UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Definitive
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Torchlight Energy Resources, Inc.
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(Name of Registrant as Specified In Its Charter)
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Registrant)
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TORCHLIGHT ENERGY RESOURCES, INC.
5700 W. Plano Parkway, Suite 3600
Plano, Texas 75093
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 13, 2019
We
hereby give notice that the Annual Meeting of Stockholders of
Torchlight Energy Resources, Inc. will be held on November 13,
2019, at 9:00 a.m. local time, at the Renaissance Dallas at Plano
Legacy West Hotel, 6007 Legacy Drive, Plano, Texas 75024, for the
following purposes:
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(1)
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To
elect five directors;
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(2)
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To
ratify the selection of Briggs & Veselka Co as our independent
registered public accounting firm for the fiscal year ending
December 31, 2019;
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(3)
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To
approve a non-binding advisory resolution on executive
compensation;
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(4)
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To vote
on whether advisory votes on executive compensation should occur
every one, two or three years; and
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(5)
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To
transact such other business as may properly come before the
meeting.
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Under
Nevada law, only stockholders of record on the record date, which
is September 16, 2019, are entitled to notice of and to vote at the
Annual Meeting or any adjournment. It is important that your shares
be represented at this meeting so that the presence of a quorum is
assured.
Your
vote is important. Even if you plan to attend the meeting in
person, please date and execute the enclosed proxy and return it
promptly in the enclosed postage-paid envelope as soon as possible.
If you attend the meeting, you may revoke your proxy and vote your
shares in person.
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By
Order of the Board of Directors,
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October
7, 2019
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John A.
Brda
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President,
Chief Executive Officer and Director
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Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Stockholders to be held November 13,
2019.
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The
Proxy Statement, form of proxy card and Annual Report are available
at:
ir.torchlightenergy.com
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TORCHLIGHT ENERGY RESOURCES, INC.
5700 W. Plano Parkway, Suite 3600
Plano, Texas 75093
PROXY STATEMENT
INFORMATION CONCERNING THE ANNUAL MEETING
Mailing and Solicitation. Proxies are
being solicited on behalf of the Board of Directors of Torchlight
Energy Resources, Inc. This Proxy Statement and accompanying form
of proxy card will be sent on or about October 7, 2019 to
stockholders entitled to vote at the Annual Meeting. The cost of
the solicitation of proxies will be paid by us. The solicitation is
to be made primarily by mail but may be supplemented by telephone
calls and personal solicitation by our officers and other
employees.
Annual Report on Form 10-K. A copy of
our Annual Report on Form 10-K for the year ended December 31,
2018, as filed with the Securities and Exchange Commission, has
been mailed with this Proxy Statement to all stockholders entitled
to vote at the Annual Meeting.
Proxies. Whether or not you plan to
attend the Annual Meeting, we request that you date and execute the
enclosed proxy card and return it in the postage-paid return
envelope. If your shares are held in “street name”
through a brokerage or other institution, telephone and internet
instructions are also provided on the proxy card you receive. A
control number, located on the proxy card, is designed to verify
your identity, allow you to vote your shares, and confirm that your
voting instructions have been properly recorded.
If your
shares are registered in the name of a bank, broker, or other
nominee, follow the proxy instructions on the form you receive from
the nominee. The availability of telephone and internet proxy will
depend on the nominee’s proxy processes. Under the rules of
the New York Stock Exchange (“NYSE”), brokers who hold
shares in “street name” for customers are precluded
from exercising voting discretion with respect to the approval of
non-routine matters (so called “broker non-votes”)
where the beneficial owner has not given voting instructions.
Effective July 1, 2009, the NYSE amended its rule regarding
discretionary voting by brokers on uncontested elections of
directors such that any investor who does not instruct the
investor’s broker on how to vote in an election of directors
will cause the broker to be unable to vote that investor’s
shares on an election of directors. Previously, the broker could
exercise its own discretion in determining how to vote the
investor’s shares even when the investor did not instruct the
broker on how to vote. Accordingly, with respect to the election of
directors (see Proposal 1), a broker is not entitled to vote the
shares of common stock unless the beneficial owner has given
instructions. Additionally, a broker is not entitled to vote
uninstructed shares on matters relating to executive compensation,
including the vote to approve a non-binding resolution on executive
compensation (see Proposal 3) and the vote on how often the
advisory votes on executive compensation should occur (see Proposal
4). With respect to the ratification of the appointment of Briggs
& Veselka Co as our independent registered public accounting
firm (see Proposal 2), a broker will have discretionary authority
to vote the shares of our stock if the beneficial owner has not
given instructions.
Revocation of Proxies. The proxy may be
revoked by the stockholder at any time before a vote is taken by
notifying our President in writing at the address of Torchlight
Energy Resources, Inc. given above; by executing a new proxy
bearing a later date or by submitting a new proxy by telephone or
internet; or by attending the Annual Meeting and voting in
person.
Voting in Accordance with Instructions.
The shares represented by your properly completed proxy will be
voted in accordance with your instructions marked on it. If you
properly sign, date, and deliver to us your proxy but you mark no
instructions on it, the shares represented by your proxy will be
voted for the election of all of the director nominees as proposed
(Proposal 1); for the ratification of Briggs & Veselka Co. as
our independent registered public accounting firm for 2019
(Proposal 2); for approval of a non-binding resolution on executive
compensation (Proposal 3); and for approval of the three-year
option regarding how often the advisory votes on executive
compensation should occur (Proposal 4). The Board of Directors is
not aware of any other matters to be presented for action at the
Annual Meeting, but if other matters are properly brought before
the Annual Meeting, shares represented by properly completed
proxies received by mail will be voted in accordance with the
judgment of the persons named as proxies.
Quorum and Voting Rights. The presence
in person or by proxy of a majority of the outstanding shares
entitled to vote on the record date constitutes a quorum for
purposes of voting on a particular matter and conducting business
at the meeting. We currently have one class of stock issued and
outstanding, common stock. Each share of common stock entitles its
holder to one vote.
Required Vote. A plurality of the
shares present in person or represented by proxy at the Annual
Meeting will elect as directors the nominees proposed (Proposal 1).
The affirmative vote of a majority of the shares entitled to vote,
present in person or represented by proxy is required for: the
ratification of Briggs & Veselka Co. as our independent
registered public accounting firm for 2019 (Proposal 2) and for
approval of a non-binding resolution on executive compensation
(Proposal 3). A plurality of the shares present in person or
represented by proxy will determine the stockholders’
selection on the frequency of advisory resolutions on executive
compensation (see Proposal 4). Abstentions and broker non-votes
will be counted for purposes of determining the presence or absence
of a quorum. Abstentions and broker non-votes will not be counted
as having voted either for or against a proposal.
Record Date. The close of business on
September 16, 2019 has been fixed as the record date of the Annual
Meeting, and only stockholders of record at that time will be
entitled to vote. As of September 16, 2019, there were 73,515,792
shares of common stock issued and outstanding and entitled to vote
at the Annual Meeting.
