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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

Amendment No. 2

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Next Bridge Hydrocarbons, Inc.

(Exact name of registrant as specified in its Charter)

Nevada 1311 87-2538731

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

6300 Ridglea Place, Suite 950

Fort Worth, TX 76116

(817) 438-1937

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

Corporate Secretary

Lucas T. Hawkins

6300 Ridglea Place, Suite 950

Fort Worth, TX 76116

(817) 438-1937

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copies to:

Mark Fitzgerald

Wilson Sonsini Goodrich & Rosati

28 State Street, 37 Floor

Boston, MA 02109

617-598-7800

Jack E. Jacobsen

Jason A. Schumacher

O’Melveny & Myers LLP

2501 N. Harwood Street, 17 Floor

Dallas, TX 75201

214-647-9270

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging Growth company ☒

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 to Section 7(a)(2)(B) of the Securities Act. ☐

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION DATED SEPTEMBER 6, 2022

SUBJECT TO COMPLETION DATED OCTOBER 5, 2022

Prospectus

Next Bridge Hydrocarbons, Inc.

165,523,363 shares of Common Stock

(par value $0.0001)

This prospectus (“Prospectus”) is being furnished to you as a Series A Preferred stockholder of Meta Materials, Inc. (“Meta”) in connection with the planned distribution (the “Spin-Off” or the “Distribution”) by Meta to its Series A Preferred stockholders of all the shares of common stock, par value $0.0001 per share (the “Common Stock”), of Next Bridge Hydrocarbons, Inc. (the “Company,” “Next Bridge,” “we,” “us” or “our”) held by Meta immediately prior to the Spin-Off. As of immediately prior to the time of the Distribution, Meta holds 165,523,363 shares of Common Stock, which is 100% of the outstanding shares of capital stock of the Company.

At the time of the Spin-Off, Meta will distribute all the outstanding shares of Common Stock held by it on a pro rata basis to holders of Meta’s Series A Non-Voting Preferred Stock. Each one share of Meta’s Series A Non-Voting Preferred Stock outstanding as of , New York City time, on , 2022, the record date for the Spin-Off (the “Record Date”), will entitle the holder thereof to receive one share of Common Stock. The Distribution will be made in book-entry form by a distribution agent. Fractional shares of Common Stock will not be distributed in the Spin-Off.

The Spin-Off will be effective as of , New York City time, on , 2022. Immediately after the Spin-Off, the Company will be an independent public reporting company, provided, the Common Stock is not and will not be publicly traded and will not be eligible for electronic transfer through the Depository Trust Company book-entry system or any other established clearing corporation.

None of the Series A Preferred Stockholders are required to vote on or take any other action in connection with the Spin-Off. We are not asking you for a proxy, and we request that you do not send us a proxy. The Series A Preferred stockholders will not be required to pay any consideration for the Common Stock they receive in the Spin-Off; immediately after the Spin-Off, all shares of Series A Non-Voting Preferred Stock of Meta shall be cancelled.

Meta currently owns all the outstanding shares of Common Stock of the Company, and we have not sought to have the shares of Common Stock traded on any exchange. Accordingly, there is currently no public market for the Common Stock, and there is no current expectation for a public market to develop for the Common Stock.

In reviewing this Prospectus, you should carefully consider the matters described in the section titled “Risk Factors” beginning on page 7 of this Prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This Prospectus is not an offer to sell, or a solicitation of an offer to buy, any securities.

The date of this Prospectus is , 2022

Table of Contents

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

DEFINITIONS

iii

PROSPECTUS SUMMARY

RISK FACTORS

THE SPIN-OFF

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

USE OF PROCEEDS

DETERMINATION OF OFFERING PRICE

CAPITALIZATION

BUSINESS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT

EXECUTIVE COMPENSATION

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

DESCRIPTION OF OUR CAPITAL STOCK

LEGAL MATTERS

EXPERTS

WHERE YOU CAN FIND MORE INFORMATION

INDEX TO FINANCIAL STATEMENTS

Table of Contents

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements and information relating to our business that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this communication, the words “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “forecasts,” “projections,” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include, without limitation, the statements regarding our strategy, future plans for development and production, future expenses and costs and future liquidity and capital resources. Forward looking statements involve a number of risks, assumptions and uncertainties which may cause actual results to differ materially from those contained in this Prospectus. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

This Prospectus contains certain forward-looking statements and information relating to our business that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this communication, the words “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “forecasts,” “projections,” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements include, without limitation, the statements regarding our strategy, future plans for development and production and other strategic options, future expenses and costs and future liquidity and capital resources. Forward looking statements involve a number of risks, assumptions and uncertainties which may cause actual results to differ materially from those contained in this Prospectus. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including, among others:

•

general competitive conditions, including actions our competitors may take to grow their businesses;

•

changes to payment terms, the discount or margin on products or other terms with our suppliers;

•

risks associated with data privacy, information security and intellectual property;

•

work stoppages or increases in labor costs;

•

our ability to attract and retain employees;

•

development costs of our current or future properties;

•

timing and success of our drilling activities;

•

amount and timing of future production of oil and natural gas;

•

our ability to successfully implement our strategic initiatives, including amount, nature and timing of capital expenditures;

•

the usual hazards associated with the oil and natural gas industry, including fires, well blowouts, pipe failure, spills, explosions and other unforeseen hazards;

•

the numerous uncertainties inherent in estimating quantities of oil and natural gas reserves and actual future production rates and associated costs;

•

operating costs including lease operating expenses, administrative costs and other expenses;

•

the volatility of prices and supply of, and demand for, oil and natural gas;

•

changes in regulatory requirements and legislation governing our business, including sustainability;

•

the amount of our indebtedness and ability to comply with covenants applicable to any future debt financing;

•

our ability to access the credit and capital markets to satisfy future capital and liquidity requirements on acceptable terms;

•

if we are not able to successfully execute on our future operating plans, we may not be able to continue as a going concern;

•

adverse results from litigation, governmental investigations or tax-related proceedings or audits;

•

changes in accounting standards;

•

impact and cost of energy conservation and other sustainability efforts;

•

exploration and development risks, which could lead to environmental damage, injury and loss of life or the destruction of property;

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•

proximity and capacity of oil, natural gas and other pipelines, transportation and support infrastructure to production facilities;

•

availability of consumables and raw materials and drilling and processing equipment;

•

adverse weather conditions, natural disasters or other events;

•

the ability to successfully estimate the impact of litigation matters;

•

our ability to initiate and maintain discussions with third parties regarding strategic options;

•

the potential adverse impact on our business resulting from the Spin-Off; and

•

the other risks and uncertainties detailed in the section titled “Risk Factors.”

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Prospectus except to the extent required by law.

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DEFINITIONS

The following are abbreviations and definitions of terms commonly used in the oil and gas industry and in this prospectus. Natural gas equivalents and crude oil equivalents are determined using the ration of six Mcf to one barrel. All references to “us”, “our”, “we”, or “Next Bridge” mean Next Bridge Hydrocarbons, Inc. and where applicable, its consolidated subsidiaries.

The following are abbreviations and definitions of terms commonly used in the oil and gas industry and in this prospectus. Natural gas equivalents and crude oil equivalents are determined using the ratio of six Mcf to one barrel. All references to “us”, “our”, “we”, or “Next Bridge” mean Next Bridge Hydrocarbons, Inc. and where applicable, its consolidated subsidiaries.

“Bbl” means a barrel of U.S. 42 gallons of oil.

“BOE” means one barrel of oil equivalent.

“Completion” means the installation of permanent equipment for the production of oil or gas.

“Condensate” means natural gas in liquid form produced in connection with natural gas wells.

“Exploratory well” means a well drilled to find a new field or to find a new productive reservoir in a field previously found to be productive of oil or natural gas in another reservoir or to extend a known reservoir.

“Gross” when used with respect to acres or wells, production or reserves refers to the total acres or wells in which we or another specified person has a working interest.

“MBbls” means one thousand barrels of oil.

“Mcf” means one thousand cubic feet of natural gas.

“Net” when used with respect to acres or wells, refers to gross acres of wells multiplied, in each case, by the percentage working interest owned by us.

“NGL” refers to natural gas liquids, which is composed exclusively of carbon and hydrogen.

“Oil” means crude oil or condensate.

“Operator” means the individual or company responsible for the exploration, development, and production of an oil or gas well or lease.

“Proved developed reserves” means reserves that can be expected to be recovered through existing wells with existing equipment or operating methods.

“Proved developed non-producing” means reserves (i) expected to be recovered from zones capable of producing but which are shut-in because no market outlet exists at the present time or whose date of connection to a pipeline is uncertain or (ii) currently behind the pipe in existing wells, which are considered proved by virtue of successful testing or production of offsetting wells.

“Proved developed producing” means reserves expected to be recovered from currently producing zones under continuation of present operating methods. This category includes recently completed shut-in gas wells scheduled for connection to a pipeline in the near future.

“Proved reserves” means the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided by contractual arrangements.

iii

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“Proved undeveloped reserves” means reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those drilling locations offsetting productive wells that are reasonably certain of production when drilled or where it can be demonstrated with certainty that there is continuity of production from the existing productive formation.

“Recompletion” means the completion for production of an existing well bore in another formation from which the well has been previously completed.

“Royalty” means an interest in an oil and gas lease that gives the owner of the interest the right to receive a portion of the production from the leased acreage (or of the proceeds of the sale thereof), but generally does not require the owner to pay any portion of the costs of drilling or operating the wells on the leased acreage. Royalties may be either landowner’s royalties, which are reserved by the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection with a transfer to a subsequent owner.

“SEC” means the United States Securities and Exchange Commission.

“Working interest” means an interest in an oil and gas lease that gives the owner of the interest the right to drill for and produce oil and gas on the leased acreage and requires the owner to pay a share of the costs of drilling and production operations. The share of production to which a working interest owner is entitled will always be smaller than the share of costs that the working interest owner is required to bear, with the balance of the production accruing to the owners of royalties. For example, the owner of a 100% working interest in a lease burdened only by a landowner’s royalty of 12.5% would be required to pay 100% of the costs of a well but would be entitled to retain 87.5% of the production.

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PROSPECTUS SUMMARY

This summary highlights certain information contained elsewhere in this Prospectus and may not contain all of the information that is important to you. To understand fully and for a more complete description of the terms and conditions of the Distribution, you should read this Prospectus in its entirety, including the information presented under the section titled “Risk Factors” and the consolidated financial statements and related notes, and the documents to which you are referred. See “Where You Can Find More Information.” Except where the context otherwise requires, or where otherwise indicated, references to the “Company,” “Next Bridge,” “we,” “us,” or “our” refer to Next Bridge Hydrocarbons, Inc. and its consolidated subsidiaries, including Torchlight Hazel, LLC, a Texas limited liability company, Hudspeth Oil Corporation, a Texas corporation, Hudspeth Operating, LLC, a Texas limited liability company, and Torchlight Energy, Inc., a Nevada corporation. “Meta” refers to Meta Materials, Inc. and its consolidated subsidiaries.

The Company

We were incorporated in Nevada on August 31, 2021, as OilCo Holdings, Inc. as a wholly owned subsidiary of Meta, and changed our name to Next Bridge Hydrocarbons, Inc. pursuant to our Amended and Restated Articles of Incorporation filed on June 30, 2022.

Background

On December 14, 2020, Meta (formerly known as Torchlight Energy Resources, Inc., “Torchlight”) and its subsidiaries, Metamaterial Exchangeco Inc. (formerly named 2798832 Ontario Inc., “Exchangeco”) and 2798831 Ontario Inc. (“Callco”), both Ontario corporations, entered into an Arrangement Agreement (the “Arrangement Agreement”) with Metamaterial Inc., an Ontario corporation headquartered in Nova Scotia, Canada, to acquire all of the outstanding common shares of Metamaterial, Inc. by way of a statutory plan of arrangement (the “Arrangement”) under the Business Corporations Act (Ontario), on and subject to the terms and conditions of the Arrangement Agreement, as amended. On June 28, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed.

In furtherance of the Arrangement, Torchlight (which subsequently changed its name to Meta Materials, Inc.) declared a dividend, on a one-for-one basis, of shares of Series A Non-Voting Preferred Stock of Meta (the “Series A Preferred Stock”) to holders of record of Torchlight’s common stock as of June 24, 2021. The holders of the Series A Preferred Stock are entitled to receive certain dividends based on the net proceeds of the sale of any assets that are used or held for use in Meta’s oil and natural gas exploration business and may also receive a pro rata dividend of equity in a spin-off entity to which Meta will transfer any remaining assets of such business. Meta has not sold to a third party any assets related to the historical oil and natural gas business and has transferred the subsidiary companies, the holders of the oil and natural gas assets, to us prior to the Spin-Off.

Business 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. Our primary focus has been the development of interests in an oil and gas project we hold in the Orogrande Basin in West Texas in Hudspeth County, Texas (the “Orogrande Project”). In addition, we have minor interests in the Eastern edge of the Midland Basin in Texas (the “Hazel Project”), and two minor well interests in Oklahoma.

We plan to operate our business through our wholly owned subsidiaries transferred to us from Meta, Torchlight Energy, Inc., a Nevada corporation, Hudspeth Oil Corporation, a Texas corporation, Torchlight Hazel, LLC, a

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Texas limited liability company, and Hudspeth Operating, LLC, a Texas limited liability company. We currently have six full-time employees, and we employ consultants for various roles as needed.

Texas limited liability company, and Hudspeth Operating, LLC, a Texas limited liability company. In addition, we may consider strategic options, including partnering with, or the possible sale of any or all of our assets to, third parties. We currently have six full-time employees, and we employ consultants for various roles as needed.

As of December 31, 2021, we had interests in three oil and gas projects: the Orogrande Project in Hudspeth County, Texas, the Hazel Project in Sterling, Tom Green, and Irion Counties, Texas, and the Hunton wells in partnership with Kodiak in Central Oklahoma. (the “Oklahoma Properties”). See the description under “Current Projects” below under Note 4, “Oil & Natural Gas Properties,” of the financial statements included with this Prospectus for information and disclosure regarding these projects, which description is incorporated herein by reference.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public reporting companies that are not emerging growth companies. These provisions include:

•

Exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting; and

•

Reduced disclosure of certain financial information requirements related to executive compensation, including the requirements to hold a non-binding advisory vote on executive compensation and to provide information relating to the ratio of total compensation of its Chief Executive Officer to the median of the annual total compensation of all of our employees.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenues as of the end of a fiscal year, if we are deemed to be a large-accelerated filer under the rules of the SEC, or if we issue more than $1.07 billion of non-convertible debt over a three-year-period.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.235 billion in annual revenues as of the end of a fiscal year, if we are deemed to be a large-accelerated filer under the rules of the SEC, or if we issue more than $1.235 billion of non-convertible debt over a three-year-period.

The JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public reporting companies. Following the consummation of the Spin-Off, we will elect to avail ourselves of the extended transition period. During the extended transition period, it may be difficult to compare our financial results with the financial results of a public reporting company that complies with accounting pronouncements when effective.

Smaller Reporting Company

We are a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”). As a “smaller reporting company,” the disclosure we will be required to provide in our SEC filings are less than it would be if we were not considered a “smaller reporting company.” Specifically, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act of 2002 requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; are not required to conduct say-on-pay and frequency votes; and have certain other decreased disclosure obligations in their

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Next Bridge Hydrocarbons, Inc.

(Exact name of registrant as specified in its Charter)

Nevada	 	1311	 	87-2538731
(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

6300 Ridglea Place, Suite 950

Fort Worth, TX 76116

(817) 438-1937

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

Corporate Secretary

Lucas T. Hawkins

6300 Ridglea Place, Suite 950

Fort Worth, TX 76116

(817) 438-1937

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copies to:

Mark Fitzgerald

Wilson Sonsini Goodrich & Rosati

28 State Street, 37 Floor

Boston, MA 02109

617-598-7800

Jack E. Jacobsen

Jason A. Schumacher

O’Melveny & Myers LLP

2501 N. Harwood Street, 17 Floor

Dallas, TX 75201

214-647-9270

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

Large Accelerated filer	 	☐	  	Accelerated filer	 	☐
Non-accelerated filer	 	☒	  	Smaller reporting company	 	☒
 		  	Emerging Growth company	 	☒
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 to Section 7(a)(2)(B) of the Securities Act.  ☐

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The information in this prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION DATED SEPTEMBER 6, 2022

Prospectus

Next Bridge Hydrocarbons, Inc.

165,523,363 shares of Common Stock

(par value $0.0001)

At the time of the Spin-Off, Meta will distribute all the outstanding shares of Common Stock held by it on a pro rata basis to holders of Meta’s Series A Non-Voting Preferred Stock. Each one share of Meta’s Series A Non-Voting Preferred Stock outstanding as of             , New York City time, on                     , 2022, the record date for the Spin-Off (the “Record Date”), will entitle the holder thereof to receive one share of Common Stock. The Distribution will be made in book-entry form by a distribution agent. Fractional shares of Common Stock will not be distributed in the Spin-Off.

The Spin-Off will be effective as of             , New York City time, on                     , 2022. Immediately after the Spin-Off, the Company will be an independent public reporting company, provided, the Common Stock is not and will not be publicly traded and will not be eligible for electronic transfer through the Depository Trust Company book-entry system or any other established clearing corporation.

In reviewing this Prospectus, you should carefully consider the matters described in the section titled “Risk Factors” beginning on page 7 of this Prospectus.

This Prospectus is not an offer to sell, or a solicitation of an offer to buy, any securities.

The date of this Prospectus is                     , 2022

Table of Contents
Table of Contents

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

i	 
DEFINITIONS

iii	 
PROSPECTUS SUMMARY

1	 
RISK FACTORS

7	 
THE SPIN-OFF

26	 
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

29	 
USE OF PROCEEDS

36	 
DETERMINATION OF OFFERING PRICE

36	 
CAPITALIZATION

36	 
BUSINESS

37	 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

47	 
MANAGEMENT

57	 
EXECUTIVE COMPENSATION

64	 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

68	 
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

69	 
DESCRIPTION OF OUR CAPITAL STOCK

73	 
LEGAL MATTERS

77	 
EXPERTS

77	 
WHERE YOU CAN FIND MORE INFORMATION

78	 
INDEX TO FINANCIAL STATEMENTS

79	 
Table of Contents
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Such statements reflect our current views with respect to future events, the outcome of which is subject to certain risks, including, among others:

•	 	
general competitive conditions, including actions our competitors may take to grow their businesses;

•	 	
changes to payment terms, the discount or margin on products or other terms with our suppliers;

•	 	
risks associated with data privacy, information security and intellectual property;

•	 	
work stoppages or increases in labor costs;

•	 	
our ability to attract and retain employees;

•	 	
development costs of our current or future properties;

•	 	
timing and success of our drilling activities;

•	 	
amount and timing of future production of oil and natural gas;

•	 	
our ability to successfully implement our strategic initiatives, including amount, nature and timing of capital expenditures;

•	 	
the usual hazards associated with the oil and natural gas industry, including fires, well blowouts, pipe failure, spills, explosions and other unforeseen hazards;

•	 	
the numerous uncertainties inherent in estimating quantities of oil and natural gas reserves and actual future production rates and associated costs;

•	 	
operating costs including lease operating expenses, administrative costs and other expenses;

•	 	
the volatility of prices and supply of, and demand for, oil and natural gas;

•	 	
changes in regulatory requirements and legislation governing our business, including sustainability;

•	 	
the amount of our indebtedness and ability to comply with covenants applicable to any future debt financing;

•	 	
our ability to access the credit and capital markets to satisfy future capital and liquidity requirements on acceptable terms;

•	 	
if we are not able to successfully execute on our future operating plans, we may not be able to continue as a going concern;

•	 	
adverse results from litigation, governmental investigations or tax-related proceedings or audits;

•	 	
changes in accounting standards;

•	 	
impact and cost of energy conservation and other sustainability efforts;

•	 	
exploration and development risks, which could lead to environmental damage, injury and loss of life or the destruction of property;

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 	•	 	
proximity and capacity of oil, natural gas and other pipelines, transportation and support infrastructure to production facilities;

•	 	
availability of consumables and raw materials and drilling and processing equipment;

•	 	
adverse weather conditions, natural disasters or other events;

•	 	
the ability to successfully estimate the impact of litigation matters;

•	 	
the potential adverse impact on our business resulting from the Spin-Off; and

•	 	
the other risks and uncertainties detailed in the section titled “Risk Factors.”

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DEFINITIONS

“Bbl” means a barrel of U.S. 42 gallons of oil.

“BOE” means one barrel of oil equivalent.

“Completion” means the installation of permanent equipment for the production of oil or gas.

“Condensate” means natural gas in liquid form produced in connection with natural gas wells.

“Gross” when used with respect to acres or wells, production or reserves refers to the total acres or wells in which we or another specified person has a working interest.

“MBbls” means one thousand barrels of oil.

“Mcf” means one thousand cubic feet of natural gas.

“Net” when used with respect to acres or wells, refers to gross acres of wells multiplied, in each case, by the percentage working interest owned by us.

“NGL” refers to natural gas liquids, which is composed exclusively of carbon and hydrogen.

“Oil” means crude oil or condensate.

“Operator” means the individual or company responsible for the exploration, development, and production of an oil or gas well or lease.

“Proved developed reserves” means reserves that can be expected to be recovered through existing wells with existing equipment or operating methods.

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“Proved undeveloped reserves” means reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those drilling locations offsetting productive wells that are reasonably certain of production when drilled or where it can be demonstrated with certainty that there is continuity of production from the existing productive formation.

“Recompletion” means the completion for production of an existing well bore in another formation from which the well has been previously completed.

“SEC” means the United States Securities and Exchange Commission.

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PROSPECTUS SUMMARY

The Company

Background

Business Overview

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Texas limited liability company, and Hudspeth Operating, LLC, a Texas limited liability company. We currently have six full-time employees, and we employ consultants for various roles as needed.

Emerging Growth Company Status

•	 	
Exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting; and

•	 	
Reduced disclosure of certain financial information requirements related to executive compensation, including the requirements to hold a non-binding advisory vote on executive compensation and to provide information relating to the ratio of total compensation of its Chief Executive Officer to the median of the annual total compensation of all of our employees.

Smaller Reporting Company

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Market Opportunity

The market for oil and natural gas that we will produce depends on factors beyond our control, including the extent of domestic production and imports of oil and natural gas, the proximity and capacity of natural gas pipelines and other transportation facilities, demand for oil and natural gas, the marketing of competitive fuels, and the effects of state and federal regulation. The oil and natural gas industry also competes with other industries in supplying the energy and fuel requirements of industrial, commercial, and individual consumers.

Our oil production is expected to be sold at prices tied to the spot oil markets. Our natural gas production is expected to be sold under short-term contracts and priced based on first of the month index prices or on daily spot market prices. We will rely on our operating partners to market and sell our production.

Regulatory Framework

Our oil and natural gas development operations are subject to stringent and complex federal, state, tribal, regional and local environmental, health and safety laws and regulations governing, among other factors, worker safety and health, the discharge and disposal of substances into the environment, and the protection of the environment and natural resources. Numerous governmental entities, including the Environmental Protection Agency (“EPA”) and analogous state and local agencies, (and, under certain laws, private individuals) have the power to enforce compliance with these laws and regulations and any permits issued under them. These laws and regulations may, among other things: (i) require permits to conduct exploration, drilling, water withdrawal, wastewater disposal and other production related activities; (ii) govern the types, quantities and concentrations of substances, including emissions of CO2, methane and certain other greenhouse gases (“GHG”), that may be disposed or released into the environment or injected into formations in connection with drilling or production activities, and the manner of any such disposal, release, or injection; (iii) limit or prohibit construction or drilling activities or require formal mitigation measures in sensitive areas such as wetlands, wilderness areas or areas inhabited by endangered or threatened species; (iv) require investigatory and remedial actions to mitigate pollution conditions arising from the Company’s operations or attributable to former operations; (v) impose safety and health restrictions designed to protect employees and others from exposure to hazardous or dangerous substances; and (vi) impose obligations to reclaim and abandon well sites and pits.

Certain existing environmental and occupational safety and health laws and regulations to which our business operations are subject including, the Clean Air Act, as amended (the “CAA”), the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), the federal Resource Conservation and Recovery Act, Federal Water Pollution Control Act of 1972 as amended by the Oil Pollution Act of 1990, EPA rules to reduce methane emissions from new, modified or reconstructed sources in the oil and natural gas sector, including implementation of a leak detection and repair (“LDAR”) program under the CAA’s New Source Performance Standards in 40 C.F.R. Part 60, Subpart OOOOa (“Quad Oa”), the federal Occupational Safety and Health Act and other state equivalent laws and regulations. For further discussion of the risks to our results of operations arising out of our environmental regulatory compliance, see “Risks Related to Our Business”, including the following risk factors “—Our operations are heavily dependent on current environmental regulation, changes in which we cannot predict,” “—Government regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays,” and “—Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the oil and natural gas that we produce”.

Corporate Information

Our executive office is located at 6300 Ridglea Place, Suite 950, Fort Worth, Texas 76116, and our telephone number is (817) 438-1937. We intend to have an internet website, nextbridgehydrocarbons.com. Information contained on or accessible through our website, when available, shall not be deemed a part of this prospectus and shall not be incorporated by reference herein.

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Summary of the Spin-Off

Distributing Company

Meta Materials, Inc., a Nevada corporation, which holds all of our Common Stock issued and outstanding prior to the Distribution. After the Distribution, the holders of the Series A Preferred Stock will own all of our Common Stock and Meta Materials, Inc. will not own any shares of our Common Stock.

Distributed Company

Next Bridge Hydrocarbons, Inc., a Nevada corporation, is a wholly owned subsidiary of Meta immediately prior to the Distribution. At the time of the Distribution, we will hold, directly or through our wholly owned subsidiaries, the assets and liabilities of the oil and natural gas business of Meta. After the Spin-Off, we will be an independent non-trading public reporting company.

Distributed Securities

165,523,363 shares of our Common Stock owned by Meta, which will be 100% of our Common Stock issued and outstanding immediately prior to the Distribution.

Each holder of Series A Preferred Stock will receive one share of our Common Stock for every one (1) share of Series A Preferred Stock held on the Record Date. The distribution agent will distribute only whole shares of our Common Stock in the Distribution. Shares of Common Stock that remain held by Meta following the Distribution, if any, shall be cancelled immediately after the Spin-Off.

Record Date

The Record Date is the close of business on                     , 2022.

Distribution Date

The Distribution Date is                     , 2022.

The Distribution

On the Distribution Date, Meta will release the shares of our Common Stock to the distribution agent to distribute to Series A Preferred stockholders. The distribution agent will distribute our shares in book-entry form, and thus we will not issue any physical stock certificates. We expect that it will take the distribution agent up to two weeks to electronically issue shares of our Common Stock to you or your bank or brokerage firm on your behalf by way of direct registration in book-entry form. You will not be required to make any payment, surrender or exchange your shares of Series A Preferred Stock or take any other action to receive your shares of our Common Stock, although your shares of Series A Preferred Stock will be cancelled as of the Record Date.

Conditions to the Spin-Off

The Spin-Off is subject to the satisfaction, or the Meta board of directors’ waiver, of the following conditions:

•	 	
the Meta board of directors shall have authorized and approved the Spin-Off and not withdrawn such authorization and approval, and shall have declared the dividend of our Common Stock to the holders of Meta’s Series A Preferred Stock;

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 	•	 	
the Distribution Agreement and the ancillary agreements contemplated by the Distribution Agreement shall have been executed by each party thereto;

•	 	
the SEC shall have declared effective our Registration Statement on Form S-1, of which this Prospectus is a part, under the Securities Act, and no stop order suspending the effectiveness of our Registration Statement shall be in effect and no proceedings for that purpose shall be pending before or threatened by the SEC;

•	 	
no order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Spin-Off shall be in effect, and no other event outside the control of Meta shall have occurred or failed to occur that prevents the consummation of the Spin-Off;

•	 	
all necessary actions and filings with regard to applicable state securities or “blue sky” laws shall have been taken; and

•	 	
any material third party consents necessary to consummate the Spin-Off shall have been obtained or waived.

The fulfillment of the foregoing conditions will not create any obligation on the part of Meta to effect the Spin-Off. We are not aware of any material federal, foreign or state regulatory requirements with which we must comply, other than SEC rules and regulations, state “blue sky” laws, or any material approvals that we must obtain, other than the SEC’s declaration of the effectiveness of the Registration Statement and applicable filings or notices required in compliance with applicable state securities or “blue sky” laws, in connection with the Spin-Off. Meta has the right not to complete the Spin-Off if, at any time, the Meta board or directors determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of Meta or its stockholders or is otherwise not advisable.

Trading Market

All of our outstanding shares of Common Stock are currently beneficially owned by Meta and our Common Stock is currently not listed for trading on any stock exchange or market and we have not sought to be traded on any exchange or market. The shares of Common Stock will not be eligible for electronic transfer through the Depository Trust Company or any other established clearing corporation. Accordingly, there currently is no public trading market for the Common Stock and there is no current expectation for a public market to develop.

U.S. Federal Income Tax Consequences to Series A Preferred Stockholders

U.S. federal income tax treatment of the issuance of our Common Stock to holders of the Series A Preferred Stock will not qualify for non-recognition of gain or loss for U.S. federal income tax purposes, and U.S. and non-U.S. holders could be subject to tax as a result of the Spin-Off and the cancellation all shares of the Series A Preferred Stock. Accordingly, holders of Series A Preferred Stock are

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encouraged to consult their own tax advisors as to the specific U.S. federal, state and local, and non-U.S. tax consequences of the Distribution to such stockholders.

Transfer Agent

American Stock Transfer & Trust Company LLC.

Risk Factors

Our business faces both general and specific risks and uncertainties. Our business also faces risks relating to the Spin-Off. Following the Spin-Off, we will also face risks associated with being an independent company. Accordingly, you should read carefully the information set forth under the heading “Risk Factors.”

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RISK FACTORS

You should carefully consider all of the information in this Prospectus and each of the risks described below, which we believe are the principal risks that we face. Some of the risks relate to our business, others to the Spin-Off and the ownership of our Common Stock. The risks and uncertainties described below are not the only ones faced by us. Additional risks and uncertainties not presently known or that are currently deemed immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, operating results and cash flows and the value of our Common Stock could be materially adversely affected.

Risks Relating to Our Business

We have a limited operating history relative to larger companies in our industry and may not be successful in developing profitable business operations.

We have a limited operating history relative to larger companies in our industry. Our business operations must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a business in the oil and natural gas industry. As of the date of this Prospectus, we have generated limited revenues and have limited assets. We have an insufficient history at this time on which to base an assumption that our business operations will prove to be successful in the long-term. Our future operating results will depend on many factors, including:

•	 	
our ability to raise adequate working capital;

•	 	
the success of our development and exploration;

•	 	
the demand for oil and natural gas;

•	 	
the level of our competition;

•	 	
our ability to attract and maintain key management and employees; and

•	 	
our ability to efficiently explore, develop, produce or acquire sufficient quantities of marketable oil or natural gas in a highly competitive and speculative environment while maintaining quality and controlling costs.

To achieve profitable operations in the future, we must, alone or with others, successfully manage the factors stated above, as well as continue to develop ways to enhance our production efforts. Despite our best efforts, we may not be successful in our exploration or development efforts or obtain required regulatory approvals. There is a possibility that some, or all, of the wells in which we obtain interests may never produce oil or natural gas.

We have limited capital and will need to raise additional capital in the immediate future.

Following the Spin-Off, we will require additional capital to maintain operations and to expand our exploration and development programs. We may be unable to obtain additional capital when required or on favorable terms. Future acquisitions, exploration, development, production and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.

We may pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, debt financing, equity financing, or other means. We may not be successful in identifying suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, our resources may not be sufficient to fund our planned operations.

Our ability to obtain financing, if and when necessary, may be impaired by such factors as the capital markets (both generally and in the oil and natural gas industry in particular), our limited operating history, the location of

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our oil and natural gas properties and prices of oil and natural gas on the commodities markets (which will impact the amount of asset-based financing available to us, if any) and the departure of key employees. Further, if oil or natural gas prices on the commodities markets decline, our future revenues, if any, will likely decrease and such decreased revenues may increase our requirements for capital. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs (even to the extent that we reduce our operations), third parties may be reluctant to provide the services we need in order to operate and we may be required to cease our operations, divest our assets at unattractive prices or obtain financing on unattractive terms.

Any additional capital raised through the sale of equity may dilute the ownership percentage of our stockholders. Raising any such capital could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of other derivative securities, and issuances of incentive awards under equity employee incentive plans, which may have a further dilutive effect.

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, which may adversely impact our financial condition.

We may not achieve or maintain profitable operations, and therefore, may not be able to continue as a going concern.

The Company has a history of net losses from operations and negative cash flow from operating activities. We will need to raise additional working capital to continue our normal and planned operations. We will also need to generate and sustain significant revenue levels in future periods in order to become profitable, and, even if we do, we may not be able to maintain or increase our level of profitability. During the three and six months ended June 30, 2022, we incurred a net loss of $1,476,849 and $2,600,106, respectively, and used cash of $4,656,992 for operating activities for the six months ended June 30, 2022. At June 30, 2022, we had an accumulated deficit of $70,787,622 and had a working capital deficit of $17,082,726 compared with a working capital deficit of $13,307,453 as of December 31, 2021. These factors raise doubt regarding our ability to continue as a going concern. Because we have incurred significant net losses, our auditors have issued a “going concern” audit qualification. A “going concern” qualification indicates that the financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result if we do not continue as a going concern. Therefore, you should not rely on our consolidated balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors, and potentially be available for distribution to stockholders, in the event of liquidation.

We are mainly concentrated in one geographic area, which increases our exposure to many of the risks enumerated herein.

Operating in a concentrated area increases the potential impact that many of the risks stated herein may have upon our ability to perform. For example, we have greater exposure to regulatory actions impacting Texas, natural disasters in the geographic area, competition for equipment, services and materials available in the area and access to infrastructure and markets. In addition, the effect of fluctuations on supply and demand may become more pronounced within specific geographic oil and natural gas producing areas such as the Permian Basin, which may cause these conditions to occur with greater frequency or magnify the effect of these conditions. Due to the concentrated nature of our portfolio of properties, a number of our properties could experience any of the same conditions at the same time, resulting in a relatively greater impact on our results of operations than they might have on other companies that have a more diversified portfolio of properties. Such delays or interruptions could have a material adverse effect on our financial condition and results of operations.

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Because of the speculative nature of oil and natural gas exploration, there is risk that we will not find commercially exploitable oil and natural gas and that our business will fail.

The search for commercial quantities of oil and natural gas as a business is extremely risky. We cannot provide investors with any assurance that any properties in which we obtain a mineral interest will contain commercially exploitable quantities of oil and/or natural gas. The exploration expenditures to be made by us may not result in the discovery of commercial quantities of oil and/or natural gas. Problems such as unusual or unexpected formations or pressures, premature declines of reservoirs, invasion of water into producing formations and other conditions involved in oil and natural gas exploration often result in unsuccessful exploration efforts. If we are unable to find commercially exploitable quantities of oil and natural gas, and/or we are unable to commercially extract such quantities, we may be forced to abandon or curtail our business plan, and as a result, any investment in us may become worthless.

Litigation may adversely affect our business, financial condition, and results of operations.

Certain of our subsidiaries are subject and from time to time in the normal course of our business operations, may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend such litigation may be significant and may require a diversion of our resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. Insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage for any claims could adversely affect our business and the results of our operations. For additional discussion of pending litigation matters, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Legal Proceedings.”

Strategic relationships upon which we may rely are subject to change, which may diminish our ability to conduct our operations.

Following the Spin-Off, our ability to successfully acquire oil and natural gas interests, to build our reserves, to participate in drilling opportunities and to identify and enter into commercial arrangements with customers will depend on developing and maintaining close working relationships with industry participants and our ability to select and evaluate suitable properties and to consummate transactions in a highly competitive environment. These realities are subject to change and our inability to maintain close working relationships with industry participants or continue to acquire suitable property may impair our ability to execute our business plan.

To continue to develop our business, we will endeavor to use the business relationships of our management to enter into strategic relationships, which may take the form of joint ventures with other private parties and contractual arrangements with other oil and natural gas companies, including those that supply equipment and other resources that we will use in our business. We may not be able to establish these strategic relationships, or if established, we may not be able to maintain them. In addition, the dynamics of our relationships with strategic partners may require us to incur expenses or undertake activities we would not otherwise be inclined to in order to fulfill our obligations to these partners or maintain our relationships. If our strategic relationships are not established or maintained, our business prospects may be limited, which could diminish our ability to conduct our operations.

Our acreage must be drilled before lease expiration in order to hold the acreage by production. In the highly competitive market for acreage, failure to drill sufficient wells in order to hold acreage will result in a substantial lease renewal cost, or if renewal is not feasible, loss of our lease and prospective drilling opportunities.

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net acres in the Orogrande Basin in West Texas expiring in 2022 if we fail to drill five wells as obligated. Unless we are able to negotiate an extension on these leases, these leases in the Orogrande Basin are also subject to expiration in 2023 in the event we fail to drill an additional five wells during the 2023 calendar year. We will require additional capital to drill these wells, and we may not be able to obtain additional capital when required in order to drill these wells, or on favorable terms. As of June 30, 2022, we have leases representing 645 net acres in the Eastern edge of the Midland Basin in West Texas, which are currently held by production by active wells. In the event that we fail to meet our drilling obligations in the Orogrande Basin, whether because we are unable to obtain additional capital when required or otherwise, or if production ceases in the Midland Basin, our leases will expire. If we have to renew such leases on new terms, we could incur significant cost increases, and we may not be able to renew such leases on commercially reasonable terms or at all. In addition, on certain portions of our acreage, third-party leases may become immediately effective if our leases expire. As such, our actual drilling activities may materially differ from our current expectations, which could adversely affect our business.

The price of oil and natural gas has historically been volatile. If it were to decrease substantially, our projections, budgets, and revenues would be adversely affected, potentially forcing us to make changes in our operations.

Following the Spin-Off, our future financial condition, results of operations and the carrying value of any oil and natural gas interests we acquire will depend primarily upon the prices paid for oil and natural gas production. Oil and natural gas prices historically have been volatile and likely will continue to be volatile in the future, especially given current world geopolitical conditions. Cash flows from operations are highly dependent on the prices that we receive for oil and natural gas. This price volatility could affect the amount of our cash flows available for capital expenditures and our ability to borrow money or raise additional capital. The prices for oil and natural gas are subject to a variety of additional factors that are beyond our control. These factors include:

•	 	
the level of consumer demand for oil and natural gas;

•	 	
the domestic and foreign supply of oil and natural gas;

•	 	
the ability of the members of the Organization of Petroleum Exporting Countries (“OPEC”) to agree to and maintain oil price and production controls;

•	 	
the price of foreign oil and natural gas;

•	 	
domestic governmental regulations and taxes;

•	 	
the price and availability of alternative fuel sources;

•	 	
weather conditions;

•	 	
market uncertainty due to political conditions in oil and natural gas producing regions, including the Middle East; and

•	 	
worldwide economic conditions.

These factors as well as the volatility of the energy markets generally make it extremely difficult to predict future oil and natural gas price movements with any certainty. Declines in oil and natural gas prices affect our revenues and could reduce the amount of oil and natural gas that we can produce economically. Accordingly, such declines could have a material adverse effect on our financial condition, results of operations, oil and natural gas reserves and the carrying values of our oil and natural gas properties. If the oil and natural gas industry experiences significant price declines, we may be unable to make planned expenditures, among other things. If this were to happen, we may be forced to abandon or curtail our business operations, which would cause the value of an investment in us to decline or become worthless.

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COVID-19 pandemic, but has recovered over the past year. These trends materially, adversely affected our results of operations, cash flows and financial condition during the last two years.

If oil or natural gas prices reverse again and go on a downward trend or drilling efforts are unsuccessful, we could be required to record additional write-downs of our oil and natural gas properties. Write-downs may occur when oil and natural gas prices are low, or if we have downward adjustments to our estimated proved reserves, increases in our estimates of operating or development costs, deterioration in drilling results or mechanical problems with wells where the cost to redrill or repair is not supported by the expected economics.

Under the full cost method of accounting, capitalized oil and natural gas property costs less accumulated depletion and net of deferred income taxes may not exceed an amount equal to the present value, discounted at 10%, of estimated future net revenues from proved oil and natural gas reserves plus the cost of unproved properties not subject to amortization (without regard to estimates of fair value), or estimated fair value, if lower, of unproved properties that are subject to amortization. Should capitalized costs exceed this ceiling, an impairment would be recognized.

The Company recognized an impairment charge of $2,108,301 in 2020 due to an adjustment required by this ceiling test.

Because of the inherent dangers involved in oil and natural gas operations, there is a risk that we may incur liability or damages as we conduct our business operations, which could force us to expend a substantial amount of money in connection with litigation and/or a settlement.

The oil and natural gas business involves a variety of operating hazards and risks such as well blowouts, pipe failures, casing collapse, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, spills, pollution, releases of toxic gas and other environmental hazards and risks. These hazards and risks could result in substantial losses to us from, among other things, injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties and suspension of operations. In addition, we may be liable for environmental damages caused by previous owners of property purchased and leased by us. In recent years, there has also been increased scrutiny on the environmental risk associated with hydraulic fracturing, such as underground migration and surface spillage or mishandling of fracturing fluids including chemical additives. This technology has evolved and continues to evolve and become more aggressive. We believe that recent designs have seen improvement in, among other things, proppant per foot, barrels of water per stage, fracturing stages, and clusters per fracturing stage. Nonetheless, substantial liabilities to third parties or governmental entities may be incurred, the payment of which could reduce or eliminate the funds available for exploration, development or acquisitions or result in the loss of our properties and/or force us to expend substantial monies in connection with cleanup, litigation or settlements. In addition, we will need to quickly adapt to the evolving technology, which could take time and divert our attention to other business matters. We currently have no insurance to cover such losses and liabilities, and even if insurance is obtained, it may not be adequate to cover any losses or liabilities. We cannot predict the availability of insurance or the availability of insurance at premium levels that justify our purchase. The occurrence of a significant event not fully insured or indemnified against could materially and adversely affect our financial condition and operations. We may elect to self-insure if management believes that the cost of insurance, although available, is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event not fully covered by insurance could have a material adverse effect on our financial condition and results of operations.

The market for oil and natural gas is intensely competitive, and competition pressures could force us to abandon or curtail our business plan.

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and are currently competing with us for oil and natural gas opportunities. Other oil and natural gas companies may seek to acquire oil and natural gas leases and properties that we have targeted. Additionally, other companies engaged in our line of business may compete with us from time to time in obtaining capital from investors. Competitors include larger companies which, in particular, may have access to greater resources, may be more successful in the recruitment and retention of qualified employees and may conduct their own refining and petroleum marketing operations, which may give them a competitive advantage. Actual or potential competitors may be strengthened through the acquisition of additional assets and interests. Additionally, there are numerous companies focusing their resources on creating fuels and/or materials which serve the same purpose as oil and natural gas but are manufactured from renewable resources.

As a result, we may not be able to compete successfully and competitive pressures may adversely affect our business, results of operations, and financial condition. If we are not able to successfully compete in the marketplace, we could be forced to curtail or even abandon our current business plan, which could cause any investment in us to become worthless.

Inflation may adversely affect us by increasing costs beyond what we can recover through price increases and limit our ability to enter into future traditional debt financing.

Inflation can adversely affect us by increasing costs of critical materials, equipment, labor, and other services. In addition, inflation is often accompanied by higher interest rates. Continued inflationary pressures could impact our profitability. Inflation may also affect our ability to enter into future traditional debt financing, as high inflation may result in an increase in cost.

We may not be able to successfully manage growth, which could lead to our inability to implement our business plan.

Any growth of the Company may place a significant strain on our managerial, operational and financial resources, especially considering that we currently only have a small number of executive officers, employees and advisors. Further, as we enter into additional contracts, we will be required to manage multiple relationships with various consultants, businesses and other third parties. These requirements will be exacerbated in the event of our further growth or in the event that the number of our drilling and/or extraction operations increases. Our systems, procedures and/or controls may not be adequate to support our operations or that our management will be able to achieve the rapid execution necessary to successfully implement our business plan. If we are unable to manage our growth effectively, our business, results of operations and financial condition will be adversely affected, which could lead to us being forced to abandon or curtail our business plan and operations.

Developing oil and natural gas wells and producing oil and natural gas are costly and high-risk activities with many uncertainties that could adversely affect future production from our oil and natural gas properties. Any delays, reductions or cancellations in development and producing activities could materially, adversely impact the value of your shares of Common Stock.

Recovery of undeveloped reserves and the development of developed non-producing reserves requires substantial capital expenditures and successful drilling operations of our oil and natural gas properties. All of the recent development costs related to our Hazel Project were paid by Masterson Hazel Partners LP (“MHP”). We granted MHP the option to acquire the Hazel Project in exchange for it conducting, and paying for, development activity sufficient to maintain the Hazel mineral leases in good standing (the “Option Agreement”). The Option Agreement provided that if MHP declined to exercise the option to acquire the property, we would be obligated to reimburse them for their cost of the development activity to the extent that the wells produced revenues beyond the date of the option’s lapse until the total amount of development expenses are reimbursed. MHP declined to exercise the option effective September 30, 2021. The 2021 reserve data included in the reserve report of our independent petroleum engineer assumes a certain amount of capital expenditures will be made to develop such reserves, and the present value of such reserves was adjusted based on our obligation to assign

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revenue from the Hazel Project to MHP. Additionally, 33.5% of the development expenses for the Orogrande Project are borne by the non-operating working interest owners of such properties.

The development of such reserves may in the future take a long period of time and may require higher levels of capital expenditures than anticipated, which, for the Orogrande Project, are borne in part by the non-operating working interest owners of such properties. Delays in the development of the reserves, increases in drilling and development costs (including expenses related to secondary and tertiary recovery techniques) of such reserves or decreases or continued volatility in commodity prices will reduce the future net revenues of the estimated possible reserves and may result in some projects becoming uneconomic. In addition, delays in the development of reserves could force us to reclassify certain of the proved reserves as unproved reserves.

In addition, the process of developing oil and natural gas wells and producing oil and natural gas from our properties is subject to numerous risks beyond our control. The ability to carry out operations or to finance planned development expenses could be materially and adversely affected by any factor that may curtail, delay, reduce or cancel development and production, including:

•	 	
delays imposed by or resulting from compliance with environmental and other governmental or regulatory requirements, including permitting requirements, limitations on or resulting from wastewater discharge and disposal of exploration and production wastes, including, subsurface injections, as well as additional regulation with respect to GHG emissions;

•	 	
pressure or irregularities in geological formations;

•	 	
restricted access to land for drilling or to existing pipeline infrastructure;

•	 	
lack of available gathering, transportation and processing facilities, including availability on commercially reasonable terms, or delays in construction of gathering facilities;

•	 	
lack of available capacity on interconnecting transmission pipelines;

•	 	
equipment failures or accidents;

•	 	
failure of secondary recovery operations to perform as expected;

•	 	
unexpected operational events and drilling conditions;

•	 	
declines in oil or natural gas prices;

•	 	
limitations in the market for oil or natural gas;

•	 	
pipe or cement failures;

•	 	
casing collapses;

•	 	
shortages, unavailability or high cost of drilling rigs, tubular materials, equipment, supplies, personnel and services;

•	 	
lost or damaged drilling and service tools;

•	 	
loss of drilling fluid circulation;

•	 	
uncontrollable flows of oil and natural gas, water or drilling fluids;

•	 	
blowouts, explosions fires and natural disasters;

•	 	
environmental hazards, such as oil and natural gas leaks, pipeline and tank ruptures, encountering naturally occurring radioactive materials, and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the surface and subsurface environment;

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adverse weather conditions, such as drought, floods, blizzards, tornados and ice storms; and

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title problems or legal disputes regarding leasehold rights.

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Our operations are heavily dependent on current environmental regulation, changes in which we cannot predict.

Oil and natural gas activities that we will engage in, including production, processing, handling and disposal of hazardous materials, such as hydrocarbons and naturally occurring radioactive materials (if any), are subject to stringent regulation. We could incur significant costs, including cleanup costs resulting from a release of hazardous material, third-party claims for property damage and personal injuries fines and sanctions, as a result of any violations or liabilities under environmental or other laws. Changes in or more stringent enforcement of environmental laws could force us to expend additional operating costs and capital expenditures to stay in compliance.

Various federal, state and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, directly impact oil and natural gas exploration, development and production operations, and consequently may impact our operations and costs. These regulations include, among others, (i) regulations by the Environmental Protection Agency and various state agencies regarding approved methods of disposal for certain hazardous and non-hazardous wastes; (ii) the Comprehensive Environmental Response, Compensation, and Liability Act and analogous state laws which regulate the removal or remediation of previously disposed wastes (including wastes disposed of or released by prior owners or operators), property contamination (including groundwater contamination), and remedial plugging operations to prevent future contamination; (iii) the Clean Air Act and comparable state and local requirements which regulate air emissions; (iv) the Oil Pollution Act of 1990 which contains numerous requirements relating to the prevention of and response to oil spills into waters of the United States; (v) the Resource Conservation and Recovery Act which is the principal federal statute governing the treatment, storage and disposal of hazardous wastes; (vi) the Federal Water Pollution Control Act and comparable state and local requirements which regulate discharges to federal and state waters; and (vii) state regulations and statutes governing the handling, treatment, storage and disposal of naturally occurring radioactive material.

We believe that we will be in substantial compliance with applicable environmental laws and regulations in reliance on our contractual relationship with Maverick Operating LLC, who operates our oil and natural gas properties and is primarily responsible for compliance with applicable environmental regulatory with respect to the operating activities of our oil and natural gas properties. We cover all costs associated with the related insurance coverage for such environmental regulatory compliance. To date, other than the cost of insurance, we have not expended any amounts to comply with such regulations, and we do not currently anticipate that future compliance will have a materially adverse effect on our consolidated financial position, results of operations or cash flows. However, if we are deemed to not be in compliance with applicable environmental laws, we could be forced to expend significant funds to be in compliance, which would have a materially adverse effect on our financial condition.

Government regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.

Several states, including Texas, and local jurisdictions, have adopted, or are considering adopting, regulations that could restrict or prohibit hydraulic fracturing in certain circumstances, impose more stringent operating standards and/or require the disclosure of the composition of hydraulic fracturing fluids. The Texas Legislature adopted legislation, effective September 1, 2011, requiring oil and natural gas operators to publicly disclose the chemicals used in the hydraulic fracturing process. The Texas Railroad Commission adopted rules and regulations implementing this legislation that apply to all wells for which the Texas Railroad Commission issues an initial drilling permit after February 1, 2012. The law requires that the well operator disclose the list of chemical ingredients subject to the requirements of OSHA for disclosure on an internet website and also file the list of chemicals with the Texas Railroad Commission with the well completion report. The total volume of water used to hydraulically fracture a well must also be disclosed to the public and filed with the Texas Railroad Commission. Also, in May 2013, the Texas Railroad Commission adopted rules governing well casing,

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cementing and other standards for ensuring that hydraulic fracturing operations do not contaminate nearby water resources. The rules took effect in January 2014. Additionally, on October 28, 2014, the Texas Railroad Commission adopted disposal well rule amendments designed, among other things, to require applicants for new disposal wells that will receive non-hazardous produced water and hydraulic fracturing flowback fluid to conduct seismic activity searches utilizing the U.S. Geological Survey. The searches are intended to determine the potential for earthquakes within a circular area of 100 square miles around a proposed new disposal well. The disposal well rule amendments, which became effective on November 17, 2014, also clarify the Texas Railroad Commission’s authority to modify, suspend or terminate a disposal well permit if scientific data indicates a disposal well is likely to contribute to seismic activity. The Texas Railroad Commission has used this authority to deny permits and temporarily suspend operations for waste disposal wells and, in September 2021, the Texas Railroad Commission curtailed the amount of water companies were permitted to inject into some wells in the Permian Basin, and has since indefinitely suspended some permits there and expanded the restrictions to other areas. These restrictions on use of produced water and a moratorium on new produced water disposal wells could result in increased operating costs, requiring us or our service providers to truck produced water, recycle it or pump it through the pipeline network or other means, all of which could be costly. We or our service providers may also need to limit disposal well volumes, disposal rates and pressures or locations, or require us or our service providers to shut down or curtail the injection of produced water into disposal wells. These factors may make drilling and completion activity in the affected parts of the Permian Basin less economical and adversely impact our business, results of operations and financial condition.

Climate change laws and regulations restricting emissions of GHGs could result in increased operating costs and reduced demand for the oil and natural gas that we produce.

The EPA previously published its findings that emissions of GHGs present a danger to public health and the environment because such gases are, according to the EPA, contributing to warming of the Earth’s atmosphere and other climatic changes. Based on these findings, the EPA has adopted various rules to address GHG emissions under existing provisions of the CAA. For example, the EPA has adopted rules requiring the reporting of GHG emissions from various oil and natural gas operations on an annual basis, which includes certain of our operations. In addition, in June 2016, the EPA finalized rules to reduce methane emissions from new, modified or reconstructed sources in the oil and natural gas sector, including implementation of an LDAR program to minimize methane emissions, under the CAA’s New Source Performance Standards Quad Oa. However, the EPA has taken several steps to delay implementation of the Quad Oa standards. The agency proposed a rulemaking in June 2017 to stay the requirements for a period of two years and in October 2018, the EPA proposed revisions to Quad Oa, such as changes to the frequency for monitoring fugitive emissions at well sites and changes to requirements that a professional engineer certify when meeting certain Quad Oa requirements is technically infeasible. In September 2020, the EPA finalized amendments to Quad Oa that rescind requirements for the transmission and storage segment of the oil and natural gas industry and rescind methane-specific limits that apply to the industry’s production and processing segments, among other things. On June 30, 2021, Congress issued a joint resolution pursuant to the Congressional Review Act disapproving the September 2020 rule, and on November 15, 2021, EPA issued a proposed rule to revise the Quad Oa regulations that, if finalized, would require methane emissions reductions and implementation of a fugitive emissions monitoring and repair program. EPA has also announced its intention to issue a supplemental proposal in 2022 that may expand on or modify the 2021 proposal in response to public input. It is possible that these rules will continue to require oil and natural gas operators to expend material sums.

In addition, in November 2016, the U.S. Department of the Interior Bureau of Land Management (“BLM”) issued final rules to reduce methane emissions from venting, flaring, and leaks during oil and natural gas operations on public lands that are substantially similar to the EPA Quad Oa requirements. However, on December 8, 2017, the BLM published a final rule to temporarily suspend or delay certain requirements contained in the November 2016 final rule until January 17, 2019, including those requirements relating to venting, flaring and leakage from oil and natural gas production activities. Further, in September 2018, the BLM published a final rule to revise or rescind certain provisions of the 2016 rule. On July 21, 2020, a Wyoming

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federal court vacated almost all of the 2016 rule, including all provisions relating to the loss of gas through venting, flaring, and leaks, and on July 15, 2020, a California federal court vacated the 2018 rule. While, as a result of these developments, future implementation of the EPA and BLM methane rules is uncertain, given the long-term trend towards increasing regulation, future federal GHG regulations of the oil and natural gas industry remain a possibility. We may be required to expend significant costs to obtain the necessary equipment (pollution control equipment and optical gas imaging equipment for LDAR inspections) and personnel trained to assist with inspection and reporting requirements to ensure we are in compliance with these rules.

We may incur increasing attention to environmental, social and governance (“ESG”) matters that may impact our business.

Businesses across all industries are facing increasing scrutiny from stakeholders related to their ESG practices. If we do not adapt to or comply with investor or stakeholder expectations and standards, which are evolving, or if we are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and the business, financial condition and/or the value of our Common Stock could be materially and adversely affected. Increasing attention to climate change, increasing societal expectations on businesses to address climate change, and potential consumer use of substitutes to energy commodities may result in increased costs, reduced demand for our hydrocarbon products, reduced profits, increased investigations and litigation, and negative impacts on our ability to access capital markets.

In addition, organizations that provided information to investors on corporate governance and related matters have developed rating processes for evaluating business entities on their approach to ESG matters. Currently, there are no universal standards for such scores or ratings, but the importance of sustainability evaluations is becoming more broadly accepted by investors and shareholders. Such ratings are used by some investors to inform their investment and voting decisions. Additionally, certain investors use these scores to benchmark businesses against their peers. If we are perceived as lagging, our investors may engage with such third party organizations to require improved ESG disclosure or performance.

Our estimates of the volume of reserves could have flaws, or such reserves could turn out not to be commercially extractable. As a result, our future revenues and projections could be incorrect.

Estimates of reserves and of future net revenues prepared by different petroleum engineers may vary substantially depending, in part, on the assumptions made and may be subject to adjustment either up or down in the future. Our actual amounts of production, revenue, taxes, development expenditures, operating expenses, and quantities of recoverable oil and natural gas reserves may vary substantially from the estimates. Oil and natural gas reserve estimates are necessarily inexact and involve matters of subjective engineering judgment. In addition, any estimates of our future net revenues and the present value thereof are based on assumptions derived in part from historical price and cost information, which may not reflect current and future values, and/or other assumptions made by us that only represent our best estimates. If these estimates of quantities, prices and costs prove inaccurate, we may be unsuccessful in expanding our oil and natural gas reserves base with our acquisitions. Additionally, if declines in and instability of oil and natural gas prices occur, then write downs in the capitalized costs associated with any oil and natural gas assets we obtain may be required. Because of the nature of the estimates of our reserves and estimates in general, reductions to our estimated proved oil and natural gas reserves and estimated future net revenues may not be required in the future, and/or that our estimated reserves may not be present and/or commercially extractable. If our reserve estimates are incorrect, we may be forced to write down the capitalized costs of our oil and natural gas properties.

Decommissioning costs are unknown and may be substantial. Unplanned costs could divert resources from other projects.

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the costs associated therewith is often referred to as “decommissioning.” We accrue a liability for decommissioning costs associated with our wells but have not established any cash reserve account for these potential costs in respect of any of our properties. If decommissioning is required before economic depletion of our properties or if our estimates of the costs of decommissioning exceed the value of the reserves remaining at any particular time to cover such decommissioning costs, we may have to draw on funds from other sources to satisfy such costs. The use of other funds to satisfy such decommissioning costs could impair our ability to focus capital investment in other areas of our business.

We may have difficulty distributing production, which could harm our financial condition.

In order to sell the oil and natural gas that we are able to produce, if any, the operators of the wells we obtain interests in may have to make arrangements for storage and distribution to the market. We will rely on local infrastructure and the availability of transportation for storage and shipment of our products, but infrastructure development and storage and transportation facilities may be insufficient for our needs at commercially acceptable terms in the localities in which we operate. This situation could be particularly problematic to the extent that our operations are conducted in remote areas that are difficult to access, such as areas that are distant from shipping and/or pipeline facilities. These factors may affect our and potential partners’ ability to explore and develop properties and to store and transport oil and natural gas production, increasing our expenses.

Furthermore, weather conditions or natural disasters, actions by companies doing business in one or more of the areas in which we will operate, or labor disputes may impair the distribution of oil and/or natural gas and in turn diminish our financial condition or ability to maintain our operations.

The marketability of any future production will be dependent upon transportation and other facilities, certain of which we do not control. When these facilities are unavailable, our operations can be interrupted and any revenues reduced.

The marketability of any future production depends in part upon the availability, proximity and capacity of transportation facilities owned by third parties. The oil produced will be transported from the wellhead to our tank batteries by our gathering system. Our purchasers would then transport the oil by truck to a pipeline for transportation. Our natural gas production will generally be transported by our gathering lines from the wellhead to an interconnection point with the purchaser. We do not control these trucks and other third-party transportation facilities and our access to them may be limited or denied. Insufficient production from our wells to support the construction of pipeline facilities by our purchasers or a significant disruption in the availability of our or third-party transportation facilities or other production facilities could adversely impact our ability to deliver to market or produce our production and thereby cause a significant interruption in our operations.

We may be required to flare a portion of our natural gas production for a number of reasons, including the fact that (i) our well is not yet tied into the third-party gathering system, (ii) the pressures on the third-party gathering system are too high to allow additional production from our well to be transported or (iii) our production is prorated due to high demand on the third-party gathering system. We may flare additional gas from time to time.

Also, the transfer of our oil and natural gas through third-party pipelines may be curtailed or delayed if it does not meet the quality specifications of the pipeline owners. Our access to transportation options, including trucks owned by third parties, can also be affected by U.S. federal and state regulation of oil and natural gas production and transportation, general economic conditions and changes in supply and demand. If, in the future, we are unable, for any sustained period, to implement acceptable delivery or transportation arrangements or encounter production-related difficulties, we may be required to shut in or curtail production. Any such shut in or curtailment, or an inability to obtain favorable terms for delivery of our production, would adversely affect our financial condition and results of operations.

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Our business will suffer if we cannot obtain or maintain necessary licenses.

Our operations will require licenses, permits and in some cases renewals of licenses and permits from various governmental authorities. Our ability to obtain, sustain or renew such licenses and permits on acceptable terms is subject to change in regulations and policies and to the discretion of the applicable governments, among other factors. Our inability to obtain, or our loss of or denial of extension of, any of these licenses or permits could hamper our ability to produce revenues from our operations.

Challenges to our properties may impact our financial condition.

Title to oil and natural gas interests is often not capable of conclusive determination without incurring substantial expense. While we have made and intend to make appropriate inquiries into the title of properties and other development rights we have acquired and intend to acquire, title defects may exist. In addition, we may be unable to obtain adequate insurance for title defects, on a commercially reasonable basis or at all. If title defects do exist, it is possible that we may lose all or a portion of our right, title and interests in and to the properties to which the title defects relate. If our property rights are reduced, our ability to conduct our exploration, development and production activities may be impaired. To mitigate title problems, common industry practice is to obtain a title opinion from a qualified oil and natural gas attorney prior to the drilling operations of a well.

We rely on technology to conduct our business, and our technology could become ineffective or obsolete.

We rely on technology, including geographic and seismic analysis techniques and economic models, to develop any reserve estimates and to guide our exploration, development and production activities. We and our operator partners will be required to continually enhance and update our technology to maintain its efficacy and to avoid obsolescence. The costs of doing so may be substantial and may be higher than the costs that we anticipate for technology maintenance and development. If we are unable to maintain the efficacy of our technology, our ability to manage our business and to compete may be impaired. Further, even if we are able to maintain technical effectiveness, our technology may not be the most efficient means of reaching our objectives, in which case we may incur higher operating costs than we would were our technology more efficient.

The loss of key personnel would directly affect our efficiency and profitability.

Our future success is dependent, in a large part, on retaining the services of our planned management team. Our executive officers possess a unique and comprehensive knowledge of our industry and related matters that are vital to our success within the industry. The knowledge, leadership and technical expertise of these individuals would be difficult to replace. The loss of one or more of our officers could have a material adverse effect on our operating and financial performance, including our ability to develop and execute our long-term business strategy. We do not maintain key-man life insurance with respect to any employees. We have entered into employment agreements with certain of our executive officers effective immediately following the Spin-Off. Three of our executives were party to prior employment agreements with one of our subsidiaries, which have been terminated and superseded by the agreements as described in more detail under the heading “Executive Compensation” elsewhere in this Prospectus.

We have limited management and staff and are dependent upon partnering arrangements and third-party service providers.

After the Spin-Off we plan to have six full-time employees, including our Chief Executive Officer and Chief Financial Officer. The loss of these individuals would have an adverse effect on our business, as we have very limited personnel. We leverage the services of other independent consultants and contractors to perform various professional services, including engineering, oil and natural gas well planning and supervision, and land, legal, environmental and tax services. We also pursue alliances with partners in the areas of geological and geophysical

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services and prospect generation, evaluation and prospect leasing. Our dependence on third-party consultants and service providers create a number of risks, including but not limited to:

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the possibility that such third parties may not be available to us as and when needed; and

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the risk that we may not be able to properly control the timing and quality of work conducted with respect to our projects.

If we experience significant delays in obtaining the services of such third parties or they perform poorly, our results of operations and stock price could be materially adversely affected.

Certain of our directors and officers have significant duties with, and spend significant time serving, entities that may compete with us in seeking acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.

Certain of our directors and officers, who are responsible for managing the direction of our operations and acquisition activities, hold positions of responsibility with other entities that are in the business of identifying and acquiring oil and natural gas properties. The existing positions held by these directors and officers may give rise to fiduciary or other duties that are in conflict with the duties they owe to us. These directors and officers may become aware of business opportunities that may be appropriate for presentation to us as well as to the other entities with which they are or may become affiliated. Due to these existing and potential future affiliations, they may present potential business opportunities to other entities prior to presenting them to us, which could cause additional conflicts of interest. They may also decide that certain opportunities are more appropriate for other entities with which they are affiliated, and as a result, they may elect not to present those opportunities to us. These conflicts may not be resolved in our favor. For additional discussion of our management’s business affiliations and the potential conflicts of interest of which our stockholders should be aware, see “Certain Relationships and Related Party Transactions.”

Our business and operations may be adversely affected by the COVID-19 pandemic and may be adversely affected by other similar outbreaks.

As a result of the COVID-19 pandemic or other adverse public health developments, including voluntary and mandatory quarantines, travel restrictions, and other restrictions, we have experienced delays, disruptions and temporary suspensions of our operations. In addition, our financial condition and results of operations may be adversely affected by the COVID-19 pandemic in the future.

The timeline and potential magnitude of the COVID-19 outbreak continue to be unknown. The continuation or amplification of the COVID-19 pandemic could continue to more broadly affect the United States and global economy, including our business and operations, and the demand for oil and natural gas. Other contagious diseases in the human population could have similar adverse effects. The potential impact from COVID-19 is difficult to predict, therefore, the extent to which it will negatively affect our operating results, or the duration of any potential business disruption is uncertain. The magnitude and duration of any impact will depend on future developments and new information that may emerge regarding the duration of COVID-19 pandemic, the severity of any variants thereof, rate of vaccinations and other actions taken by authorities to contain its impact or otherwise treat the disease, all of which are beyond our control.

Terrorist attacks or cyber-incidents could result in information theft, data corruption, operational disruption and/or financial loss.

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energy-related assets, may be at greater risk of future terrorist or cyber-attacks than other targets in the United States. Deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties, or cloud-based applications could lead to corruption or loss of our proprietary data and potentially sensitive data, delays in production or delivery, difficulty in completing and settling transactions, challenges in maintaining our books and records, environmental damage, communication interruptions, other operational disruptions and third-party liability. Our insurance may not protect us against such occurrences. Consequently, it is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, as cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyber incidents. We plan to adopt plans and policies to address precautions with respect to data security and appropriate responses in case of a reported breach.

Risks Relating to the Spin-Off

The Spin-Off could result in significant tax liability to Meta and its stockholders.

The Spin-Off and cancellation of all shares of Meta’s Series A Preferred Stock together will not qualify for non-recognition of gain or loss for U.S. federal income tax purposes. Series A Preferred stockholders could be subject to tax as a result of the Spin-Off and such cancellation. The treatment of the Spin-Off and cancellation of all shares of the Series A Preferred Stock together for U.S. federal income tax purposes for a U.S. holder (as defined further below) will depend on whether the Spin-Off and such cancellation qualify as a sale or exchange of the Series A Preferred Stock under Section 302 of the Internal Revenue Code of 1986, as amended (the “Code”). If the Spin-Off and cancellation of all shares of the Series A Preferred Stock together qualify as a sale or exchange of the Series A Preferred Stock, the U.S. holder will be treated as recognizing capital gain or loss equal to the difference between the amount realized on the Spin-Off and such cancellation together, and such U.S. holder’s adjusted tax basis in the Series A Preferred Stock surrendered in the Spin-Off and such cancellation. The treatment of the Spin-Off and cancellation of all shares of the Series A Preferred Stock for U.S. federal income tax purposes for a non-U.S. holder (as defined further below) likewise will depend on whether the Spin-Off and such cancellation together qualify as a sale or exchange of the Series A Preferred Stock under Section 302 of the Code. If the Spin-Off and such cancellation together qualify as a sale or exchange of the Series A Preferred Stock, gain recognized from the Spin-Off by a non-U.S. holder generally will not be subject to U.S. federal income taxation. If the Spin-Off and such cancellation together do not qualify as a sale or exchange of Series A Preferred Stock, a non-U.S. holder will be treated as receiving a distribution from Meta, which distribution will be treated as a dividend to the extent the distribution is paid out of Meta’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles) and will be subject to any applicable withholding. If a Series A Preferred stockholder is subject to withholding tax in connection with the Spin-Off (including nonresident withholding tax or backup withholding tax, each as described further under the heading “Material U.S. Federal Income Tax Considerations” below), Meta has the right to reduce the amount of Common Stock deliverable to such stockholder in the Spin-Off in order to pay such withholding tax.

Meta will generally recognize gain equal to the fair market value of our Common Stock in excess of Meta’s adjusted tax basis in such Common Stock at the time of the Spin-Off. To the extent such gain gives rise to unreimbursed federal, state or other tax liabilities, such liabilities could adversely affect Meta’s liquidity or capital reserves.

See below under the headings “Notes to Unaudited Pro-Forma Condensed Combined Financial Statements” and “Material U.S. Federal Income Tax Considerations” for more information.

We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off.

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our specific needs, design and implement corporate strategies and policies that are targeted to our business, more effectively respond to industry dynamics and create effective incentives for our management and employees that are more closely tied to our business performance. However, by separating from Meta, we may be more susceptible to market fluctuations and have less leverage with suppliers, and we may experience other adverse events. In addition, we may be unable to achieve some or all of the benefits that we expect to achieve as an independent company in the time we expect, if at all. The completion of the Spin-Off will also require significant amounts of our management’s time and effort, which may divert management’s attention from operating and growing our business.

We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent company, and we may experience increased costs after the Spin-Off.

Meta has provided us with various corporate services. Following the Spin-Off, Meta will have no obligation to provide us with assistance other than as described under “Certain Relationships and Related Party Transactions—Agreements with Meta.” These arrangements do not account for every service that we have received from Meta in the past. Accordingly, following the Spin-Off, we will need to provide internally or obtain from unaffiliated third parties the services we currently receive from Meta. We may be unable to replace these services in a timely manner or on terms and conditions as favorable as those we receive from Meta. We may be unable to successfully establish the infrastructure or implement the changes necessary to operate independently or may incur additional costs. If we fail to obtain the services necessary to operate effectively or if we incur greater costs in obtaining these services, our business, financial condition and results of operations may be adversely affected.

We have limited operating history as an independent company, and our historical financial information is not necessarily representative of the results we would have achieved as an independent company and may not be a reliable indicator of our future results.

We derived the historical financial information included in this Prospectus from Meta’s consolidated financial statements, and this information does not necessarily reflect the results of operations and financial position we would have achieved as an independent company during the periods presented or those that we will achieve in the future. This is primarily because of the following factors:

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Prior to the Spin-Off, we operated as part of Meta’s broader corporate organization, and Meta performed various corporate functions for us. Our historical financial information reflects allocations of corporate expenses from Meta for these and similar functions. These allocations may not reflect the costs we will incur for similar services in the future as an independent company.

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We will enter into certain transactions with Meta that did not exist prior to the Spin-Off, such as the Tax Matters Agreement, which may cause us to incur new costs.

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Our historical financial information does not reflect changes that we expect to experience in the future as a result of our separation from Meta, including changes in our cost structure, personnel needs, tax structure, financing and business operations. As part of Meta, we enjoyed certain benefits from Meta’s operating diversity, size, purchasing power, borrowing leverage and available capital for investments, and we will lose these benefits after the Spin-Off. As an independent entity, we may be unable to purchase goods, services and technologies, such as insurance and health care benefits and computer software licenses or access capital markets on terms as favorable to us as those we obtained as part of Meta prior to the Spin-Off.

Following the Spin-Off, we will also be responsible for the additional costs associated with being an independent company, including costs related to corporate governance, investor and public relations and public reporting. In addition, certain costs incurred by Meta, including executive oversight, accounting, treasury, tax, legal, human resources, occupancy, procurement, information technology and other shared services, have historically been allocated to us by Meta; but these allocations may not reflect the future level of these costs to us as we begin to

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provide these services ourselves. Therefore, our historical financial statements may not be indicative of our future performance as an independent company. We cannot assure you that our operating results will continue at a similar level when we are an independent company. For additional information about our past financial performance and the basis of presentation of our financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto included elsewhere in this Prospectus.

Our contracts may contain provisions requiring the consent of third parties in connection with the Spin-Off. If these consents are not obtained, we may be unable to enjoy the benefit of these contracts in the future.

Our contracts may contain provisions that require the consent of third parties to the Spin-Off. Failure to obtain such consents on commercially reasonable and satisfactory terms may impair our entitlement to the benefit of these contracts in the future.

The 2021 Note with Meta contains restrictive covenants that limit our operations.

In 2021, we borrowed $15 million pursuant to the terms of the 2021 Note (defined below). If we are not in compliance with the covenants of the 2021 Note, or if we are in default under the 2021 Note, it is unlikely that Meta will offer to extend any additional loans or debt financing under the 2021 Note or otherwise, which may affect our business as a going concern. The 2021 Note includes a restrictive covenant that, subject to certain exceptions and qualifications, restricts our ability to merge or consolidate with another person or entity, or sell or transfer all or substantially all of our assets, unless we are the surviving entity or the successor entity assumes all of obligations under the 2021 Note. This restriction may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry or take future actions. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information.

