10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

  X . Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended June 30, 2012.

 . Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 (No fee required)

For the transition period from _______ to _______.

Commission file number: 000-53473

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.)

2007 Enterprise Avenue

League City, Texas 77573  

(Address of Principal Executive Offices)

(281) 538-5938

(Registrant's Telephone Number, Including Area Code)

Securities registered under Section 12(g) of the Exchange Act:

Common Stock ($0.001 Par Value)

(Title of Each Class)

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 .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  

Yes   X  . No .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	. (Do not check if a smaller reporting company)	Smaller reporting company	X .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     

Yes . No   X  .

As of August 9, 2012, there were 15,139,815 shares of the registrant’s common stock outstanding (the only class of voting common stock).   

Explanatory Note

The purpose of this amendment on Form 10-Q/A to Torchlight Energy Resources, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2012, filed with the Securities and Exchange Commission on August 14, 2012 (the “Form 10-Q”), is solely to furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T.  

No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

Pursuant to Rule 406T of Regulation S-T, the interactive data files contained in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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 S-1 filed with the SEC on May 2, 2008.) *
3.2	Amended and Restated Bylaws (Incorporated by reference from Form 8-K filed with the SEC on January 12, 2011.) *
10.1	Employment Agreement between Thomas Lapinski and Torchlight Energy, Inc. (Incorporated by reference from Form 8-K filed with the SEC on November 24, 2010.) *
10.2	Agreement to Participate in Oil and Gas Development Joint Venture between Bayshore Operating Corporation, LLC and Torchlight Energy, Inc. (Incorporated by reference from Form 8-K filed with the SEC on November 24, 2010) *
10.3	Employment Agreement between John Brda and Torchlight Energy Resources, Inc. (Incorporated by reference from Form 8-K filed with the SEC on January 27, 2012)*
14.1	Code of Ethics (Incorporated by reference from Form S-1 filed with the SEC on May 2, 2008.) *
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 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.
32.2	Certification of 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
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

* Incorporated by reference from our previous filings with the SEC

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: September 6, 2012	/s/ Thomas Lapinski
	By: Thomas Lapinski
	Chief Executive Officer and Principal Financial Officer

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Promissory Notes in February and March (Details) (USD $)	2 Months Ended
	Mar. 31, 2012
Four non-interest promissory notes	$ 64,000

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Stockholders Equities warrants issued in relation to the promissory notes issued (Details)	Jun. 30, 2012
Maximum Risk-free interest rate	0.42
Minimum Risk-free interest rate	1.16
Maximum Expected volatility of common stock	40
Minimum Expected volatility of common stock	124
Dividend yield	0
Discount due to lack of marketability	30
maximum Expected life of warrant	4
Minimum Expected life of warrant	2

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Related Party Transactions Consulting Services Paid As Of Date (Details) (USD $)	Dec. 17, 2010
Common issued for consulting services	50,000
value of Common issued for consulting services	$ 150,000

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Promissory Notes And Accretion Expense (Details) (USD $)	Dec. 31, 2011	Dec. 21, 2011
Aggregate consideration for securities	$ 0	$ 385,000
Warrant exercisable into shares of common stock	0	385,000
Common stock per share value	$ 0	$ 1.75
Collateralized pledged securities	0	1,000,000
Fair value of the warrants:	0	61,600
Accretion expense'	$ 2,240	$ 0

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2012

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

4.RELATED PARTY TRANSACTIONS

On January 24, 2012, the Company entered into an employment agreement with a related party, John A. Brda, the Company’s President.  In exchange for $240,000 per year and other mutual covenants and agreements, the related party agrees to supply management and executive services.  The Company recognized payments due the related party of $60,000 and $120,000 for the three months and six months ended June 30, 2012, respectively

In February and March of 2012, the Company issued three non-interest bearing promissory notes totaling $59,000 to Thomas Lapinski, the Chief Executive Officer of the Company, for cash received.  The notes are due upon demand.

In exchange for management services provided to the Company, Opal Marketing & Consulting, Inc. (“Opal”) charges the Company a management fee of $240,000 per year.  The Company’s Chief Executive Officer, Thomas Lapinski, is the President of Opal.  The Company recognized payments due Opal of $60,000 and $120,000 for the three months and six months ended June 30, 2012, respectively, and $240,000 for the twelve months ended December 31, 2011. 

On December 1, 2010, the Company entered into a Business Consultant Agreement with a former Director and Chief Executive Officer.  The agreement provided that in consideration for consulting services, the Company will pay $4,000 per month for the term of the agreement (three months) and issue 50,000 restricted shares of common stock.  On December 17, 2010, the Company issued the 50,000 shares of common stock which were valued at $150,000 on that date.  For the year ended December 31, 2010, the Company paid the former Director and CEO a total of $4,000 in cash under the agreement.  For the year ended December 31, 2011 a total of $8,000 in cash was paid under the agreement.  This agreement was terminated in early 2011.