No Dissenters’ Rights. Under the
Nevada Revised Statutes, stockholders are not entitled to
dissenters’ rights with respect to the matters to be voted on
at the Annual Meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
General Information
Under
our bylaws, the number of members of our Board of Directors is to
be determined from time to time by resolution adopted by a majority
of the Board of Directors or by the stockholders, but in no event
will be less than one or more than 15. Each director is elected to
hold office until the next annual or special meeting of
stockholders and until such director’s successor has been
elected and qualified, or until his or her earlier resignation or
removal. As of the date hereof, the Board of Directors consists of
five members. The Board of Directors has approved and recommended
to stockholders the election of five nominees to serve on the
Board. The recommended nominees are John Brda, Gregory McCabe,
Robert Lance Cook, Michael J. Graves and Alexandre Zyngier. All the
nominees presently serve as members of our Board of Directors and
are accordingly standing for re-election. There are no family
relationships among any of our directors, nominees or executive
officers.
The
persons named in the enclosed Proxy (“Proxy”) have each
been selected by the Board of Directors to serve as proxy and will
vote the shares represented by valid proxies at the Annual Meeting
and adjournments thereof. Unless otherwise instructed or unless
authority to vote is withheld, the enclosed Proxy will be voted for
the election of the nominees listed below. Each duly elected
director will hold office until his successor shall have been
elected and qualified. Although our Board of Directors does not
contemplate that any of the nominees will be unable to serve, if
such a situation arises prior to the Annual Meeting, the person
named in the enclosed Proxy will vote for the election of such
other person(s) as may be nominated by the Board of
Directors.
Information Regarding Nominees
The
names of the nominees for election to the Board, their principal
occupations and certain other information follow:
John A. Brda – age 54 – Mr.
Brda has been our Chief Executive Officer since December 2014 and
our Secretary and a member of the Board of Director since January
2012. He has been the Managing Member of Brda & Company, LLC
since 2002, which provided consulting services to public
companies—with a focus in the oil and gas sector—on
investor relations, equity and debt financings, strategic business
development and securities regulation matters, prior to him
becoming President of the company.
We
believe Mr. Brda is an excellent fit to our Board of Directors and
management team based on his extensive experience in transaction
negotiation and business development, particularly in the oil and
gas sector as well as other non-related industries. We believe that
his extensive network of industry professionals and finance firms
will contribute to our success.
Gregory McCabe – age 58 –
Mr. McCabe has been a member of our Board of Directors since July
2016 and was appointed Chairman of the Board in October 2016. He is
an experienced geologist who brings over 32 years of oil and gas
experience to our company. He is a principal of numerous oil and
gas focused entities including McCabe Petroleum Corporation, Manix
Royalty, Masterson Royalty Fund and GMc Exploration. He has been
the President of McCabe Petroleum Corporation from 1986 to the
present. Mr. McCabe has been involved in numerous oil and gas
ventures throughout his career and has a vast experience in
technical evaluation, operations and acquisitions and divestitures.
Mr. McCabe is also our largest stockholder and provided entry for
us into our two largest assets, the Hazel Project in the Midland
Basin and the Orogrande Project in Hudspeth County,
Texas.
We
believe that Mr. McCabe’s background in geology and his many
years in the oil and gas industry compliments the Board of
Directors.
Robert Lance Cook – age 63 –
Mr. Cook has been a member of our Board of Directors since February
2019. He is currently the Vice President of Production Operations
of WellsX Corp., a position he has held since July 2018. WellsX
provides hydraulic fracturing and related oilfield services.
Additionally, he has been the Managing Partner of Metis Energy LLC
since January 2017, which owns and operates oil and gas wells in
Texas as well as holds proprietary intellectual properties. Prior
to that, Mr. Cook worked for Shell Oil Company and its subsidiaries
for over 36 years, retiring from the company in September 2016. He
held numerous management and engineering positions for Shell,
including most recently Chief Scientist for Wells and Production
Technology and Chief Operations Officer for SWMS JV with Great Wall
Drilling Company from January 2012 through the summer of 2015. He
holds a Bachelor of Science in Petroleum Engineering from the
University of Texas.
We
believe Mr. Cook’s wide-ranging experience in operating
exploration and production companies makes him an excellent fit to
the Board of Directors.
Michael J. Graves – age 51 –
Mr. Graves has served on the Board of Directors since August 17,
2017. He is a Certified Public Accountant, and since 2005 he has
been a managing shareholder of Fitch & Graves in Sioux City,
Iowa, which provides accounting and tax, financial planning,
consulting and investment services. Since 2008, he has also been a
registered representative with Western Equity Group where he has
worked in investment sales. He is also presently a shareholder in
several businesses involved in residential construction and
property rentals. Previously, he worked at Bill Markve &
Associates, Gateway 2000 and Deloitte & Touche. He graduated
Summa Cum Laude from the University of South Dakota with a B.S. in
Accounting.
With
Mr. Graves’ extensive background in accounting and investment
businesses, we believe his understanding of financial statements,
business valuations, and general business performance are a
valuable asset to the Board.
Alexandre Zyngier – age 50 –
Mr. Zyngier has served on our Board of Directors since June 2016.
He has been the Managing Director of Batuta Advisors since founding
it in August 2013. The firm pursues high return investment and
advisory opportunities in the distressed and turnaround sectors.
Mr. Zyngier has over 20 years of investment, strategy, and
operating experience. He is currently a director of Atari SA,
Applied Minerals, Inc, AudioEye Inc. and certain other private
companies. Before starting Batuta Advisors, Mr. Zyngier was a
portfolio manager at Alden Global Capital from February 2009 until
August 2013, investing in public and private opportunities. He has
also worked as a portfolio manager at Goldman Sachs & Co. and
Deutsche Bank Co. Additionally, he was a strategy consultant at
McKinsey & Company and a technical brand manager at Procter
& Gamble. Mr. Zyngier holds an MBA in Finance and Accounting
from the University of Chicago and a BS in Chemical Engineering
from UNICAMP in Brazil.
We
believe that Mr. Zyngier’s investment experience and his
experience in overseeing a broad range of companies will greatly
benefit the Board of Directors.
On
August 12, 2019, LootCrate Inc. filed for Chapter 11 bankruptcy in
Delaware. Mr. Zyngier is an independent director of LootCrate, Inc.
and oversaw the company’s filing.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
ELECTION
OF THE NOMINEES LISTED ABOVE.
Information Regarding Executive Officers
Executive officers
are appointed to serve at the discretion of the Board. These
individuals are referred to collectively as our “named
executive officers.”
Our
named executive officers are as follows:
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Name
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Age
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Position(s) and Office(s)
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John A. Brda
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54
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President, Chief Executive Officer, Secretary and
Director
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Roger N. Wurtele
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73
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Chief Financial Officer
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See
“Information Regarding Nominees” above for biographical
information of Mr. Brda.
Roger N. Wurtele
– Mr. Wurtele has served as our
Chief Financial Officer since September 2013. He is a versatile,
experienced finance executive that has served as Chief Financial
Officer for several public and private companies. He has a broad
range of experience in public accounting, corporate finance and
executive management. Mr. Wurtele previously served as CFO of
Xtreme Oil & Gas, Inc. from February 2010 to September 2013.
From May 2013 to September 2013 he worked as a financial consultant
for us. From November 2007 to January 2010, Mr. Wurtele served as
CFO of Lang and Company LLC, a developer of commercial real estate
projects. He graduated from the University of Nebraska and has been
a Certified Public Accountant for 40 years.
