UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM
10-Q/A

Amendment
No. 1



(Mark
One)



xQuarterly report under Section 13 or 15(d) of
the Securities Exchange Act of 1934

For
the Quarter Ended March 31, 2020



oTransition
report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For
the transition period from _______ to _______.



Commission
file number: 001-36247



TORCHLIGHT
ENERGY RESOURCES, INC.






(Name
of registrant in its charter)



|Nevada                                                             | 74-3237581                              
|------------------------------------------------------------------ | ----------------------------------------
|(State
    or Other Jurisdiction of Incorporation or Organization) | (I.R.S.
    Employer Identification No.)



5700
West Plano Pkwy, Suite 3600

Plano,
Texas 75093






(Address
of Principal Executive Offices)



(214)
432-8002






(Registrants
Telephone Number, Including Area Code)



Securities
registered pursuant to Section 12(b) of the Act:



|Title
    of each class            |  | Trading
    Symbol(s) |  | Name
    of each exchange on which registered
|---------------------------------- |  | --------------------- |  | ---------------------------------------------
|Common
    Stock, $0.001 par value |  | TRCH                  |  | The
    Nasdaq Stock Market LLC              



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes x No o



Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes x No o



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. Large accelerated filer o Accelerated filer x Non-accelerated filer o
Smaller reporting company x Emerging growth company o



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. o



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
No x



As of June 5, 2020, there were 86,216,424 shares of the registrants common stock outstanding (the only class of voting common stock).

1







EXPLANATORY NOTE ON AMENDMENT



Torchlight Energy Resources, Inc. is filing
this Amendment No. 1 to its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020, originally filed with the
Securities and Exchange Commission (the “SEC”) on June 6, 2020 (the “Original Report”).



This Amendment is being filed to add the
“Special Note Regarding Reliance on Relief Order” below, that was inadvertently not included in the Original Report.



This Amendment No. 1 speaks as of the filing
date of the Original Report, does not update information in the Original Report to reflect events that have occurred subsequent
to the filing date of the Original Report, and does not modify or update in any way disclosures made in the Original Report. Except
as described above (and adjustments made to the exhibit table), no other amendments are being made to the Original Report.



SPECIAL NOTE REGARDING RELIANCE ON RELIEF
ORDER



On April 29, 2020, we filed a Current Report
on Form 8-K in compliance with and in reliance on SEC Release No. 34-88465, dated March 25, 2020 (the “Relief Order”).
By way of filing the Form 8-K, we extended the time of filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2020, until no later than June 25, 2020, in reliance on the Relief Order. The Form 8-K disclosed the reasons that the
Form 10-Q could not be filed timely.



As required by the Relief Order, we hereby
disclose that we were unable to timely file the Form 10-Q and had to avail ourselves of the Relief Order because of the following
issues posed by the COVID-19 pandemic:



We were unable to meet the filing deadline
for our Form 10-Q for the quarter ended March 31, 2020 due to circumstances related to COVID-19. Our operations and business have
experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic, which resulted in limited availability
of key personnel required to assist in the preparation of the Form 10-Q due to suggested and mandated social quarantining and
work from home orders and the need to look after family members including small children who are no longer in school and day care.
We have also had to modify our business practices, including employee work locations and cancellation of physical participation
in meetings.

















FORM
10-Q



TABLE
OF CONTENTS



|Note About Forward-Looking Statements | 3                                                                                    
|------------------------------------- | -------------------------------------------------------------------------------------
|                                      |                                                                                      
|PART I                                | FINANCIAL INFORMATION                                                                
|                                      |                                                                                      
|Item 1.                               | Consolidated Financial Statements                                                    
|                                      |                                                                                      
|                                      | Consolidated Balance Sheets (Unaudited)                                              
|                                      |                                                                                      
|                                      | Consolidated Statements of Operations (Unaudited)                                    
|                                      |                                                                                      
|                                      | Consolidated Statements of Cash Flows (Unaudited)                                    
|                                      |                                                                                      
|                                      | Consolidated Statements of Stockholders Equity (Unaudited)                          
|                                      |                                                                                      
|                                      | Notes to Consolidated Financial Statements (Unaudited)                               
|                                      |                                                                                      
|Item 2.                               | Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                      |                                                                                      
|Item 3.                               | Quantitative and Qualitative Disclosures About Market Risk                           
|                                      |                                                                                      
|Item 4.                               | Controls and Procedures                                                              
|                                      |                                                                                      
|PART II                               | OTHER INFORMATION                                                                    
|                                      |                                                                                      
|Item 1.                               | Legal Proceedings                                                                    
|                                      |                                                                                      
|Item 1A.                              | Risk Factors                                                                         
|                                      |                                                                                      
|Item 2.                               | Unregistered Sales of Equity Securities and Use of Proceeds                          
|                                      |                                                                                      
|Item 6.                               | Exhibits                                                                             
|                                      |                                                                                      
|                                      | Signatures                                                                           

2





NOTE
ABOUT FORWARD-LOOKING STATEMENTS



This
Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. These statements include, among other things, statements regarding plans, objectives, goals, strategies, future events
or performance and underlying assumptions and other statements, which are other than statements of historical facts. Forward-looking
statements may appear throughout this report, including without limitation, Item 2 Managements Discussion and Analysis
of Financial Condition and Results of Operations. Forward-looking statements generally can be identified by words such
as anticipates, believes, estimates, expects, intends, plans,
predicts, projects, will be, will continue, will likely result,
and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to
risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking
statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this
report and in our Annual Report on Form 10-K for the year ended December 31, 2019 and in particular, the risks discussed in our
Form 10-K under the caption Risk Factors in Item 1A therein, and those discussed in other documents we file with
the Securities and Exchange Commission (SEC). Important factors that in our view could cause material adverse effects
on our financial condition and results of operations include, but are not limited to, risks associated with our ability to extend
or restructure existing debt, to obtain additional capital in the future to repay outstanding debt and fund planned expansion,
the demand for oil and natural gas which demand could be materially affected by the economic impacts of COVID-19 and possible
increases in supply from Russia and OPEC, general economic factors, competition in the industry, our ability to regain and maintain
compliance with the minimum bid price requirement of the Nasdaq Stock Market and other factors that may cause actual results to
be materially different from those described herein as anticipated, believed, estimated or expected. We undertake no obligation
to revise or publicly release the results of any revision to any forward-looking statements, except as required by law. Given
these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.



As
used herein, the Company, Torchlight, we, our, and similar terms include
Torchlight Energy Resources, Inc. and its subsidiaries, unless the context indicates otherwise.

3





PART
I FINANCIAL INFORMATION



ITEM
1. FINANCIAL STATEMENTS



|TORCHLIGHT
    ENERGY RESOURCES, INC.      
|-------------------------------------------
|CONSOLIDATED
    BALANCE SHEETS (Unaudited)



|                                                                                                                                                                           |  | March 31, |              |   | December 31, |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ------------ | - | ------------ | -
|                                                                                                                                                                           |  | 2020      |              |   | 2019         |  
|ASSETS                                                                                                                                                                     |  |           |              |   |              |  
|Current assets:                                                                                                                                                            |  |           |              |   |              |  
|Cash                                                                                                                                                                       |  | $         | 82,654       |   |              | $
|Accounts receivable                                                                                                                                                        |  |           | 222,509      |   |              |  
|Production revenue receivable                                                                                                                                              |  |           | 71,106       |   |              |  
|Subscription receivable                                                                                                                                                    |  |           | 0            |   |              |  
|Prepaid expenses                                                                                                                                                           |  |           | 61,671       |   |              |  
|Total current assets                                                                                                                                                       |  |           | 437,940      |   |              |  
|                                                                                                                                                                           |  |           |              |   |              |  
|Oil and gas properties, net                                                                                                                                                |  |           | 33,947,468   |   |              |  
|Office equipment, net                                                                                                                                                      |  |           | 5,867        |   |              |  
|                                                                                                                                                                           |  |           |              |   |              |  
|TOTAL ASSETS                                                                                                                                                               |  | $         | 34,391,275   |   |              | $
|                                                                                                                                                                           |  |           |              |   |              |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                       |  |           |              |   |              |  
|Current liabilities:                                                                                                                                                       |  |           |              |   |              |  
|Accounts payable                                                                                                                                                           |  | $         | 2,423,626    |   |              | $
|12% 2020 Unsecured promissory notes, net of $825 and $127,170  of discount and financing costs, respectively                                                               |  |           | 64,297       |   |              |  
|10% 2020 Convertible promissory notes payable                                                                                                                              |  |           | 540,000      |   |              |  
|14% 2020 Convertible promissory notes payable                                                                                                                              |  |           | -            |   |              |  
|Due to working interest owners                                                                                                                                             |  |           | 54,320       |   |              |  
|Accrued interest payable                                                                                                                                                   |  |           | 599,742      |   |              |  
|Total current liabilities                                                                                                                                                  |  |           | 3,681,985    |   |              |  
|                                                                                                                                                                           |  |           |              |   |              |  
|12% 2021 Secured promissory notes, net of $136,704 and $59,297 of discount and financing costs, respectively                                                               |  |           | 12,362,471   |   |              |  
|8% 2021 Convertible promissory notes payable, net of  $1,065,619 and $1,186,029 of discount and BCF, respectively                                                          |  |           | 894,381      |   |              |  
|14% 2021 Convertible promissory notes payable                                                                                                                              |  |           | 2,000,000    |   |              |  
|Convertible notes payable and accrued interest                                                                                                                             |  |           | -            |   |              |  
|Accrued payroll                                                                                                                                                            |  |           | 1,041,176    |   |              |  
|Related party payables                                                                                                                                                     |  |           | 45,000       |   |              |  
|Asset retirement obligations                                                                                                                                               |  |           | 23,461       |   |              |  
|                                                                                                                                                                           |  |           |              |   |              |  
|Total liabilities                                                                                                                                                          |  |           | 20,048,474   |   |              |  
|                                                                                                                                                                           |  |           |              |   |              |  
|Commitments and contingencies                                                                                                                                              |  |           |              |   |              |  
|                                                                                                                                                                           |  |           |              |   |              |  
|Stockholders equity:                                                                                                                                                      |  |           |              |   |              |  
|Preferred stock, par value $0.001, 10,000,000 shares authorized; -0- issued and outstanding at March 31,2020 and December 31, 2019                                         |  |           | -            |   |              |  
|Common stock, par value $0.001; 150,000,000 shares authorized; 80,272,757 issued and outstanding at March 31, 2020; 76,222,042 issued and outstanding at December 31, 2019 |  |           | 80,276       |   |              |  
|Additional paid-in capital                                                                                                                                                 |  |           | 117,110,089  |   |              |  
|Accumulated deficit                                                                                                                                                        |  |           | (102,847,564 | ) |              |  
|Total stockholders equity                                                                                                                                                 |  |           | 14,342,801   |   |              |  
|                                                                                                                                                                           |  |           |              |   |              |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                 |  | $         | 34,391,275   |   |              | $



The
accompanying notes are an integral part of these unaudited interim consolidated financial statements.

4





|TORCHLIGHT
    ENERGY RESOURCES, INC.                
|-----------------------------------------------------
|CONSOLIDATED
    STATEMENTS OF OPERATIONS (Unaudited)



|                                                      |  | Three Months   |            |   | Three Months   |  
|----------------------------------------------------- |  | -------------- | ---------- | - | -------------- | -
|                                                      |  | Ended          |            |   | Ended          |  
|                                                      |  | March 31, 2020 |            |   | March 31, 2019 |  
|Oil and gas sales                                     |  | $              | 84,620     |   |                | $
|                                                      |  |                |            |   |                |  
|Cost of revenues                                      |  |                | (67,858    | ) |                |  
|                                                      |  |                |            |   |                |  
|Gross profit                                          |  |                | 16,762     |   |                |  
|                                                      |  |                |            |   |                |  
|Operating expenses:                                   |  |                |            |   |                |  
|General and administrative                            |  |                | 1,047,624  |   |                |  
|Depreciation, depletion and amortization              |  |                | 447,405    |   |                |  
|Loss on extinguishment of debt                        |  |                | 1,829,651  |   |                |  
|Impairment loss                                       |  |                | -          |   |                |  
|Total operating expenses                              |  |                | 3,324,680  |   |                |  
|                                                      |  |                |            |   |                |  
|Other income (expense)                                |  |                |            |   |                |  
|Interest expense and accretion of note discounts      |  |                | (385,945   | ) |                |  
|Interest income                                       |  |                | -          |   |                |  
|Total (expense), net                                  |  |                | (385,945   | ) |                |  
|                                                      |  |                |            |   |                |  
|Loss before income taxes                              |  |                | (3,693,863 | ) |                |  
|                                                      |  |                |            |   |                |  
|Provision for income taxes                            |  |                | -          |   |                |  
|                                                      |  |                |            |   |                |  
|Net loss                                              |  | $              | (3,693,863 | ) |                | $
|                                                      |  |                |            |   |                |  
|Loss per common share:                                |  |                |            |   |                |  
|Basic and Diluted                                     |  | $              | (0.05      | ) |                | $
|Weighted average number of common shares outstanding: |  |                |            |   |                |  
|Basic and Diluted                                     |  |                | 79,595,394 |   |                |  



The
accompanying notes are an integral part of these unaudited interim consolidated financial statements.

