UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): April 24,
2020
Torchlight Energy Resources, Inc.
(Exact
name of registrant as specified in its charter)
Nevada
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001-36247
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74-3237581
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(State or other jurisdiction of
incorporation or organization)
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(Commission File Number)
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(IRS Employer Identification No.)
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5700 W.
Plano Parkway, Suite 3600
Plano, Texas
75093
(Address
of principal executive offices)
Telephone
– (214) 432-8002
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
☐ Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a
-12)
☐ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d -2(b))
☐ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e -4(c))
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
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Trading
Symbol(s)
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Name of
each exchange on which registered
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Common
Stock, $0.001 par value
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TRCH
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The
Nasdaq Stock Market LLC
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Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
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Item 1.01 Entry into a Material Definitive Agreement.
On
April 24, 2020, Torchlight Energy Resources, Inc., along with its
subsidiaries Hudspeth Oil Corporation, Torchlight Hazel, LLC and
Torchlight Energy, Inc., entered into a Note Amendment Agreement
with each of the David A. Straz, Jr. Foundation, as a lender (the
“Straz Foundation”), and a Note Amendment Agreement
with the David A. Straz, Jr. Irrevocable Trust DTD 11/11/1986, as a
lender and collateral agent (the “Straz Trust”), and
The Northern Trust Company and Christopher M. Straz, as co-trustees
of the Straz Trust. Under the Note Amendment Agreements, the
parties agreed to amend and restate the two promissory notes issued
to the Straz Trust on April 10, 2017 and February 6, 2018 that have
a total outstanding principal amount of $8,500,000, along with the
promissory note issued to the Straz Foundation on April 10, 2017
which has an outstanding principal amount of $4,000,000. Under the
Note Amendment Agreements, the maturity dates of the two promissory
notes held by the Straz Trust were extended to April 10, 2021. We
had previously extended the maturity date of the promissory note
held by the Straz Foundation to April 10, 2021, as disclosed in the
current report we filed on February 20, 2020.
Under
the Note Amendment Agreements, we and our subsidiaries provided a
first priority lien on certain collateral in favor of the
collateral agent for the benefit of the lenders. The collateral
includes all assets and property held by Hudspeth Oil Corporation
and Torchlight Hazel, LLC, which includes without limitation our
working interest in certain oil and gas leases in Hudspeth County,
Texas, known as the “Orogrande Project” and our working
interest in certain oil and gas leases in the Midland Basin in West
Texas, known as the “Hazel Project.” Further, these
subsidiaries, along with Torchlight Energy, Inc., provided
guaranties with respect to payment of the three promissory notes.
The Note Amendment Agreements also provide that (a) upon any
disposition of less than 100% of Borrower’s right, title and
interest in and to the Orogrande Project or the Hazel Project, we
must prepay an amount equal to 75% of the proceeds thereof (up to
the outstanding amount due under the notes), unless such
disposition results in us owning less than a 45% working interest
(on an 8/8ths basis) in the
Orogrande Project or the Hazel Project, in which case the
prepayment amount is to be equal to 100% of such proceeds (up to
the outstanding amount due under the notes); and (b) upon any
disposition of 100% of our right, title and interest in and to the
Orogrande Project or the Hazel Project, we must prepay an amount
equal to 100% of the proceeds thereof (up to the outstanding amount
due under the notes).
Additionally, the
promissory notes, as amended, now provide conversion rights whereby
the lenders will have the right, at each such lender’s
option, to convert any portion of principal and interest into
shares of common stock of Torchlight Energy Resources, Inc. at a
conversion price of $1.50 per share.
The
Note Amendment Agreements also provide that no later 20 days
following closing, we must pay: (a) to the lenders all past due
interest that has accrued on the existing promissory notes, and (b)
to the Straz Trust a fee of $170,000. Further, the agreements have
certain negative covenants regarding related party transactions,
dividends, stock
repurchases, grants of liens on other assets, and payment of
accrued executive compensation. There are also typical affirmative
covenants regarding legal compliance and payment of taxes. The
agreements also provide certain notice and disclosure requirements,
including notice of material events, such as defaults under other
obligations and litigation.
All
other terms and conditions of the three original promissory notes
remain substantially unchanged, including without limitation,
monthly payments of interest only at the rate of 12% per annum,
with a balloon payment of the outstanding principal due and payable
at maturity, and annual payments of common stock at the rate of
2.5% of the principal amount outstanding, based on a
volume-weighted average price.
