Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 21, 2017 | Jun. 30, 2016 | |
Document and Entity Information | |||
Entity Registrant Name | TORCHLIGHT ENERGY RESOURCES INC | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Entity Central Index Key | 1,431,959 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Public Float | $ 19,404,947 | ||
Entity Common Stock, Shares Outstanding | 57,862,004 | ||
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 | 2,016 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash | $ 1,769,499 | $ 1,026,600 |
Accounts receivable | 603,446 | 741,653 |
Production revenue receivable | 7,325 | 199,317 |
Note receivable | 0 | 613 |
Prepayments - development costs | 583,347 | 0 |
Prepaid expenses | 26,829 | 38,776 |
Total current assets | 2,990,446 | 2,006,959 |
Oil and gas properties, net | 9,392,288 | 7,057,671 |
Office equipment, net | 29,848 | 43,110 |
Other Assets | 21,066 | 80,306 |
TOTAL ASSETS | 12,433,648 | 9,188,046 |
Current liabilities: | ||
Accounts payable | 422,684 | 1,153,185 |
Funds received pending settlement | 520,400 | 0 |
Accrued payroll | 565,176 | 590,100 |
Related party payables | 237,044 | 130,000 |
Convertible promissory notes, ((Series B) net of discount of $91,379 at December 31, 2016 | 3,478,121 | 0 |
Note payable within one year - related party | 0 | 205,000 |
Notes payable within one year | 0 | 129,741 |
Due to working interest owners | 54,320 | 103,364 |
Interest payable | 6,049 | 173,710 |
Total current liabilities | 5,283,794 | 2,485,100 |
Convertible promissory notes, (Series B net of discount of 277,911 at December 31, 2015 | 0 | 3,291,589 |
Asset retirement obligation | 7,051 | 29,083 |
Total Liabilities | 5,290,845 | 5,805,772 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, par value .001, 10,000,000 shares authorized; -0- issued and outstanding at December 31, 2016 134,000 issued and outstanding at December 31, 2015 | 0 | 134 |
Common stock, par value 0.001 per share; 100,000,000 shares authorized; 55,096,503 issued and outstanding at December 31, 2016 33,166,344 issued and outstanding at December 31, 2015 | 55,100 | 33,168 |
Additional paid-in capital | 89,675,488 | 78,252,411 |
Accumulated deficit | (82,587,785) | (74,903,439) |
Total stockholders' equity | 7,142,803 | 3,382,274 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 12,433,648 | $ 9,188,046 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
ASSETS | ||
Discount of Convertible promissory notes current | $ 91,379 | |
Discount on Convertible promissory notes noncurrent | $ 0 | $ 277,911 |
Preferred Stock, par value | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred Stock, shares issued | 0 | 134,000 |
Preferred Stock, shares outstanding | 0 | 134,000 |
Common Stock, par or stated value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 100,000,000 | 100,000,000 |
Common Stock, shares issued | 55,096,503 | 33,166,344 |
Common Stock, shares outstanding | 55,096,503 | 33,166,344 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Revenue | ||
Oil and gas sales | $ 354,390 | $ 1,628,034 |
SWD and Royalties | 0 | 6,274 |
Cost of revenue | (328,438) | (814,078) |
Gross income | 25,952 | 820,230 |
Operating expenses: | ||
General and administrative expense | 6,447,706 | 15,550,145 |
Depreciation, depletion and amortization | 636,426 | 930,934 |
Impairment expense | 70,080 | 25,674,123 |
Loss on sale | 283,285 | 24,479 |
Total operating expenses | 7,437,497 | 42,179,681 |
Other (income) expense | ||
Interest income | (36) | 0 |
Interest and accretion expense | 272,837 | 1,893,427 |
Total other (income) expense | 272,801 | 1,893,427 |
Net loss before taxes | (7,684,346) | (43,252,878) |
Provision for income taxes | 0 | 0 |
Net loss | $ (7,684,346) | $ (43,252,878) |
Loss per share: | ||
Basic and Diluted | $ (0.19) | $ (1.58) |
Weighted average shares outstanding: | ||
Basic and Diluted | 43,122,514 | 27,897,794 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Pref. Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Begining balance, shares at Dec. 31, 2014 | 23,235,441 | ||||
Begining balance, amount at Dec. 31, 2014 | $ 23,237 | $ 50,745,072 | $ (31,650,561) | $ 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 | (577) | $ 0 | ||
Preferred dividends paid in cash | (120,427) | (120,427) | |||
Warrants issued with promissory notes | 467,800 | $ 467,800 | |||
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 | 8,225,619 | 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 | 78,252,411 | (74,903,439) | $ 3,382,274 |
Issuance of common stock for cash, shares | 3,750,000 | 3,750,000 | |||
Issuance of common stock for cash, amount | $ 3,750 | 2,996,250 | $ 3,000,000 | ||
Issuance of preferred stock for cash, amount | 10 | 999,990 | $ 1,000,000 | ||
Issuance of common stock for services, shares | 768,832 | 768,832 | |||
Issuance of common stock for services, amount | $ 769 | 669,305 | $ 670,074 | ||
Issuance of common stock - mineral interests, shares | 2,824,881 | 2,824,881 | |||
Issuance of common stock - mineral interests, amount | $ 2,825 | 1,972,221 | $ 1,975,046 | ||
Issuance of common stock in warrant exercise, shares | 3,888,745 | 3,888,745 | |||
Issuance of common stock in warrant exercise, amount | $ 3,891 | 2,539,855 | $ 2,543,746 | ||
Issuance of common stock for preferred dividends, shares | 440,262 | 440,262 | |||
Issuance of common stock for preferred dividends, amount | $ 440 | (440) | $ 0 | ||
Preferred dividends paid in cash | (320,724) | (320,724) | |||
Warrants issued with lease interests | 1,290,761 | 1,290,761 | |||