CORPORATE GOVERNANCE MATTERS
Meetings of the Board
All
directors are expected to make every effort to attend meetings of
the Board, meetings of any Board committees on which such director
serves, and annual meetings of stockholders. The Board held 11
meetings during the year ended December 31, 2018. The Board of
Directors also executed 10 written consents to action in lieu of a
meeting during the year ended December 31, 2018, which consents
were each approved unanimously. We currently have an Audit
Committee, a Compensation Committee and a Nominating Committee.
During 2018, the Audit Committee held four meetings, the
Compensation Committee held no meetings and the Nominating
Committee held one meeting. Of our current directors, during 2018,
all attended no fewer than 75 percent of (i) the total number of
meetings of the Board of Directors (including consents to action in
lieu of a meeting) held during the period for which he has been a
director, and (ii) the total number of meetings held by all
committees of the Board on which he served during the periods that
he served. All five of the then members of the Board of Directors
attended the 2018 Annual Meeting of Stockholders.
Stockholder Communications with Directors
Any
stockholder desiring to contact the Board, or any specific
director(s), may send written communications to: Board of Directors
(Attention: (Name(s) of director(s), as applicable)), c/o
President, 5700 W. Plano Parkway, Suite 3600, Plano, Texas 75093.
Any communication so received will be processed and conveyed to the
member(s) of the Board named in the communication or to the Board,
as appropriate, except for junk mail, mass mailings, product or
service complaints or inquiries, job inquiries, surveys, business
solicitations or advertisements, or patently offensive or otherwise
inappropriate material.
Director Independence
Currently three of
our five directors are independent, including Robert Lance Cook,
Alexandre Zyngier and Michael J. Graves. The definition of
“independent” used is based on the independence
standards of The NASDAQ Stock Market LLC. The Board performed a
review to determine the independence of Messrs. Cook, Zyngier and
Graves and made a subjective determination as to each of these
individuals that no transactions, relationships or arrangements
exist that, in the opinion of the Board, would interfere with the
exercise of independent judgment in carrying out the
responsibilities of a director of Torchlight Energy Resources, Inc.
In making these determinations, the Board reviewed information
provided by these individuals with regard to each
individual’s business and personal activities as they may
relate to us and our management.
Board Leadership Structure and Role in Risk Oversight
Our
Board is currently composed of five directors, with Gregory McCabe
holding the title of “Chairman.” Mr. McCabe is not an
officer of the company, but presently he is not deemed to be an
independent director. In addition to serving on the Board, John
Brda also currently serves as Chief Executive Officer. Accordingly,
there is often little separation in Mr. Brda’s role as
principal executive officer and his role as a director. To mitigate
any apparent conflicts our leadership structure may create, we
maintain a Board of Directors consisting of a majority of
independent directors. We believe this allows the Board to better
oversee and manage risk. None of our independent directors holds
the title of “lead” independent director. Accordingly,
all of our independent directors have an equal role in the
leadership of the Board. We believe that our overall leadership
structure is appropriate based on our current size.
As a
part of its oversight function, the Board of Directors monitors how
management operates the company. Risk is an important part of
deliberations at the Board level throughout the year. The Board of
Directors as a whole considers risks affecting us. The Board
considers, among other things, the relevant risks to the company
when granting authority to management and approving business
strategies. Through this risk oversight process, the Board reserves
the right to make changes to our leadership structure in the future
if it deems such changes are appropriate and in the best interest
of our stockholders.
Audit Committee
We
maintain a separately-designated standing audit committee. The
Audit Committee currently consists of three independent directors,
including Michael J. Graves, Robert Lance Cook and Alexandre
Zyngier. Mr. Zyngier is the Chairman of the Audit Committee, and
the Board of Directors has determined that he is an audit committee
financial expert as defined in Item 407(d)(5) of Regulation S-K.
The primary purpose of the Audit Committee is to oversee our
accounting and financial reporting processes and audits of our
financial statements on behalf of the Board of Directors. The Audit
Committee meets privately with our management and with our
independent registered public accounting firm and evaluates the
responses by our management both to the facts presented and to the
judgments made by our outside independent registered public
accounting firm. Our Audit Committee has reviewed and discussed our
audited financial statements for the year ended December 31, 2018
with our management.
In
November 2013, our Board adopted a charter for the Audit Committee.
A copy of the Charter of the Audit Committee can be found on our
website at www torchlightenergy.com. The Charter
establishes the independence of our Audit Committee and sets forth
the scope of the Audit Committee’s duties. All members of the
Audit Committee must be independent. The Audit Committee is
objective and reviews and assesses the work of our independent
registered public accounting firm and our internal
accounting.
Report of the Audit Committee
The
Audit Committee has reviewed and discussed with management the
audited financial statements of Torchlight Energy Resources, Inc.
for the fiscal year ended December 31, 2018. The Audit Committee
has discussed with Briggs & Veselka Co., our independent
auditors, the matters required to be discussed by the statement on
Auditing Standards No. 61, as amended (AICPA, Professional
Standards, Vol. 1, AU section 380), as adopted by the Public
Company Accounting Oversight Board in Rule 3200T. The Audit
Committee has received the written disclosures and the letter from
Briggs & Veselka Co. required by applicable requirements of the
Public Company Accounting Oversight Board regarding Briggs &
Veselka Co.’s communications with the Audit Committee
concerning independence, and has discussed with Briggs &
Veselka Co. the independence of Briggs & Veselka
Co.
Based
on the review and discussions referred to in the paragraph above,
the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in our annual report on
Form 10-K for the fiscal year ended December 31, 2018. This report
is furnished by the Audit Committee of our Board of Directors,
whose members were (at the time this report was
furnished):
Robert
Lance Cook;
Michael
J. Graves; and
Alexandre
Zyngier.
All
information within this “Audit Committee” section of
the Proxy Statement, including but not limited to the Report of the
Audit Committee, shall not be deemed to be “soliciting
material,” or to be “filed” with the SEC or
subject to Regulation 14A or 14C (17 CFR 240.14a-1 through
240.14b-2 or 240.14c-1 through 240.14c-101) or to the liabilities
of section 18 of the Exchange Act. Such information will not be
deemed to be incorporated by reference into any filing under the
Securities Act or the Exchange Act.
Compensation Committee
We have
a Compensation Committee whose members are Robert Lance Cook,
Michael J. Graves and Alexandre Zyngier. In November 2013, our
Board adopted a charter for the Compensation Committee. A copy of
the Charter of the Compensation Committee can be found on our
website at www torchlightenergy.com. The primary
purposes of the Compensation Committee are to discharge the Board
of Directors’ responsibilities relating to the evaluation and
compensation of our Chief Executive Officer, President and other
senior executives. Our executive compensation program are designed
to: (1) attract, retain and motivate skilled and knowledgeable
individuals; (2) ensure that compensation is aligned with our
corporate strategies and business objectives; (3) promote the
achievement of key strategic and financial performance measures by
linking short-term and long-term cash and equity incentives to the
achievement of measurable corporate and individual performance
goals; and (4) align executives’ and directors’
incentives with the creation of stockholder value. To achieve these
objectives, our Compensation Committee evaluates our executive
compensation program with the goal of setting compensation at
levels it believes will allow us to attract and retain qualified
executives and directors. The Compensation Committee will take
under consideration recommendations from executive officers and
directors regarding its executive compensation program. The
Compensation Committee also has the authority to obtain advice and
assistance from external advisors, including compensation
consultants, although the Compensation Committee did not elect to
retain a compensation consultant to assist with determining
executive compensation during 2018.