In
connection with the collateralization of the Orogrande Project
under the Note Amendment Agreements, our chairman Gregory McCabe
and his company McCabe Petroleum Corporation executed the related
Mortgage, Security Agreement, Fixture Filing, Financing Statement
and Assignment of Production from Hudspeth Oil Corporation solely
to acknowledge and agree that their respective reversionary
interests in and to that collateral through the related
participation agreement are not excluded from the collateral, and
are accordingly encumbered by the lien and security interest of the
mortgage.
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Item 3.02 Unregistered Sales of Equity Securities.
In
connection with the amendments to the promissory notes referenced
in Item 1.01 of this current report, which disclosure is
incorporated herein by reference, we provided such lenders the
right to convert the principal and interest under such promissory
notes into our common stock, as referenced in Item 1.01. The
addition of this conversion feature may be deemed a sale of equity
securities in a transaction that is not registered under the
Securities Act of 1933.
The
above sales (or deemed sales) of securities were sold under the
exemption from registration provided by Section 4(a)(2) of the
Securities Act of 1933 and the rules and regulations promulgated
thereunder. The issuances of securities did not involve a
“public offering” based upon the following factors: (i)
the issuances of securities were isolated private transactions;
(ii) a limited number of securities were issued to a limited number
of purchasers; (iii) there were no public solicitations; (iv) the
investment intent of the purchasers; and (v) the restriction on
transferability of the securities issued.
Item 8.01 Other Events.
Extension of Convertible Promissory Notes
On
April 21, 2020, Torchlight Energy Resources, Inc. entered into
agreements to amend two convertible promissory notes that were
originally issued on February 11, 2019, which notes presently have
a total of $2,000,000 in principal outstanding. Under the amendment
agreements, (a) the maturity dates were extended from May 11, 2020
to November 11, 2021, (b) the conversion price under which the
noteholders may convert into out common stock was changed from
$1.08 to $0.43, and (c) the noteholders were provided the right, at
each noteholder’s election, to convert their notes into
either (i) a working interest in the Orogrande Project at the rate
of one acre per $1,100 of principal and unpaid interest converted,
or (ii) a working interest in the Hazel Project at the rate of one
acre per $1,300 of principal and unpaid interest converted;
provided, that the noteholders’ right to convert into either
such working interest is subject to approval of the collateral
agent of the Note Amendment Agreements described in Item 1.01
above.
Under
the note amendments, the noteholders agreed to forebear demand or
collection on all interest payments due and payable under the Note,
including any past due interest payments, for 20 days after the
execution of the Note Amendment Agreements described in Item 1.01.
Further, we agreed to (a) issue each holder 20,000 restricted
shares of common stock immediately and (b) pay each holder a fee of
$10,000, at the same time as the payment of past due interest is
paid.
These
two promissory notes will continue to provide for monthly payments
of interest only at the rate of 14% per annum, with a balloon
payment of the outstanding principal due and payable at
maturity.
Nasdaq Tolling of Price-based Compliance Requirements
As
previously disclosed in our current report filed on November 25,
2020, on November 21, 2019 we received a letter from the Listing
Qualifications Staff of The Nasdaq Stock Market advising us that
the staff had determined that we no longer meet the requirement of
Listing Rule 5550(a)(2) which requires us to maintain a minimum bid
price of $1 per share. The Listing Rules provide us with a
compliance period of 180 calendar days in which to regain
compliance.
On
April 17, 2020, we received a letter from Listing Qualifications
Staff advising us that, because of the unprecedented turmoil in
U.S. and world financial markets over the last few weeks, Nasdaq
has determined to toll the compliance periods for bid price and
market value of publicly held shares requirements (collectively,
the “Price-based Requirements”) through June 30, 2020.
In that regard, on April 16, 2020, Nasdaq filed an immediately
effective rule change with the Securities and Exchange
Commission.
As a
result, since we had 33 calendar days remaining in our bid
compliance period as of April 16, 2020, we will, upon reinstatement
of the Price-based Requirements, still have 33 calendar days from
July 1, 2020, or until August 3, 2020, to regain compliance. We can
regain compliance, either during the suspension or during the
compliance period resuming after the suspension, if the closing bid
price of our common stock is at least $1 for a minimum of 10
consecutive trading days.
In the
event we do not regain compliance by August 3, 2020, we may be
eligible for additional time. We are currently reviewing our
options to regain compliance with the Nasdaq Listing Rules, but we
have made no decisions at this time.
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SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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Torchlight
Energy Resources, Inc.
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Date: April
27, 2020
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By:
/s/ John A.
Brda
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John A.
Brda
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President
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