Warrants and Options issued for services | 2,205,231 | 2,205,231 | |||
Lease interest conveyed in conversion of preferred stock,Amount | (10) | (999,990) | (1,000,000) | ||
Common stock issued in conversion of preferred stock, shares | 10,257,439 | (134,000) | |||
Common stock issued in conversion of preferred stock, amount | $ 10,257 | $ (134) | (10,132) | (9) | |
Net loss | (7,684,346) | (7,684,346) | |||
Warrants issued in connection with promissory note | 80,750 | 80,750 | |||
Ending balance, shares at Dec. 31, 2016 | 55,096,503 | 55,100 | |||
Ending balance, amount at Dec. 31, 2016 | $ 55,100 | $ 89,675,488 | $ (82,587,785) | $ 7,142,803 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOW - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash Flows From Operating Activities | ||
Net loss | $ (7,684,346) | $ (43,252,878) |
Adjustments to reconcile net loss to net cash from operations: | ||
Stock based compensation | 2,956,044 | 11,265,926 |
Accretion of convertible note discounts | 186,532 | 1,395,103 |
Loss on sale of assets | 283,285 | 24,479 |
Impairment expense | 70,080 | 25,674,123 |
Depreciation, depletion and amortization | 636,426 | 930,934 |
Change in: | ||
Accounts receivable | 138,207 | (187,305) |
Note receivable | 613 | 515,135 |
Production revenue receivable | 191,992 | 11,118 |
Prepayment of development costs | (1,583,347) | (290,398) |
Prepaid expenses | 11,946 | (9,142) |
Other assets | 59,240 | (8,860) |
Accounts payable and accrued liabilities | (396,456) | 1,024,098 |
Due to working interest owners | (49,044) | 29,925 |
Funds received pending settlement | 520,400 | 0 |
Interest payable | (167,661) | 469,241 |
Net cash from operating activities | (4,826,089) | (2,408,501) |
Cash Flows From Investing Activities | ||
Investment in oil and gas properties | (2,293,497) | (5,224,748) |
Acquisition of office equipment | (1,863) | (1,191) |
Proceeds from sale of oil and gas properties | 2,127,489 | 2,851,918 |
Net cash used in investing activities | (167,871) | (2,374,021) |
Cash Flows From Financing Activities | ||
Proceeds from short term advance | 150,000 | 0 |
Repayment of short term advance | (150,000) | 0 |
Proceeds from sale of common stock | 3,000,000 | 1,300,000 |
Proceeds from sale of preferred stock | 1,000,000 | 13,500,000 |
Preferred dividends paid in cash | (320,724) | (120,427) |
Proceeds from warrant exercise | 1,999,310 | 113,750 |
Proceeds from promissory notes | 708,014 | 539,916 |
Repayment of convertible notes | 0 | (8,859,011) |
Repayment of promissory notes | (649,741) | (844,893) |
Net cash from financing activities | 5,736,859 | 5,629,335 |
Net change in cash | 742,899 | 846,813 |
Cash - beginning of period | 1,026,600 | 179,787 |
Cash - end of period | 1,769,499 | 1,026,600 |
Supplemental disclosure of cash flow information: (Non Cash Items | ||
Common stock issued for mineral interests | 1,975,046 | 26,400 |
Common stock issued in conversion of promissory notes | 0 | 1,150,000 |
Common stock issued for unpaid compensation | 0 | 39,900 |
Warrants issued for mineral interests | 1,290,761 | 0 |
Cash paid for interest | $ 603,157 | $ 919,272 |
1. NATURE OF BUSINESS
1. NATURE OF BUSINESS | 12 Months Ended |
Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS | Torchlight Energy Resources, Inc. (Company) 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. We operate our business through our subsidiaries Torchlight Energy Inc., Torchlight Energy Operating, LLC, and Hudspeth Oil Corporation. |
2. GOING CONCERN
2. GOING CONCERN | 12 Months Ended |
Dec. 31, 2016 | |
GOING CONCERN | |
GOING CONCERN | At December 31, 2016, the Company had not yet achieved profitable operations. We had a net loss of $7,684,346 million for the year ended December 31, 2016 and had accumulated losses of $82,587,785 since our inception. We expect to incur further losses in the development of our business. The Company had a working capital deficit as of December 31, 2016 of $(2,293,348). Negative working capital is exacerbated by the inclusion in current liabilities of the $3,478,121 outstanding balance of subordinated convertible notes which have a maturity date of June 30, 2017.These conditions raise substantial doubt about the Companys ability to continue as a going concern. The Companys 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. Managements plan to address the Companys 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. These consolidated financial statements have been prepared assuming that the Company will continue as a going concern and therefore, the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classifications of liabilities that may result from the outcome of this uncertainty. |
3. SIGNIFICANT ACCOUNTING POLIC
3. SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2016 | |