Nominating Committee
We have
a Nominating Committee whose members are Robert Lance Cook, Michael
Graves and Alexandre Zyngier. In November 2013, our Board adopted a
charter for the Nominating Committee. A copy of the Charter of the
Nominating Committee can be found on our website at www torchlightenergy.com. The Nominating
Committee’s primary duties are identify individuals qualified
to become Board members and to recommend to the Board director
nominees for election at the Annual Meeting of Stockholders or for
election by the Board to fill open seats between annual meetings.
See “Procedures for Director Nominations” below for the
criteria it uses to evaluate nominee candidates. Its Charter
provides for the Nominating Committee to review qualifications of
individuals suggested as potential candidates for director of the
company, including candidates suggested by stockholders, and
consider for nomination any of such individuals who are deemed
qualified. For information regarding the procedures for stockholder
nominations to the Board, see “Procedures for Director
Nominations” below.
Procedures for Director Nominations
Members
of the Board are expected to collectively possess a broad range of
skills, industry and other knowledge and expertise, and business
and other experience useful for the effective oversight of our
business. All candidates must meet the minimum qualifications and
other criteria established from time to time by the Board and
Nominating Committee. In considering possible candidates for
election as director, the Board and Nominating Committee are guided
by the following standards:
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(1)
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Each
director should be an individual of the highest character and
integrity;
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(2)
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Each
director should have substantial experience that is of particular
relevance to us;
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(3)
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Each
director should have sufficient time available to devote to the
affairs of the company; and
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(4)
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Each
director should represent the best interests of the stockholders as
a whole.
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We also
consider the following criteria, among others, in our selection of
directors:
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(1)
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Technical,
scientific, academic, financial and other expertise, skills,
knowledge and achievements useful to the oversight of our business,
especially relating to the oil and gas industry;
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(2)
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Diversity
of viewpoints, backgrounds, experiences and other demographics;
and
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(3)
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The
extent to which the interplay of the candidate’s expertise,
skills, knowledge and experience with that of other Board members
will build a Board that is effective, collegial and responsive to
the needs of the company.
|
The
Nominating Committee and Board of Directors evaluates suggestions
concerning possible candidates for election to the Board submitted
to us, including those submitted by Board members (including
self-nominations) and stockholders. All candidates, including those
submitted by stockholders, will be similarly evaluated by the
Nominating Committee and Board of Directors using the Board
membership criteria described above and in accordance with
applicable procedures, including such procedures prescribed by the
SEC. Once candidates have been identified, the Nominating Committee
and Board will determine whether such candidates meet our
qualifications for director nominees and select nominees
accordingly.
As
noted above, the Nominating Committee and Board of Directors will
consider qualified director nominees recommended by stockholders
when such recommendations are submitted in accordance with
applicable SEC requirements and any other applicable law, rule or
regulation regarding director nominations. When submitting a
nomination to us for consideration, a stockholder must provide
certain information that would be required under applicable SEC
rules, including the following minimum information for each
director nominee: full name and address; age; principal occupation
during the past five years; current directorships on publicly held
companies and registered investment companies; and number of shares
of our common stock owned, if any. No candidates for director
nominations were submitted to us by any stockholder in connection
with the 2019 Annual Meeting.
COMPENSATION DISCUSSION
The
following table provides summary information for the years of 2018
and 2017 concerning cash and non-cash compensation paid or accrued
to or on behalf of certain executive officers.
Summary Executive Compensation Table
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Year
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Option
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Awards
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($)
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(A)
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Name and
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(1)
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Nonqualified
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Principal
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Position
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Compensation
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John
A. Brda
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2018
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$375,000
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-
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-
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$-
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-
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-
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-
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$375,000
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CEO/Secretary/Director
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2017
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$375,000
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-
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-
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$-
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-
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-
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-
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$375,000
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Roger
Wurtele
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2018
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$225,000
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-
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-
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$-
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-
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-
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-
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$225,000
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CFO
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2017
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$225,000
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-
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-
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$-
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-
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-
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-
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$225,000
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(A)
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Stock/Option Value as applicable is determined using the Black
Scholes Method.
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Setting Executive Compensation
We
fix executive base compensation at a level we believe enables us to
hire and retain individuals in a competitive environment and to
reward satisfactory individual performance and a satisfactory level
of contribution to our overall business goals. We also take into
account the compensation that is paid by companies that we believe
to be our competitors and by other companies with which we believe
we generally compete for executives.
In
establishing compensation packages for executive officers, numerous
factors are considered, including the particular executive’s
experience, expertise, and performance, our company’s overall
performance, and compensation packages available in the marketplace
for similar positions. In arriving at amounts for each component of
compensation, our Compensation Committee strives to strike an
appropriate balance between base compensation and incentive
compensation. The Compensation Committee also endeavors to properly
allocate between cash and non-cash compensation (including without
limitation stock and stock option awards) and between annual and
long-term compensation.
Employment Agreements
On
June 16, 2015, we entered into new five-year employment agreements
with each of John Brda, our President and Chief Executive Officer,
and Roger Wurtele, our Chief Financial Officer. Under the new
agreements, which replace and supersede their prior employment
agreements, each individual’s salary was increased by 25%, so
that the salaries of Messrs. Brda and Wurtele were $375,000, and
$225,000, respectively, provided these salary increases will accrue
unpaid until such time as management believes there is adequate
cash for such increases. Also under the new agreements, each
individual was eligible for a bonus, at the Compensation
Committee’s discretion, of up to two times his salary and was
eligible for any additional stock options, as deemed appropriate by
the Compensation Committee. Each agreement also provided that if we
(or our successor) terminate the employee upon the occurrence of a
change in control, the employee will be paid in one lump sum his
salary and any bonus or other amounts due through the end of the
term of the agreement. Each employment agreement also has a
covenant not to compete.
Outstanding Equity Awards at Fiscal Year End
The
following table details all outstanding equity awards held by our
named executive officers at December 31, 2018:
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Option
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(#)
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(#)
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Expiration
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Name
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(#)
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Date
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John
A. Brda
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3000000(1)
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-
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-
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$1.57
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6/11/2020
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Roger
Wurtele
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1500000(1)
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-
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-
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$1.57
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6/11/2020
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(1)
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The
options were awarded on June 11, 2015. The options were granted
under our 2015 Stock Option Plan which plan was approved by
stockholders on September 9, 2015. Presently, the options are all
fully vested.
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Compensation of Directors
We have
no standard arrangement pursuant to which directors are compensated
for any services they provide or for committee participation or
special assignments. We anticipate, however, implementing more
standardized director compensation arrangements in the near
future.
Summary Director Compensation Table
Compensation to
directors during the year ended December 31, 2018 was as
follows:
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Name
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Alexandre
Zyngier
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-
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-
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$100,000(1)
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-
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-
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-
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$100,000
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R.
David Newton (2)
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-
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-
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$100,000(1)
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-
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-
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-
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$100,000
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Michael
Graves
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-
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-
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$100,000(1)
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-
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-
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-
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$100,000
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(A)
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Stock
Value as applicable is determined using the Black Scholes
Method.
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(1)
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On
August 16, 2018, this director was granted 200,000 stock options
under the 2015 Stock Option Plan as director compensation. 100,000
of the stock options vested immediately, and the remaining 100,000
stock options vest on August 16, 2019.
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(2)
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Mr.