5





|TORCHLIGHT
    ENERGY RESOURCES, INC.                
|-----------------------------------------------------
|CONSOLIDATED
    STATEMENTS OF CASH FLOWS (Unaudited)



|                                                                            |  | Three Months   |            |   | Three Months   |  
|--------------------------------------------------------------------------- |  | -------------- | ---------- | - | -------------- | -
|                                                                            |  | Ended          |            |   | Ended          |  
|                                                                            |  | March 31, 2020 |            |   | March 31, 2019 |  
|Cash Flows From Operating Activities                                        |  |                |            |   |                |  
|Net loss                                                                    |  | $              | (3,693,863 | ) |                | $
|Adjustments to reconcile net loss to net cash from operations:              |  |                |            |   |                |  
|Stock based compensation                                                    |  |                | 230,650    |   |                |  
|Stock issued for interest payments on notes payable                         |  |                | -          |   |                |  
|Amortization of debt issuance costs                                         |  |                | 71,647     |   |                |  
|Accretion of note discounts                                                 |  |                | 57,291     |   |                |  
|Amortization of beneficial conversion on CV notes                           |  |                | 120,410    |   |                |  
|Accrued interest payable in stock                                           |  |                | 305,202    |   |                |  
|Depreciation, depletion and amortization                                    |  |                | 447,405    |   |                |  
|Loss on extinguishment of debt                                              |  |                | 1,829,651  |   |                |  
|Impairment loss                                                             |  |                | -          |   |                |  
|Change in:                                                                  |  |                |            |   |                |  
|Accounts receivable                                                         |  |                | (23,047    | ) |                |  
|Production revenue receivable                                               |  |                | 29,440     |   |                |  
|Prepayments - development costs                                             |  |                | -          |   |                |  
|Prepaid expenses                                                            |  |                | 34,335     |   |                |  
|Accounts payable and accrued expenses                                       |  |                | 247,269    |   |                |  
|Accrued interest payable                                                    |  |                | 22,268     |   |                |  
|Net cash from operating activities                                          |  |                | (321,342   | ) |                |  
|                                                                            |  |                |            |   |                |  
|Cash Flows From Investing Activities                                        |  |                |            |   |                |  
|Investment in oil and gas properties                                        |  |                | (2,212,852 | ) |                |  
|                                                                            |  |                |            |   |                |  
|Net cash from investing activities                                          |  |                | (2,212,852 | ) |                |  
|                                                                            |  |                |            |   |                |  
|Cash Flows From Financing Activities                                        |  |                |            |   |                |  
|Issuance of common stock, net of offering costs                             |  |                | 2,357,118  |   |                |  
|Proceeds from stock subscription receivable                                 |  |                | 250,000    |   |                |  
|Proceeds from notes payable                                                 |  |                | -          |   |                |  
|Payment of extension fee on note payable                                    |  |                | (80,000    | ) |                |  
|Proceeds from exercise of warrants into common stock                        |  |                | -          |   |                |  
|Net cash from financing activities                                          |  |                | 2,527,118  |   |                |  
|                                                                            |  |                |            |   |                |  
|Net (decrease) in cash                                                      |  |                | (7,076     | ) |                |  
|                                                                            |  |                |            |   |                |  
|Cash - beginning of period                                                  |  |                | 89,730     |   |                |  
|                                                                            |  |                |            |   |                |  
|Cash - end of  period                                                       |  | $              | 82,654     |   |                | $
|                                                                            |  |                |            |   |                |  
|Supplemental disclosure of cash flow information:                           |  |                |            |   |                |  
|Cash paid for interest                                                      |  | $              | 399,677    |   |                | $
|                                                                            |  |                |            |   |                |  
|Cash paid for state franchise tax                                           |  | $              | -          |   |                | $
|                                                                            |  |                |            |   |                |  
|Supplemental disclosure of non-cash investing
    and financing activities: |  |                |            |   |                |  
|Debt converted by transfer of working interest                              |  | $              | 7,330,849  |   |                | $
|Interest in
    accounts payable for property development costs             |  | $              | 839,855    |   |                | $



The
accompanying notes are an integral part of these unaudited interim consolidated financial statements.

6





|TORCHLIGHT
    ENERGY RESOURCES, INC.                          
|---------------------------------------------------------------
|CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY (Unaudited)



|                                                                    |  | Common |            |  | Common |   |        | Additional |  |   |             |  |  |       |             
|------------------------------------------------------------------- |  | ------ | ---------- |  | ------ | - | ------ | ---------- |  | - | ----------- |  |  | ----- | ------------
|                                                                    |  | stock  |            |  | stock  |   |        | paid-in    |  |   | Accumulated |  |  |       |             
|                                                                    |  | shares |            |  | amount |   |        | capital    |  |   | deficit     |  |  | Total |             
|Balance, December 31, 2019                                          |  |        | 76,222,042 |  |        | $ | 76,225 |            |  | $ | 114,143,872 |  |  | $     | (99,153,701 
|                                                                    |  |        |            |  |        |   |        |            |  |   |             |  |  |       |             
|Issuance of common stock for services                               |  |        | 125,000    |  |        |   | 125    |            |  |   | 86,125      |  |  |       | -           
|Issuance of common stock to a vendor for delay in payment           |  |        | 40,000     |  |        |   | 40     |            |  |   | 25,960      |  |  |       | -           
|Issuance of common stock for cash, less underwriting/offering costs |  |        | 3,885,715  |  |        |   | 3,886  |            |  |   | 2,353,232   |  |  |       | -           
|Warrants issued in conversion of notes payable                      |  |        | -          |  |        |   | -      |            |  |   | 382,500     |  |  |       | -           
|Warrants issued for services                                        |  |        | -          |  |        |   | -      |            |  |   | 98,900      |  |  |       | -           
|Stock options issued for services                                   |  |        | -          |  |        |   | -      |            |  |   | 19,500      |  |  |       | -           
|Net loss                                                            |  |        | -          |  |        |   | -      |            |  |   | -           |  |  |       | (3,693,863  
|                                                                    |  |        |            |  |        |   |        |            |  |   |             |  |  |       |             
|Balance, March 31, 2020                                             |  |        | 80,272,757 |  |        | $ | 80,276 |            |  | $ | 117,110,089 |  |  | $     | (102,847,564







|                                              |  | Common |            |  | Common |   |        | Additional |  |   |             |  |  |       |            
|--------------------------------------------- |  | ------ | ---------- |  | ------ | - | ------ | ---------- |  | - | ----------- |  |  | ----- | -----------
|                                              |  | stock  |            |  | stock  |   |        | paid-in    |  |   | Accumulated |  |  |       |            
|                                              |  | shares |            |  | amount |   |        | capital    |  |   | deficit     |  |  | Total |            
|Balance, December 31, 2018                    |  |        | 70,112,376 |  |        | $ | 70,116 |            |  | $ | 107,266,965 |  |  | $     | (89,314,305
|                                              |  |        |            |  |        |   |        |            |  |   |             |  |  |       |            
|Issuance of common stock for services         |  |        | 92,593     |  |        |   | 92     |            |  |   | 99,908      |  |  |       |            
|Issuance of common stock for cash             |  |        | 1,592,600  |  |        |   | 1,593  |            |  |   | 1,272,487   |  |  |       |            
|Issuance of common stock for interest         |  |        | 13,546     |  |        |   | 13     |            |  |   | 14,615      |  |  |       |            
|Issuance of common stock for warrant exercise |  |        | 100,000    |  |        |   | 100    |            |  |   | 76,900      |  |  |       |            
|Warrants issued for services                  |  |        |            |  |        |   |        |            |  |   | 186,000     |  |  |       |            
|Stock options issued for services             |  |        |            |  |        |   |        |            |  |   | 111,250     |  |  |       |            
|Net loss                                      |  |        |            |  |        |   |        |            |  |   |             |  |  |       | (1,677,874 
|                                              |  |        |            |  |        |   |        |            |  |   |             |  |  |       |            
|Balance, March 31, 2019                       |  |        | 71,911,115 |  |        | $ | 71,914 |            |  | $ | 109,028,125 |  |  | $     | (90,992,179



The
accompanying notes are an integral part of these unaudited interim consolidated financial statements.

7





|TORCHLIGHT
    ENERGY RESOURCES, INC.                     
|----------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|                                                          

1.
NATURE OF BUSINESS



Torchlight
Energy Resources, Inc. was incorporated in October 2007 under the laws of the State of Nevada as Pole
Perfect Studios, Inc. (PPS). From its incorporation to November 2010, the company was primarily engaged in business
start-up activities.



On
November 23, 2010, we entered into and closed a Share Exchange Agreement (the Exchange Agreement) between the major
shareholders of PPS and the shareholders of Torchlight Energy, Inc. (TEI). As a result of the transactions effected
by the Exchange Agreement, at closing TEI became our wholly-owned subsidiary, and the business of TEI became our sole business.
TEI was incorporated under the laws of the State of Nevada in June 2010. We are engaged in the acquisition, exploitation and/or
development of oil and natural gas properties in the United States. We operate our business through our subsidiaries Torchlight
Energy Inc., Torchlight Energy Operating, LLC, Hudspeth Oil Corporation, Torchlight Hazel LLC, and Warwink Properties LLC.



2.
GOING CONCERN



At
March 31, 2020, the Company had not yet achieved profitable operations. We had a net loss of $3,693,863 for the three months ended
March 31, 2020 and had accumulated losses of $102,847,564 since our inception. We expect to incur further losses in the development
of our business. The Company had a working capital deficit as of March 31, 2020 of $3,244,045. These conditions raise substantial
doubt about the Companys ability to continue as a going concern.



The
Companys ability to continue as a going concern is dependent on its ability to generate future profitable operations and/or
to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when
they come due. Managements plan to address the Companys ability to continue as a going concern includes: (1) obtaining
debt or equity funding from private placement or institutional sources; (2) obtain loans from financial institutions, where possible,
or (3) participating in joint venture transactions with third parties. Although management believes that it will be able to obtain
the necessary funding to allow the Company to remain a going concern through the methods discussed above, there can be no assurances
that such methods will prove successful.



These
consolidated financial statements have been prepared assuming that the Company will continue as a going concern and therefore,
the financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification
of assets or the amount and classifications of liabilities that may result from the outcome of this uncertainty.



3.
SIGNIFICANT ACCOUNTING POLICIES



The
Company maintains its accounts on the accrual method of accounting in accordance with accounting principles generally accepted
in the United States of America. Accounting principles followed and the methods of applying those principles, which materially
affect the determination of financial position, results of operations and cash flows are summarized below:



Use
of estimates – The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and certain assumptions that affect the amounts reported
in these consolidated financial statements and accompanying notes. Actual results could differ from these estimates.



Basis
of presentation – The financial statements are presented on a consolidated basis and include all of the
accounts of Torchlight Energy Resources Inc. and its wholly owned subsidiaries, Torchlight Energy, Inc., Torchlight Energy
Operating, LLC, Hudspeth Oil Corporation, Torchlight Hazel LLC, and Warwink Properties LLC. All significant intercompany
balances and transactions have been eliminated.



These
interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC) regarding interim financial reporting. Certain disclosures have been condensed or omitted
from these financial statements. Accordingly, they do not include all the information and notes required by accounting principles
generally accepted in the United States of America (GAAP) for complete consolidated financial statements, and should
be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form
10-K for the year ended December 31, 2019.



In
the opinion of management, the accompanying unaudited financial condensed consolidated financial statements include all adjustments,
consisting of normal recurring adjustments, necessary to fairly present the financial position as of, and the results of operations
for, all periods presented. In preparing the accompanying financial statements, management has made certain estimates and assumptions
that affect reported amounts in the condensed financial statements and disclosures of contingencies. Actual results may differ
from those estimates. The results for interim periods are not necessarily indicative of annual results. Certain reclassifications
have been made to the prior periods consolidated financial statements and related footnotes to conform them to the current
period presentation.

8





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
|                                                         

3.
SIGNIFICANT ACCOUNTING POLICIES- continued



Risks
and uncertainties – The Companys operations are subject to significant risks and uncertainties, including
financial, operational, technological, and other risks associated with operating an emerging business, including the potential
risk of business failure.



Concentration
of risks – At times the Companys cash balances are in excess of amounts guaranteed by the Federal Deposit
Insurance Corporation. The Companys cash is placed with a highly rated financial institution, and the Company regularly
monitors the credit worthiness of the financial institutions with which it does business.



Fair
value of financial instruments – Financial instruments consist of cash, receivables, payables and promissory notes,
if any. The estimated fair values of cash, receivables, and payables approximate the carrying amount due to the relatively short
maturity of these instruments. The carrying amounts of any promissory notes approximate their fair value giving affect for the
term of the note and the effective interest rates.



For
assets and liabilities that require re-measurement to fair value the Company categorizes them in a three-level fair value hierarchy
as follows:



| | ● | Level
1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
| | - | ----------------------------------------------------------------------------------------------------



| | ● | Level
2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or
liability, either directly or indirectly through market corroboration.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Level
3 inputs are unobservable inputs based on managements own assumptions used to measure assets and liabilities at fair value.
| | - | ----------------------------------------------------------------------------------------------------------------------------------



A
financial asset or liabilitys classification within the hierarchy is determined based on the lowest level input that is
significant to the fair value measurement.



Cash
and cash equivalents - Cash and cash equivalents include certain investments in highly liquid instruments with original
maturities of three months or less.