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 Basis of presentation Risks and uncertainties Concentration of risks Fair value of financial instruments 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 managements own assumptions used to measure assets and liabilities at fair value. A financial asset or liabilitys classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. Accounts receivable Oil and gas properties 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. Unevaluated properties are reviewed for impairment at least quarterly and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions. 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 Companys 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. Capitalized interest Depreciation, depletion, and amortization Ceiling test 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. Asset retirement obligations 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. Income taxes - 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 Companys tax positions and determined there were no uncertain tax positions requiring recognition in the consolidated financial statements. The Companys 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. Share-based compensation The Company also issues equity awards to non-employees. The fair value of these option awards is estimated when the award recipient completes the contracted professional services. The Company recognizes expense for the estimated total value of the awards during the period from their issuance until performance completion, at which time the estimated expense is adjusted to the final value of the award as measured at performance completion. The Company values warrant and option awards using the Black-Scholes option pricing model. Revenue recognition Basic and diluted earnings (loss) per share The loss available to common shareholders was determined by subtracting preferred dividends totaling $585,844 for 2016 and $930,169 for 2015 from each year's respective net loss. Environmental laws and regulations Recent accounting pronouncements Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern, In May 2014, the FASB issued ASU 2014-09, Revenue From Contracts With Customers, In February 2016, the FASB, issued ASU, 2016-02, Leases Other recently issued or adopted accounting pronouncements are not expected to have, or did not have, a material impact on the Companys financial position or results from operations. Subsequent events |
4. OIL & GAS PROPERTIES
4. OIL & GAS PROPERTIES | 12 Months Ended |
Dec. 31, 2016 | |
Oil Gas Properties | |
OIL & GAS PROPERTIES | The following table presents the capitalized costs for oil & gas properties of the Company as of December 31, 2016 and 2015: 2016 2015 Evaluated costs subject to amortization $ 1,470,939 $ 24,177,851 Unevaluated costs 13,376,742 9,677,425 Total capitalized costs 14,847,681 33,855,276 Less accumulated depreciation, depletion and amortization (5,455,393 ) (26,797,605 ) Total oil and gas properties $ 9,392,288 $ 7,057,671 The Company recognized impairment expense of $25,674,123 on its oil and gas properties during 2015. An additional impairment of $70,080 was expensed in 2016. 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. During 2016 the Company sold its Cimarron and Marcelina properties. Those sales of the Cimarron and the Marcelina properties in 2016 represented substantial percentages of reserves at the time of each sale and are also presented on the Statement of Operations for 2016. Proceeds from the sale of Cimarron and Marcelina properties were $750,000 and $877,489 respectively. The combined loss on sale for 2016 was $283,285. |
5. RELATED PARTY PAYABLES
5. RELATED PARTY PAYABLES | 12 Months Ended |
Dec. 31, 2016 | |
RELATED PARTY PAYABLES. | |
RELATED PARTY PAYABLES | As of December 31, 2016, related party payables consisted of accrued and unpaid compensation to one of our executive officers totaling $45,000 and $192,044 in Director Fees payable to our Directors. |
6. COMMITMENTS AND CONTINGENCIE
6. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2016 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | Leases The Company has a noncancelable lease for its office premises that expires on November 30, 2019 and which requires the payment of base lease amounts and executory costs such as taxes, maintenance and insurance. Rental expense for lease was $81,595 and $87,037 for the year ended December 31, 2016 and 2015, respectively. Approximate future minimum rental commitments under the office premises lease are: For the Year Ending December 31, Amount 2017 $ 79,658 2018 $ 81,248 2019 $ 75,814 $ 236,720 Environmental matters The Company is subject to contingencies as a result of environmental laws and regulations. Present and future environmental laws and regulations applicable to the Companys 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, 2016 and 2015, 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. Litigation With respect to Oil and Gas properties previously owned by the Company in Central Oklahoma, Torchlight Energy Resources, Inc. and its subsidiary Torchlight Energy, Inc. (Torchlight) has pending in the 429th judicial district court in Collin County, Texas a lawsuit against Husky Ventures, Inc., Charles V. Long, Silverstar of Nevada, Inc., Gastar Exploration Inc., J. Russell Porter, Michael A. Gerlich, and Jerry R. Schuyler that was originally filed in May 2016 (previous defendants April Glidewell, Maximus Exploration, LLC, Atwood Acquisitions, LLC and John M. Selser, Sr have been non-suited without prejudice to re-filing the claims). In the lawsuit, Torchlight alleges, among other things, that the defendants acted improperly in connection with multiple transactions, and that the defendants misrepresented and omitted material information to Torchlight with respect to these transactions. The lawsuit seeks damages arising from 15 different causes of action, including without limitation, violations of the Texas Securities Act, fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract, unjust enrichment and tortious interference. The lawsuit also seeks a complete accounting as to how Torchights investment funds were used, including all transfers between and among the defendants. Torchlight is seeking the full amount of our damages on $20,000,000 invested. Defendant Gastar has asserted a breach of contract counterclaim against Torchlight related to a release contained in one of the agreements between Torchlight and Husky in which Gastar claims to be a third-party beneficiary. Torchlight is claiming that this agreement should be rescinded, and in any event, that the release is unenforceable. 