Newton resigned from the Board of Directors on February 4,
2019.
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Compensation Policies and Practices as they Relate to Risk
Management
We
attempt to make our compensation programs discretionary, balanced
and focused on the long term. We believe goals and objectives of
our compensation programs reflect a balanced mix of quantitative
and qualitative performance measures to avoid excessive weight on a
single performance measure. Our approach to compensation practices
and policies applicable to employees and consultants is consistent
with that followed for its executives. Based on these factors, we
believe that our compensation policies and practices do not create
risks that are reasonably likely to have a material adverse effect
on us.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who own beneficially more than
ten percent of our common stock, to file reports of ownership and
changes of ownership with the Securities and Exchange Commission.
Based solely upon a review of Forms 3, 4 and 5 furnished to us
during the fiscal year ended December 31, 2018, we believe that the
directors, executive officers, and greater than ten percent
beneficial owners have complied with all applicable filing
requirements during the fiscal year ended December 31,
2018.
Certain Relationships and Related Transactions
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, 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 Wolfbone’s 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. McCabe’s 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.
On
November 15, 2017, we and our wholly-owned subsidiary, Hudspeth Oil
Corporation, a Texas corporation (“HOC”), entered into
an Assignment of Farmout Agreement with Founders Oil & Gas, LLC
(“Founders”) and Wolfbone Investments, LLC
(“Wolfbone”), along with Pandora Energy, LP as a party
to the agreement for limited purposes. Wolfbone is owned by our
Chairman, Gregory McCabe. Under the agreement, Founders will assign
to HOC and Wolfbone all its right, title and interest in the
remaining leases under the original Farmout Agreement that Founders
entered into with us on September 23, 2015; provided, however, that
Founders will retain an undivided 9.5% of 8/8ths working interest
and 9.5% of 75% of 8/8ths net revenue interest to the remaining
leases, which retained interest will be carried by HOC and Wolfbone
through the next $40,500,000 in total costs. Accordingly, HOC and
Wolfbone will each gain a 20.25% working interest in the remaining
leases, bringing HOC’s total working interest to 67.75%. On
behalf of HOC and Wolfbone, Founders (through its operating
affiliate) will take such action necessary to spud the University
Founders A 25 Well on or before December 1, 2017. After spudding of
the well, Founders’ operating affiliate will remain operator
of that well under the direction of us and Gregory
McCabe.
On
December 1, 2017, the transactions contemplated by the Agreement
and Plan of Reorganization that we and our newly formed
wholly-owned subsidiary, Torchlight Wolfbone Properties, Inc., a
Texas corporation (“TWP”), entered into with McCabe
Petroleum Corporation, a Texas corporation (“MPC”), and
Warwink Properties, LLC, a Texas limited liability company
(“Warwink Properties”) closed. Under the agreement,
which was entered into on November 14, 2017, TWP merged with and
into Warwink Properties and the separate existence of TWP ceased,
with Warwink Properties becoming the surviving organization and our
wholly-owned subsidiary. Warwink Properties was wholly owned by MPC
which is wholly owned by Gregory McCabe, our Chairman. Warwink
Properties owns certain assets, including a 10.71875% working
interest in 640 acres in Winkler County, Texas. At closing of the
merger transaction, our shares of common stock of TWP converted
into a membership interest of Warwink Properties, the membership
interest in Warwink Properties held by MPC ceased to exist, and we
issued MPC 2,500,000 restricted shares of common stock as
consideration. Also on December 1, 2017, MPC closed its transaction
with MECO IV, LLC (“MECO”) for the purchase and sale of
certain assets as contemplated by the Purchase and Sale Agreement
dated November 9, 2017 (the “MECO PSA”), to which we
are not a party. Under the MECO PSA, Warwink Properties received a
carry from MECO (through the tanks) of up to $1,475,000 in the next
well drilled on the Winkler County leases. A Certificate of Merger
for the merger transaction was filed with the Secretary of State of
Texas on December 5, 2017.
Also on
December 1, 2017, the transactions contemplated by the Purchase
Agreement that our wholly-owned subsidiary, Torchlight Energy,
Inc., a Nevada corporation (“TEI”), entered into with
MPC closed. Under the Purchase Agreement, which was entered into on
November 14, 2017, TEI acquired beneficial ownership of certain of
MPC’s assets, including acreage and wellbores located in Ward
County, Texas (the “Ward County Assets”). As
consideration under the Purchase Agreement, at closing TEI issued
to MPC an unsecured promissory note in the principal amount of
$3,250,000, payable in monthly installments of interest only
beginning on January 1, 2018, at the rate of 5% per annum, with the
entire principal amount together with all accrued interest due and
payable on December 31, 2020. In connection with TEI’s
acquisition of beneficial ownership in the Ward County Assets, MPC
sold those same assets, on behalf of TEI, to MECO at closing of the
MECO PSA, and accordingly, TEI received $3,250,000 in cash for its
beneficial interest in the Ward County Assets. Additionally, at
closing of the MECO PSA, MPC paid TEI a performance fee of
$2,781,500 in cash as compensation for TEI’s marketing and
selling the Winkler County assets of MPC and the Ward County Assets
as a package to MECO.
On July
25, 2018, Torchlight Energy Resources, Inc. and our wholly-owned
subsidiary, Hudspeth Oil Corporation, entered into a Settlement
& Purchase Agreement (the “Settlement Agreement”)
with Founders Oil & Gas, LLC, Founders Oil & Gas Operating,
LLC, Wolfbone Investments, LLC (a wholly-owned company of Gregory
McCabe, our Chairman) and McCabe Petroleum Corporation (also a
wholly-owned company of Mr. McCabe), which agreement provides for
Hudspeth Oil and Wolfbone Investments to each immediately pay
$625,000 and for Hudspeth Oil or the Company and Wolfbone
Investments or McCabe Petroleum to each pay another $625,000 on
July 20, 2019, as consideration for Founders Oil & Gas
assigning all of its working interest in the oil and gas leases of
the Orogrande Project to Hudspeth Oil and Wolfbone Investments
equally. The assignments to Hudspeth Oil and Wolfbone Investments
will be made when the first payments are made, and the payments to
Founders Oil & Gas due in 2019 are not securitized. After this
assignment (for which Hudspeth Oil’s total consideration is
$1,250,000), Hudspeth Oil’s working interest will increase to
72.5%. Additionally, the Settlement Agreement provides that the
Founders parties will assign to the Company, Hudspeth Oil, Wolfbone
Investments and McCabe Petroleum their claims against certain
vendors for damages, if any, against such vendors for negligent
services or defective equipment. Further, the Settlement Agreement
has a mutual release and waivers among the parties.
On
October 17, 2018, we sold to certain investors in a private
transaction 16% Series C Unsecured Convertible Promissory Notes
with a total principal amount of $6,000,000. Interest and principal
are due and payable on the notes in one balloon payment at maturity
on April 17, 2020. The notes are convertible, at the election of
the holders, into an aggregate 6% working interest in certain oil
and gas leases in Hudspeth County, Texas, known as our
“Orogrande Project.” The notes allow us to redeem them
early only upon the event of a fundamental transaction, such as a
merger or sale of substantially all our assets. The notes provide
that the noteholders may accelerate and declare any and all of the
obligations under the notes to be immediately due and payable in
the event of default, such as nonpayment, failure to perform
required conversions, failure to perform any covenant or agreement
under the notes, an insolvency event, or certain defaults or
judgments. As part of the sale of the of the notes, the noteholders
required that McCabe Petroleum Corporation, a Texas corporation
owned by our Chairman Gregory McCabe (“MPC”), provide
them a put option whereby they have the right to have MPC purchase
from them any unpaid principal amount due on the notes.