Accounts
receivable – Accounts receivable consist of uncollateralized oil and natural gas revenues due under normal trade
terms, as well as amounts due from working interest owners of oil and gas properties for their share of expenses paid on their
behalf by the Company. Management reviews receivables periodically and reduces the carrying amount by a valuation allowance that
reflects managements best estimate of the amount that may not be collectible. As of March 31, 2020 and December 31, 2019,
no valuation allowance was considered necessary.



Oil
and gas properties – The Company uses the full cost method of accounting for exploration and development activities
as defined by the Securities and Exchange Commission (SEC). Under this method of accounting, the costs of unsuccessful,
as well as successful, exploration and development activities are capitalized as properties and equipment. This includes any internal
costs that are directly related to property acquisition, exploration and development activities but does not include any costs
related to production, general corporate overhead or similar activities.



Oil
and gas properties include costs that are excluded from costs being depleted or amortized. Oil and natural gas property costs
excluded represent investments in unevaluated properties and include non-producing leasehold, geological, and geophysical costs
associated with leasehold or drilling interests and exploration drilling costs. The Company allocates a portion of its acquisition
costs to unevaluated properties based on relative value. Costs are transferred to the full cost pool as the properties are evaluated
over the life of the reservoir. Unevaluated properties are reviewed for impairment at least quarterly and are determined through
an evaluation considering, among other factors, seismic data, requirements to relinquish acreage, drilling results, remaining
time in the commitment period, remaining capital plan, and political, economic, and market conditions.



Gains
and losses on the sale of oil and gas properties are not generally reflected in income unless the gain or loss would significantly
alter the relationship between capitalized costs and proved reserves. Sales of less than 100% of the Companys interest
in the oil and gas property are treated as a reduction of the capital cost of the field, with no gain or loss recognized, as long
as doing so does not significantly affect the unit-of-production depletion rate. Costs of retired equipment, net of salvage value,
are usually charged to accumulated depreciation.

9





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
|                                                         

3.
SIGNIFICANT ACCOUNTING POLICIES- continued



Capitalized
interest – The Company capitalizes interest on unevaluated properties during the periods in which they are excluded
from costs being depleted or amortized. During the three months ended March 31, 2020 and 2019, the Company capitalized $614,479
and $670,963, respectively, of interest on unevaluated properties.



Depreciation,
depletion, and amortization – The depreciable base for oil and natural gas properties includes the sum of all capitalized
costs net of accumulated depreciation, depletion, and amortization (DD&A), estimated future development costs
and asset retirement costs not included in oil and natural gas properties, less costs excluded from amortization. The depreciable
base of oil and natural gas properties is amortized on a unit-of-production method.



Ceiling
test – Future production volumes from oil and gas properties are a significant factor in determining the full cost
ceiling limitation of capitalized costs. Under the full cost method of accounting, the Company is required to periodically perform
a ceiling test that determines a limit on the book value of oil and gas properties. If the net capitalized cost
of proved oil and gas properties, net of related deferred income taxes, plus the cost of unproved oil and gas properties, exceeds
the present value of estimated future net cash flows discounted at 10 percent, net of related realizable tax affects, plus the
cost of unproved oil and gas properties, the excess is charged to expense and reflected as additional accumulated DD&A. The
Company recorded an impairment expense of $-0- and $474,357 for the three months ended March 31, 2020 and 2019, respectively,
to recognize the adjustment required by the ceiling test.



The
ceiling test calculation uses a commodity price assumption which is based on the unweighted arithmetic average of the price on
the first day of each month for each month within the prior 12 month period and excludes future cash outflows related to estimated
abandonment costs.



The
determination of oil and gas reserves is a subjective process, and the accuracy of any reserve estimate depends on the quality
of available data and the application of engineering and geological interpretation and judgment. Estimates of economically recoverable
reserves and future net cash flows depend on a number of variable factors and assumptions that are difficult to predict and may
vary considerably from actual results. In particular, reserve estimates for wells with limited or no production history are less
reliable than those based on actual production. Subsequent re-evaluation of reserves and cost estimates related to future development
of proved oil and gas reserves could result in significant revisions to proved reserves. Other issues, such as changes in regulatory
requirements, technological advances, and other factors which are difficult to predict could also affect estimates of proved reserves
in the future.



Asset
retirement obligations – The fair value of a liability for an assets retirement obligation
(ARO) is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made,
with the corresponding charge capitalized as part of the carrying amount of the related long-lived asset. The liability is
accreted to its then-present value each subsequent period, and the capitalized cost is depleted over the useful life of the
related asset. Abandonment costs incurred are recorded as a reduction of the ARO liability.



Inherent
in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation
factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political
environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding
adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded
as a gain or loss upon settlement.



Income
taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. A valuation allowance is established to reduce deferred tax assets if it is more
likely than not that the related tax benefits will not be realized.



Authoritative
guidance for uncertainty in income taxes requires that the Company recognize the financial statement benefit of a tax position
only after determining that the relevant tax authority would more likely than not sustain the position following an examination.
Management has reviewed the Companys tax positions and determined there were no uncertain tax positions requiring recognition
in the consolidated financial statements. Company tax returns remain subject to Federal and State tax examinations. Generally,
the applicable statutes of limitation are three to four years from their respective filings.



Estimated
interest and penalties related to potential underpayment on any unrecognized tax benefits are classified as a component of tax
expense in the statements of operation. The Company has not recorded any interest or penalties associated with unrecognized tax
benefits for any periods covered by these financial statements.



Share-based
compensation – Compensation cost for equity awards is based on the fair value of the equity instrument on the date
of grant and is recognized over the period during which an employee is required to provide service in exchange for the award.

10





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
|                                                         

3.
SIGNIFICANT ACCOUNTING POLICIES- continued



The
Company accounts for stock option awards using the calculated value method. The expected term was derived using the simplified
method provided in Securities and Exchange Commission release Staff Accounting Bulletin No. 110, which averages an awards weighted
average vesting period and contractual term for plain vanilla share options.



The
Company accounts for any forfeitures of options when they occur. Previously recognized compensation cost for an award is reversed
in the period that the award is forfeited.



The
Company also issues equity awards to non-employees. The fair value of these option awards is estimated when the award recipient
completes the contracted professional services. The Company recognizes expense for the estimated total value of the awards during
the period from their issuance until performance completion.



The
Company values warrant and option awards using the Black-Scholes option pricing model.



Revenue
recognition



The
Companys revenue is typically generated from contracts to sell natural gas, crude oil or NGLs produced from interests in
oil and gas properties owned by the Company. Contracts for the sale of natural gas and crude oil are evidenced by (1) base contracts
for the sale and purchase of natural gas or crude oil, which document the general terms and conditions for the sale, and (2) transaction
confirmations, which document the terms of each specific sale. The transaction confirmations specify a delivery point which represents
the point at which control of the product is transferred to the customer. These contracts frequently meet the definition of a
derivative under ASC 815, and are accounted for as derivatives unless the Company elects to treat them as normal sales as permitted
under that guidance. The Company elects to treat contracts to sell oil and gas production as normal sales, which are then accounted
for as contracts with customers. The Company has determined that these contracts represent multiple performance obligations which
are satisfied when control of the commodity transfers to the customer, typically through the delivery of the specified commodity
to a designated delivery point.



Revenues
from oil and gas sales are detailed as follows:



|          |  | Three Months   |        |  | Three Months   |  
|--------- |  | -------------- | ------ |  | -------------- | -
|          |  | Ended          |        |  | Ended          |  
|          |  | March 31, 2020 |        |  | March 31, 2019 |  
|Revenues  |  |                |        |  |                |  
|          |  |                |        |  |                |  
|Oil sales |  | $              | 82,113 |  |                | $
|          |  |                |        |  |                |  
|Gas sales |  |                | 2,507  |  |                |  
|          |  |                |        |  |                |  
|Total     |  | $              | 84,620 |  |                | $



Revenue
is measured based on consideration specified in the contract with the customer, and excludes any amounts collected on behalf of
third parties. The Company recognizes revenue in the amount that reflects the consideration it expects to be entitled to in exchange
for transferring control of those goods to the customer. Amounts allocated in the Companys price contracts are based on
the standalone selling price of those products in the context of long-term contracts. Payment is generally received one or two
months after the sale has occurred.

11





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
|                                                         

3.
SIGNIFICANT ACCOUNTING POLICIES- continued



Gain
or loss on derivative instruments is outside the scope of ASC 606 and is not considered revenue from contracts with customers
subject to ASC 606. The Company may in the future use financial or physical contracts accounted for as derivatives as economic
hedges to manage price risk associated with normal sales, or in limited cases may use them for contracts the Company intends to
physically settle but do not meet all of the criteria to be treated as normal sales.



Producer
Gas Imbalances. The Company applies the sales method of accounting for natural gas revenue. Under this method, revenues are
recognized based on the actual volume of natural gas sold to purchasers.



Basic
and diluted earnings (loss) per share– Basic earnings (loss) per common share is computed by dividing net
income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.
Diluted earnings (loss) per common share is computed in the same way as basic earnings (loss) per common share except that the
denominator is increased to include the number of additional common shares that would be outstanding if all potential common shares
had been issued and if the additional common shares were dilutive. The calculation of diluted earnings per share excludes 13,766,528
shares issuable upon the exercise of outstanding warrants and options because their effect would be anti-dilutive.



Environmental
laws and regulations – The Company is subject to extensive federal, state, and local environmental laws and regulations.
Environmental expenditures are expensed or capitalized depending on their future economic benefit. The Company believes that it
is in compliance with existing laws and regulations. The Company accrued no liability as of March 31, 2020 and December 31, 2019.



Recent
adopted accounting pronouncements – In February 2016 the FASB, issued ASU, 2016-02, Leases. The ASU requires companies
to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02
was effective for the Company in the first quarter of 2019. The Company adopted the change which did not have a material impact
on its consolidated financial statements.



Other
recently issued or adopted accounting pronouncements are not expected to have, or did not have, a material impact on the Companys
financial position or results from operations.



Subsequent
events – The Company evaluated subsequent events through June 5, 2020, the date of issuance of these financial statements.
Subsequent events are disclosed in Note 11.



4.
OIL & GAS PROPERTIES



The
following table presents the capitalized costs for oil & gas properties of the Company as of March 31, 2020 and December 31,
2019:



|                                                          |  | March 31, 2020 |             |   | December 31, 2019 |  
|--------------------------------------------------------- |  | -------------- | ----------- | - | ----------------- | -
|Evaluated costs subject to amortization                   |  | $              | 13,253,523  |   |                   | $
|Unevaluated costs                                         |  |                | 33,870,107  |   |                   |  
|Total capitalized costs                                   |  |                | 47,123,630  |   |                   |  
|Less accumulated depreciation, depletion and amortization |  |                | (13,176,162 | ) |                   |  
|Total oil and gas properties                              |  | $              | 33,947,468  |   |                   | $



Unevaluated
costs as of March 31, 2020 include cumulative costs on developing projects including the Orogrande, Hazel, and Winkler projects
in West Texas.



The
Company identified impairment of $2,300,626 in 2017 related to its unevaluated properties. The Company adjusted the separation
of evaluated versus unevaluated costs within its full cost pool to recognize the value impairment related to the expiration of
unevaluated leases in 2017 in the amount of $2,300,626. The impact of this change was to increase the basis for calculation of
future periods depletion, depreciation and amortization to include $2,300,626 of cost which will effectively recognize the
impairment on the consolidated statement of operations over future periods. The $2,300,626 has also become an evaluated cost for
purposes of ceiling tests and which may cause recognition of increased impairment expense in future periods. An impairment of
unevaluated costs in 2019 of $756,964 has also been added to the basis for calculation of depletion, depreciation, and amortization.



Due
to the volatility of commodity prices, should oil and natural gas prices decline in the future, it is possible that a further
write-down could occur. Proved reserves are estimated quantities of crude oil, natural gas, and natural gas liquids, which geological
and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs under existing economic and
operating conditions. The independent engineering estimates include only those amounts considered to be proved reserves and do
not include additional amounts which may result from new discoveries in the future, or from application of secondary and tertiary
recovery processes where facilities are not in place or for which transportation and/or marketing contracts are not in place.
Estimated reserves to be developed through secondary or tertiary recovery processes are classified as unevaluated properties.

12





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
|                                                         

4.
OIL & GAS PROPERTIES- continued



Current
Projects



As
of March 31, 2020, we had interests in four oil and gas projects: the Orogrande Project in Hudspeth County, Texas, the Hazel Project
in Sterling, Tom Green, and Irion Counties, Texas, the Winkler Project in Winkler County, Texas and the Hunton wells in partnership
with Husky Ventures in central Oklahoma.



Orogrande
Project, West Texas



On
August 7, 2014, we entered into a Purchase Agreement with Hudspeth Oil Corporation (Hudspeth), McCabe Petroleum
Corporation (MPC), and Gregory McCabe, our Chairman. Mr. McCabe was the sole owner of both Hudspeth and MPC. Under
the terms and conditions of the Purchase Agreement, at closing, we purchased 100% of the capital stock of Hudspeth which holds
certain oil and gas assets, including a 100% working interest in approximately 172,000 mostly contiguous acres in the Orogrande
Basin in West Texas. As of December 31, 2017, leases covering approximately 134,000 acres remain in effect. As consideration,
at closing we issued 868,750 restricted shares of our common stock to Mr. McCabe and paid a total of $100,000 in geologic origination
fees to third parties. Additionally, Mr. McCabe has, at his option, a 10% working interest back-in after payout and a reversionary
interest if drilling obligations are not met, all under the terms and conditions of a participation and development agreement
among Hudspeth, MPC and Mr. McCabe. Mr. McCabe also holds a 4.5% overriding royalty interest in the Orogrande acreage, which he
obtained prior to, and was not a part of, the August 2014 transaction. We believe all drilling obligations through March 31, 2020
have been met. We have received a waiver of the requirement to develop four wells in 2020.