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, 2015. 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. On June 14, 2016, after the lawsuit was filed regarding the Hunton Play, the Company received and subsequently deposited a check from Husky Ventures in the amount of $520,400. Husky Ventures designated that the check was in full satisfaction of its obligations under the transaction in which the Company sold the Chisholm Trail properties as described above. The Company does not believe the check is in full satisfaction of Husky Venturess obligations, including but not limited to that Husky Ventures has provided insufficient information for the Company regarding this transaction. |
7. STOCKHOLDERS' EQUITY
7. STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2016 | |
Stockholders' equity: | |
STOCKHOLDERS' EQUITY | Common Stock During the years ended December 31, 2016 and 2015, the Company issued 3,750,000 and 4,931,250 shares of common stock, respectively, for cash of $3,000,000 and $1,300,000. During the years ended December 31, 2016 and 2015, the Company issued 768,832 and 2,477,696 shares of common stock with total values of $670,074 and $2,651,504, respectively, as compensation for services. During the year ended December 31, 2016 and 2015 the Company issued 10,257,439 and 86,957 shares of common stock, respectively, in conversions of preferred stock valued at $13,399,992 and $100,000. During the year ended December 31, 2015 the Company issued 1,600,000 shares of common stock, in conversions of notes payable valued $1,150,000 and 162,860 shares of common stock, respectively, for interest on notes payable of $162,860. During the year ended December 31, 2016 and 2015 the Company issued 3,888,745 and 65,000 shares of common stock, respectively, resulting from warrant exercises for consideration totaling $2,543,746 and $113,750. Preferred Stock During the year ended December 31, 2016 the Company issued 10,000 shares of Series C preferred stock for $1,000,000 in cash. The proceeds were deposited as a prepayment with the operator for development cost of the Flying B #2 well in the Hazel Project. The preferred holders exercised their option in fourth quarter of 2016 to convert their preferred shares into an aggregate 33.33% working interest in the Flying B #2 whereupon they received credit for the prepayment to their working interest joint interest billing accounts. During the year ended December 31, 2015, the Company issued 135,000 shares of preferred stock for cash of $13,500,000. During the year ended December 31, 2016 and 2015, the Company paid dividends on preferred stock in cash, respectively, of $320,724 and $120,427. In addition during the years 2016 and 2015, 440,262 and 577,140 shares of common stock, respectively, were issued for dividends on preferred stock. Warrants and Options During the years ended December 31, 2016 and 2015, the Company issued/vested 6,437,267 and 7,015,779 warrants and options with total values of $2,205,231 and $7,797,619, respectively, as compensation for services. During the year ended December 31, 2016, and 2015, the Company issued 137,500 and 770,000 warrants, respectively, in connection with financing transactions, with total values of $80,750 and $368,300. 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, 2016 and 2015, the Company issued 3,412,525 and 750,000 warrants and 2,824,881 and 30,000 shares of common stock, respectively, in connection with the acquisition of lease interests, respectively, with total value of $3,265,807 and $553,900. A summary of warrants outstanding as of December 31, 2016 by exercise price and year of expiration is presented below: Exercise Expiration Date in Price 2017 2018 2019 2020 2021 Total $ 0.50 528,099 528,099 $ 0.70 1,700,000 1,700,000 $ 0.77 100,000 100,000 $ 1.00 150,000 - 54,366 1,500,000 1,704,366 $ 1.03 120,000 120,000 $ 1.08 37,500 37,500 $ 1.40 1,643,475 1,643,475 $ 1.73 100,000 100,000 $ 1.80 500,000 500,000 $ 2.00 126,000 1,906,249 - 2,032,249 $ 2.03 2,000,000 2,000,000 $ 2.09 - 2,800,000 - 2,800,000 $ 2.23 832,512 832,512 $ 2.29 120,000 120,000 $ 2.50 - - 35,211 35,211 $ 2.82 - 38,174 - 38,174 $ 3.50 15,000 15,000 $ 4.50 - - 700,000 700,000 $ 5.00 170,000 - - 170,000 $ 5.05 40,000 40,000 $ 6.00 - 523,123 22,580 545,703 $ 7.00 - - 700,000 700,000 486,000 8,015,645 1,664,657 4,675,987 1,620,000 16,462,289 A summary of stock options outstanding as of December 31, 2016 by exercise price and year of expiration is presented below: Exercise Expiration Date in Price 2017 2018 2019 2020 2021 Total $ 0.97 259,742 259,742 $ 1.57 - - - 5,997,163 - 5,997,163 $ 1.79 - - - 412,500 - 412,500 - - - 6,409,663 259,742 6,669,405 At December 31, 2016 the Company had reserved 23,131,694 shares for future exercise of warrants and options. Warrants and options issued were valued using the Black Scholes Option Pricing Model. The assumptions used in calculating the fair value of the warrants issued were as follows: 2016 Risk-free interest rate 0.78%-1.22% Expected volatility of common stock 101% - 189% Dividend yield 0.00% Discount due to lack of marketability 20-30% Expected life of warrant 3 years - 5 years 2015 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 |