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Stockholders Equities Common stock in Escrow for Aquiring Leases (Details) (USD $)	Nov. 06, 2011	Oct. 07, 2011
Shares of common stock into escrow in connection to acquire leases in Wilson County	0	1,672,375
Deposit funding	$ 1,500,000	$ 0

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Stockholders Equities Issue Subscriptions (Details) (USD $)	12 Months Ended
	Dec. 31, 2011
Value of Subscriptions Received	$ 2,699,242
Number of Subscriptions Received	771,212
Restricted common stock Par value	$ 5.00

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Stockholders Equities Common stock issued as Consideration (Details)	May 24, 2012	Feb. 29, 2012
Common stock issued to Wayne Turner and Ken Danneberg as consideration	0	25,000
Common stock issued to outside Consultant	350,000	0

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Stockholders Equity Warrant Activity For The Period (Details)	Jun. 30, 2012	May 18, 2012	Jan. 03, 2012	Dec. 21, 2011	Nov. 14, 2011	Nov. 05, 2011	Oct. 25, 2011	Sep. 23, 2011	Aug. 12, 2011	Jun. 28, 2011	Jun. 22, 2011	Jun. 21, 2011	Jun. 20, 2011	Jun. 07, 2011	Jun. 03, 2011	Jun. 02, 2011	May 09, 2011	May 03, 2011	Apr. 13, 2011	Mar. 15, 2011	Mar. 14, 2011	Mar. 08, 2011	Feb. 18, 2011	Jan. 05, 2011	Dec. 28, 2010	Jun. 25, 2010
Number of Warrants
Outstanding	2,678,712																									0
Outstanding	2,678,712																									0
Issued		1,000,000	247,500	385,000	49,650	7,144	7,143	25,000	113,640	34,500	11,143	7,143	7,142	14,500	9,000	10,000	22,500	40,000	142,850	154,857	25,000	30,000	30,000	50,000	225,000
Weighted Average Exercise Price
Outstanding																										0
Outstanding																										0
Issued		1.75	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	5.00	2.50	2.50
Weighted. Average Exercise in Years
Outstanding																										0
Outstanding																										0
Issued		4.00	3.00	3.00	3.00	3.00	3.00	2.75	2.75	2.50	2.50	2.50	2.50	2.50	2.50	2.50	2.50	2.50	2.50	2.25	2.25	2.25	2.25	3.00	3.00

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SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2012

Accounting Policies

Significant Accounting Policies [Text Block]

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 subsidiary, Torchlight Energy, Inc.   All significant intercompany balances and transactions have been eliminated.  It is management’s opinion that all adjustments necessary for a fair statement of the results for the interim periods have been made and that all adjustments are of a normal recurring nature.

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 – The Company’s cash is placed with a highly rated financial institution, and the Company conducts ongoing evaluations of the credit worthiness of the financial institutions with which it does business.  At times during the three months ended June 30, 2012, and the twelve months ended December 31, 2011, cash balances were in excess of amounts guaranteed by the Federal Deposit Insurance Corporation. 

Fair value of financial instruments – Financial instruments consist of cash, accounts receivable, accounts payable and convertible and non-convertible promissory notes. The estimated fair values of cash, accounts receivable and accounts payable approximate the carrying amount due to the relatively short maturity of these instruments.  The carrying amounts of the convertible and non-convertible promissory notes approximate their fair value giving affect for the term of the note and the effective interest rates.  See note 7.

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 June 30, 2012 and December 31, 2011 no valuation allowance was considered necessary. 

Investment in 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. Gain or loss on the sale or other disposition of oil and gas properties is not recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves.

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.

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.   During the three months ended June 30, 2012 and the twelve months ended December 31, 2011, the investment in oil and gas properties included only unevaluated oil and gas properties and other costs excluded from amortization; therefore, no depreciation, depletion or amortization has been recognized.

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 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 ceiling test calculation uses a commodity price assumption which is based on the un-weighed 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 Company did not recognize impairment on its oil and gas properties during the three months ended June 30, 2012 nor the twelve months ended December 31, 2011.  Due to the volatility of commodity prices, should oil and natural gas prices decline in the future, it is possible that a 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.  As of June 30, 2012 and December 31, 2011, the Company did not have any proved oil or gas reserves.

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 evaluation of the same reserves as well as cost estimates related to future development costs of proved oil and gas reserves could result in significant revisions due to changes in regulatory requirements, technological advances and other factors which are difficult to predict.

Gains and losses on the sale of oil and gas properties are generally reflected in income.  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.  During the three months ended June 30, 2012 and the twelve months ended December 31, 2011, there were no gains or losses recognized from the sale of oil and gas properties.

Goodwill - Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets of acquired companies. Goodwill is not amortized; instead, it is tested for impairment annually or more frequently if indicators of impairment exist.

Goodwill was $447,084 as of June 30, 2012 and December 31, 2011 and was acquired on November 23, 2010 in connection with the Company’s reverse acquisition (Note 1).

Asset retirement obligations – Accounting principles require that the fair value of a liability for an asset’s retirement obligation (“ARO”) be recorded in the period in which it is incurred if a reasonable estimate of fair value can be made, and that the corresponding cost be 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 cost incurred is recorded as a reduction to 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. 