The 2021 Note is secured by a security interest in shares of common stock of Meta and a 25% working interest in the Orogrande Prospect as defined in the Security Agreement (defined below), each held by the Pledgor (defined below) or the Pledgor’s affiliate. Any default that is not waived could permit Meta, as lender, to exercise rights and remedies with respect to all of the collateral that is securing the 2021 Note, and/or other rights and remedies under applicable law.

Our ability to meet these restrictive covenants or to avoid defaults can be impacted by events beyond our control. The 2021 Note provides that our breach or failure to satisfy certain covenants constitutes an event of default. Upon the occurrence of an event of default, Meta as our lender could elect to declare all amounts outstanding under the 2021 Note to be immediately due and payable. If the outstanding debt under the 2021 Note was to be accelerated, we may not have sufficient cash on hand to repay it, which would have an immediate adverse effect on our business and operating results. This could potentially cause us to cease operations and result in a complete loss of your investment in our Common Stock.

Our Loan Agreement with Meta contains restrictive covenants that limit our operations.

As of August 2022, we borrowed an aggregate principal amount of $5.0 million pursuant to the terms of the Loan Agreement (defined below), which is the maximum principal balance available under the Loan Agreement. The Loan Agreement contains various restrictive covenants and other restrictions, which include, among other things, restrictions on:

•	 	
our ability to transfer all or part of our business or property, except for inventory in the ordinary course of business, surplus or obsolete equipment, permitted liens, and transfers of cash permitted by the agreement;

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our ability to liquidate or dissolve or merge or consolidate with another entity, or acquire another entity;

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our ability to incur additional debt beyond certain limits or encumber our assets; and

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our ability to pay dividends or make investments, other than permitted investments.

These restrictions may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry or take future actions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information.

Our ability to meet these restrictive covenants can be impacted by events beyond our control. The Loan Agreement provides that our breach or failure to satisfy certain covenants constitutes an event of default. Upon the occurrence and during the continuance of an event of default, Meta as the lender could elect to (i) declare all outstanding principal and accrued and unpaid interest under the Loan Agreement immediately due and payable, (ii) terminate any remaining commitment to make loans under the Loan Agreement, and/or (iii) exercise certain other rights and remedies anticipated under the Loan Agreement. The events of default under the Loan Agreement include, among other things (subject to grace periods in certain instances), payment defaults, breaches of covenants or representations and warranties, a change in control or certain material adverse effects as defined in the Loan Agreement, material judgments and attachments, cross defaults with certain of our other material indebtedness, and bankruptcy and insolvency events with respect to us and our subsidiaries. If the outstanding debt under the Loan Agreement was to be accelerated, we may not have sufficient cash on hand to repay it, which would have an immediate adverse effect on our business and operating results. This could potentially cause us to cease operations and result in a complete loss of your investment in our Common Stock.

We may have been able to receive better terms from unaffiliated third parties than the terms we receive in our agreements with Meta.

We have negotiated agreements with Meta including the 2021 Note, Loan Agreement, Distribution Agreement and Tax Matters Agreement, while we are still part of Meta. Accordingly, these agreements may not reflect terms that would have resulted from arms-length negotiations between unaffiliated parties. The terms of the agreements being negotiated relate to, among other things, loans for working capital, allocations of assets, liabilities, rights, indemnifications and other obligations between Meta and us. We may have received better terms from third parties because third parties may have competed with each other to win our business. See “Certain Relationships and Related Party Transactions” for more information.

Risks Relating to our Common Stock

Our Common Stock is not eligible with the Depository Trust Company (“DTC”), which may result in brokerage firms being unwilling to hold or trade the stock.

A significant number of the holders of the Series A Preferred Stock hold such shares in “street name” brokerage accounts. Our shares of Common Stock will not become eligible with DTC to permit our shares of Common Stock to trade electronically. If an issuer is not “DTC-eligible,” then its capital stock cannot be electronically transferred between brokerage accounts, which means that brokerage firms may be unwilling to hold or trade our Common Stock, restricting all trades by holders of our Common Stock following the Spin-Off, and the brokerage firms may return all such shares from the brokerage accounts to the beneficial holders.

No trading market for our Common Stock is expected to develop.

There is presently no public market for our shares of Common Stock and our shares are not expected to become DTC eligible for electronic trading to third parties. There is no expectation that a trading market will develop or be sustained. Accordingly, you may have to hold the shares of Common Stock indefinitely.

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We do not intend to pay any cash dividends in the foreseeable future and, therefore, any return on your investment in our Common Stock must come from increases in the fair market value of the Common Stock.

We do not intend to pay cash dividends on our Common Stock in the foreseeable future. We expect to retain future earnings, if any, for reinvestment in our business. Also, any credit agreements, which we may enter into, may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be at the discretion of our board of directors (the “Board”) and will be dependent upon our financial condition, results of operations, cash requirements, future prospects and any other factors our Board deems relevant. Therefore, any return on your investment in our Common Stock must come from increases in the fair market value of the Common Stock.

Your percentage ownership in the Company may be diluted in the future, including in our plan to issue our Common Stock for the working interests in our Orogrande Project.

Your percentage ownership in the Company may be diluted in the future because of equity awards that we expect to grant to our directors, officers and other employees and current holders of working interests in our Orogrande Project. Prior to the Spin-Off, we approved an incentive plan that will provide for the grant of Common Stock-based equity awards to our directors, officers and other employees. In addition, we may issue equity as all or part of the consideration paid for acquisitions and strategic investments that we may make in the future or as necessary to finance our ongoing operations.

We may issue preferred stock with terms that could adversely affect the voting power or value of our Common Stock.

Our Board has the authority to cause us to issue, without any further vote or action by the stockholders, shares of preferred stock in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights and terms of redemption, redemption price or prices and liquidation preferences of such series. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our Common Stock. For example, we might afford holders of preferred stock the right to elect some number of our directors in all events or upon the occurrence of specified events or the right to vote on specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our Common Stock.

Risks Relating to Our Status as a Public Reporting Company

We are an emerging growth company and a smaller reporting company, subject to less stringent reporting and regulatory requirements of other publicly reporting companies and this status may have an adverse effect on our ability to attract interest in our Common Stock.

We are an emerging growth company as defined in the JOBS Act. As long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting and regulatory requirements that are applicable to other public reporting companies that are not emerging growth companies. We cannot predict if investors will find our Common Stock less attractive if we choose to rely on these exemptions.

Additionally, we are a “smaller reporting company” as defined under the Exchange Act. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company provided: (1) the market value of our common stock held by non-affiliates is less than $250 million as of the end of the prior June 30th, or (2) our annual revenues are less than $100 million during such completed fiscal year and the market value of our Common Stock held by non-affiliates is less than $700 million as of the prior June 30th. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public reporting companies difficult or impossible.

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We may be required to file reports with the SEC only for the fiscal year in which the registration statement for the Spin-Off becomes effective and may no longer be subject to the reporting obligations under the Exchange Act thereafter.

By registering the shares of Common Stock in connection with the Spin-Off, we become subject to the reporting obligations under the Exchange Act, which includes filings of Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K for reporting periods ending on or before December 31, 2022. We would be obligated to continue these reporting obligations for subsequent reporting periods if on the last day of our fiscal year in which the Registration Statement of which this prospectus forms a part becomes effective we have more than $10 million in assets and either 2,000 or more record holders or 500 or more record holders who are not “accredited investors.” It is unclear whether the number of our record holders following the Spin-Off will meet one or both of these thresholds, in which case, we may become exempt from such reporting requirements after the year ending December 31, 2022. If we were to decide not to continue reporting, you will not have access to updated information regarding our business, financial condition and results of operation. Although we may and intend to continue to file such reports with the SEC, such filings will be voluntary.

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THE SPIN-OFF

Background

In June 2020 the board of directors of Torchlight began to pursue strategic alternatives for Torchlight due to the permeating financial climate of the oil and gas industry in 2020. In July 2020 Torchlight engaged Roth Capital Partners, LLC as its financial advisor in connection with a strategic transaction. After discussions with various companies, Torchlight began discussions with Metamaterial, Inc. in September 2020 concerning a potential strategic transaction.

After several months of negotiations, in December 2020 Torchlight and Metamaterial, Inc. entered into the Arrangement Agreement. Within the Arrangement Agreement, the oil and gas properties of Torchlight (the “O&G Assets”) were effectively allocated to the legacy Torchlight stockholders, which became the Series A Preferred stockholders of Torchlight (which was subsequently renamed “Meta Materials, Inc.”). Concurrent with the negotiation and execution of the Arrangement Agreement was the Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock. Pursuant to the Certificate of Designation, upon a sale of the O&G Assets, the proceeds from any such transaction are to be distributed to the Series A Preferred stockholders, or Meta was to pursue a spin-off. In lieu of a sale of the O&G Assets, the Meta board has now determined to pursue the Spin-Off.

Reasons for the Spin-Off

The Meta board of directors considered the Spin-Off to be strategic so that Meta can concentrate on its core business.

When and How You Will Receive Shares of Common Stock

Meta will distribute to the holders of its Series A Preferred Stock, as a pro rata dividend, one share of our Common Stock for every share of Series A Preferred Stock outstanding as of                     , 2022 (the “Record Date”).

Prior to the Spin-Off, Meta will deliver all of the issued and outstanding shares of our Common Stock to the distribution agent. American Stock Transfer & Trust Company LLC (the “Transfer Agent”) will serve as distribution agent in connection with the Distribution and as transfer agent and registrar for our Common Stock.

If you own Series A Preferred Stock of Meta as of the close of business on                     , 2022, the shares of our Common Stock that you are entitled to receive in the Distribution will be issued to your account as follows:

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Registered stockholders. If you own your shares of Series A Preferred Stock directly through Meta’s transfer agent, American Stock and Transfer, you are a registered stockholder. In this case, the distribution agent will credit the whole number of shares of our Common Stock you receive in the Distribution by way of direct registration in book-entry form to a new account with our transfer agent. Registration in book-entry form refers to a method of recording share ownership where no physical stock certificates are issued to stockholders, as is the case in the Distribution. You will be able to access information regarding your book-entry account holding our shares at American Stock Transfer & Trust Company, LLC.

Commencing on or shortly after the Distribution Date, the distribution agent will mail to you an account statement that indicates the number of whole shares of our Common Stock that have been registered in book-entry form in your name. We expect it will take the distribution agent up to two weeks after the Distribution Date to complete the distribution of the shares of our Common Stock and mail statements of holding to all registered stockholders.

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“Street name” or beneficial stockholders. Most Meta stockholders own their shares of Series A Preferred Stock beneficially through a bank, broker or other nominee. In these cases, the bank, broker

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or other nominee holds the shares in “street name” and records your ownership on its books. If you own your shares of the Series A Preferred Stock through a bank, broker or other nominee, your bank, broker or other nominee will credit your account with the whole shares of our Common Stock that you receive in the Distribution on or shortly after the Distribution Date; however, our shares of Common Stock will not be eligible for electronic trading through DTC or any other established clearing corporation. Therefore, we encourage you to contact your bank, broker or other nominee to instruct such bank, broker or other nominee to transfer the shares of Series A Preferred Stock to our transfer agent on or prior to the Record Date such that each such holder of Series A Preferred Stock is the registered holder of the distributed shares of Common Stock in book-entry form in a new account with our transfer agent.

If you sell any of your shares of Series A Preferred Stock on or before the Distribution Date, you will not receive any shares of Common Stock; provided, however, we expect to suspend all trading of the shares of Series A Preferred Stock at least one business day prior to the Record Date.

We are not asking holders of Meta Series A Preferred Stock to take any action in connection with the Spin-Off. No approval of any holders of Meta’s capital stock is required for the Spin-Off. We are not asking you for a proxy and request that you not send us a proxy. We are also not asking you to make any payment or surrender or exchange any of your shares of Meta Series A Preferred Stock for shares of our Common Stock. As of the Distribution Date, all of the shares of Series A Preferred Stock will be automatically cancelled and the holders of such Series A Preferred Stock will cease to have any rights with respect to such shares.

Number of Shares You Will Receive

On the Distribution Date, you will receive one share of our Common Stock for every share of Meta Series A Preferred Stock you hold on the Record Date. No fractional shares of Common Stock will be issued.

Results of the Spin-Off

After the Spin-Off, we will be an independent company. Immediately following the Spin-Off, we expect to have approximately 64,000 holders of shares of our Common Stock. In computing the number of holders of record, each broker-dealer and clearing corporation holding shares on behalf of its customers, the holders of the Series A Preferred Stock, is counted as a single shareholder. A significant number of shares of our Common Stock are held in either nominee name or street name brokerage accounts, and consequently, we are unable to determine the exact number of beneficial owners of our Common Stock.

Before our separation from Meta, we intend to enter into a Distribution Agreement and certain other agreements with Meta related to the Spin-Off. These agreements will govern the relationship between us and Meta up to and after completion of the Spin-Off and allocate between us and Meta various assets, liabilities, rights and obligations, including employee benefits, intellectual property and tax-related assets and liabilities. We describe these arrangements in greater detail under “Certain Relationships and Related Party Transactions—Agreements with Meta.”

Conditions to the Spin-Off

We expect that the separation will be effective on the Distribution Date, provided that the following conditions shall have been satisfied or waived by Meta:

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the Meta board of directors shall have authorized and approved the Distribution and not withdrawn such authorization and approval, and shall have declared the dividend of our Common Stock to Meta stockholders;

•	 	
the Distribution Agreement and the ancillary agreements contemplated by the Distribution Agreement shall have been executed by each party to those agreements;

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the SEC shall have declared effective our Registration Statement on Form S-1, of which this Prospectus is a part, under the Securities Act, and no stop order suspending the effectiveness of our Registration Statement shall be in effect and no proceedings for that purpose shall be pending before or threatened by the SEC;

•	 	
no order, injunction or decree issued by any governmental authority of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Distribution shall be in effect, and no other event outside the control of Meta shall have occurred or failed to occur that prevents the consummation of the Distribution;

•	 	
all necessary actions and filings with regard to applicable state securities or “blue sky” laws shall have been taken; and

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any material third party consents necessary to consummate the Spin-Off shall have been obtained or waived.

Reasons for Furnishing this Prospectus

We are furnishing this Prospectus solely to provide information to Meta Series A Preferred Stockholders who will receive shares of our Common Stock in the Distribution. You should not construe this Prospectus as an inducement or encouragement to buy, hold or sell any of our securities or any securities of Meta. We believe that the information contained in this Prospectus is accurate as of the date set forth on the cover. Changes to the information contained in this Prospectus may occur after that date, and neither we nor Meta undertake any obligation to update the information except in the normal course of our and Meta’s public disclosure obligations and practices and except as required by applicable law.

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

Certain U.S. Federal Income Tax Consequences of the Spin-Off

The following is a summary of the material U.S. federal income tax consequences of our separation from Meta, and in particular the distribution by Meta of our Common Stock to the holders of the shares of Series A Preferred Stock (the “Series A Preferred Stockholders”) and the cancellation of all shares of the Series A Preferred Stock. For purposes of this section under the heading “Certain U.S. Federal Income Tax Consequences of the Spin-Off”: (i) any references to the “Spin-Off” shall mean only the distribution of shares of our Common Stock by Meta to Series A Preferred Stockholders and the cancellation of all shares of the Series A Preferred Stock, taken together; (ii) references to “Company,” “we,” “our” and “us” mean only Next Bridge Hydrocarbons, Inc. and not its subsidiaries or other lower-tier entities, except as otherwise indicated; and (iii) references to Meta refer to Meta Materials, Inc. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), the regulations promulgated by the U.S. Treasury Department (“Treasury Regulations”), rulings and other administrative pronouncements issued by the Internal Revenue Service (“IRS”), and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. We have not sought and do not intend to seek an advance ruling from the IRS regarding any matter discussed herein. The summary is also based upon the assumption that Meta, the Company and their respective subsidiaries and affiliated entities will operate in accordance with their applicable organizational documents or partnership agreements and the agreements and other documents applicable to our separation from Meta. This summary is for general information purposes only, does not address all possible tax considerations that may be material to an investor and does not constitute legal or tax advice. Moreover, this summary does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular investor in light of its investment or tax circumstances, or to investors subject to special tax rules, such as:

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financial institutions;

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insurance companies;

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broker-dealers;

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regulated investment companies and real estate investment trusts;

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partnerships and trusts;

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persons who hold our stock on behalf of another person as a nominee;

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persons who receive our stock through the exercise of employee stock options or otherwise as compensation;

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persons holding our stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment;

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tax-exempt organizations;

and, except to the extent discussed below:

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foreign investors.

This summary assumes that investors hold their Series A Preferred Stock as a capital asset and will hold their Common Stock as a capital asset, which generally means as property held for investment.

For purposes of this discussion under the heading “Certain U.S. Federal Income Tax Consequences of the Spin-Off,” a U.S. holder is a Series A Preferred Stockholder that is for U.S. federal income tax purposes:

•	 	
a citizen or resident of the United States,

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a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any of its states, or the District of Columbia,

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an estate, whose income is subject to U.S. federal income taxation regardless of its source, or

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a trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election to be treated as a U.S. person.

A “non-U.S. holder” is a Series A Preferred Stockholder that is not a U.S. holder and is not an entity treated as a partnership for U.S. federal income tax purposes. If a partnership, entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Series A Preferred Stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. An investor that is a partnership and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of the Spin-Off.

THE U.S. FEDERAL INCOME TAX TREATMENT OF THE SPIN-OFF TO STOCKHOLDERS OF META DEPENDS IN SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF U.S. FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. IN ADDITION, THE TAX CONSEQUENCES OF THE SPIN-OFF TO ANY PARTICULAR STOCKHOLDER OF META WILL DEPEND ON THE STOCKHOLDER’S PARTICULAR TAX CIRCUMSTANCES. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES TO YOU OF THE SPIN-OFF IN LIGHT OF YOUR PARTICULAR INVESTMENT OR TAX CIRCUMSTANCES.

Tax Classification of the Spin-Off in General

For U.S. federal income tax purposes, the Spin-Off will not be eligible for treatment as a tax-deferred distribution by Meta with respect to its stock. Accordingly, the Spin-Off will generally be treated as a fully taxable transaction. The discussion below describes the U.S. federal income tax consequences to a U.S. holder and a non-U.S. holder upon the receipt of our Common Stock in the Spin-Off.

Although Meta will ascribe a value to the Common Stock distributed in the Spin-Off, this valuation is not binding on the IRS or any other taxing authority. These taxing authorities could ascribe a higher valuation to the distributed Common Stock, particularly if, following the Spin-Off, those shares of Common Stock trade at prices significantly above the value ascribed to those shares by Meta. Such a higher valuation may affect the Spin-Off distribution amount and thus the U.S. federal income tax consequences of the Spin-Off to Meta’s Series A Preferred stockholders. Fractional shares of Common Stock will not be distributed.

Meta will be required to recognize any gain, but will not be permitted to recognize any loss, with respect to the Common Stock that it distributes in the Spin-Off equal to the fair market value of the Common Stock in excess of Meta’s adjusted tax basis in the Common Stock.

Tax Basis and Holding Period of Company Shares Received by Holders of Meta Stock

A Series A Preferred stockholder’s tax basis in shares of our Common Stock received in the Spin-Off generally will equal the fair market value of such shares on the date of the Spin-Off, and the holding period for such shares will begin the day after the date of the Spin-Off.

Tax Treatment of the Spin-Off to U.S. Holders

The following discussion describes the U.S. federal income tax consequences to a U.S. holder of Meta stock upon the receipt of our Common Stock in the Spin-Off.

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The treatment of the Spin-Off for U.S. federal income tax purposes for a U.S. holder will depend on whether the Spin-Off qualifies as a sale of the Series A Preferred Stock under Section 302 of the Code. If the Spin-Off qualifies as a sale of the Series A Preferred Stock, a U.S. holder will recognize gain or loss as described below under “—Gain or Loss on the Spin-Off Treated as a Sale or Exchange of Series A Preferred Stock” below. If the Spin-Off does not qualify as a sale of the Series A Preferred Stock, a U.S. holder will be treated as receiving a corporate distribution subject to tax as described below under “—Taxation of the Spin-Off Treated as a Distribution.” Whether a distribution qualifies for sale treatment will depend largely on the total number of shares of Meta stock treated as held by a U.S. holder (including any shares constructively owned by a U.S. holder) relative to all of the Meta stock outstanding both before and after the Spin-Off. The Spin-Off generally will be treated as a sale of Series A Preferred Stock (rather than as a corporate distribution) if the Spin-Off: (i) results in a “complete termination” of a U.S. holder’s interest in Meta, (ii) is “not essentially equivalent to a dividend” with respect to such U.S. holder or (iii) is a “substantially disproportionate redemption” with respect to such U.S. holder. These tests are explained more fully below.

In determining whether any of the foregoing tests are satisfied, a U.S. holder must take into account not only shares of Meta stock actually owned by such U.S. holder, but also shares of Meta stock that are constructively owned by such U.S. holder. A U.S. holder may constructively own, in addition to shares owned directly, shares owned by certain related individuals and entities in which such U.S. holder has an interest or that have an interest in such U.S. holder, as well as any shares such U.S. holder has a right to acquire by exercise of an option. There will be a complete termination of a U.S. holder’s interest if either (i) all of the shares of Meta stock actually and constructively owned by such U.S. holder are exchanged or (ii) all of the shares of Meta stock actually owned by such U.S. holder are exchanged and such U.S. holder is eligible to waive, and does waive, the attribution of shares owned by certain family members and such U.S. holder does not constructively own any other shares. The Spin-Off of Series A Preferred Stock will not be essentially equivalent to a dividend if the Spin-Off results in a “meaningful reduction” of a U.S. holder’s proportionate interest in Meta. Whether the Spin-Off will result in a meaningful reduction in a U.S. holder’s proportionate interest in Meta will depend on the particular facts and circumstances. However, the IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held corporation who exercises no control over its corporate affairs may constitute such a “meaningful reduction.” In order to meet the “substantially disproportionate” test, the percentage of outstanding shares of Meta voting stock actually and constructively owned by a U.S. holder immediately following the Spin-Off must, among other requirements, be less than 80% of the percentage of the outstanding shares of Meta voting stock actually and constructively owned by such U.S. holder immediately before the Spin-Off. Because the Class A Preferred Stock is not voting stock, it is not expected that the “substantially disproportionate” test will be satisfied in respect of the Spin-Off. U.S. holders are urged to consult with their tax advisors as to the tax consequences of the Spin-Off.

If none of the foregoing tests are satisfied, then the Spin-Off will be treated as a corporate distribution and the tax effects will be as described under “—Taxation of the Spin-Off Treated as a Distribution,” below.

Meta currently intends to report the Spin-Off as a corporate distribution (including a determination of the portion of the distribution pursuant to the Spin-Off constituting a taxable dividend, assuming that the Spin-Off is treated as a corporate distribution) on IRS Form 1099-DIV after its earnings and profits for the taxable year in which the distribution occurs are calculated. This information may not be available until after U.S. holders file their U.S. federal and state income tax returns for that taxable year, and such U.S. holders may need to file amended tax returns to reflect the amount of the taxable dividend as finally determined. Meta reporting the Spin-Off as a corporate distribution will not preclude a U.S. holder from treating the Spin-Off as a sale of Series A Preferred Stock, if one of the tests described above is satisfied.

Taxation of the Spin-Off Treated as a Distribution

If the Spin-Off of a U.S. holder’s Series A Preferred Stock does not qualify as a sale of Series A Preferred Stock, such U.S. holder will be treated as receiving a distribution from Meta. A U.S. holder generally will be required to

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include in gross income as dividends the amount received in connection with the Spin-Off to the extent the distribution is paid out of Meta’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of such current and accumulated earnings and profits generally will be treated as a return of capital that will be applied against and reduce a U.S. holder’s adjusted tax basis in such U.S. holder’s shares of Series A Preferred Stock (but not below zero), with any remaining excess treated as gain from the sale or exchange of such shares as described below under “—Gain or Loss on the Spin-Off Treated as a Sale or Exchange of Series A Preferred Stock.”

If a U.S. holder is a corporate U.S. holder, dividends paid by Meta to such U.S. holder generally will be eligible for the dividends-received deduction allowed to domestic corporations in respect of dividends received from other domestic corporations so long as such U.S. holder satisfies the holding period requirement for the dividends-received deduction.

If a U.S. holder is a non-corporate U.S. holder, under tax laws currently in effect, dividends generally will be taxed at the preferential applicable long-term capital gains rate so long as such U.S. holder satisfies the holding period requirement (i.e., more than sixty (60) days of ownership, without protection from the risk of loss, during the 121-day period that begins sixty (60) days before the ex-dividend date) and certain other requirements are met (see “—Gain or Loss on the Spin-Off Treated as a Sale or Exchange of Series A Preferred Stock” below).

Gain or Loss on the Spin-Off Treated as a Sale or Exchange of Series A Preferred Stock

If the Spin-Off qualifies as a sale of Series A Preferred Stock, such U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between (i) the fair market value of our Common Stock received by such U.S. holder in the Spin-Off and (ii) such U.S. holder’s adjusted tax basis in the Series A Preferred Stock surrendered in the Spin-Off.

Any such capital gain or loss generally will be long-term capital gain or loss if a U.S. holder’s holding period for the Series A Preferred Stock so disposed of exceeds one (1) year. Long-term capital gains recognized by non-corporate U.S. holders generally will be eligible for taxation at reduced rates. The deductibility of capital losses is subject to limitations.

Tax Treatment of the Spin-Off to Non-U.S. Holders

For non-U.S. holders of Series A Preferred Stock, the characterization for U.S. federal income tax purposes of the Spin-Off of such non-U.S. holder’s Series A Preferred Stock generally will correspond to the U.S. federal income tax characterization of the Spin-Off of a U.S. holder’s Series A Preferred Stock, as described above under “Treatment of the Spin-Off for U.S. Holders” with respect to whether the Spin-Off is a sale or exchange of Series A Preferred Stock or is treated as a distribution.

Non-U.S. holders are urged to consult their own tax advisors as to whether the Spin-Off will be treated as a distribution, or as a sale or exchange, under the Code.

Taxation of the Spin-Off Treated as a Distribution

If the Spin-Off of a non-U.S. holder’s Series A Preferred Stock does not qualify as a sale or exchange of Series A Preferred Stock, such non-U.S. holder will be treated as receiving a distribution from Meta, which distribution will be treated as a dividend to the extent the distribution is paid out of Meta’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). The gross amount of such dividends will be subject to a withholding tax at a rate of 30% unless a non-U.S. holder is eligible for a reduced rate of withholding under an applicable income tax treaty and provides proper certification of such non-U.S. holder’s eligibility for such reduced rate. Dividends that are effectively connected with the conduct by a non-U.S. holder of a trade or

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business in the United States (and are attributable to a U.S. permanent establishment if an applicable treaty so requires) generally will be subject to U.S. federal income tax at the same regular U.S. federal income tax rates applicable to a comparable U.S. holder and, if such non-U.S. holder is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower rate under an applicable tax treaty.

Distributions in excess of current and accumulated earnings and profits generally will be treated as a return of capital that will be applied against and reduce a non-U.S. holder’s adjusted tax basis in such non-U.S. holder’s shares of Series A Preferred Stock (but not below zero), with any remaining excess treated as gain from the sale or exchange of such shares as described under “—Gain or Loss on the Spin-Off Treated as a Sale or Exchange of Series A Preferred Stock” below.

Gain or Loss on the Spin-Off Treated as a Sale or Exchange of Series A Preferred Stock

Subject to the discussions of backup withholding and FATCA withholding below, if the Spin-Off of a non-U.S. holder’s shares of Series A Preferred Stock qualifies as a sale or exchange of such shares, such non-U.S. holder generally will not be subject to U.S. federal income tax on any gain recognized on such Spin-Off unless:

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such gain is effectively connected with the conduct by such non-U.S. holder of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such non-U.S. holder maintains in the United States), in which case such non-U.S. holder generally will be subject to U.S. federal income tax on such gain at the same regular U.S. federal income tax rates applicable to a comparable U.S. holder and, if such non-U.S. holder is a corporation for U.S. federal income tax purposes, also may be subject to an additional branch profits tax at a 30% rate or a lower rate provided by an applicable tax treaty;

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such non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met, in which case such non-U.S. holder will be subject to a 30% tax on such non-U.S. holder’s net capital gain for the year (or lower rate provided by an applicable tax treaty); or

•	 	
Meta is or has been a “U.S. real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five (5) year period ending on the date of the Spin-Off or the period during which such non-U.S. holder held Series A Preferred Stock, and, in the case where shares of the Series A Preferred Stock are traded on an established securities market, such non-U.S. holder has owned, directly or constructively, more than 5% of the Series A Preferred Stock at any time within the shorter of the five (5) year period or such non-U.S. holder’s holding period for the Series A Preferred Stock. Meta does not believe that it is or has been a U.S. real property holding corporation.

Because it may not be certain at the time a non-U.S. holder’s Series A Preferred Stock is exchanged whether the Spin-Off will be treated as a sale or exchange or as a distribution, and because such determination will depend in part on such non-U.S. holder’s particular circumstances, the applicable withholding agent may not be able to determine whether (or to what extent) such non-U.S. holder is treated as receiving a dividend for U.S. federal income tax purposes. Therefore, the applicable withholding agent may withhold tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on the gross amount of any consideration paid to a non-U.S. holder in exchange for such non-U.S. holder’s Series A Preferred Stock, unless (i) the applicable withholding agent has established special procedures allowing non-U.S. holders to certify that they are exempt from such withholding tax and (ii) such non-U.S. holder is able to certify that such non-U.S. holder meets the requirements of such exemption (e.g., because such non-U.S. holder is not treated as receiving a dividend under the Section 302 tests described above). However, there can be no assurance that any applicable withholding agent will establish such special certification procedures. Thus, the applicable withholding agent may withhold some portion of our Common Stock otherwise distributable to a non-U.S. holder to satisfy its obligation to withhold tax, except to the extent it estimates that the amount of the proceeds from the Spin-Off will exceed Meta’s

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current and accumulated earnings and profits. To the extent it is required to withhold tax, the applicable withholding agent may sell the portion of our Common Stock otherwise distributable to non-U.S. holders needed to pay that tax, together with associated expenses. If an applicable withholding agent withholds excess amounts from the amount payable to a non-U.S. holder, such non-U.S. holder generally may obtain a refund of any such excess amounts by timely filing an appropriate claim for refund with the IRS. Non-U.S. holders should consult their own tax advisors regarding the application of the foregoing rules in light of such non-U.S. holder’s particular facts and circumstances and any applicable procedures or certification requirements.

Tax Considerations to U.S. Holders in Respect of Ownership and Disposition of Our Common Stock

Dividends. Any dividends paid by the Company out of its current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) generally will be taxable to a U.S. holder as ordinary dividend income. Corporate U.S. holders should generally be eligible for the dividends received deduction and non-corporate U.S. holders should generally qualify for reduced rates applicable to qualified dividend income, assuming, in each case, that a minimum holding period and certain other generally applicable requirements are satisfied. Dividends in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of the U.S. holder’s basis in our Common Stock and thereafter as capital gain. U.S. holders should consult their own tax advisors with respect to the appropriate U.S. federal income tax treatment of any dividend received from the Company. Dividends received by a non-corporate U.S. holder may be subject to a 3.8% Medicare tax on net investment income.

Sales or Other Dispositions of Our Common Stock. A U.S. holder will recognize capital gain or loss on the sale or other disposition of our Common Stock in an amount equal to the difference between the U.S. holder’s adjusted tax basis in our Common Stock and the amount realized from the disposition. Any gain or loss on a sale or other disposition of our Common Stock generally will be long-term capital gain or loss if the holder has held our Common Stock for more than one year. Deductions for capital losses are subject to limitations. Any gain recognized by a non-corporate U.S. holder may be subject to a 3.8% Medicare tax on net investment income.

Tax Considerations to Non-U.S. Holders in Respect of Ownership and Disposition of Our Common Stock

Dividends. Any dividends paid on our Common Stock that are characterized as dividends paid to a non-U.S. holder generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be provided by an applicable income tax treaty. To receive the benefit of a reduced treaty rate, a non-U.S. holder must furnish to the Company or its paying agent a valid IRS Form W-8 (or applicable successor form) certifying such holder’s qualification for the reduced rate. This certification must be provided to the Company or its paying agent prior to the payment of dividends and must be updated periodically. If a non-U.S. holder who qualifies for a reduced treaty rate but does not timely provide the Company or the payment agent with the required certification, such non-U.S. holder may be entitled to a credit against their U.S. federal income tax liability or a refund of the tax withheld, which the non-U.S. holder may claim by filing the appropriate claim for refund with the IRS.

Dividends that are treated as “effectively connected” with a trade or business conducted by a non-U.S. holder within the United States (and, if an applicable income tax treaty so provides, are also attributable to a U.S. permanent establishment of such non-U.S. holder) are not subject to withholding tax, provided the non-U.S. holder satisfies certain certification and disclosure requirements. Instead, such dividends, net of specified deductions and credits, are taxed at the same graduated U.S. federal income tax rates applicable to U.S. persons. To the extent a dividend is effectively connected with a U.S. trade or business, non-corporate non-U.S. holders may be eligible for taxation at reduced U.S. federal income tax rates applicable to qualified dividend income. Any such effectively connected dividends received by a non-U.S. holder that is a corporation may, under certain circumstances, be subject to an additional branch profits tax at a 30% rate or such lower rate as specified by an applicable income tax treaty.

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Sales or Other Dispositions of Our Common Stock. Subject to the discussions under “Information Reporting and Backup Withholding” and “FATCA,” below, a non-U.S. holder will generally not be subject to any U.S. federal income tax or withholding tax on any gain realized upon such holder’s sale or other disposition of our Common Stock. Gain on the sale of our Common Stock may be subject to U.S. net income tax (and in respect of corporate non-U.S. holders, branch profits tax) if the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base of the non-U.S. holder within the United States). Additionally, a non-U.S. holder that is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and meets certain other requirements will be subject to a flat 30% tax on the amount of gain derived from the sale that, together with certain other U.S. source capital gains realized during such year exceed certain U.S. source capital losses realized during such year.

FATCA. Pursuant to the Foreign Account Tax Compliance Act, or FATCA, foreign financial institutions (which include most foreign hedge funds, private equity funds, mutual funds, securitization vehicles and any other investment vehicles) and certain other foreign entities must comply with registration and information reporting rules with respect to their U.S. account holders and investors or be subject to a withholding tax on U.S.-source payments made to them (whether received as a beneficial owner or as an intermediary for another party). A foreign financial institution or other foreign entity that does not comply with the FATCA registration and reporting requirements will generally be subject to a 30% withholding tax on “withholdable payments.” For this purpose, withholdable payments generally include U.S.-source payments (including U.S.-source dividends), and (subject to the proposed Treasury Regulations discussed below) the gross proceeds from a sale of equity or debt instruments of issuers who are considered U.S. issuers under the FATCA rules. The FATCA withholding tax applies even if the payment would otherwise not be subject to U.S. nonresident withholding tax (e.g., because it is capital gain). While withholding under FATCA would also have applied to payments of gross proceeds from the sale or other disposition of stock on or after January 1, 2019, proposed Treasury Regulations which, if finalized in their present form, would eliminate FATCA withholding on payments of gross proceeds of a disposition of Series A Preferred Stock or our Common Stock entirely. Taxpayers may generally rely on these proposed Treasury Regulations until final Treasury Regulations are issued. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. We will not pay additional amounts in respect of amounts withheld. Investors should consult their tax advisors regarding possible implications of FATCA.

Information Reporting and Backup Withholding. In general, information reporting requirements may apply to dividends, sales proceeds or other amounts paid to U.S. holders and non-U.S. holders, unless an exemption applies. Backup withholding tax may apply to amounts subject to reporting if the holder fails to provide an accurate taxpayer identification number or fails to report all interest and dividends required to be shown on its U.S. federal income tax returns. A U.S. holder or non-U.S. holder can claim a credit against its U.S. federal income tax liability for the amount of any backup withholding tax and a refund of any overpayment of taxes, provided that all required information is timely provided to the IRS. U.S. holders and non-U.S. holders should consult their tax advisors as to their qualification for exemption from backup withholding and the procedure for establishing an exemption.

THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR STOCKHOLDER. EACH STOCKHOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF THE SPIN-OFF IN LIGHT OF THE STOCKHOLDER’S OWN CIRCUMSTANCES.

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USE OF PROCEEDS

We will not receive any proceeds from the Distribution of the Common Stock in the Spin-Off and any expenses incurred in connection with the Distribution shall be borne by us.

DETERMINATION OF OFFERING PRICE

Currently, there is no public trading market for our Common Stock and no consideration will be paid for the shares of Common Stock distributed in the Spin-Off.

CAPITALIZATION

The following table sets forth our cash and capitalization as of June 30, 2022 on (i) an actual basis; and (ii) on a pro forma basis to give effect to the Distribution. The following table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements and the notes thereto included elsewhere in this Prospectus.

June 30, 2022	 
 	  	Actual As
Reported	 	 	Pro Forma
Adjustments for
Distribution	 
Cash and cash equivalents

$	998,260	 	 	$	3,657,260

Long-term debt

$	18,137,111	 	 	$	20,902,471	 
Stockholders’ Equity

Common stock, $0.0001 par value; 500,000,000 shares authorized, 1 share issued and outstanding as reported; 165,523,363 shares issued and outstanding, pro forma as adjusted

—  	 	 	 	—  	 
Preferred stock, $0.0001 par value; 50,000,000 shares authorized, 0 shares issued and outstanding

Additional paid in capital

100,863,195	 	 	 	100,863,195	 
Accumulated deficit

(70,787,622	) 	 	 	(72,025,395	)

Total stockholders’ equity

30,075,573	 	 	 	28,837,800

Total capitalization

$	48,212,684	 	 	$	49,740,271

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BUSINESS

General

We are an energy company engaged in the acquisition, exploration, exploitation and/or development of oil and natural gas properties in the United States. Our primary focus has been the development of interests in an oil and natural gas project we hold in the Orogrande Basin in West Texas. We operate our business through our wholly owned subsidiaries, Torchlight Energy, Inc., Hudspeth Oil Corporation, Torchlight Hazel, LLC, and Hudspeth Operating, LLC.

Presently, our primary interests include the oil and natural gas leases for properties of the Orogrande Basin in Hudspeth County, Texas (the “Orogrande Project”). In addition, we have minor interests in the Eastern edge of the Midland Basin in West Texas (the “Hazel Project”) and two minor well interests in Oklahoma (the “Oklahoma Properties”).

Rich Masterson, our consulting geologist, originated our Orogrande Project, 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.

The Company has drilled 14 test wells in the Orogrande Project in the basin in order to stay in compliance with the continuous drilling clause under the 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 the wells continued through the year ended December 31, 2021 to further capture and document the scientific base in support of demonstrating the production potential of the Orogrande Project properties. Two of the wells were successfully completed for hydrocarbons, while the remaining wells serve as fresh water supply wells, wells we maintain for salt water disposal or wells we expect to be plugged and abandoned.

We satisfied the 2021 drilling obligations in the Orogrande play and, in satisfying our 2021 drilling obligations, we identified new potential pay zones not yet discovered in the Orogrande play.

In addition to the Orogrande Project, we also have an interest in our Hazel Project in Tom Green County and Sterling County, Texas. In August 2020, our subsidiaries entered into the Option Agreement with MHP, under which, in exchange for satisfying certain drilling obligations, MHP had the option to purchase the entire Hazel Project. The option to purchase the entire acreage block was extended to September 30, 2021 and at such time MHP determined not to exercise the purchase option; however, MHP is entitled to receive, as its sole recourse for the recoupment of drilling costs, the revenue from production of the well attributable to our interest until such time as it has recovered its reasonable costs and expenses for drilling, completing and operating the well. Operations continue under the Option Agreement until such time as the revenue from the project equates to the dollars spent by, and shall be reimbursed to, MHP. At such time, any acreage held by production and all wells will revert back to our subsidiary, Torchlight Hazel, LLC.

Our principal executive offices are located at 6300 Ridglea Place, Suite 950, Fort Worth, Texas 76116. The telephone number of our principal executive offices is (817) 438-1937.

Key Business Attributes

Experienced People. Upon completion of the Distribution, we will have six full-time employees and we expect to engage consultants for various roles as needed including high quality exploration and technical partners. We will build on the expertise and experiences of our management team and seek guidance from outside advisors as well as our Board.

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Project Focus. We are focusing primarily on exploitation projects. We may pursue high risk exploration prospects which may appear less favored than low risk exploration. We will, however, consider these high risk-high reward exploration prospects in connection with exploitation opportunities in a project that would reduce the overall project economic risk. We will consider such high risk-high reward prospects on their individual merits.

Lower Cost Structure. We will attempt to maintain the lowest possible cost structure, enabling the greatest margins and providing opportunities for investment that would not be feasible for higher cost competitors.

Limit Capital Risks. Limited capital exposure is planned initially to add value to a project and determine its economic viability. Management has experience in successfully managing risks of projects, finance, and value.

Business Processes

We believe there are three principal business processes that we must follow to enable our operations to be profitable. Each major business process offers the opportunity for a distinct partner or alliance as we grow. These processes are:

•	 	
Investment Evaluation and Review;

•	 	
Operations and Field Activities; and

•	 	
Administrative and Finance Management.

Investment Evaluation and Review. This process is the key ingredient to our success. Recognition of quality investment opportunities is the fuel that drives our engine. Broadly, this process includes the following activities: prospect acquisition, regional and local geological and geophysical evaluations, data processing, economic analysis, lease acquisition and negotiations, permitting, and field supervision. We expect these evaluation processes to be managed by our management team. Expert or specific technical support will be outsourced as needed.

Operations and Field Activities. This process begins following management approval of an investment. Well site supervision, construction, drilling, logging, product marketing, and transportation are examples of some activities. We will prefer to be the operator where possible.

Administrative and Finance Management. This process coordinates our initial structuring and capitalization, general operations and accounting, reporting, audit, banking and cash management, regulatory agencies reporting and interaction, timely and accurate payment of royalties, taxes, leases rentals, vendor accounts and performance management that includes budgeting and maintenance of financial controls, and interface with legal counsel and tax and other financial and business advisors.

Current Projects

As of June 30, 2022, we had interests in three oil and natural gas projects: the Orogrande Project in Hudspeth County, Texas, the Hazel Project in Sterling, Tom Green, and Irion Counties, Texas and the Oklahoma Properties. See the description under “Current Projects” below under Note 4, “Oil & Natural Gas Properties,” of the financial statements included with this Prospectus for information and disclosure regarding these projects, which description is incorporated herein by reference.

Our Properties

Our principal executive office is located at 6300 Ridglea Place, Suite 950, Fort Worth, Texas 76116. We currently sublease this office space and believe that the condition and size of our offices are adequate for our current needs.

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The Orogrande Project consists of unevaluated and undeveloped properties in progress of development for future production.

Total Acres	 	  	Developed Acres	 	  	Undeveloped Acres	 
 	  	Gross	 	  	Net	 	  	Gross	 	  	Net	 	  	Gross	 	  	Net	 
Texas—

Orogrande Project

134,000	 	  	 	89,110	 	  	 	—  	 	  	 	—  	 	  	 	134,000	 	  	 	89,110	 
Hazel Project

645	 	  	 	516	 	  	 	645	 	  	 	516	 	  	 	—  	 	  	 	—  	 
Oklahoma—

Viking

640	 	  	 	192	 	  	 	640	 	  	 	192	 	  	 	—  	 	  	 	—

Total

135,285	 	  	 	89,818	 	  	 	1,285	 	  	 	708	 	  	 	134,000	 	  	 	89,110

Investments to support our oil and natural gas properties during the years ended December 31, 2021 and 2020 were $14.7 million and $3.4 million, respectively.

Fiscal Year Ended
December 31,	 
 	  	2021	 	  	2020	 
Property acquisition costs

$	—  	 	  	$	—  	 
Development costs

14,664,463	 	  	 	3,472,281	 
Exploratory costs

—  	 	  	 	—

Totals

$	14,664,463	 	  	$	3,472,281

Property development costs presented above exclude interest capitalized into the full cost pool of $141,048 in 2021 and $2,353,700 in 2020.

The development costs for 2020 include work in the Orogrande and Hazel Projects in West Texas and for 2021 the development costs include work solely in the Orogrande Project. We made progress during 2021 to develop proved producing reserves in the Orogrande Project in the Permian Basin in West Texas, which has not yet resulted in hydrocarbon production. We incurred costs of $14.7 million in relation to certain drilling activity carried out to remain in compliance with all aspects of our lease obligations and to satisfy the continuous drilling clause under the agreement with University Lands, whereby we are obligated to satisfy certain minimum yearly requirements that may be exceeded if desired. No development costs were incurred in 2020 or 2021 for the Oklahoma Properties. During the fiscal years ended December 31, 2021 and 2020, and for the quarter ended June 30, 2022, we drilled development and exploratory wells as set forth in the table below.

June 30, 2022	 	  	December 31, 2021	 	 	December 31, 2020	 
  	 	    Gross    	 	  	 	    Net    	 	  	 	    Gross    	 	 	 	    Net    	 	 	 	    Gross    	 	 	 	    Net

Development Wells:

Total Drilled Wells Beginning of the Period:

23.00	 	  	 	15.08	 	  	 	18.00	 	 	 	11.69	 	 	 	19.00	 	 	 	11.82	 
Productive - Texas (Hazel)

—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
Productive - Texas (Warwink)

—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	(1.00	) 	 	 	(0.13	) 
Productive - Okla

—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
Test Wells - Orogrande

—  	 	  	 	—  	 	  	 	5.00	 	 	 	3.39	 	 	 	—  	 	 	 	—  	 
Test Wells - Hazel(1)

—  	 	  	 	—  	 	  	 	(1.00	) 	 	 	(0.80	) 	 	 	—  	 	 	 	—  	 
Exploration Wells:

Productive

—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 
Dry

—  	 	  	 	—  	 	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—

Total Drilled Wells:

23.00	 	  	 	15.08	 	  	 	23.00	 	 	 	15.08	 	 	 	18.00	 	 	 	11.69

(1)	
Three of the five test wells in the Hazel Project are subject to leases that expired as of December 31, 2021 and are not expected to become producing wells. We are responsible for plugging and abandonment in respect of such wells.

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For the six months ended June 30, 2022 compared to the same period in 2021, investments were as follows:

Six Months Ended June 30,	 
 	  	2022	 	  	2021	 
Property acquisition costs

$	—  	 	  	$	—  	 
Development costs

1,491,766	 	  	 	1,713,604	 
Exploratory costs

—  	 	  	 	—

Totals

$	1,491,766	 	  	$	1,713,604

Total Wells	  	June 30, 2022	 	  	December 31, 2021	 	  	December 31, 2020	 
 	  	    Gross    	 	  	Net	 	  	Gross	 	  	Net	 	  	Gross	 	  	Net	 
Productive - Texas

2.00	 	  	 	1.60	 	  	 	2.00	 	  	 	1.60	 	  	 	1.00	 	  	 	0.80	 
Productive - Okla

2.00	 	  	 	0.40	 	  	 	2.00	 	  	 	0.40	 	  	 	2.00	 	  	 	0.40

Total

4.00	 	  	 	2.00	 	  	 
4.00
 
  	 	2.00	 	  	 	3.00	 	  	 	1.20

Well Type	  	June 30, 2022	 	  	December 31, 2021	 	  	December 31, 2020	 
Oil	  	 	1.00	 	  	 	0.70	 	  	 	1.00	 	  	 	0.70	 	  	 	1.00	 	  	 	0.70	 
Gas	  	 	1.00	 	  	 	0.70	 	  	 	1.00	 	  	 	0.70	 	  	 	1.00	 	  	 	0.70	 
Combination - Oil and Gas	  	 	4.00	 	  	 	2.00	 	  	 	4.00	 	  	 	2.00	 	  	 	3.00	 	  	 	1.20	 
Test Wells	  	 	17.00	 	  	 	11.68	 	  	 	17.00	 	  	 	11.68	 	  	 	13.00	 	  	 	9.09

Total

23.00	 	  	 	15.08	 	  	 	23.00	 	  	 	15.08	 	  	 	18.00	 	  	 	11.69

During the six months ended June 30, 2022, we continued certain development activities to satisfy our drilling

obligations for the fiscal year 2021 under the terms of the Purchase Agreement (defined below) at a cost of

$1,491,766. Additionally we completed some pre-drilling activity for our upcoming 2022 drilling program,

including surveying, permitting, road and pad site work at an aggregate cost of $407,481.

With the principal goal of gathering scientific data from a strategy of drilling test wells, all wells were drilled with the intent of being completed and productive for hydrocarbons. We attempted completions on every well, however we were unable to effectuate a successful completion on all of the vertical wells due to various problems. This is not uncommon with early wells of frontier exploration projects. Two horizontal wells were successfully completed for hydrocarbons, however both wells are currently shut-in waiting for hook-up to a gas pipeline. The remaining wells serve as fresh water supply wells, wells we maintain for salt water disposal or wells we expect to be plugged and abandoned. Pipeline hook-ups will occur after we have achieved additional successful wells to justify the cost of tapping into the gas lines.

Oil and Natural Gas Reserves

No reserve report was prepared for 2020. Other than the Producing Hazel Wells (defined below), the only producing properties owned by us were the Oklahoma Properties, which were marginally producing and were uneconomic for reserve calculation purposes. At the end of 2021 and 2020, reserves did not include any value for proved undeveloped properties.

We currently have proved reserves from two producing wells located on the Hazel Project, the Flying B Ranch #3H well and the Flying B Ranch #4H well (the “Producing Hazel Wells”). Production is from the Wolfcamp formation. At December 31, 2021, there were no proved nonproducing reserves related to these properties after giving effect to the obligation to reimburse drilling costs incurred by MHP. The properties of the Hazel Project and Orogrande Project are operated by Maverick Operating LLC.

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The operating expenses reflect a substantial reduction from previous years as electric power is available and water is now disposed of on location after we drilled or converted a well to be used for saltwater disposal. Initial gross oil production from the Flying B Ranch #3H well reached 8,319 Bbl per month and 31,613 Bbl per month of water. It is anticipated that the well has an ultimate oil recovery of 154 MBbl. The Flying B Ranch #4H well had an initial monthly production rate of 4,200 Bbl of oil and has an ultimate oil recovery of 192 MBbl.

As of December 31, 2021 and 2020, our proved nonproducing reserves related to the Producing Hazel Wells totaled 0 and 0 BOE, respectively, and 0 BOE for the six months ended June 30, 2022.

Production, Price, and Production Cost History

Oklahoma Properties

During the year ended December 31, 2020, we produced and sold 278 barrels of oil net to our interest at an average sale price of $16.13 per Bbl. We produced and sold 2,012 Mcf of gas net to our interest at an average sales price of $1.20 per Mcf. Our average production cost including lease operating expenses and direct production taxes was $30.02 per BOE. Our depreciation, depletion, and amortization expense was $130.68 per BOE.

During the year ended December 31, 2021, we produced and sold 85 barrels of oil net to our interest at an average sale price of $55.00 per Bbl. We produced and sold 3,586 Mcf of gas net to our interest at an average sales price of $3.17 per Mcf. Our average production cost including lease operating expenses and direct production taxes was $18.54 per BOE. Our depreciation, depletion, and amortization expense was $0 per BOE.

During the six months ended June 30, 2022, we produced and sold 96.83 Bbls net to our interest at an average sale price of $100.05 per Bbl. We produced and sold 1,267 Mcf of natural gas net to our interest at an average sales price of $6.09 per Mcf. Our average production cost including lease operating expenses and direct production taxes was $3.83 per BOE. Our depreciation, depletion, and amortization expense was $0 per BOE.

Hazel Project

During the year ended December 31, 2021, 23,422 barrels of oil net to our interest were sold at an average sale price of approximately $60.00 per Bbl, although we received none of this revenue because all of it, after deducting expenses to produce the oil, was either received by MHP directly during the time that the Option Agreement was in effect or credited towards the recoupment of drilling costs incurred by MHP. We produced and sold Nil Mcf of natural gas net to our interest.

December 31, 2021
Reserves	 	 	December 31, 2021
Future Net Revenue (M$)	 
Category	  	Oil (Bbls)	 	 	Gas (Mcf)	 	  	Total (BOE)	 	 	Total	 	 	Present Value
Discounted at 10%	 
Proved Producing

152,000	 	 	 	0	 	  	 	152,000	 	 	$	4,317	 	 	$	2,897	 
Proved Nonproducing

0	 	 	 	0	 	  	 	0	 	 	$	—  	 	 	$	—

Adjust for Cost Reimbursement Obligation to Masterson

(152,000	) 	 	 	0	 	  	 	(152,000	) 	 	$	(4,317	) 	 	$	(2,897	)

Total Proved

0	 	 	 	0	 	  	 	0	 	 	$	—  	 	 	$	—

Standardized Measure of Future Net Cash Flows Related to Proved Oil and Gas Properties

$	—

Probable Undeveloped

0	 	 	 	    0	 	  	 	0	 	 	$	—  	 	 	$	—

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 	  	December 31, 2020
Reserves	 	  	December 31, 2020
Future Net Revenue (M$)	 
Category	  	Oil (Bbls)	 	  	Gas (Mcf)	 	  	Total (BOE)	 	  	Total	 	  	Present Value
Discounted at 10%	 
Proved Producing

0	 	  	 	0	 	  	 	0	 	  	$	—  	 	  	$	—

Proved Nonproducing

0	 	  	 	0	 	  	 	0	 	  	$	—  	 	  	$	—

Total Proved

0	 	  	 	    0	 	  	 	    0	 	  	$	—  	 	  	$	—

Standardized Measure of Future Net Cash Flows Related to Proved Oil and Gas Properties

$	—

Probable Undeveloped

$	—  	 	  	$	—

The increase in producing reserves from 2020 to 2021 from 0 to 152,000 BOE is related to the Producing Hazel Wells, which included a new well drilled in the Hazel Project as well as bringing a prior well in the Hazel Project back on line after it had been shut down in 2019. All of this activity was performed and paid for by MHP. Reserve values as of December 31, 2021 are related to the two Producing Hazel Wells, although since we have no remaining reserve value as of December 31, 2021 after consideration of the obligation to pass revenue through to MHP under the terms of the Option Agreement, and there was no reserve value at December 31, 2020, Standardized Measure is not presented.

During the six months ended June 30, 2022, 4,922 barrels of oil net to our interest were sold at an average sale price of approximately $99.99 per Bbl, although we received none of this revenue because all of it, after deducting expenses to produce the oil, was credited towards the recoupment of drilling costs incurred by MHP. We produced and sold Nil Mcf of gas net to our interest.

Due to the inherent uncertainties and the limited nature of reservoir data, both proved and probable reserves are subject to change as additional information becomes available. The estimates of reserves, future cash flows, and present value are based on various assumptions, including those prescribed by the SEC, and are inherently imprecise.

Intent to Acquire Additional Interests

Following the Spin-Off, we intend to make offers and enter into agreements with one or more of the other current working interest owners in the Orogrande Project (each an “Orogrande Owner” and collectively, the “Orogrande Owners”). We anticipate offering the Orogrande Owners shares of Common Stock in exchange for their respective working interest in the Orogrande Project. We intend to offer the number of shares of Common Stock necessary such that each participating Orogrande Owner would own the percentage of Common Stock then outstanding in proportion to the percentage owned in the working interest of the Orogrande Project. For illustration purposes, if an Orogrande Owner owns ten percent (10%) of the working interest of the Orogrande Project, and such Orogrande Owner elects to participate and accept out offer of shares of Common Stock, then such Orogrande Owner will be offered ten percent (10%) of the aggregate amount of outstanding shares of Common Stock. Our decision to enter into these transactions will depend on us and each Orogrande Owner to negotiate and enter into definitive agreements related to such transaction and our Board receiving an industry-standard fairness opinion from an investment banking firm. One of the Orogrande Owners is Wolfbone Investments LLC, an entity controlled by Gregory McCabe, who will own, directly and indirectly through entities he owns or controls, over 11% of the Common Stock following the Spin-Off, which would increase if the proportionate exchange of working interest for shares of our Common Stock is consummated.

Industry and Business Environment

We are experiencing a time of fluctuating, but higher oil prices caused by higher demand, lower U.S. supply, turmoil on the world stage and OPEC’s policies on production. Unfortunately, this is the cyclical nature of the oil

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and natural gas industry. We experience highs and lows that seem to come in cycles. Fortunately, there exists plenty of demand for US onshore oil and natural gas. We believe advances in technology drive the US market and we feel this will drive the development costs down on our exploration and drilling programs while maintaining favorable economics.

Competition

The oil and natural gas industry is intensely competitive, and we will compete with numerous other companies engaged in the exploration and production of oil and natural gas. Some of these companies have substantially greater resources than we have. Not only do they explore for and produce oil and natural gas, but also many carry on midstream and refining operations and market petroleum and other products on a regional, national, or worldwide basis. The operations of other companies may be able to pay more for exploratory prospects and productive oil and natural gas properties. They may also have more resources to define, evaluate, bid for, and purchase a greater number of properties and prospects than our financial or human resources permit.

Our larger or integrated competitors may have the resources to be better able to absorb the burden of current and future federal, state, and local laws and regulations more easily than we can, which would adversely affect our competitive position. Our ability to locate reserves and acquire interests in properties in the future will be dependent upon our ability and resources to evaluate and select suitable properties and consummate transactions in this highly competitive environment. In addition, we may be at a disadvantage in producing oil and natural gas properties and bidding for exploratory prospects because we have fewer financial and human resources than other companies in our industry. Should a larger and better financed company decide to directly compete with us, and be successful in its efforts, our business could be adversely affected.

Marketing and Customers

Governmental Regulation and Environmental Matters

Our operations are subject to various rules, regulations, and limitations impacting the oil and natural gas exploration and production industry as a whole.

Regulation of Oil and Natural Gas Production

Our oil and natural gas exploration, production, and related operations, when developed, will be subject to extensive rules and regulations promulgated by federal, state, tribal, and local authorities and agencies. Certain states may also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum rates of production from wells, and the regulation of spacing, plugging, and abandonment of such wells. We contract with Maverick Operating LLC who operates our oil and natural gas properties and is primarily responsible for compliance with applicable environmental regulatory with respect to the operating activities of our oil and natural gas properties. We cover all costs associated with the related insurance coverage for such environmental regulatory compliance. Failure to comply with any such rules and regulations can result in substantial penalties. The regulatory burden on the oil and natural gas industry will most likely increase our cost of doing business and may affect our

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profitability. Although we believe we are currently in substantial compliance with all applicable laws and regulations, because such rules and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with such laws. Significant expenditures may be required to comply with governmental laws and regulations and may have a material adverse effect on our financial condition and results of operations.

Environmental Matters

Our operations and properties are and will be subject to extensive and changing federal, state, and local laws and regulations relating to environmental protection, including the generation, storage, handling, emission, transportation, and discharge of materials into the environment, and relating to safety and health. In the future, environmental legislation and regulation may trend toward stricter standards. These laws and regulations may, for example:

•	 	
require the acquisition of a permit or other authorization before construction or drilling commences and for certain other activities;

•	 	
limit or prohibit construction, drilling, and other activities on certain lands lying within wilderness and other protected areas;

•	 	
impose substantial liabilities for pollution resulting from operations; or

•	 	
restrict certain areas from fracking and other stimulation techniques.

The permits required for our operations may be subject to revocation, modification, and renewal by issuing authorities. Governmental authorities have the power to enforce their regulations, and violations are subject to fines or injunctions, or both. In the opinion of management, we are and will be in substantial compliance with current applicable environmental laws and regulations and have no material commitments for capital expenditures to comply with existing environmental requirements. Nevertheless, changes in existing environmental laws and regulations or in interpretations thereof could have a significant impact on our company, as well as the oil and natural gas industry in general.

The Comprehensive Environmental, Response, Compensation, and Liability Act (“CERCLA”) and comparable state statutes impose strict, joint, and several liability on owners and operators of sites and on persons who disposed of or arranged for the disposal of “hazardous substances” found at such sites. It is not uncommon for the neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances released into the environment. The Federal Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes govern the disposal of “solid waste” and “hazardous waste” and authorize the imposition of substantial fines and penalties for noncompliance. Although CERCLA currently excludes petroleum from its definition of “hazardous substance,” state laws affecting our operations may impose clean-up liability relating to petroleum and petroleum related products. In addition, although RCRA classifies certain oil field wastes as “non-hazardous,” such exploration and production wastes could be reclassified as hazardous wastes thereby making such wastes subject to more stringent handling and disposal requirements.

The Endangered Species Act (“ESA”) seeks to ensure that activities do not jeopardize endangered or threatened animal, fish, and plant species, nor destroy or modify the critical habitat of such species. Under the ESA, exploration and production operations, as well as actions by federal agencies, may not significantly impair or jeopardize protected species or habitat. The ESA provides for criminal and civil penalties for violations. Other statutes that provide protection to animal and plant species and that may apply to our operations include, but are not necessarily limited to, the Fish and Wildlife Coordination Act, the Fishery Conservation and Management Act, the Migratory Bird Treaty Act and the National Historic Preservation Act. Although we believe that our operations are and will be in substantial compliance with such statutes, any change in these statutes or any reclassification of a species as endangered could subject us to significant expenses to modify our operations or could force us to discontinue certain operations altogether.

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Hydraulic fracturing is regulated by state and federal environmental and oil and gas regulatory authorities, including specifically the requirement to disclose certain information related to hydraulic fracturing operations. Operators must follow applicable legal requirements for groundwater protection and are subject to supervision by state and federal regulators (including the Bureau of Land Management on federal acreage). Furthermore, well construction practices require the installation of multiple layers of protective steel casing surrounded by cement that are specifically designed and installed to protect freshwater aquifers by preventing the migration of fracturing fluids into aquifers. Regulatory proposals in some states and local communities have been initiated to require or make more stringent the permitting and compliance requirements for hydraulic fracturing operations. Federal and state agencies have continued to assess the impacts of hydraulic fracturing, which could spur further action toward federal and/or state legislation and regulation of hydraulic fracturing activities. In addition, in light of concerns about seismic activity being triggered by the injection of produced waters into underground wells and hydraulic fracturing, certain regulators are also considering additional requirements related to seismic safety for hydraulic fracturing activities. Further restrictions on hydraulic fracturing could make it prohibitive to conduct our operations, and also reduce the amount of oil and natural gas that we or our operators are ultimately able to produce from our properties.

Climate Change

Significant studies and research have been devoted to climate change and global warming, and climate change has developed into a major political issue in the United States and globally. Certain research suggests that greenhouse gas emissions contribute to climate change and pose a threat to the environment. Recent scientific research and political debate has focused in part on carbon dioxide and methane incidental to oil and natural gas exploration and production. Many states and the federal government have enacted legislation directed at controlling greenhouse gas emissions, and future legislation and regulation could impose additional restrictions or requirements in connection with our drilling and production activities and favor use of alternative energy sources, which could affect operating costs and demand for oil products. As such, our business could be materially adversely affected by domestic and international legislation targeted at controlling climate change.

Legal Proceedings

On March 18, 2021, Cordax filed a lawsuit in Hudspeth County, Texas seeking to foreclose its mineral lien against the Orogrande Field in the amount of $104,500.01 and recover related attorney’s fees. The foreclosure action, Datalog LWT Inc. d/b/a Cordax Evaluation Technologies v. Torchlight Energy Resources, Inc., was filed in the 205th Judicial District Court of Hudspeth County, Texas. We are contesting the lien in good faith and filed a Plea in Abatement on May 10, 2021, seeking a stay in the Hudspeth County lien foreclosure case pending final disposition of the related case currently pending in Harris County, Texas. We are required to indemnify Meta in connection with this matter pursuant to the terms of the Distribution Agreement.

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Meta’s former Chief Executive Officer, and Meta’s former Chief Financial Officer, Torchlight’s former Chairman of the Board of Directors, and Torchlight’s former Chief Executive Officer. On January 26, 2022, a similar putative securities class action lawsuit was filed in the U.S. District Court for the Eastern District of New York captioned McMillan v. Meta Materials Inc., et al., No. 1:22-cv-00463. The McMillan complaint names the same defendants and asserts the same claims on behalf of the same purported class as the Maltagliati complaint. The complaints, purportedly brought on behalf of all purchasers of our publicly traded securities from September 21, 2020 through and including December 14, 2021, assert claims under Sections 10(b) and 20(a) of the Exchange Act arising primarily from a short-seller report and statements related to our business combination with Torchlight. The complaints seek unspecified compensatory damages and reasonable costs and expenses, including attorneys’ fees. On April 11, 2022, the Court held a hearing on motions to consolidate the two actions and to appoint a lead plaintiff or lead plaintiffs, but has not yet ruled on the motions. In regards to any loss incurred by us in connection with this matter, we will be entitled to seek recovery from Meta pursuant to the indemnification provisions set forth under the Distribution Agreement.

On January 14, 2022, a shareholder derivative action was filed in the U.S. District Court for the Eastern District of New York captioned Hines v. Palikaras, et al., No. 1:22-cv-00248. The complaint names as defendants certain of Meta’s current officers and directors, certain former Torchlight officers and directors, and us (as nominal defendant). The complaint, purportedly brought on behalf of Meta, asserts claims under Section 14(a) of the Exchange Act, contribution claims under Sections 10(b) and 21D of the Exchange Act, and various state law claims such as breach of fiduciary duties and unjust enrichment. The complaint seeks, among other things, unspecified compensatory damages in favor of Meta, certain corporate governance related actions, and an award of costs and expenses to the derivative plaintiff, including attorneys’ fees. On March 9, 2022, the Court entered a stipulated order staying this action until there is a ruling on a motion to dismiss in the Securities Class Action. In regards to any loss incurred by us in connection with this matter, we will be entitled to seek recovery from Meta pursuant to the indemnification provisions set forth under the Distribution Agreement.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited and unaudited financial statements and related notes, respectively, beginning on page F-1 below of this Prospectus. Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Prospectus, particularly under the section titled “Cautionary Statement Concerning Forward-Looking Statements.”

Overview

Next Bridge Hydrocarbons, Inc. (formerly known as OilCo Holdings, Inc.) was incorporated in the State of

Nevada on August 31, 2021 and established a fiscal year end of December 31st.

In connection with the Arrangement, Torchlight (the predecessor of Meta) and Metamaterial, Inc. contemplated a sale of the O&G Assets or, alternatively, a complete legal and structural separation of the Company, holding the O&G Assets, from Meta following the Arrangement. Meta determined to pursue the structural separation and will distribute all of its equity interest in us, consisting of all of the outstanding shares of our Common Stock, to the Meta Series A Preferred Stockholders on a pro rata basis. Following the Spin-Off, Meta will not own any equity interest in us, and we will operate independently from Meta.

The Spin-Off is subject to the satisfaction, or the Meta board of directors’ waiver, of a number of conditions. In addition, subject to the terms of the Arrangement Agreement, Meta has the right not to complete the Spin-Off if, at any time, the Meta Board determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of Meta or its stockholders or is otherwise not advisable.

Our consolidated financial statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Meta. Our consolidated financial statements reflect our financial position, results of operations and cash flows as we were historically managed, in conformity with GAAP. Our financial statements include certain assets and liabilities that have historically been held at the Meta corporate level but are specifically identifiable or otherwise attributable to us.

All intercompany transactions between us and Meta have been included in our financial statements. The intercompany transactions are reflected in our consolidated statements of cash flow as a financing activity and in our consolidated balance sheets as “Note Payable, Related Party.”

The historical costs and expenses reflected in our financial statements include an allocation for certain corporate shared service functions historically provided by Meta including executive oversight, accounting, treasury, tax, legal, human resources, occupancy, procurement, information technology and other shared services. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis based on sales, headcount, tangible assets or other measures considered to be a reasonable reflection of the historical utilization levels of these services.

Our management believes the assumptions underlying our financial statements, including the assumptions regarding the allocation of general corporate expenses from Meta are reasonable. Nevertheless, our financial statements may not include all of the actual expenses that would have been incurred had we operated as a stand- alone company during the periods presented and may not reflect what our actual results of operations, financial position and cash flows would have been if we had operated as a stand-alone company during the periods presented. Actual costs that would have been incurred if we had operated as a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. Following the Spin-Off, we will perform these functions using our own resources or purchased services.

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Income Taxes

Judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities. In the ordinary course of business, tax issues may arise where the ultimate outcome is uncertain. Additionally, our tax returns are subject to audit by various tax authorities. Consequently, changes in our estimates for contingent tax liabilities may materially impact our results of operations or financial position.

RESULTS OF OPERATIONS

Historical Results for the Years Ended December 31, 2021 and 2020

For the year ended December 31, 2021, we had a net loss of $8,238,808 compared to a net loss of $5,749,006 for the year ended December 31, 2020. The difference is primarily due to an increased general and administrative expenses for the year ended December 31, 2021, offset by an impairment loss and a loss on sale of oil and gas property for the year ended December 31, 2020. At December 31, 2021, we had current assets of $2,229,762 and total assets of $47,918,232. As of December 31, 2021, we had current liabilities of $15,537,215. Stockholders’ equity was $32,359,080 at December 31, 2021.

Revenue and Gross Profit

Year Ended December 31,	 
 	  	2020	 	 	2021	 	 	Change	 	 	%	 
Product sales

$	 6,906	 	 	$	15,904	 	 	$	8,998	 	 	 	130.3	%

Total Revenue

6,906	 	 	 	15,904	 	 	 	8,998		 	 	130.3	% 
Cost of revenue

87,486	 	 	 	76,331	 	 	 	(11,155	) 	 	 	(12.7	)%

Gross Profit (Loss)

(80,580	) 	 	 	(60,427	) 	 	 	(20,153	) 	 	 	25.0	%

Gross Profit (Loss) percentage

(1,166.8	)% 	 	 	(379.9	)% 	 	 	223.97	% 	 			
Production Revenues and Cost of Revenue

For the year ended December 31, 2021, we had production revenue of $15,904 compared to $6,906 of production revenue for the year ended December 31, 2020. Refer to the table of production and revenue included below. Our cost of revenue, consisting of lease operating expenses and production taxes, was $76,331 for the year ended December 31, 2021 compared with $87,486 for the year ended December 31, 2020.

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The change in revenue was primarily impacted by the increase in production from the Oklahoma Properties, suspension of production from the Flying B #3 Well in the Hazel Project in May 2019 and the sale of our Warwink Project in November 2020. Production and Revenue are detailed as follows:

Property	  	Quarter	 	  	Oil
Production
{BBLS}	 	  	Gas
Production
{MCF}	 	  	Oil
Revenue	 	 	Gas
Revenue	 	 	Total
Revenue	 
Oklahoma

Q1 - 2021	 	  	 	28	 	  	 	711	 	  	$	 1,166	 	 	$	 1,305	 	 	$	 2,471	 
Hazel (TX)

Q1 - 2021	 	  	 	0	 	  	 	0	 	  	 	—  	 	 	 	—  	 	 	 	—

Total Q1-2021

28	 	  	 	711	 	  	$	1,166	 	 	$	1,305	 	 	$	2,471

Oklahoma

Q2 - 2021	 	  	 	28	 	  	 	1,212	 	  	$	1,692	 	 	$	1,814	 	 	 	3,506	 
Hazel (TX)

Q2 - 2021	 	  	 	0	 	  	 	0	 	  	 	—  	 	 	 	—  	 	 	 	—

Total Q2-2021

28	 	  	 	1,212	 	  	$	1,692	 	 	$	1,814	 	 	$	3,506

Oklahoma

Q3 - 2021	 	  	 	29	 	  	 	441	 	  	$	1,818	 	 	$	1,146	 	 	$	2,964	 
Hazel (TX)

Q3 - 2021	 	  	 	0	 	  	 	0	 	  	 	—	 	 	 	—	 	 	$	—

Total Q3-2021

29	 	  	 	441	 	  	$	1,818	 	 	$	1,146	 	 	$	2,964

Oklahoma

Q4 - 2021	 	  	 	0	 	  	 	1,222	 	  	$	—  	 	 	$	6,963	 	 	$	6,963	 
Hazel (TX)

Q4 - 2021	 	  	 	0	 	  	 	0	 	  	$	—  	 	 	$	—  	 	 	$	—

Total Q4-2021

0	 	  	 	1,222	 	  	$	—  	 	 	$	6,963	 	 	$	6,963

2021 Year To Date

85	 	  	 	3,586	 	  	$	4,676	 	 	$	11,228	 	 	$	15,904

Oklahoma

Q1 - 2020	 	  	 	181	 	  	 	468	 	  	$	583	 	 	$	1,000	 	 	$	1,583	 
Hazel (TX)

Q1 - 2020	 	  	 	0	 	  	 	0	 	  	$	—  	 	 	$	—  	 	 	$	—  	 
MECO (TX)

Q1 - 2020	 	  	 	1,863	 	  	 	1,559	 	  	$	81,530	 	 	$	1,507	 	 	$	83,037

Total Q1-2020

2,044	 	  	 	2,027	 	  	$	82,113	 	 	$	2,507	 	 	$	84,620

Oklahoma

Q2 - 2020	 	  	 	28	 	  	 	448	 	  	$	774	 	 	$	156	 	 	$	930	 
Hazel (TX)

Q2 - 2020	 	  	 	0	 	  	 	0	 	  	$	—  	 	 	$	—  	 	 	$	—  	 
MECO (TX)

Q2 - 2020	 	  	 	1,389	 	  	 	747	 	  	$	44,223	 	 	$	324	 	 	$	44,547

Total Q2-2020

1,417	 	  	 	1,195	 	  	$	44,997	 	 	$	480	 	 	$	45,477

Oklahoma

Q3 - 2020	 	  	 	69	 	  	 	1,096	 	  	$	2,084	 	 	$	494	 	 	$	2,578	 
Hazel (TX)

Q3 - 2020	 	  	 	0	 	  	 	0	 	  	$	—  	 	 	$	—  	 	 	$	—  	 
MECO (TX)

Q3 - 2020	 	  	 	1,480	 	  	 	680	 	  	$	57,774	 	 	$	1,370	 	 	$	59,144

Total Q3-2020

1,549	 	  	 	1,776	 	  	$	59,858	 	 	$	1,864	 	 	$	61,722

Oklahoma

Q4 - 2020	 	  	 	0	 	  	 	0	 	  	$	1,042	 	 	$	773	 	 	$	1,815	 
Hazel (TX)

Q4 - 2020	 	  	 	0	 	  	 	0	 	  	$	—  	 	 	$	—  	 	 	$	—  	 
MECO (TX)

Q4 - 2020	 	  	 	435	 	  	 	0	 	  	$	9,837	 	 	$	5,519	 	 	$	15,356	 
MECO (Sold )

YTD ADJ	 	  	 	0	 	  	 	0	 	  	$	(10,092	) 	 	$	(5,519	) 	 	$	(15,611	)

Total Q4-2020

435	 	  	 	0	 	  	$	787	 	 	$	773	 	 	$	1,560

Exclude MECO

Sold	 	  	 	-5,167	 	  	 	-2,986	 	  	$	(183,272	) 	 	$	(3,201	) 	 	$	(186,473	) 
  	 	11/20

Total 2020

278	 	  	 	2,012	 	  	$	4,483	 	 	$	2,423	 	 	$	6,906

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Expenses for the Years Ended December 31, 2021 and 2022

We recorded depreciation, depletion and amortization expense of $4,642 for the year ended December 31, 2021 compared to $820,814 for the year ended December 31, 2020. Impairment expense recognized was $2,108,301 in 2020 with none for the year ended December 31, 2021.