On
September 23, 2015, Hudspeth entered into a Farmout Agreement with Pandora Energy, LP (Pandora), Founders Oil &
Gas, LLC (Founders), and for the limited purposes set forth therein, MPC and Mr. McCabe, for the entire Orogrande
Project in Hudspeth County, Texas. The Farmout Agreement provided that Hudspeth and Pandora (collectively referred to as Farmor)
would assign to Founders an undivided 50% of the leasehold interest and a 37.5% net revenue interest in the oil and gas leases
and mineral interests in the Orogrande Project, which interests, except for any interests retained by Founders, would be reassigned
to Farmor by Founders if Founders did not spend a minimum of $45.0 million on actual drilling operations on the Orogrande Project
by September 23, 2017. Under a joint operating agreement also entered into on September 23, 2015, Founders was designated as operator
of the leases.



On
March 22, 2017, Founders, Founders Oil & Gas Operating, LLC, Founders operating partner, Hudspeth and Pandora signed
a Drilling and Development Unit Agreement (the DDU Agreement), with the Commissioner of the General Land Office,
on behalf of the State of Texas, and as approved by the Board for Lease of University Lands, or University Lands, on the Orogrande
Project. The DDU Agreement has an effective date of January 1, 2017 and required a payment from Founders, Hudspeth and Pandora,
collectively, of $335,323 as the initial consideration fee. The initial consideration fee was paid by Founders in April 2017 and
was to be deducted from the required spud fee payable to us at commencement of the next well drilled.



The
DDU Agreement allows for all 192 existing leases covering approximately 134,000 net acres leased from University Lands to be combined
into one drilling and development unit for development purposes. The term of the DDU Agreement expires on December 31, 2023, and
the time to drill on the drilling and development unit continues through December 2023. The DDU Agreement also grants the right
to extend the DDU Agreement through December 2028 if compliance with the DDU Agreement is met and the extension fee associated
with the additional time is paid. Our drilling obligations began with one well to be spudded and drilled on or before September
1, 2017, and increased to two wells in year 2018, three wells in year 2019, four wells in year 2020 and five wells per year in
years 2021, 2022 and 2023. We have received a waiver of the requirement to develop four wells in 2020. The obligation for 2021
and years following will return to the schedule in the DDU Agreement. The drilling obligations are minimum yearly requirements
and may be exceeded if acceleration is desired. The DDU Agreement replaces all prior agreements, and will govern future drilling
obligations on the drilling and development unit if the DDU Agreement is extended. The Company drilled three wells during fourth
quarter, 2019.



The
Company has developed vertical tests wells in the Orogrande Project. The Orogrande Rich A-11 test well was spudded on March 31,
2015, drilled in the second quarter of 2015 and was evaluated and numerous scientific tests were performed to provide key data
for the field development thesis. We believe that future utility of this well may be conversion to a salt water disposal well
in the course of further development of the Orogrande acreage. The University Founders B-19 #1 was spudded on April 24, 2016 and
drilled in the second quarter of 2016. The well successfully pumped down completion fluid in the third quarter of 2016 and indications
of hydrocarbons were seen at the surface on this second Orogrande Project test well. We believe that future utility of this well
may be conversion to a salt water disposal well in the course of further development of the Orogrande acreage.

13





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
|                                                         

4.
OIL & GAS PROPERTIES- continued



During
the fourth quarter of 2017, we took back operational control from Founders on the Orogrande Project. We were joined by Wolfbone
Investments, LLC, (Wolfbone), a company owned by Mr. McCabe. We, along with Hudspeth, Wolfbone and, for the limited
purposes set forth therein, Pandora, entered into an Assignment of Farmout Agreement with Founders, (the Assignment of
Farmout Agreement), pursuant to which we and Wolfbone will share the remaining commitments under the Farmout Agreement.
All original provisions of our carried interest were to remain in place including reimbursement to us on each wellbore. Founders
was to remain a 9.5% working interest owner in the Orogrande Project for the $9.5 million it had spent as of the date of the Assignment
of Farmout Agreement, and such interests were to be carried until $40.5 million is spent by Wolfbone and us, with each contributing
50% of such capital spend, under the existing agreement. Our working interest in the Orogrande Project thereby increased by 20.25%
to a total of 67.75% and Wolfbone then owned 20.25%.



Founders
was to operate a newly drilled horizontal well called the University Founders #A25 (at 5,540 depth in a 1,000 lateral)
with supervision from us and our partners. The University Founders #A25 was spudded on November 28, 2017. During the month of
April, 2018, we, MPC and Mr. McCabe were to assume full operational control including managing drilling plans and timing for all
future wells drilled in the project.



On
July 25, 2018, we and Hudspeth entered into a Settlement & Purchase Agreement (the Settlement Agreement) with
Founders (and Founders Oil & Gas Operating, LLC), Wolfbone and MPC, which agreement provides for Hudspeth and Wolfbone to
each immediately pay $625,000 and for Hudspeth or the Company and Wolfbone or MPC to each pay another $625,000 on July 20, 2019,
as consideration for Founders assigning all of its working interest in the oil and gas leases of the Orogrande Project to Hudspeth
and Wolfbone equally. The final payments were made on July 18, 2019. The assignments to Hudspeth and Wolfbone were made in July
when the first payments were made. Future well capital spending obligations will require the same 50% contribution from Hudspeth
and 50% from Wolfbone until such time as the $40.5 million to be spent on the project (as per our Assignment of Farmout Agreement
with Founders) is completed. The Company estimates that there is still approximately $24.8 million remaining to be spent on the
project until such time as the capital expenditures revert back to the percentages of the working interest owners. Additionally,
the Settlement Agreement provides that the Founders parties will assign to the Company, Hudspeth, Wolfbone and MPC 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.



After
the assignment by Founders (for which Hudspeths total consideration was $1,250,000), Hudspeths working interest
increased to 72.5%.



During
the fourth quarter, 2019, the Company drilled three additional test wells in the Orogrande in order to stay in compliance with
University Lands D&D Unit Agreement, as well as, to test for potential shallow pay zones and deeper pay zones that may be
present on structural plays. Development of these wells continued into the three months ended March 31, 2020 to further capture
and document the scientific base in support of demonstrating the production potential of the property. The Company is currently
marketing the project for an outright sale or farm in partner. This marketing process has been long and arduous as the overall
market is quite soft. Due to the size and scope of the project, we are dealing with very large companies that have multitudes
of people reviewing our material, which in itself is extensive. During the marketing process, the Company and Wolfbone will endeavor
to complete the University Maverick A24 #1 as a potential producer in the Atoka formation. Should a farm out partner or sale not
occur, the Company and Wolfbone will continue to drill additional wells in the play in order to fulfill the obligations under
the DDU Agreement.. We drilled to test the two obligation wells described above. The first well, the A35 1H, was drilled and cased
in the Penn Section and tested with positive results of oil and gas production to the surface. This first well is a short horizontal
in the proven Penn Section where we will be looking to break through the dual porosity system in place with a larger frac designed
to open up the oil bearing pores. We also drilled the A25 #2 which was being drilled on an identified structure. This well is
designed to test both conventional zones and potentially the unconventional Barnett and Woodford Zones ultimately drilling down
to the cellar around 8,000 feet.



On
March 9, 2020, holders of notes payable by the Company entered into a Conversion Agreement under which the noteholders elected
to convert principal of $6,000,000 and approximately $1,331,000 of accrued interest on the notes, in accordance with their terms,
into an aggregate 6% working interest (of all such holders) in the Orogrande Project.



The
Orogrande Project ownership as of March 31, 2020 is detailed as follows:



|                                                                                      |  | Revenue  |         |   | Working  | 
|------------------------------------------------------------------------------------- |  | -------- | ------- | - | -------- | 
|                                                                                      |  | Interest |         |   | Interest | 
|University Lands - Mineral Owner                                                      |  |          | 20.000  | % |          | 
|                                                                                      |  |          |         |   |          | 
|ORRI - Magdalena Royalties, LLC, an entity controlled by Gregory McCabe, Chairman     |  |          | 4.500   | % |          | 
|                                                                                      |  |          |         |   |          | 
|ORRI - Unrelated Party                                                                |  |          | 0.500   | % |          | 
|                                                                                      |  |          |         |   |          | 
|Hudspeth Oil Corporation, a subsidiary of Torchlight Energy Resources Inc.            |  |          | 49.875  | % |          | 
|                                                                                      |  |          |         |   |          | 
|Wolfbone Investments LLC, an entity controlled controlled by Gregory McCabe, Chairman |  |          | 18.750  | % |          | 
|                                                                                      |  |          |         |   |          | 
|Conversion by Note Holders in March, 2020                                             |  |          | 4.500   | % |          | 
|                                                                                      |  |          |         |   |          | 
|Unrelated Party                                                                       |  |          | 1.875   | % |          | 
|                                                                                      |  |          |         |   |          | 
|                                                                                      |  |          | 100.000 | % |          | 



Rich
Masterson, our consulting geologist, is credited with originating the Orogrande Project in Hudspeth County in the Orogrande Basin.
With Mr. Mastersons assistance and based on all the science we have gathered to date, we have identified multiple unconventional
and conventional target pay zones with depths between 3,000 and 8,000 with primary pay, described as the Penn formation,
located at depths of 5,300 to 5,900. Based on our geologic analysis to date, this basin has stacked pay with zones including
the Wolfcamp, Penn, Barnett, Woodford, Atoka and more. These potential zones are prospective for oil and gas with a GOR of 1100
expected based on our gathered scientific information and analysis from independent third parties.

14





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
|                                                         

4.
OIL & GAS PROPERTIES- continued



Hazel
Project in the Midland Basin in West Texas



Effective
April 4, 2016, TEI acquired from MPC a 66.66% working interest in approximately 12,000 acres in the Midland Basin in exchange
for 1,500,000 warrants to purchase shares of our common stock with an exercise price of $1.00 for five years and a back-in after
payout of a 25% working interest to MPC.



Initial
development of the first well on the property, the Flying B Ranch #1, began July 9, 2016 and development continued through September
30, 2016. This well is classified as a test well in the development pursuit of the Hazel Project. We believe that this wellbore
will be utilized as a salt water disposal well in support of future development.



In
October 2016, the holders of all of our then-outstanding shares of Series C Preferred Stock (which were issued in July 2016) elected
to convert into a total 33.33% working interest in our Hazel Project, reducing our ownership from 66.66% to a 33.33% working interest.



On
December 27, 2016, drilling activities commenced on the second Hazel Project well, the Flying B Ranch #2. The well is a vertical
test similar to our first Hazel Project well, the Flying B Ranch #1. Recompletion in an alternative geological formation for this
well was performed during the three months ended September 30, 2017; however, we believe that the results were uneconomic for
continuing production. We believe that this wellbore will be utilized as a salt water disposal well in support of future development.



We
commenced planning to drill the Flying B Ranch #3 horizontal well in the Hazel Project in June 2017 in compliance with the continuous
drilling obligation. The well was spudded on June 10, 2017. The well was completed and began production in late September 2017.
As of March 31, 2020 the well is shut in due to high lease operating expenses as a result of lack of three phase electricity to
the property which forced the use of diesel generation equipment to power the production facilities.



During
the three months ended March 31, 2019 the Company deepened the Flying B #4 and took whole cores through all of the Wolfcamp A
and the upper portion of the Wolfcamp B.



Acquisition
of Additional Interests in Hazel Project



On
January 30, 2017, we and our then wholly-owned subsidiary, Torchlight Acquisition Corporation, a Texas corporation (TAC),
entered into and closed an Agreement and Plan of Reorganization and a Plan of Merger with Line Drive Energy, LLC, a Texas limited
liability company (Line Drive), and Mr. McCabe, under which agreements TAC merged with and into Line Drive and the
separate existence of TAC ceased, with Line Drive being the surviving entity and becoming our wholly-owned subsidiary. Line Drive,
which was wholly-owned by Mr. McCabe, owned certain assets and securities, including approximately 40.66% of 12,000 gross acres,
9,600 net acres, in the Hazel Project and 521,739 warrants to purchase shares of our common stock (which warrants had been assigned
by Mr. McCabe to Line Drive). Upon the closing of the merger, all of the issued and outstanding shares of common stock of TAC
automatically converted into a membership interest in Line Drive, constituting all of the issued and outstanding membership interests
in Line Drive immediately following the closing of the merger, the membership interest in Line Drive held by Mr. McCabe and outstanding
immediately prior to the closing of the merger ceased to exist, and we issued Mr. McCabe 3,301,739 restricted shares of our 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. Subsequent to the closing the name of Line Drive Energy, LLC
was changed to Torchlight Hazel, LLC.



We
were required to drill one well every six months to hold the entire 12,000 acre block for eighteen months until to November 22,
2018, and thereafter two wells every six months. During 2019 and the three months ended March 31, 2020 modifications were completed
to mineral owner leases as described below.