8. INCOME TAXES
8. INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes | |
INCOME TAXES | The Company recorded no income tax provision for 2016 or 2015 because of losses incurred. The Company has placed a full valuation allowance against net deferred tax assets because future realization of these assets is not assured. 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, 2016 and 2015: Year ended Year ended December 31, 2016 December 31, 2015 Federal income tax benefit at statutory rate $ (2,869,293 ) $ (14,705,979 ) Permanent differences 3,000 4,127 Other 4,096,947 (587,126 ) Change in valuation allowance (1,230,654 ) 15,288,978 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, 2016 and December 31, 2015 are as follows: December 31, 2016 December 31, 2015 Deferred tax assets: Net operating loss carryforward $ 16,269,090 $ 11,443,389 Accruals 15,300 30,600 Reserves 7,156,559 5,883,263 Deferred tax liabilities: Intangible drilling and other costs for oil and gas properties (74,340 ) 7,240,011 Net deferred tax assets and liabilities 23,366,609 24,597,263 Less valuation allowance (23,366,609 ) (24,597,263 ) Total deferred tax assets and liabilities $ - $ - The Company has federal net operating loss carryforwards of $47,850,266 and $39,312,173 at December 31, 2016 and 2015, respectively. The federal net operating loss carryforwards will begin to expire in 2031. 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 full valuation allowance against net deferred tax assets because future realization of these assets is not assured. |
9. PROMISSORY NOTES
9. PROMISSORY NOTES | 12 Months Ended |
Dec. 31, 2016 | |
PROMISSORY NOTES | |
PROMISSORY NOTES | During 2014, the Company issued $4,569,500 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 203,085 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 $562,404 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 March 31, 2015, the Company amended a note with a holder of a $1,000,000 Series B Convertible Unsecured Promissory Note to reset the conversion price to $1.00. During the fourth quarter of 2015, $1 million in note principal was converted into common stock. The total outstanding balance of Series B Notes at December 31, 2016 was $3,569,500. |
10. ASSET RETIREMENT OBLIGATION
10. ASSET RETIREMENT OBLIGATIONS | 12 Months Ended |
Dec. 31, 2016 | |
ASSET RETIREMENT OBLIGATIONS | |
ASSET RETIREMENT OBLIGATIONS | The following is a reconciliation of the asset retirement obligation liability through December 31, 2016: Asset retirement obligation December 31, 2014 $ 35,951 Accretion expense 3,492 Removal of ARO for wells sold (10,360 ) Asset retirement obligation December 31, 2015 $ 29,083 Accretion expense 41 Removal of ARO for wells sold (22,073 ) Asset retirement obligation December 31, 2016 $ 7,051 |
11. SUBSEQUENT EVENTS
11. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2016 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | Acquisition of Additional Interest in the Hazel Project On January 30, 2017, we and our wholly-owned subsidiary, Torchlight Acquisition Corporation, a Texas corporation (TAC), entered into and closed an Agreement and Plan of Reorganization and Plan of Merger with Line Drive Energy, LLC, a Texas limited liability company (Line Drive), under which agreements TAC merged with and into Line Drive and the separate existence of TAC ceased, with Line Drive being the surviving organization and becoming our wholly-owned subsidiary. Line Drive, which was wholly-owned by Gregory McCabe, our Chairman, owned certain assets and securities, including approximately 40.66% of 12,000 gross acres in the Hazel Project and 521,739 warrants to purchase our common stock (which warrants had been assigned by Mr. McCabe to Line Drive). Under the merger transaction, our shares of common stock of TAC converted into a membership interest of Line Drive, the membership interest in Line Drive held by Mr. McCabe immediately prior to the transaction ceased to exist, and we issued Mr. McCabe 3,301,739 restricted shares of common stock as consideration therefor. Immediately after closing, the 521,739 warrants held by Line Drive were cancelled, which warrants had an exercise price of $1.40 per share and an expiration date of June 9, 2020. A Certificate of Merger for the merger transaction was filed with the Secretary of State of Texas on January 31, 2017. Also on January 30, 2017, our wholly-owned subsidiary, Torchlight Energy, Inc., a Nevada corporation (TEI), entered into and closed a Purchase and Sale Agreement with Wolfbone Investments, LLC, a Texas limited liability company (Wolfbone) which is wholly-owned by Gregory McCabe. Under the agreement, TEI acquired certain of Wolfbones Hazel Project assets, including its interest in the Flying B Ranch #1 well and the 40 acre unit surrounding the well, for consideration of $415,000, and additionally, Wolfbone caused to be cancelled a total of 2,780,000 warrants to purchase our common stock, including 1,500,000 warrants held by McCabe Petroleum Corporation, an entity owned by Mr. McCabe, and 1,280,000 warrants held by Green Hill Minerals, an entity owned by Mr. McCabes son, which warrant cancellations were effected through certain Warrant Cancellation Agreements. The 1,500,000 warrants held by McCabe Petroleum Corporation had an exercise price of $1.00 per share and an expiration date of April 4, 2021. The warrants held by Green Hill Minerals included 100,000 warrants with an exercise price of $1.73 and an expiration date of September 30, 2018 and 1,180,000 warrants with an exercise price of $0.70 and an expiration date of February 15, 2020. After the above transactions, our total ownership in the Hazel Project increased to a 74% working interest across all 12,000 gross acres. |
