Meta Materials (MMATQ) 10-K 30 Mar 16 2015 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2015	Mar. 24, 2016
Document and Entity Information
Entity Registrant Name	TORCHLIGHT ENERGY RESOURCES INC
Document Type	10-K
Document Period End Date	Dec. 31, 2015
Amendment Flag	false
Entity Central Index Key	1,431,959
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		35,050,806
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	2,015
Document Fiscal Period Focus	FY
Entity Public Float	$ 59,737,837

CONSOLIDATED CONDENSED BALANCE

CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Current assets:
Cash	$ 1,026,600	$ 179,787
Accounts receivable	741,653	223,371
Production revenue receivable	199,317	210,435
Note receivable	613	515,748
Prepayments - development costs	0	20,602
Prepaid expenses	38,776	29,634
Total current assets	2,006,959	1,179,577
Investment in oil and gas properties, net	7,057,671	34,498,681
Office equipment	43,110	55,150
Debt issuance costs, net	8,224	353,733
Other Assets	72,082	63,223
TOTAL ASSETS	9,188,046	36,150,364
Current liabilities:
Accounts payable	1,114,409	4,018,306
Accrued liabilities	628,876	240,000
Related party payables	130,000	90,000
Note payable within one year - related party	205,000	0
Convertible promissory notes, (Series A) net of discount of $700,178 at December 31, 2014	0	7,417,420
Notes payable within one year	129,741	829,719
Due to working interest owners	103,364	73,439
Interest payable	173,710	383,741
Total current liabilities	2,485,100	13,052,625
Convertible promissory notes, (Series B) net of discount of $277,911 at December 31, 2015 and $625,457 at December 31, 2014	3,291,589	3,944,043
Asset retirement obligation	$ 29,083	$ 35,951
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.001, 100,000,000 shares authorized, 134,000 shares issued and outstanding	$ 134	$ 0
Common stock, par value $0.001 per share; 75,000,000 shares authorized; 33,166,344 issued and outstanding at December 31, 2015 23,235,441 issued and outstanding at December 31, 2014	33,168	23,235
Additional paid-in capital	61,921,450	43,108,752
Warrants outstanding	16,330,961	7,636,320
Accumulated deficit	(74,903,439)	(31,650,561)
Total stockholders' equity	3,382,274	19,117,745
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 9,188,046	$ 36,150,364

CONSOLIDATED CONDENSED BALANCE3

CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
ASSETS
Discount of Convertible promissory notes current	$ 0	$ 700,178
Discount on Convertible promissory notes noncurrent	$ 277,911	$ 625,457
Preferred Stock, no par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	100,000,000	100,000,000
Preferred Stock, shares issued	134,000	134,000
Preferred Stock, shares outstanding	134,000	134,000
Common Stock, par or stated value	$ 0.001	$ 0.001
Common Stock, shares authorized	75,000,000	75,000,000
Common Stock, shares issued	33,166,344	23,235,441
Common Stock, shares outstanding	33,166,344	23,235,441

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Revenue
Oil and gas sales	$ 1,628,034	$ 5,455,555
SWD and Royalties	6,274	85,529
Cost of revenue	(814,078)	(1,253,090)
Gross income	820,230	4,287,994
Operating expenses:
General and administrative expense	15,550,145	10,156,307
Depreciation, depletion and amortization	930,934	2,736,562
Loss on sale	24,479	0
Total operating expenses	16,505,558	12,892,869
Other income (expense)
Income - Cancellation of Debt	0	22,748
Impairment expense	25,674,123	(447,084)
Interest income	0	69
Interest and accretion expense	1,893,427	(6,780,461)
Total other income (expense)	27,567,550	(7,204,728)
Net loss before taxes	(43,252,878)	(15,809,603)
Provision for income taxes	0	0
Net (loss)	$ (43,252,878)	$ (15,809,603)
Loss per share:
Basic and Diluted	$ (2.64)	$ (1.01)
Weighted average shares outstanding:
Basic and Diluted	16,372,826	15,728,621