Lease
Modifications



In
May 2019 we entered into agreements with two of the three mineral owners on the northern section of the leases to keep the entire
acreage block as one lease with a one year extension. We issued each of them 50,000 shares of our common stock as consideration
for this extension. As of March 31, 2020 we have structured the extension agreement retroactively with the third mineral owner
for cash consideration. Due to this extension, our obligation for 2019 reduced to one obligation well. We finished that obligation
well targeting a shallow zone that showed oil potential. For the remainder of 2020 the Company must drill one well in June and
two wells by the December 31, 2020.

15





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
|                                                         

4.
OIL & GAS PROPERTIES- continued



Also
on January 30, 2017, TEI entered into and closed a Purchase and Sale Agreement with Wolfbone. 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
shares of our common stock, including 1,500,000 warrants held by MPC, 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 MPC that were cancelled had an exercise price of $1.00 per share and an expiration date of April 4,
2021. The warrants held by Green Hill Minerals that were cancelled 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.



Since
Mr. McCabe held the controlling interest in both Line Drive and Wolfbone, the transactions were combined for accounting purposes.
The working interest in the Hazel Project was the only asset held by Line Drive. The warrant cancellation was treated in the aggregate
as an exercise of the warrants with the transfer of the working interests as the consideration. We recorded the transactions as
an increase in its investment in the Hazel Project working interests of $3,644,431, which is equal to the exercise price of the
warrants plus the cash paid to Wolfbone.



Upon
the closing of the transactions, our working interest in the Hazel Project increased by 40.66% to a total ownership of 74%.



Effective
June 1, 2017, we acquired an additional 6% working interest from unrelated working interest owners in exchange for 268,656 shares
of common stock valued at $373,430, increasing our working interest in the Hazel project to 80%, and an overall net revenue interest
of 74-75%.



Mr.
Masterson is credited with originating the Hazel Project in the Midland Basin. With Mr. Mastersons assistance, we are targeting
prospects in the Midland Basin that have 150 to 130 feet of thickness, are likely to require six to eight laterals per bench,
have the potential for 12 to 16 horizontal wells per section, and 200 long lateral locations, assuming only two benches.



In
April 2018, we announced that we have commenced a process that could result in the monetization of the Hazel Project. We believe
the development activity at the Hazel Project, coupled with nearby activities of other oil and gas operators, suggests that this
project has achieved a level of value worth monetizing. We anticipate that the liquidity that would be provided from selling the
Hazel Project could be redeployed into the Orogrande Project. While this process is underway, we will take all necessary steps
to maintain the leasehold as required. As of this filing, we continue to maintain the leases in good standing and continue to
market the acreage in an effort to focus on the Orogrande Project.



The
marketing process is ongoing for the Hazel project. We continue to encounter, as does the entire industry, a soft market for acquisitions
and divestitures transactions. We will continue to look to sell the property or joint venture the property via farm in or a drillco
transaction.



Winkler
Project, Winkler County, Texas



On
December 1, 2017, the Agreement and Plan of Reorganization that we and our then wholly-owned subsidiary, Torchlight Wolfbone Properties,
Inc., a Texas corporation (TWP), entered into with MPC and Warwink Properties, LLC (Warwink Properties)
on November 14, 2017 closed. Under the agreement, TWP merged with and into Warwink Properties and the separate existence of TWP
ceased, with Warwink Properties being the surviving entity and becoming our wholly-owned subsidiary. Warwink Properties was wholly
owned by MPC. Warwink Properties owns certain assets, including a 10.71875% working interest in approximately 640 acres in Winkler
County, Texas. Upon the closing of the merger, all of the issued and outstanding shares of common stock of TWP converted into
a membership interest in Warwink Properties, constituting all of the issued and outstanding membership interests in Warwink Properties
immediately following the closing of the merger, the membership interest in Warwink Properties held by MPC and outstanding immediately
prior to the closing of the merger ceased to exist, and we issued MPC 2,500,000 restricted shares of our 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 among MPC, MECO and additional parties thereto
(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 $1,179,076 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 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 January 1, 2021. 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.

16





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)
|                                                         

4.
OIL & GAS PROPERTIES- continued



Addition
to the Winkler Project



As
of May 7, 2018 our Winkler project in the Delaware Basin had begun the drilling phase of the first Winkler Project well, the UL
21 War-Wink 47 #2H. Our operating partner, MECO had begun the pilot hole on the project. The plan is to evaluate the various potential
zones for a lateral leg to be drilled once logging is completed. We expect the most likely target to be the Wolfcamp A interval.
The well is on 320 newly acquired acres offsetting the original leasehold we entered into in December, 2017. The additional acreage
was leased by our operating partner under the Area of Mutual Interest Agreement (AMI) and we exercised its right to participate
for its 12.5% in the additional 1,080 gross acres at a cash cost of $447,847 in July, 2018. Our carried interest in the first
well, as outlined in the agreement, was originally planned to be on the first acreage acquired. That carried interest is being
applied to this new well and will allow MECO to drill and produce potential revenues sooner than originally planned. The primary
leasehold is a 320-acre block directly west of the current position and will allow for 5,000-foot lateral wells to be drilled.
The well was completed and began production in October, 2018 and is producing currently.



The operator has informed us
that there will be no planned additional wells in the acreage in 2020. All acreage is presently held by production.



In
December 2018, the Company began to take measures on its own to market the Winkler Project in an effort to focus on the Orogrande.
This process is ongoing.



Hunton
Play, Central Oklahoma



Presently,
we are producing from one well in the Viking Area of Mutual Interest and one well in Prairie Grove.





With
respect to marketing oil and natural gas properties, the Company has evaluated the properties being marketed to determine whether
any should be reclassified as held-for-sale at March 31, 2020. The held-for-sale criteria include: management commits to a plan
to sell; the asset is available for immediate sale; an active program to locate a buyer exists; the sale of the asset is probable
and expected to be completed within one year; the asset is being actively marketed for sale; and it is unlikely that significant
changes to the plan will be made. If each of these criteria is met, the property would be reclassified as held-for-sale on the
Companys consolidated balance sheets and measured at the lower of their carrying amount or estimated fair value less costs
to sell. Fair values are estimated using accepted valuation techniques, such as a discounted cash flow model, valuations performed
by third parties, earnings multiples, or indicative bids, when available. Management considers historical experience and all available
information at the time the estimates are made; however, the fair value that is ultimately realized upon the sale of the assets
to be divested may differ from the estimated fair values reflected in the consolidated financial statements. If each of these
criteria is met, DD&A expense would not be recorded on assets to be divested once they are classified as held for sale. Based
on managements assessment, these criteria have not been met and no assets are classified as held for sale as of March 31,
2020.



5.
RELATED PARTY PAYABLES



As
of March 31, 2020 and December 31, 2019, related party payables of $45,000, and accrued payroll was $1,041,176 and $996,176, respectively,
consisting of accrued and unpaid compensation due to our executive officers.



6.
COMMITMENTS AND CONTINGENCIES



Leases



The
Company had a noncancelable lease for its office premises that expired on November 30, 2019 and which requires the payment of
base lease amounts and executory costs such as taxes, maintenance and insurance. Effective June 1, 2019 the Company entered into
an agreement with a company that had been subleasing a portion of its office space to become the primary obligor on the lease
and to assume full responsibility for lease payments after lease expiration on November 30, 2019. The Company has continued after
November 30, 2019 as a subtenant on a month to month basis.



Legal
Matters



On
January 31, 2020, Torchlight Energy Resources, Inc. and its wholly owned subsidiaries Torchlight Energy, Inc. and Torchlight Energy
Operating, LLC were served with a lawsuit brought by Goldstone Holding Company, LLC (Goldstone Holding Company, LLC v. Torchlight
Energy, Inc., et al., in the 160th Judicial District Court of Dallas County, Texas). On February 24, 2020, Torchlight Energy
Resources, Inc., Torchlight Energy, Inc., and Torchlight Energy Operating, LLC timely filed their answer, affirmative defenses,
and requests for disclosure. The suit, which seeks monetary relief over $1 million, makes unspecified allegations of misrepresentations
involving a November 2015 participation agreement and a 2016 amendment to the participation agreement. The Company has denied
the allegations and has asserted several affirmative defenses including but not limited to, that the suit is barred by the applicable
statute of limitations, that the claims have been released, and that the claims are barred because of contractual disclaimers
between sophisticated parties.





On April 30, 2020, our wholly owned subsidiary,
Hudspeth Oil Corporation, filed suit against Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies. The suit seeks the recovery
of approximately $1.4 million in costs incurred as a result of a tool failure during drilling activities on the University Founders
A25 #2 well that is located in the Orogrande Field.  Working interest owner Wolfbone Investments, LLC, a company owned by
our Chairman Gregory Mccabe, is a co-plaintiff in that action. The defendant has been served, and its deadline to respond to the
lawsuit is Monday, June 8, 2020. The suit, Hudspeth Oil Corporation and Wolfbone Investments, LLC v. Datalog LWT, Inc. d/b/a
Cordax Evaluation Technologies, was filed in the 189th Judicial District Court of Harris County, Texas.





Environmental
Matters



The
Company is subject to contingencies as a result of environmental laws and regulations. Present and future environmental laws and
regulations applicable to the Companys operations could require substantial capital expenditures or could adversely affect
its operations in other ways that cannot be predicted at this time. As of March 31, 2020 and December 31, 2019, no amounts had
been recorded because no specific liability has been identified that is reasonably probable of requiring the Company to fund any
future material amounts.

17





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)



7.
STOCKHOLDERS EQUITY



Common
Stock



On
January 16, 2020, the Company announced the closing of its underwritten public offering of 3,285,715 shares of its common stock
at a public offering price of $0.70 per share, for total proceeds of $1,997,118 after deducting underwriting discounts and other
offering expenses payable by the Company.



The
Company sold 600,000 shares of common stock for cash at $0.60 per share for total proceeds of $360,000 in a private placement.



During
the three months ended March 31, 2020, the Company issued 125,000 shares of common stock with a fair value of $86,250 as compensation
for services.





During the three months ended March 31, 2020,
the Company issued 40,000 shares of common stock to a vendor with a fair value of $26,000 for delay in payment on outstanding account
payable.





Warrants
and Options



During
the three months ended March 31, 2020, the Company issued 215,000 warrants with total fair value of $98,900 as compensation for
services and recorded expense of $19,500 related to options issued in prior periods.



During
the three months ended March 31, 2020, the Company issued 750,000 warrants valued at $382,500 in connection with the conversion
of convertible notes payable into working interest in the Companys Orogrande Project.



During
the three months ended March 31, 2020, the Company issued 600,000 warrants in connection with the sale of 600,000 shares of common
stock in a private placement.



A
summary of warrants outstanding as of March 31, 2020 by exercise price and year of expiration is presented below:





|Exercise |      |  | Expiration date In |  |           |      | 
|-------- | ---- |  | ------------------ |  | --------- | ---- | 
|Price    |      |  | 2020               |  |           | 2021 | 
|$        | 0.70 |  |                    |  | -         |      | 
|$        | 0.80 |  |                    |  | -         |      | 
|$        | 1.03 |  |                    |  | -         |      | 
|$        | 1.14 |  |                    |  | -         |      | 
|$        | 1.21 |  |                    |  | -         |      | 
|$        | 1.35 |  |                    |  | -         |      | 
|$        | 1.40 |  |                    |  | 321,737   |      | 
|$        | 1.63 |  |                    |  | -         |      | 
|$        | 1.64 |  |                    |  | -         |      | 
|$        | 1.80 |  |                    |  | 1,250,000 |      | 
|$        | 2.00 |  |                    |  | -         |      | 
|$        | 2.23 |  |                    |  | 339,901   |      | 
|         |      |  |                    |  | 1,911,638 |      | 



18





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)



7.
STOCKHOLDERS EQUITY - continued



A
summary of stock options outstanding as of March 31, 2020 by exercise price and year of expiration is presented below:



|Exercise |      |  | Expiration Date in |  |           |      |  | 
|-------- | ---- |  | ------------------ |  | --------- | ---- |  | 
|Price    |      |  | 2020               |  |           | 2021 |  | 
|$        | 0.85 |  |                    |  | -         |      |  | 
|$        | 0.97 |  |                    |  | -         |      |  | 
|$        | 1.10 |  |                    |  | -         |      |  | 
|$        | 1.19 |  |                    |  | -         |      |  | 
|$        | 1.57 |  |                    |  | 4,500,000 |      |  | 
|$        | 1.63 |  |                    |  | -         |      |  | 
|         |      |  |                    |  | 4,500,000 |      |  | 





At
March 31, 2020, the Company had reserved 13,766,528 common shares for future exercise of warrants and options.



Warrants
and options granted were valued using the Black-Scholes Option Pricing Model. The assumptions used in calculating the fair value
of the warrants and options issued were as follows:



|2020                                  |  |              
|------------------------------------- |  | -------------
|Risk-free interest rate               |  | .58% - 1.21% 
|Expected volatility of common stock   |  | 204% - 205%  
|Dividend yield                        |  | 0.00%        
|Discount due to lack of marketability |  | 20%          
|Expected life of option/warrant       |  | Five Years   
|                                      |  |              
|2019                                  |  |              
|Risk-free interest rate               |  | 2.40% - 2.46%
|Expected volatility of common stock   |  | 105% - 107%  
|Dividend yield                        |  | 0.00%        
|Discount due to lack of marketability |  | 20%          
|Expected life of option/warrant       |  | Five Years   



8.
INCOME TAXES



The
Company recorded no income tax provision at March 31, 2020 and 2019 because of losses incurred.