3. SIGNIFICANT ACCOUNTING POL18
3. SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Use of estimates | 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 | Basis of presentation |
Risks and uncertainties | Risks and uncertainties The Companys 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 | Concentration of risks |
Fair value of financial instruments | Fair value of financial instruments 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 managements own assumptions used to measure assets and liabilities at fair value. A financial asset or liabilitys classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. |
Accounts receivable | Accounts receivable |
Oil and gas properties | Oil and gas properties 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. Unevaluated properties are reviewed for impairment at least quarterly and are determined through an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining time in the commitment period, remaining capital plan, and political, economic, and market conditions. 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 Companys 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. |
Capitalized interest | Capitalized interest |
Depreciation, depletion and amortization | 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 | Ceiling test 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. |
Asset retirement obligations | Asset retirement obligations 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. |
Income taxes | Income taxes - 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 Companys tax positions and determined there were no uncertain tax positions requiring recognition in the consolidated financial statements. The Companys 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. |
Share-based compensation | Share-based compensation The Company also issues equity awards to non-employees. The fair value of these option awards is estimated when the award recipient completes the contracted professional services. The Company recognizes expense for the estimated total value of the awards during the period from their issuance until performance completion, at which time the estimated expense is adjusted to the final value of the award as measured at performance completion. The Company values warrant and option awards using the Black-Scholes option pricing model. |
Revenue recognition | 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 and diluted earnings (loss) per share – |
Environmental laws and regulations | 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 | Recent accounting pronouncements Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern, In May 2014, the FASB issued ASU 2014-09, Revenue From Contracts With Customers, In February 2016, the FASB, issued ASU, 2016-02, Leases Other recently issued or adopted accounting pronouncements are not expected to have, or did not have, a material impact on the Companys financial position or results from operations. |
Subsequent events | Subsequent events The Company evaluated subsequent events through March 30, 2017, the date of issuance of the financial statements. Subsequent events are disclosed in Note 11. |
4. OIL & GAS PROPERTIES (Tables
4. OIL & GAS PROPERTIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Oil Gas Properties Tables | |
Schedule of Oil and Gas Properties | 2016 2015 Evaluated costs subject to amortization $ 1,470,939 $ 24,177,851 Unevaluated costs 13,376,742 9,677,425 Total capitalized costs 14,847,681 33,855,276 Less accumulated depreciation, depletion and amortization (5,455,393 ) (26,797,605 ) Total oil and gas properties $ 9,392,288 $ 7,057,671 |
6. COMMITMENTS AND CONTINGENC20
6. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments And Contingencies Tables | |
COMMITMENTS AND CONTINGENCIES | For the Year Ending December 31, Amount 2017 $ 79,658 2018 $ 81,248 2019 $ 75,814 $ 236,720 |
7. STOCKHOLDERS' EQUITY (Tables
7. STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
STOCKHOLDERS' EQUITY (TABLES) | |
Summary of warrant activity | Exercise Expiration Date in Price 2017 2018 2019 2020 2021 Total $ 0.50 528,099 528,099 $ 0.70 1,700,000 1,700,000 $ 0.77 100,000 100,000 $ 1.00 150,000 - 54,366 1,500,000 1,704,366 $ 1.03 120,000 120,000 $ 1.08 37,500 37,500 $ 1.40 1,643,475 1,643,475 $ 1.73 100,000 100,000 $ 1.80 500,000 500,000 $ 2.00 126,000 1,906,249 - 2,032,249 $ 2.03 2,000,000 2,000,000 $ 2.09 - 2,800,000 - 2,800,000 $ 2.23 832,512 832,512 $ 2.29 120,000 120,000 $ 2.50 - - 35,211 35,211 $ 2.82 - 38,174 - 38,174 $ 3.50 15,000 15,000 $ 4.50 - - 700,000 700,000 $ 5.00 170,000 - - 170,000 $ 5.05 40,000 40,000 $ 6.00 - 523,123 22,580 545,703 $ 7.00 - - 700,000 700,000 486,000 8,015,645 1,664,657 4,675,987 1,620,000 16,462,289 |
Summary of stock options outstanding | Exercise Expiration Date in Price 2017 2018 2019 2020 2021 Total $ 0.97 259,742 259,742 $ 1.57 - - - 5,997,163 - 5,997,163 $ 1.79 - - - 412,500 - 412,500 - - - 6,409,663 259,742 6,669,405 |
Assumptions used in calculating the fair value of the warrants | 2016 Risk-free interest rate 0.78%-1.22% Expected volatility of common stock 101% - 189% Dividend yield 0.00% Discount due to lack of marketability 20-30% Expected life of warrant 3 years - 5 years 2015 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 |
