Item 1.01 Entry into a Material Definitive Agreement
On June
12, 2020, Torchlight Energy Resources, Inc. (“we,”
“us” or “our”) entered into a Securities
Purchase Agreement with an institutional investor, relating to the
issuance and sale in a registered direct public offering of
7,894,737 shares of our common stock, par value $0.001 per share,
at a price of $0.38 per share for total gross proceeds of
approximately $3,000,000. As part of the offering, we issued to the
investor a warrant to purchase up to 3,157,895 shares of our common
stock. The warrant will be exercisable for the period of 12 months
from the date of issuance, at an exercise price of $0.55 per
share.
The
Securities Purchase Agreement contains customary representations,
warranties and agreements by us, customary conditions to closing,
indemnification obligations of us, 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 Securities Purchase 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.
Under
the Securities Purchase Agreement, we may not, subject to certain
exceptions, within 90 days of the closing, issue or enter into any
agreement, other than with the investor, to issue any of our common
stock (or securities exercisable or convertible into our common
stock); provided, however, we are permitted to file a prospectus
supplement to register an at-the-market offering facility
(“ATM”). During the first 30 days after closing of the
offering with the investor, we are prohibited from using the ATM.
Between the 31st day and the
60th day
after closing we may draw up to $25,000 per day at sales prices
under $0.55 per share and an unlimited dollar amount over $0.55 per
share. Beginning on the 61st day after closing,
we may use the ATM without restriction.
We have
also granted the investor a one-year right to participate up to
$750,000 in any subsequent debt or equity capital raising by us, so
long as the investor holds any of the shares of our common stock or
warrants issued pursuant to the Securities Purchase Agreement
during that period.
Pursuant to the
warrant to be issued to the investor, in the event the weighted
average price of our common stock as reported by Nasdaq is greater
than the exercise price, the warrant may be exercised for cash or
on a net-shares exercise basis, and if the weighted average is less
than the exercise price, the warrant may be exercised at the option
of the holder on a cashless basis, in whole or in part, for a
number of shares, equal to the same number of shares that would
have been issued to the holder, if such holder had elected to
exercise the warrant by paying the aggregate exercise price in
cash, without having to pay such aggregate exercise price. The
warrant will provide that the holder cannot exercise its warrant if
such exercise will result in the holder beneficially owning in
excess of 9.99% of our shares of common stock outstanding
immediately after giving effect to such exercise. By written
notice, the holder may from time to time increase or decrease this
percentage to any other percentage not in excess of 9.99%, provided
that any such increase will not be effective until the
61st day
after such notice is delivered to us. The warrant will also contain
antidilution provisions and other customary
provisions.
The
shares of our common stock, warrant and shares of common stock
issuable upon exercise of such warrant are 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 the
prospectus supplement to be filed with the SEC in connection with
our takedown relating to the offering.
The net
proceeds to us from the sale of such shares of common stock and
warrant are expected to be approximately $2.8 million, after
deducting estimated offering expenses payable by us, including
payment of a $150,000 fee to our financial advisor, Roth Capital
Partners, in connection with advising us regarding this offering.
There were no underwriting discounts or commissions in connection
with the offering. The offering is expected to close on or about
June 16, 2020, subject to customary closing
conditions.
The
foregoing descriptions of the terms of the Securities Purchase
Agreement and warrant do not purport to be complete and are subject
to, and qualified in their entirety by reference to, the form of
Securities Purchase Agreement and form of warrant, each of which
are attached to this Current Report on Form 8-K as exhibits 10.1
and 4.1, respectively, and are incorporated herein by
reference.