The
Company estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions
in which it operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the
quarter in which they occur. The Company recorded no income tax expense for the three months ended March 31, 2020 because the
Company expects to incur a tax loss in the current year. Similarly, no income tax expense was recognized for the three months
ended March 31, 2019.



The
Company had a net deferred tax asset related to federal net operating loss carryforwards of $70,061,148 and $66,984,024 at March
31, 2020 and December 31, 2019, respectively. The federal net operating loss carryforward will begin to expire in 2033. Realization
of the deferred tax asset is dependent, in part, on generating sufficient taxable income prior to expiration of the loss carryforwards.
The Company has placed a 100% valuation allowance against the net deferred tax asset because future realization of these assets
is not assured.

19





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)



9.
PROMISSORY NOTES



Promissory
Notes Issued in 2017



On
April 10, 2017, the Company sold to investors in a private transaction two 12% unsecured promissory notes with a total of $8,000,000
in principal amount. Interest only is due and payable on the notes each month at the rate of 12% per annum, with a balloon payment
of the outstanding principal due and payable at maturity on April 10, 2020. The holders of the notes will also receive annual
payments of common stock at the rate of 2.5% of principal amount outstanding, based on a volume-weighted average price. Both notes
were sold at an original issue discount of 94.25% and accordingly, we received total proceeds of $7,540,000 from the investors.
We used the proceeds for working capital and general corporate purposes, which includes, without limitation, drilling capital,
lease acquisition capital and repayment of prior debt.



These
12% promissory notes allow for early redemption. The notes also contain certain covenants under which we have agreed that, except
for financing arrangements with established commercial banking or financial institutions and other debts and liabilities incurred
in the normal course of business, we will not issue any other notes or debt offerings which have a maturity date prior to the
payment in full of the 12% notes, unless consented to by the holders.



The
effective interest rate is 16.15%.



On
April 24, 2017, we used $2,509,500 of the proceeds from this financing to redeem and repay a portion of the outstanding 12% Series
B Convertible Unsecured Promissory Notes. Separately, $1,000,000 of the principal amount of the Series B Notes plus accrued interest
was converted into 1,007,890 shares of common stock and $64,297 was rolled into the new debt financing.



On
February 20, 2020, the Company extended the maturity on $4 million of the 12% unsecured promissory notes previously due in April,
2020. The maturity date of the subject promissory note has been extended for one year, from April 10, 2020 to April 10, 2021.



As
part of the terms of this extension agreement, the Company paid the noteholder a fee of $80,000. The promissory note was originally
issued in April 2017, and provides for 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.



Promissory
Notes Issued in 2018



On
February 6, 2018, we sold to an investor in a private transaction a 12% unsecured promissory note with a principal amount of $4,500,000.
Interest only is due and payable on the note each month at the rate of 12% per annum, with a balloon payment of the outstanding
principal due and payable at maturity on April 10, 2020. The holder of the note will also receive annual payments of common stock
at the rate of 2.5% of principal amount outstanding, based on a volume-weighted average price. We sold the note at an original
issue discount of 96.27% and accordingly, we received total proceeds of $4,332,150 from the investor. We used the proceeds for
working capital and general corporate purposes, which includes, without limitation, drilling capital, lease acquisition capital
and repayment of prior debt.



This
12% promissory note allows for early redemption, provided that if we redeem before February 6, 2019, we must pay the holder all
unpaid interest and common stock payments on the portion of the note redeemed that would have been earned through February 6,
2019. The note also contains certain covenants under which we have agreed that, except for financing arrangements with established
commercial banking or financial institutions and other debts and liabilities incurred in the normal course of business, we will
not issue any other notes or debt offerings which have a maturity date prior to the payment in full of the 12% note, unless consented
to by the holder.



20





|TORCHLIGHT
    ENERGY RESOURCES, INC.                    
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)



9.
PROMISSORY NOTES- continued



The
effective interest rate is 15.88%.



On
April 24, 2020, the Company entered into a Note Amendment Agreement with the David A. Straz, Jr. Foundation, as a lender (the
Straz Foundation), 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 Agreement, 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 total principal outstanding of $8,500,000. Under the Note Amendment Agreement, the maturity
dates of the two promissory notes held by the Straz Trust and the Note held by the Foundation were extended to April 10, 2021.



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 guaranty 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 (as further amended) provided that no later than May 25, 2020, we were obligated to 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
which payments were made. 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.



Since
the extension of the notes was completed before the date of filing this report, the debt is presented on the balance sheet as
noncurrent debt. Reference Note 11 – Subsequent Events.



In
April 2019 and 2018, respectively, the holders of the notes described above received 202,316 and 172,342 shares of common stock
as a payment in kind representing the annual payments of common stock due at the rate of 2.5% of principal amount outstanding
as of April 10 based on a volume-weighted average price calculation. In April, 2020 the note holders payment in kind required
the issuance of 680,377 shares of our common stock.



The
12% promissory note transactions through March 31, 2020 are summarized as follows:



|12% 2020 Unsecured promissory note balance - December 31, 2019 |  | $ | 12,377,830 |  
|-------------------------------------------------------------- |  | - | ---------- | -
|                                                               |  |   |            |  
|Accretion of discount and amortization of debt issuance costs  |  |   | 128,938    |  
|Debt extension fee paid                                        |  |   | (80,000    | )
|                                                               |  |   |            |  
|12% 2020 and 2021 Promissory note balance - March 31, 2020     |  | $ | 12,426,768 |  
|                                                               |  |   |            |  
|As reported on our Balance Sheet:                              |  |   |            |  
|Current liabilities - 12% 2020 Unsecured promissory note       |  |   | 64,297     |  
|Other liabilities - 12% 2021 Secured promissory notes          |  |   | 12,362,471 |  
|                                                               |  |   |            |  
|                                                               |  | $ | 12,426,768 |  





The 12% unsecured notes
payable at December 31, 2019 included $64,297 due to a holder unrelated to the Straz entities. As of March 31, 2020 the amount
payable to that holder remains unsecured. The note was due on April 10, 2020. The holder has agreed to extend the repayment date.

21





|TORCHLIGHT
ENERGY RESOURCES, INC.                        
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)



9.
PROMISSORY NOTES- continued



Convertible
Notes Issued in October, 2018



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. After an analysis of the transaction
and a review of applicable accounting pronouncements, management concluded that the notes issued on October 17, 2018 which contain
a conversion right for holders to convert into a working interest in the Orogrande Project of the Company, meet a specific scope
exception to the provisions requiring derivative accounting.



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 used 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.



On
March 9, 2020, each of the noteholders entered into a Conversion Agreement with us and our subsidiary Hudspeth Oil Corporation
(Hudspeth), under which the noteholders elected to convert the notes, in accordance with their terms, into an aggregate
6% working interest (of all such holders) in certain oil and gas leases in Hudspeth County, Texas, known as our Orogrande
Project. Principal of $6,000,000 and approximately $1,331,000 of accrued interest were converted at March 9, 2020.

22





|TORCHLIGHT
ENERGY RESOURCES, INC.                        
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)



9.
PROMISSORY NOTES- continued



The
Conversion Agreements also provided additional consideration to the noteholders including a limited carry, a top-off obligation
of us and Hudspeth, and warrants to purchase a total of 750,000 restricted shares of our common stock, which warrants will have
a term of five years and an exercise price of $0.70 per share. The limited carry provides that for the remainder of the 2020 calendar
year, Hudspeth will pay all costs and expenses attributable to the assigned working interests, except where prohibited by law
or regulation. The top-off obligation provides that, subject to the terms and conditions of the Conversion Agreements, if (a)
we sell our entire working interest in the Orogrande Project, (b) as part of such sale, the holders entire working interests
are sold, and (c) the gross proceeds received by all the holders in such transaction are equal to less than $9,000,000; then we
must pay the holders an amount equal to $9,000,000, (i) less gross proceeds the holders received in the transaction, (ii) less
the amount of the carry the holders received under the Conversion Agreements, and (iii) less any gross proceeds the holders received
in any farmouts occurring prior to the transaction.



The
transaction was treated as an extinguishment of debt. The fair value of the working interest transferred in the conversion of
the debt was $8,778,000 and the value of warrants issued to the holders was $382,500. The Company recognized a Loss on extinguishment
of debt in the amount of $1,829,651.



Convertible
Notes Issued in First Quarter 2019



In
February 2019 the Company raised a total of $2,000,000 from investors through the sale of two 14% Series D Unsecured Convertible
Promissory Notes. Principal was payable in a lump sum at maturity on May 11, 2020 with payments of interest payable monthly at
the rate of 14% per annum. Holders of the notes have the right to convert principal and interest at any time into common stock
at a conversion price of $1.08 per share. The Company has the right to redeem the notes at any time, provided that the redemption
amount must include all interest that would have been earned through maturity. The Company evaluated the notes for beneficial
conversion features and derivative accounting criteria and concluded that derivative accounting treatment is not applicable.



On
April 21, 2020, Torchlight Energy Resources, Inc. entered into agreements to amend the two 14% Series D Unsecured Convertible
Promissory Notes that were originally issued on February 11, 2019 and 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 our 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 Agreement with
the Straz parties.



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 Agreement. 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. The past due interest was 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. Since the extension of the notes was completed before the date
of filing this report, the debt is presented on the balance sheet as noncurrent debt. Reference Note 11 – Subsequent Events.

23





|TORCHLIGHT
ENERGY RESOURCES, INC.                        
|---------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)



9.
PROMISSORY NOTES- continued



Convertible
Notes Issued in Third Quarter 2019





In July 2019, the Company issued 8%
Unsecured Convertible Promissory notes in the amount of $2,010,000 together with warrants to purchase our common stock.
Principal and 8% interest are due at maturity on May 21, 2021. The principal and accrued interest on the notes are
convertible into shares of common stock at $1.10 per common share at any time after the original issue date. Along with the
notes, the three year warrants equal to 20% of the number of shares of common stock issuable upon the conversion of the notes
were issued to note holders. The warrants are exercisable at $1.35 per share.



Warrants issued along with the notes meet the
requirements of the scope exemptions in ASC 815-10-15-74 and are thus classified as equity upon issuance. The Company determined
the fair value of the warrants using the Black Scholes pricing formula and is recognized as a discount on the carrying amount of
the notes and is credited to additional paid in capital. The fair value of the warrants at the issuance date was determined to
be $240,455.



A beneficial conversion feature (“BCF”)
of a convertible note is normally characterized as the convertible portion feature that provides a rate of conversion that is below
market value or “in the money” when issued. The BCF related to the issuance of the notes was recorded at the issuance
date. The BCF was measured using the intrinsic value method and is shown as a discount to the carrying amount of the convertible
note and is credited to additional paid in capital. The intrinsic value of the BCF at the issuance date of the notes was determined
to be $1,145,546.



The allocated fair values of the BCF and the
warrants was recorded as a debt discount from the face amount of the notes and such discount is being accreted over the expected
term of the notes and is charged to interest expense. The Company recognized interest expense of $120,410 from the amortization
of debt discount from notes for the three months ended March 31, 2020.



The Company evaluated the July, 2019 notes
for derivative accounting criteria and concluded that derivative accounting treatment was not applicable.



Convertible
Notes Issued in Fourth Quarter 2019





Effective October 31, 2019, the Company issued
10% Unsecured Convertible Promissory notes in the amount of $540,000. Principal and interest are due at maturity on December 3,
2020. The principal and accrued interest on the notes are convertible into shares of common stock at $0.75 per common share at
any time after the original issue date. The notes are convertible, at the election of the holders, into an aggregate 0.367% working
interest in our Orogrande Project.



The Company evaluated the October 2019 notes
for BCF and derivative accounting criteria and concluded that there was no BCF or derivative accounting treatment applicable.



10.
ASSET RETIREMENT OBLIGATIONS



The
following is a reconciliation of the asset retirement obligations liability through March 31, 2020:



|Asset retirement obligations – December 31, 2019 |  | $ | 23,319 | 
|------------------------------------------------ |  | - | ------ | 
|Accretion expense                                |  |   | 142    | 
|Estimated liabilities recorded                   |  |   | -      | 
|                                                 |  |   |        | 
|Asset retirement obligations – March 31, 2020    |  | $ | 23,461 | 



24





|TORCHLIGHT
    ENERGY RESOURCES, INC.                     
|----------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



11.
SUBSEQUENT EVENTS



Extension
of Promissory Notes



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 and the Note held
by the Foundation 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.



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 guaranty 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 (as further amended) provided that no later than May 25, 2020, we were obligated to 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
which payments were made. 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.

25





|TORCHLIGHT
    ENERGY RESOURCES, INC.                     
|----------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



11.
SUBSEQUENT EVENTS- continued



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 our 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 Agreement with the Straz
parties.



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 Agreement. 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. The past due interest was 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. Since the extension of the notes was completed before the date
of filing this report, the debt is presented on the balance sheet as noncurrent debt.



Common
Stock Offering



On
May 18, 2020, Torchlight Energy Resources, Inc. 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 was $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 was 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.

26





|TORCHLIGHT
    ENERGY RESOURCES, INC.                     
|----------------------------------------------------------
|NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



11.
SUBSEQUENT EVENTS- continued



The
net proceeds to us from the sale of the shares of common stock were approximately $890,000, 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 closed May 20, 2020.



Also
under the terms of the Underwriting Agreement, we issued 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 are 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 anti-dilution provisions.



Shares
issued for Payment in Kind



In
April 2020, the Company issued 680,377 shares of common stock in satisfaction of the payment in kind valued at $314,107 due on
April 10, 2020 under the terms of the promissory notes held by the Straz Foundation and the Straz Trust.





Other Stock Issued



On May 6, 2020,
we issued 1,630,434 restricted shares of common stock to an investor for the purchase price of $750,000. The investor, Maverick
Oil & Gas Corporation, is the operator for our Orogrande Project. Our subsidiary Hudspeth Oil Corporation owed the investor
in excess of $750,000 on unpaid balances and cost overruns on work performed on the Orogrande Project, which amount is due and
payable now. The investor agreed to exchange $750,000 in accounts receivable owed to it by Hudspeth Oil as consideration for the
purchase of the common stock. Under the terms of the sale, we provided registration rights to the investor.



On April 29, 2020, we issued 142,857 restricted
shared of common stock to a consultant as consideration for $60,000 in investor relations services.







Paycheck
Protection Program Loan



In
response to the COVID-19 pandemic, the U.S. Small Business Administration (the SBA) made available low-interest rate
loans to qualified small businesses, including under its Paycheck Protection Program (the PPP). On April 10, 2020,
in order to supplement its cash balance, the Company submitted an application for a loan (SBA loan) in the amount
of approximately $77,477. On May 1, 2020, Companys SBA loan application was approved and the Company received the loan proceeds.
The SBA loan has an interest rate of 0.98% and matures in April 2022.



Section
1106 of the CARES Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the PPP.
The PPP and loan forgiveness are intended to provide economic relief to small businesses, such as the Company, that are adversely
impacted under the COVID-19 Emergency Declaration issued by President Trump on March 13, 2020. The Company will apply for loan
forgiveness when the SBA site for that purpose is available.

27





ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Overview



We
are an energy company engaged in the acquisition, exploration, exploitation and/or development of oil and natural gas properties
in the United States. We are primarily focused on the acquisition of early stage projects, the development and delineation of
these projects, and then the monetization of those assets once these activities are completed.



Since
2010, our primary focus has been the development of interests in oil and gas projects we hold in the Permian Basin in West Texas,
including the Orogrande Project in Hudspeth County, Texas, the Hazel Project in the Midland Basin and the project in Winkler County,
Texas in the Delaware Basin. We also hold interests in certain other oil and gas projects that we are in the process of divesting,
including the Hunton wells project as part of a partnership with Husky Ventures, Inc., or Husky, in Central Oklahoma.



We
employ a private equity model within a public platform, with the goal to (i) enter into a play at favorable valuations, (ii) prove
up and delineate the play through committed capital and exhaustive geologic and engineering review, and (iii) monetize
our position through an exit to public and private independents that can continue full-scale development. Rich Masterson, our
consulting geologist, has originated several of our current plays, as discussed below, based on his tenure as a geologist since
1974. He is credited with originating the Wolfbone shale play in the Southern Delaware Basin of West Texas and has prepared prospects
totaling over 150,000 acres that have been leased, drilled and are currently being developed by Devon Energy Corp., Occidental
Petroleum Corporation, Noble Energy, and Samson Oil & Gas Ltd., among others.



In
April 2018, we announced that we have commenced a process that could result in the monetization of the Hazel Project. Pursuant
to our corporate strategy, in our opinion the development activity at the Hazel Project, coupled with nearby activities of other
oil and gas operators, is indicative of this project having achieved a level of value that suggests monetization. We believe that
the liquidity that would be provided from selling the Hazel Project could be redeployed into the Orogrande Project.



We
are also currently marketing the Orogrande Project for an outright sale or farm in partner and are taking measures on our own
to market the Winkler Project. These efforts are continuing.



We
operate our business through five wholly-owned subsidiaries, Torchlight Energy, Inc., a Nevada corporation, Torchlight Energy
Operating, LLC, a Texas limited liability company, Hudspeth Oil Corporation, a Texas corporation, Torchlight Hazel, LLC, a Texas
limited liability company, and Warwink Properties, LLC, a Texas limited liability company. We currently have two full-time employees
and we employ consultants for various tasks as needed.



Our
principal executive offices are located at 5700 W. Plano Parkway, Suite 3600, Plano, Texas 75093. The telephone number of our
principal executive offices is (214) 432-8002.



The
following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial
statements included herewith and our audited financial statements for the year ended December 31, 2019. This discussion should
not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion
reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best
present assessment by our management.

28





ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued



Historical
Results for the three months ended March 31, 2020 and 2019:



Revenues
and Cost of Revenues



For
the three months ended March 31, 2020, we had production revenue of $84,620 compared to $310,837 for the three months ended March
31, 2019. Refer to the table of production and revenue included below for quarterly changes in revenue. Our cost of revenue, consisting
of lease operating expenses and production taxes, was $67,858 and $127,622 for the three months ended March 31, 2020 and 2019,
respectively.



|Property              | Quarter   | Oil
    Production {BBLS} | Gas
    Production {MCF} |  | Oil
    Revenue |         |  | Gas
    Revenue |   |        | Total
    Revenue | 
|--------------------- | --------- | ------------------------- | ------------------------ |  | --------------- | ------- |  | --------------- | - | ------ | ----------------- | 
|Oklahoma              | Q1 - 2020 | 181                       | 468                      |  | $               | 583     |  |                 | $ | 1,000  |                   | 
|Hazel (TX)            | Q1 - 2020 | 0                         | 0                        |  | $               | -       |  |                 | $ | -      |                   | 
|MECO (TX)             | Q1 - 2020 | 1,863                     | 1,559                    |  | $               | 81,530  |  |                 | $ | 1,507  |                   | 
|Total Q1-2020         |           | 2,044                     | 2,027                    |  | $               | 82,113  |  |                 | $ | 2,507  |                   | 
|                      |           |                           |                          |  |                 |         |  |                 |   |        |                   | 
|Oklahoma              | Q1 - 2019 | 56                        | 1,072                    |  | $               | 2,567   |  |                 | $ | 2,333  |                   | 
|Hazel (TX)            | Q1 - 2019 | 2,864                     | 0                        |  | $               | 131,901 |  |                 | $ | -      |                   | 
|MECO (TX)             | Q1 - 2019 | 3,525                     | 2,565                    |  | $               | 167,677 |  |                 | $ | 6,359  |                   | 
|Total Q1-2019         |           | 6,445                     | 3,637                    |  | $               | 302,145 |  |                 | $ | 8,692  |                   | 
|                      |           |                           |                          |  |                 |         |  |                 |   |        |                   | 
|Oklahoma              | Q2 - 2019 | 43                        | 1,770                    |  | $               | 2,477   |  |                 | $ | 2,450  |                   | 
|Hazel (TX)            | Q2 - 2019 | 1,123                     | 0                        |  | $               | 64,302  |  |                 | $ | -      |                   | 
|Meco (TX)             | Q2 - 2019 | 2,585                     | 2,623                    |  | $               | 156,259 |  |                 | $ | 11,587 |                   | 
|Total Q2-2019         |           | 3,751                     | 4,393                    |  | $               | 223,038 |  |                 | $ | 14,037 |                   | 
|                      |           |                           |                          |  |                 |         |  |                 |   |        |                   | 
|Oklahoma              | Q3 - 2019 | 0                         | 0                        |  | $               | -       |  |                 | $ | -      |                   | 
|Hazel (TX)            | Q3 - 2019 | 0                         | 0                        |  | $               | -       |  |                 | $ | -      |                   | 
|Meco (TX)             | Q3 - 2019 | 1,320                     | 4,522                    |  | $               | 71,064  |  |                 | $ | 78     |                   | 
|Total Q3-2019         |           | 1,320                     | 4,522                    |  | $               | 71,064  |  |                 | $ | 78     |                   | 
|                      |           |                           |                          |  |                 |         |  |                 |   |        |                   | 
|Oklahoma              | Q4 - 2019 | 166                       | 3,766                    |  | $               | 8,873   |  |                 | $ | 1,895  |                   | 
|Hazel (TX)            | Q4 - 2019 | 0                         | 0                        |  | $               | -       |  |                 | $ | -      |                   | 
|Meco (TX)             | Q4 - 2019 | 2,102                     | 5,890                    |  | $               | 110,894 |  |                 | $ | 5,547  |                   | 
|Total Q4-2019         |           | 2,268                     | 9,656                    |  |                 | 119,767 |  |                 |   | 7,442  |                   | 
|                      |           |                           |                          |  |                 |         |  |                 |   |        |                   | 
|2019
    Year To Date |           | 13,784                    | 22,208                   |  | $               | 716,014 |  |                 | $ | 30,249 |                   | 



During
the three months ended March 31, 2020, oil production decreased due to down time associated with equipment repair and typical
decline in production from the MECO property.





29





ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued



We
recorded depreciation, depletion, and amortization expense of $447,405 for the three months ended March 31, 2020 compared to $185,426
for the three months ended March 31, 2019.



General
and Administrative Expenses



Our
general and administrative expenses for the three months ended March 31, 2020 and 2019 were $1,047,624 and $1,042,757, respectively,
an increase of $4,867. Our general and administrative expenses consisted of consulting and compensation expense, substantially
all of which was non-cash or deferred, accounting and administrative costs, professional consulting fees, and other general corporate
expenses. The change in general and administrative expenses for the three months ended March 31, 2020 compared to 2019 is detailed
as follows:



|Increase(decrease) in non cash stock and warrant compensation |  | $ | (181,230 | )
|------------------------------------------------------------- |  | - | -------- | -
|Increase(decrease) in consulting expense                      |  |   | 53,449   |  
|Increase(decrease) in investor relations                      |  |   | 90,693   |  
|Increase(decrease) in travel expense                          |  |   | 6,934    |  
|Increase(decrease) in salaries and compensation               |  |   | (12,141  | )
|Increase(decrease) in legal fees                              |  |   | 3,549    |  
|Increase(decrease) in contract labor                          |  |   | 20,625   |  
|Increase(decrease) in insurance                               |  |   | 11,731   |  
|Increase(decrease) in rent                                    |  |   | (5,929   | )
|Increase(decrease) in accounting and audit fees               |  |   | 43,373   |  
|Increase(decrease) in general corporate expenses              |  |   | (26,187  | )
|                                                              |  |   |          |  
|Total Increase in General and Administrative Expenses         |  | $ | 4,867    |  





30





ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued



Liquidity
and Capital Resources



At
March 31, 2020, we had working capital deficit of $3,244,045 and total assets of $34,391,275. Stockholders equity was $14,342,801.
The negative working capital is principally due to accumulated accounts payable balances at March 31, 2020 and notes payable.



Cash
flows from operating activities for the three months ended March 31, 2020 was $(321,342) compared to $(190,953) for the three
months ended March 31, 2019, a decrease of $130,389. Cash flows from operating activities for the three months ended March 31,
2020 can be primarily attributed to net loss from operations of $3,693,863, stock based compensation of $230,650, a loss on extinguishment
of debt $1,829,651, and other noncash expense adjustments. Cash flows from operating activities for the three months ended March
31, 2019 can be primarily attributed to net loss from operations of $1,677,874 and $397,250, in stock compensation expense, an
impairment expense of $474,357 and changes in other noncash expense adjustments. Reference the Consolidated Statements of Cash
Flows for additional detail of the components that comprise the net use of cash in operations. We expect to continue to use cash
flow in operating activities until such time as we achieve sufficient commercial oil and gas production to cover all of our cash
costs.



Cash
flows from investing activities for the three months ended March 31, 2020 was $(2,212,852) compared to $(2,404,783) for the three
months ended March 31, 2019. Cash flows from investing activities principally consists of investment in oil and gas properties
in Texas.



Cash
flows from financing activities for the three months ended March 31, 2020 was $2,527,118 as compared to $3,351,080 for the three
months ended March 31, 2019. Cash flows from financing activities consists of proceeds from issuance of our common stock, proceeds
from a subscription receivable, and additional borrowings under notes payable. We expect to continue to have cash flow provided
by financing activities as we seek new rounds of financing and continue to develop our oil and gas investments.



We
will require additional debt or equity financing to meet our plans and needs. We face obstacles in continuing to attract new financing
due to industry conditions and our history and current record of net losses. Despite our efforts, we can provide no assurance
that we will be able to obtain the financing required to meet our stated objectives or even to continue as a going concern.



We
do not expect to pay cash dividends on our common stock in the foreseeable future.



Commitments
and Contingencies-



Operating
Leases



The
Company had a noncancelable lease for its office premises that expired on November 30, 2019 and which requires the payment of
base lease amounts and executory costs such as taxes, maintenance and insurance. Effective June 1, 2019 the Company entered into
an agreement with a company that had been subleasing a portion of its office space to become the primary obligor on the lease
and to assume full responsibility for lease payments after lease expiration on November 30, 2019. The Company has continued after
November 30, 2019 as a subtenant on a month-to- month basis.



Environmental
matters



We
are subject to contingencies as a result of environmental laws and regulations. Present and future environmental laws and regulations
applicable to our operations could require substantial capital expenditures or could adversely affect our operations in other
ways that cannot be predicted at this time. As of March 31, 2020 and December 31, 2019, no amounts have been recorded because
no specific liability has been identified that is reasonably probable of requiring us to fund any future material amounts.



ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Not
Applicable

31





ITEM
4. CONTROLS AND PROCEDURES



Disclosure
Controls and Procedures



Under
the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer)
and Chief Financial Officer (principal financial officer), we evaluated the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2020. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
effective to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the applicable rules and forms and that such information
was accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, in a manner that allowed for timely
decisions regarding disclosure.



Changes
in Internal Control over Financial Reporting



There
were no changes during the quarter ended March 31, 2020 that materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.



PART
II OTHER INFORMATION



ITEM
1. LEGAL PROCEEDINGS



On
January 31, 2020, Torchlight Energy Resources, Inc. and its wholly owned subsidiaries Torchlight Energy, Inc. and Torchlight Energy
Operating, LLC were served with a lawsuit brought by Goldstone Holding Company, LLC (Goldstone Holding Company, LLC v. Torchlight
Energy, Inc., et al., in the 160th Judicial District Court of Dallas County, Texas). On February 24, 2020, Torchlight Energy
Resources, Inc., Torchlight Energy, Inc., and Torchlight Energy Operating, LLC timely filed their answer, affirmative defenses,
and requests for disclosure. The suit, which seeks monetary relief over $1 million, makes unspecified allegations of misrepresentations
involving a November 2015 participation agreement and a 2016 amendment to the participation agreement. We have denied the allegations
and have asserted several affirmative defenses including but not limited to, that the suit is barred by the applicable statute
of limitations, that the claims have been released, and that the claims are barred because of contractual disclaimers between
sophisticated parties.





On April 30, 2020, our wholly owned subsidiary,
Hudspeth Oil Corporation, filed suit against Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies. The suit seeks the recovery
of approximately $1.4 million in costs incurred as a result of a tool failure during drilling activities on the University Founders
A25 #2 well that is located in the Orogrande Field.  Working interest owner Wolfbone Investments, LLC, a company owned by
our Chairman Gregory Mccabe, is a co-plaintiff in that action. The defendant has been served, and its deadline to respond to the
lawsuit is Monday, June 8, 2020. The suit, Hudspeth Oil Corporation and Wolfbone Investments, LLC v. Datalog LWT, Inc. d/b/a
Cordax Evaluation Technologies, was filed in the 189th Judicial District Court of Harris County, Texas.





ITEM
1A. RISK FACTORS



There
were no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31,
2019, except for such risks and uncertainties associated with the COVID-19 pandemic, as disclosed below. The risks described in
the Annual Report on Form 10-K and in this Form 10-Q are not the only risks we face. Additional risks and uncertainties not currently
known to us, or that we deem to be immaterial, also may have a material adverse impact on our business, financial condition or
results of operations.



An
occurrence of an uncontrollable event such as the COVID-19 pandemic is likely to negatively affect, and has to date negatively
affected, our operations.



The
occurrence of an uncontrollable event such as the COVID-19 pandemic is likely to, and has already, negatively affected our operations.
A pandemic typically results in social distancing, travel bans and quarantine, and the effects of, and response to, the COVID-19
pandemic has limited access to our facilities, properties, management, support staff and professional advisors. These, in turn,
have not only negatively impacted our operations and financial condition, but our overall ability to react timely to mitigate
the impact of this event. Further, the COVID-19 pandemic has resulted in declines in the demand for, and the price of, oil and
gas, and it is unclear how long this decline will last. The full effect on our business and operation is currently unknown. In
the event that the effects of COVID-19 continue in the future and/or the economy continues to deteriorate, we may be forced to
curtail our operations and may be unable to pay our debt obligations as they come due.



The
coronavirus/COVID-19 pandemic has had a negative effect on oil and gas prices, and depending on the severity and longevity of
the pandemic, it may result in a major economic recession which will continue to depress oil and gas prices and cause our business
and results of operations to suffer.



The
inability and/or unwillingness of individuals to congregate in large groups, travel and/or visit retail businesses or travel outside
of their homes will, and has to date, had a negative effect on the demand for, and the current prices of, oil and gas. Additionally,
the demand for oil and gas is based partially on global
economic conditions. If the COVID-19 pandemic results in a global economic
recession, there will be a continued negative effect on the demand for oil and gas and this will have a negative effect on our
operating results. All of the above may be exacerbated in the future as the COVID-19 outbreak and the governmental responses thereto
continue. Concerns about global economic growth have had a significant adverse impact on global financial markets and commodity
prices. If the economic climate in the United States or abroad continues to deteriorate, demand for petroleum products could further
diminish, which will impact the price at which we can sell our oil and gas, impact the value of our working interests and other
oil and gas assets, affect the ability of our vendors, suppliers and customers to continue operations, affect our operations and
ultimately adversely impact our results of operations, liquidity and financial condition.



ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



In
January 2020, we sold 600,000 restricted shares of common stock to an investor for a total purchase price of $360,000. As part
of the sale, we also issued the investor 600,000 five-year warrants to purchase shares of common stock at an exercise price of
$0.80 per share.



In
February 2020, we issued a total of 125,000 restricted shares of common stock at consideration for consulting services.



In
March 2020, we issued the operator of our Orogrande Project 40,000 restricted shares of common stock for services.



All
of the above 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.

32





ITEM
6. EXHIBITS



|Exhibit
    No. |  | Description                                                                                                                                                                                                                                                                                                                                     
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|2.1             |  | Share
    Exchange Agreement dated November 23, 2010. (Incorporated by reference from Form 8-K filed with the SEC on November 24, 2010.)
    *                                                                                                                                                                                                  
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|3.1             |  | Articles
    of Incorporation. (Incorporated by reference from Form 10-K filed with the SEC on March 18, 2019.) *                                                                                                                                                                                                                               
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|3.2             |  | Certificate
    of Amendment to Articles of Incorporation dated December 10, 2014. (Incorporated by reference from Form 10-Q filed with the
    SEC on May 15, 2015.) *                                                                                                                                                                         
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|3.3             |  | Certificate
    of Amendment to Articles of Incorporation dated September 15, 2015. (Incorporated by reference from Form 10-Q filed with the
    SEC on November 12, 2015.) *                                                                                                                                                                   
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|3.4             |  | Certificate of Amendment to Articles of Incorporation dated August 18, 2017 (Incorporated by reference from Form 10-Q filed with the SEC on August 9, 2018.) *                                                                                                                                                                                  
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|3.5             |  | Amended
    and Restated Bylaws (Incorporated by reference from Form 8-K filed with the SEC on October 26, 2016.) *                                                                                                                                                                                                                             
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.1            |  | Employment
    Agreement (with John A. Brda) (Incorporated by reference from Form 8-K filed with the SEC on June 16, 2015.) *                                                                                                                                                                                                                   
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.2            |  | Employment
    Agreement (with Roger Wurtele) (Incorporated by reference from Form 8-K filed with the SEC on June 16, 2015.) *                                                                                                                                                                                                                  
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.3            |  | Farmout
    Agreement between Hudspeth Oil Corporation, Founders Oil & Gas, LLC and certain other parties (Incorporated by reference
    from Form 8-K filed with the SEC on September 29, 2015) *                                                                                                                                              
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.4            |  | Purchase
    and Sale Agreement with Husky Ventures, Inc. (Incorporated by reference from Form 8-K filed with the SEC on November 12, 2015)
    *                                                                                                                                                                                               
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.5            |  | Purchase
    Agreement with McCabe Petroleum Corporation for acquisition of Hazel Project (Incorporated by reference from
    Form 10-Q filed with the SEC on August 15, 2016) *                                                                                                                                                              
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.6            |  | Agreement
    and Plan of Reorganization and Plan of Merger with Line Drive Energy, LLC (Incorporated by reference from Form 10-K filed
    with the SEC on March 31, 2017) *                                                                                                                                                                   
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.7            |  | Purchase
    and Sale Agreement with Wolfbone Investments, LLC (Incorporated by reference from Form 10-K filed with the SEC on March 31,
    2017) *                                                                                                                                                                                            
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.8            |  | Agreement
    and Plan of Reorganization and Plan of Merger with McCabe Petroleum Corporation and Warwink Properties, LLC(Incorporated by
    reference from Form 10-K filed with the SEC on March 16, 2018) *                                                                                                                                  
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.9            |  | Purchase
    Agreement with Torchlight Energy, Inc. and McCabe Petroleum Corporation (Incorporated by reference from Form 10-K filed with
    the SEC on March 16, 2018) *                                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.10           |  | Promissory
    Note for $3,250,000 by Torchlight Energy, Inc. to McCabe Petroleum Corporation (Incorporated by reference from Form 10-K filed
    with the SEC on March 16, 2018) *                                                                                                                                                             
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.11           |  | Assignment
    of Farmout Agreement between Hudspeth Oil Corporation, Founders Oil & Gas, LLC and Wolfbone Investments, LLC (Incorporated
    by reference from Form 10-K filed with the SEC on March 16, 2018) *                                                                                                                               
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.12           |  | Underwriting
    Agreement, dated April 19, 2018, between Torchlight Energy Resources, Inc. and Roth Capital Partners, LLC (Incorporated by
    reference from Form 8-K filed with the SEC on April 19, 2018) *                                                                                                                                 
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.13           |  | Purchase
    & Settlement Agreement, dated July 24, 2018, between Torchlight Energy Resources, Inc., Hudspeth Oil Corporation, Founders
    Oil & Gas, LLC, Founders Oil & Gas Operating, LLC, Wolfbone Investments, LLC and McCabe Petroleum. Corporation (Incorporated
    by reference from Form 10-Q filed with the SEC on August 9, 2018) *
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.14           |  | 16%
                                         Series C Unsecured Convertible Promissory Note (form of) dated October 17, 2018 (Incorporated
                                         by reference from Form 8-K filed with the SEC on October 18, 2018)*                                                                                         
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.15           |  | Underwriting
    Agreement, dated January 14, 2020, between Torchlight Energy Resources, Inc. and Aegis Capital Corp. (Incorporated by reference
    from Form 8-K filed with the SEC on January 14, 2020) *                                                                                                                                    
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.16           |  | Conversion
    Agreement (form of) dated March 9, 2020 between Torchlight Energy Resources, Inc., Hudspeth Oil Corporation and the previous
    holders of 16% Series C Unsecured Convertible Promissory Notes (Incorporated by reference from Form 10-K filed with the SEC
    on March 16, 2020) *                                            
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.17           |  | Underwriting
    Agreement, dated May 18, 2020, between Torchlight Energy Resources, Inc. and ThinkEquity, a division of Fordham Financial
    Management, Inc. (Incorporated by reference from Form 8-K filed with the SEC on May 18, 2020) *                                                                                                  
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.18           |  | Foundation Note Amendment Agreement dated April 24, 2020 with the David A. Straz, Jr Foundation (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020) *                                                                                                                                                                 
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.19           |  | Amendment to Foundation Note Amendment Agreement dated May 12, 2020 with David A. Straz, Jr. Foundation (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020) *                                                                                                                                                         
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.20           |  | Trust Note Amendment Agreement dated April 24, 2020 with The David A. Straz, Jr. Irrevocable Trust DTD 11/11/1986 (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020) *                                                                                                                                               
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.21           |  | Amendment to Trust Note Amendment Agreement dated May 12, 2020 with the David A. Straz Jr. Irrevocable Trust DTD 11/11/1986 (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020) *                                                                                                                                     
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.22           |  | Amended and Restated Note dated April 24, 2020 in the amount of $4,000,000 with The David A. Straz, Jr. Irrevocable Trust DTD 11/11/1986 (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020) *                                                                                                                        
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.23           |  | Amended and Restated Note dated April 24, 2020 in the amount of $4,500,000 with THE David A. Straz, Jr. Irrevocable Trust DTD 11/11/1986 (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020) *                                                                                                                        
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|10.24           |  | Amended and Restated Note dated April 24, 2020 in the amount of $4,000,000 with David A. Straz, Jr. Foundation (Incorporated by reference from Form 10-Q filed with the SEC on June 5, 2020) *                                                                                                                                                  
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|31.1            |  | Certification of principal executive officer required by Rule 13a 14(1) or Rule 15d 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                         
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|31.2            |  | Certification of principal financial officer required by Rule 13a 14(1) or Rule 15d 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                         
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|32.1            |  | Certification of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.                                                                                                                                                                        
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|101.INS         |  | XBRL
    Instance Document                                                                                                                                                                                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|101.SCH         |  | XBRL
    Taxonomy Extension Schema                                                                                                                                                                                                                                                                                                              
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|101.CAL         |  | XBRL
    Taxonomy Extension Calculation Linkbase                                                                                                                                                                                                                                                                                                
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|101.DEF         |  | XBRL
    Taxonomy Extension Definitions Linkbase                                                                                                                                                                                                                                                                                                
|                |  |                                                                                                                                                                                                                                                                                                                                                 
|101.LAB         |  | XBRL
    Taxonomy Extension Label Linkbase                                                                                                                                                                                                                                                                                                      



| | * | Incorporated
    by reference from our previous filings with the SEC
| | - | --------------------------------------------------------------------

33





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 thereunto duly authorized.



|                        | Torchlight
    Energy Resources, Inc.                       
|----------------------- | ------------------------------------------------------------
|                        |                                                             
|Date:
    June 17, 2020 | /s/
    John A. Brda                                        
|                        | By:
    John A. Brda                                        
|                        | Chief
    Executive Officer                                 
|                        |                                                             
|Date:
    June 17, 2020 | /s/
    Roger Wurtele                                       
|                        | By:
    Roger Wurtele                                       
|                        | Chief
    Financial Officer and Principal Accounting Officer

34