Operating Expenses

Year Ended December 31,	 
 	  	2021	 	  	2020	 	  	Change	 	  	%	 
Operating Expenses

General & Administrative

$	8,050,443	 	  	$	2,557,975	 	  	$	5,472,468	 	  	 	214.7	%

Total operating expenses

$	8,050,443	 	  	$	2,557,975	 	  	$	2,557,975	 	  	 	214.7	%

General and Administrative Expenses

Our general and administrative expense for the year ended December 31, 2021 was $8,050,443 compared with $2,557,975 for the year ended December 31, 2020. Our general and administrative expenses consisted of consulting and compensation expense, substantially all of which were non-cash or deferred, accounting and administrative costs, professional consulting fees, and other general corporate expenses. The change in general and administrative expenses in 2021, compared to 2020, is primarily due to employee bonus compensation and expenses related to the Arrangement Agreement including consulting fees, filing fees, legal fees, director and officer liability insurance, and investor relations expenses.

Historical Results for the Three Months Ended June 30, 2022 and 2021

For the three months ended June 30, 2022, we had a net loss of $1,476,849 compared to a net loss of $4,126,667 for the three months ended June 30, 2021. The difference is primarily due to decreased general and administrative expenses for the three months ended June 30, 2022 offset with an increase in interest expense. At June 30, 2022, we had current assets of $1,224,145 and total assets of $48,404,381. As of June 30, 2022, we had current liabilities of $17,865,871. Stockholders’ equity was $30,516,573 at June 30, 2022.

Three Months Ended June 30,	 
 	  	2022	 	 	2021	 	 	Change	 	 	%	 
Product sales

$	17,404	 	 	$	3,502	 	 	$	13,902	 	 	 	397	%

Total Revenue

17,404	 	 	 	3,502	 	 	 	13,902	 	 	 	397	% 
Cost of revenue

31,453	 	 	 	(71,192	) 	 	 	102,645	 	 	 	144	%

Gross Profit

$	(14,049	) 	 	$	74,694	 	 	$	96,835	 	 	 	(118	)%

Gross Profit percentage

(81	)% 	 	 	2,133	% 	 	 	631	% 	 			
For the three months ended June 30, 2022, we had production revenue of $17,404 compared to $3,502 of production revenue for the three months ended June 30, 2021. Our cost of revenue, consisting of lease operating expenses and production taxes, was $31,453 for the three months ended June 30, 2022 compared with $(71,192) for the three months ended June 30, 2021. The change in revenue was impacted by an increase in production from the Oklahoma Properties and commodity prices. The change in lease operating expenses is due to a vendor refund during the 2021 period.

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Expenses for the three months ended June 30, 2022 and 2021

Three Months Ended June 30,	 
 	  	2022	 	  	2021	 	  	Change	 	  	%	 
Operating Expenses

General & Administrative

$	1,162,957	 	  	$	4,202,008	 	  	$	(3,039,051	) 	  	 	(72.3	)%

Total operating expenses

$	1,162,957	 	  	$	4,202,008	 	  	$	(3,039,051	) 	  	 	(72.3	)%

The change in general & administrative expenses during the three months ended June 30, 2022, compared to the same period in 2021 is related to reductions in directors fees, consulting services and investor relations expenses.

As described in “Our Properties—Intent to Acquired Additional Interests” one of the Orogrande Owners, an entity we intend to make an offer to acquire its working interest in the Orogrande Project, is Wolfbone Investments LLC, which is an affiliate of Gregory McCabe, who is also an affiliate of the Company.

Historical Results for the Six Months Ended June 30, 2022 and 2021

For the six months ended June 30, 2022, we had a net loss of $1,988,694 compared to a net loss of $5,236,601 for the six months ended June 30, 2021. The difference is primarily due to decreased general and administrative expenses for the six months ended June 30, 2022 offset with an increase in interest expense. At June 30, 2022, we had current assets of $1,224,145 and total assets of $48,404,381. As of June 30, 2022, we had current liabilities of $17,865,871. Stockholders’ equity was $30,516,573 at June 30, 2022.

Six Months Ended June 30,	 
 	  	2022	 	 	2021	 	 	Change	 	 	%	 
Product sales

$	17,404	 	 	$	5,973	 	 	$	11,431	 	 	 	191.4	%

Total Revenue

17,404	 	 	 	5,973	 	 	 	11,431	 	 	 	191.4	% 
Cost of Revenue

42,074	 	 	 	38,735	 	 	 	3,339	 	 	 	8.6	%

Gross Profit

$	(24,670	) 	 	$	(32,762	) 	 	$	8,092	 	 	 	24.7	%

Gross Profit percentage

141.7	% 	 	 	(548.5	)% 	 	 	70.8	% 	 			
For the six months ended June 30, 2022, we had production revenue of $17,404 compared to $5,973 of production revenue for the six months ended June 30, 2021. Our cost of revenue, consisting of lease operating expenses and production taxes, was $42,074 for the six months ended June 30, 2022 compared with $38,735 for the six months ended June 30, 2021. The change in revenue was impacted by an increase in production from the Oklahoma Properties.

Expenses for the six months ended June 30, 2022 and 2021

Six Months Ended June 30,	 
 	  	2022	 	  	2021	 	  	Change	 	  	%	 
Operating Expenses

General & Administrative

$	1,988,694	 	  	$	5,236,601	 	  	$	(3,247,907	) 	  	 	62.0	%

Total operating Expenses

$	1,988,694	 	  	$	5,236,601	 	  	$	(3,247,907	) 	  	 	62.0	%

The change in general & administrative expenses during the six months ended June 30, 2022, compared to the same period in 2021 is related to reductions in directors fees, consulting services and investor relations expenses.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity risk is the risk that we will not meet our financial obligations as they become due after use of currently available cash. We have a planning and budgeting process to monitor operating cash requirements, including amounts projected for capital expenditures, which are adjusted as input variables change. These variables include, but are not limited to, our ability to generate revenue from operations, general and administrative requirements and the availability of equity or debt capital. As these variables change, we may be required to issue equity or obtain debt financing.

At December 31, 2021, we had cash and cash equivalents of $1,989,419 compared to $130,504 as of December 31, 2020.

Cash from operating activities for the for the year ended December 31, 2021, was $(7,050,541) compared to $(3,300,589) for the year ended December 31, 2020.

Cash used in operating activities for the year ended December 31, 2021 can be attributed principally to net loss from operations of $8,238,808 adjusted for $4,642 in depreciation, depletion and amortization expense, a decrease in accrued liabilities, and an increase in accounts payable.

Cash used in operating activities during 2020 can be attributed principally to net loss from operations of $5,749,006 adjusted for $820,814 in depreciation, depletion and amortization expense, and $2,108,301 in impairment expense.

Cash used in investing activities for the year ended December 31, 2021 and for year ended December 31, 2020 was $14,805,511 compared to $2,271,968. Cash used in investing activities consisted primarily of investments in oil and natural gas properties in 2021 offset by proceeds from the sale of property in 2020.

Cash from financing activities for the year ended December 31, 2021 and for year ended December 31, 2020 was $23,714,967 compared to $1,128,451 for the year ended December 31, 2020. Cash from financing activities consisted primarily of contributions from, and a note payable to, Meta.

At June 30, 2022, we had cash and cash equivalents of $998,260 compared to $1,989,419 as of December 31, 2021.

Cash flows from operating activities for the six months ended June 30, 2022 was $(4,656,992) compared to $(5,855,887) for the six months ended June 30, 2021, a decrease of $1,198,895. Cash flows from operating activities for the six months ended June 30, 2022 can be primarily attributed to net loss from operations and a decrease in accounts payable.

Cash flows from operating activities for the six months ended June 30, 2021 can be primarily attributed to net loss from operations of $5,193,214 and a decrease in accrued expenses.

Reference the Consolidated Statements of Cash Flows included in the financial statements 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 operating costs.

Cash flows from investing activities for the six months ended June 30, 2022 was $(1,491,766) compared to $(1,713,604) for the six months ended June 30, 2021. Cash flows from investing activities principally consists of investment in oil and natural gas properties in Texas.

Cash flows from financing activities for the six months ended June 30, 2022 was $5,157,599 as compared to $11,398,151 for the six months ended June 30, 2021.

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Cash flows from financing activities consists of intercompany loans from Meta for the six months ended June 30, 2022. For the six months ended June 30, 2021, cash flows from financing activities also consisted of intercompany loans from Meta. 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 natural gas investments. We do not expect to pay cash dividends on our Common Stock in the foreseeable future.

On October 1, 2021, we issued a secured, revolving promissory note in an original principal amount of up to $15 million in favor of Meta (the “2021 Note”). The 2021 Note bears interest at 8% per annum, computed on the basis of a 360-day year, and matures March 31, 2023 (the “2021 Note Maturity Date”); provided, however, if we raise $30 million or more in capital through debt or equity or a combination thereof by the 2021 Note Maturity Date, the 2021 Note Maturity Date will be extended to September 30, 2023. If an event of default has occurred and is continuing, interest on the 2021 Note may accrue at the default rate of 12% per annum. The outstanding principal of the 2021 Note, together with all accrued interest thereon, becomes due on the 2021 Note Maturity Date. While the revolving commitment under the 2021 Note expires on 2021 Note Maturity Date, as of the date hereof, the full $15 million available under the 2021 Note has been fully drawn.

The 2021 Note is secured by a security interest in (a) pursuant to a Stock Pledge Agreement dated as of September 30, 2021 between Gregory McCabe (the “Pledgor”) and Meta (the “Stock Pledge Agreement”), 1,515,000 shares of common stock of Meta that are owned directly and beneficially by the Pledgor, and (b) pursuant to a Deed of Trust, Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment of Production dated as of September 30, 2021 made by Wolfbone Investments, LLC (an affiliate of the Pledgor) for the benefit of Meta (the “Security Agreement”), a 25% working interest beneficially owned by the Pledgor in the Orogrande Prospect as defined in the Security Agreement.

The 2021 Note includes a restrictive covenant that, subject to certain exceptions and qualifications, restricts our ability to merge or consolidate with another person or entity, or sell or transfer all or substantially all of our assets, unless we are the surviving entity or the successor entity assumes all of obligations under the 2021 Note.

Upon the occurrence and during the continuance of an event of default under the 2021 Note, Meta as the lender may declare all outstanding principal and accrued and unpaid interest under the 2021 Note immediately due and payable, may terminate any remaining commitment to make advances under the 2021 Note, and may exercise the other rights and remedies provided for under the 2021 Note and related security documents. The events of default under the 2021 Note include among other things, subject to grace periods in certain instances, payment defaults, breaches of covenants, an event of default under the Stock Pledge Agreement or the Security Agreement, bankruptcy and insolvency events with respect us or our subsidiaries, cross defaults with certain of our other material indebtedness, and material judgments against us.

On June 28, 2022, we borrowed $1.9 million as an advance from Meta to be treated as an unsecured term loan, in addition to the $441,000 previously advanced, under a Loan Agreement with Meta as the lender (the “Loan Agreement”), the proceeds of which are available for our working capital and general corporate purposes. As of the date of this prospectus, we had an aggregate principal amount outstanding of $5.0 million, which is the maximum amount available under the Loan Agreement. The loans are due and payable on March 31, 2023 (the “Maturity Date”), unless extended as described below. Loans under the Loan Agreement bear interest at a fixed rate of 8% per annum if no event of default exists, and at a fixed rate of 12% per annum if an event of default exists. Under the Loan Agreement, if we raise $30 million or more in capital through debt or equity or a combination thereof by the Maturity Date, the Maturity Date will be extended to October 3, 2023 and the 2021 Note plus the loans under the Loan Agreement would be amortized in six equal monthly installments.

We have the right to prepay the loans under the Loan Agreement in whole or in part at any time without penalty. Amounts repaid or prepaid may not be reborrowed. We will be required to prepay the loans upon an asset disposition (other than permitted asset sales), certain equity issuances (other than permitted equity), debt issuances (other than permitted debt), and certain extraordinary receipts. We are required to prepay the loans from our annual excess cash flow, if any.

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The Loan Agreement includes customary representations and covenants that, subject to certain exceptions and qualifications, restrict our ability to do certain things, such as: incur additional indebtedness; incur liens; engage in mergers, acquisitions, and asset sales; make loans and investments; declare dividends or redeem or repurchase equity interests; transact with affiliates on a non-arm’s length basis; and enter into certain restrictive agreements. In addition, the Loan Agreement contains customary affirmative covenants, including covenants regarding the payment of taxes and other obligations, maintenance of insurance, maintenance of our existence and material properties, customary visitation rights, reporting requirements, compliance with applicable laws and regulations, and formation or acquisition of new subsidiaries.

Upon the occurrence and during the continuance of an event of default, Meta as the lender has the right to declare all outstanding principal and accrued and unpaid interest under the Loan Agreement immediately due and payable and exercise certain other rights and remedies. The events of default under the Loan Agreement include among other things, subject to grace periods in certain instances, payment defaults, breaches of covenants or representations and warranties, a change in control or a material adverse change defined in the Loan Agreement, material judgments and attachments, cross defaults with certain other material indebtedness, and bankruptcy and insolvency events with respect to the Company and our subsidiaries.

Contractual Obligations and Other Commitments

Our most significant contractual obligations relate to the Loan Agreement, the 2021 Note and drilling and development commitments and other lease operating expenses under certain leases for the Orogrande Project.

Our debt obligations include the $15 million principal balance outstanding under the 2021 Note with Meta, which incurs interest at 8% per annum and matures on March 31, 2023. For the six months ended June 30, 2022, we incurred an interest expense in respect of the 2021 Note of $587,222 that is paid in kind. On September 2, 2022, we entered into a Loan Agreement that governs the term loans advanced to us from Meta on April 14, 2022, May 4, 2022, May 12, 2022, May 26, 2022, June 1, 2022, June 13, 2022, June 28, 2022, August 11, 2022 and August 29, 2022, for an aggregate principal balance outstanding of $5 million, which is the maximum amount of Meta’s commitment under the Loan Agreement. The term loans incur interest at a per annum rate equal to 8% and mature on March 31, 2023. Under both the 2021 Note and the Loan Agreement, if we raise additional capital through debt or equity, or any combination thereof, of at least $30,000,000 before the respective maturity dates, we will be entitled to extend maturity to October 3, 2023 and repay the outstanding balances in six equal monthly installments beginning in April 2023 up to such extended maturity date. In addition, we will be obligated to pay Meta for costs associated with the Spin-off. See the discussion under the caption “Certain Relationships and Related Party Transactions—Agreements with Meta—Distribution Agreement—Settlement of Expenses.” As of the date of this Prospectus, we do not have any long-term debt obligations.

In addition to our debt commitments, the Orogrande Project leases representing approximately 134,066 net acres in the Orogrande Basin in West Texas are subject to expiration in 2022 if we fail to drill five wells as obligated by the end of the 2022 calendar year. Unless we are able to negotiate an extension on these leases, these leases in the Orogrande Basin are also subject to expiration in 2023 in the event we fail to drill an additional five wells during the 2023 calendar year. In order to fulfill our drilling commitments for 2022, we currently estimate that our capital expenditures needs may be up to $10 million, and to the extent Meta pays any of these capital expenditures on our behalf, our indebtedness to Meta will increase. As such, we will require additional capital, and may not be able to obtain such additional capital when or in the amount necessary to fulfill our commitments under, and maintain our interest in, the leases. We do not yet know what our capital expenditure needs will be to satisfy our drilling commitments for the calendar year 2023. For a discussion of the risks relating to our drilling obligations, see “Risk Factors—Risks Related to Our Business”, including the risk factor “—Our acreage must be drilled before lease expiration in order to hold the acreage by production. In the highly competitive market for acreage, failure to drill sufficient wells in order to hold acreage will result in a substantial lease renewal cost, or if renewal is not feasible, loss of our lease and prospective drilling opportunities”. See also Note 4 of the notes to our financial statements as of and for the years ended December 31, 2020 and 2021 included elsewhere in this Prospectus.

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Management believes that currently available resources may not provide sufficient funds to enable us to meet our financing and drilling obligations for the remainder of the 2022 fiscal year and for the 2023 fiscal year. We anticipate that we will continue to incur operating losses and generate negative cash flows from operations for the foreseeable future. As a result, we will need additional capital resources to fund our operations both in the short term and in the long term, prior to achieving break even or positive operating cash flow. While we do not have any committed sources of capital, we expect to continue to opportunistically seek access to additional funds through public or private equity offerings or debt financings, through partnering or other strategic arrangements, including credit application arrangements with our third party servicers, or a combination of the foregoing. We may also seek additional credit support from Meta. Despite our efforts, we may face obstacles in continuing to attract new financing due to industry conditions and our history and current record of net losses. 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.

Critical Accounting Estimates

Oil and natural gas properties—The Company uses the full cost method of accounting for exploration and development activities as defined by the 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 natural 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 annually 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 natural 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.

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 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

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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.

Recent Accounting Pronouncements

Our audited financial statements and the accompanying notes thereto found elsewhere in this Prospectus contain a description of recent accounting pronouncements.

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MANAGEMENT

Executive Officers and Non-Employee Directors Following the Spin-Off

The following sets forth information regarding individuals who are currently expected to serve as executive officers and non-employee directors immediately after the Spin-Off, including their positions.

Name	  	Age	 	  	Position
Executive Officers

Clifton DuBose, Jr.

40	 	  	Chief Executive Officer, Chairman of the Board of Directors
Joseph DeWoody

40	 	  	President, Director
Lucas T. Hawkins

36	 	  	Chief Financial Officer
Delvina Oelkers

36	 	  	Chief Operating Officer
Key Employees

Kyle Bradford

42	 	  	Executive Vice President, Drilling & Construction
Daren Rader

38	 	  	Executive Vice President, Completions & Production
Non-Employee Directors

Robert Lance Cook

65	 	  	Director
Mia Pitts

38	 	  	Director
Kristin Whitley

38	 	  	Director
Executive Officers

Clifton DuBose, Jr. has successfully acquired, managed, and/or sold thousands of royalty acres and non-operated working interests in the Permian Basin. Since April 2018, Mr. DuBose has served as co-founder and member of Valor Mineral Management LLC (“Valor”). Valor is a mineral and working interest management firm which uses a proprietary software platform it has developed, known as “mineral.tech.” Since August 2016 Mr. DuBose has also served as President of Imperial Royalty Management I, LLC, which is the general partner of a company that owns certain mineral interests, and since August 2016 as the managing member of Korban Resources LLC, a company which invests in oil and gas interests. Mr. DuBose is also an attorney, licensed to practice law in the State of Texas. He earned his law degree from Georgetown Law, in Washington D.C.in 2009 and a BS in Agribusiness from Abilene Christian University in 2004.

Joseph DeWoody has served as the founder and partner of several successful minerals-rights companies, including Clear Fork Royalty, since April 2010, and Valor since May 2018. Mr. DeWoody implemented strategic initiatives at Valor, managing 80,000 oil and gas interests in over 2,000,000 gross acres across 32 States, with strong revenue growth since inception developing full P&L, strategy, and business operations. He also developed Valor’s proprietary mineral and working interest management software, known as “mineral.tech.” Mr. DeWoody has also structured and participated in multiple complex transactions in both operated and non-operated assets. He has managed reporting to partners, including quarterly compilations, annual audit, and contractual calculations and payments. Mr. DeWoody was the 2021 D CEO Energy Services and Technology Executive of the Year and is a life member of American Mensa. He received his BBA and MBA from Baylor University, where he played football. He was appointed to the Texas Board of Professional Geoscientists, and he serves as director of the National Association of Royalty Owners—Texas. He was named one of Oil and Gas Investor Magazine’s “Top 20 Under 40” and was featured in the Dallas Business Journal’s “Who’s Who in Energy.”

Lucas T. Hawkins is the Co-Founder and has served as Chief Financial Officer of Mammoth Exploration LLC, a private equity backed upstream oil and gas company, since June 2016. Since July 2013, Mr. Hawkins has served as VP—Business Development of Hawkins Exploration, Inc. (“HEI”). HEI is an independently owned oil and gas exploration company focused on the Permian Basin. Mr. Hawkins led, managed and executed numerous acquisitions and subsequent development of oil and gas properties across the Permian Basin. From 2010 to 2011, Mr. Hawkins served as an Associate with The Sterling Group, a middle market private equity group focusing on

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industrial, manufacturing and distribution businesses. From 2011 to 2013 Mr. Hawkins served as an Associate with Natural Gas Partners, an energy private equity firm. Mr. Hawkins has a background in energy investment banking and private equity and earned his BBA in Finance and Business Honors from the University of Texas at Austin.

Delvina Oelkers served as Asset Manager from March 2016 to March 2019 at Eclipse Resources and as Completions Manager from March 2019 to November 2020 at Montage Resources, in each position where she managed engineering teams, achieving cost and efficiency improvements while implementing innovative technology for substantial reserve recovery. She led her operations team through several successful M&A transactions. Ms. Oelkers designed completions for the Eclipse and Montage Resources Super Lateral Program, including the design and execution of the first world-record-setting “Purple Hayes 1H” Well. As an Asset Manager at Eclipse Resources, Ms. Delvina was responsible for leading the multidisciplinary team to prove-up the asset. By utilizing innovative technologies in design, the first exploratory well produced 35% higher than type curve.

Key Employees

Kyle Bradford has served as general manager of our subsidiary, Hudspeth Operating LLC, since September 2021. Prior to joining the Company, Mr. Bradford in the roles of Director, from February 2019 to November 2020 and VP of Drilling and Completions January 2014 to February 2019 for Eclipse Resources and Montage Resources. He led the drilling and operational teams through the development of the super-lateral program highlighted by the drilling and completion of the world record setting “Purple Hayes 1H”. He has a proven track record of implementing technological advancements to reduce costs and increasing operational efficiencies. He previously worked at Chesapeake Energy holding various positions including Senior Operations Engineer Utica Business Unit from April 2012 to January 2014, and Asset Manager of the Appalachian North Business Unit from October 2010 to April 2012. His career started in May 2002 at CNX Gas. He holds a Bachelor of Science in Petroleum Engineering from Marietta College.

Daren Rader has 16 years of experience across the MidCon and Appalachian Basins as an engineer and operations leader. From March 2016 to November 2020, Mr. Rader served as a Senior Operations Manager for Montage Resources, and from February 2017 to February 2019, served as an Operations Manager for Blue Ridge Mountain Resources. He was instrumental in creating synergy amongst the field teams through multiple mergers and acquisition transactions. Mr. Rader is highly experienced both in prolific unconventional condensate and natural gas production and completion operations. Mr. Rader has a proven track record as a team leader with a focus on optimizing and streamlining field operations to reduce cost and minimize cycle times. Mr. Rader has been with the Company since September 2021.

Non-Employee Directors

Robert Lance Cook spent 36 years at Shell Oil with final positions of Vice President of Wells Technology and Chief Scientist. Mr. Cook has extensive experience in Deepwater, Arctic, and Unconventional Research & Development and Operations. Mr. Cook is the founder and CEO of Enventure Global Technology, a joint venture between Shell and Halliburton. Mr. Cook has served as the COO of Sirius Well Manufacturing, a joint venture between Shell and CNPC and is a technologist with an extensive patent portfolio. Since retiring from Shell in 2016, Mr. Cook has served as Vice President of Production Operations for WellsX Inc. from 2017 to 2020 and in 2020, he founded and continues to serves as president and chief technology officer of Sage Geosystems Inc.

Mia Pitts is currently serving as Senior Counsel at Marsh McLennan Companies (February 2018-current) and previously was a litigator and regulatory compliance lawyer at Freshfields Bruckhaus Deringer (March 2010-March 2016), one of the world’s largest and oldest law firms. Ms. Pitts has represented corporate and individual clients in internal, regulatory, civil, and criminal investigations before the U.S. Security and Exchange Commission, Department of Justice, and state attorney generals as well as in shareholder securities litigation, class action litigations, and other private civil allegations and suits. She has also represented independent

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corporate oversight authorities appointed by the federal government, including the DOJ-appointed monitor of a global financial institution and the federal court-appointed receiver of a multi-national firm in an SEC securities fraud matter. Ms. Pitts graduated from Georgetown University Law Center and Barnard College of Columbia University.

Kristin Whitley, CPA, began her career in June 2006 as a public accounting with Whitley Penn where she worked for 10 years. While at Whitley Penn she served a variety of clients within the energy and mining industries. In August 2016, Mrs. Whitley joined Vista Minerals, a leading in-basin regional provider of sand to industrial, oil and gas companies, in the role of Chief Accounting Officer and less than a year later was named Chief Financial Officer. While at Vista Minerals, Mrs. Whitley has managed the finance and accounting, human resources, and information technology functions, participating in numerous capital raises, strategic initiatives, contract negotiations, and risk management exercises. Mrs. Whitley is a Certified Public Accountant in the State of Texas. She graduated from The University of Texas at Austin with her BBA and from Texas Christian University’s Neeley School of Business with her MBA. In 2019, Mrs. Whitley was named one of Oil and Gas Investor’s Forty Under 40 in Energy.

Conflicts of Interest

Nevada law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its directors, officers or stockholders. Our Amended and Restated Articles of Incorporation, to the maximum extent permitted from time to time by Nevada law, renounce any interest or expectancy that we have in, or right to be offered an opportunity to participate in, specified business opportunities that are from time to time presented to our directors, officers or stockholders or their respective affiliates. Our Amended and Restated Articles of Incorporation provide that, to the fullest extent permitted by law neither any director or officer nor his or her affiliates will have any duty to refrain from (i) engaging in a corporate opportunity in the same or similar lines of business in which we or our affiliates now engage or propose to engage or (ii) otherwise competing with us or our affiliates. In addition, to the fullest extent permitted by law, in the event that any director or officer acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for such director or officer or such person’s affiliates or for us or our affiliates, such person will have no duty to communicate or offer such transaction or business opportunity to us or any of our affiliates and they may take any such opportunity for themselves or offer it to another person or entity. We do not believe, however, that any fiduciary duties or contractual obligations of our directors or officers arising in the future would materially undermine our ability to operate our business. Our Amended and Restated Articles of Incorporation do not renounce our interest in any business opportunity that is expressly offered to a director or officer solely in his or her capacity as a director or officer of the Company. To the fullest extent permitted by law, no business opportunity will be deemed to be a potential corporate opportunity for us unless we would be permitted to undertake the opportunity under our Amended and Restated Articles of Incorporation, we have sufficient financial resources to undertake the opportunity and the opportunity would be in line with our business.

Director Independence

It is anticipated that after the Distribution a majority of the members of our Board will meet the criteria for independence as defined by the corporate governance guidelines to be adopted by our Board.

Corporate Governance Guidelines

The Board has adopted written corporate governance guidelines that serve as a flexible framework within which our Board and its committees operate. The guidelines will be available on our website at www.nextbridgehydrocarbons.com, and are available upon written request to our corporate secretary.

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Code of Business Conduct and Ethics

The Board has adopted a written code of ethics that is designed to deter wrongdoing and to promote, among other things:

•	 	
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

•	 	
the protection of the confidentiality of our non-public information;

•	 	
the responsible use of and control over our assets and resources;

•	 	
full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and other regulators and in our other public communications;

•	 	
compliance with applicable laws, rules and regulations; and

•	 	
accountability for adherence to the code and prompt internal reporting of any possible violation of the code.

The code of conduct and ethics will be available on our website at www.nextbridgehydrocarbons.com, and is available upon written request to our corporate secretary.

While the Board oversees risk management, company management is charged with managing risk. Management communicates routinely with the Board and individual directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management.

Our Board administers its risk oversight function as a whole by making risk oversight a matter of collective consideration. Much of this work has been delegated to committees, which will meet regularly and report back to the full Board.

Committees of Our Board

We have established an audit committee, a compensation committee, a nominating and governance committee and an ESG committee, each of which operate under a written charter that will be available on our website.

In addition, our Board may, from time to time, designate one or more additional committees, which shall have the duties and powers granted to it by our Board.

Audit Committee

Upon their appointment to the Board, the members of the Audit Committee will consist of Kristin Whitley, as the chairperson, Mia Pitts and Robert L. Cook, each of whom meet the independence requirements set forth in Rule 10A-3 under the Exchange Act and our Audit Committee Charter. Each member of the Audit Committee is financially literate, and Ms. Whitley has accounting and related financial management expertise and satisfies the criteria to be an “audit committee financial expert” under the rules and regulations of the SEC, as those qualifications are interpreted by our Board in its business judgment.

The functions of the Audit Committee include:

•	 	
oversee the quality and integrity of our financial statements, accounting practices and financial information we provide to the SEC or the public;

•	 	
review our annual and interim financial statements, the report of our independent registered public accounting firm on our annual financial statements, Management’s Report on Internal Control over Financial Reporting and the disclosures under Management’s Discussion and Analysis of Financial Condition and Results of Operations;

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 	•	 	
select and appoint an independent registered public accounting firm;

•	 	
pre-approve all services to be provided to us by our independent registered public accounting firm;

•	 	
review related party transactions;

•	 	
review with our independent registered public accounting firm and our management the accounting firm’s significant findings and recommendations upon the completion of the annual financial audit and quarterly reviews;

•	 	
review and evaluate the qualification, performance, fees and independence of our registered public accounting firm;

•	 	
meet with our independent registered public accounting firm and our management regarding our internal controls, critical accounting policies and practices and other matters;

•	 	
discuss with our independent registered public accounting firm and our management earnings releases prior to their issuance;

•	 	
oversee our internal audit function; and

•	 	
oversee our compliance program, response to regulatory actions involving financial, accounting and internal control matters, internal controls and risk management policies.

Compensation Committee

Upon their appointment to the Board, the members of the Compensation Committee will consist of Mia Pitts, as the chairperson, Kristin Whitley and Robert L. Cook, each of whom are independent, “non-employee directors” (within the meaning of Rule 16b-3 under the Exchange Act).

The functions of our Compensation Committee include:

•	 	
setting and reviewing our general policy regarding executive compensation;

•	 	
determining the compensation of our Chief Executive Officer and other executive officers;

•	 	
approving employment agreements for our Chief Executive Officer and other executive officers;

•	 	
reviewing the benefits provided to our Chief Executive Officer and other executive officers;

•	 	
overseeing our overall compensation structure, practices and benefits plans;

•	 	
administering our executive bonus and equity-based incentive plans; and

•	 	
assessing the independence of compensation consultants, legal counsel and other advisors to the Compensation Committee and hiring, approving the fees and overseeing the work of, and terminating the services of such advisors.

Corporate Governance and Nominating Committee

Upon their appointment to the Board, the members of the Corporate Governance and Nominating Committee will consist of Robert L. Cook, as the chairperson, Kristin Whitley and Mia Pitts, each of whom are independent, “non-employee directors” (within the meaning of Rule 16b-3 under the Exchange Act).

The functions of our Corporate Governance and Nominating Committee include:

•	 	
overseeing our corporate governance practices;

•	 	
reviewing and recommending to our Board amendments to our committee charters and other corporate governance guidelines;

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 	•	 	
reviewing and making recommendations to our Board regarding the structure of our various board committees;

•	 	
identifying, reviewing and recommending to our Board individuals for election to the Board;

•	 	
adopting and reviewing policies regarding the consideration of board candidates proposed by stockholders and other criteria for Board membership; and

•	 	
overseeing our Board’s annual self-evaluation.

ESG Committee

Upon their appointment to the Board, the members of the ESG Committee will consist of Joseph DeWoody, as the chairperson, Kristin Whitley and Robert L. Cook.

The functions of our ESG Committee include:

•	 	
provide oversight with respect to ESG matters;

•	 	
advise and assist the Board with its responsibilities for the oversight of ESG matters; and

•	 	
provide oversight with respect to our annual sustainability report, which we plan to make available through our website.

Board Leadership Structure and Role in Risk Oversight

Governance Structure

The position of Board chairman is filled by our Chief Executive Officer (the “CEO”). We believe this combined leadership structure is appropriate for us because our Chairman and CEO (i) conveys a singular, cohesive message to our stockholders, employees, industry partners and the investment community, (ii) eliminates any ambiguity as to who is accountable for our performance and (iii) is able to draw on his knowledge of our operations to provide the Board with leadership and properly focus discussions on the issues of greatest importance to the Company and our stockholders. Our directors and management team engage frequently and directly in the flow of information and ideas and we believe our combined leadership structure facilitates the quality, quantity and timeliness of the information flow and communication.

Since our Board chairman is also a member of management, our Board has designated Robert L. Cook, a non-management director, as “Lead Director.” The responsibilities of the Lead Director include:

•	 	
Coordinating the scheduling of board meetings and preparation of agenda material for board meetings and executive sessions;

•	 	
Defining the scope, quality, quantity and timeliness of the flow of information between management and the Board;

•	 	
Chairing all meetings of non-management directors and of the executive committee;

•	 	
Overseeing the process of hiring, firing, evaluating and compensating the CEO;

•	 	
Approving the retention of consultants who report directly to the Board;

•	 	
Facilitating communication between the directors and the CEO, and communicating the directors’ perspectives and consensus view to the CEO;

•	 	
Assisting the Board and officers in assuring compliance with and implementation of our governance principles;

•	 	
Leading the annual evaluation of the chairman;

•	 	
Serving as an independent point of contact for stockholders wishing to communicate with the Board;

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 	•	 	
Acting as principal liaison between the independent directors and the CEO on sensitive issues; and

•	 	
Leading the Board in anticipating and responding to crises.

The Board’s Role in Risk Oversight

The Board oversees that the assets of the Company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the Board’s oversight of the various risks facing our company. In this regard, our board seeks to understand and oversee critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of our business strategy. The Board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its objectives.

Related Party Transactions

The Board has adopted a written policy regarding the approval of related party transactions. At regularly scheduled audit committee meetings, management will recommend any related party transactions that are contemplated, and such transactions will require the audit committee’s approval. Generally, a “related party” is each of our executive officers, directors, nominees for director, any stockholder owning greater than five percent of our outstanding shares, including any immediate family member of each of the foregoing, and any entity owned or controlled by any of the foregoing. Transactions that are available to all of our employees generally or totaling less than $5,000 when aggregated with all similar transactions are excluded from the policy.

Legal Proceedings

None of our current and future directors and executive officers has been involved in legal proceedings that would be material to an evaluation of our management team.

Director Compensation

We are currently in the process of developing the details regarding the compensation packages of only those directors who are considered independent directors. Following the Spin-Off, we expect to grant each of our directors who are not employed by us or any of our subsidiaries (“non-employee directors”) an option to purchase approximately 412,500 shares of our Common Stock. The vesting of these options will be subject to achievement of certain performance-based conditions on substantially the same terms as the options expected to be granted to our named executive officers described below under “Performance-Based Options.”

We did not pay any compensation or grant any equity or other incentive awards to any of non-employee directors during the fiscal year ended December 31, 2021, nor did any of our non-employee directors receive any such compensation or awards from Meta or any of our other affiliates for their services during such fiscal year.

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EXECUTIVE COMPENSATION

We are currently in the process of determining the philosophy and design of our compensation plans and programs to be offered to our senior management team, which we expect will incorporate elements of compensation to attract, retain and motivate highly talented individuals of our management team, align the interests of management with the interests of our stockholders and incentivize behaviors that we believe are necessary to enable us to succeed in our mission while upholding our values in a highly competitive marketplace. All decisions with respect to management compensation are made by the Board (and after the Spin-Off, will be made by the Compensation Committee).

Incentive Compensation Awards

Our executive officers have not historically been paid bonuses or received equity awards, and our Board and Compensation Committee has not yet established a formal compensation policy for the determination of such awards. If our revenue grows and bonuses become affordable and justifiable, we expect to use the following parameters in justifying and quantifying bonuses for our executive officers: (1) the growth in our revenue, (2) the growth in our earnings before interest, taxes, depreciation and amortization, as adjusted (“EBITDA”), and (3) the value of our Common Stock. The Board and Compensation Committee has not adopted specific performance goals and target bonus amounts for any of its fiscal years, but may do so in the future. Subject to approval by the sole stockholder, we also expect that our executive officers will be granted performance-based stock options under our 2022 Plan (described below) in connection with or immediately following the Spin-Off and may be granted additional equity awards in future years under the 2022 Plan or a successor plan. The Compensation Committee will recommend to the Board the size, type and other terms of such equity awards.

Employment Agreements

In connection with the Spin-Off, we entered into new employment agreements with certain of our named executive officers identified in the Summary Compensation Table below to be effective immediately following the Spin-Off. These agreements do not have a specified term and provide for the executive to receive an annual base salary as follows: Mr. DuBose – $400,000; Mr. DeWoody - $395,000; Mr. Hawkins - $390,000 and Ms. Oelkers - $385,000. Each executive is also eligible for an annual discretionary bonus as determined by the Compensation Committee, with a target bonus equal to 50% of the executive’s base salary, and to participate in our benefit plans to be made available to employees generally. If the executive’s employment with the Company is terminated by the Company without “cause” or by the executive for “good reason” (as defined in the agreement), the executive will receive severance of 12 months base salary, payable in installments over a 12-month period, a pro-rated amount of the executive’s target bonus for the year of termination, payment of the executive’s COBRA premiums for 12 months, and 12 months’ accelerated vesting of the executive’s then-outstanding and unvested equity awards granted by the Company (except that, in the case of Mr. DuBose the cash severance and pro-rated target bonus will be payable only if such termination occurs following the initial 12 months after the Spin-Off). However, if such a termination of the executive’s employment occurs in connection with or within 12 months following a change in control of the Company, the executive’s cash severance will equal 18 months of base salary (paid in a lump sum together with the pro-rated target bonus), the executive will be entitled to payment of COBRA premiums for 18 months, and the executive’s then-outstanding equity awards granted by the Company will be fully vested. In each case, the executive’s right to receive these severance benefits is subject to the executive’s providing a release of claims to the Company and continued compliance with confidentiality, non-competition, non-solicitation and other covenants in favor of the Company set forth in the employment agreement. Mr. DuBose, Mr. DeWoody and Ms. Oelkers were each party to an employment agreement with Hudspeth Operating, LLC, one of our subsidiaries (as reflected in the Summary Compensation Table below). The agreements between Hudspeth Operating, LLC and Mr. DuBose, Mr. DeWoody and Ms. Oelkers have been superseded by their new employment agreements with us.

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Performance-Based Options

In connection with the Spin-Off, we expect to grant each of the following executive officers a performance-based stock option under the 2022 Plan described below with respect to the following number of shares: for Mr. DuBose, an amount equal to three percent (3%) of outstanding shares; and for Mr. DeWoody, Mr. Hawkins and Ms. Oelkers, an amount equal to one percent (1%) of outstanding shares (the “Option Percentage”). The exercise price of each of these options will be established at grant based on an implied fair market value of $199,500,000 for the Company’s working interest in the Orogrande Project (which is significantly higher than the estimated fair market value of the Company’s interest as of the date of the Spin-off and is intended to create an additional incentive for the executives to increase the value of the Company’s working interest above that threshold amount). If the Company increases its working interest in the Orogrande Project while the option is outstanding and subject to compliance with applicable tax laws, the option agreement will provide that the exercise price will increase proportionally based on an implied fair market value of $300,000,000 if the Company’s working interest were to increase to 100%. If the executive’s interest represented by the option is diluted by an increase in the Company’s working interest, the executive may be entitled to an additional option grant to restore their Option Percentage. The vesting of the option will generally be contingent on the optionee’s continued employment or service for at least one year following the Spin-off (or such longer period as provided in the option agreement). Each of these options will have a maximum term of 10 years and will be granted under, and subject to the terms of, the 2022 Plan described below.

Equity Incentive Plan

Our Board adopted the 2022 Equity Incentive Plan (the “2022 Plan”) to provide an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons. Meta, as the current sole stockholder, approved the 2022 Plan prior to the Spin-Off. The summary of the 2022 Plan below is qualified in its entirety by the full text of the plan document, which is being filed with the SEC as an exhibit to this amendment to the Registration Statement on Form S-1, of which this prospectus is a part and is available through the SEC’s internet site at http://sec.report.

Employees, officers, directors and consultants that provide services to us or one of our subsidiaries may be selected to receive awards under the 2022 Plan. Our Compensation Committee will administer the 2022 Plan. The Compensation Committee has broad authority to:

•	 	
select participants and determine the types of awards that they are to receive;

•	 	
determine the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or the award and establish the vesting conditions (if applicable) of such shares or awards;

•	 	
cancel, modify or waive our rights with respect to, or modify, discontinue, suspend or terminate any or all outstanding awards, subject to any required consents;

•	 	
construe and interpret the terms of the 2022 Plan and any agreements relating to the plan;

•	 	
accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards subject to any required consent;

•	 	
subject to the other provisions of the 2022 Plan, make certain adjustments to an outstanding award and authorize the termination, conversion, substitution or succession of an award; and

•	 	
allow the purchase price of an award or shares of our Common Stock to be paid in the form of cash, check or electronic funds transfer, by the delivery of previously-owned shares of our Common Stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third party payment or cashless exercise on such terms as the administrator may authorize or any other form permitted by law.

The number of shares of our Common Stock initially reserved for issuance with respect to awards granted under the 2022 Plan is 50,000,000. The share limit will automatically increase on the first trading day in January of

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each year (commencing with January 2023). Any shares subject to awards that are not paid, delivered or exercised before they expire or are canceled or terminated, fail to vest, as well as shares used to pay the purchase or exercise price of awards or related tax withholding obligations, will become available for other award grants under the 2022 Plan. As of the date of this prospectus, no awards have been granted under the 2022 Plan, and the full number of shares reserved under the 2022 Plan is available for award purposes.

Awards under the 2022 Plan may be in the form of incentive or nonqualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including cash awards. Awards under the plan generally will not be transferable other than by will or the laws of descent and distribution, except that the plan administrator may authorize certain transfers.

Nonqualified and incentive stock options may not be granted at prices below the fair market value of the common stock on the date of grant. Incentive stock options must have an exercise price that is at least equal to the fair market value of our Common Stock on the date of grant (or 110% of the fair market value of our Common Stock for incentive stock option grants to any 10% owner of our Common Stock). The maximum term of options and stock appreciation rights granted under the plan is 10 years (or five years for incentive stock option grants to any 10% owner of our Common Stock). These and other awards may also be issued solely or in part for services. Awards are generally paid in shares of our Common Stock or in cash. The plan administrator may provide for the deferred payment of awards and may determine the terms applicable to deferrals.

As is customary in incentive plans of this nature, the number and type of shares available under the 2022 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, will be subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the stockholders. In no case (except due to an adjustment referred to above or any repricing that may be approved by our stockholders) will any adjustment be made to a stock option or stock appreciation right award under the 2022 Plan (by amendment, cancellation and regrant, exchange or other means) that would constitute a repricing of the per-share exercise or base price of the award.

Generally, and subject to limited exceptions set forth in the 2022 Plan, if we dissolve or undergo certain corporate transactions such as a merger, business combination or other reorganization, or a sale of all or substantially all of its assets, all awards then-outstanding under the 2022 Plan will become fully vested or paid, as applicable, and will terminate or be terminated in such circumstances, unless the plan administrator provides for the assumption, substitution or other continuation of the award. The plan administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2022 Plan. For example, the administrator could provide for the acceleration of vesting or payment of an award in connection with a corporate event that is not described above and provide that any such acceleration shall be automatic upon the occurrence of any such event.

Our Board will have the ability to amend or terminate the 2022 Plan at any time, but no such action will affect any outstanding award in any manner materially adverse to a participant without the consent of the participant. Plan amendments will be submitted to stockholders for their approval as required by applicable law or any applicable listing agency. The 2022 Plan will not be exclusive – our Board and Compensation Committee may grant stock and performance incentives or other compensation, in stock or cash, under other plans or authority.

The 2022 Plan terminates on the tenth anniversary date of the adoption. However, the plan administrator will retain its authority under the 2022 Plan until all outstanding awards are exercised or terminated.

Benefits

At this stage of our business, we provide no benefits or prerequisites for our employees other than health insurance and vacation benefits that we believe are generally comparable to those offered by other small private

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and public companies or as may be required by applicable state employment laws. We do not have a 401(k) retirement plan or any other retirement plan for our employees NEOs. We may adopt these plans and confer other fringe benefits for our executive officers in the future.

Summary Compensation Table—Fiscal Year 2021

As an emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined under the Securities Act of 1933, as amended, which require compensation disclosure for our principal executive officer and up to two other executive officers who were employed by our wholly owned subsidiary Hudspeth Operating, LLC as of December 31, 2021 (also referred to as our “named executive officers” or “NEOs”). The table below sets forth the annual compensation for services rendered during 2021 by our named executive officers.

Name and Principal Position	 	Year	 	 	Salary
($)	 	 	Bonus
($)	 	 	Stock
Awards
($)	 	 	Option
Awards
($)	 	 	Non-Equity
Incentive Plan
Compensation
($)	 	 	Non-Qualified
Deferred
Compensation
Earnings ($)	 	 	All Other
Compensation
($)	 	 	Total
($)	 
Clifton DuBose, Jr.(2)

2021	 	 	 	126,667	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	11,300	(1) 	 	 	137,967	 
Chief Executive Officer

Joseph DeWoody(2)

2021	 	 	 	63,333	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	11,300	(1) 	 	 	74,633	 
President

Delvina Oelkers(2)

2021	 	 	 	121,915	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	11,300	(1) 	 	 	133,215	 
Chief Operating Officer

(1)	
The amount includes insurance reimbursements paid to Mr. DuBose, Mr. DeWoody and Ms. Oelkers.

(2)	
Mr. DuBose, Mr. DeWoody and Ms. Oelkers each commenced employment with one of our subsidiaries, Hudspeth Operating, LLC, on September 7, 2021 each as a general manager.

Outstanding Equity Awards as of December 31, 2021

As of December 31, 2021, our NEOs did not hold any outstanding equity awards with respect to our equity securities or equity securities of Meta or any of its affiliated companies.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

All of the Common Stock is currently beneficially owned by Meta. After the Spin-Off, Meta will not own any of the Common Stock. The following table provides information with respect to the expected beneficial ownership of the Common Stock after giving effect to the Spin-Off by (i) each person who we believe will be a beneficial owner of more than 5% of the outstanding Common Stock, (ii) each of our directors and our NEOs, and (iii) all directors and executive officers as a group. We based the share amounts on each person’s beneficial ownership of Series A Preferred Stock as of                     , 2022, unless we indicate some other basis for the share amounts, and assuming a distribution ratio of one share of our Common Stock for each share of Meta’s Series A Preferred Stock.

To the extent our directors and officers own Series A Preferred Stock at the time of the Spin-Off, they will participate in the Spin-Off on the same terms as other holders of Series A Preferred Stock.

Except as otherwise noted in the footnotes below, each person or entity identified below has sole voting and investment power with respect to such securities. Following the Spin-Off, we will have outstanding an aggregate of shares of Common Stock based upon shares of Series A Preferred Stock outstanding on                     , 2022 and applying the distribution ratio of one share of our Common Stock for each share of Series A Preferred Stock held as of the Record Date.

Name of Beneficial Owner	  	Number of Series A
Preferred Stock
Beneficially Owned
Before Distribution	 	 	Percentage of Series
A Preferred Stock
Beneficially Owned
Before Distribution	 	 	Number of
Common Stock
Beneficially Owned
After Distribution	 	  	Percentage of
Common Stock
Beneficially Owned
After Distribution	 
5% or More Stockholders

Gregory McCabe

6015 Green Hill Ct.

Midland, TX 79707

19,605,348	(1) 	 	 	11.84	% 	 	 	19,605,348	 	  	 	11.84	% 
Directors and Executive Officers

Robert L. Cook

300,000	 	 	 	0.18	% 	 	 	300,000	 	  	 	0.18	% 
Clifton DuBose Jr.

—  	 	 	 	—  	 	 	 	—  	 	  	 	—  	 
Joseph DeWoody

—  	 	 	 	—  	 	 	 	—  	 	  	 	—  	 
Lucas T. Hawkins

—  	 	 	 	—  	 	 	 	—  	 	  	 	—  	 
Delvina Oelkers

—  	 	 	 	—  	 	 	 	—  	 	  	 	—  	 
Mia Pitts

—  	 	 	 	—  	 	 	 	—  	 	  	 	—  	 
Kristin Whitley

—  	 	 	 	—  	 	 	 	—  	 	  	 	—  	 
Kyle Bradford

—  	 	 	 	—  	 	 	 	—  	 	  	 	—  	 
Daren Rader

—  	 	 	 	—  	 	 	 	—  	 	  	 	—

All officers and directors as a group (9 persons)

300,000	 	 	 	0.18	% 	 	 	300,000	 	  	 	0.18	%

(1)	
Represents shares of Series A Preferred Stock owned personally by Mr. McCabe and further includes 797,099 shares out of 19,605,348 shares owned by G MC Exploration, LLC, an entity that is owned 50% by Mr. McCabe.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

With respect to the standards applied by the audit committee when deciding whether to approve a related party transaction, the audit committee shall approve or ratify the transaction if it is on terms believed to be comparable to those that could be obtained in arm’s length dealings with an unrelated third party. We believe that the transactions and agreements discussed below (including renewals of any existing agreements) between us and related third parties are at least as favorable to us as could have been obtained from unrelated parties at the time they were entered into.

Transactions with Stockholder Gregory McCabe

On August 7, 2014, our predecessor entered into a Purchase Agreement (the “Purchase Agreement”) with Hudspeth Oil Corporation (“Hudspeth”), McCabe Petroleum Corporation (“MPC”), and Gregory McCabe, Meta’s former Chairman. Mr. McCabe was the sole owner of both Hudspeth and MPC. 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 that was entered into as a part of the Purchase Agreement (the “Participation Agreement”). As of December 31, 2021, leases covering approximately 134,000 acres remain in effect that are subject to the Participation Agreement. As of June 30, 2022, we had a balance of $165,238 for an account receivable due from McCabe Petroleum Corporation for amounts advanced related to the Orogrande Project pursuant to the terms of the Participation Agreement.

Mr. McCabe also owns a controlling interest in Wolfbone Investments, LLC (“Wolfbone”), the owner of certain properties in the Orogrande Project. On August 6, 2018, we and Hudspeth entered into a Purchase & Settlement Agreement (the “Settlement Agreement”) with Founders Oil & Gas Operating, LLC, Wolfbone and MPC, which agreement provided for Founders assigning its 50% working interest in the oil and gas leases of the Orogrande Project to Hudspeth and Wolfbone equally, with each entity receiving 25% working interest.

Under that certain Farmout Agreement, by and among Hudspeth, Pandora Energy LP, Founders Oil & Gas, LLC, MPC and Mr. McCabe dated as of September 23, 2015, as amended, future well capital spending obligations remained the same 50% contribution from Hudspeth and 50% from Wolfbone until such time as the $40.5 million to be spent on the project. Cumulative capital spending did not exceed $40.5 million until after the closing of the Arrangement. With such $40.5 MM threshold being met, Wolfbone will bear 25% of the costs of the wells being drilled in the Orogrande acreage going forward provided that Wolfbone elects to participate in drilling such wells.

Additionally, Mr. McCabe owns a controlling interest in Magdalena Royalties, LLC (“Magdalena”), an entity that holds a 4.5% overriding royalty interest in the Orogrande acreage. Magdalena’s overriding royalty interest in the Orogrande acreage, which was obtained prior to, and was not a part of any of the transactions with us or subsidiaries.

Effective April 4, 2016, Torchlight Energy, Inc. (“TEI”) acquired from MPC a 66.66% working interest in approximately 12,000 acres in the Midland Basin. As part of that transaction, MPC, TEI, and Imperial Exploration, LLC entered into Participation Agreement effective as of May 1, 2016. MPC and another unrelated working interest owner retained a back-in after payout working interest of 25% in that same acreage, and the interest will be triggered back to MPC upon the proceeds from production equal the costs of developing the project area.

Lastly, on August 13, 2020, our subsidiaries TEI and Torchlight Hazel, LLC (collectively, “Torchlight Subs”) entered into the Option Agreement with MHP and MPC. Under the Option Agreement, MHP was obligated to satisfy certain drilling obligations on the Hazel Project. Further, under the terms of the Option Agreement (which was amended in September 2020), MHP had the option to purchase the entire Hazel Project no later than May 31, 2021. The Option Agreement provided that if MHP declined to exercise the option to acquire the property, we

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would be obligated to reimburse MHP for its cost of the development activity to the extent that the wells produced revenues beyond the date of the option’s lapse until the total amount of development expenses are reimbursed. MHP declined to exercise the option in 2021.

For a discussion regarding prior transactions and our ongoing relationship with Mr. McCabe and certain entities controlled by Mr. McCabe with respect to the Oregrande Project and Hazel Project, please refer to Note 4 of the notes accompanying the financial statements included elsewhere in this Prospectus.

Transactions with Meta

Following the Spin-Off, we and Meta will operate independently, and neither will have any ownership interest in the other. In order to govern the ongoing relationships between us and Meta after the Spin-Off, we and Meta intend to enter into certain agreements following the Spin-Off, and under which we and Meta will agree to indemnify each other against certain liabilities arising from our respective businesses. The following summarizes the terms of the material agreements we expect to enter into with Meta.

Assignment of Company Interests

Pursuant to an Assignment of Company Interests and Stock Power dated as of June 28, 2022 between Meta and us, Meta assigned and conveyed to us one hundred percent (100%) of the equity interest of each of Torchlight Energy, Inc., Torchlight Hazel, LLC and Hudspeth Oil Corporation, such that following such assignment and conveyance, each of such entities became our wholly-owned subsidiaries.

2021 Note

In 2021, we entered into a note payable with Meta to borrow up to $15 million. On October 1, 2021, the Company issued the 2021 Note, which bears interest at 8% per annum, computed on the basis of a 360-day year, and matures March 31, 2023 (the “2021 Note Maturity Date”); provided, however, if we raise $30 million or more in capital through debt or equity or a combination thereof by the 2021 Note Maturity Date, the 2021 Note Maturity Date will be extended to September 30, 2023, and the outstanding principal of the 2021 Note will amortize in six equal monthly installments. If an event of default has occurred and is continuing under the 2021 Note, interest on the 2021 Note may accrue at the default rate of 12% per annum. The outstanding principal of the 2021 Note, together with all accrued interest thereon, becomes due on the 2021 Note Maturity Date. The 2021 Note includes a restrictive covenant that, subject to certain exceptions and qualifications, restricts the Company’s ability to merge or consolidate with another person or entity, or sell or transfer all or substantially all of its assets, unless the Company is the surviving entity or the successor entity assumes all of obligations under the 2021 Note. The note payable is collateralized by certain shares of common stock in Meta held by one of its stockholders and by a lien on a 25% interest in the Orogrande Project.

Loan Agreement

We entered into the Loan Agreement with Meta as the lender which governs the unsecured term loans previously advanced to us on April 14, 2022, May 4, 2022, May 12, 2022, May 26, 2022, June 1, 2022, June 13, 2022, June 28, 2022, August 11, 2022 and August 29, 2022, for an aggregate principal balance outstanding of $5 million, each bearing interest at 8% per annum. For additional discussion regarding the terms of the Loan Agreement, see the discussion under the heading “Liquidity and Capital Resources” included elsewhere in this Prospectus.

Distribution Agreement

We intend to enter into a Distribution Agreement with Meta before the Distribution. The Distribution Agreement will set forth our agreements with Meta regarding the principal actions to be taken in connection with the

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Spin-Off. It will also set forth other agreements that govern aspects of our relationship with Meta following the Spin-Off. We have not yet finalized all the terms of this agreement, and we intend to include additional details on the terms of this agreement in an amendment to this Prospectus.

Intercompany Arrangements. All agreements, arrangements, commitments and understandings, including most intercompany accounts payable or accounts receivable, between us, on the one hand, and Meta, on the other hand, will terminate effective as of the Distribution, except specified agreements and arrangements that are intended to survive the Distribution.

The Distribution. The Distribution Agreement will govern Meta’s and our respective rights and obligations regarding the proposed Distribution. Prior to the Distribution, Meta will deliver all the issued and outstanding shares of our common stock to the distribution agent. Following the Distribution Date, the distribution agent will electronically deliver the shares of our common stock to Meta stockholders based on the distribution ratio. The Meta Board will have the sole and absolute discretion to determine the terms of, and whether to proceed with, the Distribution.

Settlement of Expenses. Within 90 days after consummation of the Spin-Off, we and Meta have agreed to negotiate the settlement and agreement regarding (i) advances made to us by Meta or expenses paid by Meta on our behalf, whether before or after the Spin-Off and (ii) costs related to the Spin-Off that are to be borne by us. In addition, to the extent Meta signs or guaranties any credit applications with trade creditors on our behalf to allow us to meet our drilling obligations, any amounts drawn under such credit applications would be included in the settlement. All the above mentioned amounts owed by us to Meta are expected to become payable pursuant to a promissory note on terms to be negotiated.

Conditions. The Distribution Agreement will also provide that several conditions must be satisfied or waived by Meta in its sole and absolute discretion before the Distribution can occur. For further information about these conditions, see “The Spin-Off—Conditions to the Spin-Off.” The Meta Board may, in its sole and absolute discretion, determine the Record Date, the Distribution Date and the terms of the Spin-Off and may at any time prior to the completion of the Spin-Off decide to abandon or modify the Spin-Off.

Exchange of Information. We and Meta will agree to provide each other with information reasonably necessary to comply with reporting, disclosure, filing or other requirements of any national securities exchange or governmental authority, for use in judicial, regulatory, administrative and other proceedings and to satisfy audit, accounting, litigation and other similar requests. We and Meta will also agree to use reasonable best efforts to retain such information in accordance with our respective record retention policies as in effect on the date of the Distribution Agreement. Until the end of the first full fiscal year following the Distribution, each party will also agree to use its reasonable best efforts to assist the other with its financial reporting and audit obligations.

Termination. The Meta Board, in its sole and absolute discretion, may terminate the Distribution Agreement at any time prior to the Distribution.

Release of Claims. We and Meta will each agree to release the other and its affiliates, successors and assigns, and all persons that prior to the Distribution have been the other’s stockholders, directors, officers, members, agents and employees, and their respective heirs, executors, administrators, successors and assigns, from certain claims against any of them that arise out of or relate to events, circumstances or actions occurring or failing to occur or any conditions existing at or prior to the time of the Distribution.

Indemnification. We and Meta will each agree to indemnify the other and each of the other’s current, former and future directors, officers and employees, and each of the heirs, administrators, executors, successors and assigns of any of them, against certain liabilities incurred in connection with the Spin-Off and our and Meta’s respective businesses. The Distribution Agreement will also specify procedures regarding claims subject to indemnification, including our entitlement to indemnification with respect to the matters described under “Legal Proceedings” in this Prospectus.

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Tax Matters Agreement

The Tax Matters Agreement will govern Meta’s and our respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes incurred as a result of the Spin-Off), tax attributes, tax returns, tax contests and certain other tax matters. A copy of the Tax Matters Agreement is included as an exhibit to our Registration Statement on Form S-1, of which this prospectus forms a part, and is incorporated in this prospectus by reference.

The Tax Matters Agreement allocates responsibility for the preparation and filing of certain tax returns (and the

payment of taxes reflected thereon), including Meta’s consolidated federal income tax return, tax returns

associated with both the Meta business and our business, and tax returns associated with either the Meta business

or our business, and provides for certain reimbursements by the parties.

Under the Tax Matters Agreement, we will be liable for taxes of Meta attributable to us or our subsidiaries or arising or resulting from the Spin-Off. We will bear liability for any transfer taxes incurred on the Spin-Off.

Each of Meta and the Company will indemnify each other against certain taxes allocated to such party under the Tax Matters Agreement, and related out-of-pocket costs and expenses.

We encourage you to read the Tax Matters Agreement carefully.

Related Party Transactions

Policy and Procedures Governing Related Person Transactions

Our audit committee of the Board will adopt written procedures in evaluating the terms and provisions of proposed related party transactions or agreements in accordance with the Exchange Act, and the fiduciary duties of directors under Nevada law. Our related party transaction procedures will contemplate audit committee review and approval of all new agreements, transactions or courses of dealing with related parties, including any modifications, waivers or amendments to existing related party transactions. We will ensure that the terms of related party transactions are at least as favorable to us as could have been obtained from unrelated parties at the time of the transaction. The audit committee will consider, at a minimum, the nature of the relationship between us and the related party, the history of the transaction (in the case of modifications, waivers or amendments), the terms of the proposed transaction, our rationale for entering into the transaction and the terms of comparable transactions with unrelated third parties. In addition, management and internal audit will annually analyze all existing related party agreements and transactions and review them with the audit committee.

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DESCRIPTION OF OUR CAPITAL STOCK

General

Prior to the Distribution Date, Meta, as our sole stockholder, approved and adopted our Amended and Restated Articles of Incorporation, and our Board approved and adopted our Amended and Restated By-laws. The following summarizes information concerning our capital stock, including material provisions of our Amended and Restated Articles of Incorporation, our Amended and Restated By-laws and certain provisions of Nevada law. You are encouraged to read our Amended and Restated Articles of Incorporation and our Amended and Restated By-laws, which have been filed as exhibits to the Registration Statement on Form S-1, of which this Prospectus is a part, for greater detail with respect to these provisions.

The Company was incorporated on August 31, 2021, and 1 share of Common Stock was issued to Meta. Subsequent to the formation of the Company, we have not sold any securities of the Company; provided, that as of July 2022, the Company issued 165,523,362 additional shares of Common Stock to Meta.

Authorized Capital Stock

Immediately following the Spin-Off, our authorized capital stock will consist of 500,000,000 shares of Common Stock, par value $0.0001 per share, and 50,000,000 shares of preferred stock, par value $0.0001 per share.

Common Stock

Shares Outstanding. Immediately following the Spin-Off, we estimate that approximately 165.5 million shares of our Common Stock will be issued and outstanding, based on the approximate number of shares of Series A Preferred Stock outstanding as of August 30, 2022. The actual number of shares of our Common Stock outstanding immediately following the Spin-Off will depend on the actual number of shares of Series A Preferred Stock outstanding on the Record Date.

Voting Rights. The holders of our Common Stock will be entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Holders of shares of our Common Stock will not have cumulative voting rights.

Other Rights. Subject to the preferential liquidation rights of any preferred stock that may be outstanding, upon our liquidation, dissolution or winding-up, the holders of our Common Stock will be entitled to share ratably in our assets legally available for distribution to our stockholders.

Fully Paid. The issued and outstanding shares of our Common Stock are fully paid and non-assessable. Any additional shares of Common Stock that we may issue in the future will also be fully paid and non-assessable.

The holders of our Common Stock will not have preemptive rights or preferential rights to subscribe for shares of our capital stock.

Preferred Stock

Our Amended and Restated Articles of Incorporation authorize our Board to designate and issue from time to time one or more series of preferred stock without stockholder approval. If we offer a new series of preferred stock, a more specific description may be filed with the SEC, and the designations and rights of such preferred stock will be described in an accompanying prospectus supplement, including the following terms:

•	 	
the series, the number of shares offered, and the liquidation value of the preferred stock;

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 	•	 	
the price at which the preferred stock will be issued;

•	 	
the dividend rate, the dates on which the dividends will be payable, and other terms relating to the payment of dividends on the preferred stock;

•	 	
the liquidation preference of the preferred stock;

•	 	
the voting rights of the preferred stock;

•	 	
whether the preferred stock is redeemable, or subject to a sinking fund, and the terms of any such redemption or sinking fund;

•	 	
whether the preferred stock is convertible, or exchangeable for any other securities, and the terms of any such conversion or exchange; and

•	 	
any additional rights, preferences, qualifications, limitations, and restrictions of the preferred stock.

The description of the terms of the preferred stock that will be set forth in an applicable prospectus will not be complete and will be subject to and qualified in its entirety by reference to the certificate of designation relating to the applicable series of preferred stock. The registration statement, of which this prospectus forms a part, will include the certificate of designation as an exhibit or incorporate it by reference.

Undesignated preferred stock may enable our Board to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger, or otherwise and to thereby protect the continuity of our management. The issuance of shares of preferred stock may adversely affect the rights of the holders of our Common Stock. For example, any preferred stock issued may:

•	 	
rank senior to our common stock as to dividend rights, liquidation preference, or both;

•	 	
have full or limited voting rights; and

•	 	
be convertible into shares of common stock or another series of preferred stock.

The issuance of additional preferred stock could adversely affect the voting power, conversion or other rights of holders of Common Stock.

Certain Provisions of Nevada Law

Combination with Interested Stockholders Statute

Sections 78.411 to 78.444 of the Nevada Revised Statutes (N.R.S.), which apply to any Nevada corporation with more than 200 stockholders, prohibits an “interested stockholder” from entering into a “combination” with the corporation for two years, unless certain conditions are met. A “combination” includes:

•	 	
any merger of the corporation or any subsidiary of the corporation with an “interested stockholder,” or any other entity, whether or not itself an “interested stockholder,” which is, or after and as a result of the merger would be, an affiliate or associate of an “interested stockholder,”

•	 	
any sales, lease, exchange, mortgage, pledge, transfer, or other disposition in one transaction, or a series of transactions, to or with an “interested stockholder” or any affiliate or associate of an “interested stockholder,” of assets of the corporation or any subsidiary of the corporation:

•	 	
having an aggregate market value equal to more than 5% of the aggregate market value of the corporation’s assets, determined on a consolidated basis;

•	 	
having an aggregate market value equal to more than 5% of the aggregate market value of all of the outstanding shares of the corporation; or

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 	•	 	
representing more than 10% of the earning power or net income, determined on a consolidated basis, of the corporation; or

•	 	
the issuance or transfer by the corporation or any subsidiary, of any shares of the corporation or any subsidiary to an “interested stockholder” or any affiliate or associate of an “interested stockholder,” having an aggregate market value equal to 5% or more of the aggregate market value of all of the outstanding voting shares of the corporation, except under the exercise of warrants or rights to purchase shares offered, or a dividend or distribution paid or made, pro rata to all stockholders of the resident domestic corporation;

•	 	
the adoption of any plan, or proposal for the liquidation or dissolution of the corporation, under any agreement, arrangement or understanding, with the “interested stockholder.” or any affiliate or associated of the “interested stockholder;”

•	 	
if any of the following actions occurs:

•	 	
a reclassification of the corporation’s securities, including, without limitation, any splitting of shares, share dividend, or other distribution of shares with respect to other shares, or any issuance of new shares in exchange for a proportionately greater number of old shares;

•	 	
recapitalization of the corporation;

•	 	
merger of consolidation of the corporation with any subsidiary; or

•	 	
any other transaction, whether or not with or into or otherwise involving the interested stockholder, under any agreement, arrangement or understanding, whether or not in writing, with the interested stockholder or any affiliate or associate of the interested stockholder, which has the immediate and proximate effect of increasing the proportionate share of the outstanding shares of any class or series of voting shares or securities convertible into voting shares of the corporation or any subsidiary of the corporation which is beneficially owned by the interested stockholder or any affiliate or associate of the interested stockholder;

•	 	
any receipt by an “interested stockholder” or any affiliate or associate of an “interested stockholder” except proportionately as a stockholder of the corporation, of the benefit of any loan, advance, guarantee, pledge or other financial assistance or any tax credit or other tax advantage provided by or through the corporation

An “interested stockholder” is a person who is:

•	 	
directly or indirectly, the beneficial owner of 10% or more of the voting power of the outstanding voting shares of the corporation; or

•	 	
an affiliate or associate of the corporation, which at any time within two years immediately before the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding shares of the corporation.

A corporation to which the Combinations with Interested Stockholders Statute applies may not engage in a “combination” within two years after the interested stockholder first became an interested stockholder, unless the combination meets all of the requirements of the corporation’s articles of incorporation and (i) the combination or the transaction by which the person first became an interested stockholder is approved by the board of directors before the person first became an interested stockholder, or (ii)(a) the combination is approved by the board of directors and (b) at or after that time, the combination is approved at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of the stockholders representing at least sixty percent (60%) of the outstanding voting power of the corporation not beneficially owned by the interested stockholder or the affiliates or associates of the interested stockholder. If this approval is not obtained, the combination may be consummated after the two year period expires if either (i)(a) the combination or transaction

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by which the person first became an interested stockholder is approved by the board of directors before such person first became an interested stockholder, (b) the combination is approved by a majority of the outstanding voting power of the corporation not beneficially owned by the interested stockholder or any affiliate or associate of the interested stockholder, or (c) the combination otherwise meets the requirements of the Combination with Interested Stockholders Statute. Alternatively, a combination with an interested stockholder engaged in more than 2 years after the date the person first became an interested stockholder may be permissible if the aggregate amount of cash and the market value of consideration other than cash to be received by holders of shares of common stock and holders of any other class or series of shares meets the minimum requirements set forth in the statue, and prior to the completion of the combination, except in limited circumstances, the interested stockholder has not become the beneficial owner of additional voting shares of the corporation.

Acquisition of Controlling Interest Statute

In addition, Nevada’s “Acquisition of Controlling Interest Statute,” prohibits an acquiror, under certain circumstances, from voting shares of a target corporation’s stock after crossing certain threshold ownership percentages, unless the acquiror obtains the approval of the target corporation’s stockholders. Sections 78.378 to 78.3793 of the N.R.S. only apply to Nevada corporations with at least 200 stockholders, including at least 100 record stockholders who are Nevada residents, that do business directly or through an affiliated corporation in Nevada and whose articles of incorporation or bylaws in effect 10 days following the acquisition of a controlling interest by an acquiror do not prohibit its application.

We do not intend to “do business” in Nevada within the meaning of the Acquisition of Controlling Interest Statute. Therefore, we believe it is unlikely that this statute will apply to us. The statute specifies three thresholds:

•	 	
at least one-fifth but less than one-third;

•	 	
at least one-third but less than a majority; and

•	 	
a majority or more, of the outstanding voting power. Once an acquiror crosses one of these thresholds, shares which it acquired in the transaction taking it over the threshold (or within ninety days preceding the date thereof) become “control shares” which could be deprived of the right to vote until a majority of the disinterested stockholders restore that right.

A special stockholders’ meeting may be called at the request of the acquiror to consider the voting rights of the acquiror’s shares. If the acquiror requests a special meeting and gives an undertaking to pay the expenses of said meeting, then the meeting must take place no earlier than 30 days (unless the acquiror requests that the meeting be held sooner) and no more than 50 days (unless the acquiror agrees to a later date) after the delivery by the acquiror to the corporation of an information statement which sets forth the range of voting power that the acquiror has acquired or proposes to acquire and certain other information concerning the acquiror and the proposed control share acquisition.

If no such request for a stockholders’ meeting is made, consideration of the voting rights of the acquiror’s shares must be taken at the next special or annual stockholders’ meeting. If the stockholders fail to restore voting rights to the acquiror, or if the acquiror fails to timely deliver an information statement to the corporation, then the corporation may, if so provided in its articles of incorporation or bylaws in effect on the tenth day following the acquisition, call certain of the acquiror’s shares for redemption at the average price paid for such shares by the acquiror.

Our restated articles of incorporation and amended and restated bylaws do not currently permit us to redeem an acquiror’s shares under these circumstances, but could be amended to so provide within ten days following the acquisition. The Acquisition of Controlling Interest Statute also provides that in the event the stockholders restore full voting rights to a holder of control shares that owns a majority of the voting stock, then, unless the

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corporation’s articles of incorporation or bylaws in effect on the tenth day following the acquisition otherwise provide, all other stockholders who do not vote in favor of restoring voting rights to the control shares may demand payment for the “fair value” of their shares as determined by a court in dissenters rights proceeding pursuant to Chapter 92A of the N.R.S.

