14,152,415	4,758,806
Total capitalized costs.	38,428,898	14,242,820
Less accumulated depreciation, depletion and amortization	-3,930,217	-1,204,069
Net capitalized costs.	$34,498,681	$13,038,751

7_Capitalized_costs_Text_Detai

7. Capitalized costs Text (Details Narrative) (USD $)	Dec. 31, 2014
Capitalized costs Text
Unevaluated costs associated with company's interest in Coulter#1 well	$710,139
Amount Allocated to Cimarron Area	$940

8_Income_Taxess_Details_Narrat

8. Income Taxess (Details Narrative) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Income Taxes Operating loss carryforwards
Net deferred tax asset related to federal net operating loss carryforwards of	$8,190,580	$4,229,034

8_Income_Taxes_Details

8. Income Taxes (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Tax Reconciliation and provision for income taxes
Federal income tax benefit at statutory rate	($5,626,540)	($3,542,345)
Permanent Differences	511,184	696,631
Other	894,181	-470,413
Change in valuation allowance	4,221,175	3,316,127
Provision for income taxes	$0	$0

8_Income_Taxes_Details_1

8. Income Taxes (Details 1) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Deferred tax assets:
Net operating loss carryforward	$8,190,580	$4,229,034
Accruals	30,600	30,600
Reserves	2,952,364	1,132,778
Intangible drilling and other costs for oil and gas properties	-1,865,259	-318,039
Net deferred tax assets and liabilities	9,308,285	5,074,373
Less valuation allowance	-9,308,285	-5,074,373
Total deferred tax assets and liabilities	$0	$0

10_ASSET_RETIREMENT_OBLIGATION2

10. ASSET RETIREMENT OBLIGATIONS (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
ASSET RETIREMENT OBLIGATIONS RECONCILIATION
Asset retirement obligation.,		$24,382	$12,614
Accretion expense.	3,780	1,361
Estimated liabilities recorded.	7,789	10,407
Asset retirement obligation..	$35,951	$24,382