Additionally, if there is a fundamental transaction, Mr. McCabe
will be required to pay a fee to each noteholder that elects not to
convert or require MPC to purchase the principal amount under the
note, which fee will be equal to such noteholder’s pro-rata
share of a total fee amount of $1,500,000. We received total
proceeds of $6,000,000 from the sale of the notes, of which
$3,000,000 was used to pay back the promissory note issued to MPC
on December 1, 2017, which note was due on December 31, 2020. We
intend to use the remaining proceeds for working capital and
general corporate purposes, which includes, without limitation,
drilling and lease acquisition capital. Prior to entering into the
above transactions, our Board of Directors formed a special
committee composed of independent directors to analyze and
authorize the transactions on behalf of Torchlight Energy
Resources, Inc. and determine whether the transactions are fair to
the company. In this role, the special committee engaged an
independent financial consulting firm which rendered a fairness
opinion deeming that the transactions were fair to the company,
from a financial point of view, and contained terms no less
favorable to the company than those that could be obtained in
arm’s length transactions.
In
December 2018, we paid WellsX Corp. a total of $173,000 for
performing hydraulic fracturing services on a well at our Orogrande
Project in Hudspeth County, Texas. Robert Lance Cook, a member of
our Board of Directors, holds a 19% beneficial ownership in WellsX
Corp. and is its Vice President of Production
Operations.
Security Ownership of Certain Beneficial Owners and
Management
The
following table sets forth information, as of September 16, 2019,
concerning, except as indicated by the footnotes below, (i) each
person whom we know beneficially owns more than 5% of our common
stock, (ii) each of our directors, (iii) each of our named
executive officers, (iv) all of our directors and executive
officers as a group and (v) each of our nominees for election to
the Board of Directors. Unless otherwise noted below, the
address of each beneficial owner listed in the table is c/o
Torchlight Energy Resources, Inc., 5700 W. Plano Parkway, Suite
3600, Plano, Texas 75093. We have determined beneficial
ownership in accordance with the rules of the SEC. Except as
indicated by the footnotes below, we believe, based on the
information furnished to us, that the persons and entities named in
the table below have sole voting and investment power with respect
to all shares of common stock that they beneficially own, subject
to applicable community property laws. Applicable percentage
ownership is based on 73,515,792 shares of common stock outstanding
at September 16, 2019 (which amount excludes the 262,001 restricted
shares of common stock held by our director Alexandre Zyngier). In
computing the number of shares of common stock beneficially owned
by a person and the percentage ownership of that person, we deemed
outstanding shares of common stock subject to stock options or
warrants held by that person that are currently exercisable or
exercisable within 60 days of September 16, 2019 and shares of
common stock issuable upon conversion of other securities held by
that person that are currently convertible or convertible within 60
days of September 16, 2019. We did not deem these shares
outstanding, however, for the purpose of computing the percentage
ownership of any other person. Unless otherwise noted, stock
options and warrants referenced in the footnotes below are
currently fully vested and exercisable. Beneficial ownership
representing less than 1% is denoted with an asterisk
(*).
Shares
Beneficially Owned
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Name
of beneficial owner
|
|
|
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|
|
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John
A. Brda
|
5,318,322
|
(1)
|
6.95
|
|
President,
CEO, Secretary and Director
|
|
|
|
|
|
|
|
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|
Gregory
McCabe
|
13,648,390
|
(2)
|
18.54
|
|
Director
(Chairman of the Board)
|
|
|
|
|
|
|
|
|
|
Roger
N. Wurtele
|
1,510,000
|
(3)
|
2.01
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
Robert
Lance Cook
|
100,000
|
(4)
|
*
|
|
Director
|
|
|
|
|
|
|
|
|
|
Michael
J. Graves
|
545,000
|
(5)
|
*
|
|
Director
|
|
|
|
|
|
|
|
|
|
Alexandre
Zyngier
|
400,000
|
(6)
|
*
|
|
Director
|
|
|
|
|
|
|
|
|
|
All
directors and executive officers as a group (6
persons)
|
21,521,712
|
|
27.24
|
|
|
|
|
|
|
Robert
Kenneth Dulin (7)
|
4,351,381
|
(7)
|
5.78
|
|
|
|
|
|
|
David Moradi
(8)
|
4,176,891
|
(8)
|
5.68
|
|
(1)
|
Includes
2,318,322 shares of common stock held by the John A. Brda Trust
(the “Trust”). Mr. Brda is the settlor of the Trust and
reserves the right to revoke the Trust without the consent of
another person. Further, he is the trustee of the Trust and
exercises investment control over the securities held by the Trust.
Also includes stock options that are exercisable into 3,000,000
shares of common stock, held individually by Mr. Brda.
|
|
(2)
|
Includes
(a) 10,264,335 shares of common stock held individually by Mr.
McCabe; (b) securities held by G Mc Exploration, LLC
(“GME”), including (i) 797,099 shares of common stock
and (ii) 86,956 shares issuable upon exercise of warrants; and (c)
2,500,000 shares of common stock beneficially owned by McCabe Petroleum Corporation
(“MPC”). Mr. McCabe may be deemed to hold
beneficial ownership of securities held by GME as a result of his
ownership of 50% of the outstanding membership interests of GME.
Mr. McCabe may be
deemed to hold beneficial ownership of securities held by MPC as a
result of his ownership of 100% of the outstanding shares of
capital stock of MPC.
|
|
(3)
|
Includes
10,000 shares of common stock and stock options that are
exercisable into 1,500,000 shares of common stock held by Mr.
Wurtele.
|
|
(4)
|
Includes
stock options that are exercisable into 100,000 shares of common
stock held by Mr. Cook.
|
|
(5)
|
Includes
145,000 shares of common stock and stock options that are
exercisable into 400,000 shares of common stock held by Mr.
Graves.
|
|
(6)
|
Includes
stock options that are exercisable into 400,000 shares of common
stock held by Mr. Zyngier.
|
|
(7)
|
Includes
(a) securities held individually by Robert Kenneth Dulin, including
(i) 27,000 shares of common stock and (ii) warrants that are
exercisable into 150,000 shares of common stock; (b) 243,360 shares
of common stock held in trust for the benefit of immediate family
members of Mr. Dulin; (c) securities held by Sawtooth Properties,
LLLP (“Sawtooth”), including (i) 892,258 shares of
common stock and (ii) warrants that are exercisable into 234,745
shares of common stock; (d) securities held by Black Hills
Properties, LLLP (“Black Hills”), including (i) 612,099
shares of common stock, and (ii) warrants that are exercisable into
189,956 shares of common stock; (e) securities held by Pine River
Ranch, LLC (“Pine River”), including (i) 801,939 shares
of common stock and (ii) warrants that are exercisable into 450,024
shares of common stock; and (f) securities held by Pandora Energy,
LP (“Pandora”), including warrants that are exercisable
into 750,000 shares of common stock. Mr. Dulin is trustee/custodian
of each of the trusts and/or accounts referenced in
“(b)” above and has voting and investment authority
over the shares held by them. Mr. Dulin is the Managing Partner of
Sawtooth Properties, LLLP, the Managing Partner of Black Hills, the
Managing Member of Pine River, and the General Partner of Pandora,
and he has voting and investment authority over the shares held by
each entity. Mr. Dulin’s address is 8449 Greenwood Drive,
Niwot, Colorado, 80503. The information herein is based in part on
information provided to us by Mr. Dulin, and accordingly, we are
unable to verify the accuracy this information.