Limitations of Liability and Indemnification Matters

Our Amended and Restated Articles of Incorporation contain provisions that limit the liability of our current and former directors for monetary damages to the fullest extent permitted by Nevada law. Nevada law provides that directors of a corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors, unless the presumption that the directors have acted in good faith, on an informed basis, and with a view to the interests of the corporation has been rebutted, in which case directors may be liable for damages resulting from intentional misconduct, fraud or a knowing violation of law. To the extent that indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. If a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of our company in the successful defense of any action, suit or proceeding) is asserted by any of our directors, officers or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of that issue.

Transfer Agent and Registrar

The transfer agent and registrar for the Common Stock is American Stock Transfer & Trust Company LLC.

No Listing

Our Common Stock is not listed on any securities exchange and will not be eligible for electronic trading through DTC or any other established clearing corporation.

LEGAL MATTERS

Certain legal matters in connection with the distribution of our Common Stock in the Spin-Off described in this Prospectus will be passed upon for us by O’Melveny & Myers, LLP, Dallas, Texas, and by Woodburn and Wedge, Reno, Nevada, with respect to matters of Nevada law.

EXPERTS

The consolidated financial statements of Next Bridge Hydrocarbons, Inc. as of December 31, 2021 and 2020, and for each of the fiscal years then ended, appearing in this Prospectus, have been audited by BF Borgers, CPA, an independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

Estimates of the oil and gas reserves of the Company and related future net cash flows and the present values were based upon reserve reports prepared by PeTech Enterprises, Inc. have been included in this Prospectus. We have included these estimates in reliance on the authority of such firm as an expert in such matters.

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WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act to register the shares of our Common Stock to be distributed in the Spin-Off. The term registration statement means the original registration statement and any and all amendments thereto, including the exhibits and schedules to the original registration statement and any amendments. This Prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information with respect to us, reference is made to the registration statement and the exhibits and schedules filed therewith. Statements contained in this Prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. A copy of the registration statement, along with the exhibits and schedules filed therewith, may be inspected without charge at the SEC’s website. The SEC maintains an internet website at sec.report that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.

The information contained on or accessible through our website shall not be deemed to be a part of this Prospectus or the registration statement on Form S-1, of which this Prospectus is a part.

You may request a copy of any of our filings with the SEC at no cost by writing us at the following address:

Investor Relations

Next Bridge Hydrocarbons, Inc.

6300 Ridglea Place, Suite 950, Fort Worth, Texas 76116

We have not authorized anyone to give any information or make any representation about the Spin-Off or of the Company that is different from, or in addition to, that contained in this Prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to sell, or solicitations of offers to purchase, the securities offered by this Prospectus or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this Prospectus does not extend to you. The information contained in this Prospectus speaks only as of the date of this Prospectus unless the information specifically indicates that another date applies.

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INDEX TO FINANCIAL STATEMENTS

PAGE	 
Consolidated Financial Statements (audited)

Report of Independent Registered Public Accounting Firm

F-1	 
Consolidated Balance Sheets as of December 31, 2021 and 2020

F-2	 
Consolidated Statements of Operations for the years ended December  31, 2021 and 2020

F-3	 
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021 and 2020

F-4	 
Consolidated Statements of Cash Flows for the years ended December  31, 2021 and 2020

F-5	 
Notes to Consolidated Financial Statements

F-6	 
Condensed Consolidated Financial Statements (unaudited)

Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

F-21	 
Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021

F-22	 
Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021

F-24	 
Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

F-26	 
Notes to Unaudited Condensed Consolidated Financial Statements

F-27	 
Pro Forma Combined Financial Statements (unaudited)

Combined Statements of Operations for the year ended December  31, 2021

F-44	 
Combined Statements of Operations for the six months ended June 30, 2022

F-45	 
Combined Balance Sheets as of June 30, 2022

F-46	 
Notes to Unaudited Pro Forma Combined Financial Statements

F-47

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of Next Bridge Hydrocarbons, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Next Bridge Hydrocarbons, Inc. as of December 31, 2021 and 2020, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/S/ BF Borgers CPA PC

BF Borgers CPA PC

PCAOB ID: 5041

We have served as the Company’s auditor since 2022

Lakewood, CO

July 15, 2022

F-1

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Next Bridge Hydrocarbons, Inc. and its Subsidiaries

Consolidated Balance Sheets

December 31,
2021	 	 	December 31,
2020	 
ASSETS	  				 			
Current assets:

Cash

$	1,989,419	 	 	$	130,504	 
Accounts receivable, related party

163,366	 	 	 	69,056	 
Grants and other receivables

74,310	 	 	 	161,064	 
Prepaid expenses

2,667	 	 	 	103,672

Total current assets

2,229,762	 	 	 	464,296	 
Oil and natural gas properties, net

45,663,470	 	 	 	30,857,959	 
Property and equipment

—  	 	 	 	4,549	 
Other assets

25,000	 	 	 	—

TOTAL ASSETS

$	47,918,232	 	 	$	31,326,804

LIABILITIES AND STOCKHOLDER’S EQUITY	  				 			
Current liabilities:

Accounts payable

$	2,828,326	 	 	$	708,260	 
Accrued liabilities

—  	 	 	 	1,213,779	 
Notes payable, related party

12,708,889	 	 	 	—

Total current liabilities

15,537,215	 	 	 	1,922,039	 
Asset retirement obligations

21,937	 	 	 	21,844

Total liabilities

15,559,152	 	 	 	1,943,883

Commitments and contingencies

Stockholder’s equity:

Preferred stock, par value $0.0001; 25,000,000 shares authorized; 0 issued and outstanding

Common stock, par value $0.0001; 250,000,000 shares authorized; 1 issued and outstanding

—  	 	 	 	—  	 
Additional paid-in capital

100,546,596	 	 	 	89,331,629	 
Accumulated deficit

(68,187,516	) 	 	 	(59,948,708	)

Total stockholder’s equity

32,359,080	 	 	 	29,382,921

TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY

$	47,918,232	 	 	$	31,326,804

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Next Bridge Hydrocarbons, Inc. and its Subsidiaries

Consolidated Statements of Operations

For the Years Ended December 31, 2021 and 2020

2021	 	 	2020	 
Oil sales

$	4,675	 	 	$	4,484	 
Natural gas sales

11,229	 	 	 	2,422

Revenue

15,904	 	 	 	6,906	 
Operating expenses

Lease operating expenses

75,330	 	 	 	86,988	 
Production and ad valorem tax

1,001	 	 	 	498	 
General and administrative

8,050,443	 	 	 	2,557,975	 
Depreciation, depletion and amortization

4,642	 	 	 	820,814	 
Impairment

—  	 	 	 	2,108,301

Total operating expenses

8,131,416	 	 	 	5,574,576	 
Other income (expense)

Interest expense

(212,201	) 	 	 	(11,121	) 
Gain (loss) on sale of assets

1,000	 	 	 	(170,215	) 
Gain on extinguishment of debt

77,477	 	 	 	—  	 
Interest income

10,428	 	 	 	—

Total other income (expense)—net

(123,296	) 	 	 	(181,336	)

Loss before income taxes

(8,238,808	) 	 	 	(5,749,006	) 
Provision for income tax

—  	 	 	 	—

Net loss

$	(8,238,808	) 	 	$	(5,749,006	)

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Next Bridge Hydrocarbons, Inc. and its Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the Years Ended December 31, 2021 and 2020

Common
stock
shares	 	  	Common
stock
amount	 	  	Additional
paid-in
capital	 	  	Accumulated
deficit	 	 	Total	 
Balance, December 31, 2019

1	 	  	$	—  	 	  	$	88,203,178	 	  	$	(54,199,702	) 	 	$	34,003,476	 
Contributions from parent

—  	 	  	 	—  	 	  	 	1,128,451	 	  	 	—  	 	 	 	1,128,451	 
Net loss

—  	 	  	 	—  	 	  	 	—  	 	  	 	(5,749,006	) 	 	 	(5,749,006	)

Balance, December 31, 2020

1	 	  	$	—  	 	  	$	89,331,629	 	  	$	(59,948,708	) 	 	$	29,382,921

Contributions from parent

—  	 	  	 	—  	 	  	 	11,214,967	 	  	 	—  	 	 	 	11,214,967	 
Net loss

—  	 	  	 	—  	 	  	 	—  	 	  	 	(8,238,808	) 	 	 	(8,238,808	)

Balance, December 31, 2021

1	 	  	$	—  	 	  	$	100,546,596	 	  	$	(68,187,516	) 	 	$	32,359,080

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Next Bridge Hydrocarbons, Inc. and its Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2021 and 2020

2021	 	 	2020	 
Cash Flows From Operating Activities

Net loss

$	(8,238,808	) 	 	$	(5,749,006	) 
Adjustments to reconcile net loss to net cash from operations:

Depreciation, depletion and amortization

4,642	 	 	 	820,814	 
Impairment loss

—  	 	 	 	2,108,301	 
Paid in kind interest

208,889	 	 	 	—  	 
Change in:

Accounts receivable, related party

(94,310	) 	 	 	(27,684	) 
Grants and other receivables

86,754	 	 	 	—  	 
Prepaid expenses

101,005	 	 	 	(7,666	) 
Accounts payable

2,120,066	 	 	 	(617,952	) 
Accrued liabilities

(1,213,779	) 	 	 	172,603	 
Other assets

(25,000	) 	 	 	—

Net cash from operating activities

(7,050,541	) 	 	 	(3,300,590	)

Cash Flows From Investing Activities

Investment in oil and natural gas properties

(14,805,511	) 	 	 	(236,807	) 
Proceeds from sale of oil and natural gas properties

—  	 	 	 	2,508,775

Net cash from investing activities

(14,805,511	) 	 	 	2,271,968

Cash Flows From Financing Activities

Contributions from parent

11,214,967	 	 	 	1,128,451	 
Proceeds from notes payable, related party

12,500,000	 	 	 	—

Net cash from financing activities

23,714,967	 	 	 	1,128,451

Net increase in cash

1,858,915	 	 	 	99,829	 
Cash—beginning of year

130,504	 	 	 	30,675

Cash—end of year

$	1,989,419	 	 	$	130,504

Supplemental disclosure of cash flow information: (Non Cash Items)

Cash paid for interest

$	—  	 	 	$	—  	 
Cash paid for state franchise tax

$	—  	 	 	$	—

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NEXT BRIDGE HYDROCARBONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	
NATURE OF BUSINESS

Next Bridge Hydrocarbons, Inc., formerly OilCo Holdings, Inc., (the “Company”, “we”, “our”) was incorporated in August 2021 under the laws of the State of Nevada. We are engaged in the acquisition, exploration and development of oil and natural gas properties in the United States. We operate our business through our subsidiaries Torchlight Energy Inc., Hudspeth Operating, LLC, Hudspeth Oil Corporation, and Torchlight Hazel LLC.

Prior to the formation of Next Bridge Hydrocarbons, Inc. (formerly named OilCo Holdings, Inc.), our subsidiaries were consolidated into the financial statements of our parent, Meta Materials Inc. (formerly named Torchlight Energy Resources, Inc. (“TERI”)). All intercompany transactions have been eliminated in the consolidated financial statements of Meta Materials, Inc.

On June 29, 2021, TERI acquired Metamaterial Inc., an Ontario corporation, and changed its name to Meta Materials, Inc. (with Metamaterial Inc. being the accounting acquiror).

2.	
GOING CONCERN

At December 31, 2021, the Company had not yet achieved profitable operations. We had a net loss of $8,238,808 for the year ended December 31, 2021. We expect to incur further losses in the development of our business. The Company had a working capital deficit as of December 31, 2021 of $13,307,453. 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, institutional, or public 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 the Company and its wholly owned subsidiaries, Torchlight Energy, Inc., Hudspeth Operating, LLC,

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Hudspeth Oil Corporation, and Torchlight Hazel LLC. All significant intercompany balances and transactions have been eliminated between the Company and its subsidiaries.

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.

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) and the significant risks to the international community and economies as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified COVID-19 as a pandemic, based on the rapid increase in exposure globally, and thereafter, COVID-19 continued to spread throughout the U.S. and worldwide. In addition, actions taken by OPEC members and other exporting nations on the supply and demand in global oil and natural gas markets resulted in significant negative pricing pressure in the first half of 2020, followed by a recovery in pricing and an increase in demand in the second half of 2020 and into 2021. However, multiple variants emerged in 2021 and became highly transmissible, which contributed to additional pricing volatility during 2021 and into 2022. The financial results of companies in the oil and natural gas industry have been impacted materially as a result of changing market conditions. Such circumstances generally increase uncertainty in the Company’s accounting estimates. Although demand and market prices for oil and natural gas have increased, due to the rising energy use and the improvement in U.S. economic activity, we cannot predict events that may lead to future price volatility and the near term energy outlook remains subject to heightened levels of uncertainty.

We are continuing to closely monitor the overall impact and the evolution of the COVID-19 pandemic, including the ongoing spread of any variants, along with future OPEC actions on all aspects of our business, including how these events may impact our future operations, financial results, liquidity, employees, and operators. Additional actions may be required in response to the COVID-19 pandemic on a national, state, and local level by governmental authorities, and such actions may further adversely affect general and local economic conditions, particularly if the 2021 resurgence and spread of the COVID-19 pandemic continues. We cannot predict the long-term impact of these events on our liquidity, financial position, results of operations or cash flows due to uncertainties including the severity of COVID-19 or any of the ongoing variants, and the effect the virus will have on the demand for oil and natural gas. These situations remain fluid and unpredictable, and we are actively managing our response.

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, convertible note receivable, 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.

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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 natural 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 December 31, 2021 and 2020, no valuation allowance was considered necessary. Bad debt expense for the years ended December 31, 2021 and 2020 was $0 and $15,606, respectively.

Oil and natural 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 natural 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 natural 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 natural 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.

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 years ended December 31, 2021 and 2020, the Company capitalized $141,048, and $2,353,700 respectively, of interest on unevaluated properties.

Ceiling test—Future production volumes from oil and natural 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 natural gas properties. If the net capitalized cost of proved oil and natural gas properties, net of related deferred income taxes, plus the cost of unproved oil and natural gas properties, exceeds the present value of estimated future net cash flows discounted at ten percent, net of related realizable tax affects, plus the cost of unproved oil

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and natural gas properties, the excess is charged to expense and reflected as additional accumulated DD&A. The Company recorded an impairment expense of $-0- and $2,108,301 for the years ended December 31, 2021 and 2020, 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 natural 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 natural 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.

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 natural 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.

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 natural gas properties owned by the Company. Contracts for the sale

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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. The Company elects to treat contracts to sell oil and natural 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.

Revenue is measured based on considerations 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.

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.

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 December 31, 2021 and 2020.

Recently adopted accounting pronouncements—

Effective January 1, 2021, we adopted ASU 2019-12 on a prospective basis. The new standard was issued in December 2019 with the intent of simplifying the accounting for income taxes. The accounting update removes certain exceptions to the general principles in ASC 740 Income Taxes as well as provides simplification by clarifying and amending existing guidance. The adoption of this ASU did not have a material impact on our consolidated financial statements.

In October 2020, the FASB issued ASU 2020-09, Debt- Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762 (“ASU 2020-09”). The amendments in ASU 2020-09 amend rules focused on the provision of material, relevant, and decision-useful information regarding guarantees and other credit enhancements, and eliminate prescriptive requirements that have imposed unnecessary burdens and incentivized issuers of securities with guarantees and other credit enhancements to offer and sell those securities on an unregistered basis. The adopted amendments relate to the financial disclosure requirements for guarantors and issuers of guaranteed securities registered or being registered in Rule 3-10 of Regulation S-X, and affiliates whose securities collateralize securities registered or being registered in Rule 3-16 of Regulation S-X. The amendments in ASU 2020-09 are effective for public business entities for annual periods beginning after December 15, 2020. The Company has evaluated the provisions of ASU 2020-09 and noted no material impact to our consolidated financial statements or disclosures from the adoption of this ASU.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which updated various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. The

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amendments in ASU 2020-10 are effective for annual periods beginning after December 15, 2020, for public business entities. The Company adopted ASU 2020-10 on January 1, 2021 and its adoption did not have a material effect on the Company’s financial statements and related disclosures.

Recent accounting pronouncements not yet adopted—

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which adds a new Topic 326 to the Codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the company expects to collect over the instrument’s contractual life. ASU 2016-13 also amends the credit loss measurement guidance for available-for sale debt securities and beneficial interests in securitized financial assets. The guidance is applicable for fiscal years beginning after December 15, 2019 and interim periods within those years, however, the FASB extended the effective date for smaller reporting companies to fiscal years beginning after December 15, 2022. The Company is currently evaluating the potential impact of the adoption of this standard on its related disclosures.

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.

4.	
OIL & NATURAL GAS PROPERTIES

The following table presents the capitalized costs for oil & natural gas properties of the Company:

December 31,
2021	 	  	December 31,
2020	 
Evaluated costs subject to amortization

$	—  	 	  	$	15,656,182	 
Unevaluated costs

45,663,470	 	  	 	29,794,015

Total capitalized costs

45,663,470	 	  	 	45,450,197	 
Less accumulated depreciation, depletion and amortization

—  	 	  	 	(15,656,182	)

Total oil and natural gas properties

$	45,663,470	 	  	$	30,857,959

Unevaluated costs as of December 31, 2021 and 2020 include cumulative costs on developing projects including the Orogrande and Hazel Projects in West Texas.

The Company periodically adjusts for the separation of evaluated versus unevaluated costs within its full cost pool to recognize the value impairment related to the expiration of, or changes in market value, of unevaluated leases. The impact of reclassifications as they become necessary is to increase the basis for calculation of future period’s depletion, depreciation and amortization which effectively recognizes the impairment on the consolidated statement of operations over future periods. Reclassified costs also become evaluated costs for purposes of ceiling tests and which may cause recognition of increased impairment expense in future periods. The remaining cumulative unevaluated costs which have been reclassified within our full cost pool totals $0 as of December 31, 2021. As of December 31, 2021, evaluated costs are $-0- since we have no proved reserve value associated with our properties.

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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.

Current Projects

We are an energy company engaged in the acquisition, exploration, exploitation and 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 natural gas projects we hold in the Permian Basin in West Texas. We also hold minor interests in certain other oil and natural gas projects in Central Oklahoma that we are in the process of divesting.

Orogrande Project, West Texas

On August 7, 2014, our predecessor entered into a Purchase Agreement with Hudspeth Oil Corporation (“Hudspeth”), McCabe Petroleum Corporation (“MPC”), and Gregory McCabe, Meta’s former Chairman. Mr. McCabe was the sole owner of both Hudspeth and MPC. Under the terms and conditions of the Purchase Agreement, our predecessor acquired 100% of the capital stock of Hudspeth which held certain oil and natural gas assets, including a 100% working interest in approximately 172,000 predominately contiguous acres in the Orogrande Basin in West Texas. 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. As of December 31, 2021, leases covering approximately 134,000 acres remain in effect.

Effective March 27, 2017, the property became subject to a DDU Agreement which 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 include five wells per year in years 2021, 2022 and 2023. The drilling obligations are minimum yearly requirements and may be exceeded if acceleration is desired.

We believe all drilling obligations through December 31, 2021 have been met.

On July 25, 2018, we and Hudspeth entered into a Settlement & Purchase Agreement (the “Settlement Agreement”) with University Founders (and Founders Oil & Gas Operating, LLC, former Operator), Wolfbone Investments, LLC (“Wolfbone”) and MPC (entities controlled by a related party), which agreement provided for Founders assigning all of its working interest in the oil and gas leases of the Orogrande Project to Hudspeth and Wolfbone equally. Future well capital spending obligations remained the same 50% contribution from Hudspeth

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and 50% from Wolfbone until such time as the $40.5 million to be spent on the project. Cumulative capital spending did not exceed $40.5 million until after the closing of the Arrangement.

The Company has drilled fourteen test wells in the Orogrande Project properties 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 the wells continued through the year ended December 31, 2021 to further capture and document the scientific base in support of demonstrating the production potential of the property.

On March 9, 2020, holders of certain 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.

Following the Spin-Off, the Company intends to make offers and enter into agreements with one or more of the other current working interest owners in the Orogrande Project (each an “Orogrande Owner” and collectively, the “Orogrande Owners”). The Company anticipates offering the Orogrande Owners shares of Common Stock in exchange for their respective working interest in the Orogrande Project. The Company intends to offer the number of shares of Common Stock necessary such that each participating Orogrande Owner would own the percentage of Common Stock then outstanding in proportion to the percentage owned in the working interest of the Orogrande Project. For illustration purposes, if an Orogrande Owner owns ten percent (10%) of the working interest of the Orogrande Project, and such Orogrande Owner elects to participate and accept our offer of shares of Common Stock, then such Orogrande Owner will be offered ten percent (10%) of the aggregate amount of outstanding shares of Common Stock. The Company’s decision to enter into these transactions will depend on ability of the Company and each Orogrande Owner to negotiate and enter into definitive agreements related to such transaction and the Company’s board of directors receiving an industry-standard fairness opinion from an investment banking firm. One of the Orogrande Owners is Wolfbone Investments LLC, an entity controlled by Gregory McCabe, who will own, directly and indirectly through entities he owns or controls, over 11% of the Common Stock following the Spin-Off, which would increase if the proportionate exchange of working interest for shares of our Common Stock is consummated.

The Orogrande Project ownership as of December 31, 2021 is detailed as follows:

Revenue
Interest	 	 	Working
Interest	 
University Lands—Mineral Owner

20.000	% 	 	 	n/a	 
ORRI—Magdalena Royalties, LLC, an entity controlled by Gregory McCabe, Meta’s former Chairman

4.500	% 	 	 	n/a	 
ORRI—Unrelated Party

0.500	% 	 	 	n/a	 
Hudspeth Oil Corporation, a subsidiary of Torchlight Energy Resources Inc.

49.875	% 	 	 	66.500	% 
Wolfbone Investments LLC, an entity controlled by Gregory McCabe, Meta’s former Chairman

18.750	% 	 	 	25.000	% 
Conversion by Note Holders in March, 2020

4.500	% 	 	 	6.000	% 
Unrelated Party

1.875	% 	 	 	2.500	%

100.000	% 	 	 	100.000	%

Hazel Project in the Midland Basin in West Texas

Effective April 4, 2016, Torchlight Energy, Inc. (“TEI”) acquired from MPC a 66.66% working interest in approximately 12,000 acres in the Midland Basin. A back-in after payout of a 25% working interest was retained by MPC and another unrelated working interest owner.

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In October 2016, the holders of all of Torchlight Energy Resources, Inc. 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.

Acquisition of Additional Interests in Hazel Project

On January 30, 2017, we entered into and closed an Agreement and Plan of Reorganization and a Plan of Merger with an entity which was wholly owned by Mr. McCabe, which resulted in the acquisition of approximately 40.66% working interest in the 12,000 gross acres, 9,600 net acres, in the Hazel Project.

Also, on January 30, 2017, the Company entered into and closed a Purchase and Sale Agreement with Wolfbone. Under the agreement, we 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.

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 increasing our working interest in the Hazel Project to 80%, and an overall net revenue interest of 75%.

The Company has drilled seven test wells on the Hazel Project to capture and document the scientific base in support of demonstrating the production potential of the property.

Option Agreement with Masterson Hazel Partners, LP

On August 13, 2020, our subsidiaries Torchlight Energy, Inc. and Torchlight Hazel, LLC (collectively, “Torchlight Subs”) entered into an option agreement (the “Option Agreement”) with Masterson Hazel Partners, LP (“MHP”) and McCabe Petroleum Corporation. Under the agreement, MHP was obligated to drill and complete, or cause to be drilled and completed, at its sole cost and expense, a new lateral well (the “Well”) on our Hazel Project, sufficient to satisfy Torchlight’s continuous development obligations on the southern half of the prospect no later than September 30, 2020. MHP has satisfied this drilling obligation. MHP paid to Torchlight Subs $1,000 as an option fee at the time of execution of the Option Agreement. MHP is entitled to receive, as its sole recourse for the recoupment of drilling costs, the revenue from production of the well attributable to Torchlight Subs’s interest until such time as it has recovered its reasonable costs and expenses for drilling, completing, and operating the well.

In exchange for MHP satisfying the above drilling obligations, Torchlight Subs granted to MHP the exclusive right and option to perform operations, at MHP’s sole cost and expense, on the Hazel Project sufficient to satisfy Torchlight Subs’s continuous development obligations on the northern half of the prospect. Because MHP exercised this drilling option and satisfied the continuous development obligations on the northern half of the prospect, under the terms of the Option Agreement (as amended in September 2020) MHP had the option to purchase the entire Hazel Project no later than May 31, 2021. Such purchase would be under the terms of a form of Purchase and Sale Agreement included as an exhibit to the Option Agreement, at an aggregate purchase price of $12,690,704 for approximately 9,762 net mineral acres, and not less than 74% net revenue interest (approximately $1,300 per net mineral acre). MHP declined to exercise the Option in 2021.

Hunton Play, Central Oklahoma

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

5.	
RELATED PARTY BALANCES

As of December 31, 2021 and 2020, related party payables were $-0- and $98,805, respectively, due to our executive officers and directors included in accounts payable on the consolidated balance sheets. Accrued payroll was $-0- and $1,213,779, respectively, consisting of accrued and unpaid compensation due to our executive officers.

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As of December 31, 2021, and 2020, the Company had a balance of $163,366 and $69,056, respectively, for an account receivable due from McCabe Petroleum Corporation for amounts advanced related to the Orogrande Project participation and development agreement.

6.	
COMMITMENTS AND CONTINGENCIES

Leases

The Company is subject to a sublease for occupancy of its office premises which requires monthly rent payments of $8,300.

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 sought monetary relief over $1 million, made unspecified allegations of misrepresentations involving a November 2015 participation agreement and a 2016 amendment to the participation agreement. Torchlight denied the allegations and asserted several affirmative defenses including but not limited to, that the suit is barred by the applicable statute of limitations, that the claims had been released, and that the claims were barred because of contractual disclaimers between sophisticated note parties. Torchlight also asserted counterclaims for attorney fees. On January 14, 2021, Goldstone Holding Company, LLC dismissed its claims without prejudice, leaving Torchlight’s counterclaims for attorney fees as the only pending claim in the case. On February 26, 2021, Torchlight filed a non-suit without prejudice on its counterclaims for attorney fees, leaving no claims in the case. The court signed a final order disposing of the entire case on March 5, 2021. However, Goldstone Holding Company, LLC asked the court to re-instate its claims, and a hearing was held on April 13, 2021. On June 16, 2021, the court signed an order denying the motion to reinstate Goldstone Holding Company, LLC’s claims, and the case is closed.

On April 30, 2020, the Company’s 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 the Meta’s former Chairman Gregory McCabe, is a co-plaintiff in that action. After the suit was filed, Cordax filed a mineral lien in the amount of $104,500 against the Orogrande Field and has sued the operator and counterclaimed against Hudspeth for breach of contract, seeking the same amount as the lien. The Company has added the manufacturer of one of the tool components that the Company contends was a cause of the tool failure. It was later discovered that Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies forfeited its charter to conduct business in the State of Texas by failing to timely pay its franchise taxes, and the Company added members of the board of directors to the case pursuant to the Texas Tax Code. It was recently disclosed that Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies is the subsidiary of a Canadian parent company, Cordax Evaluation Technologies, Inc., who has also been added to the case. 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. Gregory McCabe, Meta’s former Chairman of the Board filed a special appearance after being served with citation, alleging that he was a Canadian citizen with no meaningful ties to Texas. After discovery was conducted on this issue, Meta filed a nonsuit without prejudice for this Defendant, dismissing him from the case. The remaining parties are currently engaged in preliminary discovery and are scheduling mediation.

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recover related attorney’s fees. The foreclosure action, Datalog LWT Inc. d/b/a Cordax Evaluation Technologies v. Torchlight Energy Resources, Inc., was filed in the 205th Judicial District Court of Hudspeth County, Texas. We are contesting the lien in good faith and filed a Plea in Abatement on May 10, 2021, seeking a stay in the Hudspeth County lien foreclosure case pending final disposition of the related case currently pending in 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 December 31, 2021 and 2020, 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.

7.	
STOCKHOLDERS’ EQUITY

Next Bridge Hydrocarbons, Inc. has preferred and common stock both at a par value of $.0001. As of December 31, 2021, the Company has issued 1 share of common stock and 0 shares of preferred stock.

8.	
INCOME TAXES

The Company recorded no income tax provision for 2021 and 2020 because of losses incurred.

There are no uncertain tax positions accounted for in this tax provision.

The following is a reconciliation between the federal income tax benefit computed at statutory federal income tax rates and actual income tax provision for the years ended December 31, 2021 and 2020:

Year Ended
December 31,
2021	 	  	Year Ended
December 31,
2020	 
Federal income tax benefit at statutory rate

$	(1,686,283	) 	  	$	(1,207,291	) 
Permanent Differences

390,419	 	  	 	308	 
Annual reconciling adjustment

(451,708	) 	  	 	(19,077	) 
Change in valuation allowance

1,747,572	 	  	 	1,226,060

Provision for income taxes

$	—  	 	  	$	—

The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, 2021 and 2020 are as follows:

December 31,
2021	 	  	December 31,
2020	 
Deferred tax assets:

Net operating loss carryforward

$	12,491,191	 	  	$	10,335,223	 
Disallowed interest expense

—  	 	  	 	2,404	 
Other

385	 	  	 	9,824	 
Deferred tax liabilities:

Investment in oil and gas properties

(2,765,485	) 	  	 	(2,368,932	)

Net deferred tax assets and liabilities

9,726,091	 	  	 	7,978,519	 
Less valuation allowance

(9,726,091	) 	  	 	(7,978,519	)

Total deferred tax assets and liabilities	  	$	—		  	$	—

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The Company had a net deferred tax asset related to federal net operating loss carryforwards of $59,481,861 and $49,215,346 at December 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.

9.	
PROMISSORY NOTES

Certain assets of the Company were used as collateral for promissory notes entered into by TERI.

Promissory Notes Issued in 2017

On April 10, 2017, TERI sold two 12% unsecured promissory notes with a total of $8,000,000 in principal amount to David A. Straz, Jr. Foundation (the “Straz Foundation”) and the David A. Straz, Jr. Irrevocable Trust DTD 11/11/1986 (the “Straz Trust”) in a private transaction. Interest only was 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 also received annual payments of common stock in TERI 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, TERI received total proceeds of $7,540,000 from the investors. TERI used the proceeds for working capital and general corporate purposes, which includes, without limitation, drilling capital, lease acquisition capital and repayment of prior debt.

The effective interest rate was 16.15%.

On February 20, 2020, TERI 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 had been extended for one year, from April 10, 2020, to April 10, 2021.

During the quarter ended March 31, 2021, the notes were retired in full by conversion into TERI’s common stock.

Promissory Notes Issued in 2018

On February 6, 2018, TERI sold to the Straz Trust in a private transaction a 12% unsecured promissory note with a principal amount of $4,500,000. Interest only was 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 also received annual payments of common stock in TERI at the rate of 2.5% of principal amount outstanding, based on a volume-weighted average price. TERI sold the note at an original issue discount of 96.27% and accordingly, TERI received total proceeds of $4,332,150 from the investor. TERI used the proceeds for working capital and general corporate purposes, which includes, without limitation, drilling capital, lease acquisition capital and repayment of prior debt.

The effective interest rate was 15.88%.

During the quarter ended March 31, 2021, the notes were retired in full by conversion into TERI’s common stock.

Extension of Promissory Notes

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2017 which had an outstanding principal amount of $4,000,000. 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. TERI 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, we and TERI, provided guaranty with respect to payment of the three promissory notes. The Note Amendment Agreements also provided restrictions on the use of proceeds if the Orogrande Project or the Hazel Project were sold.

Additionally, the promissory notes, as amended, provided conversion rights whereby the lenders have the right, at each such lender’s option, to convert any portion of principal and interest into shares of common stock of TERI at a conversion price of $1.50 per share.

These notes payable issued in 2017 and 2018 totaling $12,500,000 were retired by conversion into TERI common stock in 2021.

Convertible Notes Issued in October 2018

On October 17, 2018, TERI 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 were due and payable on the notes in one balloon payment at maturity on April 17, 2020. The notes were 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 contained 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.

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 the “Orogrande Project.” Principal of $6,000,000 and approximately $1,331,000 of accrued interest were converted at March 9, 2020.

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 TERI 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 by TERI.

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Convertible Notes Issued in First Quarter 2019

On February 11, 2019 TERI 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 had the right to convert principal and interest at any time into common stock of TERI at a conversion price of $1.08 per share. TERI had 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. TERI evaluated the notes for beneficial conversion features and derivative accounting criteria and concluded that derivative accounting treatment was not applicable.

On April 21, 2020, TERI entered into agreements to amend the two 14% Series D Unsecured Convertible Promissory Notes that were originally issued on February 11, 2019. 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 and fee was paid.

These two promissory notes required 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.

These notes payable have been converted into TERI common stock. $1,000,000 was converted in December 2020 and the remaining $1,000,000 was converted in April 2021.

Convertible Notes Issued in Fourth Quarter 2019

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

These convertible notes were retired by conversion into TERI common stock in December 2020.

10.	
NOTE PAYABLE, RELATED PARTY

In 2021, the Company entered into a note payable with Meta to borrow up to $15 million. On October 1, 2021, the Company issued a secured, revolving promissory note in an original principal amount of up to $15 million in favor of Meta (the “2021 Note”). The 2021 Note bears interest at 8% per annum, computed on the basis of a 360-day year, and matures March 31, 2023 (the “2021 Note Maturity Date”); provided, however, if we raise $30 million or more in capital through debt or equity or a combination thereof by the 2021 Note Maturity Date, the 2021 Note Maturity Date will be extended to September 30, 2023, and the outstanding principal of the 2021 Note will amortize in six equal, monthly installments. If an event of default has occurred and is continuing, interest on the 2021 Note may accrue at the default rate of 12% per annum. The outstanding principal of the 2021

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Note, together with all accrued interest thereon, becomes due on the 2021 Note Maturity Date. The 2021 Note includes a restrictive covenant that, subject to certain exceptions and qualifications, restricts the Company’s ability to merge or consolidate with another person or entity, or sell or transfer all or substantially all of its assets, unless the Company is the surviving entity or the successor entity assumes all of obligations under the 2021 Note. The note payable is collateralized by shares of common stock in Meta held by one of its stockholders, Wolfbone Investments, LLC, and by a lien on a 25% interest in the Orogrande prospect.

The balance on the loan as of December 31, 2021 is $12,500,000 and the Company incurred interest that is paid in kind of $208,889 for the year ended December 31, 2021. The Company subsequently drew the additional $2,500,000 on the note payable in 2022.

11.	
ASSET RETIREMENT OBLIGATIONS

The following is a reconciliation of the asset retirement obligations liability through December 31, 2021:

Asset retirement obligations—December 31, 2020

$	21,844	 
Accretion expense

93	 
Estimated liabilities recorded

—  	 
Liability reduction at sale of property

—

Asset retirement obligations—December 31, 2021

$	21,937

12.	
SUBSEQUENT EVENTS

In July 2022, the Company issued 165,523,362 shares of its common stock to Meta.

On April 14, 2022, May 4, 2022, May 12, 2022, May 26, 2022, June 1, 2022, June 13, 2022, June 28, 2022, August 11, 2022 and August 29, 2022, respectively, the Company borrowed as advances to be subject to a loan agreement between the Company and Meta an aggregate amount of borrowings equal to $5.0 million, bearing interest at a per annum rate equal to 8% and which become due and payable on March 31, 2023. See Note 12 of the accompanying notes to the unaudited condensed consolidated financial statements included elsewhere in this prospectus.

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NEXT BRIDGE HYDROCARBONS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,
2022	 	 	December 31,
2021	 
ASSETS	  				 			
Current assets:

Cash

$	998,260	 	 	$	1,989,419	 
Accounts receivable, related party

165,238	 	 	 	163,366	 
Grants and other receivables

50,970	 	 	 	74,310	 
Prepaid expenses

9,677	 	 	 	2,667

Total current assets

1,224,145	 	 	 	2,229,762	 
Oil and natural gas properties, net

47,155,236	 	 	 	45,663,470	 
Other assets

25,000	 	 	 	25,000

TOTAL ASSETS

$	48,404,381	 	 	$	47,918,232

LIABILITIES AND STOCKHOLDER’S EQUITY	  				 			
Current liabilities:

Accounts payable

$	169,760	 	 	$	2,828,326	 
Notes payable, related party

18,137,111	 	 	 	12,708,889

Total current liabilities

18,306,871	 	 	 	15,537,215	 
Asset retirement obligations

21,937	 	 	 	21,937

Total liabilities

18,328,808	 	 	 	15,559,152

Commitments and contingencies

Stockholder’s equity:

Preferred stock, par value $0.0001; 25,000,000 shares authorized; 0 issued and outstanding

—  	 	 	 	—  	 
Common stock, par value $0.001; 500,000,000 and 250,000,000 shares authorized; 1 issued and outstanding

—  	 	 	 	—  	 
Additional paid-in capital

100,863,195	 	 	 	100,546,596	 
Accumulated deficit

(70,787,622	) 	 	 	(68,187,516	)

Total stockholder’s equity

30,075,573	 	 	 	32,359,080

TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY

$	48,404,381	 	 	$	47,918,232

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

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NEXT BRIDGE HYDROCARBONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months
Ended
June 30,
2022	 	 	Three Months
Ended
June 30,
2021	 
Oil sales

$	9,688	 	 	$	1,692	 
Natural gas sales

7,716	 	 	 	1,810

Revenue

17,404	 	 	 	3,502	 
Operating expenses

Lease operating expenses

30,200	 	 	 	(71,440	) 
Production and ad valorem tax

1,253	 	 	 	248	 
General and administrative

1,162,957	 	 	 	4,202,008	 
Depreciation, depletion and amortization

—  	 	 	 	421

Total operating expenses

1,194,410	 	 	 	4,131,237	 
Other income (expense)

Interest expense

(300,000	) 	 	 	(1,394	) 
Interest income

157	 	 	 	1,462

Total other income (expense) – net

(299,843	) 	 	 	1,068

Loss before income taxes

(1,476,849	) 	 	 	(4,126,667	) 
Provision for income tax

—  	 	 	 	—

Net loss

$	(1,476,849	) 	 	$	(4,126,667	)

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

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NEXT BRIDGE HYDROCARBONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Six Months
Ended
June 30, 2022	 	 	Six Months
Ended
June 30, 2021	 
Oil sales

$	9,688	 	 	$	2,858	 
Natural gas sales

7,716	 	 	 	3,115

Revenue

17,404	 	 	 	5,973	 
Operating expenses

Lease operating expenses

40,821	 	 	 	38,309	 
Production and ad valorem tax

1,253	 	 	 	426	 
General and administrative

1,988,694	 	 	 	5,236,601	 
Depreciation, depletion and amortization

—  	 	 	 	935

Total operating expenses

2,030,768	 	 	 	5,276,271	 
Other income (expense)

Interest expense

(587,222	) 	 	 	(3,312	) 
Gain on extinguishment of debt

—  	 	 	 	77,477	 
Interest income

480	 	 	 	1,919

Total other income (expense) - net

(586,742	) 	 	 	77,084

Loss before income taxes

(2,600,106	) 	 	 	(5,193,214	) 
Provision for income tax

—  	 	 	 	—

Net loss

$	(2,600,106	) 	 	$	(5,193,214	)

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

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NEXT BRIDGE HYDROCARBONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common
stock
shares	 	  	Common
stock
amount	 	  	Additional
paid-in
capital	 	 	Accumulated
deficit	 	 	Total	 
Three Months Ended June 30, 2021 Balance, March 30, 2021

1	 	  	$	—  	 	  	$	104,169,630	 	 	$	(61,015,255	) 	 	$	43,154,375	 
Distributions to parent

—  	 	  	 	—  	 	  	 	(4,503,794	) 	 	 	—  	 	 	 	(4,503,794	) 
Net loss

—  	 	  	 	—  	 	  	 	—  	 	 	 	(4,126,667	) 	 	 	(4,126,667	)

Balance, June 30, 2021

1	 	  	$	—  	 	  	$	99,665,836	 	 	$	(65,141,922	) 	 	$	34,523,914

Three Months Ended June 30, 2021 Balance, March 30, 2022

1	 	  	$	—  	 	  	$	100,864,388	 	 	$	(69,310,773	) 	 	$	31,553,615	 
Distributions to parent

—  	 	  	 	—  	 	  	 	(1,193	) 	 	 	—  	 	 	 	(1,193	) 
Net loss

—  	 	  	 	—  	 	  	 	—  	 	 	 	(1,476,849	) 	 	 	(1,476,849	)

Balance, June 30, 2022

1	 	  	$	—  	 	  	$	100,863,195	 	 	$	(70,787,622	) 	 	$	30,075,573

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

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NEXT BRIDGE HYDROCARBONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common
stock
shares	 	  	Common
stock
amount	 	  	Additional
paid-in
capital	 	  	Accumulated
deficit	 	 	Total	 
Balance, December 31, 2020

1	 	  	$	—  	 	  	$	88,267,685	 	  	$	(59,948,708	) 	 	$	28,318,977	 
Contributions from parent

—  	 	  	 	—  	 	  	 	11,398,151	 	  	 	—  	 	 	 	11,398,151	 
Net loss

—  	 	  	 	—  	 	  	 	—  	 	  	 	(5,193,214	) 	 	 	(5,193,214	)

Balance, June 30, 2021

1	 	  	$	—  	 	  	$	99,665,836	 	  	$	(66,141,922	) 	 	$	34,523,914

Balance, December 31, 2021

1	 	  	$	—  	 	  	$	100,546,596	 	  	$	(68,187,514	) 	 	$	32,359,080	 
Contributions from parent

—  	 	  	 	—  	 	  	 	316,599	 	  	 	—  	 	 	 	316,599	 
Net loss

—  	 	  	 	—  	 	  	 	—  	 	  	 	(2,600,106	) 	 	 	(2,600,106	)

Balance, June 30, 2022

1	 	  	$	—  	 	  	$	100,863,195	 	  	$	(70,787,622	) 	 	$	30,075,573

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

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NEXT BRIDGE HYDROCARBONS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months
Ended
June 30,
2022	 	 	Six Months
Ended
June 30,
2021	 
Cash Flows From Operating Activities

Net loss

$	(2,600,106	) 	 	$	(5,193,214	) 
Adjustments to reconcile net loss to net cash from operations:

Depreciation, depletion and amortization

—  	 	 	 	935	 
Paid in kind interest

587,222	 	 	 	—  	 
Change in:

Accounts receivable, related party

(1,872	) 	 	 	(54,443	) 
Grants and other receivables

23,340	 	 	 	110,094	 
Prepaid expenses

(7,010	) 	 	 	(219,576	) 
Accounts payable

(2,658,566	) 	 	 	(714,096	) 
Accrued liabilities

—  	 	 	 	(1,213,779	)

Net cash from operating activities

(4,656,992	) 	 	 	(5,855,887	)

Cash Flows From Investing Activities

Investment in oil and natural gas properties

(1,491,766	) 	 	 	(1,713,604	)

Net cash from investing activities

(1,491,766	) 	 	 	(1,713,604	)

Cash Flows From Financing Activities

Contributions from parent

316,599
 
 	 	11,398,151	 
Proceeds from notes payable, related party

4,841,000	 	 	 	—

Net cash from financing activities

5,157,599	 	 	 	11,398,151

Net (decrease) increase in cash

(991,159	) 	 	 	3,828,660	 
Cash—beginning of period

1,989,419	 	 	 	130,504

Cash—end of period

$	998,260	 	 	$	3,959,164

Supplemental disclosure of cash flow information: (Non Cash Items)

Cash paid for interest

$	—  	 	 	$	—  	 
Cash paid for state franchise tax

$	—  	 	 	$	—  	 
The accompanying notes are an integral part of these consolidated financial statements.

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NEXT BRIDGE HYDROCARBONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	
NATURE OF BUSINESS

Next Bridge Hydrocarbons, Inc. (formerly OilCo Holdings, Inc.) (“the Company”, “we”, “our”) was incorporated in August 2021 under the laws of the State of Nevada. We are engaged in the acquisition, exploration and development of oil and natural gas properties in the United States. We operate our business through our subsidiaries Torchlight Energy Inc., Hudspeth Operating, LLC, Hudspeth Oil Corporation, and Torchlight Hazel LLC.

Prior to the formation our subsidiaries were consolidated into Meta Materials Inc., an affiliated company. All intercompany transactions have been eliminated in the consolidated financial statements.

On June 29, 2021, our former parent, Torchlight Energy Resources, Inc. (“TERI”) was acquired by Meta Materials, Inc.

2.	
GOING CONCERN

At June 30, 2022, the Company had not yet achieved profitable operations. We had a net loss of $2,600,106 for the six months ended June 30, 2022. We expect to incur further losses in the development of our business. The Company had a working capital deficit as of June 30, 2022 of $17,082,726. 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, institutional, or public 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.

3.	
SIGNIFICANT ACCOUNTING POLICIES

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

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These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the 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 herein for the year ended December 31, 2021.

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.

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) and the significant risks to the international community and economies as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified COVID-19 as a pandemic, based on the rapid increase in exposure globally, and thereafter, COVID-19 continued to spread throughout the U.S. and worldwide. In addition, actions taken by OPEC members and other exporting nations on the supply and demand in global oil and natural gas markets resulted in significant negative pricing pressure in the first half of 2020, followed by a recovery in pricing and an increase in demand in the second half of 2020 and into 2021. However, multiple variants emerged in 2021 and became highly transmissible, which contributed to additional pricing volatility during 2021 to date. The financial results of companies in the oil and natural gas industry have been impacted materially as a result of changing market conditions. Such circumstances generally increase uncertainty in the Partnership’s accounting estimates. Although demand and market prices for oil and natural gas have recently increased, due to the rising energy use and the improvement in U.S. economic activity, we cannot predict events that may lead to future price volatility and the near term energy outlook remains subject to heightened levels of uncertainty.

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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 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 natural 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, 2022 and December 31, 2021, no valuation allowance was considered necessary.

Oil and natural 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 natural 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 natural 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 natural 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.

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 six months ended June 30, 2022 and 2021, the Company capitalized $-0, and $141,048 respectively, of interest on unevaluated properties.

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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 natural 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 natural gas properties. If the net capitalized cost of proved oil and natural gas properties, net of related deferred income taxes, plus the cost of unproved oil and natural 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 natural gas properties, the excess is charged to expense and reflected as additional accumulated DD&A. The Company recorded an impairment expense of $-0- for the six months ended June 30, 2022 and 2021, respectively, to recognize the adjustment required by the ceiling test.

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 natural 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.

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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.

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 natural 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. The Company elects to treat contracts to sell oil and natural 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.

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.

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 0 shares.

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 June 30, 2022 and December 31, 2021.

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Recent accounting pronouncements not yet adopted—

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which adds a new Topic 326 to the Codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the company expects to collect over the instrument’s contractual life. ASU 2016-13 also amends the credit loss measurement guidance for available-for sale debt securities and beneficial interests in securitized financial assets. The guidance is applicable for fiscal years beginning after December 15, 2019 and interim periods within those years, however, the FASB extended the effective date for smaller reporting companies to fiscal years beginning after December 15, 2022. The Company is currently evaluating the potential impact of the adoption of this standard on its related disclosures.

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.

4.	
OIL & NATURAL GAS PROPERTIES

The following table presents the capitalized costs for oil & natural gas properties of the Company:

June 30, 2022	 	  	December 31,
2021	 
Evaluated costs subject to amortization

$	—  	 	  	$	—  	 
Unevaluated costs

47,155,236	 	  	 	45,663,470

Total capitalized costs

47,155,236	 	  	 	45,663,470	 
Less accumulated depreciation, depletion and amortization

—  	 	  	 	—

Total oil and natural gas properties

$	47,155,125	 	  	$	45,663,470

Unevaluated costs as of June 30, 2022 and December 31, 2021 include cumulative costs on developing projects including the Orogrande and Hazel projects in West Texas.

The Company periodically adjusts for the separation of evaluated versus unevaluated costs within its full cost pool to recognize the value impairment related to the expiration of, or changes in market value, of unevaluated leases. The impact of reclassifications as they become necessary is to increase the basis for calculation of future period’s depletion, depreciation and amortization which effectively recognizes the impairment on the consolidated statement of operations over future periods. Reclassified costs also become evaluated costs for purposes of ceiling tests and which may cause recognition of increased impairment expense in future periods. The remaining cumulative unevaluated costs which have been reclassified within our full cost pool totals $0 as of June 30, 2022. As of June 30, 2022, evaluated costs are $-0- since we have no proved reserve value associated with our properties.

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.

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Current Projects

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.

As of June 30, 2022, we had interests in three oil and gas projects: the Orogrande Project in Hudspeth County, Texas, the Hazel Project in Sterling, Tom Green, and Irion Counties, Texas, and two wells 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, Meta’s former Chairman. Mr. McCabe was the sole owner of both Hudspeth and MPC. Under the terms and conditions of the Purchase Agreement, we purchased 100% of the capital stock of Hudspeth which held certain oil and natural gas assets, including a 100% working interest in approximately 172,000 predominately contiguous acres in the Orogrande Basin in West Texas. 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. As of June 30, 2022, leases covering approximately 134,000 acres remain in effect.

Our drilling obligations include five wells per year in years 2021, 2022 and 2023. The drilling obligations are minimum yearly requirements and may be exceeded if acceleration is desired.

We believe all drilling obligations through June 30, 2022, have been met.

On July 25, 2018, we and Hudspeth entered into a Settlement & Purchase Agreement (the “Settlement Agreement”) with University Founders (and Founders Oil & Gas Operating, LLC, former Operator), Wolfbone and MPC (entities controlled by a related party), which agreement provided for Founders assigning all of its working interest in the oil and gas leases of the Orogrande Project to Hudspeth and Wolfbone equally. Future well capital spending obligations remained the same 50% contribution from Hudspeth and 50% from Wolfbone until such time as the $40.5 million to be spent on the project. Cumulative capital spending did not exceed $40.5 million until after the closing of the Arrangement.

The Company has drilled fourteen 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 the wells continued through the three months ended June 30, 2022, to further capture and document the scientific base in support of demonstrating the production potential of the property.

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Following the Spin-Off, the Company intends to make offers and enter into agreements with one or more of the other current working interest owners in the Orogrande Project (each an “Orogrande Owner” and collectively, the “Orogrande Owners”). The Company anticipates offering the Orogrande Owners shares of Common Stock in exchange for their respective working interest in the Orogrande Project. The Company intends to offer the number of shares of Common Stock necessary such that each participating Orogrande Owner would own the percentage of Common Stock then outstanding in proportion to the percentage owned in the working interest of the Orogrande Project. For illustration purposes, if an Orogrande Owner owns ten percent (10%) of the working interest of the Orogrande Project, and such Orogrande Owner elects to participate and accept out offer of shares of Common Stock, then such Orogrande Owner will be offered ten percent (10%) of the aggregate amount of outstanding shares of Common Stock. The Company’s decision to enter into these transactions will depend on ability of the Company and each Orogrande Owner to negotiate and enter into definitive agreements related to such transaction and the Company’s board of directors receiving an industry-standard fairness opinion from an investment banking firm. One of the Orogrande Owners is Wolfbone Investments LLC, an entity controlled by Gregory McCabe, who will own, directly and indirectly through entities he owns or controls, over 11% of the Common Stock following the Spin-Off, which would increase if the proportionate exchange of working interest for shares of our Common Stock is consummated.

The Orogrande Project ownership as of June 30, 2022 is detailed as follows:

Revenue
Interest	 	 	Working
Interest	 
University Lands—Mineral Owner

20.000	% 	 	 	n/a	 
ORRI—Magdalena Royalties, LLC, an entity controlled by Gregory McCabe, Meta’s former Chairman

4.500	% 	 	 	n/a	 
ORRI—Unrelated Party

0.500	% 	 	 	n/a	 
Hudspeth Oil Corporation, a subsidiary of Torchlight Energy Resources Inc.

49.875	% 	 	 	66.500	% 
Wolfbone Investments LLC, an entity controlled by Gregory McCabe, Meta’s former Chairman

18.750	% 	 	 	25.000	% 
Conversion by Note Holders in March, 2020

4.500	% 	 	 	6.000	% 
Unrelated Party

1.875	% 	 	 	2.500	%

100.000	% 	 	 	100.000	%

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. A back-in after payout of a 25% working interest was retained by MPC and another unrelated working interest owner.

In October 2016, the holders of all of Torchlight Energy Resources, Inc. 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.

Acquisition of Additional Interests in Hazel Project

On January 30, 2017, we entered into and closed an Agreement and Plan of Reorganization and a Plan of Merger with an entity which was wholly-owned by Mr. McCabe, which resulted in the acquisition of approximately 40.66% working interest in the 12,000 gross acres, 9,600 net acres, in the Hazel Project.

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Also, on January 30, 2017, the Company entered into and closed a Purchase and Sale Agreement with Wolfbone. Under the agreement, we 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.

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 increasing our working interest in the Hazel project to 80%, and an overall net revenue interest of 75%.

The Company has drilled seven test wells on the Hazel Project to capture and document the scientific base in support of demonstrating the production potential of the property.

Option Agreement with Masterson Hazel Partners, LP

On August 13, 2020, our subsidiaries Torchlight Energy, Inc. and Torchlight Hazel, LLC (collectively, “Torchlight”) entered into an option agreement (the “Option Agreement”) with Masterson Hazel Partners, LP (“MHP”) and McCabe Petroleum Corporation. Under the agreement, MHP was obligated to drill and complete, or cause to be drilled and completed, at its sole cost and expense, a new lateral well (the “Well”) on our Hazel Project, sufficient to satisfy Torchlight’s continuous development obligations on the southern half of the prospect no later than September 30, 2020. MHP has satisfied this drilling obligation. MHP paid to Torchlight $1,000 as an option fee at the time of execution of the Option Agreement. MHP is entitled to receive, as its sole recourse for the recoupment of drilling costs, the revenue from production of the Well attributable to Torchlight’s interest until such time as it has recovered its reasonable costs and expenses for drilling, completing, and operating the well.

In exchange for MHP satisfying the above drilling obligations, Torchlight granted to MHP the exclusive right and option to perform operations, at MHP’s sole cost and expense, on the Hazel Project sufficient to satisfy Torchlight’s continuous development obligations on the northern half of the prospect. Because MHP exercised this drilling option and satisfied the continuous development obligations on the northern half of the prospect, under the terms of the Option Agreement (as amended in September 2020) MHP had the option to purchase the entire Hazel Project no later than May 31, 2021. Such purchase would be under the terms of a form of Purchase and Sale Agreement included as an exhibit to the Option Agreement, at an aggregate purchase price of $12,690,704 for approximately 9,762 net mineral acres, and not less than 74% net revenue interest (approximately $1,300 per net mineral acre). MHP declined to exercise the Option in 2021.

Hunton Play, Central Oklahoma

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

5.	
RELATED PARTY BALANCES

As of June 30, 2022 and December 31, 2021, the Company had a balance of $165,238 and $163,366, respectively, for an account receivable due from McCabe Petroleum Corporation for amounts advanced related to the Orogrande development cost sharing agreement.

6.	
COMMITMENTS AND CONTINGENCIES

Leases

The Company is subject to a sublease agreement on a month-to-month term for occupancy of its office premises which requires monthly rent payments of $8,300.

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Legal Matters

On April 30, 2020, The Company’s 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 Meta’s former Chairman Gregory McCabe, is a co-plaintiff in that action. After the suit was filed, Cordax filed a mineral lien in the amount of $104,500 against the Orogrande Field and has sued the operator and counterclaimed against Hudspeth for breach of contract, seeking the same amount as the lien. The Company has added the manufacturer of one of the tool components that the Company contends was a cause of the tool failure. It was later discovered that Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies forfeited its charter to conduct business in the State of Texas by failing to timely pay its franchise taxes, and the Company added members of the board of directors to the case pursuant to the Texas Tax Code. It was recently disclosed that Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies is the subsidiary of a Canadian parent company, Cordax Evaluation Technologies, Inc., who has also been added to the case. 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. The Company’s current Chairman of the Board filed a special appearance after being served with citation, alleging that he was a Canadian citizen with no meaningful ties to Texas. After discovery was conducted on this issue, the Company filed a nonsuit without prejudice for this Defendant, dismissing him from the case. The remaining parties are currently engaged in preliminary discovery and are scheduling mediation.

On March 18, 2021, Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies filed a lawsuit in Hudspeth County, Texas seeking to foreclose its mineral lien against the Orogrande Field in the amount of $104,500.01 and recover related attorney’s fees. The foreclosure action, Datalog LWT Inc. d/b/a Cordax Evaluation Technologies v. Torchlight Energy Resources, Inc., was filed in the 205th Judicial District Court of Hudspeth County, Texas. We are contesting the lien in good faith and filed a Plea in Abatement on May 10, 2021, seeking a stay in the Hudspeth County lien foreclosure case pending final disposition of the related case currently pending in Harris County, Texas.

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similar putative securities class action lawsuit was filed in the U.S. District Court for the Eastern District of New York captioned McMillan v. Meta Materials Inc., et al., No. 1:22-cv-00463. The McMillan complaint names the same defendants and asserts the same claims on behalf of the same purported class as the Maltagliati complaint. The complaints, purportedly brought on behalf of all purchasers of our publicly traded securities from September 21, 2020 through and including December 14, 2021, assert claims under Sections 10(b) and 20(a) of the Exchange Act arising primarily from a short-seller report and statements related to our business combination with Torchlight. The complaints seek unspecified compensatory damages and reasonable costs and expenses, including attorneys’ fees. On April 11, 2022, the Court held a hearing on motions to consolidate the two actions and to appoint a lead plaintiff or lead plaintiffs, but has not yet ruled on the motions.

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 June 30, 2022 and December 31, 2021, 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.

7. STOCKHOLDERS’ EQUITY

Next Bridge Hydrocarbons, Inc. has preferred and common stock both at a par value of $.0001. As of June 30, 2022, the Company has issued 1 share of common stock and 0 shares of preferred stock.

8. INCOME TAXES

The Company recorded no income tax provision at June 30, 2022 and December 31, 2021 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 six months ended June 30, 2022 because the Company expects to incur a tax loss in the current year. Similarly, no income tax expense was recognized for the six months ended June 30, 2021.

The Company had a net deferred tax asset related to federal net operating loss carryforwards of $65,730,932 and $59,481,861 at June 30, 2022 and December 31, 2021, 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.

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9. PROMISSORY NOTES

Certain assets of the Company were used as collateral for promissory notes entered into by TERI.

Promissory Notes Issued in 2017

On April 10, 2017, TERI sold two 12% unsecured promissory notes with a total of $8,000,000 in principal amount to the Straz Foundation and the Straz Trust in a private transaction. Interest only was 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 also received annual payments of common stock in TERI 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, TERI received total proceeds of $7,540,000 from the investors. TERI used the proceeds for working capital and general corporate purposes, which includes, without limitation, drilling capital, lease acquisition capital and repayment of prior debt.

The effective interest rate was 16.15%.

On February 20, 2020, the TERI 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 had been extended for one year, from April 10, 2020, to April 10, 2021.

During the quarter ended March 31, 2021, the notes were retired in full by conversion into TERI’s common stock.

Promissory Notes Issued in 2018

The effective interest rate was 15.88%.

During the quarter ended March 31, 2021, the notes were retired in full by conversion into TERI’s common stock.

Extension of Promissory Notes

On April 24, 2020, TERI entered into a Note Amendment Agreement with each of the Straz Foundation, as a lender, the Straz Trust, as a lender and collateral agent, 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, along with the promissory note issued to the Straz Foundation on April 10, 2017 which had an outstanding principal amount of $4,000,000. 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. TERI had previously extended the maturity date of the promissory note held by the Straz Foundation to April 10, 2021.

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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, we and TERI, provided guaranty with respect to payment of the three promissory notes. The Note Amendment Agreements also provided restrictions on the use of proceeds if the Orogrande Project or the Hazel Project were sold.

These notes payable issued in 2017 and 2018 totaling $12,500,000 were retired by conversion into TERI common stock in 2021.

Convertible Notes Issued in October 2018

The Conversion Agreements also provided additional consideration to the noteholders including a limited carry, atop-off obligation of us and Hudspeth, and warrants to purchase a total of 750,000 restricted shares of TERI 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 by TERI.

Convertible Notes Issued in First Quarter 2019

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On April 21, 2020, TERI entered into agreements to amend the two 14% Series D Unsecured Convertible Promissory Notes that were originally issued on February 11, 2019. 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.

These two promissory notes required 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.

These notes payable have been converted into TERI common stock. $1,000,000 was converted in December 2020 and the remaining $1,000,000 was converted in 2021.

Convertible Notes Issued in Fourth Quarter 2019

These notes payable were retired by conversion into TERI common stock in December 2020.

10.	
NOTES PAYABLE, RELATED PARTY

In 2021, the Company entered into a note payable with Meta to borrow up to $15 million. On October 1, 2021, the Company issued the 2021 Note, which bears interest at 8% per annum, computed on the basis of a 360-day year, and matures March 31, 2023 (the “2021 Note Maturity Date”); provided, however, if we raise $30 million or more in capital through debt or equity or a combination thereof by the 2021 Note Maturity Date, the 2021 Note Maturity Date will be extended to September 30, 2023, and the outstanding principal of the 2021 Note will amortize in six equal, monthly installments. If an event of default has occurred and is continuing, interest on the 2021 Note may accrue at the default rate of 12% per annum. The outstanding principal of the 2021 Note, together with all accrued interest thereon, becomes due on the 2021 Note Maturity Date. The 2021 Note includes a restrictive covenant that, subject to certain exceptions and qualifications, restricts the Company’s ability to merge or consolidate with another person or entity, or sell or transfer all or substantially all of its assets, unless the Company is the surviving entity or the successor entity assumes all of obligations under the 2021 Note. The note payable is collateralized by certain shares of common stock in Meta held by one of its stockholders, Gregory McCabe, and by a lien on a 25% interest in the Orogrande Project owned by Wolfbone Investments, LLC, an affiliate of Mr. McCabe.

The balance on the loan as of June 30, 2022 and December 31, 2021 is $15,000,000 and $12,500,000, respectively. The Company incurred interest that is paid in kind of $208,889 for the year ended December 31, 2021. The Company incurred interest that is paid in kind of $587,222 for the six months ended June 30, 2022.

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In July 2022, the Company issued 165,523,362 shares of its common stock to Meta.

As of June 28, 2022, the Company borrowed $1.9 million as an advance converted into a term loan under the Loan Agreement (defined below), which was in addition to previously advanced amounts equal to $441,000, and resulted in a total of $2.34 million principal amount outstanding, the proceeds of which were used for working capital and general corporate purposes. The term loans bear interest at a per annum rate equal to 8%. The commitments under the Loan Agreement expire on December 31, 2022. The loans become due and payable on March 31, 2023.

11.	
ASSET RETIREMENT OBLIGATIONS

The following is a reconciliation of the asset retirement obligations liability through June 30, 2022:

Asset retirement obligations—December 31, 2021

$	21,937	 
Accretion expense

—  	 
Estimated liabilities recorded

—  	 
Liability reduction at sale of property

—

Asset retirement obligations—June 30, 2022

$	21,937

12.	
SUBSEQUENT EVENTS

On September 2, 2022, we entered into a loan agreement with Meta, as lender (the “Loan Agreement”) that would govern prior loan amounts advanced to the Company from Meta. As of August 11, 2022 and August 29, 2022, we borrowed an additional $1.2 million and $1.46 million, respectively, the remaining amount available for borrowing under the Loan Agreement, and resulting in a total of $5.0 million principal amount outstanding related to the Loan Agreement, the proceeds of which were used for working capital and general corporate purposes. The term loans under the Loan Agreement bear interest at a per annum rate equal to 8% and mature on March 31, 2023 (the “Maturity Date”); provided, however, if we raise $30 million or more in capital through debt or equity, or a combination thereof by the Maturity Date, the Maturity Date will be extended to October 3, 2023 and the term loan would be amortized in six equal monthly installments. The Loan Agreement includes customary representations and covenants that, subject to exceptions and qualifications, restrict our ability to do certain things, such as: engage in mergers, acquisitions, and asset sales; transact with affiliates; undergo a change in control; incur additional indebtedness; incur liens; make loans and investments; declare dividends or redeem or repurchase equity interests; and enter into certain restrictive agreements. In addition, the Loan Agreement contains customary events of default, mandatory prepayment events and affirmative covenants, including, without limitation, covenants regarding the payment of taxes and other obligations, maintenance of insurance, maintenance of our material properties, reporting requirements, compliance with applicable laws and regulations, and formation or acquisition of new subsidiaries.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Next Bridge Hydrocarbons, Inc. (the “Company”, “we”, “our”, “Next Bridge”) is a holding company formed to own an interest in, and act as the sole owner of, Torchlight Energy Inc., Hudspeth Operating, LLC, Hudspeth Oil Corporation, and Torchlight Hazel LLC following the Distribution.

The unaudited pro forma condensed combined balance sheet as of June 30, 2022 (the “pro forma balance sheet”), and the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2022 and the year ended December 31, 2021 (the “pro forma statement of operations,” together with the pro forma balance sheet and the corresponding notes hereto, the “pro forma financial statements”) present the pro forma financial statements of the Company after giving effect to the transfer and assignment to us by Meta of the three subsidiaries described above and the consummation of the Distribution:

The pro forma financial statements have been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786, “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” using the assumptions set forth in the notes to the pro forma financial statements. The pro forma financial statements have been adjusted to include transaction accounting adjustments in accordance with GAAP, linking the effects of the Distribution to the historical consolidated financial statements of the Company, the accounting predecessor to the Company, and the historical combined financial statements of the Company and its subsidiaries.

On June 29, 2021, TERI acquired Metamaterial Inc., an Ontario corporation, and changed its name to Meta Materials, Inc. (with Metamaterial Inc. being the accounting acquiror).

The assumptions and estimates used to determine the adjustments are described in the notes to the pro forma financial statements. The final determination of the adjustments will be based on the actuals that exist as of the Distribution Date and, therefore, cannot be made prior to its completion.

The pro forma financial statements have been prepared from the respective historical consolidated financial statements of Next Bridge with respect to the oil and natural gas assets held by Torchlight Energy Inc., Hudspeth Operating, LLC, Hudspeth Oil Corporation, and Torchlight Hazel LLC, adjusted to give pro forma effect to the Distribution. The pro forma statement of operations for the six months ended June 30, 2022 and the year ended December 31, 2021, combine the historical consolidated statements of operations of Next Bridge, giving effect to the Distribution as if it had been consummated on January 1, 2021. The pro forma balance sheet combines the historical consolidated balance sheet of Next Bridge as of June 30, 2022, giving effect to the Distribution as if it had been consummated on June 30, 2022.

The pro forma financial statements are presented to reflect the Distribution and do not represent what the Company’s financial position or results of operations would have been had the Distribution occurred on the dates noted above, nor do they project the financial position or results of operations of the Company following the Distribution. The transaction accounting adjustments are based on available information and certain assumptions that management believes are factually supportable and are expected to have a continuing impact on the Company’s results of operations with the exception of certain non-recurring charges to be incurred in connection with the Distribution, as further described below. In the opinion of management, all adjustments necessary to present fairly the pro forma financial statements have been made.

The Company anticipates that certain non-recurring charges will be incurred in connection with the Distribution. Any such charge could affect the future results of the Company in the period in which such charges are incurred;

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however, these costs are not expected to be incurred in any period beyond 12 months from the Distribution Date. Accordingly, the pro forma statement of operations for the six months ended June 30, 2022 and the year ended December 31, 2021 reflects the effects of these non-recurring charges.

As a result of the foregoing, the accounting adjustments are preliminary and subject to change as additional information becomes available and additional analysis is performed. The transaction accounting adjustments have been made solely for the purpose of providing the pro forma financial statements presented below.

The pro forma financial statements should be read together with “The Spin-Off,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Certain Relationships and Related Party Transactions,” and the annual and interim financial statements and accompanying notes thereto of Next Bridge included elsewhere in this Prospectus.

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Next Bridge Hydrocarbons, Inc. and its Subsidiaries

Unaudited Pro Forma Combined Statement of Operations

For the Year Ended December 31, 2021

Year Ended
December 31, 2021	 	 	Pro Forma
Adjustments	 	 	Pro Forma Year Ended
December 31, 2021	 
Oil sales

$	4,675	 	 				 	$	4,675	 
Natural gas sales

11,229	 	 				 	 	11,229

Revenue, net

15,904	 	 	 	—  	 	 	 	15,904	 
Operating expenses

Lease operating expenses

75,330	 	 				 	 	75,330	 
Production and ad valorem tax

1,001	 	 				 	 	1,001	 
General and administrative

8,050,443	 	 	 	1,131,413	(c) 	 	 	9,181,856	 
Depreciation, depletion and amortization

4,642	 	 				 	 	4,642

Total operating expenses

8,131,416	 	 	 	—  	 	 	 	9,262,829	 
Other income (expense)

Interest expense

(212,201	) 	 	 	(400,000	)(b) 	 	 	(612,201	) 
Gain (loss) on sale of assets

1,000	 	 				 	 	1,000	 
Gain on extinguishment of debt

77,477	 	 				 	 	77,477	 
Interest income

10,428	 	 				 	 	10,428

Total other expense—net

(123,296	) 	 	 	(400,000	) 	 	 	(523,296	)

Loss before income taxes

(8,238,808	) 	 	 	(1,531,413	) 	 	 	(9,770,221	) 
Provision for income tax

—

Net loss

$	(8,238,808	) 	 	$	(1,531,413	) 	 	 	(9,770,221	)

Basic and Diluted EPS

$	(8,238,808	) 	 	 	(1,531,413	) 	 	$	(.06	)

Weighted average number of common shares outstanding:

Basic and Diluted

1	 	 	 	165,523,362	(a) 	 	 	165,523,363

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Next Bridge Hydrocarbons, Inc. and its Subsidiaries

Unaudited Pro Forma Combined Statements of Operations

For the Six Months Ended June 30, 2022

Six Months
Ended
June 30, 2022	 	  	Pro Forma
Adjustments	 	 	Six Months
Ended
June 30, 2022	 
Oil Sales

$	9,688	 	  	$	—  	 	 	$	9,688	 
Natural gas sales

7,716	 	  	 	—  	 	 	 	7,716

Revenue, net

17,404	 	  	 	—  	 	 	 	17,404	 
Operating expenses (income)

Lease operating expenses

40,821	 	  	 	—  	 	 	 	40,821	 
Production and ad valorem tax

1,253	 	  	 	—  	 	 	 	1,253	 
General and administrative

1,988,694	 	  	 	1,131,413	(c) 	 	 	3,120,107

Total operating expenses

2,030,768	 	  	 	1,131,413	 	 	 	3,162,181	 
Other income (expense)

Interest expense

(587,222	) 	  	 	(106,360	)(b) 	 	 	(693,582	) 
Interest income

480	 	  	 	—  	 	 	 	480

Total other expense – net

(586,742	) 	  	 	(106,360	) 	 	 	(693,102	)

Loss before income taxes

(2,600,106	) 	  	 	(1,237,773	) 	 	 	(3,855,283	) 
Provision for income tax

—  	 	  	 	—  	 	 	 	—

Net loss

$	(2,600,106	) 	  	$	(1,237,773	) 	 	$	(3,855,283	)

Basic and Diluted

$	(2,600,106.00	) 	  	$	(0.01	) 	 	 	(0.02	)

Weighted average number of common shares outstanding:

Basic and Diluted

1	 	  	 	165,523,362	(a) 	 	 	165,523,363

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Next Bridge Hydrocarbons, Inc. and its Subsidiaries

Unaudited Pro Forma Balance Sheet

As of June 30, 2022

Historical	 	 	Pro Forma
Adjustments	 	 	Pro Forma	 
ASSETS	  				 				 			
Current assets:

Cash

$	998,260	 	 	$	2,659,000	(b) 	 	$	3,657,260	 
Accounts receivable, related party

165,238	 	 				 	 	165,238	 
Grants and other receivables

50,970	 	 				 	 	50,970	 
Prepaid expenses

9,677	 	 				 	 	9,677

Total current assets

1,224,145	 	 	 	2,659,000	 	 	 	3,883,145	 
Oil and natural gas properties, net

47,155,236	 	 				 	 	47,155,236	 
Other assets

25,000	 	 				 	 	25,000

TOTAL ASSETS

$	48,404,381	 	 	$	2,659,000	 	 	$	51,063,381

LIABILITIES AND STOCKHOLDERS’ EQUITY	  				 				 			
Current liabilities:

Accounts payable

$	169,760	 	 	$	1,131,413	(c) 	 	$	1,301,173	 
Notes payable, related party

18,137,111	 	 	 	2,765,360	(b) 	 	 	20,902,471

Total current liabilities

18,306,871	 	 	 	3,896,773	 	 	 	22,203,644	 
Asset retirement obligations

21,937	 	 				 	 	21,937

Total liabilities

18,328,808	 	 	 	3,896,773	 	 	 	22,225,581

Commitments and contingencies

Stockholders’ equity:

Preferred stock, par value $0.0001; 25,000,000 shares authorized; 0 issued and outstanding

—  	 	 	 	—  	 	 			
Common stock, par value $0.001; 500,000,000 and 250,000,000 shares authorized; 1 issued and outstanding

—  	 	 	 	—  	 	 	 	—  	 
Additional paid-in capital

100,863,195	 	 	 	—  	 	 	 	100,863,195	 
Accumulated deficit

(70,787,622	) 	 	 	(1,237,773	)(b), (c) 	 	 	(72,025,395	)

Total stockholders’ equity

30,075,573	 	 	 	(1,237,773	) 	 	 	28,837,800

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$	48,404,381	 	 	$	2,659,000	 	 	$	51,063,381

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

NOTE 1—BASIS OF PRESENTATION AND DESCRIPTION OF TRANSACTIONS

In connection with the Distribution, the Company’s common stock will be distributed to the holders of Meta’s Series A Preferred Stock on a 1:1 basis.