8. INCOME TAXES (Tables)
8. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Schedule of Income Taxes: | |
Schedule of Effective Income Tax Rate Reconciliation | Year ended Year ended December 31, 2016 December 31, 2015 Federal income tax benefit at statutory rate $ (2,869,293 ) $ (14,705,979 ) Permanent differences 3,000 4,127 Other 4,096,947 (587,126 ) Change in valuation allowance (1,230,654 ) 15,288,978 Provision for income taxes $ - $ - |
Schedule of Deferred Tax Assets and Liabilities | December 31, 2016 December 31, 2015 Deferred tax assets: Net operating loss carryforward $ 16,269,090 $ 11,443,389 Accruals 15,300 30,600 Reserves 7,156,559 5,883,263 Deferred tax liabilities: Intangible drilling and other costs for oil and gas properties (74,340 ) 7,240,011 Net deferred tax assets and liabilities 23,366,609 24,597,263 Less valuation allowance (23,366,609 ) (24,597,263 ) Total deferred tax assets and liabilities $ - $ - |
10. ASSET RETIREMENT OBLIGATI23
10. ASSET RETIREMENT OBLIGATIONS (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
ASSET RETIREMENT OBLIGATIONS (Tables) | |
Schedule of asset retirement obligation liability | Asset retirement obligation December 31, 2014 $ 35,951 Accretion expense 3,492 Removal of ARO for wells sold (10,360 ) Asset retirement obligation December 31, 2015 $ 29,083 Accretion expense 41 Removal of ARO for wells sold (22,073 ) Asset retirement obligation December 31, 2016 $ 7,051 |
2. GOING CONCERN (Details Narra
2. GOING CONCERN (Details Narrative) | Dec. 31, 2016USD ($) |
Going Concern Accumulated Losses | |
Accumulated deficit | $ (82,587,785) |
Accumulated Losses since inception | 82,587,785 |
Working Capital deficit | $ 2,293,348 |
3. SIGNIFICANT ACCOUNTING POL25
3. SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Significant Accounting Policies {1} | ||
Capitalized interest on unevaluated properties | $ 215,938 | $ 705,561 |
Shares issuable exercise of outstanding warrants and options | 23,131,694 |
4. OIL & GAS PROPERTIES (Detail
4. OIL & GAS PROPERTIES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Oil Gas Properties Details | ||
Evaluated costs subject to amortization | $ 1,470,939 | $ 24,177,851 |
Unevaluated costs | 13,376,742 | 9,677,425 |
Total capitalized costs | 14,847,681 | 33,855,276 |
Less accumulated depreciation, depletion and amortization | (545,539) | (26,797,605) |
Total oil and gas properties | $ 9,392,288 | $ 7,057,671 |
4. OIL & GAS PROPERTIES (Deta27
4. OIL & GAS PROPERTIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Oil Gas Properties Details Narrative | ||
Impairment expense oil and gas properties | $ 25,674,123 | |
Additional impairment | $ 70,080 | |
Proceeds from sale | 750,000 | $ 877,489 |
Combined loss on sale | $ 283,285 |
5. RELATED PARTY PAYABLES (Deta
5. RELATED PARTY PAYABLES (Details Narrative) | 3 Months Ended |
Dec. 31, 2016USD ($) | |
Related Party Transactions payments due to related party | |
Notes payable within one year | $ 0 |
Director Fees | $ 192,044 |
6. COMMITMENTS AND CONTINGENC29
6. COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2016USD ($) |
Commitments And Contingencies Details | |
2,017 | $ 79,658 |
2,018 | 81,248 |
2,019 | 75,814 |
Total | $ 236,720 |
6. COMMITMENTS AND CONTINGENC30
6. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | Dec. 31, 2016 | Jun. 14, 2016 | Dec. 31, 2015 |
Commitments And Contingencies Details Narrative | |||
Torchlight invested | $ 20,000,000 | ||
Account receivable from Husky Ventures | $ 419,839 | ||
Deposited from Husky Ventures | $ 520,400 |
7. STOCKHOLDERS' EQUITY (Detail
7. STOCKHOLDERS' EQUITY (Details) | Dec. 31, 2016shares |
1.79 | |
Outstanding warrants and stock options | 528,099 |
0.70 | |
Outstanding warrants and stock options | 1,700,000 |
0.77 | |
Outstanding warrants and stock options | 100,000 |
1 | |
Outstanding warrants and stock options | 1,704,366 |
1.03 | |
Outstanding warrants and stock options | 120,000 |
1.08 | |
Outstanding warrants and stock options | 37,500 |
1.4 | |
Outstanding warrants and stock options | 1,643,475 |
1.73 | |
Outstanding warrants and stock options | 100,000 |
1.8 | |
Outstanding warrants and stock options | 500,000 |
2 | |
Outstanding warrants and stock options | 2,032,249 |
2.03 | |
Outstanding warrants and stock options | 2,000,000 |
2.09 | |
Outstanding warrants and stock options | 2,800,000 |
2.5 | |
Outstanding warrants and stock options | 832,512 |
2.82 | |
Outstanding warrants and stock options | 120,000 |
3.5 | |
Outstanding warrants and stock options | 35,211 |
4.5 | |
Outstanding warrants and stock options | 38,174 |
0.97 | |
Outstanding warrants and stock options | 15,000 |
5.05 | |
Outstanding warrants and stock options | 700,000 |
6 | |
Outstanding warrants and stock options | 170,000 |
7 | |
Outstanding warrants and stock options | 40,000 |
6 | |
Outstanding warrants and stock options | 545,703 |
1.57 | |
Outstanding warrants and stock options | 700,000 |
Total | |
Outstanding warrants and stock options | 16,462,289 |
Total | Expiring in the year 2021 | |
Outstanding warrants and stock options | 486,000 |
Total | Expiring in the year 2016 | |
Outstanding warrants and stock options | 8,015,645 |
Total | Expiring in the year 2017 | |
Outstanding warrants and stock options | 1,664,657 |
Total | Expiring in the year 2018 | |
Outstanding warrants and stock options | 4,675,987 |
Total | Expiring in the year 2019 | |
Outstanding warrants and stock options | 1,620,000 |
Total | Expiring in the year 2020 | |