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(8)
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Based
on a Schedule 13G/A filed on February 5, 2019, by Anthion
Management, LLC, a Delaware limited liability company
(“Anthion Management”), which reports beneficial
ownership of our common stock held by Anthion Management, Anthion
Partners II LLC, a Delaware limited liability company
(“Anthion Partners”), and David Moradi, an individual.
The filing lists the address of all three reporting persons as 119
Washington Avenue, Suite 406, Miami Beach, Florida 33139, and
indicates that Anthion Management and Antion Partners each has sole
voting power and sole dispositive power with respect to 2,034,513
shares of common stock and David Moradi has sole voting power and
sole dispositive power with respect to 4,176,891 shares of common
stock.
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PROPOSAL 2 – RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee of the Board of Directors has selected Briggs &
Veselka Co. as our independent registered public accounting firm
for the current fiscal year. Briggs & Veselka Co. has served as
our independent registered public accounting firm continuously
since January 2017. We wish to obtain from the stockholders a
ratification of the Audit Committee’s action in selecting
Briggs & Veselka Co. for the fiscal year ending December 31,
2019. Such ratification requires the affirmative vote of a majority
of the shares of common stock present or represented by proxy and
entitled to vote at the Annual Meeting. A representative of Briggs
& Veselka Co. is expected to be present at the Annual Meeting
with the opportunity to make a statement if he or she so desires
and to respond to appropriate questions.
Although not
required by law or otherwise, the selection is being submitted to
the stockholders for their approval as a matter of good corporate
practice. In the event the selection of Briggs & Veselka Co. as
our independent registered public accounting firm is not ratified
by the stockholders, the adverse vote will be considered as a
direction to the Audit Committee to reconsider whether or not to
retain that firm as independent registered public accounting firm
for the fiscal year ending December 31, 2019. Even if the selection
is ratified, the Board of Directors in its discretion may direct
the selection of a different independent accounting firm at any
time during or after the year if it determines that such a change
would be in the best interests of us and our
stockholders.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
RATIFICATION OF THE SELECTION OF BRIGGS & VESELKA CO. AS OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2019.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On
December 15, 2016, Calvetti Ferguson (“Calvetti”)
resigned as our independent registered public accounting firm.
Calvetti informed us that its resignation was in connection with
its recently adopted business decision to discontinue auditing all
public company clients that file Form 10-K’s.
Calvetti did not
audit the financial statements for either of the past two fiscal
years.
During
our two most recent fiscal years or any subsequent interim period
preceding the resignation of Calvetti, there have been no
disagreements with Calvetti on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement(s), if not resolved to the
satisfaction of Calvetti, would have caused it to make reference to
the subject matter of the disagreement(s) in connection with its
report.
During
our two most recent fiscal years or any subsequent interim period
preceding the resignation of Calvetti, none of the kinds of events
listed in paragraphs (a)(1)(v) (A) through (D) of Item 304 of
Regulation S-K occurred while Calvetti was engaged.
On
January 10, 2017, we engaged Briggs & Veselka Co.
(“Briggs & Veselka”) as our new independent
registered public accounting firm.
During
our two most recent fiscal years and through the interim period
through January 10, 2017, neither we nor anyone on our behalf
consulted Briggs & Veselka regarding (i) the application of
accounting principles to a specified transaction, either completed
or proposed, or the type of audit opinion that might be rendered on
our consolidated financial statements, and no written report or
oral advice was provided by Briggs & Veselka to us that Briggs
& Veselka concluded was an important factor considered by us in
reaching a decision as to the accounting, auditing or financial
reporting issue, or (ii) any matter that was either the subject of
a disagreement (as described in Item 304(a)(1)(iv) of Regulation
S-K and the related instructions) or a reportable event (as
described in Item 304(a)(1) (v) of Regulation S-K).
Disclosure about Fees
The
following table sets forth the fees paid or accrued by us for the
audit and other services provided by our auditor, Briggs &
Veselka Co. and our independent consultant during the years ended
December 31, 2018 and 2017.
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|
|
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Audit
Fees(1)
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$159,253
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$196,666
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|
Audit
Related Fees(2)
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107,186
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-
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|
Tax
Fees(3)
|
20,400
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65,888
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|
All
Other Fees
|
41,959
|
-
|
|
|
|
|
|
Total
Fees
|
$328,798
|
$262,554
|
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(1)
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Audit
Fees: This category represents the aggregate fees billed for
professional services rendered by the principal independent
accountant for the audit of our annual financial statements and
review of financial statements included in our Form 10-K and
services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for the fiscal
years.
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(2)
|
Audit
Related Fees: This category consists of the aggregate fees billed
for SOX 404 Internal Control compliance services and assurance and
related services by our independent consultant that are reasonably
related to the performance of the audit or review of our financial
statements and are not reported under “Audit
Fees.”
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(3)
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Tax
Fees: This category consists of the aggregate fees billed for
professional services rendered by the principal independent
consultant for tax compliance, tax advice, and tax
planning.
|
Pre-Approval of Audit and Non-Audit Services
For
the fiscal years ended December 31, 2018 and 2017, all audit
services and audit-related services, as described above, were
provided to us based upon prior approval of our Audit
Committee.
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PROPOSAL 3 – NON-BINDING ADVISORY VOTE ON EXECUTIVE
COMPENSATION
|
The
SEC’s proxy rules provide that not less than once every three
years, all companies subject to the Securities Exchange Act of 1934
(the “Exchange Act”) must include a separate resolution
subject to stockholder vote to approve the compensation of the
company’s named executive officers, as disclosed in the proxy
statement. This vote, commonly known as a “say-on-pay”
vote, gives a company’s stockholders the opportunity to
endorse or not endorse the company’s executive pay program
and policies. We are asking stockholders to approve the
following resolution:
“RESOLVED,
that the compensation paid to Torchlight Energy Resources,
Inc.’s named executive officers, as disclosed in this Proxy
Statement pursuant to Item 402 of Regulation S–K, including
the compensation tables and narrative discussion, is hereby
APPROVED.”
As
provided in Section 14A of the Exchange Act, this vote will not be
binding on us or our Board of Directors and may not be construed as
overruling a decision by the Board, creating or implying any change
to the fiduciary duties of the Board or any additional fiduciary
duty by the Board or restricting or limiting the ability of
stockholders to make proposals for inclusion in proxy materials
related to executive compensation. The Compensation Committee may,
however, take into account the outcome of the vote when considering
future executive compensation arrangements.
At our
2016 Annual Meeting of Stockholders, the last meeting where we
included a say-on-pay vote, stockholders approved the executive
compensation resolution.
In
voting to approve the above resolution, stockholders may vote for
the resolution, against the resolution or abstain from voting. This
matter will be decided by the affirmative vote of a majority of the
votes cast at the Annual Meeting. On this matter,
abstentions and broker non-votes will have no effect on the
voting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RESOLUTION TO
APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS
DISCLOSED IN THIS PROXY STATEMENT.