The pro forma financial statements have been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786, “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” and present the pro forma financial condition and results of operations of the Company based upon the historical financial information of Next Bridge after giving effect to the Distribution and related adjustments set forth in the notes to the pro forma financial statements. The historical consolidated financial statements of Next Bridge were prepared in accordance with U.S. GAAP and shown in U.S. dollars

The pro forma financial statements do not purport to be indicative of the financial position or results of operations of the Company that would have occurred if the Distribution had occurred on the dates indicated, nor are they indicative of Next Bridge’s future financial position or results of operations. In addition, future results may vary significantly from those reflected in such statements due to factors discussed under “Risk Factors” included elsewhere in the Prospectus.

NOTE 2—PRO FORMA ADJUSTMENTS

The pro forma financial statements have been adjusted to reflect the following:

(a)	
Represents the 165,523,362 shares of the Company’s common stock issued to Meta and distributed to the holders of the Series A Preferred Stock in the Distribution.

(b)	
Represents the Loan Agreement entered into with Meta, including accrued interest expense. As of August 29, 2022, we borrowed advances converted into term loans under the Loan Agreement in the aggregate amount of $5.0 million, the maximum amount available under the Loan Agreement, the proceeds in each case were used for working capital and general corporate purposes. The term loans bears interest at a per annum rate equal to 8%. The Company may enter into additional credit or note payable agreements with Meta in order to secure financing for operations. The amount of this additional commitment is not known.

(c)	
Reflects the accrual of non-recurring costs of $1,131,413 related to the Distribution and does not account for additional amounts of expenses incurred in connection with the Distribution which are anticipated to be borne by the Company after the date of this prospectus. These costs are not expected to be incurred in any period beyond 12 months from the closing date of the Distribution. The Company may also enter into credit arrangements with certain contractors in order to secure financing for ongoing operations. The amount of credit arrangements are not known.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth an itemization of all estimated expenses in connection with the issuance and distribution of the securities to be registered:

Item	  	Amount	 
Registration Statement filing fee

$	5.11	 
Accountants fees and expenses

31,585	 
Legal fees and expenses

1,072,479	 
Printing

50,000	 
Transfer and distribution agent fees and expenses

Miscellaneous

20,000

Total

$	1,174,069.11	 
Item 14. Indemnification of Directors and Officers.

The Company’s Amended and Restated Articles of Incorporation and Bylaws provide that, to the fullest extent permitted by the laws of the State of Nevada, any officer or director of the Company, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he/she is or was or has agreed to serve at the request of the Company as a director, officer, employee or agent of the Company, or while serving as a director or officer of the Corporation, is or was serving or has agreed to serve at the request of the Company as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, partner or manager or similar capacity) of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity. For the avoidance of doubt, the foregoing indemnification obligation includes, without limitation, claims for monetary damages against indemnitee to the fullest extent permitted under Section 78.7502 and 78:751 of the Nevada Revised Statutes as in existence on the date hereof.

The indemnification provided shall be from and against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by indemnitee or on indemnitee’s behalf in connection with such action, suit or proceeding and any appeal therefrom, but shall only be provided if indemnitee acted in good faith and in a manner indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action, suit or proceeding, had no reasonable cause to believe indemnitee’s conduct was unlawful.

In the case of any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that he/she is or was a director, officer, employee or agent of the Company, or while serving as a director or officer of the Company, is or was serving or has agreed to serve at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, no indemnification shall be made in respect of any claim, issue or matter as to which indemnitee shall have been adjudged to be liable to the Company unless, and only to the extent that, the Nevada courts or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which the Nevada courts or such other court shall deem proper.

The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the indemnitee did not act in good

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faith and in a manner which indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that indemnitee’s conduct was unlawful.

To the extent that indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. If a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of our company in the successful defense of any action, suit or proceeding) is asserted by any of our directors, officers or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of that issue.

Item 15. Recent Sales of Unregistered Securities.

None

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits.

Exhibit

Number	  	Exhibit Description
    2.1	  	Distribution Agreement between Meta Materials Inc. and Next Bridge Hydrocarbons, Inc.*
    3.1	  	First Amended and Restated Articles of Incorporation of Next Bridge Hydrocarbons, Inc.**
    3.2	  	Amended and Restated By-laws of Next Bridge Hydrocarbons, Inc.**
    5.1	  	Opinion of Woodburn and Wedge**
  10.1	  	Assignment Agreement between Meta Materials Inc. and Next Bridge Hydrocarbons, Inc.**
  10.2	  	Tax Matters Agreement between Meta Materials Inc. and Next Bridge Hydrocarbons, Inc. *
  10.3+	  	Executive Employment Agreement of Chief Executive Officer‡
  10.4+	  	Executive Employment Agreement of President‡
  10.5+	  	Executive Employment Agreement of Chief Financial Officer‡
  10.6+	  	Executive Employment Agreement of Chief Operating Officer‡
  10.7+	  	2022 Equity Incentive Plan of Next Bridge Hydrocarbons, Inc.*
  10.8	  	Purchase & Settlement Agreement, dated August 6, 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*†
  10.9	  	Purchase Agreement dated April 4, 2016, by and among McCabe Petroleum Corporation, Torchlight Energy Resources, Inc. and Torchlight Energy, Inc.*†
  10.10	  	Purchase Agreement, dated November 14, 2017, by and between Torchlight Energy, Inc. and McCabe Petroleum Corporation*†
  10.11	  	Option Agreement, by and among Torchlight Energy, Inc., Torchlight Hazel, LLC, Masterson Hazel Partners, LP and McCabe Petroleum Corporation, dated August 13, 2020**†

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Exhibit

Number	  	Exhibit Description
  10.12	  	First Amendment to Option Agreement, by and among Torchlight Energy, Inc., Torchlight Hazel, LLC, Masterson Hazel Partners, LP and McCabe Petroleum Corporation, dated September 18, 2020**†
  10.13	  	Second Amendment to Option Agreement, by and among Torchlight Energy, Inc., Torchlight Hazel, LLC, Masterson Hazel Partners, LP and McCabe Petroleum Corporation, dated April 15, 2021**†
  10.14	  	Secured Promissory Note, between Next Bridge Hydrocarbons, Inc., as debtor, and Meta Materials, Inc., as holder, dated October 1, 2021.**
  10.15	  	First Amendment to Secured Promissory Note, between Next Bridge Hydrocarbons, Inc., as debtor, and Meta Materials, Inc., as holder, dated September 2, 2022.*
  10.16	  	Loan Agreement between Meta Materials, Inc. and Next Bridge Hydrocarbons, Inc.*†
  21.1	  	List of subsidiaries of Next Bridge Hydrocarbons, Inc.**
  23.1	  	Consent of BF Borgers, CPA (independent registered public accountant)*
  23.2	  	Consent of Woodburn and Wedge (included in Exhibit 5.1)**
  23.3	  	Consent of Independent Petroleum Engineers*
  24.1	  	Power of Attorney (Included on the Signature Pages to the Registration Statement)**
  99.1	  	Report of Independent Petroleum Engineers*
  99.2	  	Consent of Clifton DuBose, Jr. to be Named as Director*
  99.3	  	Consent of Joseph DeWoody to be Named as Director*
  99.4	  	Consent of Mia Pitts to be Named as Director*
  99.5	  	Consent of Kristin Whitley to be Named as Director*
107	  	Filing Fee Table*

†	
Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant hereby agrees to furnish a copy of any omitted exhibits and schedules to the SEC upon its request.

‡	
To be filed.

+	
Indicates a management contract or compensatory plan.

*	
Filed herewith.

**	
Previously filed to Registration Statement on Form S-1 filed with the SEC on July 15, 2022 and incorporated herein by reference.

(b) Financial Statement Schedules

No financial statement schedules are provided because the information called for is not required or is shown either in our consolidated financial statements or notes thereto.

Item 17. Undertakings.

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dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) The undersigned registrant hereby undertakes that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) The undersigned registrant hereby undertakes to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act, Next Bridge Hydrocarbons, Inc. has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Fort Worth, Texas, on September 6, 2022.

NEXT BRIDGE HYDROCARBONS, INC.
By:	 	
/s/ Ken Rice

Name: Ken Rice
Title: Chairman and Chief Financial Officer
SIGNATURES

Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	  	Title	 	Date
/s/ Ken Rice

Ken Rice

Chairman and Chief

Financial Officer

September 6, 2022
*

George Palikaras

President

September 6, 2022
*

Robert L. Cook

Director	 	September 6, 2022

*By:	 	
/s/ Ken Rice

Attorney-in-fact

II-Signature Page

External Resources:
 nextbridgehydrocarbons.com
 mineral.tech
 nextbridgehydrocarbons.com
d302576dex21.htm  EX-2.1
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EX-2.1
Exhibit 2.1

DISTRIBUTION AGREEMENT

BETWEEN

META MATERIALS, INC.

AND

NEXT BRIDGE HYDROCARBONS, INC.

Dated September 2, 2022

DISTRIBUTION AGREEMENT

THIS DISTRIBUTION AGREEMENT, made and entered into effective as of September 2, 2022 (this “Agreement”), is by and between META MATERIALS, INC., a Nevada corporation (formerly known as Torchlight Energy Resources, Inc., “Parent”), and NEXT BRIDGE HYDROCARBONS, INC., a Nevada corporation, and, as of the date hereof, a wholly-owned subsidiary of Parent (“NBH”). Parent and NBH are each a “Party” and are sometimes referred to herein as the “Parties”. Certain capitalized terms used in this Agreement are defined in Section 1.1.

WITNESSETH:

WHEREAS, Parent and NBH previously entered into an Assignment of Company Interests and Stock Power dated as of June 28, 2022 (the “Assignment Agreement”), pursuant to which Parent contributed to NBH the equity interests of certain entities that were previously wholly-owned subsidiaries of Parent;

WHEREAS, Parent intends to divest all of its ownership interest in NBH through a distribution of outstanding shares of NBH Common Stock to the persons holding shares of Parent Series A Preferred Stock (each, a “Parent Shareholder” and one or more, “Parent Shareholders”) on the Record Date, without any consideration being paid by such Parent’s stockholders, pursuant to the terms and subject to the conditions of this Agreement (the “Distribution”); and

WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Distribution, as well as certain other agreements all on the terms and conditions set forth below.

NOW, THEREFORE, for and in consideration of the premises and the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Certain Definitions.

For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1:

“AAA Commercial Arbitration Rules” shall have the meaning set forth in Section 5.2(a).

“Action” means any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international Governmental Entity or any arbitration or mediation tribunal.

“Affiliate” means, when used with respect to a specified Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”), when used with respect to any specified Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, from and after the Effective Time and for purposes of this Agreement and the Ancillary Agreements, NBH shall not be deemed to be an Affiliate of Parent, and Parent shall not be deemed to be an Affiliate of NBH.

“Ancillary Agreements” means the (i) Tax Matters Agreement, (ii) Assignment Agreement, (iii) 8% Secured Promissory Note, dated October 1, 2021, issued by Oilco Holdings, Inc., a Nevada corporation (now known as Next Bridge Hydrocarbons, Inc.), in an original principal amount of up to $15 million in favor of Parent and (iv) unsecured Loan Agreement, dated August [___], 2022 by and among NBH, Torchlight Energy, Inc., a Nevada corporation, Torchlight Hazel, LLC, a Texas limited liability company, Hudspeth Oil Corporation, a Texas corporation, Hudspeth Operating, LLC, a Texas limited liability company and Parent.

“Assignment Agreement” has the meaning set forth in the Recitals.

“Code” means the Internal Revenue Code of 1986, as amended.

“Consent” means any consent, waiver or approval from, or notification requirement to, any third parties.

“Dispute” means any controversy or dispute with respect to the interpretation or enforcement of this Agreement.

“Distribution” has the meaning set forth in the Recitals.

“Distribution Agent” means the distribution agent to be appointed by Parent to distribute to the Parent Shareholders all of the outstanding shares of NBH pursuant to the Distribution.

“Distribution Date” means the date on which Parent, through the Distribution Agent, distributes all of the issued and outstanding shares of NBH to Parent Shareholders in the Distribution.

“Effective Time” means 5:00 p.m. Central Time, or such other time as Parent may determine, on the Distribution Date.

“Force Majeure” means, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which by its nature could not have been reasonably foreseen by such Party (or such Person) or, if it could have been reasonably foreseen, was unavoidable, and includes acts of God, storms, floods, riots, labor unrest, pandemics, nuclear incidents, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities, or other national or international calamity or one or more acts of terrorism or failure of energy sources or distribution or transportation facilities.

“Governmental Approvals” means any notice, report or other filing to be made with, or any consent, registration, approval, permit or authorization to be obtained from, any Governmental Entity; provided, however, that no consent required from any counterparty to any contract shall constitute a Governmental Approval for purposes of this Agreement.

“Governmental Entity” means any domestic or foreign (whether national, federal, state, provincial, local or otherwise) government or any court, administrative agency or commission or other governmental or regulatory authority or agency, domestic or foreign.

“Group” means either the NBH Group or the Parent Group, as the context requires.

“Indemnifying Party” shall have the meaning set forth in Section 6.3(a).

“Indemnitee” shall have the meaning set forth in Section 6.3(a).

“Indemnity Payment” shall have the meaning set forth in Section 6.3(a).

“Information” means documents and information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible form, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memoranda and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.

“Insurance Proceeds” means those monies:

(a) received by an insured from an insurance carrier; or

(b) paid by an insurance carrier on behalf of the insured;

in either such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof; provided, however, that with respect to a captive insurance arrangement, Insurance Proceeds shall only include net amounts received by the captive insurer from a Third Party in respect of any captive reinsurance arrangement.

“Law” means any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Entity.

“Lien” means any pledges, claims, liens, charges, options, rights of first refusal, encumbrances and security interests of any kind or nature whatsoever (including any limitation on voting, sale, transfer or other disposition or exercise of any other attribute of ownership).

“Losses” means actual losses (including any diminution in value), costs, damages, fines, penalties and expenses (including legal and accounting fees and expenses and costs of investigation and litigation), whether or not involving a Third-Party Claim.

“NBH Common Stock” means the common stock, $0.0001 par value, of NBH.

“NBH Group” means NBH, each Subsidiary of NBH immediately after the Effective Time and each Affiliate of NBH immediately after the Effective Time.

“NBH Indemnities” has the meaning set forth in Section 6.2.

“NBH Liabilities” means any and all liabilities associated with or relating to the oil and gas operations of Parent whether before or after the Distribution, including, without limitation, any environmental liabilities, any obligation or liability resulting from the extinguishment of debt on or about March 9, 2020 relating to Parent’s Series C Unsecured Convertible Promissory Notes, and any liabilities that are expressly provided by this Agreement or any Ancillary Agreement as liabilities to be assumed by NBH.

“Parent Group” means Parent, each Subsidiary of Parent immediately after the Effective Time and each Affiliate of Parent immediately after the Effective Time (in each case other than any member of the NBH Group).

“Parent Indemnitees” has the meaning set forth in Section 6.2.

“Parent Preferred Stock” means the Series A Preferred Stock, $0.0001 par value, of Parent.

“Parent Shareholder” and “Parent Shareholders” have the meaning set forth in the Recitals.

“Person” means any individual, general or limited partnership, corporation, business trust, joint venture, association, company, limited liability company, unincorporated organization, a limited liability entity, any other entity and any Governmental Entity.

“Privilege” has the meaning set forth in Section 4.4.

“Prospectus” means the Prospectus attached to the S-1, including any amendment or supplement thereto.

“Record Date” means 5:00 p.m. Central Time on the date to be determined by the Board of Directors of Parent as the Record Date for determining Parent Shareholders entitled to receive shares of NBH Common Stock in the Distribution.

“Record Holders” means the holders of record of Parent Preferred Stock as of the Record Date.

“Representatives” means, with respect to any Person, any of such Person’s directors, officers, employees, agents, consultants, advisors, accountants, attorneys or other representatives.

“S-1” means the registration statement on Form S-1 filed by NBH with the SEC in connection with the Distribution, including any amendments or supplements thereto.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Subsidiary” or “subsidiary” means, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities of such Person, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, or (b) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

“Taxing Authority” means a Governmental Entity having jurisdiction over the assessment, determination, collection, or other imposition of any Tax.

“Tax Matters Agreement” means the Tax Matters Agreement, dated as of the date hereof, between Parent and NBH, in substantially the form attached as Exhibit A hereto, as such agreement may be modified or amended from time to time in accordance with its terms.

“Tax Return” means any return, declaration, report, claim for refund, property rendition or information return or statement relating to Taxes, including any schedule or attachment thereto and including any amendment thereof.

“Taxes” means (a) all federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Section 59A of the Code), customs, duties, capital stock, franchise, margins, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, escheat, registration, value added, wealth, net wealth, net worth, alternative or add-on minimum, estimated or any other taxes, unclaimed property liabilities, any payments in lieu of taxes or other similar payments, charges, fees, fines, levies, imposts, customs or duties of any kind, whatsoever, including any interest, penalty, fines, or addition thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person or (b) any liability for the payment of any taxes, interest, penalty, addition to tax or like additional amount resulting from the application of Treasury Regulation Section 1.1502-6 or comparable federal, state or local Law.

“Third Party” shall have the meaning set forth in Section 6.4(a).

“Third-Party Claim” shall have the meaning set forth in Section 6.4(a).

ARTICLE II

CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTION

2.1 Time and Place of Distribution.

Subject to the terms and conditions of this Agreement, the Distribution shall be consummated on the Distribution Date.

2.2 Pre-Distribution Transactions.

(a) On or prior to the Distribution Date, the appropriate parties shall enter into the Ancillary Agreements.

(b) NBH shall file with the SEC any amendments or supplements to the S-1 as may be necessary or advisable in order to cause the S-1 to become and remain effective as required by the SEC or federal, state or other applicable securities Laws. Parent and NBH shall cooperate in preparing, filing with the SEC and causing to become effective registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or advisable in connection with the transactions contemplated by this Agreement and the Ancillary Agreements. Parent and NBH shall take all such action as may be necessary or advisable under the securities or “blue sky” Laws of the United States (and any comparable Laws under any non-U.S. jurisdiction) in connection with the transactions contemplated by this Agreement and the Ancillary Agreements.

ARTICLE III

THE DISTRIBUTION

3.1 The Distribution.

(a) On or prior to the Distribution Date, Parent shall deliver to the Distribution Agent, for the benefit of the Record Holders, book-entry transfer authorizations for such number of the outstanding shares of NBH Common Stock as is necessary to effect the Distribution.

(b) The Effective Time on the Distribution Date shall be 5:00 p.m. Central Time, or such other time as Parent may determine.

(c) Parent shall instruct the Distribution Agent to distribute, as soon as practicable following the Effective Time, to each Record Holder one share of NBH Common Stock for every one (1) share of Parent Preferred Stock held by such Record Holder as of the Record Date.

3.2 Actions in Connection with the Distribution.

(a) NBH shall make available to the Parent Shareholders, at such time on or prior to the Distribution Date, any information concerning NBH, its business, operations and management, the Distribution and such other matters as may be required by Law.

(b) Promptly after receiving a request from Parent, NBH shall take all such actions as may be necessary or appropriate under the state securities or Blue Sky Laws of the United States (and any comparable Laws under any foreign jurisdiction) in connection with the Distribution.

(c) NBH shall take all reasonable steps necessary and appropriate to cause the conditions set forth in Section 3.3 to be satisfied and to effect the Distribution, or any portion thereof, on the Distribution Date.

3.3 Conditions to Distribution.

The following are conditions to the consummation of any part of the Distribution. The conditions are for the sole benefit of Parent and shall not give rise to or create any duty on the part of Parent or Parent’s board of directors to waive or not waive any such condition.

(a) The actions and filings with regard to state securities and Blue Sky Laws of the United States (and any comparable Laws under any foreign jurisdictions) described in Section 2.2(b) shall have been taken and, where applicable, have become effective or been accepted.

(b) Any material Consents necessary to consummate the Distribution or any portion thereof shall have been obtained and be in full force and effect.

(d) No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of all or any portion of the Distribution shall be in effect, and no other event outside the control of Parent shall have occurred or failed to occur that prevents the consummation of all or any portion of the Distribution.

(e) Each of the Ancillary Agreements shall have been duly executed and delivered by the parties thereto.

(f) Parent’s Board of Directors shall have approved the Distribution and shall have not determined that any events or developments shall have occurred that make it inadvisable to effect the Distribution.

3.4 Closing. The closing and consummation of the transactions contemplated by this Agreement to occur prior to or on the Distribution Date shall take place at the principal office of Parent.

3.5 Withholding Taxes. Notwithstanding anything to the contrary in this Agreement, Parent, the Distribution Agent and each of their Affiliates and Representatives (each, a “Withholding Agent”) shall be entitled to deduct and withhold, or cause to be deducted and withheld, from any amounts payable or otherwise deliverable pursuant to this Agreement such amounts as may be required to be deducted or withheld therefrom under any provision of U.S. federal, state, local or non-U.S. Tax Law. If a Withholding Agent intends to deduct or withhold any Taxes as required by Law from any amounts payable or otherwise deliverable to NBH pursuant to this Agreement, such Withholding Agent shall use commercially reasonable efforts to provide reasonable advance notice of its intent to deduct or withhold such amounts and shall use commercially reasonable efforts to cooperate with NBH to mitigate, reduce or eliminate such deduction or withholding. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

3.6 General Representation and Warranties.

(a) Each Party has all requisite power and authority necessary to carry out the transactions contemplated by this Agreement.

(b) The execution, delivery and performance of this Agreement have been duly authorized by each Party, and this Agreement constitutes a valid and binding obligation of each Party, enforceable in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by rules of law governing specific performance, injunctive relief or other equitable remedies.

(c) Neither the execution and delivery of this Agreement to which such Party is a party, and none of the transactions contemplated hereby shall (i) violate any provision of the governing documents of such Party, (ii) violate any Law or other restriction to which such Party is subject, or (iii) result in the imposition of any Lien upon any of the assets, of such Party. Other than the S-1, neither Party is required to give notice to, make any filing with, or obtain any authorization, consent or approval of any Governmental Entity in order for the Parties to consummate the transactions contemplated by this Agreement.

3.7 Tax Representations and Warranties.

(a) Except to the extent as would not have a material adverse effect on NBH or its Subsidiaries:

(i) each of Parent and its Subsidiaries has (1) duly and timely filed or caused to be filed all Tax Returns required to be filed by them with the appropriate Taxing Authority, and each Tax Return of Parent and its Subsidiaries is true, complete and correct in all material respects, and (2) paid all Taxes due or claimed due by a Taxing Authority (whether or not shown as due on a filed Tax Return) from or with respect to it; and

(ii) there are no currently proposed or pending adjustments by any Taxing Authority in connection with any Tax Returns relating to NBH or any of its Subsidiaries, and no waiver or extension of any statute of limitations as to any U.S. federal, state, local or non-U.S. Tax matter relating to each of NBH and its Subsidiaries has been given by or requested from Parent or its Subsidiaries with respect to any Tax year.

(b) Neither NBH nor any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement, or (ii) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the transactions contemplated by this Agreement.

3.8 Transition Services. Except as otherwise provided in any Ancillary Agreement, as of the Effective Time Parent shall not be obligated to provide any services that it had been previously providing to NBH.

3.9 Post-Distribution Liabilities. As of the Effective Time, NBH shall become responsible and liable for all NBH Liabilities.

ARTICLE IV

COVENANTS

4.1 Agreement for Exchange of Information; Access to Employees.

Except as otherwise provided in any Ancillary Agreement, each of Parent and NBH, on behalf of itself and the members of its respective Group, shall use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the other Party, at any time before or after the Effective Time, as soon as reasonably practicable after written request therefor, any Information (or a copy thereof) in the possession or under the control of either Party or any of its Subsidiaries to the extent that: (i) such Information relates to NBH if NBH is the requesting Party, or to Parent if Parent is the requesting Party; (ii) such Information is required by the requesting Party to comply with its obligations under this Agreement or any Ancillary Agreement; (iii) such Information is required by the requesting Party in connection with any litigation, legal proceeding or dispute involving the requesting Party; or (iv) such Information is required by the requesting Party to comply with any obligation imposed by any Governmental Entity; provided, however, that, in the event that the Party to whom the request has been made determines that any such provision of Information could be commercially detrimental, violate any Law or agreement or waive any attorney-client privilege, then the Parties shall use commercially reasonable efforts to permit compliance with such obligations to the extent and in a manner that avoids any such harm or consequence. The Party providing Information pursuant to this Section 4.1 shall only be obligated to provide such Information in the form, condition and format in which it then exists and in no event shall such Party be required to perform any improvement, modification, conversion, updating or reformatting of any such Information.

In addition, each of Parent and NBH, on behalf of itself and the members of its respective Group, shall use commercially reasonable efforts to provide or make available, or cause to be provided or made available, to the other Party, at any time before or after the Effective Time, as soon as reasonably practicable after written request therefor, such Party’s employees to support and in connection with any litigation, legal proceeding or dispute involving the requesting Party.

4.2 Ownership of Information. Any Information owned by one Group that is provided to a requesting Party pursuant to Section 4.1 shall remain the property of the providing Party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.

4.3 Compensation for Providing Information4.4 . The Party requesting Information agrees to reimburse the other Party for the reasonable out-of-pocket costs, if any, of creating, gathering and copying such Information or otherwise complying with the request with respect to such Information.

4.4 Additional Indebtedness to Parent.

(a) No later than three months after the Distribution, the Parties hereby agree to negotiate in good faith the settlement and agreement regarding (i) advances made to NBH by Parent or paid by Parent on behalf of NBH, whether before or after the Distribution (including the Credit Amount, as defined below), and (ii) the costs related to the Spin-Off to be borne by NBH that were not otherwise advanced to NBH by Parent prior to the Distribution, i.e. pursuant to the 8% Secured Promissory Note, dated October 1, 2021, issued by Oilco Holdings, Inc., a Nevada corporation (now known as Next Bridge Hydrocarbons, Inc.), in an original principal amount of up to $15 million in favor of Parent and the Loan Agreement dated September [___], 2022 by and among NBH, Torchlight Energy, Inc., a Nevada corporation, Torchlight Hazel, LLC, a Texas limited liability company, Hudspeth Oil Corporation, a Texas corporation, Hudspeth Operating, LLC, a Texas limited liability company and Parent. NBH shall then enter into a promissory note in favor of Parent for that amount owed by NBH to Parent. Such aggregate amount owed by NBH to Parent is currently not expected to exceed $11 million.

(b) To the extent Parent has signed credit applications with trade creditors of NBH, for NBH’s benefit, to allow NBH to pursue its drilling obligations under the leases for the Orogrande Basin in order to maintain such leases, the aggregate amount, including any cash down-payments, for which Parent is guaranteeing NBH’s obligations to such trade creditors (the “Credit Amount”) shall be due and payable from NBH if Parent actually pays any such amounts.

ARTICLE V

DISPUTE RESOLUTION

5.1 General Provisions.

(a) Any dispute, controversy or claim arising out of or relating to this Agreement or the Ancillary Agreements (except as otherwise set forth in any such Ancillary Agreements)(a “Dispute”), including (i) the validity, interpretation, breach or termination thereof or (ii) whether any liability not specifically characterized in this Agreement or the Ancillary Agreements, whose proper characterization is disputed, shall be resolved in accordance with the procedures set forth in this Article V, which shall be the sole and exclusive procedures for the resolution of any such Dispute unless otherwise specified in the applicable Ancillary Agreement or in this Article V.

(b) THE PARTIES EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO TRIAL BY JURY.

(c) The specific procedures set forth in this Article V, including the time limits referenced herein, may be modified by agreement of both of the Parties in writing.

(d) All applicable statutes of limitations and defenses based upon the passage of time shall be tolled while the procedures specified in this Article V are pending. The Parties shall take any necessary or appropriate action required to effectuate such tolling.

(e) All communications between the Parties or their representatives in connection with the attempted resolution of any Dispute shall be deemed to have been delivered in furtherance of a Dispute settlement and shall be exempt from discovery and production, and shall not be admissible into evidence for any reason (whether as an admission or otherwise), in any arbitral or other proceeding for the resolution of any Dispute.

5.2 Arbitration.

(a) In the event any Dispute is not finally resolved between the Parties pursuant to good faith negotiations, and unless the Parties have mutually agreed to mediate or use some other form of alternative dispute resolution in an attempt to resolve the Dispute, then such Dispute may be submitted by either Party to be finally resolved by binding arbitration pursuant to the AAA Commercial Arbitration Rules as then in effect (the “AAA Commercial Arbitration Rules”).

(b) Without waiving its rights to any remedy under this Agreement, either Party may seek any interim or provisional relief that is necessary to protect the rights or property of that Party either (i) before any federal or state court in Dallas County, Texas, (ii) before a special arbitrator, as provided for under the AAA Commercial Arbitration Rules, or (iii) before the arbitral tribunal established hereunder.

(c) Unless otherwise agreed by the Parties in writing, any Dispute to be decided in arbitration hereunder shall be decided (i) before a sole arbitrator if the amount in dispute, inclusive of all claims and counterclaims, totals less than $1,000,000; or (ii) by an arbitral tribunal of three (3) arbitrators if (A) the amount in dispute, inclusive of all claims and counterclaims, is equal to or greater than $1,000,000 or (B) either Party elects in writing to have such dispute decided by three (3) arbitrators when one of the Parties believes, in its sole judgment, the issue could have significant precedential value; however, the Party who makes such election under clause (B) shall solely bear the increased costs and expenses associated with a panel of three (3) arbitrators (i.e., the additional costs and expenses associated with the two (2) additional arbitrators).

(d) A panel of three (3) arbitrators shall be chosen as follows: (i) upon the written demand of either Party and within fifteen (15) days from the date of receipt of such demand, each Party shall name an arbitrator selected by such Party in its sole discretion; and (ii) the two (2) party-appointed arbitrators shall thereafter, within thirty (30) days from the date on which the second of the two (2) arbitrators was named, name a third, independent arbitrator who shall act as chairperson of the arbitral tribunal. In the event that either Party fails to name an arbitrator within fifteen (15) days from the date of receipt of a written demand to do so, then upon written application by either Party, that arbitrator shall be appointed pursuant to the AAA Commercial Arbitration Rules. In the event that the two (2) party-appointed arbitrators fail to appoint the third, independent arbitrator within thirty (30) days from the date on which the second of the two (2) arbitrators was named, then upon written application by either Party, the third, independent arbitrator shall be appointed pursuant to AAA Commercial Arbitration Rules. If the arbitration shall be before a sole independent arbitrator, then the sole independent arbitrator shall be appointed by agreement of the Parties within fifteen (15) days from the date of receipt of written demand of either Party. If the Parties cannot agree to a sole independent arbitrator, then upon written application by either Party, the sole independent arbitrator shall be appointed pursuant to AAA Commercial Arbitration Rules.

(e) The place of arbitration shall be Dallas County, Texas. Along with the arbitrator(s) appointed, the Parties shall agree to a mutually convenient location, date and time to conduct the arbitration, but in no event shall the final hearing(s) be scheduled more than six (6) months from submission of the Dispute to arbitration unless the Parties agree otherwise in writing.

(f) Neither Party shall be bound by Rule 13 of the Federal Rules of Civil Procedure or any analogous Law or provision in the AAA Commercial Arbitration Rules governing deadlines for compulsory counterclaims; rather, each Party shall be free to bring a counterclaim at any time (subject to any applicable statutes of limitation).

(g) So long as either Party has a timely claim to assert, the agreement to arbitrate Disputes set forth in this Section 5.2 shall continue in full force and effect subsequent to, and notwithstanding the completion, expiration or termination of, this Agreement.

(h) The interim or final award in an arbitration pursuant to this Article V shall be conclusive and binding upon the Parties, and a Party obtaining a final award may enter judgment upon such award in any federal or state court in Dallas County, Texas.

(i) It is the intent of the Parties that the agreement to arbitrate Disputes set forth in this Section 5.2 shall be interpreted and applied broadly such that all reasonable doubts as to arbitrability of a Dispute shall be decided in favor of arbitration.

(j) The Parties agree that any Dispute submitted to arbitration shall be governed by, and construed and interpreted in accordance with Laws of the State of Nevada and, except as otherwise provided in this Article V or mutually agreed to in writing by the Parties, the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq., shall govern any arbitration between the Parties pursuant to this Section 5.2.

(k) Subject to Section 5.2(c)(ii)(B), each Party shall bear its own fees, costs and expenses and shall bear an equal share of the costs and expenses of the arbitration, including the fees, costs and expenses of the three (3) arbitrators; provided that the arbitral tribunal may award the prevailing Party its reasonable fees and expenses (including attorneys’ fees), if it finds that there was no good faith basis for the position taken by the other Party in the arbitration.

(l) Notwithstanding anything in this Article V to the contrary, any disputes relating to the interpretation of Article VI or requesting injunctive relief or specific performance shall be conducted according to the fast-track arbitration procedures of the AAA Commercial Arbitration Rules then in effect.

5.3. Allocation of Undetermined Liabilities and Third-Party Claims.

(a) If either Party or any of its Subsidiaries shall receive notice or otherwise learn of the assertion of a liability or Third-Party Claim which is not determined to be a NBH Liability or a retained liability of Parent, such Party shall give the other Party written notice thereof promptly (and in any event within 15 days) after such Person becomes aware of such liability or Third-Party Claim. Thereafter, the Party shall deliver to the other Party, promptly (and in any event within 10 calendar days) after the Party’s receipt thereof, copies of all notices and documents (including court papers) received by the Party relating to the matter. If a dispute shall arise between the Parties as to the proper characterization of any liability, the dispute shall be attempted to be resolved between the Parties pursuant to good faith negotiations, and if unable, then pursuant to binding arbitration in accordance with Section 5.2 hereof.

(b) Parent may commence defense of any unallocated Third-Party Claims but shall not be obligated to do so. If Parent commences any such defense and subsequently NBH is determined hereunder to have the exclusive obligation to such Third-Party Claim, then, upon the request of NBH, Parent shall promptly discontinue the defense of such matter and transfer the control thereof to NBH. In such event, NBH will reimburse Parent for all costs and expenses incurred prior to resolution of such dispute in the defense of such Third-Party Claim.

(c) NBH may commence defense of any unallocated Third-Party Claims but shall not be obligated to do so. If NBH commences any such defense and subsequently Parent is determined hereunder to have the exclusive obligation to such Third-Party Claim, then, upon the request of Parent, NBH shall promptly discontinue the defense of such matter and transfer the control thereof to Parent. In such event, Parent will reimburse NBH for all costs and expenses incurred prior to resolution of such dispute in the defense of such Third-Party Claim.

ARTICLE VI

MUTUAL RELEASES; INDEMNIFICATION; COOPERATION

6.1 Release of Pre-Distribution Claims.

(a) Except as provided in Section 6.1(b) and Section 6.1(d), effective as of the Effective Time, each Party does hereby, on behalf of itself and its successors and assigns, release and forever discharge the other Party, each Subsidiary of such other Party and their respective successors and assigns, and all Persons who at any time prior to the Distribution Date have been directors, officers or employees of such other Party (in each case, in their respective capacities as such), and their respective successors and assigns, from any and all demands, Actions and liabilities whatsoever, whether at law or in equity, whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Date, including in connection with the transactions and all other activities to implement the Distribution. Parent shall cause each of the other parties of the Parent Group to, effective as of the Effective Time, release and forever discharge each of the NBH Indemnitees as and to the same extent as the release and discharge provided by Parent pursuant to this Section 6.1(a). NBH shall cause each of the other parties of the NBH Group to, effective as of the Effective Time, release and forever discharge each of the Parent Indemnitees as and to the same extent as the release and discharge provided by NBH pursuant to this Section 6.1(a).

(b) Nothing contained in Section 6.1(a) shall impair any right of any Person identified in Section 6.1(a) to enforce this Agreement or any Ancillary Agreement. Nothing contained in Section 6.1(a) shall release or discharge any Person from any liability that any Party may have with respect to indemnification pursuant to this Agreement.

(c) No Party shall make, nor permit any of its Subsidiaries to make, any claim or demand, or commence any Action asserting any claim or demand against the other Party, or any other Person released pursuant to Section 6.1(a), with respect to any liability released pursuant to Section 6.1(a).

(d) For the avoidance of any doubt, Section 6.1 and Section 6.3, specifically, and this Agreement, generally, do not release current or former directors or officers of Parent (notwithstanding whether or not such directors or officers would otherwise fall within the definition of “NBH Group” or “NBH Indemnitees”) save and except for any employees or contractors of subsidiaries of Parent that are becoming directors and officers of Parent as of the Distribution Date for any liability to Parent or the Parent Group in respect of pre-Distribution Date misconduct or breaches of fiduciary duty, including but not limited to the claims asserted in the consolidated securities class action pending in the United States District Court for the Eastern District of New York captioned In re Meta Materials Inc. Securities Litigation, No. 1:21-cv-07203 or the shareholder derivative action pending in the United States District Court for the Eastern District of New York captioned Hines v. Palikaras, et al., No. 1:22-cv-00248.

6.2 Indemnification by NBH. Subject to Section 6.5, NBH shall, and shall cause the other members of the NBH Group to, indemnify, defend and hold harmless Parent, each member of the Parent Group and each of their respective directors, officers and employees, and each of the successors and assigns of any of the foregoing (collectively, the “Parent Indemnitees”), from and against any and all liabilities of the Parent Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):

(a) any breach by NBH or any member of the NBH Group of any representation, warranty or covenant contained in this Agreement or any of the Ancillary Agreements;

(b) the Hudspeth Oil Corporation and Wolfbone Investments, LLC v. Datalog LWT, Inc. d/b/a Cordax Evaluation Technologies suit, filed on April 30, 2020 in the 189th Judicial District Court of Harris County, Texas and the foreclosure action, Datalog LWT Inc. d/b/a Cordax Evaluation Technologies v. Torchlight Energy Resources, Inc., filed on March 18, 2021 in the 205th Judicial District Court of Hudspeth County, Texas; and

(c) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in any of the S-1 (including in any amendments or supplements thereto) or the Prospectus (as amended or supplemented if NBH shall have furnished any amendments or supplements thereto), other than any such statement or omission in the S-1, Prospectus or marketing materials based on information furnished by Parent and solely concerning the Parent Group.

6.3 Indemnification by Parent. Subject to Section 6.5, Parent shall, and shall cause the other members of the Parent Group to, indemnify, defend and hold harmless NBH and each member of the NBH Group, and each of the successors and assigns of any of the foregoing (collectively, the “NBH Indemnitees”), from and against any and all liabilities of the NBH Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):

(d) any breach by Parent or any member of the Parent Group of any representation, warranty or covenant contained in this Agreement or any Ancillary Agreements;

(e) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in any of the S-1 (including in any amendments or supplements thereto), or the Prospectus (as amended or supplemented if NBH shall have furnished any amendments or supplements thereto) filed in connection with this Distribution Agreement, in each case based on information furnished by Parent and solely concerning the Parent Group; and

(c) subject to Section 6.2(b), any liability of the Parent or its Subsidiaries in connection with litigation, whether or not outstanding on the Distribution Date, arising in respect of pre-Distribution Date acts or omissions of the Parent or its Subsidiaries or arising in respect of Parent’s consummation of the transactions contemplated herein (including the legal proceedings set forth in Part II, Item 1 of the Parent’s Form 10-Q for the quarterly period ended March 31, 2022).

For the avoidance of doubt, nothing in this Section 6.3, specifically, or this Agreement, generally, shall create, extend, modify, limit, change, supplant, replace or amend in any way any obligation of the Parent or the Parent Group to indemnify current or former directors or officers of Parent (notwithstanding whether or not such directors or officers would otherwise fall within the definition of “NBH Group” or “NBH Indemnitees”) with respect to pre-Distribution Date misconduct or breaches of fiduciary duty, including but not limited to any misconduct or breaches of fiduciary duty prior to consummation of the Arrangement Agreement between Parent and Metamaterial Inc. on June 28, 2021, including but not limited to any indemnification rights related to the claims asserted in the consolidated securities class action pending in the United States District Court for the Eastern District of New York captioned In re Meta Materials Inc. Securities Litigation, No. 1:21-cv-07203 or the shareholder derivative action pending in the United States District Court for the Eastern District of New York captioned Hines v. Palikaras, et al., No. 1:22-cv-00248. The current and former directors and officers of Parent and/or Torchlight Energy Resources, Inc. shall retain whatever rights they have to indemnification by Parent or the Parent Group, including but not limited to by contract, Parent’s Articles of Incorporation and Bylaws, and/or Nevada law, as of the Distribution Date.

6.4 Indemnification Obligations Net of Insurance Proceeds.

(a) The Parties intend that any liability subject to indemnification or reimbursement pursuant to this Article VI shall be net of Insurance Proceeds that actually reduce the amount of the liability. Accordingly, the amount that any party (an “Indemnifying Party”) is required to pay to any Person entitled to indemnification hereunder (an “Indemnitee”) shall be reduced by any Insurance Proceeds theretofore actually recovered by or on behalf of the Indemnitee in respect of the related liability. If an Indemnitee receives a payment (an “Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of any liability and subsequently receives Insurance Proceeds, then the Indemnitee shall pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds had been received, realized or recovered before the Indemnity Payment was made.

(b) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other Third Party shall be entitled to a “windfall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions hereof) by virtue of the indemnification provisions hereof.

(c) For all claims as to which indemnification is provided under Section 6.2 or 6.3, the reasonable fees and expenses of counsel to the Indemnitee for the enforcement of the indemnity obligations shall be borne by the Indemnifying Party.

6.5 Procedures for Indemnification of Third-Party Claims.

(a) If an Indemnitee shall receive written notice from a Person (including any Governmental Entity) who is not a member of the Parent Group or the NBH Group (a “Third Party”) of any claim or of the commencement by any such Person of any action (collectively, a “Third-Party Claim”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 6.2 or 6.3, or any other Section of this Agreement or, subject to Section 6.9, any Ancillary Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof within fourteen (14) days of receipt of such written notice. Any such notice shall describe the Third-Party Claim in reasonable detail and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim. Notwithstanding the foregoing, the failure of an Indemnitee to provide notice in accordance with this Section 6.5(a) shall not relieve an Indemnifying Party of its indemnification obligations under this Agreement, except to the extent to which the Indemnifying Party shall demonstrate that it was materially prejudiced by the Indemnitee’s failure to provide notice in accordance with this Section 6.5(a).

(b) An Indemnifying Party may elect to defend (and to seek to settle or compromise), at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel, any Third Party Claim. Within thirty (30) days after the receipt of notice from an Indemnitee in accordance with Section 6.5(a) (or sooner, if the nature of such Third-Party Claim so requires), the Indemnifying Party shall notify the Indemnitee of its election whether the Indemnifying Party shall assume responsibility for defending such Third-Party Claim. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third-Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the fees and expenses of such counsel shall be the expense of such Indemnitee except as otherwise expressly set forth herein.

(c) If an Indemnifying Party has elected to assume the defense of a Third-Party Claim, then such Indemnifying Party shall be solely liable for all fees and expenses incurred by it in connection with the defense of such Third-Party Claim and shall not be entitled to seek any indemnification or reimbursement from the Indemnitee for any such fees or expenses incurred during the course of its defense of such Third Party Claim, regardless of any subsequent decision by the Indemnifying Party to reject or otherwise abandon its assumption of such defense. If an Indemnifying Party elects not to assume responsibility for defending any Third-Party Claim or fails to notify an Indemnitee of its election within thirty (30) days after receipt of a notice from an Indemnitee, such Indemnitee shall have the right to control the defense of such Third-Party Claim, in which case the Indemnifying Party shall be liable for all reasonable fees and expenses incurred by the Indemnitee in connection with the defense of such Third-Party Claim.

(d) Notwithstanding an election by an Indemnifying Party to defend a Third-Party Claim pursuant to Section 6.5(b), a Indemnitee may, upon notice to the Indemnifying Party, elect to take over the defense of such Third-Party Claim if (i) in its exercise of reasonable business judgment, the Indemnitee determines that the Indemnifying Party is not defending such Third-Party Claim competently or in good faith, (ii) the Indemnitee determines in its exercise of reasonable business judgment that there exists a compelling business reason for such Indemnitee to defend such Third-Party Claim (other than as contemplated by the foregoing clause (i)), (iii) the Indemnifying Party makes a general assignment for the benefit of creditors, has filed against it or files a petition in bankruptcy or insolvency or is declared bankrupt or insolvent or declares that it is bankrupt or insolvent, or (iv) there occurs a change of control of the Indemnifying Party.

(e) An Indemnitee that does not conduct and control the defense of any Third-Party Claim, or an Indemnifying Party that has failed to elect to defend any Third-Party Claim as contemplated hereby, nevertheless shall have the right to employ separate counsel (including local counsel as necessary) of its own choosing to monitor and participate in (but not control) the defense of any Third-Party Claim for which it is a potential Indemnitee or Indemnifying Party, but the fees and expenses of such counsel shall be at the expense of such Indemnitee or Indemnifying Party, as the case may be, and the provisions of Section 6.5(c) shall not apply to such fees and expenses. Notwithstanding the foregoing, such Party shall cooperate with the Party entitled to conduct and control the defense of such Third-Party Claim in such defense and make available to the controlling Party, at the non-controlling Party’s expense, all witnesses, information and materials in such Party’s possession or under such Party’s control relating thereto as are reasonably required by the controlling Party. In addition to the foregoing, if any Indemnitee shall in good faith determine that such Indemnitee and the Indemnifying Party have actual or potential differing defenses or conflicts of interest between them that make joint representation inappropriate, then the Indemnitee shall have the right to employ separate counsel (including local counsel as necessary) and to participate in (but not control) the defense, compromise or settlement thereof, and the Indemnifying Party shall bear the reasonable fees and expenses of such counsel for all Indemnitees.

(f) Neither Party may settle or compromise any Third-Party Claim for which either Party is seeking to be indemnified hereunder without the prior written consent of the other Party, which consent may not be unreasonably withheld, unless such settlement or compromise is solely for monetary damages, does not involve any finding or determination of wrongdoing or violation of Law by the other Party and provides for a full, unconditional and irrevocable release of the other Party from all liability in connection with the Third-Party Claim. The Parties hereby agree that if a Party presents the other Party with a written notice containing a proposal to settle or compromise a Third-Party Claim for which either Party is seeking to be indemnified hereunder and the Party receiving such proposal does not respond in any manner to the Party presenting such proposal within thirty (30) days (or within any such shorter time period that may be required by applicable Law or court order) of receipt of such proposal, then the Party receiving such proposal shall be deemed to have consented to the terms of such proposal.

(g) The Indemnifying Party shall establish a procedure reasonably acceptable to the Indemnitee to keep the Indemnitee reasonably informed of the progress of the Third-Party Claim and to notify the Indemnitee when any such Third-Party Claim is closed, regardless of whether such Third-Party Claim was resolved by settlement, verdict, dismissal or otherwise.

6.6 Additional Matters.

(a) Indemnification payments in respect of any liabilities for which an Indemnitee is entitled to indemnification under this Article VI shall be paid by the Indemnifying Party to the Indemnitee as such liabilities are incurred upon demand by the Indemnitee, including reasonably satisfactory documentation setting forth the basis for the amount of such indemnification payment, including documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such liabilities. THE INDEMNITY AGREEMENTS CONTAINED IN THIS ARTICLE VI SHALL REMAIN OPERATIVE AND IN FULL FORCE AND EFFECT, REGARDLESS OF (I) ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY INDEMNITEE, (II) THE KNOWLEDGE BY THE INDEMNITEE OF LIABILITIES FOR WHICH IT MIGHT BE ENTITLED TO INDEMNIFICATION HEREUNDER AND (III) ANY TERMINATION OF THIS AGREEMENT.

(b) Any claim on account of a liability that does not result from a Third-Party Claim shall be asserted by written notice given by the Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such thirty (30)-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If such Indemnifying Party does not respond within such thirty (30)-day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such party as contemplated by this Agreement and the Ancillary Agreements.

(c) In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

(d) In the event of an action for which indemnification is sought pursuant to Section 6.2 or 6.3 and in which the Indemnifying Party is not a named defendant, if either the Indemnitee or Indemnifying Party shall so request, the Parties shall use commercially reasonable efforts to substitute the Indemnifying Party for the named defendant.

(e) An Indemnitee shall take all reasonable steps to mitigate damages in respect of any claim for which it seeks indemnification hereunder, and shall use reasonable efforts to avoid any costs or expenses associated with such claim and, if such costs and expenses cannot be avoided, to minimize the amount thereof; provided, however, that an Indemnitee shall have no obligation to make a claim for recovery against any of its insurers with respect to any Losses for which it is seeking indemnification.

6.7 Remedies Cumulative. The remedies provided in this Article VI shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party; provided, however, if a Party has recovered any Losses from the other Party pursuant to any provision of this Agreement or any Ancillary Agreement or otherwise, it shall not be entitled to recover the same Losses pursuant to any other provision of this Agreement or any Ancillary Agreement or otherwise.

6.8 Survival of Indemnities. The rights and obligations of each of Parent and NBH and their respective Indemnitees under this Article VI shall survive (a) the sale or other transfer by any Party of any Assets or businesses or the assignment by it of any liabilities, and (b) any merger, consolidation business combination, sale of all or substantially all of the Assets, restructuring, recapitalization, reorganization or similar transaction involving either Party or any of its respective Subsidiaries.

6.9 Ancillary Agreements. Notwithstanding anything in this Agreement to the contrary, to the extent any Ancillary Agreement contains any indemnification provisions, the indemnification obligations set forth in such Ancillary Agreement shall govern.

6.10 Cooperation in Defense and Settlement.

(a) With respect to any Third-Party Claim that implicates both Parties in a material fashion due to the allocation of liabilities, responsibilities for management of defense and related indemnities pursuant to this Agreement or any of the Ancillary Agreements, the Parties agree to use commercially reasonable efforts to cooperate fully and maintain a joint defense (in a manner that will preserve for the Parties the attorney-client privilege, joint defense or other privilege with respect thereto).

(b) To the extent there are documents, other materials, access to employees or witnesses related to or from a Party that is not responsible for the defense or liability of a particular action, such Party shall provide to the other Party reasonable access to documents, other materials, employees, and shall permit employees, officers and directors to cooperate as witnesses in the defense of such action.

(c) Each of Parent and NBH agrees that at all times from and after the Effective Time, if an action currently exists or is commenced by a third party with respect to which a Party (or one of its Subsidiaries) is a named defendant, but the defense of such action and any recovery in such action is otherwise not a liability allocated under this Agreement or any Ancillary Agreement to that Party, then the other Party shall use commercially reasonable efforts to cause the named but not liable defendant to be removed from such action and such defendants shall not be required to make any payments or contributions therewith.

6.11 Tax Matters. The provisions of this Article VI (other than this Section 6.11) shall not apply to Taxes (Taxes being governed by the Tax Matters Agreement).

ARTICLE VII

OTHER AGREEMENTS

7.1 Further Assurances.

(a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the Parties hereto shall use its commercially reasonable efforts, prior to, on and after the Effective Time, to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable on its part under applicable Laws, regulations and agreements, to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

(b) Without limiting the foregoing, prior to, on and after the Effective Time, each Party hereto shall cooperate with each other Party hereto, and without any further consideration, but at the expense of the requesting Party, to execute and deliver, or use its commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain or make any approvals or notifications of, any Governmental Entity or any other Person under any permit, license, agreement, indenture or other instrument (including any Third-Party consents or Governmental Approvals), and to take all such other actions as such Party may reasonably be requested to take by any other Party hereto from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each Party shall, at the reasonable request, cost and expense of any other Party, take such other actions as may be reasonably necessary to vest in such other Party all of the transferring Party’s right, title and interest to the Assets allocated to such Party by this Agreement or any Ancillary Agreement, in each case, if and to the extent it is practicable to do so.

(c) Parent shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the Parent Group. NBH shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth in this Agreement or in any Ancillary Agreement to be performed by any member of the NBH Group. Each Party (including its permitted successors and assigns) further agrees that it shall (i) give timely notice of the terms, conditions and continuing obligations contained in this Section 7.1 to all of the other members of its Group, and (ii) cause all of the other members of its Group not to take, or omit to take, any action which action or omission would violate or cause such Party to violate this Agreement or any Ancillary Agreement.

7.2 Confidentiality.

(f) From and after the Effective Time, and except as contemplated by or otherwise provided in this Agreement or any Ancillary Agreement, Parent, on behalf of itself and each of the Parent Subsidiaries, and NBH, on behalf of itself and each of the NBH Subsidiaries, agrees to hold, and to cause its respective Representatives to hold, in strict confidence, with at least the same degree of care that applies to Parent’s confidential and proprietary information pursuant to policies in effect as of the Effective Time, all confidential and proprietary Information concerning the other Party (or its business) and the other Party’s Subsidiaries (or their respective businesses) that is either in its possession (including confidential and proprietary Information in its possession prior to the Effective Time) or furnished by the other Party or the other Party’s Subsidiaries or their respective Representatives at any time pursuant to this Agreement or any Ancillary Agreement, and shall not use any such confidential and proprietary Information other than for such purposes as may be expressly permitted hereunder or thereunder, except, in each case, to the extent that such confidential and proprietary Information has been: (i) in the public domain or generally available to the public, other than as a result of a disclosure by such Party or any of its Subsidiaries or any of their respective Representatives in violation of this Agreement, (ii) later lawfully acquired from other sources by such Party or any of its Subsidiaries, which sources are not themselves bound by a confidentiality obligation or other contractual, legal or fiduciary obligation of confidentiality with respect to such confidential and proprietary Information or (iii) independently developed or generated without reference to or use of the respective proprietary or confidential Information of the other Party or any of its Subsidiaries. If any confidential and proprietary Information of one Party or any of its Subsidiaries is disclosed to another Party or any of its Subsidiaries in connection with providing services to such first Party or any of its Subsidiaries under this Agreement or any Ancillary Agreement, then such disclosed confidential and proprietary Information shall be used only as required to perform such services.

(g) Each Party agrees not to release or disclose, or permit to be released or disclosed, any confidential or proprietary Information of the other Party addressed in Section 7.2(a) to any other Person, except its Representatives who need to know such Information in their capacities as such. Without limiting the foregoing, when any Information furnished by the other Party after the Effective Time pursuant to this Agreement or any Ancillary Agreement is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each Party shall, at its option, promptly after receiving a written notice from the disclosing Party, either return to the disclosing Party all such Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the disclosing Party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon); provided, however, that a Party shall not be required to destroy or return any such Information to the extent that (i) the Party is required to retain the Information in order to comply with any applicable Law, (ii) the Information has been backed up electronically pursuant to the Party’s standard document retention policies and will be managed and ultimately destroyed consistent with such policies or (iii) it is kept in the Party’s legal files for purposes of resolving any dispute that may arise under this Agreement or any Ancillary Agreement.

(h) Each Party acknowledges that it and its respective Subsidiaries may presently have and, following the Effective Time, may gain access to or possession of confidential or proprietary Information of, or personal Information relating to, Third Parties: (i) that was received under confidentiality or non-disclosure agreements entered into between such Third Parties, on the one hand, and the other Party or the other Party’s Subsidiaries, on the other hand, prior to the Effective Time or (ii) that, as between the two parties, was originally collected by the other Party or the other Party’s Subsidiaries and that may be subject to and protected by privacy, data protection or other applicable Laws. As may be provided in more detail in an applicable Ancillary Agreement, each Party agrees that it shall hold, protect and use, and shall cause its Subsidiaries and its and their respective Representatives to hold, protect and use, in strict confidence the confidential and proprietary Information of, or personal Information relating to, Third Parties in accordance with privacy, data protection or other applicable Laws and the terms of any agreements that were either entered into before the Effective Time or affirmative commitments or representations that were made before the Effective Time by, between or among the other Party or the other Party’s Subsidiaries, on the one hand, and such Third Parties, on the other hand.

7.3 Order of Precedence. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, in the case of any conflict between the provisions of this Agreement and the provisions of any Ancillary Agreement, the provisions of this Agreement shall prevail; provided, however, that in relation to any matters concerning Taxes, the Tax Matters Agreement shall prevail over this Agreement and any other Ancillary Agreement.

ARTICLE VIII

MISCELLANEOUS

8.1 Governing Law.

This Agreement and, unless expressly provided therein, each other Ancillary Agreement, shall be governed by, and construed and interpreted in accordance with, the laws of the State of Nevada, without giving effect to any conflicts of law rule or principle that might require the application of the laws of another jurisdiction.

8.2 Notices.

All notices, requests, claims, demands and other communications under this Agreement and, to the extent applicable and unless otherwise provided therein, under each of the Transaction Documents shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 8.2):

If to Parent, to:

Meta Materials Inc.

Attention: CEO

1 Research Drive

Dartmouth, Nova Scotia B2Y 4M9

Email: george.palikaras@metamaterial.com

With a copy to:

Wilson Sonsini Goodrich & Rosati

Attention: Tom Hornish

12235 El Camino Real

San Diego, California 92130

Email: thornish@wsgr.com

If to NBH, to:

Next Bridge Hydrocarbons, Inc.

6300 Ridglea Place, Suite 950

Fort Worth, Texas 76116

Email: cdubose@nextbridgehydrocarbons.com

With a copy to:

O’Melveny & Myers LLP

Attention: Jason A. Schumacher

2501 N. Harwood Street, Floor 17

Dallas, Texas 75201

Email: jschumacher@omm.com

8.3 Severability. If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

8.4 Entire Agreement. This Agreement and the Ancillary Agreements, and the exhibits, annexes and schedules thereto, contain the entire agreement between the Parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter and there are no agreements or understandings between the Parties with respect to such subject matter other than those set forth or referred to herein or therein.

8.5 Assignment; No Third-Party Beneficiaries. This Agreement shall not be assigned by any Party hereto without the prior written consent of the other Party hereto. Except for the indemnification rights under this Agreement or any Ancillary Agreement of any Parent Indemnitee or NBH Indemnitee in their respective capacities as such, this Agreement is for the sole benefit of the Parties to this Agreement and their permitted successors and assigns and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

8.6 Amendment. No provision of this Agreement may be amended or modified except by a written instrument signed by both Parties. No waiver by any Party of any provision hereof shall be effective unless explicitly set forth in writing and executed by the Party so waiving. The waiver by either Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach.

8.7 Counterparts. This Agreement may be executed in one or more counterparts, and by each Party in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or electronic mail shall be as effective as delivery of a manually executed counterpart of any such Agreement.

8.8 Termination. This Agreement may be terminated at any time prior to the Effective Time by and in the sole discretion of Parent without the approval of NBH in which case neither Party will have any liability of any kind to the other Party.

8.9 Force Majeure. Neither Party shall be deemed in default of this Agreement or any Ancillary Agreement for failure to fulfill any obligation, other than a delay or failure to make a payment, so long as and to the extent to which any delay or failure in the fulfillment of such obligations is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event, (a) provide written notice to the other Party of the nature and extent of any such Force Majeure condition; and (b) use commercially reasonable efforts to remove any such causes and resume performance under this Agreement or any Ancillary Agreement, as applicable, as soon as reasonably practicable.

8.10 Publicity. From and after the Effective Time for a period of 180 days, NBH and Parent shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Ancillary Agreements, and shall not issue any such press release or make any public statement prior to such consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have caused this Distribution Agreement to be executed to be effective on the date first written above by their respective duly authorized officers.

PARENT
META MATERIALS, INC.,
A Nevada corporation
By:	 	
/s/ Kenneth Rice

Name:	 	Kenneth Rice
Title:	 	Chief Financial Officer and Chief Operating Officer
NBH
NEXT BRIDGE HYDROCARBONS, INC.,
A Nevada corporation
By:	 	
/s/ George Palikaras

Name:	 	George Palikaras
Title:	 	President
[Signature Page to Distribution Agreement]

d302576dex102.htm  EX-10.2
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EX-10.2
Exhibit 10.2

TAX MATTERS AGREEMENT

This Tax Matters Agreement, dated as of September 2, 2022 (this “Agreement”), is between Meta Materials, Inc., a Nevada corporation, on behalf of itself and the Affiliated Group (as defined below) (other than NBH and the NBH Group), on the one hand, and Next Bridge Hydrocarbons, Inc., a Nevada corporation (“NBH”), on behalf of itself and the NBH Group (as defined below), on the other hand. Parent and NBH are referred to in this Agreement collectively as the “Parties” and individually as a “Party.” Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in that certain Distribution Agreement entered into by the Parties as of September 2, 2022 (“Distribution Agreement”).

WHEREAS, as of the date of this Agreement, the Parent, NBH and the members of the NBH Group are members of the consolidated U.S. federal income tax group (as defined in Section 1504(a) of the Code) of which Parent is the common parent corporation, which will join annually in the filing of a consolidated U.S. federal income Tax Return under Section 1501 of the Code, so that the Tax liability of the Affiliated Group is determined under Section 1502 of the Code and the Treasury Regulations thereunder by consolidating the income, expenses, gains, losses and credits of all of the members of the Affiliated Group;

WHEREAS, Parent intends to distribute all of its shares of NBH stock to holders of Parent’s Series A Preferred Stock in redemption of the Series A Preferred Stock (the “Distribution”);

WHEREAS, the Parties wish to provide for the allocation among them of their consolidated federal income tax liability, state and local income tax liability, and certain related matters; and

WHEREAS, after the Effective Date of the Distribution Agreement (the “Distribution Date”), NBH and the NBH Group will no longer be included in the Affiliated Group.

NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants and agreements contained herein, the parties agree as follows:

Article I.

DEFINITIONS

Section 1.1 Definitions. For purposes of this Agreement, the terms set forth below shall be defined as follows:

“Adjustment” means an adjustment determined on an issue-by-issue or transaction by-transaction basis, as appropriate, made by a Taxing Authority with respect to any amount reflected or required to be reflected on any Tax Return.

“Affiliated Group” means Parent, NBH, and all other corporations (including any members of the NBH Group) which may now or from time to time hereafter be eligible or required to be included in a Consolidated Return with Parent as the common parent corporation.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Consolidated Return” means any consolidated, combined or unitary Tax Return filed by Parent for the Affiliated Group with respect to U.S. federal, state or local Taxes, including Taxes imposed or based on net income, net worth or gross receipts.

“Consolidated Return Year” means any taxable period during which the Affiliated Group actually files or is required to file a Consolidated Return, including the taxable year that includes the Effective Date.

“Consolidated Tax Liability” means the Tax liability of the Affiliated Group with respect to a Consolidated Return for a Consolidated Return Year.

“NBH Group” means NBH and each Subsidiary of NBH immediately before the Effective Time, whether or not eligible or required to be included in a Consolidated Return with Parent as the common parent corporation.

“Parent” means (i) Meta Materials, Inc., a Nevada corporation, (ii) any successor common parent corporation described in Treasury Regulations Section 1.1502-75(d)(2)(i) or (ii) (or any comparable provision of state or local law), or (iii) any corporation as to which Parent (or successor corporation described in clause (ii) hereof) is the “predecessor” within the meaning of Treasury Regulations Section 1.1502-1(f)(4), if such corporation acquires Parent (or a successor corporation described in clause (ii) hereof) in a “reverse acquisition” within the meaning of Treasury Regulations Section 1.1502-75(d)(3) (or any comparable provision of state or local law).

“Tax” or “Taxes” means all federal, state, local and foreign income, alternative or add-on minimum tax, gross income, sales, use, ad valorem, gross receipts, value added, franchise, profits, license, transfer, recording, withholding, payroll, employment, excise, severance, stamp occupation, premium, property, windfall profit, custom duty, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any related interest, penalties, or other additions to tax, or additional amounts imposed by any such Taxing Authority.

“Tax Attribute” means one or more of the following attributes of Parent or a member of the NBH Group: (i) with respect to the Consolidated Return, a net operating loss, a net capital loss, an unused investment credit, an unused foreign Tax credit, an excess charitable contribution, a U.S. federal minimum Tax credit or U.S. federal general business credit (but not Tax basis or earnings and profits) and (ii) any comparable Tax item reflected on any Tax Return (other than for federal income Taxes) filed on a consolidated, combined (including nexus combination, worldwide combination, domestic combination, line of business combination or any other form of combination) or unitary basis.

“Taxing Authority” means any governmental authority or any subdivision, agency, commission or authority thereof, or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or other imposition of Taxes.

“Tax Returns” means all returns, reports and information statements (including all exhibits and schedules thereto and including amendments) required to be filed with a Taxing Authority with respect to any Taxes.

“Transfer Tax” means all sales, use and transfer Taxes, bulk transfer Taxes, deed Taxes, real property or leasehold interest transfer or gains Taxes, conveyance fees, documentary and recording charges and similar taxes imposed as a result of the transactions contemplated by this Agreement, together with any interest, penalties or additions to such transfer Taxes or attributable to any failure to comply with any requirement regarding Tax Returns.

Article II.

PREPARATION AND FILING OF TAX RETURNS

Section 2.1 Tax Returns.

A. Parent shall prepare and file, or cause to be prepared and filed, the Consolidated Returns for all Consolidated Return Years. NBH shall, and shall cause the NBH Group to, execute and file such consents, elections and other documents that may be required or appropriate for the proper filing of such returns and maintain such books and records and provide such information as Parent may reasonably request in connection with the matters contemplated by this Agreement.

B. The Affiliated Group will jointly file state and local Tax Returns, including returns for Tax periods beginning before and ending after the Distribution, on a combined, consolidated, unitary, or other basis that Parent determines appropriate and beneficial for the Affiliated Group. In the event any such state or local Consolidated Returns are filed, the provisions of this Agreement (including those relating to allocation, preparation, filing, payment, indemnification, information, and Tax audits) shall be applied as is appropriate in the context of the applicable state and local Tax laws as determined in the discretion of Parent. The provisions of this Agreement also apply to any other Taxes of the Affiliated Group.

C. Parent shall prepare and file, or cause to be prepared and filed, all Tax Returns of the NBH Group not described in Section 2.1A or Section 2.1B that are required to be filed before the Distribution Date.

D. NBH shall, on a timely basis and at its own expense, prepare and file, or cause to be prepared and filed, all Tax Returns not described in Section 2.1A or Section 2.1B required to be filed by NBH or a member of the NBH Group after the Distribution Date and shall pay in full any Taxes shown due thereon. NBH shall not amend or refile, or permit to be amended or refiled, any Tax Return described in Section 2.1A or Section 2.1B.

Section 2.2 Preparation of Consolidated Returns. With respect to all Consolidated Returns, Parent shall have the right to (i) subject to the review and comment of NBH, which comments Parent shall be required only to consider in good faith, make any elections which are employed in the filing of such Consolidated Returns, including any elections denominated as such in the Code such as choice of methods of accounting and depreciation; (ii) subject to the review

and comment of NBH, which comments Parent shall be required only to consider in good faith, determine the manner in which Consolidated Returns shall be prepared and filed, including without limitation, the manner in which any item of income, gain, loss, deduction or credit shall be reported; (iii) contest, compromise or settle any adjustment or deficiency proposed, asserted or assessed as a result of any audit of any such returns; (iv) file, prosecute, compromise or settle any claim for refund; (v) determine whether any refunds to which the Affiliated Group may be entitled shall be paid by way of refund or credit against the Tax liability of the Affiliated Group and (vi) subject to the review and comment of NBH, which comments Parent shall be required only to consider in good faith, allocate Tax assets and attributes including losses, credits and earnings and profits.

Section 2.3 Amended Tax Returns.

A. Subject to Section 2.1D, except to reflect the resolution of any dispute between the Parties resolved pursuant to Section 4.1, subject to the review and reasonable comment of Parent, which comments NBH shall be required only to consider in good faith, NBH shall be permitted, and shall be permitted to allow any member of the NBH Group, to amend any Tax Return of the NBH Group for any Tax period ending on or before the Distribution Date.

B. Except to reflect the resolution of any dispute between the Parties resolved pursuant to Section 4.1, subject to the review and reasonable comment of NBH, which comments Parent shall be required only to consider in good faith, Parent shall be permitted, and shall be permitted to allow any member of the Affiliated Group, to amend any Consolidated Return for any Tax Period ending on or before the Distribution Date.

Section 2.4 Right to Review. The Party responsible for preparing (or causing to be prepared) any Tax Return under this Article II shall make such Tax Return and related work papers available for review by the other Party, if requested, to the extent (i) such Tax Return relates to Taxes for which the requesting Party would be liable under Article III or (ii) such Tax Return relates to Taxes for which the requesting Party would reasonably be expected to have a claim for a Tax refund under this Agreement. The Party responsible for preparing (or causing to be prepared) the relevant Tax Return shall (x) use its reasonable efforts to make such portion of such Tax Return available for review as required under this paragraph sufficiently in advance of the due date for the filing of such Tax Return to provide the requesting Party with a meaningful opportunity to analyze and comment on such Tax Return and (y) consider in good faith any comments provided by the requesting Party.

Section 2.5 Tax Audits.

A. The Parties acknowledge and agree that the Parent is, and shall continue to be, authorized to undertake any and all actions that are within the scope of Parent’s authority under the Code or the applicable Treasury Regulations, as the common parent corporation of the Consolidated Group in connection with the filing of any Consolidated Returns and any U.S. federal income tax audit, examination or other tax proceeding involving Taxes filed on a group basis. Parent shall have the authority to control, settle and resolve any dispute relating to any Consolidated Returns with the Internal Revenue Service (the “IRS”) or any other Taxing Authority; provided, however, that Parent shall keep NBH duly informed of the progress thereof

to the extent that such Tax Proceeding (as defined below in Section 2.5B) or Tax Claim (as defined below in Section 2.5B) could directly or indirectly affect (adversely or otherwise) any member of the NBH Group and that NBH shall have the right to review and comment on any and all submissions made to the IRS, a court, or other Taxing Authority with respect to such Tax Claim or Tax Proceeding and that Parent will consider such comments in good faith. If Parent provides written notice to NBH of its intent to settle or resolve any such Tax Proceeding or Tax Claim (the “Proposed Resolution”), NBH shall have thirty (30) days (or such shorter time as is necessary to avoid material prejudice to Parent or any member of the Affiliated Group, which shorter period Parent shall provide notice of to NBH) within which to provide any objection thereto in writing. If the Parties are unable to reach an agreement within thirty (30) days (or such shorter time as is necessary to avoid material prejudice to Parent or any member of the Affiliated Group, which shorter period Parent shall provide notice of to NBH) after Parent’s receipt of NBH’s written objection to any potential settlement or resolution by Parent of any such Tax Claim or Tax Proceeding, the objection shall be resolved by an independent, nationally recognized accounting firm mutually selected by the Parties (the “Accounting Firm”). The Accounting Firm shall determine whether it is “more likely than not” that an alternative settlement or resolution of such Tax Proceeding or Tax Claim could reasonably be obtained that imposes less liability on the NBH Group (either under this Agreement or applicable law) than the Proposed Resolution and no greater liability on Parent or its affiliates (either under this Agreement or applicable law) than the Proposed Resolution (such settlement or resolution, the “Alternative Resolution”). If the Accounting Firm determines that an Alternative Resolution is reasonably available, Parent shall not enter into the Proposed Resolution. The determination by the Accounting Firm shall be final and binding upon the Parties. Each of Parent and NBH shall bear all fees and costs incurred by it in connection with the resolution of any such Tax Proceeding or Tax Claim, except that (i) the Parties shall each pay one-half (50%) of the fees and expenses of the Accounting Firm, and (ii) without prejudice to Parent’s rights under Section 3.3B, if the Alternative Resolution requires pursuing the settlement or resolution of such Tax Claim or Tax Proceeding in a different forum than the forum in which the Proposed Resolution arose, NBH shall bear all fees and costs incurred in connection with the Tax Proceeding or Tax Claim following the Accounting Firm’s determination.

B. If any claim, demand, assessment (including a notice of proposed assessment) or other assertion is made with respect to federal income Taxes against Parent or any member of the NBH Group the calculation of which involves a matter covered in this Agreement (“Tax Claim”) or if Parent or NBH receives any notice from any jurisdiction with respect to any current or future audit, examination, investigation or other proceeding (“Tax Proceeding”) involving Parent or any member of the NBH Group or that otherwise could involve a matter covered in this Agreement and could directly or indirectly affect Parent or any member of the NBH Group (adversely or otherwise), then Parent or NBH, as applicable, shall promptly notify Parent or NBH, as applicable, of such Tax Claim or Tax Proceeding. Each of the Parent and NBH shall retain all Tax Returns, schedules, work papers and other Tax records relating to matters or periods covered by this Agreement until the expiration of the statute of limitations applicable to such underlying Taxes. Notwithstanding the foregoing, the delay or failure of any party to give notice to the other party as provided in this Section 2.5B shall not relieve the other Party of its obligations, if any, under this Agreement, except to the extent that such other Party is actually and substantially prejudiced by such delay or failure to give notice.

Section 2.6 Special Rules Relating to the Preparation of Tax Returns.

