Item 1.01 Entry into a Material Definitive Agreement
On May
18, 2020, Torchlight Energy Resources, Inc. (“we,”
“us” or “our”) entered into an Underwriting
Agreement with ThinkEquity, a division of Fordham Financial
Management, Inc., as underwriter, relating to the issuance and sale
in an underwritten public offering of 3,000,000 shares of our
common stock, par value $0.001 per share, plus an
additional 450,000 shares through the over-allotment option which
the underwriter exercised on that same date. The public
offering price for each share of common stock is
$0.34.
The
Underwriting Agreement contains customary representations,
warranties and agreements by us, customary conditions to closing,
indemnification obligations of us and the underwriter, including
for liabilities under the Securities Act of 1933, as amended, other
obligations of the parties and termination provisions. The
representations, warranties and covenants contained in the
Underwriting Agreement were made only for purposes of such
agreement and as of specific dates, were solely for the benefit of
the parties to such agreement and may be subject to limitations
agreed upon by the contracting parties.
Pursuant to the
Underwriting Agreement, and subject to certain exceptions, for a
period of 15 trading days we agreed (i) not to sell capital stock
or any securities convertible into or exercisable or exchangeable
for shares of capital stock in a public offering, (ii) not to sell
capital stock or any securities convertible into or exercisable or
exchangeable for shares of capital stock in a non-public offering
for consideration less than the public offering price set forth in
the Underwriting Agreement, (iii) file a registration statement
relating to the offering of any capital stock or securities
convertible into or exercisable or exchangeable for shares of
capital stock, (iv) complete any offering of debt securities, or
(v) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of
ownership of capital stock, whether any such transaction described
in clause (i), (ii), (iii), (iv) or (v) above is to be settled by
delivery of shares of capital stock or such other securities, in
cash or otherwise. Our directors and executive officers agreed to a
lock-up period of 90 days.
The
common stock is being offered and sold pursuant to our effective
shelf registration statement on Form S-3 (Registration
Statement No. 333-220181) filed with the Securities and Exchange
Commission (the “SEC”) on August 25, 2017 and declared
effective by the SEC on September 28, 2017, the accompanying
prospectus contained therein, and preliminary and final prospectus
supplements filed with the SEC in connection with our takedown
relating to the offering. A copy of the opinion of Axelrod &
Smith relating to the legality of the issuance and sale of the
shares of common stock in the offering is attached to this current
report as Exhibit 5.1.
The net proceeds to
us from the sale of the shares of common stock are expected to be
approximately $889,825, after deducting underwriting discounts and
commissions and other estimated offering expenses payable by us,
which includes the underwriter’s exercise of the full amount
of the 45-day over-allotment option granted under the terms of the
Underwriting Agreement to purchase up to an additional 450,000
shares of common stock to cover over-allotments. The offering is
expected to close on or about May 20, 2020, subject to customary
closing conditions.
Also under the
terms of the Underwriting Agreement, we have agreed to issue to the
underwriter warrants (the “Representative’s
Warrants”) to purchase an aggregate of 172,500 shares of
common stock (5% of the total shares issued in in the public
offering including exercise by the underwriter of the full amount
of the over-allotment option). The Representative’s Warrants
will be exercisable at a per share exercise price of $0.425. The
warrants are exercisable for a term of four and one-half years
commencing 180 days from May 18, 2020. The warrants also provide
for “piggyback” registration rights with respect to the
registration of the shares of common stock underlying the warrants,
cashless exercise if there is no effective registration statement
registering such shares and customary antidilution
provisions.
The
foregoing description of the terms of the Underwriting Agreement
does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Underwriting Agreement, which
includes the form of Representative’s Warrants and is
attached to this current report as Exhibit 1.1 and is incorporated
herein by reference.