CONSOLIDATED STATEMENT OF STOCK

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($)	Common Stock	Pref. Stock	Additional Paid-in Capital	Accumulated Deficit	Warrants Outstanding	Total
Begining balance, shares at Dec. 31, 2013	16,141,765
Begining balance, amount at Dec. 31, 2013	$ 16,142		$ 21,978,607	$ (15,840,958)	$ 3,043,420	$ 9,197,210
Issuance of common stock for cash, shares	2,989,655					2,989,655
Issuance of common stock for cash, amount	$ 2,989		10,629,802			$ 10,632,791
Issuance of common stock for services, shares	450,180					450,180
Issuance of common stock for services, amount	$ 451		933,977			$ 934,428
Issuance of common stock - mineral interests, shares	1,781,595					1,781,595
Issuance of common stock - mineral interests, amount	$ 1,782		5,135,097			$ 5,136,879
Issuance of common stock in warrant exercise, shares	617,500					623,369
Issuance of common stock in warrant exercise, amount	$ 618		1,276,882			$ 1,277,500
Issuance of common stock for note interest, shares	5,869					5,869
Issuance of common stock for note interest, amount	$ 5		10,265			$ 10,270
Warrants issued with promissory notes			$ 562,354		$ 72,000	$ 634,354
Warrants issued in private placement, shares	0
Warrants issued in private placement			123,250		(116,700)	6,550
Warrants issued for services, shares	0
Warrants issued for services			$ 78,765			$ 78,765
Common stock issued in conversion of notes, shares	1,248,877					1,248,877
Common stock issued in conversion of notes, amount	$ 1,248		2,184,287			$ 2,185,535
Beneficial conversion feature on conv. notes			$ 195,466			195,466
Warrants issued for services					$ 4,637,600	4,637,600
Net loss				$ (15,809,603)		(15,809,603)
Ending balance, shares at Dec. 31, 2014	23,235,441
Ending balance, amount at Dec. 31, 2014	$ 23,235		$ 43,108,752	$ (31,650,561)	$ 7,636,320	$ 19,117,745
Issuance of common stock for cash, shares	4,931,250					4,931,250
Issuance of common stock for cash, amount	$ 4,931		1,295,069			$ 1,300,000
Issuance of preferred stock for cash, shares		135,000				135,000
Issuance of preferred stock for cash, amount		$ 135	13,499,865			$ 13,500,000
Issuance of common stock for services, shares	2,447,696					2,477,696
Issuance of common stock for services, amount	$ 2,448		2,649,056			$ 2,651,504
Issuance of common stock - mineral interests, shares	30,000					30,000
Issuance of common stock - mineral interests, amount	$ 30		26,370			$ 26,400
Issuance of common stock in warrant exercise, shares	65,000					65,000
Issuance of common stock in warrant exercise, amount	$ 65		113,685			$ 113,750
Issuance of common stock for note interest, shares	162,860					162,860
Issuance of common stock for note interest, amount	$ 163		162,697			$ 162,860
Issuance of common stock for preferred dividends, shares	577,140					577,140
Issuance of common stock for preferred dividends, amount	$ 577		809,169			$ 809,746
Accounting Value of Dividend			(809,746)			(809,746)
Preferred dividends paid in cash			$ (120,427)			(120,427)
Warrants issued with promissory notes					$ 467,800	$ 467,800
Warrants issued in private placement, shares
Warrants issued in private placement
Warrants issued for services						$ 7,797,619
Common stock issued in conversion of notes, shares	1,600,000					1,600,000
Common stock issued in conversion of notes, amount	$ 1,600		$ 1,148,400			$ 1,150,000
Common stock issued in part payment of bonuses, shares	30,000
Common stock issued in part payment of bonuses, amount	$ 30		39,870			39,900
Common stock issued in conversion of preferred stock, shares	86,957
Common stock issued in conversion of preferred stock, amount	$ 87		99,913			100,000
Preferred stock cancelled in conversion, shares		(1,000)
Preferred stock cancelled in conversion, Amount		$ (1)	(99,999)			(100,000)
Warrants issued for services			$ (1,222)		$ 8,226,841	8,225,619
Net loss				$ (43,252,878)		(43,252,878)
Ending balance, shares at Dec. 31, 2015	33,166,344	134,000
Ending balance, amount at Dec. 31, 2015	$ 33,168	$ 134	$ 61,921,450	$ (74,903,439)	$ 16,330,961	$ 3,382,274