Asset retirement obligation activity is disclosed in Note 10.

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.  Compensation cost for liability awards is based on the fair value of the vested award at the end of each period.

Revenue recognition – The Company recognizes oil and gas revenues when production is sold at a fixed or determinable price, persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, and collectability is reasonably assured.

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.

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.

Recent accounting pronouncements – In September 2011, the FASB issued guidance that amends and simplifies the rules related to testing goodwill for impairment.  The revised guidance allows an entity to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination whether it is more likely than not that the fair value of reporting unit is less than its carrying amount.  The results of this assessment will determine whether it is necessary to perform the currently required two-step impairment test. Under this update, an entity also has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the two-step goodwill impairment test.  The adoption of this guidance was effective for fiscal years beginning after December 31, 2011 and did not have a material effect on the Company’s 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 all subsequent events through August 14, 2012, the date of issuance of the financial statements. 

Reclassifications – Certain prior amounts have been reclassified to conform to the current presentation.  The reclassifications had no impact on total assets or the net loss.

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Stockholders Equities warrants Reserved for future (Details)	Jun. 30, 2012
warrants reserved for future Issue	2,678,712

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CONSOLIDATED CONDENSED BALANCE SHEETS (USD $)	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash	$ 451	$ 518,281
Accounts receivable	0	17,274
Accounts receivable other	74,571	0
Debt issuance cost, net of amortization of $33,863 at June 30, 2012	33,863	0
Prepaid costs	20,524	16,267
Total current assets	129,409	551,822
Investment in oil and gas properties - unevaluated	3,822,701	3,182,128
Goodwill	447,084	447,084
TOTAL ASSETS	4,399,194	4,181,034
Current liabilities:
Accounts payable	198,338	45,011
Related party payable	420,000	258,750
Convertible promissory notes, net of discount of $18,592 at June 30, 2012	389,416	262,500
Promissory notes, net of discount of $43,808 and $59,360 at June 30, 2012 and December 31, 2011, respectively	371,408	325,640
Promissory notes, related Party	59,000	0
Interest payable	50,881	14,608
Total current liabilities	1,489,043	906,509
Asset retirement obligation	11,910	11,369
Commitments and contingencies
Stockholders equity:
Preferred stock, no par value, 5,000,000 shares authorized; no shares issued or outstanding	0	0
Common stock, par value $0.001 per share; 70,000,000 shares authorized; 15,139,815 issued and outstanding at June 30, 2012 14,664,815 issued and outstanding at December 31, 2011	15,489	5,177
Additional paid-in capital	7,046,552	5,871,473
Accumulated deficit	(4,163,800)	(2,613,494)
Total stockholders' equity	2,898,241	3,263,156
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 4,399,194	$ 4,181,034

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NATURE OF BUSINESS

6 Months Ended

Jun. 30, 2012

NATURE OF BUSINESS

NATURE OF BUSINESS

1.NATURE OF BUSINESS

Torchlight Energy, Inc. (“TEI”) was formed in the state of Nevada on June 25, 2010. TEI’s operations commenced with initial funding on July 8, 2010.  TEI is an Exploration Stage energy company formed as a corporation to engage in the acquisition, exploration, exploitation and/or development of oil and natural gas properties in the United States. 

On November 23, 2010 Torchlight Energy Resources, Inc. (“we,” “us” and the “Company”), formerly, Pole Perfect Studios, Inc. (“Pole Perfect”) entered into a Share Exchange Agreement (the “Exchange Agreement”) with its major stockholders, TEI, and the persons owning 100% of the outstanding capital stock of TEI (the “TEI Stockholders”).   At closing, the TEI Stockholders transferred 9,444,501 shares of TEI common stock, representing 100% of the common stock of TEI, to the Company in exchange for an aggregate of 2,361,125 shares (pre-stock split) of newly issued common stock of the Company.  Also at closing of the Exchange Agreement, the Pole Perfect shareholders transferred to the Company an aggregate of 3,600,000 shares of common stock of the Company for cancellation in exchange for an aggregate consideration of $270,000.  This transaction was recorded as a reverse acquisition for accounting purposes where TEI is the accounting acquirer.   The assets and liabilities of Pole Perfect were recorded at a fair value of $0. The Company recorded $447,084 of goodwill which represents the estimated fair value of the consideration exchanged.  In addition, at closing (i) TEI became the Company’s wholly-owned subsidiary, (ii) the Company abandoned all of its previous business plans within the health and fitness industries, including opening and operating dance studios, and (iii) the business of TEI became the Company’s sole business.  Descriptions of its business hereinafter refer to the business of TEI.

On December 10, 2010, the Company effected a 4-for-1 forward split of its shares of common stock outstanding.  All owners of record at the close of business on December 10, 2010 (record date) received three additional shares for every one share they owned. 

Effective February 8, 2011 the Company changed its name from “Pole Perfect Studios, Inc.” to “Torchlight Energy Resources, Inc.”  In connection with the name change, the Company’s ticker symbol changed from “PPFT” to “TRCH.”

In an Exploration Stage company, management devotes most of its activities to establishing a new business, including raising capital to acquire interests in oil and gas properties. Planned principle activities have not yet produced any significant revenues, and the Company has incurred operating losses as is normal in Exploration Stage companies.

The Company is engaged in the acquisition, exploration, development and producing of oil and gas properties.  The Company is interested in programs that have a short window of payback, a high internal rate of return and proven and bookable reserves.  The Company’s success will depend in large part on its ability to obtain and develop oil and gas interests within the United States. 

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Promissory Notes Sawtooth Properties, LLLP (Details) (USD $)	Jan. 02, 2012
Convertible Promissory notes aggregate principal amount	$ 262,500
Note bears interest rate	10.00%
Number of shares on pro rata issuance	75,000
Units Conversion Price	$ 3.50
Per share value of common stock	$ 5
Fair value of warrants	$ 42,900

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Related Party Transactions payments due to related party (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Payments due to related party	$ 60,000	$ 120,000

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Promissory Notes Acceretion Expense (Details) (USD $)	6 Months Ended
	Jun. 30, 2012
Accretion Expense:	$ 21,992
Accretion Expense;	$ 40,768

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Related Party Transactions payments due to related party for Management fee (Details) (USD $)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Jun. 30, 2012
Payments due to related party as management fee	$ 60,000	$ 120,000	$ 240,000

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GOING CONCERN

6 Months Ended

Jun. 30, 2012

GOING CONCERN

GOING CONCERN

2.GOING CONCERN

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. 

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CONSOLIDATED CONDENSED BALANCE SHEETS PARANTHETICALS (USD $)	Jun. 30, 2012	Dec. 31, 2011
Debt issuance cost, net of amortization	$ 33,863	$ 0
Convertible promissory note, net of discount	18,592	0
Promissory notes, net of discount	$ 43,808	$ 59,360
Preferred Stock, no par value	$ 0.000	$ 0.000
Preferred Stock, shares authorized	5,000,000	5,000,000
Preferred Stock, shares issued	0	0
Preferred Stock, shares outstanding	0	0
Common Stock, par or stated value	$ 0.001	$ 0.001
Common Stock, shares authorized	70,000,000	70,000,000
Common Stock, shares issued	15,139,815	14,664,815
Common Stock, shares outstanding	15,139,815	14,664,815

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STOCKHOLDERS' EQUITY (TABLES)

6 Months Ended

Jun. 30, 2012

STOCKHOLDERS' EQUITY (TABLES)

Summary of warrant activity

A summary of warrant activity for the period from June 25, 2010 (inception) to June 30, 2012 is presented below:

				Weighted	Weighted
				Average	Average
			Number of	Exercise	Exercise
			Warrants	Price	Price
Outstanding June 25, 2010			-	-	-
	Issued	12/28/2010	225,000	$2.50	3.00 years
	Issued	01/05/2011	50,000	$2.50	3.00 years
	Issued	02/18/2011	30,000	$5.00	2.25 years
	Issued	03/08/2011	30,000	$5.00	2.25 years
	Issued	03/08/2011	30,000	$5.00	2.25 years
	Issued	03/14/2011	25,000	$5.00	2.25 years
	Issued	03/15/2011	154,857	$5.00	2.25 years
	Issued	04/13/2011	142,850	$5.00	2.50 years
	Issued	05/03/2011	40,000	$5.00	2.50 years
	Issued	05/09/2011	22,500	$5.00	2.50 years
	Issued	06/02/2011	10,000	$5.00	2.50 years
	Issued	06/03/2011	9,000	$5.00	2.50 years
	Issued	06/07/2011	14,500	$5.00	2.50 years
	Issued	06/20/2011	7,142	$5.00	2.50 years
	Issued	06/21/2011	7,143	$5.00	2.50 years
	Issued	06/22/2011	11,143	$5.00	2.50 years
	Issued	06/28/2011	34,500	$5.00	2.50 years
	Issued	08/12/2011	113,640	$5.00	2.75 years
	Issued	09/23/2011	25,000	$5.00	2.75 years
	Issued	10/25/2011	7,143	$5.00	3.00 years
	Issued	11/05/2011	7,144	$5.00	3.00 years
	Issued	11/14/2011	49,650	$5.00	3.00 years
	Issued	12/21/2011	385,000	$5.00	3.00 years
	Issued	01/01/2012	247,500	$5.00	3.00 years
	Issued	05/18/2012	1,000,000	$1.75	4.00 years
Outstanding June 30, 2012			2,678,712

Assumptions used in calculating the fair value of the warrants

. The assumptions used in calculating the fair value of the warrants issued are as follows:

Risk-free interest rate	0.42% - 1.16%
Expected volatility of common stock	40.00% - 124.00%
Dividend yield	0.00%
Discount due to lack of marketability	30.00%
Expected life of warrant	2 years- 4 years

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 09, 2012
Document and Entity Information
Entity Registrant Name	TORCHLIGHT ENERGY RESOURCES INC
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Entity Central Index Key	0001431959
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		15,139,815
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

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ASSET RETIREMENT OBLIGATIONS (Tables)

6 Months Ended

Jun. 30, 2012

ASSET RETIREMENT OBLIGATIONS (Tables)

Reconciliation of the asset retirement obligation liability

The following is a reconciliation of the asset retirement obligation liability for the six months ended June 30, 2012 and the year ended December 31, 2011:

Asset retirement obligation – January 1, 2011	$	-
Liabilities incurred		10,828
Accretion expense		541
Asset retirement obligation – December 31, 2011		11,369
Accretion expense		541
Asset retirement obligation – March 31, 2012	$	11,910

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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		6 Months Ended		24 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012
Revenue
Oil and gas sales	$ 251,412	$ 24,152	$ 275,629	$ 24,152	$ 299,781
Cost of revenue	247,221	25,273	263,745	25,273	289,018
Gross income (loss)	4,191	(1,121)	11,884	(1,121)	10,763
Operating expenses:
General and administrative expenses	1,219,738	759,669	1,450,959	1,310,098	3,968,920
Total operating expenses	1,219,738	759,669	1,450,959	1,310,098	3,968,920
Other income (expense)
Interest income	0	55	12	132	198
Interest expense	(49,597)	(40,552)	(111,243)	(77,966)	(205,841)
Total other income (expense)	(49,597)	(40,497)	(111,231)	(77,834)	(205,643)
Net loss before taxes	1,265,144	801,287	1,550,306	1,389,053	4,163,800
Provision for income taxes	0	0	0	0	0
Net loss	$ 1,265,144	$ 801,287	$ 1,550,306	$ 1,389,053	$ 4,163,800
Loss per share Basic and Diluted	$ (0.085)	$ (0.058)	$ (0.104)	$ (0.104)	$ (0.295)
Weighted average shares outstanding Basic and Diluted	14,928,277	13,853,366	14,845,202	13,391,655	14,110,185

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2012

Fair Value Measures and Disclosures

Fair Value Disclosures [Text Block]

7.FAIR VALUE MEASUREMENTS

Assets and liabilities that require measurement to fair value on a recurring basis are categorized 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.  At June 30, 2012 and December 31, 2011 there were no financial assets or liabilities measured on a recurring or a nonrecurring basis.

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STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2012

Equity

Stockholders' Equity Note Disclosure [Text Block]

6.STOCKHOLDERS’ EQUITY

The Board of Directors has the authority to issue up to 5,000,000 shares of preferred stock in one or more series, to fix the number of shares constituting any such series, and to fix the rights and preferences of the shares constituting any series, without any further vote or action by the stockholders. There are no issued and outstanding shares of preferred stock; there are no agreements or understandings for the issuance of preferred stock, and the Board of Directors has no present intention to issue preferred stock.

Through subscription agreements, the Company received $2,699,242 for the issuance of 771,212 Units during the period of January 1, 2011 through December 31, 2011.  Each Unit consisted of two restricted shares of common stock and one three year warrant to purchase a share of restricted common stock at the price of $5.00.  The Company also issued common shares as compensation for services during this time.

On October 7, 2011, the Company placed 1,672,375 shares of common stock into escrow in connection with a letter of intent with Wexco Resources to acquire leases in Wilson County, Texas and two farm-in agreements with Hockley Energy. Under the terms, and subject to closing, Hockley Energy was to fund a deposit of $1,500,000 by November 6, 2011.  To date no funds have been deposited, and the Company has filed a lawsuit against Hockley Energy.  Subsequent to December 31, 2011, the Company requested the return of the shares held in escrow from the escrow agent.  At this time we are awaiting receipt of the shares.

In February, 2012, the Company issued 25,000 shares of common stock each to Wayne Turner and Ken Danneberg as consideration for serving on the board of Directors in 2011.

On May 24, 2012, the Company issued 350,000 shares of common stock to an outside consultant as consideration for investor and public relation services.

A summary of warrant activity for the period from June 25, 2010 (inception) to June 30, 2012 is presented below:

				Weighted	Weighted
				Average	Average
			Number of	Exercise	Exercise
			Warrants	Price	Price
Outstanding June 25, 2010			-	-	-
	Issued	12/28/2010	225,000	$2.50	3.00 years
	Issued	01/05/2011	50,000	$2.50	3.00 years
	Issued	02/18/2011	30,000	$5.00	2.25 years
	Issued	03/08/2011	30,000	$5.00	2.25 years
	Issued	03/08/2011	30,000	$5.00	2.25 years
	Issued	03/14/2011	25,000	$5.00	2.25 years
	Issued	03/15/2011	154,857	$5.00	2.25 years
	Issued	04/13/2011	142,850	$5.00	2.50 years
	Issued	05/03/2011	40,000	$5.00	2.50 years
	Issued	05/09/2011	22,500	$5.00	2.50 years
	Issued	06/02/2011	10,000	$5.00	2.50 years
	Issued	06/03/2011	9,000	$5.00	2.50 years
	Issued	06/07/2011	14,500	$5.00	2.50 years
	Issued	06/20/2011	7,142	$5.00	2.50 years
	Issued	06/21/2011	7,143	$5.00	2.50 years
	Issued	06/22/2011	11,143	$5.00	2.50 years
	Issued	06/28/2011	34,500	$5.00	2.50 years
	Issued	08/12/2011	113,640	$5.00	2.75 years
	Issued	09/23/2011	25,000	$5.00	2.75 years
	Issued	10/25/2011	7,143	$5.00	3.00 years
	Issued	11/05/2011	7,144	$5.00	3.00 years
	Issued	11/14/2011	49,650	$5.00	3.00 years
	Issued	12/21/2011	385,000	$5.00	3.00 years
	Issued	01/01/2012	247,500	$5.00	3.00 years
	Issued	05/18/2012	1,000,000	$1.75	4.00 years
Outstanding June 30, 2012			2,678,712

At June 30, 2012 the Company had reserved 2,678,712 shares for future exercise of warrants.

Warrants issued in relation to the promissory notes issued (see note 9) and the equity Units above were valued using the Black Scholes Option Pricing Model. The assumptions used in calculating the fair value of the warrants issued are as follows:

Risk-free interest rate	0.42% - 1.16%
Expected volatility of common stock	40.00% - 124.00%
Dividend yield	0.00%
Discount due to lack of marketability	30.00%
Expected life of warrant	2 years- 4 years

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Related Party Transactions Management Fee (Details) (USD $)	Jan. 24, 2012
Management fee per year	$ 240,000

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Nature Of Business Share Exchange Agreement (Details) (USD $)	Nov. 23, 2010
Percentage of holding share on outstanding capital of TEI	100
Number of shares transferred by the TEI Stockholders	9,444,501
Number of shares pre stock split of newly issued common stock	2,361,125
Transferred shares by Polo Perfect Shareholders for cancellation in exchange for consideration	3,600,000
Aggregate consideration of the shares cancelled	$ 270,000
Fair value of assets of liabilities	0
Estimated Fair Value of Goodwill	$ 447,084

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ASSET RETIREMENT OBLIGATIONS

6 Months Ended

Jun. 30, 2012

ASSET RETIREMENT OBLIGATIONS

ASSET RETIREMENT OBLIGATIONS

10. ASSET RETIREMENT OBLIGATIONS

The following is a reconciliation of the asset retirement obligation liability for the six months ended June 30, 2012 and the year ended December 31, 2011:

Asset retirement obligation – January 1, 2011	$	-
Liabilities incurred		10,828
Accretion expense		541
Asset retirement obligation – December 31, 2011		11,369
Accretion expense		541
Asset retirement obligation – March 31, 2012	$	11,910

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INCOME TAXES

6 Months Ended

Jun. 30, 2012

Income Taxes

Income Tax Disclosure [Text Block]

8.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 carryforwards.  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.  The Company’s tax returns remain subject to Federal and State tax examinations for all tax years since inception as none of the statutes have expired.  Generally, the applicable statutes of limitation are three to four years from their respective filings.

At June 30, 2012, the Company has a net operating loss carryover of approximately $4,875,000 available to offset future income for income tax reporting purposes, which will expire in various years through 2030, if not previously utilized. However, the Company’s ability to use the carryover net operating loss may be substantially limited or eliminated pursuant to Internal Revenue Code Section 382.

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PROMISSORY NOTES

6 Months Ended

Jun. 30, 2012

PROMISSORY NOTES

PROMISSORY NOTES

9. PROMISSORY NOTES

The Company entered into an extension agreement, effective January 1, 2012, with stockholders Sawtooth Properties, LLLP, Black Hills Properties, LLLP and Pine River Ranch, LLC (collectively the “Note Holders”).  Previously on June 24, 2011, the Company issued a total of three 10% Convertible Promissory Notes with an aggregate principal amount of $262,500 to the Note Holders who paid $262,500 in aggregate consideration for the notes.  Each of the notes bears interest at the rate of 10% per annum and was due on December 31, 2011.  Under the terms of the extension agreement, the Note Holders agreed to extend the maturity date of each of the notes to December 31, 2012 in consideration of the following: (i) the pro-rata issuance of a total of 75,000 shares of common stock to the Note Holders, (ii) the continued right to convert any of the outstanding principal and interest of the notes into Units of the Company’s securities at the conversion price of $3.50 per Unit, which Units each consist of two shares of common stock and one three-year warrant to purchase a share of common stock at the price of $5.00 per share, and (iii) upon such conversion set forth in “(ii)” above, the right to receive two additional three-year warrants to purchase a share of common stock at the price of $5.00 per share for each Unit into which outstanding principal and interest is converted.  The convertible notes were recorded net of discount that includes the relative fair value of the warrants amounting to $42,900.  The discount is accreted over the life of the debt using the effective interest method.  Accretion expense was $21,992 for the six months ended June 30, 2012. The initial value of the warrants was calculated using the Black Scholes Option Pricing Model.

On December 21, 2011, the Company issued a 10% promissory note and a warrant to purchase shares of common stock to an accredited investor who paid $385,000 in aggregate consideration for the securities.  The 10%  promissory note bears interest at the rate of 10% per annum, has a principal amount of $385,000 and has a maturity date of September 21, 2012.The warrant is exercisable into 385,000 shares of common stock as of December 20, 2011 at a price of $1.75 per share and expires on December  21, 2015.   The note was collateralized by 1,000,000 shares of pledged securities of a related party.  The convertible note was recorded net of discount that includes the relative fair value of the warrants amounting to $61,600.  The discount is accreted over the life of the debt using the effective interest method.  Accretion expense was $40,768 for the six months ended June 30, 2012 and $2,240 for the 10 days ended December 31, 2011. The initial value of the warrants was calculated using the Black Scholes Option Pricing Model.

On March 26, 2012, the Company issued two Series A 10% Convertible Promissory Notes to Sawtooth Properties, LLLP and Pine River Ranch, LLC for aggregate consideration of $150,000.  The notes are due on September 26, 2012 and bear interest at the rate of 10% per annum.  Each of the notes is convertible on and after the earlier to occur of (i) August 26, 2012, (ii) an un-cured event of default and (iii) the Company’s election to pre-pay the note.  The notes are convertible into shares of common stock at the conversion price of $1.75 per share.  The notes are collateralized with (i) a first lien on the Company’s interest in the Johnson #4 well, (ii) a second lien on the Company’s interest in the John Coulter #1-R well, and (iii) shares of stock pledged by the Company’s President.  In connection with the issuance of the notes, the Company also issued the holders three-year warrants to purchase an aggregate of 150,000 shares of common stock at the exercise price of $1.75 per share, which warrants are not exercisable until August 26, 2012.  Also in connection with the issuance of the notes, the Company entered into allonges that amended the promissory notes it had previously issued Sawtooth Properties, LLLP, Pine River Ranch, LLC and Black Hills Properties, LLLP on June 24, 2011, which notes have subsequently been amended pursuant to an extension agreement effective January 1, 2012.  The allonges give the holders collateral in the Company’s interest in the Johnson #4 well and the John Coulter #1-R well.  The allonges also provide that each holder will not have the right to convert outstanding principal and interest of the note or the right to receive additional warrants to purchase shares of common stock until the earlier to occur of (i) December 1, 2012, (ii) an un-cured event of default and (iii) the Company’s election to pre-pay the note. 

In February and March of 2012, the Company issued four non-interest bearing promissory notes totaling $64,000 to two individuals, one of whom is its Chief Executive Officer, for cash received.  The notes are due upon demand.

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SIGNIFICANT ACCOUNTING POLICIES (POLICIES)

6 Months Ended

Jun. 30, 2012

SIGNIFICANT ACCOUNTING POLICIES (POLICIES)

Use of estimates

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

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 subsidiary, Torchlight Energy, Inc.   All significant intercompany balances and transactions have been eliminated.  It is management’s opinion that all adjustments necessary for a fair statement of the results for the interim periods have been made and that all adjustments are of a normal recurring nature.

Risks and uncertainties

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

Concentration of risks – The Company’s cash is placed with a highly rated financial institution, and the Company conducts ongoing evaluations of the credit worthiness of the financial institutions with which it does business.  At times during the three months ended June 30, 2012, and the twelve months ended December 31, 2011, cash balances were in excess of amounts guaranteed by the Federal Deposit Insurance Corporation. 

Fair value of financial instruments

Fair value of financial instruments – Financial instruments consist of cash, accounts receivable, accounts payable and convertible and non-convertible promissory notes. The estimated fair values of cash, accounts receivable and accounts payable approximate the carrying amount due to the relatively short maturity of these instruments.  The carrying amounts of the convertible and non-convertible promissory notes approximate their fair value giving affect for the term of the note and the effective interest rates.  See note 7.

Accounts Receivable

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 June 30, 2012 and December 31, 2011 no valuation allowance was considered necessary. 

Investment in oil and gas properties

Investment in 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. Gain or loss on the sale or other disposition of oil and gas properties is not recognized, unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves.

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.

Depreciation, depletion and amortization

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.   During the three months ended June 30, 2012 and the twelve months ended December 31, 2011, the investment in oil and gas properties included only unevaluated oil and gas properties and other costs excluded from amortization; therefore, no depreciation, depletion or amortization has been recognized.

Ceiling test

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 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 ceiling test calculation uses a commodity price assumption which is based on the un-weighed 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 Company did not recognize impairment on its oil and gas properties during the three months ended June 30, 2012 nor the twelve months ended December 31, 2011.  Due to the volatility of commodity prices, should oil and natural gas prices decline in the future, it is possible that a 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.  As of June 30, 2012 and December 31, 2011, the Company did not have any proved oil or gas reserves.

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 evaluation of the same reserves as well as cost estimates related to future development costs of proved oil and gas reserves could result in significant revisions due to changes in regulatory requirements, technological advances and other factors which are difficult to predict.

Gains and losses on the sale of oil and gas properties are generally reflected in income.  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.  During the three months ended June 30, 2012 and the twelve months ended December 31, 2011, there were no gains or losses recognized from the sale of oil and gas properties.

Goodwill

Goodwill - Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets of acquired companies. Goodwill is not amortized; instead, it is tested for impairment annually or more frequently if indicators of impairment exist.

Goodwill was $447,084 as of June 30, 2012 and December 31, 2011 and was acquired on November 23, 2010 in connection with the Company’s reverse acquisition (Note 1).

Asset retirement obligations

Asset retirement obligations – Accounting principles require that the fair value of a liability for an asset’s retirement obligation (“ARO”) be recorded in the period in which it is incurred if a reasonable estimate of fair value can be made, and that the corresponding cost be 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 cost incurred is recorded as a reduction to 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. 

Asset retirement obligation activity is disclosed in Note 10.

Share-Based Compensation

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.  Compensation cost for liability awards is based on the fair value of the vested award at the end of each period.

Revenue recognition

Revenue recognition – The Company recognizes oil and gas revenues when production is sold at a fixed or determinable price, persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, and collectability is reasonably assured.

Basic and Diluted Earnings (Loss) Per Share

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.

Environmental laws and regulations

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.

Recent accounting pronouncements

Recent accounting pronouncements – In September 2011, the FASB issued guidance that amends and simplifies the rules related to testing goodwill for impairment.  The revised guidance allows an entity to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination whether it is more likely than not that the fair value of reporting unit is less than its carrying amount.  The results of this assessment will determine whether it is necessary to perform the currently required two-step impairment test. Under this update, an entity also has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the two-step goodwill impairment test.  The adoption of this guidance was effective for fiscal years beginning after December 31, 2011 and did not have a material effect on the Company’s 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

Subsequent Events – The Company evaluated all subsequent events through August 14, 2012, the date of issuance of the financial statements. 

Reclassifications

Reclassifications – Certain prior amounts have been reclassified to conform to the current presentation.  The reclassifications had no impact on total assets or the net loss.

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Income Taxes Operating loss carryforwards (Details) (USD $)	Jun. 30, 2012
Net operating loss carryforwards	$ 4,875,000

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Related Party Transactions Management Services (Details) (USD $)	Jan. 24, 2012
Management and executive services fee per year	$ 240,000

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Related Party Transactions Payment Made to Former CEO and Director (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Payment made to formar CEO and Director	$ 8,000	$ 4,000

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (USD $)	6 Months Ended		24 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012
Cash Flows From Operating Activities
Net loss.	$ (1,550,306)	$ (1,389,054)	$ (4,163,800)
Adjustments to reconcile net loss to net cash from operating activities:
Stock based compensation	1,106,452	1,005,972	2,525,425
Accretion of convertible note discount	62,760	65,250
Depreciation, amortization and accretion	541	0	1,082
Change in:
Accounts receivable.	17,274	(17,274)	0
Accounts receivables other	(74,571)	0	(74,571)
Prepaid costs.	(4,257)	(17,589)	(20,524)
Accounts payable.	153,327	(160,105)	198,338
Related party payable.	161,250	157,500	420,000
Interest payable.	36,273	216	50,881
Net cash used in operating activities	(91,257)	(355,084)	(932,919)
Cash Flows From Investing Activities
Investment in oil and gas properties unevaluated	(640,573)	(1,707,462)	(3,811,873)
Cash Flows From Financing Activities
Issuance of promissory notes	214,000	262,500	1,111,500
Payment of promissory note	0	(250,000)	(250,000)
Shares issued to management	0	0	10,000
Shares issued for private placement	0	1,990,223	4,143,743
Cancellation of common shares	0	0	(270,000)
Net cash provided by financing activities	214,000	2,002,723	4,745,243
Net increase in cash	(517,830)	(59,824)	451
Cash beginning of period	518,281	278,191
Cash end of period	451	218,368	451
Non cash transactions:
Stock issued in conjunction with renewal of promissory notes	67,725	0	0
Reclassification of paid in capital to common stock	9,837	0	0
Recapitalization on reverse merger	0	0	447,084
Discount on warrants issued in conjunction with convertible note	45,076	0	95,600
Asset retirement obligation.	0	0	10,828
Interest paid	$ 0	$ 0	$ 12,501

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2012

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

5.COMMITMENTS AND CONTINGENCIES

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 June 30, 2012 and December 31, 2011, 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.

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Stockholders Equities Issue of Prefered Stock (Details)	Jun. 30, 2012
Authorised To Issue Preferred Stock	5,000,000

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Promissory Notes Sawtooth Properties, LLLP Consideration (Details) (USD $)	Mar. 26, 2012
Aggregate consideration	$ 150,000
Note bears interest rate.	10.00%
Conversion Price of common stock	1.75
Three year warrants to purchase common stock	150,000
Warrants Exercise Price	$ 1.75

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Significant Accounting Policies Goodwill (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011	Nov. 23, 2010
Balance Goodwill	$ 447,084	$ 447,084	$ 447,084