A. General. Except as provided in this Section 2.6, NBH shall prepare (or cause to be prepared) any Tax Return for which it is responsible under this Article II in accordance with past practices, accounting methods, elections or conventions (“Past Practices”) used by the Parent prior to the Distribution Date with respect to such Tax Return to the extent permitted by applicable law, and to the extent any items, methods or positions are not covered by Past Practices, as directed by Parent to the extent permitted by applicable law.

B. Election to File Joint Tax Returns. Parent shall be entitled to file any Consolidated Return if the filing of such Tax Return is elective under applicable Tax law. Each member of the Affiliated Group shall execute and file such consents, elections and other documents as may be required, appropriate or otherwise requested by Parent in connection with the filing of such Consolidated Returns.

C. Preparation of Transfer Tax Returns. The Party required under applicable Tax law to file any Tax Returns in respect of Transfer Taxes shall prepare and file (or cause to be prepared and filed) such Tax Returns. If required by applicable Tax law, Parent and NBH shall, and shall cause their respective affiliates to, cooperate in preparing and filing, and join the execution of, any such Tax Returns.

Section 2.7 Accumulated Earnings and Profits, Initial Determination and Subsequent Adjustments. Within one hundred and eighty (180) days following the Distribution Date, Parent shall notify NBH of the balance of accumulated earnings and profits on Parent’s Tax records as of the Distribution Date which are allocable to the business of any member of the NBH Group, as calculated in accordance with the appropriate provisions of the Code and the Treasury Regulations thereunder (including Section 312(h) of the Code and Treasury Regulations Section 1.312-10 or any successor regulation thereto) by Parent. The notice provided by Parent to NBH hereunder shall include supporting documentation which details the calculation of earnings and profits allocated to the business of any member of the NBH Group as of the Distribution Date. Within sixty (60) days after filing the Consolidated Return for the taxable year that includes the Distribution Date, Parent shall notify NBH of any adjustments in Parent’s earnings and profits as of the Distribution Date and shall provide to NBH supporting documentation which details the recalculation of Parent earnings and profits allocable to the business of any member of the NBH Group as of the Distribution Date.

Article III.

RESPONSIBILITY FOR TAX

Section 3.1 Payment of Tax Liabilities. With respect to any payment of Tax (including any estimated payment of Tax) made or required to be made by Parent or its Subsidiaries with respect to a Consolidated Return filed or to be filed on behalf of the Affiliated Group following the Distribution Date, NBH shall pay to Parent, not later than twenty (20) days before the due date of such payment of Tax, an amount equal to, without duplication, the NBH Affiliated Group Tax Liability (as defined below in Section 3.4A) and Distribution Tax Liability (as defined below in Section 3.4C) with respect to such payment.

Section 3.2 Adjustments to Tax Liabilities. If, with respect to any taxable year the Consolidated Tax Liability or any member’s separate Tax liability is subject to an Adjustment, or the Affiliated Group pays additional Taxes with respect to a Consolidated Return, including by reason of any of the events specified in Section 6213(b) or (d) of the Code, then NBH shall pay to Parent, not later than twenty (20) days after Parent notifies NBH of such Adjustment or payment, the amount of such Adjustment or payment that is an NBH Affiliated Group Tax Liability, if any.

Section 3.3 Indemnification.

A. NBH shall indemnify and hold harmless Parent and members of the Affiliated Group (other than NBH and members of the NBH Group) against the amount of any and all liability, loss, expense or damage Parent and members of the Affiliated Group (other than NBH and members of the NBH Group) may suffer or incur after the Distribution Date as a result of any or all claims, demands, costs or expenses (including, without limitation, attorneys’ and accountants’ fees), interest, penalties or judgments made against it arising from or incurred in relation to (i) any failure of NBH to pay any amount to Parent with respect to NBH’s obligations under Section 3.1 and Section 3.2 of this Agreement, (ii) any and all Taxes (other than Taxes in respect of Consolidated Returns) of members of the NBH Group for any taxable year or period, and (iii) any NBH Affiliated Group Tax Liability, Distribution Tax Liability or other Tax liabilities allocated to the NBH Group under this Agreement. NBH shall be able to offset any liabilities that are owed by Parent to NBH under Section 3.3.B for any payments that are owed under this Section 3.3.A.

B. Parent shall indemnify and hold harmless NBH and the members of the NBH Group against the amount of any and all liability, loss, expense or damage NBH and members of the NBH Group may suffer or incur after the Distribution Date as a result of any or all claims, demands, costs or expenses (including, without limitation, attorneys’ and accountants’ fees), interest, penalties or judgments made against it arising from or incurred in relation to any and all Taxes, other than any NBH Affiliated Group Tax Liability, Distribution Tax Liability or other liability for Taxes for which NBH is required to indemnify Parent pursuant to Section 3.3A, (i) in respect of all Consolidated Returns, including but not limited to Taxes for which the NBH Group is liable under Treasury Regulation Section 1.1502-6 or any comparable provision of state or local tax law, and (ii) imposed on Parent or any member of the Affiliated Group (other than NBH or a member of the NBH Group or any predecessor thereof) and (a) for which the NBH Group is liable pursuant to any contract entered into before the Distribution Date (excluding, for the avoidance of doubt, this Agreement and the Distribution Agreement) or (b) which may be collected from NBH or a member of the NBH Group pursuant to applicable law. Parent shall be able to offset any liabilities that are owed by NBH to Parent under Section 3.1, Section 3.2 or Section 3.3A for any payments that are owed under this Section 3.3B.

Section 3.4 Allocation of Tax Liabilities.

A. Allocation of Consolidated Tax Liabilities

(i) For each taxable period in which NBH and/or any other member of the NBH Group is included in the Affiliated Group, the “NBH Affiliated Group Tax Liability” with respect to any Consolidated Return filed or required to be filed with respect to the Affiliated Group shall equal the hypothetical separate return Tax liability of NBH and the NBH Group, calculated as though NBH and the NBH Group had filed such a Consolidated Return for such taxable period that included only NBH and the NBH Group, and determined, in the case of any U.S. federal income tax liability, in accordance with the provisions of Treasury Regulations Section 1.1552-1(a)(2)(ii) (treating references to a “member” therein as references to NBH and the NBH Group, and including the adjustments under clauses (a)(i) thereof), with such hypothetical Consolidated Return prepared:

(a) assuming that the members of the NBH Group were not included in the Affiliated Group and by including only Tax items of the members of the NBH Group that are included in the Consolidated Return;

(b) except as provided in Section 3.4A(i)(d) hereof, using all elections, accounting methods and conventions used on the Consolidated Return for such period;

(d) assuming that the NBH Group elects not to carry back any net operating losses and may elect either to deduct or take a credit for foreign Taxes paid or deemed paid (and to carryback or carryforward any excess foreign Taxes).

(ii) NBH and the NBH Group’s federal income Tax liability for the taxable year during which NBH and the NBH Group cease to be members of the Affiliated Group shall be determined in accordance with the provisions of Treasury Regulations Section 1.1502-76(b)(2) by closing the books of NBH and the other members of the NBH Group as of the end of the last day of the Consolidated Return Year and taking into account only items accruing during the portion of the taxable year ending on such date in computing such liability. Items shall not be pro-rated in accordance with clauses (ii) or (iii) of Treasury Regulations Section 1.1502-76(b)(2), except to the extent Parent in its discretion determines that it is impracticable to allocate particular items in accordance with the preceding sentence.

(iii) The parties acknowledge that the allocation of federal Tax liability provided for by this Section 3.4A is for purposes of determining the Parties’ actual payment obligations to each other with respect to Taxes of the Affiliated Group for the Consolidated Return Year and not for purposes of computing earnings and profits pursuant to Section 1552 of the Code. Each of Parent and NBH recognizes that such allocation may differ from the allocation provided by Section 1552 of the Code for earnings and profits purposes.

B. Preparation and Delivery of Pro Forma Tax Returns. Not later than ninety (90) days following the date on which the related Consolidated Return is filed with the appropriate Taxing Authority, Parent shall prepare and deliver to NBH pro forma Tax Returns calculating the NBH Affiliated Group Tax Liability which is attributable to the period covered by such filed Tax Return.

C. Allocation of Tax Liabilities Arising from the Distribution. For purposes of this Agreement, notwithstanding the provisions of Section 3.4A, all Tax liabilities arising or resulting from the Distribution (“Distribution Tax Liability”) shall be borne by the NBH Group.

Section 3.5 Tax Attributes. Not later than ninety (90) days following the filing of the Consolidated Return for each taxable year, Parent shall determine the aggregate amount of the Tax Attributes of the Affiliated Group that are allocable to the NBH Group as of the end of such year and shall inform NBH of such determination.

Section 3.6 Allocation of Additional Tax Liabilities. Each Party shall be entitled to retain or be paid all refunds of Tax received, whether in the form of payment, credit or otherwise, from any Taxing Authority with respect to any Tax for which such Party is responsible under this Article III.

Article IV.

GENERAL PROVISIONS

Section 4.1 Resolution of Disputes. In the event of any dispute relating to the application of the Tax laws of the United States (or any jurisdiction within the United States) as relates this Agreement, the Parties shall work together in good faith to resolve such dispute within thirty (30) days. In the event that such dispute is not resolved, upon written notice by a Party after such thirty (30)-day period, the matter shall be referred to U.S. Tax counsel or other U.S. Tax advisor of recognized national standing (the “Tax Arbiter”) that will be jointly chosen by Parent and NBH; provided, however, that, if Parent and NBH do not agree on the selection of the Tax Arbiter after five (5) days of good faith negotiation, the Tax Arbiter shall consist of a panel of, as applicable, U.S. Tax counsel or other U.S. Tax advisors of recognized national standing with one member chosen by Parent, one member chosen by NBH, and a third member chosen by mutual agreement of the other members within the following ten (10)-day period. Each decision of a panel Tax Arbiter shall be made by majority vote of the members. The Tax Arbiter may, in its discretion, obtain the services of any third party necessary to assist it in resolving the dispute. The Tax Arbiter shall furnish written notice to the Parties to the dispute of its resolution of the dispute as soon as practicable, but in any event no later than ninety (90) days after acceptance of the matter for resolution. Any such resolution by the Tax Arbiter shall be binding on the Parties, and the Parties shall take, or cause to be taken, any action necessary to implement such resolution. All fees and expenses of the Tax Arbiter shall be shared equally by the Parties to the dispute. In the case of any dispute involving the Tax laws of a jurisdiction other than the United States (or any jurisdiction within the United States), the provisions of this Section 4.1 shall apply to such dispute mutatis mutandis.

Section 4.2 Tax Sharing Agreements. All Tax sharing, indemnification and similar agreements, written or unwritten, as between Parent, on the one hand, and NBH, on the other (other than this Agreement, the Distribution Agreement and any other transaction document), shall be or shall have been terminated no later than the Effective Time and, after the Effective Time, neither Parent nor NBH shall have any further rights or obligations under any such Tax sharing, indemnification or similar agreement.

Section 4.3 General Cooperation. The Parties shall each reasonably cooperate with all reasonable requests in writing from the other Party, or from an agent, representative or advisor to such Party, in connection with the preparation and filing of Tax Returns, claims for Tax refunds, Tax Proceedings and calculations of amounts required to be paid pursuant to this Agreement, in each case, related or attributable to or arising in connection with Taxes of any of the Parties covered by this Agreement and the establishment of any reserve required in connection with any financial reporting matter (a “Tax Matter”). Such cooperation shall include the provision of any information reasonably necessary or helpful in connection with a Tax Matter and shall include the execution of any document (including any power of attorney) that are reasonably necessary to permit a Party to exercise its rights hereunder in connection with any Tax Proceedings of any of the Parties. Each Party shall make its employees, advisors and facilities available, without charge, on a reasonable and mutually convenient basis in connection with the foregoing matters.

Section 4.4 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by email or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 4.2):

if to the Parent:

Meta Materials, Inc.

85 Swanson Road

Boxborough, MA 01719

Attention: [ ]

Email: [ ]

with a copy (which shall not constitute notice) to:

Wilson Sonsini Goodrich & Rosati

12235 El Camino Real

San Diego, CA 92130

Attention: Tom Hornish

Email: thornish@wsgr.com

if to NBH:

Next Bridge Hydrocarbons, Inc.

6300 Ridglea Place, Suite 950

Fort Worth, Texas 76116

Attention: Clifton Dubose

Email: cdubose@nextbridgehydrocarbons.com

with a copy (which shall not constitute notice) to:

O’Melveny & Myers LLP

Attention: Jason A. Schumacher

2501 N. Harwood Street, Floor 17

Dallas, Texas 75201

Email: jschumacher@omm.com

Section 4.5 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner.

Section 4.6 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each Party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 4.7 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada applicable to contracts executed in and to be performed in that State. All legal actions and proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any Nevada District Court; provided, however, that if jurisdiction is not then available in a Nevada District Court, then any such legal action may be brought in any federal court located in the State of Nevada or any other Nevada state court. The Parties hereto hereby (a) irrevocably submit to the exclusive jurisdiction of the aforesaid courts for themselves and with respect to their respective properties for the purpose of any action arising out of or relating to this Agreement brought by any Party hereto, and (b) agree not to commence any action relating thereto except in the courts described above in Nevada, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Nevada as described herein. Each of the Parties further agrees that notice as provided herein shall constitute sufficient service of process and the Parties further waive any argument that such service is insufficient. Each of the Parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action arising out of or relating to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the courts in Nevada as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the action in any such court is brought in an inconvenient forum, (ii) the venue of such action is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

Section 4.8 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 4.6.

Section 4.9 Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 4.10 Counterparts. This Agreement may be executed and delivered (including by facsimile or portable document format (pdf) transmission) in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

Section 4.11 Specific Performance. The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof, and, accordingly, that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in a Nevada District Court or, if that court does not have jurisdiction, any court of the United States located in the State of Nevada without proof of actual damages or otherwise, in addition to any other remedy to which they are entitled at law or in equity as expressly permitted in this Agreement. Each of the Parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief.

Section 4.12 Expenses. Except as set forth elsewhere in this Agreement, all expenses incurred in connection with this Agreement shall be paid by the Party incurring such expenses.

Section 4.13 Amendment. This Agreement may be amended in writing by the Parties hereto at any time prior to the Effective Time. This Agreement may not be amended except by an instrument in writing signed by each of the Parties hereto.

Section 4.14 Waiver. Any Party to this Agreement may, at any time prior to the Effective Time, (a) extend the time for the performance of any obligation or other act of the other Parties hereto, (b) waive any inaccuracy in the representations and warranties of another Party hereto contained herein or in any document delivered by another Party pursuant hereto and (c) waive compliance with any agreement of another Party hereto or any condition to its own obligations contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the Party or Parties to be bound thereby.

Section 4.15 Entire Agreement. This Agreement and the Distribution Agreement contain the entire understanding of the Parties hereto with respect to the subject matter contained herein and supersedes all prior written, oral or implied understandings, representations and agreements among the parties with respect thereto.

Section 4.16 Term. This Agreement shall be effective as of September 2, 2022 and shall apply to and govern all subsequent taxable periods, unless the Parties hereto each agree in writing to terminate this Agreement. Notwithstanding any such termination, this Agreement shall continue in effect with respect to any payment due from one Party to the other with respect to any taxable period occurring prior to the effective date of the termination of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, the Parent and NBH have caused this Tax Matters Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

META MATERIALS, INC.
By:	 	
/s/ Kenneth Rice

Name:  Kenneth Rice

Title:   Chief Financial Officer and Chief Operating Officer

NEXT BRIDGE HYDROCARBONS, INC.
By:	 	
/s/ George Palikaras

Name:  George Palikaras

Title:   President

d302576dex107.htm  EX-10.7
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EX-10.7
Exhibit 10.7

NEXT BRIDGE HYDROCARBONS, INC.

2022 EQUITY INCENTIVE PLAN

1.	
PURPOSE OF PLAN

The purpose of this Next Bridge Hydrocarbons, Inc. 2022 Equity Incentive Plan (this “Plan”) of Next Bridge Hydrocarbons, Inc., a Nevada corporation (the “Corporation”), is to promote the success of the Corporation by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons and to enhance the alignment of the interests of the selected participants with the interests of the Corporation’s stockholders.

2.	
ELIGIBILITY

The Administrator (as such term is defined in Section 3.1) may grant awards under this Plan only to those persons that the Administrator determines to be Eligible Persons. An “Eligible Person” is any person who is either: (a) an officer (whether or not a director) or employee of the Corporation or one of its Subsidiaries; (b) a director of the Corporation or one of its Subsidiaries; or (c) an individual consultant or advisor who renders or has rendered bona fide services (other than services in connection with the offering or sale of securities of the Corporation or one of its Subsidiaries in a capital-raising transaction or as a market maker or promoter of securities of the Corporation or one of its Subsidiaries) to the Corporation or one of its Subsidiaries and who is selected to participate in this Plan by the Administrator; provided, however, that a person who is otherwise an Eligible Person under clause (c) above may participate in this Plan only if such participation would not adversely affect either the Corporation’s eligibility to use Form S-8 to register under the Securities Act of 1933, as amended (the “Securities Act”), the offering and sale of shares issuable under this Plan by the Corporation or the Corporation’s compliance with any other applicable laws. An Eligible Person who has been granted an award (a “participant”) may, if otherwise eligible, be granted additional awards if the Administrator shall so determine. As used herein, “Subsidiary” means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation; and “Board” means the Board of Directors of the Corporation.

3.	
PLAN ADMINISTRATION

3.1	
The Administrator. This Plan shall be administered by and all awards under this Plan shall be authorized by the Administrator. The “Administrator” means the Board or one or more committees (or subcommittees, as the case may be) appointed by the Board or another committee (within its delegated authority) to administer all or certain aspects of this Plan. Any such committee shall be comprised solely of one or more directors or such number of directors as may be required under applicable law. A committee may delegate some or all of its authority to another committee so constituted. The Board or a committee comprised solely of directors may also delegate, to the extent permitted by applicable law, to one or more officers of the Corporation, its authority under this Plan. The Board or another committee (within its delegated authority) may delegate different levels of authority to different committees or persons with

administrative and grant authority under this Plan. Unless otherwise provided in the Bylaws of the Corporation or the applicable charter of any Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum, and (b) the vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute action by the acting Administrator.

3.2	
Powers of the Administrator. Subject to the express provisions of this Plan, the Administrator is authorized and empowered to do all things necessary or desirable in connection with the authorization of awards and the administration of this Plan (in the case of a committee or delegation to one or more officers, within any express limits on the authority delegated to that committee or person(s)), including, without limitation, the authority to:

(a)	
determine eligibility and, from among those persons determined to be eligible, determine the particular Eligible Persons who will receive an award under this Plan;

(b)	
grant awards to Eligible Persons, determine the price (if any) at which securities will be offered or awarded and the number of securities to be offered or awarded to any of such persons (in the case of securities-based awards), determine the other specific terms and conditions of awards consistent with the express limits of this Plan, establish the installment(s) (if any) in which such awards shall become exercisable or shall vest (which may include, without limitation, performance and/or time-based schedules), or determine that no delayed exercisability or vesting is required, establish any applicable performance-based exercisability or vesting requirements, determine the circumstances in which any performance-based goals (or the applicable measure of performance) will be adjusted and the nature and impact of any such adjustment, determine the extent (if any) to which any applicable exercise and vesting requirements have been satisfied, establish the events (if any) on which exercisability or vesting may accelerate (which may include, without limitation, retirement and other specified terminations of employment or services, or other circumstances), and establish the events (if any) of termination, expiration or reversion of such awards;

(c)	
approve the forms of any award agreements (which need not be identical either as to type of award or among participants);

(d)	
construe and interpret this Plan and any agreements defining the rights and obligations of the Corporation, its Subsidiaries, and participants under this Plan, make any and all determinations under this Plan and any such agreements, further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan or the awards granted under this Plan;

(e)	
cancel, modify, or waive the Corporation’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consent under Section 8.6.5;

(f)	
accelerate, waive or extend the vesting or exercisability, or modify or extend the term of, any or all such outstanding awards (in the case of options or stock appreciation rights, within the maximum term of such awards) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a retirement or other termination of employment or services, or other circumstances) subject to any required consent under Section 8.6.5;

(g)	
adjust the number of shares of Common Stock subject to any award, adjust the price of any or all outstanding awards or otherwise waive or change previously imposed terms and conditions, in such circumstances as the Administrator may deem appropriate, in each case subject to Sections 4 and 8.6 (and subject to the no repricing provision below);

(h)	
determine the date of grant of an award, which may be a designated date after but not before the date of the Administrator’s action to approve the award (unless otherwise designated by the Administrator, the date of grant of an award shall be the date upon which the Administrator took the action approving the award);

(i)	
determine whether, and the extent to which, adjustments are required pursuant to Section 7.1 hereof and take any other actions contemplated by Section 7 in connection with the occurrence of an event of the type described in Section 7;

(j)	
acquire or settle (subject to Sections 7 and 8.6) rights under awards in cash, stock of equivalent value, or other consideration (subject to the no repricing provision below); and

(k)	
determine the fair market value of the Common Stock or awards under this Plan from time to time and/or the manner in which such value will be determined.

3.3	
Prohibition on Repricing. Notwithstanding anything to the contrary in Section 3.2 and except for an adjustment pursuant to Section 7.1 or a repricing approved by stockholders, in no case may the Administrator (1) amend an outstanding stock option or SAR to reduce the exercise price or base price of the award, (2) cancel, exchange, or surrender an outstanding stock option or SAR in exchange for cash or other awards for the purpose of repricing the award, or (3) cancel, exchange, or surrender an outstanding stock option or SAR in exchange for an option or SAR with an exercise or base price that is less than the exercise or base price of the original award.

3.4	
Binding Determinations. Any determination or other action taken by, or inaction of, the Corporation, any Subsidiary, or the Administrator relating or pursuant to this Plan (or any award made under this Plan) and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. Neither the Board nor

any other Administrator, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan (or any award made under this Plan), and all such persons shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time. Neither the Board nor any other Administrator, nor any member thereof or person acting at the direction thereof, nor the Corporation or any of its Subsidiaries, shall be liable for any damages of a participant should an option intended as an ISO (as defined below) fail to meet the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to ISOs, should any other award(s) fail to qualify for any intended tax treatment, should any award grant or other action with respect thereto not satisfy Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, or otherwise for any tax or other liability imposed on a participant with respect to an award.

3.5	
Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Administrator may obtain and may rely upon the advice of experts, including employees and professional advisors to the Corporation. No director, officer or agent of the Corporation or any of its Subsidiaries shall be liable for any such action or determination taken or made or omitted in good faith.

3.6	
Delegation. The Administrator may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Corporation or any of its Subsidiaries or to third parties.

4.	
SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMITS

4.1	
Shares Available. Subject to the provisions of Section 7.1, the capital stock that may be delivered under this Plan shall be shares of the Corporation’s authorized but unissued Common Stock and any shares of its Common Stock held as treasury shares. For purposes of this Plan, “Common Stock” shall mean the common stock of the Corporation and such other securities or property as may become the subject of awards under this Plan, or may become subject to such awards, pursuant to an adjustment made under Section 7.1.

4.2	
Aggregate Share Limit. The maximum number of shares of Common Stock that may be delivered pursuant to awards granted to Eligible Persons under this Plan is equal to 50,000,000 shares (the “Share Limit”).

In addition, the Share Limit shall automatically increase on the first trading day in January of each calendar year during the term of this Plan, with the first such increase to occur in January 2023, by an amount equal to the lesser of (i) five percent (5%) of the total number of shares of Common Stock issued and outstanding on December 31 of the immediately preceding calendar year or (ii) such number of shares of Common Stock as may be established by the Board.

4.3	
Additional Share Limits. The following limits also apply with respect to awards granted under this Plan. These limits are in addition to, not in lieu of, the aggregate Share Limit in Section 4.2.

(a)	
The maximum number of shares of Common Stock that may be delivered pursuant to options qualified as incentive stock options granted under this Plan is 50,000,000 shares.

(b)	
Awards that are granted under this Plan during any one calendar year to any person who, on the grant date of the award, is a non-employee director are subject to the limits of this Section 4.3(b). The maximum number of shares of Common Stock subject to those awards that are granted under this Plan during any one calendar year to an individual who, on the grant date of the award, is a non-employee director is the number of shares that produce a grant date fair value for the award that, when combined with (i) the grant date fair value of any other awards granted under this Plan during that same calendar year to that individual in his or her capacity as a non-employee director and (ii) the dollar amount of all other cash compensation payable by the Corporation to such non-employee director for his or her services in such capacity during that same calendar year (regardless of whether deferred and excluding any interest or earnings on any portion of such amount that may be deferred), is $500,000; provided that this limit is $750,000 as to (1) a non-employee director who is serving as the independent Chair of the Board or as a lead independent director at the time the applicable grant is made or (2) any new non-employee director for the calendar year in which the non-employee director is first elected or appointed to the Board. For purposes of this Section 4.3(b), a “non-employee director” is an individual who, on the grant date of the award, is a member of the Board who is not then an officer or employee of the Corporation or one of its Subsidiaries. For purposes of this Section 4.3(b), “grant date fair value” means the value of the award as of the date of grant of the award and as determined using the equity award valuation principles applied in the Corporation’s financial reporting. The limits of this Section 4.3(b) do not apply to, and shall be determined without taking into account, any award granted to an individual who, on the grant date of the award, is an officer or employee of the Corporation or one of its Subsidiaries. The limits of this Section 4.3(b) apply on an individual basis and not on an aggregate basis to all non-employee directors as a group.

4.4	
Share-Limit Counting Rules. The Share Limit shall be subject to the following provisions of this Section 4.4:

(a)	
Shares that are subject to or underlie awards granted under this Plan which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.

(b)	
Except as provided below, to the extent that shares of Common Stock are delivered pursuant to the exercise of a stock appreciation right granted under this Plan, the number of underlying shares which are actually issued in payment of the award shall be counted against the Share Limit. (For purposes of clarity, if a stock appreciation right relates to 100,000 shares and is exercised in full at a time when the payment due to the participant is 15,000 shares, 15,000 shares shall be counted against the Share Limit with respect to such exercise and the 85,000 shares not issued shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.)

(c)	
Shares that are exchanged by a participant or withheld by the Corporation as full or partial payment in connection with any award granted under this Plan, as well as any shares exchanged by a participant or withheld by the Corporation or one of its Subsidiaries to satisfy the tax withholding obligations related to any award granted under this Plan, shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.

(d)	
To the extent that an award granted under this Plan is settled in cash or a form other than shares of Common Stock, the shares that would have been delivered had there been no such cash or other settlement shall not be counted against the Share Limit and shall be available for subsequent awards under this Plan.

(e)	
In the event that shares of Common Stock are delivered in respect of a dividend equivalent right granted under this Plan, the number of shares delivered with respect to the award shall be counted against the Share Limit. (For purposes of clarity, if 1,000 dividend equivalent rights are granted and outstanding when the Corporation pays a dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 50 shares shall be counted against the Share Limit). Except as otherwise provided by the Administrator, shares delivered in respect of dividend equivalent rights shall not count against any individual award limit under this Plan other than the aggregate Share Limit.

(f)	
The Corporation may not increase the Share Limit by repurchasing shares of Common Stock on the market (by using cash received through the exercise of stock options or otherwise).

Refer to Section 8.10 for application of the share limits of this Plan, including the limits in Sections 4.2 and 4.3, with respect to assumed awards. Each of the numerical limits and references in Sections 4.2 and 4.3, and in this Section 4.4, is subject to adjustment as contemplated by Sections 7 and 8.10.

4.5	
No Fractional Shares; Minimum Issue. Unless otherwise expressly provided by the Administrator, no fractional shares shall be delivered under this Plan. The Administrator may pay cash in lieu of any fractional shares in settlements of awards under this Plan. The Administrator may from time to time impose a limit (of not greater than 100 shares) on the minimum number of shares that may be purchased or exercised as to awards (or any particular award) granted under this Plan unless (as to any particular award) the total number purchased or exercised is the total number at the time available for purchase or exercise under the award.

5.	
AWARDS

5.1	
Type and Form of Awards. The Administrator shall determine the type or types of award(s) to be made to each selected Eligible Person. Awards may be granted singly, in combination or in tandem. Awards also may be made in combination or in tandem with, in replacement of, as alternatives to, or as the payment form for grants or rights under any other employee or compensation plan of the Corporation or one of its Subsidiaries. The types of awards that may be granted under this Plan are:

5.1.1 Stock Options. A stock option is the grant of a right to purchase a specified number of shares of Common Stock during a specified period as determined by the Administrator. An option may be intended as an incentive stock option within the meaning of Section 422 of the Code (an “ISO”) or a nonqualified stock option (an option not intended to be an ISO). The agreement evidencing the grant of an option will indicate if the option is intended as an ISO; otherwise it will be deemed to be a nonqualified stock option. The maximum term of each option (ISO or nonqualified) shall be ten (10) years. The per share exercise price for each option shall be not less than 100% of the fair market value of a share of Common Stock on the date of grant of the option. When an option is exercised, the exercise price for the shares to be purchased shall be paid in full in cash or such other method permitted by the Administrator consistent with Section 5.4.

5.1.2 Additional Rules Applicable to ISOs. To the extent that the aggregate fair market value (determined at the time of grant of the applicable option) of stock with respect to which ISOs first become exercisable by a participant in any calendar year exceeds $100,000, taking into account both Common Stock subject to ISOs under this Plan and stock subject to ISOs under all other plans of the Corporation or one of its Subsidiaries (or any parent or predecessor corporation to the extent required by and within the meaning of Section 422 of the Code and the regulations promulgated thereunder), such options shall be treated as nonqualified stock options. In reducing the number of options treated as ISOs to meet the $100,000 limit, the most recently granted options shall be reduced first. To the extent a reduction of simultaneously granted options is necessary to meet the $100,000 limit, the Administrator may, in the manner and to the extent permitted by law, designate which shares of Common Stock are to be treated as shares acquired pursuant to the exercise of an ISO. ISOs may only be granted to employees of the Corporation or one of its subsidiaries (for this purpose, the term “subsidiary” is used as defined in Section 424(f) of the Code, which generally requires an unbroken chain of ownership of at least 50% of the total combined voting power of all classes of stock of each subsidiary in the chain beginning with the Corporation and ending with the subsidiary in question). No ISO may be granted to any person who, at the time the option is granted, owns (or is deemed to own under Section 424(d) of the Code) shares of outstanding Common Stock

possessing more than 10% of the total combined voting power of all classes of stock of the Corporation, unless the exercise price of such option is at least 110% of the fair market value of the stock subject to the option and such option by its terms is not exercisable after the expiration of five years from the date such option is granted. If an otherwise-intended ISO fails to meet the applicable requirements of Section 422 of the Code, the option shall be a nonqualified stock option.
5.1.3 Stock Appreciation Rights. A stock appreciation right or “SAR” is a right to receive a payment, in cash and/or Common Stock, equal to the excess of the fair market value of a specified number of shares of Common Stock on the date the SAR is exercised over the “base price” of the award, which base price shall be set forth in the applicable award agreement and shall be not less than 100% of the fair market value of a share of Common Stock on the date of grant of the SAR. The maximum term of a SAR shall be ten (10) years.

5.1.4 Other Awards; Dividend Equivalent Rights. The other types of awards that may be granted under this Plan include: (a) stock bonuses, restricted stock, performance stock, stock units, restricted stock units, deferred shares, phantom stock or similar rights to purchase or acquire shares, whether at a fixed or variable price (or no price) or fixed or variable ratio related to the Common Stock, and any of which may (but need not) be fully vested at grant or vest upon the passage of time, the occurrence of one or more events, the satisfaction of performance criteria or other conditions, or any combination thereof; or (b) cash awards. The types of cash awards that may be granted under this Plan include the opportunity to receive a payment for the achievement of one or more goals established by the Administrator, on such terms as the Administrator may provide, as well as discretionary cash awards. Dividend equivalent rights may be granted as a separate award or in connection with another award under this Plan; provided, however, that dividend equivalent rights may not be granted as to a stock option or SAR granted under this Plan. In addition, any dividends and/or dividend equivalents as to the portion of an award that is subject to unsatisfied vesting requirements will be subject to termination and forfeiture to the same extent as the corresponding portion of the award to which they relate in the event the applicable vesting requirements are not satisfied.

5.2	
Award Agreements. Each award shall be evidenced by a written or electronic award agreement or notice in a form approved by the Administrator (an “award agreement”), and, in each case and if required by the Administrator, executed or otherwise electronically accepted by the recipient of the award in such form and manner as the Administrator may require.

5.3	
Deferrals and Settlements. Payment of awards may be in the form of cash, Common Stock, other awards or combinations thereof as the Administrator shall determine, and with such restrictions (if any) as it may impose. The Administrator may also require or permit participants to elect to defer the issuance of shares or the settlement of awards in cash under such rules and procedures as it may establish under this Plan. The Administrator may also provide that deferred settlements include the payment or crediting of interest or other earnings on the deferral amounts, or the payment or crediting of dividend equivalents where the deferred amounts are denominated in shares.

5.4	
Consideration for Common Stock or Awards. The purchase price (if any) for any award granted under this Plan or the Common Stock to be delivered pursuant to an award, as applicable, may be paid by means of any lawful consideration as determined by the Administrator, including, without limitation, one or a combination of the following methods:

(a)	
services rendered by the recipient of such award;

(b)	
cash, check payable to the order of the Corporation, or electronic funds transfer;

(d)	
the delivery of previously owned shares of Common Stock;

(e)	
by a reduction in the number of shares otherwise deliverable pursuant to the award; or

(f)	
subject to such procedures as the Administrator may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of (or who otherwise facilitates) the purchase or exercise of awards.

In no event shall any shares newly-issued by the Corporation be issued for less than the minimum lawful consideration for such shares or for consideration other than consideration permitted by applicable state law. Shares of Common Stock used to satisfy the exercise price of an option shall be valued at their fair market value. The Corporation will not be obligated to deliver any shares unless and until it receives full payment of the exercise or purchase price therefor and any related withholding obligations under Section 8.5 and any other conditions to exercise or purchase have been satisfied. Unless otherwise expressly provided in the applicable award agreement, the Administrator may at any time eliminate or limit a participant’s ability to pay any purchase or exercise price of any award or shares by any method other than cash payment to the Corporation.

5.5	
Definition of Fair Market Value. For purposes of this Plan, “fair market value” shall mean, unless otherwise determined or provided by the Administrator in the circumstances, the closing price (in regular trading) for a share of Common Stock on the principal securities exchange on which the Common Stock is listed or admitted to trade (the “Exchange”) for the date in question or, if no sales of Common Stock were reported on the Exchange on that date, the closing price (in regular trading) for a share of Common Stock on the Exchange on the last day preceding the date in question on which sales of Common Stock were reported on the Exchange. The Administrator may, however, provide with respect to one or more awards that the fair market value shall equal the closing price (in regular trading) for a share of Common Stock on the Exchange on the last trading day preceding the date in question or the average of the high and low trading prices of

a share of Common Stock on the Exchange for the date in question or the most recent trading day. If the Common Stock is no longer listed or is no longer actively traded on an established securities exchange as of the applicable date, the fair market value of the Common Stock shall be the value as reasonably determined by the Administrator for purposes of the award in the circumstances. The Administrator also may adopt a different methodology for determining fair market value with respect to one or more awards if a different methodology is necessary or advisable to secure any intended favorable tax, legal or other treatment for the particular award(s) (for example, and without limitation, the Administrator may provide that fair market value for purposes of one or more awards will be based on an average of closing prices (or the average of high and low daily trading prices) for a specified period preceding the relevant date).

5.6	
Transfer Restrictions.

5.6.1 Limitations on Exercise and Transfer. Unless otherwise expressly provided in (or pursuant to) this Section 5.6 or required by applicable law: (a) all awards are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (b) awards shall be exercised only by the participant; and (c) amounts payable or shares issuable pursuant to any award shall be delivered only to (or for the account of) the participant.

5.6.2 Exceptions. The Administrator may permit awards to be exercised by and paid to, or otherwise transferred to, other persons or entities pursuant to such conditions and procedures, including limitations on subsequent transfers, as the Administrator may, in its sole discretion, establish in writing. Any permitted transfer shall be subject to compliance with applicable federal and state securities laws and shall not be for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting interests are held by the Eligible Person or by the Eligible Person’s family members).

5.6.3 Further Exceptions to Limits on Transfer. The exercise and transfer restrictions in Section 5.6.1 shall not apply to:

(a)	
transfers to the Corporation (for example, in connection with the expiration or termination of the award);

(b)	
the designation of a beneficiary to receive benefits in the event of the participant’s death or, if the participant has died, transfers to or exercise by the participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution;

(c)	
subject to any applicable limitations on ISOs, transfers to a family member (or former family member) pursuant to a domestic relations order if received by the Administrator;

(d)	
if the participant has suffered a disability, permitted transfers or exercises on behalf of the participant by his or her legal representative; or

(e)	
the authorization by the Administrator of “cashless exercise” procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of awards consistent with applicable laws and any limitations imposed by the Administrator.

5.7	
International Awards. One or more awards may be granted to Eligible Persons who provide services to the Corporation or one of its Subsidiaries outside of the United States. Any awards granted to such persons may be granted pursuant to the terms and conditions of any applicable sub-plans, if any, appended to this Plan and approved by the Administrator from time to time. The awards so granted need not comply with other specific terms of this Plan, provided that stockholder approval of any deviation from the specific terms of this Plan is not required by applicable law or any applicable listing agency.

6.	
EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE ON AWARDS

6.1	
General. The Administrator shall establish the effect (if any) of a termination of employment or service on the rights and benefits under each award under this Plan and in so doing may make distinctions based upon, inter alia, the cause of termination and type of award. If the participant is not an employee of the Corporation or one of its Subsidiaries, is not a member of the Board, and provides other services to the Corporation or one of its Subsidiaries, the Administrator shall be the sole judge for purposes of this Plan (unless a contract or the award otherwise provides) of whether the participant continues to render services to the Corporation or one of its Subsidiaries and the date, if any, upon which such services shall be deemed to have terminated.

6.2	
Events Not Deemed Terminations of Employment. Unless the express policy of the Corporation or one of its Subsidiaries, or the Administrator, otherwise provides, or except as otherwise required by applicable law, the employment relationship shall not be considered terminated in the case of: (a) medical leave, (b) military leave, or (c) any other leave of absence authorized by the Corporation or one of its Subsidiaries, or the Administrator; provided that, unless reemployment upon the expiration of such leave is guaranteed by contract or law or the Administrator otherwise provides, such leave is for a period of not more than three months. In the case of any employee of the Corporation or one of its Subsidiaries on an approved leave of absence, continued vesting of the award while on leave from the employ of the Corporation or one of its Subsidiaries may be suspended until the employee returns to service, unless the Administrator otherwise provides or applicable law otherwise requires. In no event shall an award be exercised after the expiration of any applicable maximum term of the award.

6.3	
Effect of Change of Subsidiary Status. For purposes of this Plan and any award, if an entity ceases to be a Subsidiary of the Corporation a termination of employment or service shall be deemed to have occurred with respect to each Eligible Person in respect of such Subsidiary who does not continue as an Eligible Person in respect of the Corporation or another Subsidiary that continues as such after giving effect to the transaction or other event giving rise to the change in status unless the Subsidiary that is sold, spun-off or otherwise divested (or its successor or a direct or indirect parent of such Subsidiary or successor) assumes the Eligible Person’s award(s) in connection with such transaction.

7.	
ADJUSTMENTS; ACCELERATION

7.1	
Adjustments.

(a)	
Subject to Section 7.2, upon (or, as may be necessary to effect the adjustment, immediately prior to): any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split; any merger, combination, consolidation, conversion or other reorganization; any spin-off, split-up, or extraordinary dividend distribution in respect of the Common Stock; or any exchange of Common Stock or other securities of the Corporation, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock; then the Administrator shall equitably and proportionately adjust: (1) the number and type of shares of Common Stock (or other securities) that thereafter may be made the subject of awards (including the specific share limits, maximums and numbers of shares set forth elsewhere in this Plan); (2) the number, amount and type of shares of Common Stock (or other securities or property) subject to any outstanding awards; (3) the grant, purchase, or exercise price (which term includes the base price of any SAR or similar right) of any outstanding awards; and/or (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding awards, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by this Plan and the then-outstanding awards.

(b)	
Without limiting the generality of Section 3.4, any good faith determination by the Administrator as to whether an adjustment is required in the circumstances pursuant to this Section 7.1, and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.

7.2	
Corporate Transactions – Assumption and Termination of Awards.

(a)	
Upon any event in which the Corporation does not survive, or does not survive as a public company in respect of its Common Stock (including, without limitation, a dissolution, merger, combination, consolidation, conversion, exchange of securities, or other reorganization, or a sale of all or substantially all of the business, stock or assets of the Corporation, in any case in connection with which the Corporation does not survive or does not survive as a public company in respect of its Common Stock), then the Administrator may make provision for a cash payment in settlement of, or for the termination, assumption, substitution or exchange of any or all outstanding awards or the cash, securities or property deliverable to the holder of any or all outstanding awards, based upon, to the extent relevant under the circumstances, the distribution or consideration payable to holders of the Common Stock upon or in respect of such event. Upon the occurrence of any event described in the preceding sentence in connection with which the Administrator has made

provision for the award to be terminated (and the Administrator has not made a provision for the substitution, assumption, exchange or other continuation or settlement of the award): (1) unless otherwise provided in the applicable award agreement, each then-outstanding option and SAR shall become fully vested, all shares of restricted stock then outstanding shall fully vest free of restrictions, and each other award granted under this Plan that is then outstanding shall become payable to the holder of such award (with any performance goals applicable to the award in each case being deemed met, unless otherwise provided in the award agreement, at the “target” performance level); and (2) each award (including any award or portion thereof that, by its terms, does not accelerate and vest in the circumstances) shall terminate upon the related event; provided that the holder of an option or SAR shall be given reasonable advance notice of the impending termination and a reasonable opportunity to exercise his or her outstanding vested options and SARs (after giving effect to any accelerated vesting required in the circumstances) in accordance with their terms before the termination of such awards (except that in no case shall more than ten days’ notice of the impending termination be required and any acceleration of vesting and any exercise of any portion of an award that is so accelerated may be made contingent upon the actual occurrence of the event).

(b)	
Without limiting the preceding paragraph, in connection with any event referred to in the preceding paragraph or any change in control event defined in any applicable award agreement, the Administrator may, in its discretion, provide for the accelerated vesting of any award or awards as and to the extent determined by the Administrator in the circumstances.

(c)	
For purposes of this Section 7.2, an award shall be deemed to have been “assumed” if (without limiting other circumstances in which an award is assumed) the award continues after an event referred to above in this Section 7.2, and/or is assumed and continued by the surviving entity following such event (including, without limitation, an entity that, as a result of such event, owns the Corporation or all or substantially all of the Corporation’s assets directly or through one or more subsidiaries (a “Parent”)), and confers the right to purchase or receive, as applicable and subject to vesting and the other terms and conditions of the award, for each share of Common Stock subject to the award immediately prior to the event, the consideration (whether cash, shares, or other securities or property) received in the event by the stockholders of the Corporation for each share of Common Stock sold or exchanged in such event (or the consideration received by a majority of the stockholders participating in such event if the stockholders were offered a choice of consideration); provided, however, that if the consideration offered for a share of Common Stock in the event is not solely the ordinary common stock of a successor corporation or a Parent, the Administrator may provide for the consideration to be received upon exercise or payment of the award, for each share subject to the award, to be solely ordinary common stock of the successor corporation or a Parent equal in fair market value to the per share consideration received by the stockholders participating in the event.

(d)	
The Administrator may adopt such valuation methodologies for outstanding awards as it deems reasonable in the event of a cash or property settlement and, in the case of options, SARs or similar rights, but without limitation on other methodologies, may base such settlement solely upon the excess if any of the per share amount payable upon or in respect of such event over the exercise or base price of the award. In the case of an option, SAR or similar right as to which the per share amount payable upon or in respect of such event is less than or equal to the exercise or base price of the award, the Administrator may terminate such award in connection with an event referred to in this Section 7.2 without any payment in respect of such award.

(e)	
In any of the events referred to in this Section 7.2, the Administrator may take such action contemplated by this Section 7.2 prior to such event (as opposed to on the occurrence of such event) to the extent that the Administrator deems the action necessary to permit the participant to realize the benefits intended to be conveyed with respect to the underlying shares. Without limiting the generality of the foregoing, the Administrator may deem an acceleration and/or termination to occur immediately prior to the applicable event and, in such circumstances, will reinstate the original terms of the award if an event giving rise to an acceleration and/or termination does not occur.

(f)	
Without limiting the generality of Section 3.4, any good faith determination by the Administrator pursuant to its authority under this Section 7.2 shall be conclusive and binding on all persons.

(g)	
The Administrator may override the provisions of this Section 7.2 by express provision in the award agreement and may accord any Eligible Person a right to refuse any acceleration, whether pursuant to the award agreement or otherwise, in such circumstances as the Administrator may approve. The portion of any ISO accelerated in connection with an event referred to in this Section 7.2 (or such other circumstances as may trigger accelerated vesting of the award) shall remain exercisable as an ISO only to the extent the applicable $100,000 limitation on ISOs is not exceeded. To the extent exceeded, the accelerated portion of the option shall be exercisable as a nonqualified stock option under the Code.

8.	
OTHER PROVISIONS

8.1	
Compliance with Laws. This Plan, the granting and vesting of awards under this Plan, the offer, issuance and delivery of shares of Common Stock, and/or the payment of money under this Plan or under awards are subject to compliance with all applicable federal, state, local and foreign laws, rules and regulations (including, but not limited to, state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Corporation, be necessary or

advisable in connection therewith. The person acquiring any securities under this Plan will, if requested by the Corporation or one of its Subsidiaries, provide such assurances and representations to the Corporation or one of its Subsidiaries as the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.

8.2	
No Rights to Award. No person shall have any claim or rights to be granted an award (or additional awards, as the case may be) under this Plan, subject to any express contractual rights (set forth in a document other than this Plan) to the contrary.

8.3	
No Employment/Service Contract. Nothing contained in this Plan (or in any other documents under this Plan or in any award) shall confer upon any Eligible Person or other participant any right to continue in the employ or other service of the Corporation or one of its Subsidiaries, constitute any contract or agreement of employment or other service or affect an employee’s status as an employee at will, nor shall interfere in any way with the right of the Corporation or one of its Subsidiaries to change a person’s compensation or other benefits, or to terminate his or her employment or other service, with or without cause. Nothing in this Section 8.3, however, is intended to adversely affect any express independent right of such person under a separate employment or service contract other than an award agreement.

8.4	
Plan Not Funded. Awards payable under this Plan shall be payable in shares or from the general assets of the Corporation, and no special or separate reserve, fund or deposit shall be made to assure payment of such awards. No participant, beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly otherwise provided) of the Corporation or one of its Subsidiaries by reason of any award hereunder. Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Corporation or one of its Subsidiaries and any participant, beneficiary or other person. To the extent that a participant, beneficiary or other person acquires a right to receive payment pursuant to any award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Corporation.

8.5	
Tax Withholding. Upon any exercise, vesting, or payment of any award, or upon the disposition of shares of Common Stock acquired pursuant to the exercise of an ISO prior to satisfaction of the holding period requirements of Section 422 of the Code, or upon any other tax withholding event with respect to any award, arrangements satisfactory to the Corporation shall be made to provide for any taxes the Corporation or any of its Subsidiaries may be required or permitted to withhold with respect to such award event or payment. Such arrangements may include (but are not limited to) any one of (or a combination of) the following:

(a)	
The Corporation or one of its Subsidiaries shall have the right to require the participant (or the participant’s personal representative or beneficiary, as the case may be) to pay or provide for payment of the amount of any taxes which the Corporation or one of its Subsidiaries may be required or permitted to withhold with respect to such award event or payment.

(b)	
The Corporation or one of its Subsidiaries shall have the right to deduct from any amount otherwise payable in cash (whether related to the award or otherwise) to the participant (or the participant’s personal representative or beneficiary, as the case may be) the amount of any taxes which the Corporation or one of its Subsidiaries may be required or permitted to withhold with respect to such award event or payment.

(c)	
In any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock under this Plan, the Administrator may in its sole discretion (subject to Section 8.1) require or grant (either at the time of the award or thereafter) to the participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, that the Corporation reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their fair market value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy any applicable withholding obligation on exercise, vesting or payment.

8.6	
Effective Date, Termination and Suspension, Amendments.

8.6.1 Effective Date. This Plan is effective as of [________], 2022, the date of its approval by the Board (the “Effective Date”). This Plan shall be submitted for and subject to stockholder approval no later than twelve months after the Effective Date. Unless earlier terminated by the Board and subject to any extension that may be approved by stockholders, this Plan shall terminate at the close of business on the day before the tenth anniversary of the Effective Date. After the termination of this Plan either upon such stated termination date or its earlier termination by the Board, no additional awards may be granted under this Plan, but previously granted awards (and the authority of the Administrator with respect thereto, including the authority to amend such awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan.

8.6.2 Board Authorization. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part. No awards may be granted during any period that the Board suspends this Plan.

8.6.3 Stockholder Approval. To the extent then required by applicable law or deemed necessary or advisable by the Board, any amendment to this Plan shall be subject to stockholder approval.

8.6.4 Amendments to Awards. Without limiting any other express authority of the Administrator under (but subject to) the express limits of this Plan, the Administrator by agreement or resolution may waive conditions of or limitations on awards to participants that the Administrator in the prior exercise of its discretion has imposed, without the consent of a participant, and (subject to the requirements of Sections 3.2 and 8.6.5) may make other changes to the terms and conditions of awards. Any amendment or other action that would constitute a repricing of an award is subject to the no-repricing provision of Section 3.3.

8.6.5 Limitations on Amendments to Plan and Awards. No amendment, suspension or termination of this Plan or amendment of any outstanding award agreement shall, without written consent of the participant, affect in any manner materially adverse to the participant any rights or benefits of the participant or obligations of the Corporation under any award granted under this Plan prior to the effective date of such change. Changes, settlements and other actions contemplated by Section 7 shall not be deemed to constitute changes or amendments for purposes of this Section 8.6.

8.7	
Privileges of Stock Ownership. Except as otherwise expressly authorized by the Administrator, a participant shall not be entitled to any privilege of stock ownership as to any shares of Common Stock not actually delivered to and held of record by the participant. Except as expressly required by Section 7.1 or otherwise expressly provided by the Administrator, no adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery.

8.8	
Governing Law; Severability.

8.8.1 Choice of Law. This Plan, the awards, all documents evidencing awards and all other related documents shall be governed by, and construed in accordance with the laws of the State of Nevada, notwithstanding any Nevada or other conflict of law provision to the contrary.

8.8.2 Severability. If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.

8.9	
Captions. Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.

8.10	
Stock-Based Awards in Substitution for Stock Options or Awards Granted by Other Corporation. Awards may be granted to Eligible Persons in substitution for or in connection with an assumption of employee stock options, SARs, restricted stock or other stock-based awards granted by other entities to persons who are or who will become Eligible Persons in respect of the Corporation or one of its Subsidiaries, in connection with a distribution, merger or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Corporation or one of its Subsidiaries, directly or indirectly, of all or a substantial part of the stock or assets of the employing entity. The awards so granted need not comply with other specific terms of this Plan, provided the

awards reflect adjustments giving effect to the assumption or substitution consistent with any conversion applicable to the common stock (or the securities otherwise subject to the award) in the transaction and any change in the issuer of the security. Any shares that are delivered and any awards that are granted by, or become obligations of, the Corporation, as a result of the assumption by the Corporation of, or in substitution for, outstanding awards previously granted or assumed by an acquired company (or previously granted or assumed by a predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by the Corporation or one of its Subsidiaries in connection with a business or asset acquisition or similar transaction) shall not be counted against the Share Limit or other limits on the number of shares available for issuance under this Plan.

8.11	
Non-Exclusivity of Plan. Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Administrator to grant awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority.

8.12	
No Corporate Action Restriction. The existence of this Plan, the award agreements and the awards granted hereunder shall not limit, affect, or restrict in any way the right or power of the Corporation or any Subsidiary (or any of their respective shareholders, boards of directors or committees thereof (or any subcommittees), as the case may be) to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the capital structure or business of the Corporation or any Subsidiary, (b) any merger, amalgamation, consolidation or change in the ownership of the Corporation or any Subsidiary, (c) any issue of bonds, debentures, capital, preferred or prior preference stock ahead of or affecting the capital stock (or the rights thereof) of the Corporation or any Subsidiary, (d) any dissolution or liquidation of the Corporation or any Subsidiary, (e) any sale or transfer of all or any part of the assets or business of the Corporation or any Subsidiary, (f) any other award, grant, or payment of incentives or other compensation under any other plan or authority (or any other action with respect to any benefit, incentive or compensation), or (g) any other corporate act or proceeding by the Corporation or any Subsidiary. No participant, beneficiary or any other person shall have any claim under any award or award agreement against any member of the Board or the Administrator, or the Corporation or any employees, officers or agents of the Corporation or any Subsidiary, as a result of any such action. Awards need not be structured so as to be deductible for tax purposes.

8.13	
Other Company Benefit and Compensation Programs. Payments and other benefits received by a participant under an award made pursuant to this Plan shall not be deemed a part of a participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Corporation or any Subsidiary, except where the Administrator expressly otherwise provides or authorizes in writing. Awards under this Plan may be made in addition to, in combination with, as alternatives to or in payment of grants, awards or commitments under any other plans, arrangements or authority of the Corporation or its Subsidiaries.

8.14	
Clawback Policy. The awards granted under this Plan are subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of awards or any shares of Common Stock or other cash or property received with respect to the awards (including any value received from a disposition of the shares acquired upon payment of the awards).

d302576dex108.htm  EX-10.8
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EX-10.8
Exhibit 10.8

PURCHASE & SETTLEMENT AGREEMENT

The Parties, as defined below, enter into this Purchase & Settlement Agreement, effective as of August 6, 2018, (“Effective Date”), upon the terms and conditions stated herein.

DEFINITIONS

“Agreement” means this Settlement Agreement & Mutual Release.

“Founders” means Founders Oil & Gas, LLC and all of its parents, subsidiaries, affiliates, agents, servants, employees, attorneys, accountants, partners, predecessors, successors and assigns, and all other persons or entities acting or purporting to act on its behalf.

“Founders Operating” means Founders Oil & Gas Operating, LLC and all of its parents, subsidiaries, affiliates, agents, servants, employees, attorneys, accountants, partners, predecessors, successors and assigns, and all other persons or entities acting or purporting to act on its behalf.

“Hudspeth” means Hudspeth Oil Corporation and all of its parents, subsidiaries, affiliates, agents, servants, employees, attorneys, accountants, partners, predecessors, successors and assigns, and all other persons or entities acting or purporting to act on its behalf.

“McCabe Petroleum” means McCabe Petroleum Corporation and all of its parents, subsidiaries, affiliates, agents, servants, employees, attorneys, accountants, partners, predecessors, successors and assigns, and all other persons or entities acting or purporting to act on its behalf.

“Torchlight” means Torchlight Energy Resources, Inc. and all of its parents, subsidiaries, affiliates, agents, servants, employees, attorneys, accountants, partners, predecessors, successors and assigns, and all other persons or entities acting or purporting to act on its behalf.

“Wolfbone” means Wolfbone Investments, LLC and all of its parents, subsidiaries, affiliates, agents, servants, employees, attorneys, accountants, partners, predecessors, successors and assigns, and all other persons or entities acting or purporting to act on its behalf.

“Founders Parties” means Founders and Founders Operating.

“Partners” means Hudspeth, McCabe Petroleum, Torchlight, and Wolfbone.

“Project” means the ownership, management, operations of the State of Texas oil and gas leases and University Land Board oil and gas leases covered by the Farmout Agreement dated September 23, 2015 among Founders, Hudspeth, and Pandora Energy, LP.

“All Claims” means past, present and future actions and/or causes of action, counter-claims, cross-claims, rights, claims, demands, costs, liabilities, damages, losses, expenses and penalties, whether known or unknown, suspected or unsuspected, liquidated or contingent. Under this definition, “All Claims” includes, but is not limited to, all claims, demands, and causes of action of any nature, whether in contract or in tort or otherwise, or arising under or by virtue of any constitution, statute, regulation, at common law, or in equity, for past, present, future, known, and unknown personal injuries, property damage, and all other losses or damages of any kind, including but not limited to the following: all actual damages, all exemplary and punitive damages, all penalties of any kind, all contract damages, all tort damages, loss of consortium, damage to familial relations, ensuing death, loss of inheritance, loss of companionship, loss of society and affection, loss of enjoyment of life, intentional and/or malicious conduct, actual and/or constructive fraud, statutory and/or common law fraud, class action suit, misrepresentation of any kind or character, libel, slander, negligence, gross negligence, costs, attorney fees, economic loss, and pre-judgment and post- judgment interests. This definition further includes, but is not limited to, all elements of damages, all remedies, all claims, demands, and causes of action that are now recognized by law or that may be created or recognized in the future in any manner, including without limitation by constitution, statute, regulation, or judicial decision.

“Released Claims” means All Claims, existing as of the Effective Date, arising out of or relating in any way, directly or indirectly to the Project, and All Claims which have been or could have been asserted in the Project or which arise out of or are in any way connected with the Project. This definition does not include, and specifically excludes, any claim that the Parties may have in the future against the other arising out of any obligation contained in this Agreement.

“Vendors” means any and all of the service and material suppliers used to drill or provide work or services on the University Founders A-25 Well.

In this Agreement, the singular includes the plural, and vice versa; likewise, the disjunctive includes the conjunctive, and vice versa.

AGREEMENT

For and in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and agreed to, the Parties agree as follows:

A.	
2018 Payments.

1.	
Contemporaneously with the execution of this Agreement, Hudspeth will pay Founders Six-Hundred-Twenty-Five Thousand and No/100ths United States Dollars ($625,000) by electronic transfer; and

2.	
Contemporaneously with the execution of this Agreement, Wolfbone will pay Founders Six-Hundred-Twenty-Five Thousand and No/100ths United States Dollars ($625,000) by electronic transfer.

B.	
2019 Payments.

1.	
No later than July 20, 2019, Hudspeth or Torchlight will pay Founders Six-Hundred-Twenty-Five Thousand and No/100ths United States Dollars ($625,000) by electronic transfer; and

2.	
No later than July 20, 2019, Wolfbone or McCabe Petroleum will pay Founders Six-Hundred-Twenty-Five Thousand and No/100ths United States Dollars ($625,000) by electronic transfer.

C.	
Default. In the event the 2019 Payments are not made by July 25, 2019, the Partners agree to pay interest on any unpaid balance owed by the respective party, with such interest being applied to such unpaid balance beginning on July 25, 2019 until paid. The applied interest rate will be 12% per annum.

D.	
Assignment of Oil & Gas Leases. Within five business days after the full performance of the obligations contained in Paragraph A, the Founders Parties will deliver two fully executed originals of the assignment of oil and gas leases attached as Exhibits A and B. The assignments will be delivered to LeBlanc Law PC, 1111 North Loop West, Suite 705, Houston, Texas 77008.

E.	
Assignment of Claims. Within five business days after the full performance of the obligations contained in Section A, the Founders Parties will deliver two fully executed originals of the assignment of claims attached as Exhibit C. The assignment of claims will be delivered to LeBlanc Law PC, 1111 North Loop West, Suite 705, Houston, Texas 77008.

F.	
Assignment of University Lands Development Unit Agreement 2837. Within five business days after the full performance of the obligations contained in Section A, the Founders Parties will deliver two fully executed originals of an assignment of development unit agreement which is substantially similar to the one attached as Exhibit D. The assignment of development unit agreement will be delivered to LeBlanc Law PC, 1111 North Loop West, Suite 705, Houston, Texas 77008. The Founders Parties will reasonably cooperate with Partners to obtain the necessary consents from University Lands and/or the State of Texas.

G.	
Mutual Releases & Waivers.

1.	
The Founders Parties RELEASE, ACQUIT, and FOREVER DISCHARGE the Partners from all Released Claims.

2.	
The Partners RELEASE, ACQUIT, and FOREVER DISCHARGE the Founders Parties from all Released Claims.

3.	
THE PARTIES HEREBY WAIVE THEIR RIGHTS AGAINST THE OTHER(S) UNDER THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 et seq., BUSINESS AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS, AND ANY SIMILAR LAW IN ANY OTHER STATE TO THE EXTENT SUCH ACT OR SIMILAR LAW WOULD OTHERWISE APPLY. AFTER CONSULTATION WITH AN ATTORNEY OF THEIR OWN SELECTIONS, THE PARTIES VOLUNTARILY CONSENT TO THIS WAIVER.

H.	
Third Party Lawsuits In the event one or more members of the Partners initiate litigation in regards to the Project against any third party, including but not limited to vendors, contractors and manufacturers, and if the Founders Parties are then included in any counter claim or action by such third party due to such initiated litigation, the member(s) of the Partners which initiated said litigation agree to pay all reasonable attorney fees which are incurred by the Founders Parties in connection with such counter claim or action, up to the amount of $250,000.00, with the Founders Parties being responsible for any such attorney fees over said amount. Provided, however, that the indemnity obligations in this section shall only apply to and cover the claims assigned by Founders Parties (see Exhibit C) to Partners as part of this settlement.

I.	
Representations and Warranties.

1.	
Founders Parties’ Representations and Warranties. Founders Parties warrant and represent to the Partners that:

i.	
They are authorized to enter into this Agreement, and each person executing this Agreement, individually or on behalf of an entity, has the authority to do so; and

ii.	
They are the owner of all of their respective Released Claims; there are no other parties with an interest in all or any of their respective Released Claim(s); and that none of their respective Released Claims have been assigned to any third-party, nor is any such assignment pending.

iii.	
As of the Effective Date, to the best of their knowledge they have not entered into any settlement agreement or waiver of any Released Claims with any of the Vendors.

iv.	
As of the Effective Date, to the best of their knowledge there are no Released Claims or litigation pending which impair or otherwise adversely affect the Project.

v.	
As of the Effective Date, to the best of their knowledge there are no material liens or encumbrances which impair or otherwise adversely affect the Project.

vi.	
As of the Effective Date, to the best of their knowledge they are not in default under any contract or agreement with any of the Vendors or third-parties pertaining to the Project.

vii.	
To the best of their knowledge, during the time Founders Operating served as operator for the University Founders A-25 Well, until March 1, 2018, all invoices due and owing to any Vendors or third-parties which pertain to services rendered or work performed for the Project have been paid.

2.	
Partners’ Representations and Warranties. Partners warrant and represent to Founders Parties that:

i.	
They are authorized to enter into this Agreement, and each person executing this Agreement, individually or on behalf of an entity, has the authority to do so; and

J.	
Non-Reliance. The Parties hereby declare and represent that in making this Agreement, they rely wholly upon their respective judgment, belief, and knowledge of their respective liabilities and that this Agreement is executed and made without any reliance upon any statement or representation of any other Party or of any other Party’s representative.

K.	
Non-admission of Liability. It is hereby agreed that the fact that the Parties have entered into this Agreement does not constitute an admission of any liability as to any conduct or claim related to the Project or which could or should have been asserted in legal proceeding arising out of the Project by any Party to this Agreement, such liability being expressly denied.

L.	
Controlling Law. The Parties agree that this Agreement shall be governed, construed, and applied in accordance with the laws of the State of Texas applicable to contracts between Texas residents that are to be wholly performed in Texas, without regard to choice of law or conflicts of law principles of Texas or any other jurisdiction.

M.	
Forum Selection Clause & Attorney Fees. The Parties agree that all disputes arising under this Agreement shall be brought solely in the Judicial District Court of Harris County, Texas. A party who prevails in defending or prosecuting any legal proceeding related to this Agreement is entitled to recover its reasonable attorney’s fees and all costs of such proceeding.

N.	
Entire Agreement. This Agreement constitutes the entire, final agreement of the Parties on all matters related in any way to the Project and the Released Claims, and it fully supersedes and replaces any and all prior agreements or understandings, written or oral, between or among the Parties related to the Project in any way.

O.	
Multiple Counterparts. This Agreement may be executed in multiple counterparts by the undersigned and all such counterparts so executed shall together be deemed to constitute one final agreement, as if one document had been signed by all parties hereto; and each such counterpart shall be deemed to be an original, binding the Party subscribed thereto, and multiple signature pages (including faxes or other electronic delivery of signature pages) affixed to a single copy of this Agreement shall be deemed to be a fully executed original Agreement. It shall be sufficient in making proof of this Agreement to produce or account for a facsimile or PDF copy of an executed counterpart of this Agreement.

P.	
Fees & Costs. It is further agreed and understood that except as set forth in this Agreement, each Party has no claim against the other for any costs or fees it may have incurred, and that each Party shall pay its own taxable costs, expenses of litigation and legal fees. For the avoidance of doubt, this section does not apply to any legal proceeding for the enforcement of this Agreement.

Q.	
Joint Drafting. The Parties agree that this Agreement was drafted jointly and that this Agreement shall not be construed against any Party because of a Party’s involvement in drafting this Agreement.

R.	
Non-Waiver. No exercise or failure to exercise or delay by any Party in exercising any right or remedy under this Agreement shall constitute a waiver by such Party of such right or remedy in any other instance or any other right or remedy.

S.	
Amendment & Modification. Any amendment or modification to this Agreement must be in writing and executed by the Parties.

T.	
No Assignments. No obligation or right arising under this Agreement may be assigned or delegated by any Party without the express written consent of the other Parties.

U.	
Future Documents. The Parties shall perform any and all acts and execute and deliver any and all documents that may be or become necessary and proper to give effect to and carry out the terms hereof.

V.	
No Third-Party Beneficiary. Any agreement to perform any obligations herein contained, express or implied, shall be only for the benefit of the Parties and their respective heirs, successors, executors, administrators, assigns and legal representatives, and such agreements and obligations shall not inure to the benefit of the obligees of any indebtedness of any other party, whatsoever, it being the intention of the Parties that no one shall be deemed to be a third-party beneficiary of this Agreement.

W.	
Binding Effect. The Parties may plead this Agreement in an action, suit, or other proceeding, for mandatory injunction or otherwise, to enforce the terms of this Agreement or the Agreed Judgment. The Parties may also plead this Agreement as a full and complete defense to, and may use this Agreement as the basis for, an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted by the other Party, or by the other Party’s respective representatives, agents, executors, administrators, decedents, trustees, beneficiaries, successors, heirs, attorneys and assigns, in contravention or breach of this Agreement.

X.	
Severability. Each part of this Agreement is intended to be severable. If any term, covenant, condition or provision violates any applicable law or is declared illegal, invalid or unenforceable, in whole or in part, by a court of last resort, such provision shall be enforced to the greatest extent permitted by law, and such a declaration shall not affect the legality, validity or enforceability of the remaining parts of this Agreement, all of which shall remain in full force and effect.

Y.	
Review by Counsel. The Parties have had sufficient opportunity to read this Agreement and to consult with legal counsel of their choosing regarding the meaning and effect of this Agreement and its rights and liabilities under it. Accordingly, each Party and signatory to this Agreement has entered into it freely, voluntarily and without duress.

Z.	
Survival of Representations and Warranties. For a period of two years from the Effective Date, the representations and warranties provided for in Section I of this Agreement shall survive the close of the assignments described in Sections D and E and shall be deemed covenants running with the lands associated with the Project, binding on the Founders Parties and the Partners, but not their respective heirs, successors and assigns.

AA.	
Public Announcements. Except for the filing of record the assignments of oil and gas leases attached in Exhibits A and B, the press release attached as Exhibit E. and except as required by law or regulation, neither the Founders Parties or the Partners shall issue any news release, public announcement, or other form of publicity concerning this Agreement, or the transactions contemplated by it, without obtaining the prior written approval of the other, which approval will not be unreasonably withheld or delayed.

INTENTIONALLY BLANK—SIGNATURE PAGES FOLLOW

AGREED AND EXECUTED as of the Effective Date:
Founders Oil & Gas, LLC	 	Founders Oil & Gas Operating, LLC
By:	 	
/s/ Paten Morrow

By:	 	
/s/ Paten Morrow

Paten Morrow	 		 	Paten Morrow
 	President	 		 	President
Hudspeth Oil Corporation	 	Torchlight Energy Resources, Inc.
By:	 	
/s/ John Brda

By:	 	
/s/ John Brda

John Brda	 		 	John Brda
 	CEO	 		 	CEO
Wolfbone Investments, LLC	 	McCabe Petroleum Corporation
By:	 	
/s/ Greg McCabe

By:	 	
/s/ Greg McCabe

Greg McCabe	 		 	Greg McCabe
 	CEO	 		 	CEO

d302576dex109.htm  EX-10.9
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EX-10.9
Exhibit 10.9

PURCHASE AGREEMENT

This Purchase Agreement (“Agreement”) is made and entered into this 4th day of April 2016, by and among McCabe Petroleum Corporation, a Texas corporation (“MPC”), Torchlight Energy Resources, Inc., a Nevada corporation (“TRCH”), and Torchlight Energy, Inc., a Nevada corporation (“TEI” or “Purchaser”). MPC and TEI are sometimes hereinafter collectively referred to as the “Parties.”

WHEREAS, MPC owns certain beneficial rights in leasehold estate of approximately 12,000 gross acres located in Sterling, Tom Green and Irion Counties, Texas, (the “Oil and Gas Leases”). Such Interest was created by that certain Farmout Agreement (the “Farmout Agreement”) between Oxy USA Inc. (“Farmor”) and Imperial Exploration, LLC (“Imperial”), dated effective March 21, 2016. The Oil and Gas Leases and lands that such leases cover are more particularly described in the Farmout Agreement;

WHEREAS, MPC desires to transfer and convey a 2/3rds of 8/8ths undivided interest in its rights in the Oil and Gas Leases and Farmout Agreement (“Subject Interest”) to TEI. Additionally, MPC desires to create an area of mutual interest (“AMI”) with TEI as set forth in the AMI attached hereto as Exhibit “A”;

WHEREAS, TEI is a wholly owned subsidiary of TRCH; and

WHEREAS, the Purchaser desire to purchase the oil and gas rights from MPC.

NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements and the respective representations and warranties herein contained, and on the terms and subject to the conditions herein set forth, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I

PURCHASE AND SALE OF THE OIL AND GAS LEASES

Section 1.1 Sale of the Oil and Gas Leases. Subject to the terms and conditions set forth in this Agreement, MPC hereby sells, transfers, conveys and delivers to TEI the Subject Interest. The Oil and Gas Leases represent a 75% net revenue interest and are subject to a 25% royalty interest. In the event that the Oil and Gas Leases cover less than a 75% net revenue interest, Purchaser’s interest in the Oil and Gas Leases shall be proportionately reduced and MPC shall return to TEI or TRCH the same proportion of the warrants received through this Agreement. The Oil and Gas Leases will be subject to a retention by the MPC of a 25% Back-In After Payout to the 8/8ths interest as defined below. The Farmout Agreement from Oxy attached as Exhibit “B” provides for a 5% Project Back-In After Payout on the Farmout Agreement acreage only; it does not provide for a Back-In on any other acreage within the AMI. In the event the OXY back-in occurs before MPC Back-In event, then Purchaser will be proportionately reduced by the 5% working interest given to OXY. The reduced income will be accounted for in the project payout accounting for MPC back-in. Once MPC back-in occurs, the 5% OXY back-in will be deducted from the 25% MPC back-in, leaving MPC with 20% of the Farmout acreage and 25% of any additional acreage within the AMI. In the event the OXY back-in occurs after MPC Back-In, the OXY back-in will immediately be deducted from the 25% owned by MPC as described above.

Purchase Agreement - Page 1

Section 1.2 Purchase Price. As consideration for the purchase of the Oil and Gas Leases, TEI shall pay to MPC a total aggregate consideration in the form of a five-year warrant (the “Warrant”) to purchase 1,500,000 shares of common stock, par value $.001 per share, of Torchlight Energy Resources, Inc. at a purchase price of $1.00 per share (the “Warrant Shares”). The Warrant provides that in the event an initial well is not drilled on the Oil and Gas Leases on or before July 10, 2016, that (i) if as of July 10, 2016 MPC has exercised no portion of the Warrant, the number of Warrant Shares that MPC will be able to acquire will be reduced to 500,000, (ii) if as of July 10, 2016 MPC has exercised a portion of the Warrant in an amount less than 500,000 Warrant Shares, the number of Warrant Shares that MPC will be able to acquire will be reduced to the difference between 500,000 and the number of Warrant Shares for which the Warrant has already been exercised, and (iii) if as of July 10, 2016 MPC has exercised a portion of the Warrant in an amount more than 500,000 Warrant Shares, the number of Warrant Shares that MPC will be able to acquire will be reduced to zero.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

OF MPC

MPC hereby represents and warrants to Purchaser and TRCH as follows:

Section 2.1 Organization. MPC is a Texas corporation, duly organized and validly existing and in good standing under the laws of the state of Texas.

Section 2.2 Authorization. All action on the part of MPC necessary for the authorization, execution, delivery and performance of this Agreement and all documents related to consummate the transactions contemplated herein have been taken by MPC. MPC has the requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement, when duly executed and delivered in accordance with its terms, will constitute a valid and binding obligation of MPC, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, and other similar laws of general application relating to or affecting creditors’ rights and to general equitable principles.