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOW - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Cash Flows From Operating Activities
Net (loss)	$ (43,252,878)	$ (15,809,603)
Adjustments to reconcile net loss to net cash from operations:
Stock based compensation	11,265,926	5,644,028
Accretion of convertible note discounts	1,395,103	5,771,050
Impairment expense	25,674,123	447,084
Depreciation, depletion and amortization	930,934	2,736,562
Loss on sale of assets	24,479	0
Income - Cancellation of Debt	0	(22,748)
Change in:
Accounts receivable	(187,305)	133,851
Note receivable	515,135	(515,748)
Production revenue receivable	11,118	(210,435)
Prepayment of development costs	(290,398)	(20,602)
Prepaid expenses	(9,142)	(20,490)
Debt issuance costs	0	(185,875)
Other assets	(8,860)	(3,506)
Accounts payable and accrued liabilities	1,024,098	3,180,467
Due to working interest owners	29,925	(507,045)
Asset retirement obligation	(948)	11,170
Interest payable	469,241	84,513
Capitalized interest	(705,561)	(371,116)
Net cash provided by (used) in operating activities	(3,115,010)	341,557
Cash Flows From Investing Activities
Investment in oil and gas properties	(4,518,239)	(18,591,329)
Acquisition of office equipment	(1,191)	(53,960)
Proceeds from sale of leases	2,851,918	0
Net cash used in investing activities	(1,667,512)	(18,645,289)
Cash Flows From Financing Activities
Proceeds from sale of common stock	1,300,000	10,632,791
Proceeds from sale of preferred stock	13,500,000	0
Payment of preferred stock dividends	(120,427)	0
Repayment of convertible notes	(8,859,011)	0
Proceeds from warrant exercise	113,750	744,282
Proceeds from promissory notes	539,916	5,384,991
Repayment of promissory notes	(844,893)	(90,258)
Net cash provided by financing activities	5,629,335	16,671,806
Net increase (decrease) in cash	846,813	(1,631,926)
Cash - beginning of period	179,787	1,811,713
Cash - end of period	1,026,600	179,787
Non cash transactions:
Common stock issued for services	2,651,504	933,977
Common stock issued for mineral interests	26,400	5,136,879
Warrants issued for services	8,225,619	4,716,365
Common stock issued in conversion of promissory notes	1,150,000	2,185,535
Common stock issued for unpaid compensation	39,900	0
Warrants issued in connection with promissory notes	467,800	634,354
Beneficial conversion feature on promissory notes	$ 0	$ 195,466
Common stock issued in warrant exercises	113,750	1,277,500
Cash paid for interest	$ 919,272	$ 1,243,816

1. NATURE OF BUSINESS

1. NATURE OF BUSINESS	12 Months Ended
	Dec. 31, 2015
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, 2015
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, 2015, the Company had not yet achieved profitable operations. We had a net loss of approximately $43.2 million for the year ended December 31, 2015 and had accumulated losses of $74,903,439 since its inception and expects to incur further losses in the development of its business. Working Capital as of December 31, 2015 was negative $478,141. 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. Planned Divestiture of Hunton Assets Management has 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. As of March 30, 2016 negotiations and documentation of the sale of the Company’s Cimarron assets in Oklahoma is nearing completion.

3. SIGNIFICANT ACCOUNTING POLIC

3. SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
	Dec. 31, 2015
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 subsidiaries, Torchlight Energy, Inc., Torchlight Energy Operating, LLC, and Hudspeth Oil Corporation. 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, 2015 and December 31, 2014 no valuation allowance was considered necessary. As of December 31, 2015, the Company had a $419,839 account receivable from Husky Ventures for the estimated balance of the sale proceeds from the sale of the Chisholm Trail properties in fourth quarter, 2016. The Chisholm Trail properties were sold to Husky Ventures who then included them with the Husky interests in Chisholm Trail and then entered into a sale agreement with Gastar Exploration Inc. for the combined Torchlight and Husky interests. Receipt of the balance of the sale proceeds was subject to final determination of mineral lease classification and was to occur by February 28, 2016. The account receivable is not collected as of March 30, 2016. 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, 2015 and 2014, the Company capitalized $705,561 and $371,116, 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 unweighted 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 recognized impairment of $22,438,114 on its oil and gas properties during the three months ended June 30, 2015 and an additional impairment at December 31, 2015 of $3,236,009 for a total impairment adjustment for 2015 of $25,674,123. No impairment was recognized at December 31, 2014. 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 unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves. 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. The Company’s sale of the Chisholm Trail properties in fourth quarter, 2016 transferred approximately 27% of reserve value which represents a significant alteration of the relationship of reserves to capitalized costs. The $24,479 loss on the sale of the Chisholm Trail properties is, therefore, presented on the Statement of Operations. 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 March 30, 2016, 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, 2015
RELATED PARTY PAYABLES.
RELATED PARTY PAYABLES	As of December 31, 2015, related party payables consisted of accrued and unpaid compensation to two of our executive officers totaling $90,000 and $40,000 in deferred Director Fee payable to one of our Directors,Mr. Edward J. Devereaux who elected to receive $50,000 in cash when funds are available and $50,000 in common stock (amounting to 21,834 shares). As of December 31, 2015 $10,000 had been paid to Mr. Devereaux. On November 4, 2014, Eunis L. Shockey loaned us $500,000 under a 30 day promissory note. The promissory note accrues interest at an annual rate of 10%. The balance of the note at December 31, 2015 was $205,000. The due date of the note has been extended to March 31, 2016.

5. COMMITMENTS AND CONTINGENCIE

5. COMMITMENTS AND CONTINGENCIES	12 Months Ended
	Dec. 31, 2015
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, 2015 and 2014, 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, 2015
Stockholders' equity:
STOCKHOLDERS' EQUITY	During the years ended December 31, 2015 and 2014, the Company issued 4,931,250 and 2,989,655 shares of common stock, respectively, for cash of $1,300,000 and $10,632,791. During the years ended December 31, 2015 and 2014, the Company issued 135,000 and -0- shares of preferred stock, respectively, for cash of $13,500,000 and $-0-. During the year ended December 31, 2015, the Company paid dividends on preferred stock in cash of $120,427. In addition 577,140 shares of common stock were issued for dividends on preferred stock. During the years ended December 31, 2015 and 2014, the Company issued 2,477,696 and 450,180 shares of common stock, respectively, as compensation for services, with total values of $2,651,504 and $934,428. During the year ended December 31, 2015 the Company issued 2,615,676 warrants in connection with the issuance of preferred stock. During the year ended December 31,2015,the Company issued 750,000 warrants in connection with the acquisition of lease interests with total value of $527,500. During the year ended December 31, 2015 and 2014, the Company issued 30,000 and 1,781,595 shares of common stock, respectively, as acquisition of lease interests valued at $26,400 and $5,136,879. During the years ended December 31, 2015 and 2014, the Company issued 162,860 and 5,869 shares of common stock, respectively, for interest on notes payable of $162,860 and $10,270. During the year ended December 31, 2015 and 2014 the Company issued 65,000 and 623,369 shares of common stock, respectively, resulting from Warrant exercises for consideration totaling $113,750 and $1,277,500. A summary of stock options and warrants outstanding as of December 31, 2015 by exercise price and year of expiration is presented below: Exercise Expiration Date in Price 2016 2017 2018 2019 2020 Total $ 0.50 800,000 800,000 $ 1.00 - 150,000 - - 150,000 $ 1.40 1,704,346 1,704,346 $ 1.57 3,750,000 3,750,000 $ 1.73 100,000 100,000 $ 1.75 1,135,714 - - - 1,135,714 $ 1.79 225,000 225,000 $ 1.80 850,000 850,000 $ 2.00 1,035,271 126,000 1,696,380 - 2,857,651 $ 2.03 2,000,000 2,000,000 $ 2.09 - - 2,800,000 - 2,800,000 $ 2.23 911,330 911,330 $ 2.29 120,000 120,000 $ 2.31 500,000 500,000 $ 2.50 100,000 - - 80,779 180,779 $ 2.82 - - 38,174 - 38,174 $ 3.00 100,000 - - - 100,000 $ 3.50 15,000 15,000 $ 4.50 - - - 700,000 700,000 $ 5.00 8,391 190,000 - - 198,391 $ 6.00 - - 577,501 327,675 905,176 $ 7.00 - - - 700,000 700,000 2,379,376 466,000 8,632,055 1,823,454 7,440,676 20,741,561 As of the date of this filing, 99,200 of the warrants exercisable in 2016 have expired. At December 31, 2015 the Company had reserved 20,741,561 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, 2015
CAPITALIZED COSTS
CAPITALIZED COSTS	The following table presents the capitalized costs of the Company as of December 31, 2015 and December 31, 2014: 2015 2014 Evaluated costs subject to amortization $ 24,177,851 $ 24,276,483 Unevaluated costs 9,677,425 14,152,415 Accumulated impairment expense (22,783,989 ) - Total capitalized costs 11,071,287 38,428,898 Less accumulated depreciation, depletion and amortization (4,013,616 ) (3,930,217 ) Net capitalized costs $ 7,057,671 $ 34,498,681 Unevaluated costs as of December 31, 2015 consisted of $696,949 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, 2015
Income Taxes
INCOME TAXES	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, 2015 and December 31, 2014: Year ended Year ended Dec. 31, 2015 Dec. 31, 2014 Federal income tax benefit at statutory rate $ (14,705,979 ) $ (5,626,540 ) Permanent Differences 4,127 511,184 Other (587,126 ) 894,181 Change in valuation allowance 15,288,978 4,221,175 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, 2015 and December 31, 2014 are as follows: Dec. 31, 2015 Dec. 31, 2014 Deferred tax assets: Net operating loss carryforward $ 11,443,389 $ 8,190,580 Accruals 30,600 30,600 Reserves 5,883,263 2,952,364 Deferred tax liabilities: Intangible drilling and other costs for oil and gas properties 7,240,011 (1,865,259 ) Net deferred tax assets and liabilities 24,597,263 9,308,285 Less valuation allowance (24,597,263 ) (9,308,285 ) Total deferred tax assets and liabilities $ - $ - The Company had a net deferred tax asset related to federal net operating loss carryforwards of $33,657,027 and $24,089,942 at December 31, 2015 and December 31, 2014, respectively. The federal net operating loss carryforward 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 carryforwards. 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, 2015
PROMISSORY NOTES
PROMISSORY NOTES	Series “A” Convertible Notes issued by the Company during 2012 through 2014 having a total outstanding principal balance of $8,117,598 plus interest, were due in full at their maturity date of March 31, 2015. The notes were paid in full on June 9, 2015. During the quarter ended June 30, 2014, the Company issued $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. Notes Payable within one year The Company is obligated on a short term note payable totaling $129,741 as of December 31, 2015. The note is due with interest at its maturity date December 31, 2016.

10. ASSET RETIREMENT OBLIGATION

10. ASSET RETIREMENT OBLIGATIONS	12 Months Ended
	Dec. 31, 2015
ASSET RETIREMENT OBLIGATIONS
ASSET RETIREMENT OBLIGATIONS	The following is a reconciliation of the asset retirement obligation liability through December 31, 2015: Asset retirement obligation – December 31, 2014 $ 35,951 Estimated liabilities recorded - Accretion Expense 1,107 Asset retirement obligation – March 31, 2015 $ 37,058 Estimated liabilities recorded - Accretion Expense 819 Removal of ARO for wells sold (1,152 ) Asset retirement obligation – June 30, 2015 $ 36,725 Estimated liabilities recorded - Accretion Expense 819 Asset retirement obligation – September 30, 2015 $ 37,544 Estimated liabilities recorded - Accretion Expense 747 Removal of ARO for wells sold (9,208 ) Asset retirement obligation – December 31, 2015 $ 29,083

11. SUBSEQUENT EVENTS

11. SUBSEQUENT EVENTS	12 Months Ended
	Dec. 31, 2015
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS	Planned Divestiture of Hunton Project The Company previously announced that it is 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. As of March 30, 2016 negotiations and documentation of the sale of the Company’s Cimarron assets in Oklahoma is nearing completion.

3. SIGNIFICANT ACCOUNTING POL18

3. SIGNIFICANT ACCOUNTING POLICIES (POLICIES)	12 Months Ended
	Dec. 31, 2015
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 subsidiaries, Torchlight Energy, Inc., Torchlight Energy Operating, LLC, and Hudspeth Oil Corporation. 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, 2015 and December 31, 2014 no valuation allowance was considered necessary. As of December 31, 2015, the Company had a $419,839 account receivable from Husky Ventures for the estimated balance of the sale proceeds from the sale of the Chisholm Trail properties in fourth quarter, 2016. The Chisholm Trail properties were sold to Husky Ventures who then included them with the Husky interests in Chisholm Trail and then entered into a sale agreement with Gastar Exploration Inc. for the combined Torchlight and Husky interests. Receipt of the balance of the sale proceeds was subject to final determination of mineral lease classification and was to occur by February 28, 2016. The account receivable is not collected as of March 30, 2016.
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, 2015 and 2014, the Company capitalized $705,561 and $371,116, 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 unweighted 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 recognized impairment of $22,438,114 on its oil and gas properties during the three months ended June 30, 2015 and an additional impairment at December 31, 2015 of $3,236,009 for a total impairment adjustment for 2015 of $25,674,123. No impairment was recognized at December 31, 2014. 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 unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves. 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. The Company’s sale of the Chisholm Trail properties in fourth quarter, 2016 transferred approximately 27% of reserve value which represents a significant alteration of the relationship of reserves to capitalized costs. The $24,479 loss on the sale of the Chisholm Trail properties is, therefore, presented on the Statement of Operations.
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 March 30, 2016, 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, 2015
STOCKHOLDERS' EQUITY (TABLES)
Summary of warrant activity	Exercise Expiration Date in Price 2016 2017 2018 2019 2020 Total $ 0.50 800,000 800,000 $ 1.00 - 150,000 - - 150,000 $ 1.40 1,704,346 1,704,346 $ 1.57 3,750,000 3,750,000 $ 1.73 100,000 100,000 $ 1.75 1,135,714 - - - 1,135,714 $ 1.79 225,000 225,000 $ 1.80 850,000 850,000 $ 2.00 1,035,271 126,000 1,696,380 - 2,857,651 $ 2.03 2,000,000 2,000,000 $ 2.09 - - 2,800,000 - 2,800,000 $ 2.23 911,330 911,330 $ 2.29 120,000 120,000 $ 2.31 500,000 500,000 $ 2.50 100,000 - - 80,779 180,779 $ 2.82 - - 38,174 - 38,174 $ 3.00 100,000 - - - 100,000 $ 3.50 15,000 15,000 $ 4.50 - - - 700,000 700,000 $ 5.00 8,391 190,000 - - 198,391 $ 6.00 - - 577,501 327,675 905,176 $ 7.00 - - - 700,000 700,000 2,379,376 466,000 8,632,055 1,823,454 7,440,676 20,741,561
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, 2015
Capitalized Costs (Table):
Capitalized Costs (Table)	2015 2014 Evaluated costs subject to amortization $ 24,177,851 $ 24,276,483 Unevaluated costs 9,677,425 14,152,415 Accumulated impairment expense (22,783,989 ) - Total capitalized costs 11,071,287 38,428,898 Less accumulated depreciation, depletion and amortization (4,013,616 ) (3,930,217 ) Net capitalized costs $ 7,057,671 $ 34,498,681

8. INCOME TAXES (Tables)

8. INCOME TAXES (Tables)	12 Months Ended
	Dec. 31, 2015
Schedule of Income Taxes:
Schedule of Effective Income Tax Rate Reconciliation	Year ended Year ended Dec. 31, 2015 Dec. 31, 2014 Federal income tax benefit at statutory rate $ (14,705,979 ) $ (5,626,540 ) Permanent Differences 4,127 511,184 Other (587,126 ) 894,181 Change in valuation allowance 15,288,978 4,221,175 Provision for income taxes $ - $ -
Schedule of Deferred Tax Assets and Liabilities	Dec. 31, 2015 Dec. 31, 2014 Deferred tax assets: Net operating loss carryforward $ 11,443,389 $ 8,190,580 Accruals 30,600 30,600 Reserves 5,883,263 2,952,364 Deferred tax liabilities: Intangible drilling and other costs for oil and gas properties 7,240,011 (1,865,259 ) Net deferred tax assets and liabilities 24,597,263 9,308,285 Less valuation allowance (24,597,263 ) (9,308,285 ) Total deferred tax assets and liabilities $ - $ -