PROPOSAL 4 – NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF
VOTES ON EXECUTIVE COMPENSATION
As
required by the SEC’s proxy rules, we are seeking an
advisory, non-binding stockholder vote about how often we should
present stockholders with the opportunity to vote on compensation
awarded to our named executive officers. You may elect to have the
say-on-pay vote held every year, every two years, or every three
years, or you may abstain.
As
provided in Section 14A of the Exchange Act, this vote will not be
binding on us or the Board of Directors and may not be construed as
overruling a decision by the Board, creating or implying any change
to the fiduciary duties of the Board or any additional fiduciary
duty by the Board or restricting or limiting the ability of
stockholders to make proposals for inclusion in proxy materials
related to executive compensation.
The
Board of Directors recommends that say-on-pay votes be held once
every three years, but stockholders are not voting to approve or
disapprove of that recommendation. We believe that a three-year
voting frequency will provide our stockholders with sufficient time
to evaluate the effectiveness of our overall compensation
philosophy, policies, and practices in the context of our long-term
business results for the corresponding period, while avoiding
over-emphasis on short-term variations in compensation and business
results. We also believe that a three-year timeframe provides a
better opportunity to observe and evaluate the impact of any
changes to our executive compensation policies and practices that
have occurred since the last advisory vote.
At our
2013 Annual Meeting of Stockholders, the last meeting where we
included this vote on the frequency of say-on-pay votes,
stockholders voted, on an advisory basis, to hold say-on-pay votes
every three years. The next stockholder advisory vote on the
frequency of say-on-pay votes will occur at our Annual Meeting held
in 2025.
The
frequency that receives the highest number of votes cast will be
deemed to be the frequency selected by the stockholders. Because
this vote is advisory, it will not be binding upon our Board of
Directors. The Board of Directors will, however, consider the
outcome of the stockholder vote, along with other relevant factors,
in determining the voting frequency.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE TO HAVE
THE NON-BINDING VOTE ON EXECUTIVE COMPENSATION EVERY THREE
YEARS.
INTERESTS OF CERTAIN PERSONS IN OR OPPOSITION TO
MATTERS TO BE ACTED UPON
None of
the persons who have served as our executive officers or directors
since the beginning of our last fiscal year, or any associates of
such persons, have any substantial interest, direct or indirect, in
any of the proposals set forth herein, other than elections to
office described under Proposal 1.
OTHER MATTERS WHICH MAY BE PRESENTED FOR ACTION AT THE
MEETING
The
Board of Directors does not intend to present for action at this
Annual Meeting any matter other than those specifically set forth
in the Notice of Annual Meeting. If any other matter is properly
presented for action at the Annual Meeting, it is the intention of
persons named in the proxy to vote thereon in accordance with their
judgment pursuant to the discretionary authority conferred by the
proxy.
PROPOSALS FOR 2020 ANNUAL MEETING
Under
SEC regulations, any stockholder desiring to make a proposal
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
as amended, to be acted upon at the 2020 Annual Meeting of
Stockholders must present the proposal to us at our principal
executive offices at 5700 W. Plano Parkway, Suite 3600, Plano,
Texas 75093, Attention: President, by June 9, 2020 for the proposal
to be eligible for inclusion in our proxy statement. Notice of a
stockholder proposal submitted outside the processes of Rule 14a-8
for the 2020 Annual Meeting of Stockholders will be considered
untimely unless received by us no later than 45 days before the
date on which we first sent our proxy materials for this
year’s Annual Meeting.
MISCELLANEOUS
We file
annual, quarterly and current reports, proxy statements and other
documents with the SEC electronically. The SEC maintains an
Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file
electronically with the SEC. You can access the electronic versions
of these filings on the SEC’s website found at www.sec.gov.
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By
Order of the Board of Directors,
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John A.
Brda
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Dated:
October 7, 2019
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President,
Chief Executive Officer and Director
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PROXY
TORCHLIGHT ENERGY RESOURCES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 13, 2019
The
undersigned hereby appoints John A. Brda and Gregory McCabe, and
each of them as the true and lawful attorney, agent and proxy of
the undersigned, with full power of substitution, to represent and
to vote all shares of common stock of Torchlight Energy Resources,
Inc. (the “Company”) held of record by the undersigned
on September 16, 2019, at the Annual Meeting of Stockholders to be
held on November 13, 2019, at 9:00 a.m. (Central Time) at the
Renaissance Dallas at Plano Legacy West Hotel, 6007 Legacy Drive,
Plano, Texas 75024, and at any adjournments thereof. Any and all
other proxies heretofore given are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY
THE UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED
FOR THE NOMINEES
LISTED IN NUMBER 1, FOR THE RATIFICATION IN NUMBER
2,
FOR APPROVAL OF
THE RESOLUTION IN NUMBER 3, FOR THE
THREE-YEAR OPTION IN NUMBER 4, AND FOR APPROVAL IN NUMBER
5.
1.
ELECTION OF
DIRECTORS OF THE COMPANY. (INSTRUCTION: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH, OR
OTHERWISE STRIKE, THAT NOMINEE'S NAME IN THE LIST
BELOW.)
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[ ]
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FOR all nominees listed
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[ ]
|
WITHHOLD authority to
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below except as marked
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vote for all nominees
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to the contrary.
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below.
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John
A. Brda
Gregory
McCabe
Robert
Lance Cook
Michael
J. Graves
Alexandre
Zyngier
2.
PROPOSAL TO RATIFY
THE SELECTION OF BRIGGS & VESELKA CO. AS THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2019.
[ ] FOR
[
] AGAINST
[
] ABSTAIN
3.
PROPOSAL
TO APPROVE THE FOLLOWING NON-BINDING ADVISORY RESOLUTION:
“RESOLVED, THAT THE COMPENSATION PAID TO TORCHLIGHT ENERGY
RESOURCES, INC.’S NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN
THIS PROXY STATEMENT PURSUANT TO ITEM 402 OF REGULATION S–K,
INCLUDING THE COMPENSATION TABLES AND NARRATIVE DISCUSSION, IS
HEREBY APPROVED.”
[ ] FOR
[
] AGAINST
[
] ABSTAIN
4.
PROPOSAL
TO APPROVE WHETHER THE NON-BINDING ADVISORY VOTES ON EXECUTIVE
COMPENSATION SHOULD OCCUR EVERY ONE, TWO, OR THREE
YEARS.
[ ] THREE YEARS [ ]
TWO YEARS [ ]
ONE YEAR [ ]
ABSTAIN
5.
IN HIS DISCRETION,
THE PROXY IS AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS THAT MAY
PROPERLY COME BEFORE THE ANNUAL MEETING.
[ ] FOR
[
] AGAINST
[
] ABSTAIN
Please
sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such.
If a partnership, please sign in partnership name by authorized
person. If a corporation or other business entity, please sign in
full corporate name by President or other authorized
officer.
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NUMBER OF
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SIGNATURE:
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SHARES OWNED
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PRINTED NAME:
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DATE:
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THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED AT THE
MEETING. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY.
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Important Notice Regarding the Availability of Proxy Materials for
the Annual Meeting of Stockholders to be held November 13,
2019.
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The
Proxy Statement, form of proxy card and Annual Report are available
at:
ir.torchlightenergy.com
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