Outstanding warrants and stock options | 16,462,289 |
7. STOCKHOLDERS' EQUITY (Deta32
7. STOCKHOLDERS' EQUITY (Details 1) | Dec. 31, 2016shares |
0.97 | |
Stock Options Outstanding | 259,742 |
1.57 | |
Stock Options Outstanding | 5,997,163 |
1.79 | |
Stock Options Outstanding | 412,500 |
Total | |
Stock Options Outstanding | 6,669,405 |
Total | Expiring in the year 2017 | |
Stock Options Outstanding | |
Total | Expiring in the year 2018 | |
Stock Options Outstanding | |
Total | Expiring in the year 2019 | |
Stock Options Outstanding | 6,409,663 |
Total | Expiring in the year 2020 | |
Stock Options Outstanding | 259,742 |
Total | Expiring in the year 2021 | |
Stock Options Outstanding | 6,669,405 |
7. STOCKHOLDERS' EQUITY (Deta33
7. STOCKHOLDERS' EQUITY (Details 2) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Minimum [Member] | ||
Risk-free interest rate | 0.78% | 0.78% |
Expected volatility of common stock | 101.00% | 191.00% |
Dividend yield | 0.00% | 0.00% |
Discount due to lack of marketability | 20.00% | 20.00% |
Expected life of warrant | 5 years | |
Maximum [Member] | ||
Risk-free interest rate | 1.22% | |
Expected volatility of common stock | 189.00% | 253.00% |
Discount due to lack of marketability | 30.00% | 30.00% |
Expected life of warrant | 5 years |
7. STOCKHOLDERS' EQUITY (Deta34
7. STOCKHOLDERS' EQUITY (Details Narrative) | 12 Months Ended | |
Dec. 31, 2016USD ($)shares | Dec. 31, 2015USD ($)shares | |
Assumptions used in calculating the fair value of the warrants issued are as follows: | ||
Issuance of common stock for cash, shares | shares | 3,750,000 | 4,931,250 |
Issuance of common stock for cash, amount | $ | $ 3,000,000 | $ 1,300,000 |
Issuance of preferred stock for cash, shares | shares | 135,000 | |
Issuance of preferred stock for cash, amount | $ | 1,000,000 | $ 13,500,000 |
Preferred dividends paid in cash | $ | $ 320,724 | $ 120,427 |
Issuance of common stock for preferred dividends, shares | shares | 440,262 | 577,140 |
Common stock issued for services | shares | 768,832 | 2,477,696 |
Issuance of common stock for services, amount | $ | $ 670,074 | $ 2,651,504 |
Warrants issued for services, shares | shares | 6,437,267 | 7,015,779 |
Warrants issued for services, amount | $ | $ 2,205,231 | $ 7,797,619 |
warrants issued in connection with financing transactions, shares | shares | 137,500 | 770,000 |
warrants issued in connection with financing transactions, amount | $ | $ 80,750 | $ 368,300 |
Warrants issued in connection with the issuance of preferred stock. | shares | 2,615,676 | |
Warrants issued in connection with the acquisition of lease, shares | shares | 3,412,525 | 750,000 |
Warrants issued in connection with the acquisition of lease, amount | $ | $ 1,290,761 | $ 527,500 |
Issuance of common stock - mineral interests, shares | shares | 2,824,881 | 30,000 |
Issuance of common stock - mineral interests, amount | $ | $ 1,975,046 | $ 26,400 |
Common stock issued in conversion of notes, shares | shares | 1,600,000 | |
Common stock issued in conversion of notes, amount | $ | $ 1,150,000 | |
Issuance of common stock for note interest, shares | shares | 162,860 | |
Issuance of common stock for note interest, amount | $ | $ 162,860 | |
Issuance of common stock in warrant exercise, shares | shares | 3,888,745 | 65,000 |
Issuance of common stock in warrant exercise, amount | $ | $ 2,543,746 | $ 113,750 |
Preferred Shares Working Interest | 0.3333 | |
Reserved Future Exercise of Warrants and options | $ | $ 23,131,694 | |
Warrants issued/vested | shares | 6,437,267 | 7,015,779 |
Warrants issued/vested Total Value | $ | $ 2,285,270 | $ 7,797,619 |
8. INCOME TAXES (Details)
8. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Tax Reconciliation and provision for income taxes | ||
Federal income tax benefit at statutory rate | $ (2,869,293) | $ (14,705,979) |
Permanent Differences | 3,000 | 4,127 |
Other | 4,096,947 | (587,126) |
Change in valuation allowance | (1,230,654) | 15,288,978 |
Provision for income taxes |
8. INCOME TAXES (Details 1)
8. INCOME TAXES (Details 1) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred tax assets: | ||
Net operating loss carryforward | $ 16,269,090 | $ 11,443,389 |
Accruals | 15,300 | 30,600 |
Reserves | 7,156,559 | 5,883,263 |
Deferred tax liabilities: | ||
Intangible drilling and other costs for oil and gas properties | (74,340) | 7,240,011 |
Net deferred tax assets and liabilities | 23,366,609 | 24,597,263 |
Less valuation allowance | (23,366,609) | (24,597,263) |
Total deferred tax assets and liabilities |
8. INCOME TAXES (Details Narrat
8. INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes Operating loss carryforwards | ||
Net deferred tax asset related to federal net operating loss carryforwards of | $ 47,850,266 | $ 39,312,173 |
Statutory Federal Iincome Tax Rate | 34.00% | 34.00% |
9. PROMISSORY NOTES (Details Na
9. PROMISSORY NOTES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Promissory Notes Details Narrative | ||
Converted common stock | $ 3,569,500 | $ 1,000,000 |
Series B convertible unsecured promissory | $ 1,000,000 | |
Conversion price | $ 1 |
10. ASSET RETIREMENT OBLIGATI39
10. ASSET RETIREMENT OBLIGATIONS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
ASSET RETIREMENT OBLIGATIONS RECONCILIATION | ||
Asset Retirement Obligation, Begining | $ 29,083 | $ 35,951 |
Asset retirement obligation | 29,083 | 35,951 |
Accretion expense | 41 | 3,492 |
Removal of ARO for wells sold | (22,073) | (10,360) |
Asset Retirement Obligation, Ending | $ 7,051 | $ 29,083 |