10. ASSET RETIREMENT OBLIGATI22

10. ASSET RETIREMENT OBLIGATIONS (Tables)	12 Months Ended
	Dec. 31, 2015
ASSET RETIREMENT OBLIGATIONS (Tables)
Reconciliation of the asset retirement obligation liability	Asset retirement obligation – December 31, 2014 $ 35,951 Estimated liabilities recorded - Accretion Expense 1,107 Asset retirement obligation – March 31, 2015 $ 37,058 Estimated liabilities recorded - Accretion Expense 819 Removal of ARO for wells sold (1,152 ) Asset retirement obligation – June 30, 2015 $ 36,725 Estimated liabilities recorded - Accretion Expense 819 Asset retirement obligation – September 30, 2015 $ 37,544 Estimated liabilities recorded - Accretion Expense 747 Removal of ARO for wells sold (9,208 ) Asset retirement obligation – December 31, 2015 $ 29,083

2. GOING CONCERN (Details Narra

2. GOING CONCERN (Details Narrative)	12 Months Ended
	Dec. 31, 2015USD ($)
Going Concern Accumulated Losses
Accumulated Losses since inception	$ 74,903,439
Working Capital deficit	478,141
Net loss	$ (43,252,878)

3. SIGNIFICANT ACCOUNTING POL24

3. SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Significant Accounting Policies {1}
Capitalized interest on unevaluated properties	$ 705,561	$ 371,116
Account receivable	419,839
Impairment expense	25,674,123	$ (447,084)
Additional impairment	$ 3,236,009

4. RELATED PARTY PAYABLES (Deta

4. RELATED PARTY PAYABLES (Details Narrative)	Dec. 31, 2015USD ($)
Related Party Transactions payments due to related party
Related party payable accrued and unpaid compensation to two of the executive officers	$ 130,000
Notes payable within one year	$ 129,741

6. STOCKHOLDERS' EQUITY (Detail

6. STOCKHOLDERS' EQUITY (Details)	Dec. 31, 2015shares
0.50
Outstanding warrants and stock options	800,000
1
Outstanding warrants and stock options	150,000
1.40
Outstanding warrants and stock options	1,704,346
1.57
Outstanding warrants and stock options	3,750,000
1.73
Outstanding warrants and stock options	100,000
1.75
Outstanding warrants and stock options	1,135,714
1.79
Outstanding warrants and stock options	225,000
1.80
Outstanding warrants and stock options	850,000
2
Outstanding warrants and stock options	2,857,651
2.03
Outstanding warrants and stock options	2,000,000
2.09
Outstanding warrants and stock options	2,800,000
2.23
Outstanding warrants and stock options	911,330
2.29
Outstanding warrants and stock options	120,000
2.31
Outstanding warrants and stock options	500,000
2.50
Outstanding warrants and stock options	180,779
2.82
Outstanding warrants and stock options	38,174
3
Outstanding warrants and stock options	100,000
3.50
Outstanding warrants and stock options	15,000
4.50
Outstanding warrants and stock options	700,000
5
Outstanding warrants and stock options	198,391
6
Outstanding warrants and stock options	905,176
7
Outstanding warrants and stock options	700,000
Total
Outstanding warrants and stock options	20,741,561
Total | Expiring in the year 2016
Outstanding warrants and stock options	2,379,376
Total | Expiring in the year 2017
Outstanding warrants and stock options	466,000
Total | Expiring in the year 2018
Outstanding warrants and stock options	8,632,055
Total | Expiring in the year 2019
Outstanding warrants and stock options	1,823,454
Total | Expiring in the year 2020
Outstanding warrants and stock options	7,440,676

6. STOCKHOLDERS' EQUITY (Deta27

6. STOCKHOLDERS' EQUITY (Details 1)	12 Months Ended
	Dec. 31, 2015
Risk-free interest rate	0.78%
Dividend yield	0.00%
Minimum [Member]
Expected volatility of common stock	191.00%
Discount due to lack of marketability	20.00%
Expected life of warrant	3 years
Maximum [Member]
Expected volatility of common stock	253.00%
Discount due to lack of marketability	30.00%
Expected life of warrant	5 years