Section 2.3 Ownership. MPC represents and warrants to Purchaser that (a) it owns all of the Subject Interest in the Oil and Gas Leases free and clear of any liens, claims, equities, charges, options, rights of first refusal, or encumbrances; (b) it has not assigned any of the Subject Interest in the Oil and Gas Leases to any third party, nor is any such assignment pending; (c) it has the unrestricted right and power to transfer, convey and deliver full ownership of the Subject Interest in the Oil and Gas Leases without the consent or agreement of any other person and without any designation, declaration or filing with any governmental authority; and (d) upon the transfer of the Subject Interest in the Oil and Gas Leases to Purchaser as contemplated herein, Purchaser will receive good and valid title thereto to such Subject Interest, free and clear of any liens, claims, equities, charges, options, rights of first refusal, encumbrances or other restrictions.

Section 2.4 No Transfer. MPC has not transferred, sold, assigned conveyed, encumbered, pledged or hypothecated any rights, title or interest in or to the Subject Interest in the Oil and Gas Leases.

Purchase Agreement - Page 2

Section 2.5 Validity of Leases. The leases included in the Oil and Gas Leases are valid, in effect, and have not lapsed or reverted to the lessor(s).

Section 2.6 Pending Claims. There is no claim, suit, arbitration, investigation, action, litigation or other proceeding, whether judicial, administrative or otherwise, now pending or, to the MPC’s knowledge, contemplated or threatened against MPC or the Subject Interest in the Oil and Gas Leases before any court, arbitration, administrative or regulatory body or any governmental agency which may result in any judgment, order, award, decree, liability or other determination which will or could reasonably be expected to have any material effect upon the Oil and Gas Leases. No litigation is pending, or, to MPC’s knowledge, threatened against MPC or the Subject Interest in the Oil and Gas Leases which seeks to restrain or enjoin the execution and delivery of this Agreement or any of the documents referred to herein or the consummation of any of the transactions contemplated thereby or hereby.

Section 2.7 Access to Information. MPC hereby confirms and represents that it (a) has access to and has reviewed all current information about the TEI filed with the Securities and Exchange Commission (the “SEC”) (which filings can be accessed by going to sec.report/edgar/searchedgar/companysearch.html, typing “Torchlight Energy Resources” in the “Company name” field, and clicking the “Search” button) (collectively, the “SEC Reports”); (b) has been afforded the opportunity to ask questions of and receive answers from representatives of TEI concerning the business and financial condition, properties, operations and prospects of the TEI and all such questions have been answered to the full satisfaction of MPC; (c) has such knowledge and experience in financial and business matters so as to be capable of evaluating the relative merits and risks of the transactions contemplated hereby; (d) has had an opportunity to engage and is represented by an attorney of his choice; (e) has had an opportunity to negotiate the terms and conditions of this Agreement; (f) has been given adequate time to evaluate the merits and risks of the transactions contemplated hereby; and (g) has been provided with and given an opportunity to review all current information about TEI.

Section 2.8 Purchase for Investment – Accredited Investor. MPC is acquiring the Warrant for its own account, for investment purposes only and not with view to any public resale or other distribution thereof. MPC represents and warrants that it is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D of the Act.

Section 2.9 Acquisition of Warrant for Investment. MPC understands that the issuance of the Warrant (as referenced in Section 1.2 herein) will not have been registered under the Securities Act of 1933, as amended (the “Act”), or any state securities acts, and accordingly, are restricted securities, and MPC represents and warrants to TEI that the present intention of MPC is to receive and hold the Warrant for investment only and not with a view to the distribution or resale thereof. Additionally, MPC understands that any sale of the Warrant or any of the Warrant Shares underlying the Warrant, under current law, will require either (a) the registration of such security under the Act and applicable state securities acts; (b) compliance with Rule 144 of the Act; or (c) the availability of an exemption from the registration requirements of the Act and applicable state securities acts.

To assist in implementing the above provisions, MPC hereby consents to the placement of the legend, or a substantially similar legend, set forth below, on all certificates representing ownership of the Warrant or any Warrant Shares underlying the Warrant acquired hereby until the securities have been sold, transferred, or otherwise disposed of, pursuant to the requirements hereof. The legend shall read substantially as follows:

Purchase Agreement - Page 3

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACTS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, ARE RESTRICTED AS TO TRANSFERABILITY, AND MAY NOT BE SOLD, HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION AND QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.”

Section 2.10 Farmout Agreement. The Farmout Agreement is valid and in existence.

Section 2.11 Breach of Representation or Warranty. If any of these representation and warranties are found to be false or if MPC breaches this Agreement, MPC’s total liability for such false representations or warranties or breach shall be capped at the total compensation received under this Agreement (the 1.5MM warrants, any proceeds received therefrom, and any cash consideration received by MPC).

ARTICLE III

REPRESENTATIONS AND WARRANTIES

OF TEI AND TRCH

TEI and TRCH hereby represent and warrant to MPC as follows:

Section 3.1 Organization. (a) TEI is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada, and (b) TRCH is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada.

Section 3.2 Authorization. All action on the part of TEI and TRCH necessary for the authorization, execution, delivery and performance of this Agreement and all documents related to consummate the transactions contemplated herein has been taken by TEI and TRCH. TEI has the requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement, when duly executed and delivered in accordance with its terms, will constitute a valid and binding obligation of TEI and TRCH, enforceable against TEI and TRCH in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, and other similar laws of general application relating to or affecting creditors’ rights and to general equitable principles.

Section 3.3 Pending Claims. No litigation is pending, or, to TEI’s or TRCH’s knowledge, threatened against the TEI or TRCH which seeks to restrain or enjoin the execution and delivery of this Agreement or any of the documents referred to herein or the consummation of any of the transactions contemplated thereby or hereby.

Purchase Agreement - Page 4

ARTICLE IV

COVENANTS OF MPC AND PURCHASERS

Section 4.1 Participation Agreement. The Parties hereto will enter into a Participation and Development Agreement (the “Participation Agreement”), which will provide, among other terms and conditions customary for oil and gas transactions, that MPC will have a 25% Back-In After Payout (“BIAPO”). The Participation Agreement will also provide: that the Purchaser will pay its proportion of the $25,000 fee to the prior lessor of the Oil and Gas Leases to spud each well and its proportionate share of approximately $75,000 for geological and land man costs; that the Purchaser will spud the first vertical development well by July 10, 2016; that there will be a 180 day continuous development clause from spud to spud of each well throughout the life of the Agreement; that drilling vertical pilot wells are required on the first two wells provided they are completed with sufficient casing size; that the third well must be horizontal, however this first horizontal well shall not be proposed until at least one year from the effective date of the Agreement; and that the Purchaser shall run a full suite of logs and core data as required on all wells drilled on the acreage. The Participation Agreement will further provide that all drilled, completed and producing wells will hold the acreage according to acceptable field rules established by the Texas Railroad Commission. Once acreage is held by production, it will fall outside the continuous development agreement and will not be subject to surrender. BIAPO hall be defined as the point in time when the proceeds of all production from all operations conducted on all acreage within the AMI (attached hereto as Exhibit “A”) (exclusive of royalty, overriding royalty and taxes chargeable to the working interest) equals the actual cost incurred by the Operator in drilling, testing, equipping and the cost of operating the well(s), inclusive of overhead charges as defined in the “COPAS” attached to the Joint Operating Agreement, any additional acreage acquisition, seismic costs, spud fees, land costs, and further including the cost of the Warrant Shares as accounted for by TRCH utilizing the Black Sholes method of accounting and including the geologic and land man costs of $75,000. No sales proceeds of working interests shall ever be included in or characterized as revenues attributable to ownership of the oil and gas leases for purposes of calculating BIAPO under the Participation Agreement. For the first three wells drilled on the lands subject to the Oil and Gas Leases or on AMI lands, if any Party of this Agreement, the Participation Agreement or Joint Operating Agreement does not pay their proportionate drilling or completion costs for any operations authorized under the Joint Operating Agreement, then such Party shall forfeit all of its leasehold interest in the Oil and Gas Leases and any leases obtained on AMI lands that have not been already earned through drilling and completion operations. After the first three wells, any Party that elects not to consent to any authorized operations under the Joint Operating Agreement shall be penalized by 500% of the costs of all authorized operations for that well and any wells drilled on any tract that is directly adjacent to the tract where the well was drilled and such party went non-consent. If upon reasonable efforts and/or no later than 30 days after the effective date of this Agreement, the Participation Agreement has not been executed by MPC and Purchaser and any other necessary party, then this Agreement shall be terminated, MPC shall return all warrants to TEI or TRCH and MPC, TEI and TRCH shall have no liability to each other under this Agreement (except for and unless there is a breach under another provision of this Agreement).

Section 4.2 Joint Operating Agreement. Purchaser and MPC will enter into a Joint Operating Agreement which will provide that the Purchaser will be the operator of the acreage and will contain such terms and conditions as are customary for oil and gas transactions. Such Joint Operating Agreement shall be entered into contemporaneously with the Participation and Development Agreement.

Purchase Agreement - Page 5

Section 4.3 Geologic Data. Purchaser agrees to furnish to MPC all geologic, seismic and engineering data related to the Oil and Gas Leases.

Section 4.4 Mid-stream Activities. Any activity on the Oil and Gas Leases and/or the AMI related to mid-stream or associated economic activities will be subject to the terms of an agreement between the Purchaser and MPC.

Section 4.5 Farmout Agreement. This Agreement is expressly subject to the Farmout Agreement. If there is any conflict between the terms of this Agreement and the Farmout Agreement, the Farmout Agreement shall control. (See attached Exhibit B)

ARTICLE V

MISCELLANEOUS

Section 5.1 Amendment; Waiver. Neither this Agreement nor any provision hereof may be amended, modified or supplemented unless in writing, executed by all the parties hereto. Except as otherwise expressly provided herein, no waiver with respect to this Agreement shall be enforceable unless in writing and signed by the party against whom enforcement is sought. Except as otherwise expressly provided herein, no failure to exercise, delay in exercising, or single or partial exercise of any right, power or remedy by any party, and no course of dealing between or among any of the parties, shall constitute a waiver of, or shall preclude any other or further exercise of, any right, power or remedy.

Section 5.2 Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing and delivered in Person or sent by registered or certified mail (return receipt requested) or nationally recognized overnight delivery service, postage pre-paid, addressed as follows, or to such other address has such party may notify to the other parties in writing:

(a)	  	If to the MPC:	  	
McCabe Petroleum Corporation

Attn: Greg McCabe

500 W. Texas, Suite 1110

Midland, Texas 79702

(b)	  	If to the TEI or TRCH:	  	
Torchlight Energy Resources, Inc.

Torchlight Energy, Inc.

Attn: John Brda, CEO

5700 W. Plano Parkway, Suite 3600

Plano, Texas 75093

A notice or communication will be effective (i) if delivered in Person or by overnight courier, on the business day it is delivered and (ii) if sent by registered or certified mail, three (3) business days after dispatch.

Purchase Agreement - Page 6

Section 5.3 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

Section 5.4 Assignment; Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and permitted assigns of the parties hereto. No party hereto may assign its rights or delegate its obligations under this Agreement without the prior written consent of the other parties hereto, which consent will not be unreasonably withheld.

Section 5.5 Entire Agreement. This Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof and supersede and cancel all prior representations, alleged warranties, statements, negotiations, undertakings, letters, acceptances, understandings, contracts and communications, whether verbal or written among the parties hereto and thereto or their respective agents with respect to or in connection with the subject matter hereof.

Section 5.6 Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas.

Section 5.7 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf’ format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf’ signature page were an original thereof.

Section 5.8 Costs and Expenses. Each party shall pay their own respective fees, costs and disbursements incurred in connection with this Agreement.

Section 5.9 No Third-Party Beneficiaries. Nothing in this Agreement will confer any third party beneficiary or other rights upon any person (specifically including any employees of The Company) or any entity that is not a party to this Agreement.

Section 5.10 Further Assurances. Each party covenants that at any time, and from time to time, after the Closing Date, it will execute such additional instruments and take such actions as may be reasonably be requested by the other parties to confirm or perfect or otherwise to carry out the intent and purposes of this Agreement.

Purchase Agreement - Page 7

Section 5.11 Exhibits Not Attached. Any exhibits not attached hereto on the date of execution of this Agreement shall be deemed to be and shall become a part of this Agreement as if executed on the date hereof upon each of the parties initialing and dating each such exhibit, upon their respective acceptance of its terms, conditions and/or form.

Section 5.12 Attorney Review - Construction. In connection with the negotiation and drafting of this Agreement, the parties represent and warrant to each other that they have had the opportunity to be advised by attorneys of their own choice and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments hereto.

IN WITNESS WHEREOF, the undersigned have executed this Purchase Agreement to become effective as of the date first set forth above.

TORCHLIGHT ENERGY RESOURCES, INC.
By:	 	
/s/ John Brda

John Brda, CEO
TORCHLIGHT ENERGY, INC.
By:	 	
/s/ John Brda

John Brda, CEO
MCCABE PETROLEUM CORPORATION
By:	 	
/s/ Greg McCabe

Greg McCabe, President

Purchase Agreement - Page 8

Exhibit A

LOGO

Torchlight Energy Resources, Inc.

5700 Plano Parkway, Suite 3600

Plano, Texas 75093

Telephone: (214) 432-8002

July 7, 2016

McCabe Petroleum Corporation

Attn: Greg McCabe

500 W. Texas, Suite 1110

Midland, Texas 79702

RE: Purchase Agreement dated April, 2016

Dear Mr. McCabe:

On or about April 4, 2016, McCabe Petroleum Corporation (“MPC”), Torchlight Energy Resources, Inc. (“TERI”) and Torchlight Energy, Inc. (“TEI”) entered into a Purchase Agreement whereby MPC conveyed an interest to TEI of a certain leasehold estate located in Sterling, Tom Green and Irion Counties, Texas (the “Purchase Agreement”). It has come to our attention, that section 1.2 of the Purchase Agreement incorrectly references July 10, 2016 for purpose of that section. The intent of the parties to the Purchase Agreement was that the date referenced in that section was to correspond with the underlying lease and Farmout Agreement, and accordingly should be July 11, 2016. Accordingly, MPC, TERI and TEI hereby mutually agree that reference to July 10, 2016 in section 1.2 of the Purchase Agreement is hereby amended and replaced with July 11, 2016. All terms and conditions of the Purchase Agreement shall, except as herein modified, remain in full force and effect.

If the foregoing accurately sets forth our agreement and understanding regarding the matters set forth therein, please so indicate by signing this letter on behalf of MPC and returning one copy.

TORCHLIGHT ENERGY RESOURCES, INC.
 		 	By:	 	
/s/ John Brda

John Brda, President and CEO
 		 	TORCHLIGHT ENERGY, INC.
 		 	By:	 	
/s/ John Brda

John Brda, President
AGREED TO AND ACCEPTED ON	 		 		 	
July 7, 2016.	 		 		 	
 		 	MCCABE PETROLEUM CORPORATION
 		 	By:	 	
/s/ Greg McCabe

Name
 		 		 	Greg McCabe, President
External Resources:
 sec.report/edgar/searchedgar/companysearch.html
d302576dex1010.htm  EX-10.10
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EX-10.10
Exhibit 10.10

PURCHASE AGREEMENT

This Purchase Agreement (this “Agreement”), is made and entered into this 14th day of November, 2017, by and between MCCABE PETROLEUM CORPORATION, a Texas corporation, with mailing address at 500 W. Texas Ave., Ste. 890, Midland, Texas 79701 (“MPC”) and TORCHLIGHT ENERGY, INC., a Nevada corporation, with mailing address at 5700 W. Plano Pkwy, Ste. 3600, Plano, TX 75093 (“TEI”). MPC and TEI are sometimes hereinafter referred to as the “Parties”.

WHEREAS, MPC is the owner of certain oil and gas leases in Ward County (the “Ward County Leases”) and Winkler County (the “Winkler County Leases”) (collectively the “Leases”), which are more particularly described in Exhibit A, which is attached hereto and incorporated herein for all purposes;

WHEREAS, MPC and TEI believe that if the Ward County Leases and Winkler County Leases were packaged together and sold, the Leases would receive a higher value for both together as compared to each being sold separately;

WHEREAS, in anticipation of the transactions contemplated by the MECO PSA (as defined below), MPC and TEI desire that MPC sell beneficial ownership interest in the Ward County Leases to TEI in exchange for $3.25MM in the form of a promissory note (as further provided in this Agreement below);

WHEREAS, MPC entered into a Purchase and Sale Agreement dated November 9, 2017 (the “MECO PSA”) with MECO IV, LLC (“MECO”) whereby MPC, on behalf of TEI and itself, will sell the Leases to MECO at a closing anticipated to occur on or before November 29, 2017;

WHEREAS, MPC and TEI desire that MPC pay TEI a performance fee in consideration for its successful efforts in obtaining an offer from MECO on behalf of MPC and TEI and assisting in the negotiation of the MECO PSA;

WHEREAS, the Parties have entered into this Agreement to memorialize the terms of their agreement.

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby covenant and agree as follows:

1.	
Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) will take place at the MPC’s offices or at such other place as agreed upon among the Parties as practicable following fulfillment or waiver of the conditions specified in Section 4 and Section 5 of this Agreement (the “Closing Date”).

Page 1 of 12 - Purchase Agreement

2.	
MPC Sale to TEI of Ward County Leases.

a.	
Sale. Subject to the terms and conditions of this Agreement, on or before the Closing Date, MPC agrees to sell, assign and convey to TEI all of its beneficial right, title and interest, in the Ward County Leases, any wells located on the lands covered by the Ward County Leases, and all other rights associated or incident to MPC’s ownership of the Ward County Leases (the “Ward Assets”).

b.	
Purchase Price. At Closing, TEI agrees to pay MPC Three Million Two Hundred and Fifty Thousand Dollars (the “Purchase Price”) for the Ward Assets in the form of a promissory note as described below.

c.	
Promissory Note. At Closing, TEI shall issue to MPC a promissory note for the Purchase Price memorialized by a loan agreement and note in substantial form as to the agreements contained in Exhibit B; containing the following material terms:

1.	
The principal amount of the loan shall be Three Million Two Hundred and Fifty Thousand Dollars;

2.	
Beginning January 1, 2018, TEI shall pay to MPC monthly installments of the accrued interest of the principal amount;

3.	
Interest shall accrue on the principal amount at a rate of 5% per annum; and

4.	
On December 31, 2020, the entire principal balance, together with all accrued interest, fees or otherwise, shall be due and payable;

d.	
Beneficial Ownership. Unless agreed to otherwise by the Parties in writing, the ownership that TEI shall receive from 2(a) above shall be beneficial ownership only. MPC shall retain record title ownership and shall act as TEI’s agent in selling the Ward Assets as defined herein.

e.	
Assignment. At or before Closing, MPC and TEI shall enter into an assignment, bill of sale and conveyance, of the beneficial ownership in the Ward Assets (the “Ward Assignment”) in substantial form as contained in the form contained in Exhibit C, which is attached hereto and incorporated herein for all purposes. The Parties agree that the Ward Assignment shall not be filed in the Ward County public records unless mutually agreed to in writing.

Page 2 of 12 - Purchase Agreement

f.	
Power of Attorney.

i.	
Grant of Power of Attorney. At or before Closing, TEI hereby grants MPC the right to sell TEI’s beneficial ownership of the Ward Assets to MECO, strictly pursuant to the MECO PSA, doing any and all actions it might do if personally present including, but not limited to the execution, modification and delivery of contracts, deeds, bill of sale, closing statements, notices, certificates and all other documents; the acceptance of the closing funds and the deposit of those funds in TEI’s account as identified, which MPC shall deem necessary, appropriate or expedient for the purpose of closing the sale of the Ward Assets as described herein.

ii.	
Effective Date and Termination. This power of attorney shall become effective on the Closing Date and shall expire on: (a) November 29, 2017; (b) revocation by TEI; or (c) resignation of MPC, whichever event occurs first.

iii.	
Third Party Reliance. Every instrument executed by MPC in relation to the Ward Assets shall be conclusive evidence in favor of every person claiming any right, title or interest under MPC in the Ward Assets, that at the time of delivery of any such instrument, this Agreement (and any amendments) was in full force and effect; that any such instrument was executed in accordance with the terms and conditions of this Agreement, and that MPC was duly authorized and empowered to execute and deliver such instrument.

iv.	
Recording of Agreement. This Agreement shall not be placed on record in the county in which the Leases is situated.

v.	
Sales Proceeds. MPC shall pay or direct any sales proceeds from the sale of the Ward Assets to TEI MPC shall not be liable for any sales proceeds until and unless received.

3.	
Performance Fee. At Closing, the Parties agree to the following terms:

a.	
Performance Fee: As compensation for marketing and selling the Winkler County Leases as a package and receiving the consideration contemplated by the MECO PSA, MPC agrees to pay or cause to be paid to TEI a performance fee of Two Million Seven Hundred Eighty-One Thousand Five Hundred Dollars ($2,781,500) (the “Performance Fee”).

b.	
MPC shall pay TEI the Performance Fee upon MPC receiving the total amount contemplated by the MECO PSA.

Page 3 of 12 - Purchase Agreement

c.	
MPC shall not be liable for paying the Performance Fee unless and until MPC receives such sales proceeds from MECO.

d.	
TEI agrees that in the event that the purchase price for the MECO transaction is reduced pursuant to the MECO PSA, then the Performance Fee shall be proportionately reduced by the same amount.

4.	
Conditions to Closing of MPC. Each obligation of MPC to be performed on the Closing Date shall be subject to the satisfaction of each of the conditions stated in this Section 4, except to the extent that such satisfaction is waived by MPC in writing:

a.	
TEI shall provide a corporate resolution of its Board of Directors which approves the transactions contemplated herein and authorizes the execution, delivery and performance of this Agreement and the documents referred to herein to which it is or is to be a party dated as of the Closing Date.

b.	
No action, suit or proceeding by or before any court or any governmental or regulatory authority shall have been commenced and no investigation by any governmental or regulatory authority shall have been commenced seeking to restrain, prevent or challenge the transactions contemplated hereby or seeking judgments against TEI.

c.	
The closing of the contemplated transactions (the “Transactions”) with MECO in the MECO PSA;

d.	
The closing of the transactions contemplated by the Agreement and Plan of Reorganization dated of even date herewith by and among Warwink Properties, LLC, a Texas limited liability, MPC, TEI, and Torchlight Wolfbone Properties, Inc., a Texas corporation.

5.	
Conditions to Closing of TEI. Each obligation of TEI to be performed on the Closing Date will be subject to the satisfaction of each of the conditions stated in this Section 5, except to the extent that such satisfaction is waived by TEI in writing.

a.	
MPC shall provide a corporate resolution of its Board of Directors, which approves all of the transactions contemplated herein and authorizes the execution, delivery and performance of this Agreement and the documents referred to herein to which it is or is to be a party dated as of the Closing Date.

b.	
No action, suit or proceeding by or before any court or any governmental or regulatory authority will have been commenced and no investigation by any governmental or regulatory authority will have been commenced seeking to restrain, prevent or challenge the transactions contemplated hereby or seeking judgments against MPC.

Page 4 of 12 - Purchase Agreement

c.	
The closing of the contemplated Transactions with MECO in the MECO PSA;

6.	
Miscellaneous.

a.	
No Partnership or Joint Venture. Nothing in this agreement is intended to create and nothing herein or therein shall ever be construed as creating a partnership, joint venture, mining partnership, association or other relationship whereby any party hereto shall ever be held liable for the acts or debts of another. The duties, obligations and liabilities of each of the parties hereto set forth in this agreement shall be several and not joint so that any party shall be liable only for its proportionate share of the duties, obligations and liabilities under the terms of this Agreement.

b.	
Amendment; Waiver. Neither this Agreement nor any provision hereof may be amended, modified or supplemented unless in writing, executed by all the parties hereto. Except as otherwise expressly provided herein, no waiver with respect to this Agreement shall be enforceable unless in writing and signed by the party against whom enforcement is sought. Except as otherwise expressly provided herein, no failure to exercise, delay in exercising, or single or partial exercise of any right, power or remedy by any party, and no course of dealing between or among any of the parties, shall constitute a waiver of, or shall preclude any other or further exercise of, any right, power or remedy.

c.	
Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing and delivered in Person or sent by registered or certified mail (return receipt requested) or nationally recognized overnight delivery service, postage pre-paid, addressed as follows, or to such other address has such party may notify to the other parties in writing:

If to MPC            	  	
Greg McCabe

500 W. Texas, Suite 890

Midland, Texas 79701

Page 5 of 12 - Purchase Agreement

with a copy to:    	  	
Michael J. Dawson

Dawson Parrish, PC

309 W. 7th St, Ste. 915

Fort Worth, Texas 76102

If to TEI	  	
Torchlight Energy, Inc.

Attn: John Brda, President

5700 W. Plano Parkway, Suite 3600

Plano, Texas 75093

with a copy to:	  	
Robert D. Axelrod

Axelrod, Smith & Kirshbaum

5300 Memorial Drive, Suite 1000

Houston, Texas 77007

Jared G. LeBlanc

LeBlanc Law PC

1111 North Loop West, Suite 705

Houston, Texas 77008

Any party may change its address by sending written notice to all Parties to this Agreement.

d.	
Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

e.	
Assignments. This agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This agreement may not be assigned by any party hereto except with the prior written consent of the other party and any such assignment not consented to shall be void and of no force or effect. All assignments, conveyances or any other agreement by any party to this Agreement or their respective successors and permitted assigns transferring any right under this Agreement either express or implied must be made in writing expressly making such transfer of rights conditional and subject to this Agreement.

f.	
Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas without regard to principles of conflict of laws. In any action between or among any of the parties, whether arising out of this Agreement or otherwise, each of the parties irrevocably consents to the exclusive jurisdiction and venue of the federal and state district courts located in Midland County, Texas.

Page 6 of 12 - Purchase Agreement

g.	
Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf’ format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf’ signature page were an original thereof.

h.	
Section Headings. The section and subsection headings in this Agreement are used solely for convenience of reference, do not constitute a part of this Agreement, and shall not affect its interpretation.

i.	
Further Assurances. Each party covenants that at any time, and from time to time, whether before or after the closing date, it will execute such additional instruments and take such actions as may be reasonably be requested by the other parties to confirm or perfect or otherwise to carry out the intent and purposes of this Agreement.

j.	
Attorney Review - Construction. In connection with the negotiation and drafting of this Agreement, the parties represent and warrant to each other that they have had the opportunity to be advised by attorneys of their own choice and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments hereto.

k.	
Parties Bound. All the rights and obligations arising under this Agreement will be binding on the parties’ respective successors, heirs, and assigns.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE.]

Page 7 of 12 - Purchase Agreement

IN WITNESS WHEREOF, the undersigned have executed this Purchase Agreement to become effective as of the date of execution.

MCCABE PETROLEUM CORPORATION
By:	 	
/s/ Greg McCabe, Sr.

Greg McCabe, Sr., President
TORCHLIGHT ENERGY, INC.
By:	 	
/s/ John Brda

John Brda, President

Page 8 of 12 - Purchase Agreement

ACKNOWLEDGEMENTS

STATE OF

COUNTY OF

Before me personally appeared John Brda, President of Torchlight Energy, Inc., to me well known and known to me to be the person described in and who executed the foregoing instrument, and acknowledged to and before me that he executed said instrument for the purposes therein expressed.

WITNESS my hand and official seal in the State and County aforesaid, this day of                     , 2017.

(SEAL)	 		 	      	 	
Notary Public

State of

My Commission Expires:

Page 9 of 12 - Purchase Agreement

EXHIBIT A

LEASES AND LANDS

WARD:

WINKLER:

Page 10 of 12 - Purchase Agreement

EXHIBIT B

NOTE AND LOAN AGREEMENT

Page 11 of 12 - Purchase Agreement

EXHIBIT C

ASSIGNMENT, BILL OF SALE AND CONVEYANCE OF

BENEFICIAL OWNERSHIP

Page 12 of 12 - Purchase Agreement

d302576dex1015.htm  EX-10.15
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EX-10.15
Exhibit 10.15

FIRST AMENDMENT AGREEMENT

This FIRST AMENDMENT AGREEMENT, dated as of September 2, 2022 (this “Amendment”), is entered into among the undersigned with respect to that certain 8% Secured Promissory Note, dated October 1, 2021 (as amended from time to time, the “Secured Note”), made by Next Bridge Hydrocarbons, Inc. (f/k/a Oilco Holdings, Inc.), a Nevada corporation (the “Borrower”), in favor of Meta Materials, Inc., a Nevada corporation (the “Holder”). As used in this Amendment, capitalized terms which are not defined herein shall have the meaning ascribed to such terms in the Secured Note.

W I T N E S S E T H

WHEREAS, the obligations of the Borrower under the Secured Note are secured by (a) the Stock Pledge Agreement dated as of September 30, 2021 (as amended from time to time, the “Pledge Agreement”), made by Gregory McCabe (the “Pledgor”) in favor of the Holder, and (b) the Deed of Trust, Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment of Production, dated as of September 30, 2021 (as amended from time to time, the “Security Agreement”, and together with the Secured Note and the Pledge Agreement, the “Secured Note Documents”), made by Wolfbone Investments, LLC, a Texas limited liability company (“Wolfbone” and, together with the Pledgor, the “Grantors”; the Grantors together with the Company, the “Obligors”), to Travis Vargo, as trustee, for the benefit of the Holder.

WHEREAS, the parties hereto desire to amend the Secured Note as set forth herein and subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Amendments.

(a) The first sentence of Section 3 of the Secured Note is hereby deleted in its entirety and replaced with the following:

“The principal balance of the Drawdowns outstanding hereunder and all accrued and unpaid interest thereon and all other amounts accrued under this Note shall be due and payable in full, in United States Dollars, on the Maturity Date (hereinafter, as defined below). If a Qualified Financing (hereinafter, as defined below) is consummated before March 31, 2023, then the Company shall repay to the Holder the aggregate outstanding principal amount of this Note in equal monthly installments, one such installment due and payable on each of April 30, 2023, May 31, 2023, June 30, 2023, July 31, 2023, August 31, 2023 and the Maturity Date; provided, that the final principal repayment installment of this Note shall be repaid on the Maturity Date and in any event shall be in an amount equal to the total principal amount of this Note outstanding on such date. The “Maturity Date” means March 31, 2023; provided, if the Company or any of its subsidiaries consummates a Qualified Financing before March 31, 2023 and if no Event of Default exists, then the Maturity Date shall be September 30, 2023. “Qualified Financing” means a transaction or series of transactions pursuant to which the Company and/or any of its subsidiaries

issues and sells its equity interests (excluding, for avoidance of doubt, the Spin Out defined below), and/or incurs indebtedness (other than indebtedness owing to the Holder), for aggregate gross proceeds of at least $30,000,000 (excluding all proceeds from the incurrence of any Indebtedness that is converted into such equity interests, or otherwise cancelled in consideration for the issuance of such equity interests) with the principal purpose of raising capital. “Spin Out” means the transaction (or series of transactions) whereby the Holder distributes all of the shares of common stock of the Company to the holders the Series A Special Non-Voting Preferred Stock of the Holder, immediately after which all shares of the Series A Non-Voting Preferred Stock of the Holder are cancelled.”

Section 2. Representations and Warranties. In order to induce the Holder to enter into this Amendment, each Grantor hereby represents and warrants to the Holder that this Amendment has been duly executed and delivered by each Grantor and constitutes a legal, valid and binding obligation of such Grantor, enforceable against such Grantor in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors’ rights and (ii) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

Section 3. Conditions Precedent to Effectiveness. The amendments to the Secured Note as set forth in Section 1 hereto shall be effective upon the Holder’s receipt of the Amendment, properly executed by each of the parties hereto.

Section 4. Miscellaneous.

(a) Effect of Amendments. As of the date hereof, the Secured Note and each other Secured Note Document shall be construed as giving effect to the amendments set forth in Section 1 hereto and all references to the Secured Note in the Secured Note Documents shall be deemed to refer to the Secured Note as expressly amended and modified by this Amendment.

(b) No Other Modification. Except as expressly modified by this Amendment, each Secured Note Document is and shall remain unchanged and in full force and effect, and nothing contained in this Amendment shall, by implication or otherwise, limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Holder or any of the other parties hereto, or shall alter, modify, amend or in any way affect any of the other terms, conditions, obligations, covenants or agreement contained in the Secured Note Documents which are not by the terms of this Amendment being amended, or alter, modify or amend or in any way affect any of the other Secured Note Documents.

(c) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEVADA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAW OF THE STATE OF NEVADA.

(d) Incorporation by Reference. Sections 11 through 20, inclusive, of the Secured Note are hereby incorporated by reference herein, mutatis mutandis.

- 2 -

(e) Secured Note Documents. This Amendment shall be deemed to be a Secured Note Document.

(f) Release. Each Obligor, by signing below, hereby waives and releases the Holder and the Holder’s directors, officers, employees, attorneys and affiliates (other than the Company) from any and all claims, offsets, defenses and counterclaims arising out of the Secured Note Documents which such Obligor has or may have arising prior to the date hereof, such waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto.

(g) Ratification and Reaffirmation. Each Obligor acknowledges and agrees that each Secured Note Document to which it is a party remains in full force and effect and is hereby reaffirmed, ratified and confirmed. Without limiting the foregoing, each Obligor hereby (i) agrees that this Amendment and the transactions contemplated hereby shall not limit or diminish the obligations of such party arising under or pursuant to any Secured Note Document to which it is a party as of the date of this Amendment and (ii) reaffirms all Liens on the collateral which have been granted by such Obligor in favor of the Holder pursuant to any of the applicable Secured Note Documents.

[Signature Pages Follow]

- 3 -

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their duly authorized officers as of the day and year first above written.

COMPANY:
NEXT BRIDGE HYDROCARBONS, INC.
By:	 	
/s/ Ken Rice

Name: Ken Rice
Title: Chief Financial Officer
[Signature Page to First Amendment Agreement]

GRANTORS:
/s/ Gregory McCabe

Name: Gregory McCabe
WOLFBONE INVESTMENTS, LLC,
A Texas limited liability company
By:	 	
/s/ Gregory McCabe

Name: Greg McCabe
Title: Manager
[Signature Page to First Amendment Agreement]

HOLDER:
META MATERIALS, INC.,
A Nevada corporation
By:	 	
/s/ George Palikaras

Name: George Palikaras
Title: President

d302576dex1016.htm  EX-10.16
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EX-10.16
Exhibit 10.16

LOAN AGREEMENT

dated as of

September 2, 2022

among

NEXT BRIDGE HYDROCARBONS, INC.

TORCHLIGHT ENERGY, INC.

TORCHLIGHT HAZEL, LLC

HUDSPETH OIL CORPORATION

HUDSPETH OPERATING, LLC

as Borrowers

and

META MATERIALS, INC.

as Lender

TABLE OF CONTENTS

Page	 
ARTICLE 1 DEFINITIONS

Section 1.01.

Defined Terms	  	 	5	 
Section 1.02.

Terms Generally	  	 	17	 
Section 1.03.

Accounting Terms; GAAP	  	 	18	 
ARTICLE 2 THE LOANS

Section 2.01.

Commitment	  	 	18	 
Section 2.02.

Loans and Borrowings	  	 	18	 
Section 2.03.

Requests for Loans	  	 	19	 
Section 2.04.

Termination and Reduction of Commitments	  	 	19	 
Section 2.05.

Repayment of Loans; Evidence of Debt	  	 	19	 
Section 2.06.

Prepayment of Loans	  	 	19	 
Section 2.07.

Interest	  	 	21	 
Section 2.08.

Withholding of Taxes; Gross-Up	  	 	21	 
Section 2.09.

Payments Generally; Pro Rata Treatment; Sharing of Setoffs	  	 	22	 
Section 2.10.

Continuing Guaranty	  	 	22	 
ARTICLE 3 REPRESENTATIONS AND WARRANTIES

Section 3.01.

Organization; Powers	  	 	24	 
Section 3.02.

Authorization; Enforceability	  	 	25	 
Section 3.03.

Governmental Approvals; No Conflicts	  	 	25	 
Section 3.04.

Financial Condition; No Material Adverse Change	  	 	25	 
Section 3.05.

Properties	  	 	25	 
Section 3.06.

Litigation and Environmental Matters	  	 	25	 
Section 3.07.

Compliance with Laws and Agreements	  	 	26	 
Section 3.08.

Investment Company Status	  	 	26	 
Section 3.09.

Taxes	  	 	26	 
Section 3.10.

ERISA	  	 	26	 
Section 3.11.

Disclosure	  	 	26	 
Section 3.12.

Anti-Corruption Laws and Sanctions	  	 	27	 
Section 3.13.

Plan Assets; Prohibited Transactions	  	 	27	 
Section 3.14.

Margin Regulations	  	 	27	 
Section 3.15.

Solvency	  	 	27	 
ARTICLE 4 CONDITIONS

Section 4.01.

Effective Date	  	 	27	 
Section 4.02.

Each Credit Event	  	 	28	 
ARTICLE 5 AFFIRMATIVE COVENANTS

Section 5.01.

Financial Statements; Ratings Change and Other Information	  	 	29	 
Section 5.02.

Notices of Material Events	  	 	30	 
Section 5.03.

Existence; Conduct of Business	  	 	31	 
Section 5.04.

Payment of Obligations	  	 	31	 
Section 5.05.

Maintenance of Properties; Insurance	  	 	32	 
Section 5.06.

Books and Records; Inspection Rights	  	 	32	 
Section 5.07.

Compliance with Laws	  	 	32	 
Section 5.08.

Use of Proceeds	  	 	32	 
Section 5.09.

Accuracy of Information	  	 	32	 
ARTICLE 6 NEGATIVE COVENANTS

Section 6.01.

Indebtedness	  	 	33	 
Section 6.02.

Liens	  	 	33	 
Section 6.03.

Fundamental Changes	  	 	34	 
Section 6.04.

Dispositions	  	 	34	 
Section 6.05.

Investments, Loans, Advances, Guarantees and Acquisitions	  	 	35	 
Section 6.06.

Swap Agreements	  	 	35	 
Section 6.07.

Restricted Payments	  	 	35	 
Section 6.08.

Transactions with Affiliates	  	 	36	 
Section 6.09.

Restrictive Agreements	  	 	36	 
ARTICLE 7 EVENTS OF DEFAULT

Section 7.01.

Events of Default	  	 	36	 
Section 7.02.

Remedies Upon an Event of Default	  	 	38	 
Section 7.03.

Application of Payments	  	 	39	 
ARTICLE 8 MISCELLANEOUS

Section 8.01.

Notices	  	 	39	 
Section 8.02.

Waivers; Amendments	  	 	40	 
Section 8.03.

Expenses; Limitation of Liability; Indemnity, Etc	  	 	40	 
Section 8.04.

Successors and Assigns	  	 	41	 
Section 8.05.

Survival	  	 	42	 
Section 8.06.

Counterparts; Integration; Effectiveness; Electronic Execution	  	 	43	 
Section 8.07.

Severability	  	 	44	 
Section 8.08.

Right of Setoff	  	 	44	 
Section 8.09.

Governing Law; Jurisdiction; Consent to Service of Process	  	 	44	 
Section 8.10.

WAIVER OF JURY TRIAL	  	 	45	 
Section 8.11.

Headings	  	 	45	 
Section 8.12.

Interest Rate Limitation	  	 	45	 
Section 8.13.

No Fiduciary Duty, etc	  	 	46	 
Section 8.14.

USA PATRIOT Act	  	 	46

SCHEDULES:

Schedule 2.01A – Commitments

Schedule 3.06 – Disclosed Matters

Schedule 6.01 – Existing Indebtedness

Schedule 6.02 – Existing Liens

Schedule 6.09 – Existing Restrictions

Schedule 8.01 – Addresses

LOAN AGREEMENT dated as of September 1, 2022 (this “Agreement”), by and among NEXT BRIDGE HYDROCARBONS, INC., a Nevada corporation (the “Parent Borrower”), TORCHLIGHT ENERGY, INC., a Nevada corporation (“Torchlight Energy”), TORCHLIGHT HAZEL, LLC, a Texas limited liability company (“Hazel”), HUDSPETH OIL CORPORATION, a Texas corporation (“Hudspeth Oil”), HUDSPETH OPERATING, LLC, a Texas limited liability company (“Hudspeth Operating”, and together with Parent Borrower, Torchlight Energy, Hazel and Hudspeth Oil, the “Borrowers”), and META MATERIALS, INC., a Nevada corporation (a “Lender”).

The parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agreement” has the meaning specified in introductory paragraph hereof.

“Ancillary Document” has the meaning assigned to it in Section 9.06(b).

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrowers or any of their Subsidiaries from time to time concerning or relating to bribery or corruption.

“Applicable Law” means any statute or law or any judgment, order, decree, rule, or regulation of any court or Governmental Authority to which a specified Person or property is subject.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), in a form approved by the Lender.

“Availability Period” means the period from and including the Effective Date to but excluding the earlier of December 30, 2022 and the date of termination of the Commitment.

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

“Borrowers” has the meaning set forth in the introductory paragraph hereto.

“Borrowing” means a borrowing of a Loan hereunder.

“Borrowing Request” means a request by a Borrower for a Borrowing in accordance with Section 2.03, which shall be in a form approved by the Lender.

“Business Day” means, any day (other than a Saturday or a Sunday) on which banks are open for business in New York City, Boston, Massachusetts and Canada.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases or financing leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Change in Control” means: (a) before the Spin Out, the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), of Equity Interests representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of any Borrower; or (b) from and after the Spin Out: (1) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), of Equity Interests representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Parent Borrower; (2) occupation of a majority of the seats (other than vacant seats) on the board of directors of any Borrower by Persons who were not (A) directors of such Borrower on the date the Spin Out is consummated or nominated or appointed by the board of directors of such Borrower or (B) appointed by directors so nominated or appointed; (3) the acquisition of direct or indirect Control of the Parent Borrower by any Person or group; (4) the Parent Borrower ceases to own, directly or indirectly, 100% of all Equity Interests of any one or more of Torchlight Energy, Hazel, Hudspeth Oil or Hudspeth Operating; (5) the Parent Borrower ceases to Control each other Borrower; or (6) the sale of all or any material portion of the assets, in the aggregate, of the Parent Borrower and its Subsidiaries; provided, the Spin Out shall not constitute a Change in Control.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commitment” means, with respect to the Lender, the amount set forth on Schedule 2.01A opposite the Lender’s name, or in the Assignment and Assumption, and giving effect to (a) any reduction in such amount from time to time pursuant to Section 2.04(b) and (b) any reduction or increase in such amount from time to time pursuant to assignments by or to the Lender pursuant to Section 8.04.

“Consolidated EBITDA” means, at any date of determination, an amount equal to Consolidated Net Income of the Parent Borrower and its Subsidiaries on a consolidated basis for the most recently completed fiscal year of the Parent Borrower plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges, (ii) the provision for federal, state, local and foreign income taxes payable, (iii) depreciation and amortization expense and (iv) other expenses reducing such Consolidated Net Income which do not represent a cash item in such period or any future period (in each case of or by the Parent Borrower and its Subsidiaries for such fiscal year) and minus (b) the following to the extent included in calculating such Consolidated Net Income: (i) federal, state, local and foreign income tax credits and (ii) all non-cash items increasing Consolidated Net Income (in each case of or by the Parent Borrower and its Subsidiaries for such fiscal year).

“Consolidated Interest Charges” means, for any fiscal year of the Parent Borrower, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, (b) all interest paid or payable with respect to discontinued operations and (c) the portion of rent expense under Capitalized Lease Obligations that is treated as interest in accordance with GAAP, in each case, of or the Parent Borrower and its Subsidiaries on a consolidated basis for the most recently completed fiscal year.

“Consolidated Net Income” means, at any date of determination, the net income (or loss) of the Parent Borrower and its Subsidiaries on a consolidated basis for the most recently completed fiscal year; provided that Consolidated Net Income shall exclude (a) extraordinary gains and extraordinary losses for such fiscal year, (b) the net income of any Subsidiary during such fiscal year to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such income is not permitted by operation of the terms of its constitutive documents or any agreement, instrument or law applicable to such Subsidiary during such fiscal year, except that the Parent Borrower’s equity in any net loss of any such Subsidiary for such fiscal year shall be included in determining Consolidated Net Income, and (c) any income (or loss) for such fiscal year of any Person if such Person is not a Subsidiary, except that Parent Borrower’s equity in the net income of any such Person for such fiscal year shall be included in Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such fiscal year to the Parent Borrower or a Subsidiary as a dividend or other distribution (and in the case of a dividend or other distribution to a Subsidiary, such Subsidiary is not precluded from further distributing such amount to the Parent Borrower as described in clause (b) of this proviso).

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Debtor Relief Laws” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Disclosed Matters” means the actions, suits and proceedings and the environmental matters (if any) disclosed in Schedule 3.06.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (in one transaction or in a series of transactions and whether effected pursuant to a division or otherwise) of any property by any Person (including any sale and leaseback transaction and any issuance of Equity Interests by a Subsidiary of such Person), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

“Dollars”, “dollars” or “$” refers to lawful money of the United States of America.

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 8.02).

“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.

“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to (i) the environment, (ii) preservation or reclamation of natural resources, (iii) the management, release or threatened release of any Hazardous Material or (iv) health and safety matters.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest, but excluding any debt securities convertible into any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrowers, is treated as a single employer under Section 414(b) or (c) of the Code or Section 4001(14) of ERISA or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30 day notice period is waived); (b) the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Borrowers or any of their ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Borrowers or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by any Borrowers or any of their ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal of any Borrowers or any of their ERISA Affiliates from any Plan or Multiemployer Plan; or (g) the receipt by any Borrowers or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Borrowers or any ERISA Affiliate of any notice, concerning the imposition upon any Borrowers or any of their ERISA Affiliates of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Event of Default” has the meaning assigned to such term in Section 7.01.

“Excess Cash Flow” means, for any fiscal year of the Parent Borrower and its Subsidiaries, the excess (if any) of (a) Consolidated EBITDA for such fiscal year over (b) the sum (for such fiscal year) of (i) Consolidated Interest Charges actually paid in cash by the Parent Borrower and its Subsidiaries, (ii) scheduled principal repayments, to the extent actually made, of Existing Loans and the Existing Secured Note on the Maturity Date, (iii) all income taxes actually paid in cash by the Parent Borrower and its Subsidiaries and (iv) capital expenditures actually made by the Parent Borrower and its Subsidiaries in such fiscal year.

“Excluded Issuance” by the Parent Borrower means an issuance and sale of an Equity Interest in the Parent Borrower to its employees, officers, directors or consultants, or an issuance of shares of capital stock of (or other ownership or profit interests in) the Parent Borrower upon the exercise of warrants, options or other rights for the purchase of such capital stock (or other ownership or profit interest), in each case, pursuant to employee stock option plans of the Parent Borrower.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which such Lender acquires such interest in the Loan or Commitment, except to the extent that, pursuant to Section 2.08, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan or Commitment or to such Lender immediately before it changed its lending office, and (c) any withholding Taxes imposed under FATCA.

“Existing Loans” means the term loans made by the Lender to the Borrower in the aggregate principal amount of $5,000,000, as further described in Schedule A hereto.

“Existing Secured Note” means the 8% Secured Promissory Note, dated October 1, 2021, issued by Oilco Holdings, Inc., a Nevada corporation (now known as Next Bridge Hydrocarbons, Inc.), in favor of Lender.

“Existing Security Documents” means, collectively, (a) the Stock Pledge Agreement dated as of September 30, 2021, executed and delivered by Gregory McCabe in favor of the Lender, and (b) the Deed of Trust, Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment of Production, dated as of September 30, 2021, executed and delivered by Wolfbone Investments, LLC, a Texas limited liability company, to Travis Vargo, as trustee, for the benefit of the Lender.

“Extraordinary Receipt” means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including tax refunds, pension plan reversions, proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustments; provided, that an Extraordinary Receipt shall not include cash receipts from proceeds of insurance, condemnation awards (or payments in lieu thereof) or indemnity payments to the extent that such proceeds, awards or payments in respect of loss or damage to equipment, fixed assets or real property are applied (or in respect of which expenditures were previously incurred) to replace or repair the equipment, fixed assets or real property in respect of which such proceeds were received in accordance with the terms of Section 2.06(b)(v).

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of a Borrower.

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

“Guaranty” has the meaning assigned to it in Section 2.10.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

“Hazel” has the meaning set forth in the introductory paragraph hereto.

“Hudspeth Oil” has the meaning set forth in the introductory paragraph hereto.

“Hudspeth Operating” has the meaning set forth in the introductory paragraph hereto.

“Immaterial Subsidiary” means any Subsidiary of the Parent Borrower that (a) individually constitutes or holds less than two and one half percent (2.5%) of the Parent Borrower’s consolidated total assets and generates less than two and one half percent (2.5%) of the Parent Borrower’s consolidated total revenue and (b) when taken together with all then existing Immaterial Subsidiaries, such Subsidiary and such Immaterial Subsidiaries, in the aggregate, would constitute or hold less than five percent (5%) of the Parent Borrower’s consolidated total assets and generate less than five percent (5%) of the Parent Borrower’s consolidated total revenue, in each case of the foregoing clauses as of the last day of, or for, the most recently ended fiscal period for which financial statements were required to have been delivered pursuant to 5.01(a) or (b).

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit, demand guarantees and similar independent undertakings and (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a) hereof, Other Taxes.

“Indemnitee” has the meaning assigned to it in Section 8.03(c).

“IRS” means the United States Internal Revenue Service.

“Leases” shall mean the leases held by any Borrower or its Subsidiaries pertaining to such Borrower’s or such Subsidiary’s interests in any of the following oil and gas projects: the Orogrande Project in Hudspeth County, Texas, the Hazel Project in Sterling, Tom Green, and Irion Counties, Texas, and two wells in Central Oklahoma.

“Lender-Related Person” has the meaning assigned to it in Section 8.03(b).

“Lenders” means the Persons listed on Schedule 2.01A and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption or otherwise, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption or otherwise.

“Liabilities” means any losses, claims (including intraparty claims), demands, damages or liabilities of any kind.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Loan Documents” means this Agreement, including schedules and exhibits hereto, and any agreements entered into in connection herewith by any Loan Party with or in favor of the Lender, including the Note, any amendments, modifications or supplements thereto or waivers thereof, and any other documents prepared in connection with the other Loan Documents, if any.

“Loan Parties” means the Borrowers.

“Loans” means the loans made by the Lender to the Borrowers pursuant to this Agreement.

“Margin Stock” means margin stock within the meaning of Regulations T, U and X, as applicable.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), or condition (financial or otherwise) of the Parent Borrower and its Subsidiaries taken as a whole; (b) a material impairment of the rights and remedies of the Lender under any Loan Document, or of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.

“Material Indebtedness” means Indebtedness (other than the Loans), or obligations in respect of one or more Swap Agreements, of any one or more of any Borrower and its Subsidiaries in an aggregate principal amount exceeding $250,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of any Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.

“Maturity Date” means March 31, 2023; provided, if the Parent Borrower consummates a Qualified Financing on or before March 31, 2023 and if no Default exists, then the Maturity Date shall be October 3, 2023.

“Maximum Lawful Rate” has the meaning assigned to it in Section 8.14.

“Monthly Payment Date” means the last Business Day of each of April 2023, May 2023, June 2023, July 2023 and August 2023, and the Maturity Date.

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Note” means a promissory note made by the Borrowers in favor of the Lender evidencing the Loans made by the Lender, in form and substance satisfactory to the Lender.

“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrowers arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against the Borrowers or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed or allowable claims in such proceeding. Without limiting the foregoing, the Obligations include (a) the obligation to pay principal, interest, charges, expenses, fees, indemnities and all other amounts payable by the Borrowers under any Loan Document and (b) the obligation of the Borrowers to reimburse any amount in respect of any of the foregoing that the Lender, in each case in its sole discretion, may elect to pay or advance on behalf of the Borrowers.

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

“Parent Borrower” has the meaning set forth in the introductory paragraph hereto.

“Participant” has the meaning assigned to such term in Section 8.04(c).

“Participant Register” has the meaning assigned to such term in Section 8.04(c).

“Patriot Act” has the meaning assigned to it in Section 8.16.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Permitted Encumbrances” means:

(a) Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 5.04;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04;

(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;

(d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(e) judgment liens in respect of judgments that do not constitute an Event of Default under Section 7.01(k);

(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of any Borrower or any Subsidiary of a Borrower;

(g) To the extent constituting Liens, the Leases; provided that the Leases do not secure any Indebtedness (other than Indebtedness owing to the Lender) for borrowed money;

(h) Liens in favor of a banking or other financial institution arising as a matter of law or in the ordinary course of business under customary general terms and conditions encumbering deposits or other funds maintained with a financial institution (including the right of set-off) and that are within the general parameters customary in the banking industry or arising pursuant to such banking institution’s general terms and conditions;

(i) Liens on specific items of inventory or other goods (other than fixed or capital assets) and proceeds thereof of any Person securing such Person’s obligations in respect of bankers’ acceptances or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business; and

(j) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business so long as such Liens only cover the related goods;

provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

“Permitted Investments” means:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

(b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;

(c) investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and

(e) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.

“Proceeding” means any claim, litigation, investigation, action, suit, arbitration or administrative, judicial or regulatory action or proceeding in any jurisdiction.

“Qualified Financing” means a transaction or series of transactions pursuant to which the Parent Borrower and/or any of its Subsidiaries issues and sells its Equity Interests (excluding, for avoidance of doubt, the Spin Out), and/or incurs Indebtedness (other than Indebtedness owing to the Lender), for aggregate gross proceeds of at least $30,000,000 (excluding all proceeds from the incurrence of any Indebtedness that is converted into such Equity Interests, or otherwise cancelled in consideration for the issuance of such Equity Interests) with the principal purpose of raising capital.

“Recipient” means the Lender.

“Register” has the meaning assigned to such term in Section 8.04(b).

“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“Responsible Officer” means the president, Financial Officer or other executive officer of a Borrower.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in any Borrower or any Subsidiary of a Borrower, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or any option, warrant or other right to acquire any such Equity Interests.

“S&P” means Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business.

“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of this Agreement, the so—called Donetsk People’s Republic, the so- called Luhansk People’s Republic, the Crimea Region of Ukraine, Cuba, Iran, North Korea and Syria).

“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, (b) any Person operating, organized or resident in a Sanctioned Country, (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b), or (d) any Person otherwise the subject of any Sanctions.

“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State.

“SEC” means the Securities and Exchange Commission of the United States of America.

“Solvent” means, as to any Person as of any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair saleable value of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts, including contingent debts, as they become absolute and matured and (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities, including contingent debts and liabilities, beyond such Person’s ability to pay such debts and liabilities as they mature. The amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Spin Out” means the transaction (or series of transactions) whereby the Lender distributes all of the shares of common stock of the Parent Borrower to the holders of the Series A Non-Voting Preferred Stock of the Lender, immediately after which all shares of the Series A Non-Voting Preferred Stock of the Lender are cancelled.

“Stated Rate” has the meaning assigned to such term in Section 8.12.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled by the parent and/or one or more subsidiaries of the parent.

“Subsidiary” means any subsidiary of the Parent Borrower.

“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Parent Borrower or the Subsidiaries shall be a Swap Agreement.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), value added taxes, or any other goods and services, use or sales taxes, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Torchlight Energy” has the meaning set forth in the introductory paragraph hereto.

“Transactions” means, with respect to any Loan Party, the execution, delivery and performance by such Loan Party of each Loan Document to which it is party, the borrowing of Loans, and the use of the proceeds thereof.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

Section 1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), any reference herein to any Person shall be construed to include such Person’s successors and assigns, the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and

Exhibits and Schedules to, this Agreement, any reference to any law, rule or regulation herein shall, unless otherwise specified, refer to such law, rule or regulation as amended, modified or supplemented from time to time and the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

Section 1.03. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Financial Accounting Standards Board Accounting Standards Codification 825 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower or any Subsidiary at “fair value”, as defined therein and any treatment of Indebtedness under Accounting Standards Codification 470-20 or 2015-03 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.

(a) Notwithstanding anything to the contrary contained in Section 1.04(a) or in the definition of “Capital Lease Obligations,” any change in accounting for leases pursuant to GAAP resulting from the adoption of Financial Accounting Standards Board Accounting Standards Update No. 2016-02, Leases (Topic 842) (“FAS 842”), to the extent such adoption would require treating any lease (or similar arrangement conveying the right to use) as a capital lease where such lease (or similar arrangement) would not have been required to be so treated under GAAP as in effect on December 31, 2015, such lease shall not be considered a capital lease, and all calculations and deliverables under any Loan Document shall be made or delivered, as applicable, in accordance therewith.

ARTICLE 2

THE LOANS

Section 2.01. Commitment. Subject to the terms and conditions set forth herein, the Lender agrees to make Loans to the Borrowers from time to time during the Availability Period in an aggregate principal amount not to exceed the Lender’s Commitment. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed.

Section 2.02. Loans and Borrowings. Each Loan shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof (or, if less, the remaining unused portion of the Commitment).

(a) Notwithstanding any other provision of this Agreement, effective as of the date hereof, each Borrower hereby expressly acknowledges and agrees that the Existing Loans shall constitute Loans hereunder for all purposes of the Loan Documents, and that $5,000,000 of the Commitment shall be deemed to have been utilized hereunder as of the Effective Date.

Section 2.03. Requests for Loans. To request a Loan, the Parent Borrower shall notify the Lender of such request by submitting a Borrowing Request not later than 11:00 a.m., New York City time, at least ten Business Days before the date of the proposed Borrowing. Each such Borrowing Request shall be irrevocable and shall be signed by a Responsible Officer of the Parent Borrower. Each such Borrowing Request shall specify the following information:

(i) the principal amount of the requested Loan;

(ii) the date of such Loan, which shall be a Business Day;

(iii) detailed evidence of how the proceeds of the preceding Loans have been applied by the applicable Borrower(s);

(iv) a detailed description of the use of proceeds of such Loan by the applicable Borrower(s); and

(v) the location and number of the applicable Borrower’s account in the United States to which funds are to be disbursed.

Section 2.04. Termination and Reduction of Commitments. Unless previously terminated, the Commitment shall terminate on the Maturity Date.

(a) The Borrowers may at any time terminate, or from time to time reduce, the Commitment, by irrevocable written notice to the Lender. Any termination or reduction of the Commitment shall be permanent.

Section 2.05. Repayment of Loans; Evidence of Debt. The Borrowers hereby unconditionally promise to pay, jointly and severally, to the Lender the then unpaid principal amount of each Loan on the Maturity Date. If a Qualified Financing is consummated on or before March 31, 2023, then the Borrowers shall repay, jointly and severally, to the Lender the aggregate principal amount of all Loans outstanding in equal monthly installments, one such installment due and payable on each Monthly Payment Date (which amounts shall be reduced as a result of the application of prepayments made pursuant to Section 2.06); provided, that the final principal repayment installment of the Loans shall be repaid on the Maturity Date and in any event shall be in an amount equal to the aggregate principal amount of all Loans outstanding on such date.

(a) The Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to the Lender resulting from each Loan made by the Lender, including the amounts of principal and interest payable and paid to the Lender from time to time hereunder.

(b) The entries made in the accounts maintained pursuant to paragraph (b) of this Section shall be conclusive (absent manifest error) evidence of the existence and amounts of the obligations recorded therein; provided that the failure of the Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of any Borrower to repay the Loans in accordance with the terms of this Agreement.

(c) The Loans made by the Lender shall be evidenced by one or more Notes executed by the Borrowers in an original principal amount equal to the Lender’s Commitment.

Section 2.06. Prepayment of Loans. Optional. The Borrowers shall have the right at any time and from time to time to prepay any Loan in whole or in part, without penalty or premium, subject to prior notice in accordance with Section 2.06(c). Each prepayment of Loans pursuant to this Section 2.06(a) shall be applied ratably to the Loans.

(a) Mandatory Prepayments. From and after the Spin Out:

(i) Within five Business Days after financial statements are required to be delivered pursuant to Section 5.01(a), the Borrowers shall prepay an aggregate principal amount of Loans equal to the excess (if any) of (A) 100% of Excess Cash Flow for the fiscal year covered by such financial statements over (B) $10,000,000 (such prepayments to be applied as set forth in clause (vi) below).

(ii) If any Loan Party or any of its Subsidiaries Disposes of any property (other than any Disposition of any property permitted by Section 6.04) which results in the realization by such Person of net cash proceeds, the Borrowers shall prepay an aggregate principal amount of Loans equal to 100% of such net cash proceeds immediately upon receipt thereof by such Person (such prepayments to be applied as set forth in clause (vi) below);

(iii) Upon the sale or issuance by any Loan Party or any of its Subsidiaries of any of its Equity Interests (other than a Qualified Financing, any Excluded Issuances and any non-cash sales or issuances of Equity Interests from one Loan Party to another Loan Party), the Borrowers shall prepay an aggregate principal amount of Loans equal to 100% of all net cash proceeds received therefrom immediately upon receipt thereof by such Loan Party or such Subsidiary (such prepayments to be applied as set forth in clause (vi) below).

(iv) Upon the incurrence or issuance by any Loan Party or any of its Subsidiaries of any Indebtedness (other than Indebtedness expressly permitted to be incurred or issued pursuant to Section 6.01), the Borrowers shall prepay an aggregate principal amount of Loans equal to 100% of all net cash proceeds received therefrom immediately upon receipt thereof by such Loan Party or such Subsidiary (such prepayments to be applied as set forth in clause (vi) below).

(v) Upon any Extraordinary Receipt received by or paid to or for the account of any Loan Party or any of its Subsidiaries, and not otherwise included in clause (ii), (iii) or (iv) of this Section 2.06(b), the Borrowers shall prepay an aggregate principal amount of Loans equal to 100% of all net cash proceeds received therefrom immediately upon receipt thereof by such Loan Party or such Subsidiary (such prepayments to be applied as set forth in clause (vi) below); provided, that with respect to any proceeds of insurance or condemnation awards (or payments in lieu thereof), at the election of the Borrowers (as notified by the Parent Borrower to the Lender on or prior to the date of receipt of such insurance proceeds or condemnation awards), and so long as no Default shall have occurred and be continuing, the Borrowers or such Subsidiary may apply within 30 days after the receipt of such cash proceeds to replace or repair the equipment, fixed assets or real property in respect of which such cash proceeds were received; and provided, further, that any cash proceeds not so applied shall be immediately applied to the prepayment of the Loans as set forth in this Section 2.06(b)(v).

(vi) Each prepayment of Loans pursuant to the foregoing provisions of this Section 2.06(b) shall be applied ratably to the Loans.

(b) The Borrowers shall notify the Lender by telephone (confirmed by telecopy or electronic mail) of any prepayment hereunder on or before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Loan or portion thereof to be prepaid. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.07.

Section 2.07. Interest. The Loans shall bear interest at a rate equal to eight percent (8%) per annum.

(a) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by any Borrower or any other Loan Party hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to twelve percent (12%) per annum. While any Event of Default exists, the Borrowers shall pay interest on the principal amount of all outstanding Obligations hereunder at a fixed interest rate per annum at all times equal to twelve percent (12%) per annum to the fullest extent permitted by applicable laws.

(b) Accrued interest on each Loan shall be payable in arrears on the Maturity Date for such Loan, on the date of repayment of principal of such Loan on each Monthly Payment Date pursuant to Section 2.05(a), on the date of any prepayment (in whole or in part) of such Loan, and upon termination of the Commitment; provided that interest accrued pursuant to paragraph (b) of this Section shall be payable on demand, and in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment.

(c) Interest shall be computed on the basis of a year of 360 days, and interest shall be payable for the actual number of days elapsed (including the first day but excluding the last day). All interest hereunder on any Loan shall be computed on a daily basis based upon the outstanding principal amount of such Loan as of the applicable date of determination.

Section 2.08. Withholding of Taxes; Gross-Up.

(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable withholding agent) requires the deduction or withholding of any Tax from any such payment by a withholding agent, then the applicable withholding agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(b) Payment of Other Taxes by the Borrowers. The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Lender timely reimburse it for, Other Taxes.

(c) Evidence of Payments. As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section, at Lender’s request, such Loan Party shall deliver to the Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.

(d) Indemnification by the Borrowers. The Borrowers shall jointly and severally indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Parent Borrower by the Lender shall be conclusive absent manifest error.

(e) Survival. Each party’s obligations under this Section shall survive the resignation or replacement of the Lender or any assignment of rights by, or the replacement of, the Lender, the termination of the Commitment and the repayment, satisfaction or discharge of all obligations under any Loan Document.

Section 2.09. Payments Generally; Pro Rata Treatment; Sharing of Setoffs. The Borrowers shall make each payment or prepayment required to be made by any Borrower hereunder (whether of principal, interest, fees or otherwise) in Dollars prior to 12:00 noon, New York City time, on the date when due or the date fixed for any prepayment hereunder, in immediately available funds, without setoff, recoupment or counterclaim. Any amounts received after such time on any date may, in the discretion of the Lender, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Lender at its offices set forth in Schedule 8.01, except that payments pursuant to Section 8.03 shall be made directly to the Persons entitled thereto. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars.

(a) If at any time insufficient funds are received by and available to the Lender to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and second, towards payment of principal then due hereunder.

Section 2.10. Continuing Guaranty.

(a) Guaranty. Each Borrower hereby absolutely and unconditionally guarantees (the “Guaranty”), as a guaranty of payment and performance and not merely as a guaranty of collection, prompt payment when due, whether at stated maturity, by required prepayment, upon acceleration, demand or otherwise, and at all times thereafter, of any and all of the Obligations, whether for principal, interest, premiums, fees, indemnities, damages, costs, expenses or otherwise, of each other Borrower to the Lender, and whether arising hereunder or under any other Loan Document (including all renewals, extensions, amendments, refinancings and other modifications thereof and all costs, attorneys’ fees and expenses incurred by the Lender in connection with the collection or enforcement thereof). The Lender’s books and records showing the amount of the Obligations shall be admissible in evidence in any action or proceeding, and shall be binding upon each Borrower, and conclusive for the purpose of establishing the amount of the Obligations. This Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations or any instrument or agreement evidencing any Obligations, or by the existence, validity, enforceability, perfection, non-perfection or extent of any collateral therefor, or by any fact or circumstance relating to the Obligations which might otherwise constitute a defense to the obligations of any Borrower under this Guaranty, and each Borrower hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to any or all of the foregoing.

(b) Rights of Lender. Related to Borrower’s obligations under the Guaranty, each Borrower consents and agrees that the Lender may, at any time and from time to time, without notice or demand, and without affecting the enforceability or continuing effectiveness hereof: (a) amend, extend, renew, compromise, discharge, accelerate or otherwise change the time for payment or the terms of the Obligations or any part thereof; (b) take, hold, exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any security for the payment of this Guaranty or any Obligations; (c) apply such security and direct the order or manner of sale thereof as the Lender in its sole discretion may determine; and (d) release or substitute one or more of any endorsers or other guarantors of any of the Obligations. Without limiting the generality of the foregoing, each Borrower consents to the taking of, or failure to take, any action which might in any manner or to any extent vary the risks of such Borrower under this Guaranty or which, but for this provision, might operate as a discharge of such Borrower.

(c) Certain Waivers. Each Borrower waives (a) any defense arising by reason of any disability or other defense of the other Borrowers or any other guarantor, or the cessation from any cause whatsoever (including any act or omission of Lender) of the liability of any other Borrower; (b) any defense based on any claim that such Borrower’s obligations exceed or are more burdensome than those of the other Borrowers; (c) the benefit of any statute of limitations affecting such Borrower’s liability hereunder; (d) any right to proceed against any other Borrower, proceed against or exhaust any guarantee or security for the Obligations, or pursue any other remedy in the power of Lender whatsoever; (e) any benefit of and any right to participate in any security now or hereafter held by Lender; and (f) to the fullest extent permitted by law, any and all other defenses or benefits that may be derived from or afforded by applicable law limiting the liability of or exonerating guarantors or sureties. Each Borrower expressly waives all setoffs and counterclaims and all presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Obligations, and all notices of acceptance of this Guaranty or of the existence, creation or incurrence of new or additional Obligations, including but not limited to the benefits of Chapter 34 of the Texas Business and Commerce Code, §17.01 of the Texas Civil Practice and Remedies Code, and Rule 31 of the Texas Rules of Civil Procedure, or any similar statute.

(d) Obligations Independent. The obligations of each Borrower hereunder are those of primary obligor, and not merely as surety, and are independent of the Obligations and the obligations of any other guarantor, and a separate action may be brought against such Borrower to enforce this Guaranty whether or not any other Borrower or any other Person is joined as a party.

(e) Subrogation. No Borrower shall exercise any right of subrogation, contribution, indemnity, reimbursement or similar rights with respect to any payments it makes under this Guaranty until all of the Obligations and any amounts payable under this Guaranty have been indefeasibly paid and performed in full in cash and the Commitment is terminated. If any amounts are paid to any Borrower in violation of the foregoing limitation, then such amounts shall be held in trust for the benefit of Lender and shall forthwith be paid to Lender to reduce the amount of the Obligations, whether matured or unmatured.

(f) Termination; Reinstatement. This Guaranty is a continuing and irrevocable guaranty of all Obligations now or hereafter existing and shall remain in full force and effect until all Obligations and any other amounts payable under this Guaranty are indefeasibly paid in full in cash and the Commitment with respect to the Obligations is terminated. Notwithstanding the foregoing, this Guaranty shall continue in full force and effect or be revived, as the case may be, if any payment by or on behalf of any Borrower is made, or Lender exercises its right of setoff, in respect of the Obligations and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Laws or otherwise, all as if such payment had not been made or such setoff had not occurred and whether or not Lender is in possession of or have released this Guaranty and regardless of any prior revocation, rescission, termination or reduction. The obligations of each Borrower under this paragraph shall survive termination of this Guaranty.

(g) Subordination. Each Borrower hereby subordinates the payment of all obligations and indebtedness of the other Borrowers owing to such Borrower, whether now existing or hereafter arising, including but not limited to any obligation of any other Borrower to such Borrower as subrogee of the Lender or resulting from such Borrower’s performance under this Guaranty, to the indefeasible payment in full in cash of all Obligations. If the Lender so requests, any such obligation or indebtedness of any other Borrower to such Borrower shall be enforced and performance received by such Borrower as trustee for the Lender and the proceeds thereof shall be paid over to the Lender on account of the Obligations, but without reducing or affecting in any manner the liability of such Borrower under this Guaranty.

(h) Stay of Acceleration. If acceleration of the time for payment of any of the Obligations is stayed, in connection with any case commenced by or against any Borrower under any Debtor Relief Laws, or otherwise, all such amounts shall nonetheless be payable by each Borrower immediately upon demand by the Lender.

(i) Condition of Borrowers. Each Borrower acknowledges and agrees that it has the sole responsibility for, and has adequate means of, obtaining from the other Borrowers and any other guarantor such information concerning the financial condition, business and operations of the other Borrowers and any such other guarantor as such Borrower requires, and that Lender does not have any duty, and such Borrower is not relying on the Lender at any time, to disclose to such Borrower any information relating to the business, operations or financial condition of the other Borrowers or any other guarantor (Parent Borrower waiving any duty on the part of the Lender to disclose such information and any defense relating to the failure to provide the same).

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

Each Borrower represents and warrants to the Lender that:

Section 3.01. Organization; Powers. Each of such Borrower and its Subsidiaries is duly organized or formed, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

Section 3.02. Authorization; Enforceability. The Transactions are within such Borrower’s corporate or other organizational powers and have been duly authorized by all necessary corporate or other organizational and, if required, stockholder action. This Agreement has been duly executed and delivered by such Borrower and constitutes a legal, valid and binding obligation of such Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

Section 3.03. Governmental Approvals; No Conflicts. The Transactions do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of such Borrower or any of its Subsidiaries or any order of any Governmental Authority, will not violate or result in a default under any indenture, agreement or other instrument binding upon such Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by such Borrower or any of its Subsidiaries, and will not result in the creation or imposition of, or the requirement to create, any Lien on any asset of such Borrower or any of its Subsidiaries.

Section 3.04. Financial Condition; No Material Adverse Change. The Parent Borrower has heretofore furnished to the Lender the consolidated and consolidating balance sheet and statements of income, stockholders equity and cash flows for the Parent Borrower and its Subsidiaries as of and for the fiscal year ended December 31, 2021, reported on by BF Borgers CPA, independent public accountants, and as of and for the fiscal quarter ended June 30, 2022, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Parent Borrower and its Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.

(a) Since June 30, 2022, there has been no a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), or condition (financial or otherwise) of the Parent Borrower and its Subsidiaries taken as a whole.

Section 3.05. Properties. Each Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.

(a) Each Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, trade names, copyrights, patents and other intellectual property material to its business, and the use thereof by such Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 3.06. Litigation and Environmental Matters. There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of such Borrower, threatened against or affecting any Borrower or any of its Subsidiaries as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or that involve the Loan Documents or the Transactions.

(a) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, no Borrower nor any of its Subsidiaries has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, has become subject to any Environmental Liability, has received notice of any claim with respect to any Environmental Liability or knows of any basis for any Environmental Liability.

(b) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

Section 3.07. Compliance with Laws and Agreements. Each Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.

Section 3.08. Investment Company Status. Neither Borrower nor any of its Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

Section 3.09. Taxes. Each Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except Taxes that are being contested in good faith by appropriate proceedings and for which such Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves and to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

Section 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $5000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $5000 the fair market value of the assets of all such underfunded Plans.

Section 3.11. Disclosure. Each Borrower has disclosed to the Lender all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of such Borrower or any Subsidiary to the Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, such Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

Section 3.12. Anti-Corruption Laws and Sanctions. Such Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by such Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and such Borrower, its Subsidiaries and their respective officers and directors and to the knowledge of such Borrower its employees and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of such Borrower, any Subsidiary, any of their respective directors or officers or employees, or to the knowledge of such Borrower, any agent of such Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Loan, use of proceeds or other Transaction will violate any Anti-Corruption Law or applicable Sanctions.