6. STOCKHOLDERS' EQUITY (Deta28

6. STOCKHOLDERS' EQUITY (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Assumptions used in calculating the fair value of the warrants issued are as follows:
Issuance of common stock for cash, shares	4,931,250	2,989,655
Issuance of common stock for cash, amount	$ 1,300,000	$ 10,632,791
Issuance of preferred stock for cash, shares	135,000
Issuance of preferred stock for cash, amount	$ 13,500,000
Preferred dividends paid in cash	$ 120,427
Issuance of common stock for preferred dividends, shares	577,140
Common stock issued for services	2,477,696	450,180
Issuance of common stock for services, amount	$ 2,651,504	$ 934,428
Warrants issued for services, shares	7,015,779	1,847,500
Warrants issued for services, amount	$ 7,797,619	$ 78,765
warrants issued in connection with financing transactions, shares	770,000
warrants issued in connection with financing transactions, amount	$ 368,300
Warrants issued in connection with the issuance of preferred stock.	2,615,676
Warrants issued in connection with the acquisition of lease, shares	750,000
Warrants issued in connection with the acquisition of lease, amount	$ 527,500
Issuance of common stock - mineral interests, shares	30,000	1,781,595
Issuance of common stock - mineral interests, amount	$ 26,400	$ 5,136,879
Common stock issued in conversion of notes, shares	1,600,000	1,248,877
Common stock issued in conversion of notes, amount	$ 1,150,000	$ 2,185,535
Issuance of common stock for note interest, shares	162,860	5,869
Issuance of common stock for note interest, amount	$ 162,860	$ 10,270
Issuance of common stock in warrant exercise, shares	65,000	623,369
Issuance of common stock in warrant exercise, amount	$ 113,750	$ 1,277,500

7. CAPITALIZED COSTS (Details)

7. CAPITALIZED COSTS (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
The following table presents the capitalized costs of the Company as of December 31, 2013 and December 31, 2012:
Evaluated costs subject to amortization	$ 24,177,851	$ 24,276,483
Unevaluated costs	9,677,425	$ 14,152,415
Accumulated impairment expense	(22,783,989)
Total capitalized costs.	11,071,287	$ 38,428,898
Less accumulated depreciation, depletion and amortization	(4,013,616)	(3,930,217)
Net capitalized costs.	$ 7,057,671	$ 34,498,681

7. CAPITALIZED COSTS (Details N

7. CAPITALIZED COSTS (Details Narrative)	Dec. 31, 2015USD ($)
Capitalized costs Text
Unevaluated costs associated with company's interest in Coulter well	$ 696,949

8. INCOME TAXES (Details)

8. INCOME TAXES (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Tax Reconciliation and provision for income taxes
Federal income tax benefit at statutory rate	$ (14,705,979)	$ (5,626,540)
Permanent Differences	4,127	511,184
Other	(587,126)	894,181
Change in valuation allowance	15,288,978	4,221,175
Provision for income taxes	$ 0	$ 0

8. INCOME TAXES (Details 1)

8. INCOME TAXES (Details 1) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Deferred tax assets:
Net operating loss carryforward	$ 11,443,389	$ 8,190,580
Accruals	30,600	30,600
Reserves	5,883,263	2,952,364
Deferred tax liabilities:
Intangible drilling and other costs for oil and gas properties	7,240,011	(1,865,259)
Net deferred tax assets and liabilities	24,597,263	9,308,285
Less valuation allowance	(24,597,263)	(9,308,285)
Total deferred tax assets and liabilities	$ 0	$ 0

8. INCOME TAXES (Details Narrat

8. INCOME TAXES (Details Narrative) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Income Taxes Operating loss carryforwards
Net deferred tax asset related to federal net operating loss carryforwards of	$ 33,657,027	$ 24,089,942

9. PROMISSORY NOTES (Details Na

9. PROMISSORY NOTES (Details Narrative) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Promissory Notes Details Narrative
Notes payable within one year	$ 129,741	$ 829,719

10. ASSET RETIREMENT OBLIGATI35

10. ASSET RETIREMENT OBLIGATIONS (Details) - USD ($)	3 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015
ASSET RETIREMENT OBLIGATIONS RECONCILIATION
Asset retirement obligation	$ 37,544	$ 36,725	$ 37,058	$ 35,951
Estimated liabilities recorded			0
Accretion expense	$ 747	$ 819	819	$ 1,107
Removal of ARO for wells sold	(9,208)		(1,152)
Asset retirement obligation	$ 29,083	$ 37,544	$ 36,725	$ 37,058