Section 3.13. Plan Assets; Prohibited Transactions. None of such Borrower or any of its Subsidiaries is an entity deemed to hold “plan assets” (within the meaning of the Plan Asset Regulations), and neither the execution, delivery nor performance of the transactions contemplated under this Agreement, including the making of any Loan hereunder, will give rise to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

Section 3.14. Margin Regulations. Such Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying Margin Stock, or extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any Loan hereunder will be used to buy or carry any Margin Stock. Following the application there has been no a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), or condition (financial or otherwise) of the Parent Borrower and its Subsidiaries taken as a whole of the proceeds of each Loan, not more than 25% of the value of the assets (either of the Parent Borrower only or of the Parent Borrower and its Subsidiaries on a consolidated basis) will be Margin Stock.

Section 3.15. Solvency. Such Borrower and its Subsidiaries taken as a whole are Solvent.

ARTICLE 4

CONDITIONS

Section 4.01. Effective Date. The obligations of the Lender to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied in the Lender’s sole discretion (or waived in writing in the Lender’s sole discretion):

(a) The Lender (or its counsel) shall have received a counterpart of this Agreement and each other Loan Document, duly executed and delivered by each party hereto and thereto.

(b) The Lender shall have received such documents and certificates as the Lender or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating to the Loan Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to the Lender and its counsel.

(c) The Lender shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of each Loan Party, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02.

(d) The Lender shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out of pocket expenses required to be reimbursed or paid by the Borrowers hereunder.

(e) The Lender shall have received evidence satisfactory to the Lender that the Borrowers have used all of the proceeds of the Existing Loans to pay for general and administrative expenses, payments for third party advisors, attorneys, engineers, and accountants, and operating and drilling expenses in the ordinary course of the Borrowers’ business.

(f) The Lender shall have received an amendment to the Existing Secured Note and a ratification of the related Existing Security Documents, each duly executed by the parties thereto, and each in form and substance satisfactory to the Lender, pursuant to which the maturity date of the Existing Secured Note is extended to March 31, 2023 (which maturity date may be further extended to September 30, 2023 if a Qualified Financing is consummated on or before March 31, 2023, subject to six-month amortization of principal of the Existing Secured Note on each Monthly Payment Date).

(g) The Lender shall have received such other documents as the Lender may reasonably request.

The Lender shall notify the Parent Borrower of the Effective Date, and such notice shall be conclusive and binding.

Section 4.02. Each Credit Event. The obligation of the Lender to make a Loan on the occasion of any Borrowing of a Loan, is subject to the satisfaction of the following conditions:

(a) The representations and warranties of each Loan Party set forth in each Loan Document shall be true and correct in all material respects on and as of the date of such Loan.

(b) At the time of and immediately after giving effect to such Loan, no Default shall have occurred and be continuing.

(c) The Lender shall have received evidence satisfactory to the Lender that all of the proceeds of any and all preceding Loans have been used in full and only in strict compliance with Section 5.08, and that the proceeds of the requested Loan shall be used only in strict compliance with Section 5.08.

(d) In the Lender’s sole judgment, there shall not have been a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), or condition (financial or otherwise) of the Parent Borrower and its Subsidiaries taken as a whole.

(e) The Lender shall have received a satisfactory Borrowing Request in accordance with Section 2.03.

Each Borrowing of a Loan shall be deemed to constitute a representation and warranty by each Borrower on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section.

ARTICLE 5

AFFIRMATIVE COVENANTS

Until the Commitment has expired or been terminated and all principal of, and interest on, each Loan and all fees payable hereunder and all other outstanding Obligations shall have been paid in full in cash, each Borrower covenants and agrees with the Lender that, from and after the Effective Date:

Section 5.01. Financial Statements; Ratings Change and Other Information. The Borrowers will furnish to the Lender:

(a) within 90 days after the end of each fiscal year of the Parent Borrower (commencing with the fiscal year ended December 31, 2022), its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows of the Parent Borrower and its consolidated Subsidiaries as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by BF Borgers CPA or other independent public accountants of recognized national standing (without a “going concern” or like qualification commentary or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Parent Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

(b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Parent Borrower (commencing with the fiscal quarter ended September 30, 2022), its consolidated and consolidating balance sheets and related statements of operations, stockholders’ equity and cash flows of the Parent Borrower and its Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures as of the end of and for the corresponding period or periods of the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Parent Borrower and its Subsidiaries on a consolidated and consolidating basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

(c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Parent Borrower certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, setting forth a reasonably detailed operations report and summary, including without limitation with respect to any drilling operations and results and any cash flows from the Hazel project in Texas, and stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines);

(e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Parent Borrower or any Subsidiary with the SEC or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by any Borrower to its shareholders generally, as the case may be;

(f) promptly after receipt thereof by any Borrower or any Subsidiary, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by the SEC or such other agency regarding financial or other operational results of any Borrower or any Subsidiary thereof;

(g) promptly following any request therefor, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of any Borrower by independent accountants in connection with the accounts or books of any Borrower or any Subsidiary, or any audit of any of them as the Lender may request; and

(h) promptly following any request therefor, (x) such other information regarding the operations, business affairs and financial condition of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as the Lender may reasonably request and (y) information and documentation reasonably requested by the Lender for purposes of compliance with applicable “know your customer” and anti-money laundering rules and regulations.

Documents required to be delivered pursuant to Section 5.01(a), (b) or (e) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and, if so delivered, shall be deemed to have been delivered on the date (i) on which such materials are publicly available as posted on the Electronic Data Gathering, Analysis and Retrieval system (EDGAR); or (ii) on which such documents are posted on the Parent Borrower’s behalf on an Internet or intranet website, if any, to which the Lender has access (whether a commercial, third-party website or otherwise); provided that: (A) upon written request by the Lender to the Parent Borrower, the Parent Borrower shall deliver paper copies of such documents to the Lender until a written request to cease delivering paper copies is given by the Lender and (B) the Parent Borrower shall notify the Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Lender by electronic mail electronic versions (i.e., soft copies) of such documents. The Lender shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrowers with any such request by the Lender for delivery.

Section 5.02. Notices of Material Events. The Borrowers will furnish to the Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any Proceeding by or before any arbitrator or Governmental Authority against or affecting any Borrower or any Affiliate thereof, including pursuant to any applicable Environmental Laws, that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of any Borrower and its Subsidiaries in an aggregate amount exceeding $25,000;

(d) notice of any action arising under any Environmental Law or of any noncompliance by any Borrower or any Subsidiary with any Environmental Law or any permit, approval, license or other authorization required thereunder that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

(e) any material change in accounting or financial reporting practices by any Borrower or any Subsidiary;

(f) any change in the credit ratings from a credit rating agency, or the placement by a credit rating agency of any Borrower (or, after the Spin Out, any parent entity of the Parent Borrower) on a “CreditWatch” or “WatchList” or any similar list, in each case with negative implications, or the cessation by a credit rating agency of, or its intent to cease, rating any Borrower’s debt;

(g) notice of (i) any default, event of default, termination, suspension, rescission, force majeure event or material breach, in each case, of or under any Lease, and (ii) any event or condition which could reasonably be expected to result in a default, event of default, termination, suspension, rescission or material breach of or under any Lease; and

(h) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section (i) shall be in writing, and (ii) shall be accompanied by a statement of a Financial Officer or other executive officer of the Parent Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

Section 5.03. Existence; Conduct of Business. Such Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03.

Section 5.04. Payment of Obligations. Such Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where the validity or amount thereof is being contested in good faith by appropriate proceedings, such Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

Section 5.05. Maintenance of Properties; Insurance. Such Borrower will, and will cause each of its Subsidiaries to, keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.

Section 5.06. Books and Records; Inspection Rights. Such Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Such Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Lender, upon at least 3 Business Days’ notice, to visit and inspect its properties, to examine and make extracts from its books and records, to discuss its affairs, finances and condition with its officers and independent accountants (and hereby authorizes the Lender to contact its independent accountants directly) and to provide contact information for each bank where such Borrower and its Subsidiaries have a depository and/or securities account and each such Loan Party hereby authorizes the Lender to contact the bank(s) in order to request bank statements and/or balances, all at such reasonable times during normal business hours and as often as reasonably requested.

Section 5.07. Compliance with Laws. Such Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Such Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by such Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

Section 5.08. Use of Proceeds. The proceeds of the Loans (including the Existing Loans) will be used only for general and administrative expenses, working capital, payments for third party advisors, attorneys, engineers, and accountants, and operating and drilling expenses in the ordinary course of the Borrowers’ business. The proceeds of any Qualified Financing will be used solely (i) to pay for general and administrative expenses, payments for third party advisors, attorneys, engineers, and accountants, and operating and drilling expenses in the ordinary course of the Borrowers’ business, and transaction expenses related to such Qualified Financing, and (ii) to repay and/or prepay the Obligations. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the regulations of the Federal Reserve Board, including Regulations T, U and X. Such Borrower will not request any Loan, and such Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Loan in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, except to the extent permitted for a Person required to comply with Sanctions, or in any manner that would result in the violation of any Sanctions applicable to any party hereto.

Section 5.09. Accuracy of Information. Such Borrower will ensure that any information, including financial statements or other documents, furnished to the Lender in connection with this Agreement or any amendment or modification hereof or waiver hereunder contains no material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and the furnishing of such information shall be deemed to be a representation and warranty by such Borrower on the date thereof as to the matters specified in this Section.

ARTICLE 6

NEGATIVE COVENANTS

Section 6.01. Indebtedness. The Borrowers will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except:

(a) Indebtedness created hereunder;

(b) Indebtedness existing on the date hereof and set forth in Schedule 6.01, but not any extensions, renewals or replacements of any such Indebtedness;

(c) Indebtedness of any Loan Party to another Loan Party, so long as such Indebtedness (1) is unsecured and has a maturity date that is after December 31, 2023 and (2) are expressly subordinated to the Obligations and all other Indebtedness of the Loan Parties payable to the Lender pursuant to a subordination agreement in form and substance satisfactory to the Lender;

(d) Guarantees by any Loan Party of Indebtedness of any other Loan Party, so long as such Guarantees (1) are unsecured and (2) are expressly subordinated to the Obligations and all other Indebtedness of the Loan Parties payable to the Lender pursuant to a subordination agreement in form and substance satisfactory to the Lender;

(e) Indebtedness of any Loan Party incurred to finance commitments related to drilling (including drilling preparation and completion expenses), the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that the aggregate principal amount of Indebtedness permitted by this clause (e) shall not exceed $500,000 at any time outstanding; and

(f) Indebtedness constituting a Qualified Financing, so long as the proceeds of such Qualified Financing are used solely (i) to pay for general and administrative expenses, payments for third party advisors, attorneys, engineers, and accountants, and operating, drilling and completion expenses in the ordinary course of the Borrowers’ business operating and drilling expenses in the ordinary course of the Borrowers’ business, and transaction expenses related to such Qualified Financing, and (ii) to repay and/or prepay the Obligations pursuant to this Agreement.

Section 6.02. Liens. The Borrowers will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a) Permitted Encumbrances;

(b) any Lien on any property or asset of a Loan Party existing on the date hereof and set forth in Schedule 6.02; provided that such Lien shall not apply to any other property or asset of any Loan Party or any Subsidiary and such Lien shall secure only those obligations which it secures on the date hereof; and

(c) Liens on fixed or capital assets acquired, constructed or improved by any Loan Party; provided that such security interests secure Indebtedness permitted by clause (e) of Section 6.01, such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of any Loan Party or any Subsidiary; and

(d) Liens securing Indebtedness permitted under Section 6.01(f).

Section 6.03. Fundamental Changes. The Borrowers will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or otherwise Dispose of all or any substantial part of its assets, or all or substantially all of the Equity Interests of any of their respective Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, (i) if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing, any Subsidiary may merge into the Parent Borrower in a transaction in which the Parent Borrower is the surviving corporation; provided that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.05, (ii) Borrowers may consummate the Spin Out and (iii) a Borrower may Dispose of an Immaterial Subsidiary.

(a) The Borrowers will not, and will not permit any of its Subsidiaries to, engage in any business other than businesses of the type conducted by the Parent Borrower and its Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto.

(b) The Borrowers will not permit their fiscal years to end on a day other than December 31 or change the Borrowers’ method of determining its fiscal quarters.

Section 6.04. Dispositions. The Borrowers will not, and will not permit any Subsidiary to, make any Disposition, except:

(a) Dispositions of obsolete or worn out property in the ordinary course of business;

(b) Dispositions of inventory and Permitted Investments in the ordinary course of business;

(c) Dispositions of equipment or real property to the extent that such property is exchanged for credit against the purchase price of similar replacement property or the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property;

(d) Dispositions of property by any Subsidiary of the Parent Borrower to a Borrower;

(e) Dispositions permitted by Section 6.03;

(f) Dispositions of intellectual property rights that are no longer used or useful in the business of the Parent Borrower and its Subsidiaries; and

(g) Restricted Payments permitted by Section 6.07 and investments permitted by Section 6.05;

provided, for avoidance of doubt, the Borrowers will not, and will not permit any Subsidiary to, Dispose of any Lease without the prior written consent of Lender.

Section 6.05. Investments, Loans, Advances, Guarantees and Acquisitions. The Borrowers will not, and will not permit any of their Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:

(a) Permitted Investments;

(b) investments by a Borrower existing on the date hereof in the capital stock of its Subsidiaries;

(c) intercompany loans or advances made by a Loan Party to another Loan Party, so long as such intercompany loans or advances (1) are unsecured and have a maturity date that is after December 31, 2023 and (2) are expressly subordinated to the Obligations and all other Indebtedness of the Loan Parties payable to the Lender pursuant to a subordination agreement in form and substance satisfactory to the Lender;

(d) Guarantees constituting Indebtedness permitted by Section 6.01(d); and

(e) For avoidance of any doubt, the Spin Out.

Section 6.06. Swap Agreements. The Borrowers will not, and will not permit any of their Subsidiaries to, enter into any Swap Agreement; provided, with the prior written consent of the Lender (such consent not to be unreasonably withheld), Borrowers may enter into a Swap Agreement in connection with a Qualified Financing.

Section 6.07. Restricted Payments. The Borrowers will not, and will not permit any of their Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except the Parent Borrower may declare and pay dividends with respect to its Equity Interests payable solely in additional shares of its common stock, each Subsidiary may make Restricted Payments to the Parent Borrower and to any Subsidiaries of the Parent Borrower that are Borrowers, before the Spin Out, the Borrowers may make Restricted Payments to the Lender, (d) the Parent Borrower may make Restricted Payments pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Parent Borrower and its Subsidiaries, (e) the Parent Borrower may pay cash in lieu of fractional shares and (f) the Borrowers may consummate the Spin Out.

Section 6.08. Transactions with Affiliates. The Borrowers will not, and will not permit any of their Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except in the ordinary course of business at prices and on terms and conditions not less favorable to a Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, transactions between or among the Borrowers and their wholly owned Subsidiaries not involving any other Affiliate, any Restricted Payment permitted by Section 6.07 and (d) the Spin Out.

Section 6.09. Restrictive Agreements. The Borrowers will not, and will not permit any of their Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon the ability of any Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrowers or any other Subsidiary or to Guarantee Indebtedness of the Borrowers or any other Subsidiary; provided that the foregoing shall not apply to restrictions and conditions imposed by law or by the Loan Documents, the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.09 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale; provided that such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness, clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof, (vi) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the Spin Out, and (vii) solely with and to the extent (if any) of the prior written consent of the Lender in the Lender’s reasonable discretion (it being understood and agreed that it would be reasonable for the Lender to withhold consent if the Lender’s board of directors does not approve, or if any Indebtedness that any Borrower or any Affiliate thereof owes to the Lender may be subordinated or structurally subordinated, or if a Default exists or could reasonably be expected to occur), clause (b) of the foregoing shall not apply to a Qualified Financing.

ARTICLE 7

EVENTS OF DEFAULT

Section 7.01. Events of Default. If any of the following events (“Events of Default”) shall occur:

(a) any Borrower shall fail to pay any principal of, or interest on, any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b) any Borrower shall fail to pay any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under any Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days;

(c) any representation or warranty made or deemed made by or on behalf of any Loan Party or any Subsidiary in or in connection with any Loan Document, or any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document, or any amendment or modification hereof or thereof or waiver hereunder or thereunder, shall prove to have been incorrect when made or deemed made;

(d) any Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to a Borrower’s existence), 5.04, or 5.08 or in Article 6;

(e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article) or any other Loan Document, and such failure shall continue unremedied for a period of thirty (30) days;

(f) any Loan Party or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable;

(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking liquidation, reorganization or other relief in respect of any Loan Party or any Subsidiary or its debts, or of a substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 45 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i) Any Loan Party or any Subsidiary shall voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, file an answer admitting the material allegations of a petition filed against it in any such proceeding, make a general assignment for the benefit of creditors or take any action for the purpose of effecting any of the foregoing;

(j) Any Loan Party or any Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(k) one or more judgments for the payment of money in an aggregate amount in excess of $50,000 shall be rendered against any Loan Party, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of any Loan Party or any Subsidiary to enforce any such judgment;

(l) an ERISA Event shall have occurred that, in the opinion of the Lender, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

(m) a Change in Control shall occur;

(n) a Material Adverse Effect shall occur; or

(o) any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in writing the validity or enforceability of any provision of any Loan Document; or any Loan Party denies in writing that it has any or further liability or obligation under any Loan Document, or purports in writing to revoke, terminate or rescind any Loan Document;

(p) any Lease shall terminate, and such termination could reasonably be expected to have a Material Adverse Effect.

Section 7.02. Remedies Upon an Event of Default. If an Event of Default occurs (other than an event with respect to any Loan Party described in Sections 7.01(h) or 7.01(i)), and at any time thereafter during the continuance of such Event of Default, the Lender may, by notice to the Borrower, take any or all of the following actions, at the same or different times:

(a) terminate the Commitment, and thereupon the Commitment shall terminate immediately;

(b) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder and under any other Loan Document, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and

If an Event of Default described in Sections 7.01(h) or 7.01(i) occurs with respect to any Loan Party, the Commitment shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder and under any other Loan Document, and all other Obligations, shall automatically become due and payable, in each case, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers.

Section 7.03. Application of Payments. Notwithstanding anything herein to the contrary, following the occurrence and during the continuance of an Event of Default:

(a) all payments received on account of the Obligations shall, be applied by the Lender as follows:

(i) first, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts payable to the Lender (including fees and disbursements and other charges of counsel to the Lender payable under Section 8.03);

(ii) second, to payment of that portion of the Obligations constituting fees, expenses, indemnities and other amounts (other than principal and interest) payable to the Lender (including fees and disbursements and other charges of counsel to the Lender payable under Section 8.03) arising under the Loan Documents;

(iii) third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans;

(iv) fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans;

(v) fifth, to the payment in full of all other Obligations; and

(vi) finally, the balance, if any, after all Obligations have been paid in full in cash, to the Borrowers or as otherwise required by law.

ARTICLE 8

MISCELLANEOUS

Section 8.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, (i) if to a Borrower, to it at its address set forth in Schedule 8.01, and (ii) if to the Lender, to it at its address set forth in Schedule 8.01. Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).

(a) Unless the Lender otherwise prescribes, notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

(b) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto.

Section 8.02. Waivers; Amendments. No failure or delay by the Lender in exercising any right or power under the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Lender under the Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Lender may have had notice or knowledge of such Default at the time.

(a) Neither this Agreement nor any other Loan Document nor any provision of any Loan Document may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Lender.

Section 8.03. Expenses; Limitation of Liability; Indemnity, Etc.

(a) Expenses. Following the Spin Out, the Borrowers shall jointly and severally pay all out of pocket expenses incurred by the Lender and its Affiliates, including the fees, charges and disbursements of counsel for the Lender, in connection with the negotiation, preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and all out-of-pocket expenses incurred by the Lender, including the fees, charges and disbursements of any counsel for the Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Loans.

(b) Limitation of Liability. To the fullest extent permitted by applicable law the Borrowers and any Loan Party shall not assert, and each Loan Party hereby waives, any claim against the Lender, and any Related Party of the Lender (each such Person being called a “Lender-Related Person”) for any Liabilities arising from the use by others of information or other materials (including, without limitation, any personal data) obtained through telecommunications, electronic or other information transmission systems (including the Internet), and no party hereto shall assert, and each such party hereby waives, any Liabilities against any other party hereto, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, any Loan Document, or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or the use of the proceeds thereof; provided that, nothing in this paragraph shall relieve each Loan Party of any obligation it may have to indemnify an Indemnitee, as provided in Section 8.03(c), against any special, indirect, consequential or punitive damages asserted against such Indemnitee by a third party.

(c) Indemnity. The Borrowers hereby jointly and severally indemnify the Lender, and each Related Party of the Lender (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all Liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of the execution or delivery of this Agreement, any other Loan Document, or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or

thereunder or the consummation of the Transactions or any other transactions contemplated thereby, any Loan or the use of the proceeds therefrom, any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrowers or any of their Subsidiaries, or any Environmental Liability related in any way to the Borrowers or any of their Subsidiaries, or any actual or prospective Proceeding relating to any of the foregoing, whether or not such Proceeding is brought by any Loan Party or its equity holders, Affiliates, creditors or any other third Person and whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such Liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee. This Section 8.03(c) shall not apply with respect to Taxes other than any Taxes that represent losses, claims or damages arising from any non-Tax claim.

(d) Payments. All amounts due under this Section 8.03 shall be payable not later than three Business Days after written demand therefor.

Section 8.04. Successors and Assigns. The provisions of this Agreement and the other Loan Documents shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations under any Loan Document without the prior written consent of the Lender (and any attempted assignment or transfer by a Loan Party without such consent shall be null and void) and the Lender may not assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in any Loan Document, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of the Lender) any legal or equitable right, remedy or claim under or by reason of any Loan Document.

(a) The Lender may assign to one or more Persons all or a portion of its rights and obligations under the Loan Documents (including all or a portion of its Commitment and the Loans at the time owing to it) at any time. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement and the other Loan Documents.

(i) Subject to acceptance and recording thereof pursuant to paragraph (b)(iii) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under the Loan Documents, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under the Loan Documents (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.08 and 8.03). Any assignment or transfer by a Lender of rights or obligations under the Loan Documents that does not comply with this Section shall be treated for purposes of the Loan Documents as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

(ii) The Lender, acting for this purpose as a non-fiduciary agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrowers, and the Lender(s) shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of the Loan Documents, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(b) The Lender may, without the consent of, or notice to, the Borrowers, sell participations to one or more banks or other entities (a “Participant”), in all or a portion of the Lender’s rights and/or obligations under the Loan Documents (including all or a portion of its Commitment and/or the Loans owing to it); provided that the Lender’s obligations under the Loan Documents shall remain unchanged; the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; and the Borrowers, shall continue to deal solely and directly with the Lender in connection with the Lender’s rights and obligations under the Loan Documents. The Borrowers agree that each Participant shall be entitled to the benefits of Section 2.08 (subject to the requirements and limitations therein) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 8.08 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Commitment, Loans, or its other obligations under any Loan Document) to any Person. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Lender (in its capacity as Lender) shall have no responsibility for maintaining a Participant Register.

Section 8.05. Survival. All covenants, agreements, representations and warranties made by the Borrowers in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to any Loan Documents shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other Obligations payable under this Loan Documents is outstanding and so long as the Commitment has not expired or terminated. The provisions of Sections 2.08 and 8.03 and Article 8 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Obligations in full in cash, the expiration or termination of the Commitments or the termination of the Loan Documents or any provision thereof.

Section 8.06. Counterparts; Integration; Effectiveness; Electronic Execution. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Lender and when the Lender shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

(a) Delivery of an executed counterpart of a signature page of (x) this Agreement, (y) any other Loan Document and/or (z) any document, amendment, approval, consent, information, notice (including, for the avoidance of doubt, any notice delivered pursuant to Section 8.01), certificate, request, statement, disclosure or authorization related to this Agreement, any other Loan Document and/or the transactions contemplated hereby and/or thereby (each an “Ancillary Document”) that is an Electronic Signature transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement, such other Loan Document or such Ancillary Document, as applicable. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to this Agreement, any other Loan Document and/or any Ancillary Document shall be deemed to include Electronic Signatures, deliveries or the keeping of records in any electronic form (including deliveries by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page), each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be; provided that nothing herein shall require the Lender to accept Electronic Signatures in any form or format without its prior written consent and pursuant to procedures approved by it; provided, further, without limiting the foregoing, to the extent the Lender has agreed to accept any Electronic Signature, the Lender shall be entitled to rely on such Electronic Signature purportedly given by or on behalf of any Loan Party without further verification thereof and without any obligation to review the appearance or form of any such Electronic signature and upon the request of the Lender, any Electronic Signature shall be promptly followed by a manually executed counterpart. Without limiting the generality of the foregoing, each Loan Party hereby agrees that, for all purposes, including without limitation, in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among the Lender and the Loan Parties, Electronic Signatures transmitted by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page and/or any electronic images of this Agreement, any other Loan Document and/or any Ancillary Document shall have the same legal effect, validity and enforceability as any paper original, the Lender may, at its option, create one or more copies of this Agreement, any other Loan Document and/or any Ancillary Document in the form of an imaged electronic record in any format, which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document (and all such electronic records shall be considered an original for all purposes and shall have the same legal effect, validity and enforceability as a paper record), waives any argument, defense or right to contest the legal effect, validity or enforceability of this Agreement, any other Loan Document and/or any Ancillary Document based solely on the lack of paper original copies of this Agreement, such other Loan Document and/or such Ancillary Document, respectively, including with respect to any signature pages thereto and waives any claim against any Lender-Related Person for any Liabilities arising solely from the Lender’s and/or any Lender’s reliance on or use of Electronic Signatures and/or transmissions by telecopy, emailed pdf. or any other electronic means that reproduces an image of an actual executed signature page, including any Liabilities arising as a result of the failure of any Loan Party to use any available security measures in connection with the execution, delivery or transmission of any Electronic Signature.

Section 8.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

Section 8.08. Right of Setoff. From and after the Spin Out, if an Event of Default shall have occurred and be continuing, the Lender and its Affiliates (other than any Borrower or any Borrower’s Affiliates) is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held, and other obligations at any time owing, by the Lender or any such Affiliate of the Lender, to or for the credit or the account of any Borrower against any and all of the obligations of any Borrower now or hereafter existing under any Loan Document to the Lender, irrespective of whether or not the Lender shall have made any demand under any Loan Document and although such obligations of the Borrowers may be contingent or unmatured or are owed to an Affiliate of the Lender different from the Affiliate holding such deposit or obligated on such indebtedness. The rights of the Lender and such Affiliates of the Lender under this Section are in addition to other rights and remedies (including other rights of setoff) that the Lender and such Affiliates of the Lender may have. The Lender agrees to notify the Parent Borrower promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

Section 8.09. Governing Law; Jurisdiction; Consent to Service of Process. This Agreement and the other Loan Documents shall be construed in accordance with and governed by the law of the State of New York.

(a) Each Loan Party hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District Court for the Southern District of New York sitting in the Borough of Manhattan (or if such court lacks subject matter jurisdiction, the Supreme Court of the State of New York sitting in the Borough of Manhattan), and any appellate court from any thereof, in any action or proceeding arising out of or relating to any and all Loan Documents or the transactions relating thereto, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may (and any such claims, cross-claims or third party claims brought against the Lender or any of its Related Parties may only) be heard and determined in such federal (to the extent permitted by law) or New York State court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in any Loan Document shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Loan Party or its properties in the courts of any jurisdiction.

(b) Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each Loan Party hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c) Each Loan Party irrevocably consents to service of process in the manner provided for notices in Section 8.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

Section 8.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 8.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

Section 8.12. Interest Rate Limitation. In no event shall the interest charged with respect to the Loans or any other Obligations of any Loan Party under any Loan Document exceed the maximum amount permitted under the laws of the State of New York or of any other applicable jurisdiction. Notwithstanding anything to the contrary herein or elsewhere, if at any time the rate of interest payable hereunder or under any Note or other Loan Document (the “Stated Rate”) would exceed the highest rate of interest permitted under any applicable law to be charged (the “Maximum Lawful Rate”), then for so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable shall be equal to the Maximum Lawful Rate; provided, that if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate, each Loan Party shall, to the extent permitted by law, continue to pay interest at the Maximum Lawful Rate until such time as the total interest received is equal to the total interest which would have been received had the Stated Rate been (but for the operation of this provision) the interest rate payable. Thereafter, the interest rate payable shall be the Stated Rate unless and until the Stated Rate again would exceed the Maximum Lawful Rate, in which event this provision shall again apply. In no event shall the total interest received by the Lender exceed the amount which it could lawfully have received had the interest been calculated for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the prior sentence, the Lender has received interest hereunder in excess of the Maximum Lawful Rate, such excess amount shall be applied to the reduction of the principal balance of the Loans or to other amounts (other than interest) payable hereunder, and if no such principal or other amounts are then outstanding, such excess or part thereof remaining shall be paid to Borrower. In computing interest payable with reference to the Maximum Lawful Rate applicable to the Lender, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.

Section 8.13. No Fiduciary Duty, etc. Each Borrower acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that Lender will not have any obligations except those obligations expressly set forth in the Loan Documents and Lender is acting solely in the capacity of an arm’s length contractual counterparty to each Borrower with respect to the Loan Documents and the transactions contemplated herein and therein and not as a financial advisor or a fiduciary to, or an agent of, any Borrower or any other person. Each Borrower agrees that it will not assert any claim against Lender based on an alleged breach of fiduciary duty by Lender in connection with this Agreement and the transactions contemplated hereby. Additionally, each Borrower acknowledges and agrees that Lender is not advising any Borrower as to any legal, tax, investment, accounting, regulatory or any other matters in any jurisdiction. Each Borrower shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated in the Loan Documents, and Lender shall have no responsibility or liability to the Borrowers with respect thereto.

Section 8.14. USA PATRIOT Act. From and after the Spin Out, to the extent the Lender is subject to the requirements of the USA PATRIOT Act of 2001 (the “Patriot Act”), the Lender hereby notifies the Borrowers that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrowers, which information includes the names and addresses of the Borrowers and other information that will allow the Lender to identify the Borrowers in accordance with the Patriot Act.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective authorized officers as of the day and year first above written.

BORROWERS:

NEXT BRIDGE HYDROCARBONS, INC.

By:	 	
/s/ George Palikaras

Name: George Palikaras
 	Title:   President
TORCHLIGHT ENERGY, INC.
By:	 	
/s/ George Palikaras

Name: George Palikaras
 	Title:   President
TORCHLIGHT HAZEL, LLC
By:	 	
/s/ George Palikaras

Name: George Palikaras
 	Title:   President
HUDSPETH OIL CORPORATION
By:	 	
/s/ George Palikaras

Name: George Palikaras
 	Title:   President
HUDSPETH OPERATING, LLC
By:	 	
/s/ George Palikaras

Name: George Palikaras
 	Title:   President
LENDER:

META MATERIALS, INC.

By:	 	
/s/ Kenneth Rice

Name: Kenneth Rice
 	
Title:   Chief Financial Officer and Chief

Operating Office

SCHEDULE A

EXISTING LOANS

Date of Loan	  	Principal
Amount
(in $)	 	  	
Borrower

April 14, 2022

90,000		  	Parent Borrower
May 4, 2022

69,000		  	Parent Borrower
May 12, 2022

89,000		  	Parent Borrower
May 26, 2022

82,000		  	Parent Borrower
June 1, 2022

30,000		  	Parent Borrower
June 13, 2022

81,000		  	Parent Borrower
June 28, 2022

1,900,000		  	Parent Borrower
August 11, 2022

1,200,000		  	Parent Borrower
August 29, 2022

1,459,000	 	  	Parent Borrower
Total

5,000,000		  	
SCHEDULE 2.01A

Commitment

Name of Lender	  	Commitment	 
Meta Materials, Inc.

$	5,000,000	 
d302576dex231.htm  EX-23.1
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EX-23.1
Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation in this Amendment No. 1 to Registration Statement on Form S-1 filed with the SEC on September 6, 2022 of our report dated July 15, 2022 relating to the financial statements of Next Bridge Hydrocarbons, Inc. as of December 31, 2021 and 2020 and to all references to our firm included in this Amendment No. 1 to Registration Statement on Form S-1.

/s/ B.F. Borgers CPA PC

Certified Public Accountants

Lakewood, CO

September 6, 2022

d302576dex233.htm  EX-23.3
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EX-23.3
Exhibit 23.3

CONSENT OF PETECH ENTERPRISES, INC.

We hereby consent to Next Bridge Hydrocarbon Inc.’s inclusion of our estimates of the oil and natural gas reserves as of December 31, 2021 contained in our report dated April 28, 2022, as revised on August 18, 2022, in the form and context in which they appear in the registration statement on Form S-1 and the related prospectus (including any amendments thereto) (the “Registration Statement”) filed with the Securities and Exchange Commission by Next Bridge Hydrocarbons, Inc., the successor-in-interest to the oil and natural gas assets of Torchlight Energy Resources, Inc. We also consent to the references to PeTech Enterprises, Inc. as the independent petroleum engineering firm under the heading “Experts” in the Registration Statement.

PETECH ENTERPRISES, INC.

By:    	 	
/s/ Amiel David

Amiel David, PE
 	Houston, Texas
 	September 6, 2022
d302576dex991.htm  EX-99.1
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EX-99.1
Exhibit 99.1

LOGO

August 18, 2022

Mr. Roger Wurtele

Torchlight Energy Resources, Inc.

5700 W. Plano Parkway #3600

Plano, TX 75093

Dear Mr. Wurtele,

These estimates include only Proved and Producing reserves and were prepared following the United States Securities and Exchange Commission (“SEC”) guidelines rule 4-10 Regulation S-X for evaluating and reporting oil and gas reserves. Rule 4-10 defines reserves as “...those quantities of oil and gas, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations before the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for estimation…..Reserves which can be produced through the application of improved recovery techniques.....Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12 months before the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for completion. A complete ruling is available on the SEC website.

Acceptable evaluation geological, engineering, and accounting (cost, taxes, etc.) practice principles were utilized to reach the results of this evaluation. Results were based on historical oil production information, geological maps, logs, and offsetting lease analogs. The evaluation is based on information provided by or through TER. Data such as production rates, lease operating costs, ownership interests, and projections for future activities were relied on to be true. In all cases, PEI has reviewed the data to ensure reasonable values, consistency, and dependability.

OPERATIONS

TEXAS

The Hazel project is located in Sterling and Tom Green counties, TX. The company drilled five wells of which the Flying “B” Ranch #3H and #4H are producing. Production is from the Wolfcamp formation. The properties are operated by Maverick Operating. The company drilled or converted a well to be used for saltwater disposal. The currently operating expenses reflect a substantial reduction from previous years as water is now disposed of on location and electric power is available. Initial gross oil production reached 8,319 bbl per month and 31,613 bbl per month of water. It is anticipated that the well has an ultimate oil recovery of 154 Mbbl. The Flying B well 4H had an initial production rate of 4,200 bbl of oil and has an ultimate oil recovery of 192 Mbbl.

NOTE. AS A RESULT OF THE EXISTENCE OF A REMAINING OUTSTANDING COST REIMBURSEMENT BALANCE OF $4,768,323.73 TO MASTERSON HAZEL PARTNERS LP 2021, THESE WELLS DO NOT REFLECT A POSITIVE PRESENT VALUE TO TORCHLIGHT ENERGY RESOURCES, INC.

PRODUCTS PRICE

PRODUCTS PRICE The twelve months unweighted average of the first day of the month prices for oil (WTI) was used in calculating the 2021 average price resulting in $63.04 per barrel.

Oil and gas price differentials were calculated from the actual prices realized and were utilized in this evaluation. The average oil and gas prices were held constant throughout the economic life of the leases

OPERATING EXPENSES and CAPITAL COSTS reoccurring lease operating expenses were provided by the company and accepted when they seemed reasonable for the type of operation and area. Lease operating expenses were held constant throughout the life of the reserve.

TAXES

Production and ad valorem taxes were based on the Texas regulatory rates.

Hedge values were not considered in this evaluation.

Note that oil and gas reserves, as well as gross and net revenues, are ESTIMATES that may change as additional production and other technical data become available or due to prices change. All estimates are subject to change due to the inherent uncertainty in the application of judgmental factors as well as the regulatory environment.

PEI did not physically visit the field, PEI accepted as true all ownership interests. PEI has not evaluated any potential environmental liability. PEI does not own an economic interest in any of the company’s assets.

As of December 31, 2021

PROVED DEVELOPED
PRODUCING	 	  	PROVED
UNDEVELOPED	 
 	  	OIL,
Mbbl	 	  	GAS
MMcf	 	  	OIL, Mbbl	 	  	GAS, MMcf	 
GROSS ULTIMATE RESERVES

346.3	 	  	 	NA	 	  	 	NA	 	  	 	NA	 
GROSS REMAINING RESERVES

253.1	 	  	 	NA	 	  	 	NA	 	  	 	NA	 
NET REMAINING RESERVES

151.9	 	  	 	NA	 	  	 	NA	 	  	 	NA	 
Values of the proved reserves in this report are expressed in terms of ESTIMATED future gross revenue, future net revenue, and present worth using a discount factor of 10%. Future gross revenue is the revenue that will accrue to the appraised interests from the production and sale of the estimated net reserves. Net revenue is the gross revenue less production and ad valorem taxes, operating expenses, and capital costs. Operating expenses include direct field expenses but exclude general administration costs. Federal income tax was not included in this analysis.

AS OF DECEMBER 31, 2021

PROVED	 
 	  	DEVELOPED
PRODUCING	 	  	UNDEVELOPED	 
FUTURE GROSS INCOME, M$

9098.1	 	  	 	NA	 
PRODUCTION AND ADVALOREM TAX, M$

419.8	 	  	 	NA	 
OPERATING EXPENSES, M$

4361.8	 	  	 	NA	 
CAPITAL COST, M$

0	 	  	 	NA	 
FUTURE NET REVENUE, M$

4316.6	 	  	 	NA	 
PRESENT VALUE, DISC AT 10%, M$

2896.8	 	  	 	NA	 
This report is followed by detailed cash flow for each well, followed by production plots. Qualifications of the evaluator are also attached.

LOGO

Amiel David, Ph.D., P.E. #50970

For PeTech Enterprises, Inc. Registration # F-15360

Date: 04/28/2022    1:04:40PM	  	
TORCHLIGHT ENERGY, INC

Reserve and Economic Projection

As of 12/31/2021

Custom Selection

Estimated 8/8 Ths Production	 	  	Net Production	 	  	 	 
 	  	 	 	  	Oil	 	  	NGL	 	  	Gas	 	  	Oil	 	  	NGL	 	  	Gas	 	  	Oil	 	  	NGL	 	  	Gas	 
Year	  	Wells	 	  	Mbbl	 	  	Mgal	 	  	MMcf	 	  	Mbbl	 	  	Mgal	 	  	MMcf	 	  	$/bbl	 	  	$/gal	 	  	$Mcf	 
2021

0	 	  	 	0.12	 	  	 	0.00	 	  	 	0.00	 	  	 	0.07	 	  	 	0.00	 	  	 	0.00	 	  	 	59.86	 	  	 	0.00	 	  	 	0.00	 
2022

2	 	  	 	32.86	 	  	 	0.00	 	  	 	0.00	 	  	 	19.71	 	  	 	0.00	 	  	 	0.00	 	  	 	59.88	 	  	 	0.00	 	  	 	0.00	 
2023

2	 	  	 	24.05	 	  	 	0.00	 	  	 	0.00	 	  	 	14.43	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2024

2	 	  	 	19.94	 	  	 	0.00	 	  	 	0.00	 	  	 	11.97	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2025

2	 	  	 	17.35	 	  	 	0.00	 	  	 	0.00	 	  	 	10.41	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2026

2	 	  	 	15.59	 	  	 	0.00	 	  	 	0.00	 	  	 	9.35	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2027

2	 	  	 	14.27	 	  	 	0.00	 	  	 	0.00	 	  	 	8.56	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2028

2	 	  	 	13.28	 	  	 	0.00	 	  	 	0.00	 	  	 	7.97	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2029

2	 	  	 	12.41	 	  	 	0.00	 	  	 	0.00	 	  	 	7.45	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2030

2	 	  	 	11.72	 	  	 	0.00	 	  	 	0.00	 	  	 	7.03	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2031

2	 	  	 	11.12	 	  	 	0.00	 	  	 	0.00	 	  	 	6.67	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2032

2	 	  	 	10.59	 	  	 	0.00	 	  	 	0.00	 	  	 	6.36	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2033

2	 	  	 	10.04	 	  	 	0.00	 	  	 	0.00	 	  	 	6.02	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2034

2	 	  	 	9.53	 	  	 	0.00	 	  	 	0.00	 	  	 	5.72	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
2035

2	 	  	 	9.06	 	  	 	0.00	 	  	 	0.00	 	  	 	5.43	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
Sub-T

211.93	 	  	 	0.00	 	  	 	0.00	 	  	 	127.16	 	  	 	0.00	 	  	 	0.00	 	  	 	59.89	 	  	 	0.00	 	  	 	0.00	 
After

41.17	 	  	 	0.00	 	  	 	0.00	 	  	 	24.70	 	  	 	0.00	 	  	 	0.00	 	  	 	60.03	 	  	 	0.00	 	  	 	0.00	 
Total

253.10	 	  	 	0.00	 	  	 	0.00	 	  	 	151.86	 	  	 	0.00	 	  	 	0.00	 	  	 	59.91	 	  	 	0.00	 	  	 	0.00	 
Cum.

93.25	 	  	 	0.00	 	  	 	0.00	 	  				  				  				  				  				  			
Ult.

346.34	 	  	 	0.00	 	  	 	0.00

Company Future Gross Revenue	 	  	 	 	  	Prod & Adv Taxes	 	  	Revenue	 
 	  	Oil	 	  	NGL	 	  	Gas	 	  	Other	 	  	Total	 	  	Prod Tax	 	  	Adv Tax	 	  	after Sev & Adv	 
Year	  	M$	 	  	M$	 	  	M$	 	  	M$	 	  	M$	 	  	M$	 	  	M$	 	  	M$	 
2021

4.41	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	4.41	 	  	 	0.20	 	  	 	0.00	 	  	 	4.20	 
2022

1,180.49	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	1,180.49	 	  	 	54.46	 	  	 	0.00	 	  	 	1,126.02	 
2023

864.20	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	864.20	 	  	 	39.87	 	  	 	0.00	 	  	 	824.33	 
2024

716.60	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	716.60	 	  	 	33.06	 	  	 	0.00	 	  	 	683.54	 
2025

623.30	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	623.30	 	  	 	28.76	 	  	 	0.00	 	  	 	594.55	 
2026

560.10	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	560.10	 	  	 	25.84	 	  	 	0.00	 	  	 	534.26	 
2027

512.94	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	512.94	 	  	 	23.66	 	  	 	0.00	 	  	 	489.28	 
2028

477.27	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	477.27	 	  	 	22.02	 	  	 	0.00	 	  	 	455.25	 
2029

445.99	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	445.99	 	  	 	20.58	 	  	 	0.00	 	  	 	425.42	 
2030

421.09	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	421.09	 	  	 	19.43	 	  	 	0.00	 	  	 	401.66	 
2031

399.63	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	399.63	 	  	 	18.44	 	  	 	0.00	 	  	 	381.19	 
2032

380.67	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	380.67	 	  	 	17.56	 	  	 	0.00	 	  	 	363.11	 
2033

360.64	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	360.64	 	  	 	16.64	 	  	 	0.00	 	  	 	344.00	 
2034

342.62	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	342.62	 	  	 	15.81	 	  	 	0.00	 	  	 	326.81	 
2035

325.50	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	325.50	 	  	 	15.02	 	  	 	0.00	 	  	 	310.48	 
Sub-T

7,615.45	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	7,615.45	 	  	 	351.34	 	  	 	0.00	 	  	 	7,264.10	 
After

1,482.69	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	1,482.69	 	  	 	1,482.69	 	  	 	0.00	 	  	 	1,414.28	 
Total

9,098.13	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	9,098.13	 	  	 	419.72	 	  	 	0.00	 	  	 	8,678.39

Deductions	 	 	 	 	 	Future Net Income Before Income Taxes	 
 	 	Lease	 	 	Net	 	 	Trans.	 	 	Net	 	 	Undiscounted	 	 	Discounted Ann	 	 	Disc. Cum.	 
Year	 	Net Costs
M$	 	 	Investments
M$	 	 	Costs
M$	 	 	Profits
M$	 	 	Annual
M$	 	 	Cumulative
M$	 	 	@ 10.00%
M$	 	 	Annual @ 10.00%
M$	 
2021	 	 	0.62	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	3.58	 	 	 	3.58	 	 	 	3.58	 	 	 	3.58	 
2022	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	895.62	 	 	 	895.62	 	 	 	857.36	 	 	 	860.94	 
2023	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	593.93	 	 	 	593.93	 	 	 	516.13	 	 	 	1,377.07	 
2024	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	453.14	 	 	 	453.14	 	 	 	357.74	 	 	 	1,734.82	 
2025	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	364.15	 	 	 	364.15	 	 	 	261.22	 	 	 	1,996.04	 
2026	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	303.86	 	 	 	303.86	 	 	 	198.13	 	 	 	2,194.16	 
2027	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	258.88	 	 	 	258.88	 	 	 	153.44	 	 	 	2,347.60	 
2028	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	224.85	 	 	 	224.85	 	 	 	121.14	 	 	 	2,468.75	 
2029	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	195.02	 	 	 	195.02	 	 	 	95.49	 	 	 	2,564.24	 
2030	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	171.26	 	 	 	171.26	 	 	 	76.24	 	 	 	2,640.48	 
2031	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	150.79	 	 	 	150.79	 	 	 	61.02	 	 	 	2,701.50	 
2032	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	132.71	 	 	 	132.71	 	 	 	48.83	 	 	 	2,750.33	 
2033	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	113.60	 	 	 	113.60	 	 	 	37.99	 	 	 	2,788.33	 
2034	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	96.41	 	 	 	96.41	 	 	 	29.32	 	 	 	2,817.64	 
2035	 	 	230.40	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	80.08	 	 	 	80.08	 	 	 	22.14	 	 	 	2,839.79	 
Sub-T	 	 	3,226.22	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	4,037.88	 	 	 	4,037.88	 	 	 	2,839.79	 	 	 	2,839.79	 
After	 	 	1,135.59	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	278.69	 	 	 	278.69	 	 	 	57.02	 	 	 	57.02	 
Total	 	 	4,361.81	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	 	 	4,316.58	 	 	 	4,316.58	 	 	 	2,896.81	 	 	 	2,896.81

Eco. Indicators	  	 	 	  	 	  	Present Worth Profile (M$)	 	 	 	 
Return on Investment (disc):

0.000	 	  		  	 	PW	 	  	 	5.00	% 	 	 	3,451.35	 
Return on Investment (undisc):

0.000	 	  		  	 	PW	 	  	 	8.00	% : 	 	 	3,092.24	 
Years to Payout :

0.00	 	  		  	 	PW	 	  	 	9.00	% : 	 	 	2,990.77	 
Internal Rate of Return (%):

0.00	 	  		  	 	PW	 	  	 	12.00	%: 	 	 	2,728.45	 
  				  		  	 	PW	 	  	 	15.00	%: 	 	 	2,515.83	 
  				  		  	 	PW	 	  	 	20.00	% : 	 	 	2,239.27	 
TRC Eco Detailed2.rpt

Date: 04/28/2022    1:04:40PM

FLYING ‘B’ RANCH 3H - 3H

GARDEN CITY, S. Field, STERLING (TX) Co., TX

Operator: MAVERICK OPERATING, LLC

Reservoir: WOLFCAMP

TORCHLIGHT ENERGY, INC

Reserve and Economic Projection

As of 12/31/2021

Custom Selection

Proved Producing

Estimated 8/8 Ths Production	 	  	 	 	  	Net Production	 
 	  	 	 	  	Estimated 8/8 Ths Production	 	  	Net Production	 	  	 	 	  	 	 	  	 	 
 	  	 	 	  	Oil	 	  	NGL	 	  	Gas	 	  	Oil	 	  	NGL	 	  	Gas	 	  	Oil	 	  	NGL	 	  	Gas	 
Year	  	Wells	 	  	Mbbl	 	  	Mgal	 	  	MMcf	 	  	Mbbl	 	  	Mgal	 	  	MMcf	 	  	$/bbl	 	  	$/gal	 	  	$/Mcf	 
2021

0	 	  	 	0.06	 	  	 	0.00	 	  	 	0.00	 	  	 	0.03	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2022

1	 	  	 	13.86	 	  	 	0.00	 	  	 	0.00	 	  	 	8.32	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2023

1	 	  	 	9.90	 	  	 	0.00	 	  	 	0.00	 	  	 	5.94	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2024

1	 	  	 	8.11	 	  	 	0.00	 	  	 	0.00	 	  	 	4.87	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2025

1	 	  	 	7.02	 	  	 	0.00	 	  	 	0.00	 	  	 	4.21	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2026

1	 	  	 	6.28	 	  	 	0.00	 	  	 	0.00	 	  	 	3.77	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2027

1	 	  	 	5.74	 	  	 	0.00	 	  	 	0.00	 	  	 	3.44	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2028

1	 	  	 	5.33	 	  	 	0.00	 	  	 	0.00	 	  	 	3.20	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2029

1	 	  	 	4.97	 	  	 	0.00	 	  	 	0.00	 	  	 	2.98	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2030

1	 	  	 	4.69	 	  	 	0.00	 	  	 	0.00	 	  	 	2.82	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2031

1	 	  	 	4.45	 	  	 	0.00	 	  	 	0.00	 	  	 	2.67	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2032

1	 	  	 	4.24	 	  	 	0.00	 	  	 	0.00	 	  	 	2.54	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2033

1	 	  	 	4.02	 	  	 	0.00	 	  	 	0.00	 	  	 	2.41	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2034

1	 	  	 	3.82	 	  	 	0.00	 	  	 	0.00	 	  	 	2.29	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
2035

1	 	  	 	3.63	 	  	 	0.00	 	  	 	0.00	 	  	 	2.18	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
Sub-T

86.11	 	  	 	0.00	 	  	 	0.00	 	  	 	51.67	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
After

3.17	 	  	 	0.00	 	  	 	0.00	 	  	 	1.90	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
Total

89.28	 	  	 	0.00	 	  	 	0.00	 	  	 	53.57	 	  	 	0.00	 	  	 	0.00	 	  	 	59.64	 	  	 	0.00	 	  	 	0.00	 
Cum.

64.89	 	  	 	0.00	 	  	 	0.00	 	  				  				  				  				  				  			
Ult.

154.17	 	  	 	0.00	 	  	 	0.00

Company Future Gross Revenue	 	  	 	 	  	Prod & Adv Taxes	 	  	Revenue	 
Year	  	Oil
M$	 	  	NGL
M$	 	  	Gas
M$	 	  	Other
M$	 	  	Total
M$	 	  	Prod Tax
M$	 	  	Adv Tax
M$	 	  	after Sev & Adv
M$	 
2021

2.07	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	2.07	 	  	 	0.10	 	  	 	0.00	 	  	 	1.98	 
2022

496.05	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	496.05	 	  	 	22.89	 	  	 	0.00	 	  	 	473.16	 
2023

354.17	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	354.17	 	  	 	16.34	 	  	 	0.00	 	  	 	337.83	 
2024

290.32	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	290.32	 	  	 	13.39	 	  	 	0.00	 	  	 	276.93	 
2025

251.04	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	251.04	 	  	 	11.58	 	  	 	0.00	 	  	 	239.46	 
2026

224.78	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	224.78	 	  	 	10.37	 	  	 	0.00	 	  	 	214.41	 
2027

205.36	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	205.36	 	  	 	9.47	 	  	 	0.00	 	  	 	195.89	 
2028

190.75	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	190.75	 	  	 	8.80	 	  	 	0.00	 	  	 	181.95	 
2029

178.01	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	178.01	 	  	 	8.21	 	  	 	0.00	 	  	 	169.80	 
2030

167.90	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	167.90	 	  	 	7.75	 	  	 	0.00	 	  	 	160.15	 
2031

159.26	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	159.26	 	  	 	7.35	 	  	 	0.00	 	  	 	151.92	 
2032

151.71	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	151.71	 	  	 	7.00	 	  	 	0.00	 	  	 	144.71	 
2033

143.73	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	143.73	 	  	 	6.63	 	  	 	0.00	 	  	 	137.09	 
2034

136.54	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	136.54	 	  	 	6.30	 	  	 	0.00	 	  	 	130.24	 
2035

129.72	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	129.72	 	  	 	5.98	 	  	 	0.00	 	  	 	123.74	 
Sub-T

3,081.42	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	3,081.42	 	  	 	142.17	 	  	 	0.00	 	  	 	2,939.25	 
After

113.35	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	113.35	 	  	 	5.23	 	  	 	0.00	 	  	 	108.12	 
Total

3,194.77	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	3,194.77	 	  	 	147.39	 	  	 	0.00	 	  	 	3,047.37

Deductions	 	 	 	 	  	Future Net Income Before Income Taxes	 
 	 	Lease	 	 	Net	 	 	Trans.	 	 	Net	 	  	Undiscounted	 	  	Discounted Ann	 	  	Disc. Cum.	 
Year	 	Net Costs
M$	 	 	Investments
M$	 	 	Costs
M$	 	 	Profits
M$	 	  	Annual
M$	 	  	Cumulative
M$	 	  	@ 10.00%
M$	 	  	Annual @ 10.00%
M$	 
2021	 	 	0.31	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	1.67	 	  	 	1.67	 	  	 	1.67	 	  	 	1.67	 
2022	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	357.96	 	  	 	359.63	 	  	 	342.78	 	  	 	344.45	 
2023	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	222.63	 	  	 	582.26	 	  	 	193.54	 	  	 	537.99	 
2024	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	161.73	 	  	 	743.99	 	  	 	127.72	 	  	 	665.72	 
2025	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	124.26	 	  	 	868.25	 	  	 	89.16	 	  	 	754.88	 
2026	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	99.21	 	  	 	967.46	 	  	 	64.71	 	  	 	819.59	 
2027	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	80.69	 	  	 	1,048.14	 	  	 	47.84	 	  	 	867.42	 
2028	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	66.75	 	  	 	1,114.89	 	  	 	35.97	 	  	 	903.40	 
2029	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	54.60	 	  	 	1,169.49	 	  	 	26.74	 	  	 	930.14	 
2030	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	44.95	 	  	 	1,214.44	 	  	 	20.02	 	  	 	950.15	 
2031	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	36.72	 	  	 	1,251.16	 	  	 	14.86	 	  	 	965.02	 
2032	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	29.51	 	  	 	1,280.67	 	  	 	10.87	 	  	 	975.88	 
2033	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	21.89	 	  	 	1,302.56	 	  	 	7.33	 	  	 	983.21	 
2034	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	15.04	 	  	 	1,317.61	 	  	 	4.58	 	  	 	987.79	 
2035	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	8.54	 	  	 	1,326.15	 	  	 	2.37	 	  	 	990.16	 
Sub-T	 	 	1,613.11	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	1,326.15	 	  	 	1,326.15	 	  	 	990.16	 	  	 	990.16	 
After	 	 	105.60	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	2.52	 	  	 	2.52	 	  	 	0.64	 	  	 	0.64	 
Total	 	 	1,718.71	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	1,328.66	 	  	 	1,328.66	 	  	 	990.80	 	  	 	990.80

Ownership Interests	 	  	Present Worth Profile	 
Eco. Indicators	  	 	 	  	 	  	Initial	 	  	1st Rev.	 	  	2nd Rev.	 	  	(M$)	 
Return on Investment (disc):

0.000	 	  		  				  				  				  	 	PW	 	  	 	5.00	% 	 	 	1,131.93	 
Return on Investment (undisc):

0.000	 	  	W. I. :	  	 	0.80000000	 	  	 	0.00000000	 	  	 	0.00000000	 	  	 	PW	 	  	 	8.00	% : 	 	 	1,042.08	 
Years to Payout :

0.00	 	  	Net R. I. :	  	 	0.60000000	 	  	 	0.00000000	 	  	 	0.00000000	 	  	 	PW	 	  	 	9.00	% : 	 	 	1,015.67	 
Internal Rate of Return (%):

0.00	 	  	Rev. Date :	  				  	 	PW	 	  	 	12.00	%: 	 	 	945.17	 
  		  				  				  				  	 	PW	 	  	 	15.00	%: 	 	 	885.50	 
  				  			  	 	PW	 	  	 	20.00	% : 	 	 	804.29	 
TRC Eco Detailed2.rpt

Date: 04/28/2022    1:04:40PM

FLYING ‘B’ RANCH 4H – 4 H

GARDEN CITY, S. Field, STERLING (TX) Co., TX

Operator:

Reservoir: WOLFCAMP

TORCHLIGHT ENERGY, INC

Reserve and Economic Projection

As of 12/31/2021

Custom Selection

Proved Producing

0	 	  	 	0.06	 	  	 	0.00	 	  	 	0.00	 	  	 	0.04	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2022

1	 	  	 	18.99	 	  	 	0.00	 	  	 	0.00	 	  	 	11.40	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2023

1	 	  	 	14.15	 	  	 	0.00	 	  	 	0.00	 	  	 	8.49	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2024

1	 	  	 	11.83	 	  	 	0.00	 	  	 	0.00	 	  	 	7.10	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2025

1	 	  	 	10.33	 	  	 	0.00	 	  	 	0.00	 	  	 	6.20	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2026

1	 	  	 	9.31	 	  	 	0.00	 	  	 	0.00	 	  	 	5.58	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2027

1	 	  	 	8.54	 	  	 	0.00	 	  	 	0.00	 	  	 	5.12	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2028

1	 	  	 	7.95	 	  	 	0.00	 	  	 	0.00	 	  	 	4.77	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2029

1	 	  	 	7.44	 	  	 	0.00	 	  	 	0.00	 	  	 	4.46	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2030

1	 	  	 	7.03	 	  	 	0.00	 	  	 	0.00	 	  	 	4.22	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2031

1	 	  	 	6.67	 	  	 	0.00	 	  	 	0.00	 	  	 	4.00	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2032

1	 	  	 	6.35	 	  	 	0.00	 	  	 	0.00	 	  	 	3.81	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2033

1	 	  	 	6.02	 	  	 	0.00	 	  	 	0.00	 	  	 	3.61	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2034

1	 	  	 	5.72	 	  	 	0.00	 	  	 	0.00	 	  	 	3.43	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
2035

1	 	  	 	5.43	 	  	 	0.00	 	  	 	0.00	 	  	 	3.26	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
Sub-T

125.82	 	  	 	0.00	 	  	 	0.00	 	  	 	75.49	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
After

38.00	 	  	 	0.00	 	  	 	0.00	 	  	 	22.80	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
Total

163.82	 	  	 	0.00	 	  	 	0.00	 	  	 	98.29	 	  	 	0.00	 	  	 	0.00	 	  	 	60.06	 	  	 	0.00	 	  	 	0.00	 
Cum.

28.36	 	  	 	0.00	 	  	 	0.00	 	  				  				  				  				  				  			
Ult.

192.18	 	  	 	0.00	 	  	 	0.00

2.33	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	2.33	 	  	 	0.11	 	  	 	0.00	 	  	 	2.23	 
2022

684.44	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	684.44	 	  	 	31.58	 	  	 	0.00	 	  	 	652.86	 
2023

510.03	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	510.03	 	  	 	23.53	 	  	 	0.00	 	  	 	486.50	 
2024

426.28	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	426.28	 	  	 	19.67	 	  	 	0.00	 	  	 	406.61	 
2025

372.26	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	372.26	 	  	 	17.17	 	  	 	0.00	 	  	 	355.08	 
2026

335.32	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	335.32	 	  	 	15.47	 	  	 	0.00	 	  	 	319.85	 
2027

307.58	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	307.58	 	  	 	14.19	 	  	 	0.00	 	  	 	293.39	 
2028

286.52	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	286.52	 	  	 	13.22	 	  	 	0.00	 	  	 	273.31	 
2029

267.98	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	267.98	 	  	 	12.36	 	  	 	0.00	 	  	 	255.62	 
2030

253.19	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	253.19	 	  	 	11.68	 	  	 	0.00	 	  	 	241.51	 
2031

240.36	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	240.36	 	  	 	11.09	 	  	 	0.00	 	  	 	229.27	 
2032

228.96	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	228.96	 	  	 	10.56	 	  	 	0.00	 	  	 	218.40	 
2033

216.91	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	216.91	 	  	 	10.01	 	  	 	0.00	 	  	 	206.90	 
2034

206.07	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	206.07	 	  	 	9.51	 	  	 	0.00	 	  	 	196.57	 
2035

195.78	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	195.78	 	  	 	9.03	 	  	 	0.00	 	  	 	186.74	 
Sub-T

4,534.03	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	4,534.03	 	  	 	209.18	 	  	 	0.00	 	  	 	4,324.85	 
After

1,369.34	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	1,369.34	 	  	 	63.17	 	  	 	0.00	 	  	 	1,306.16	 
Total

5,903.37	 	  	 	0.00	 	  	 	0.00	 	  	 	0.00	 	  	 	5,903.37	 	  	 	272.35	 	  	 	0.00	 	  	 	5,631.01

Deductions	 	 	 	 	  	Future Net Income Before Income Taxes	 
 	 	Lease	 	 	Net	 	 	Trans.	 	 	Net	 	  	Undiscounted	 	  	Discounted Ann	 	  	Disc. Cum.	 
Year	 	Net Costs
M$	 	 	Investments
M$	 	 	Costs
M$	 	 	Profits
M$	 	  	Annual
M$	 	  	Cumulative
M$	 	  	@ 10.00%
M$	 	  	Annual @ 10.00%
M$	 
2021	 	 	0.31	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	1.92	 	  	 	1.92	 	  	 	1.92	 	  	 	1.92	 
2022	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	537.66	 	  	 	539.58	 	  	 	514.58	 	  	 	516.49	 
2023	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	371.30	 	  	 	910.88	 	  	 	322.58	 	  	 	839.08	 
2024	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	291.41	 	  	 	1,202.29	 	  	 	230.02	 	  	 	1,069.10	 
2025	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	239.88	 	  	 	1,442.18	 	  	 	172.06	 	  	 	1,241.16	 
2026	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	204.65	 	  	 	1,646.82	 	  	 	133.42	 	  	 	1,374.58	 
2027	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	178.19	 	  	 	1,825.02	 	  	 	105.60	 	  	 	1,480.18	 
2028	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	158.11	 	  	 	1,983.12	 	  	 	85.17	 	  	 	1,565.35	 
2029	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	140.42	 	  	 	2,123.54	 	  	 	68.75	 	  	 	1,634.10	 
2030	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	126.31	 	  	 	2,249.85	 	  	 	56.22	 	  	 	1,690.32	 
2031	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	114.07	 	  	 	2,363.92	 	  	 	46.16	 	  	 	1,736.48	 
2032	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	103.20	 	  	 	2,467.12	 	  	 	37.97	 	  	 	1,774.45	 
2033	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	91.70	 	  	 	2,558.83	 	  	 	30.67	 	  	 	1,805.12	 
2034	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	81.37	 	  	 	2,640.20	 	  	 	24.74	 	  	 	1,829.85	 
2035	 	 	115.20	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	71.54	 	  	 	2,711.74	 	  	 	19.78	 	  	 	1,849.63	 
Sub-T	 	 	1,613.11	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	2,711.74	 	  	 	2,711.24	 	  	 	1,849.63	 	  	 	1,849.63	 
After	 	 	1,029.99	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	276.18	 	  	 	276.18	 	  	 	56.38	 	  	 	56.38	 
Total	 	 	2,643.10	 	 	 	0.00	 	 	 	0.00	 	 	 	0.00	 	  	 	2,987.92	 	  	 	2,987.92	 	  	 	1,906.01	 	  	 	1,906.01

Ownership Interests	 	  	Present Worth Profile	 
Eco. Indicators	 	  	 	  	Initial	 	  	1st Rev.	 	  	2nd Rev.	 	  	(M$)	 
Return on Investment (disc):

0.000	 	  		  				  				  				  	 	PW	 	  	 	5.00	% 	 	 	2,319.42	 
Return on Investment (undisc):

0.000	 	  	W. I. :	  	 	0.80000000	 	  	 	0.00000000	 	  	 	0.00000000	 	  	 	PW	 	  	 	8.00	% : 	 	 	2,050.16	 
Years to Payout :

0.00	 	  	Net R. I. :	  	 	0.60000000	 	  	 	0.00000000	 	  	 	0.00000000	 	  	 	PW	 	  	 	9.00	% : 	 	 	1,975.10	 
Internal Rate of Return (%):

0.00	 	  	Rev. Date :	  				  	 	PW	 	  	 	12.00	%: 	 	 	1,783.28	 
  		  				  				  				  	 	PW	 	  	 	15.00	%: 	 	 	1,630.33	 
  				  			  	 	PW	 	  	 	20.00	% : 	 	 	1,434.98	 
TRC Eco Detailed2.rpt

04/28/2022 1:06:44PM

Project Name: TORCHLIGHT ENERGY, INC

Ownership Group: All Cases

Economic One-Liners

As of Date: 12/31/2021

Net Reserves	 	 	Net Revenue	 	 	 	 	 	 	 	 	Cash Flow	 	 	 	 
Lease Name
Risked/UnRisked	 	Reserve
Category	 	 	Oil, Cond,
NGL *
(Mbbl)	 	 	Gas
(MMcf)	 	 	Oil, Cond
NGL *
(M$)	 	 	Gas
(M$)	 	 	Other
(M$)	 	 	Expense
& Tax
(M$)	 	 	Invest.
(M$)	 	 	Non-Disc.
(M$)	 	 	Disc. CF
(M$)	 	 	Life
(years)	 
FLYING ‘B’ RANCH 3H – 3H

P-DP	 	 	 	53.57	 	 	 	0.00	 	 	 	3,914.77	 	 	 	0.00	 	 	 	0.00	 	 	 	1,866.10	 	 	 	0.00	 	 	 	1,328.66	 	 	 	990.80	 	 	 	14.92	 
Grand Total

Total	 	 	 	98.29	 	 	 	0.00	 	 	 	5,903.37	 	 	 	0.00	 	 	 	0.00	 	 	 	2,915.45	 	 	 	0.00	 	 	 	2,987.92	 	 	 	1,906.01	 	 	 	22.94	 
FLYING ‘B’ RANCH 4H – 4 H

P-DP	 	 	 	98.29	 	 	 	0.00	 	 	 	5,903.37	 	 	 	0.00	 	 	 	0.00	 	 	 	2,915.45	 	 	 	0.00	 	 	 	2,987.92	 	 	 	1,906.01	 	 	 	22.94	 
TRC Eco One Liner 2.rpt * Assumes Oil, Condensate and NGL are all using the same units.

Case Name: FLYING ‘B’ RANCH 3H	  	Oper: MAVERICK OPERATING, LLC
Field: GARDEN CITY, S.	  	
County, State: STERLING (TX), WX	  	Disc Value: 990.80 M$

LOGO

Case Name: FLYING ‘B’ RANCH 4H	  	 	Oper:	 
Field: GARDEN CITY, S.	  			
County, State: STERLING (TX), WX	  	 
Disc Value:
1,906.01 M$

LOGO

Appraiser Qualifications

Amiel David Amiel David is a Registered Petroleum Engineer in the State of Texas, having a license # 50970. Amiel is the owner of PeTech Enterprises, Inc having a Firm Registration number F-15360. Amiel has been practicing petroleum engineering since his college graduation and as a Professional Registered Engineer since 1982. His consulting practice covers all major basins in the US and Canada. He also performed evaluation on assets outside North America. Amiel graduated from the U of Tulsa with a BS in Petroleum Engineering, from the U of Pennsylvania with a MSE in Chemical Engineering, from Stanford U with a PhD in Petroleum Engineering and an MBA from the U of Pittsburgh. Amiel is a member of the Society of Petroleum Engineers and The Society of Petroleum Evaluation Engineers. He has authored over twenty papers on subjects related to his profession.

d302576dex992.htm  EX-99.2
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EX-99.2
Exhibit 99.2

Consent to be Named as a Director

In connection with the filing by Next Bridge Hydrocarbons, Inc. of the Registration Statement on Form S-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), I hereby consent, pursuant to Rule 438 of the Securities Act, to being named in the Registration Statement and any and all amendments and supplements thereto as a member of the board of directors of Next Bridge Hydrocarbons, Inc. following the consummation of the spin-off transaction. I also consent to the filing of this consent as an exhibit to such Registration Statement and any amendments thereto.

Dated: September 6, 2022

/s/ Clifton DuBose, Jr.

Clifton DuBose, Jr.
d302576dex993.htm  EX-99.3
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EX-99.3
Exhibit 99.3

Consent to be Named as a Director

Dated: September 6, 2022

/s/ Joseph DeWoody

Joseph DeWoody

d302576dex994.htm  EX-99.4
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EX-99.4
Exhibit 99.4

Consent to be Named as a Director

Dated: September 6, 2022

/s/ Mia Pitts

Mia Pitts

d302576dex995.htm  EX-99.5
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EX-99.5
Exhibit 99.5

Consent to be Named as a Director

Dated: September 6, 2022

/s/ Kristin Whitley

Kristin Whitley
d302576dexfilingfees.htm  EX-FILING FEES
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EX-FILING FEES
Exhibit 107

Calculation of Filing Fee Table

Form S-1

(Form Type)

Next Bridge Hydrocarbons, Inc.

(Exact Name of Registrant as Specified in its Charter)

CALCULATION OF REGISTRATION FEE

Title of Each Class of
Securities to be Registered

Amount to be  
Registered(1)	 	 	
Proposed Maximum

Offering Price Per Share

Proposed
Maximum
Aggregate Offering
Price(2)	 	 	 Amount of Registration 
Fee	 
Common stock, par value $0.0001 per share

165,523,363	 	 	Not Applicable	 	$	54,622.71	 	 	$	5.11

(1)	
The securities will be distributed by Meta Materials, Inc., a Nevada corporation, referred to as Meta, as a dividend in kind to the holders of Meta’s Series A Non-Voting Preferred Stock at a 1:1 ratio. The amount of shares registered is based on the assumption that there will be 165,523,363 shares of Series A Non-Voting Preferred Stock of Meta outstanding as of the close of business on the Record Date (as defined herein).

(2)	
Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933, as amended, based on one-third of the par value of Registrant’s common stock.

परिवर्तित टेक्स्ट

Open file

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Next Bridge Hydrocarbons, Inc.

(Exact name of registrant as specified in its Charter)

Nevada	 	1311	 	87-2538731
(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

6300 Ridglea Place, Suite 950

Fort Worth, TX 76116

(817) 438-1937

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

Corporate Secretary

Lucas T. Hawkins

6300 Ridglea Place, Suite 950

Fort Worth, TX 76116

(817) 438-1937

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copies to:

Mark Fitzgerald

Wilson Sonsini Goodrich & Rosati

28 State Street, 37 Floor

Boston, MA 02109

617-598-7800

Jack E. Jacobsen

Jason A. Schumacher

O’Melveny & Myers LLP

2501 N. Harwood Street, 17 Floor

Dallas, TX 75201

214-647-9270

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

SUBJECT TO COMPLETION DATED OCTOBER 5, 2022

Prospectus

Next Bridge Hydrocarbons, Inc.

165,523,363 shares of Common Stock

(par value $0.0001)

At the time of the Spin-Off, Meta will distribute all the outstanding shares of Common Stock held by it on a pro rata basis to holders of Meta’s Series A Non-Voting Preferred Stock. Each one share of Meta’s Series A Non-Voting Preferred Stock outstanding as of             , New York City time, on                     , 2022, the record date for the Spin-Off (the “Record Date”), will entitle the holder thereof to receive one share of Common Stock. The Distribution will be made in book-entry form by a distribution agent. Fractional shares of Common Stock will not be distributed in the Spin-Off.

The Spin-Off will be effective as of             , New York City time, on                     , 2022. Immediately after the Spin-Off, the Company will be an independent public reporting company, provided, the Common Stock is not and will not be publicly traded and will not be eligible for electronic transfer through the Depository Trust Company book-entry system or any other established clearing corporation.

In reviewing this Prospectus, you should carefully consider the matters described in the section titled “Risk Factors” beginning on page 7 of this Prospectus.

This Prospectus is not an offer to sell, or a solicitation of an offer to buy, any securities.

The date of this Prospectus is                     , 2022

Table of Contents
Table of Contents

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

i	 
DEFINITIONS

iii	 
PROSPECTUS SUMMARY

1	 
RISK FACTORS

7	 
THE SPIN-OFF

26	 
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

29	 
USE OF PROCEEDS

36	 
DETERMINATION OF OFFERING PRICE

36	 
CAPITALIZATION

36	 
BUSINESS

37	 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

47	 
MANAGEMENT

58	 
EXECUTIVE COMPENSATION

65	 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

69	 
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

70	 
DESCRIPTION OF OUR CAPITAL STOCK

74	 
LEGAL MATTERS

78	 
EXPERTS

78	 
WHERE YOU CAN FIND MORE INFORMATION

79	 
INDEX TO FINANCIAL STATEMENTS

80	 
Table of Contents
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS