UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM
(Amendment No. 1)
For
the Fiscal Year Ended
OR
For the transition period from _______ to ________.
Commission
file number:
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒
Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | ☐ |
| ☒ | 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 pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark, whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒
The
aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s
most recently completed second fiscal quarter, April 30, 2024, was $
As of January 29, 2025, there were shares of the registrant’s common stock outstanding.
EXPLANATORY NOTE
The Company’s Principal Executive and Principal Financial Officer has provided new certifications dated as of the date of this filing in connection with this Amendment (Exhibits 31.1, 31.2, 32.1 and 32.2).
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES.
| 1 |
| 2 |
| 3 |
* Filed herewith.
** Furnished, not filed
† Includes management contracts and compensation plans and arrangements
| 4 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TRIO PETROLEUM CORP. | ||
| By: | /s/ Robin Ross | |
| Robin Ross | ||
Chairman and Chief Executive Officer |
||
| (Principal Executive Officer) | ||
| Date: | January 30, 2025 |
| By: | /s/ Greg Overholtzer | |
| Greg Overholtzer | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and | ||
| Principal Accounting Officer) |
| Date: | January 30, 2025 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities held on the dates indicated.
| Signature | Title | Date | ||
| /s/ Robin Ross | Chairman, Chief Executive Officer and Director |
|||
| Robin Ross | (principal executive officer) | January 30, 2025 | ||
| /s/ Gregory L. Overholtzer | Chief Financial Officer | |||
| Gregory L. Overholtzer | (principal financial officer and principal accounting officer) | January 30, 2025 | ||
| * | Vice Chairman and Director | January 30, 2025 | ||
| Stanford Eschner | ||||
| * | Director | January 30, 2025 | ||
| William J. Hunter | ||||
| * | Director | January 30, 2025 | ||
| John Randall | ||||
| * | Director | January 30, 2025 | ||
| Thomas J. Pernice | ||||
| * | Director | January 30, 2025 | ||
| James H. Blake |
| *By: | /s/ Robin Ross | |
| Robin Ross | ||
| Attorney-in-fact |
| 5 |
TRIO PETROLEUM CORP.
Financial Statements for the Years Ended October 31, 2024 and 2023
| F-1 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Trio Petroleum Corp.
5401 Business Park South, Suite 115
Bakersfield, California 93309
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Trio Petroleum Corp. as of October 31, 2024 and 2023, and the related statements of operations, changes in stockholder’s equity, and cash flow for each of 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 Trio Petroleum Corp. as of October 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Substantial doubt about the Company’s ability to continue as going concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 3 of the financial statements, the Company has suffered substantial net losses and negative cash flows from operations in recent years and is dependent on debt and equity financing to fund its operations, all of which raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are disclosed in Note 3. The consolidated 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 entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 Trio Petroleum Corp. 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 audits 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. Trio Petroleum Corp. 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 entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits 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 audits 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 audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
We have served as Trio Petroleum Corp.’s auditor since 2024
January 17, 2025
| F-2 |
TRIO PETROLEUM CORP.
BALANCE SHEETS
| October 31, 2024 | October 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other receivables | ||||||||
| Total current assets | ||||||||
| Oil and gas properties - not subject to amortization | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Asset retirement obligations – current | ||||||||
| Convertible note, net of discounts | ||||||||
| Due to operators | ||||||||
| Promissory notes, net of discounts | ||||||||
| Note payable - related party | ||||||||
| Payable – related party | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Asset retirement obligations, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 8) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value; shares authorized; -- shares issued and outstanding at October 31, 2024 and 2023, respectively | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding as of October 31, 2024 and 2023, respectively | ||||||||
| Stock subscription receivable | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-3 |
TRIO PETROLEUM CORP.
STATEMENTS OF OPERATIONS
For the Years Ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| Operating expenses: | ||||||||
| Exploration expense | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Stock-based compensation expense | ||||||||
| Accretion expense | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other expenses: | ||||||||
| Interest expense | ||||||||
| Loss on settlement | ||||||||
| Loss on note conversion | ||||||||
| Total other expenses | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and Diluted Net Loss per Common Share | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Number of Common Shares Outstanding | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
TRIO PETROLEUM CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Stock | Additional | Total | ||||||||||||||||||||||
| Common Stock | Subscription | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Receivable | Capital | Deficit | Equity | |||||||||||||||||||
| Balance at November 1, 2023 | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||
| Issuance
of common shares in lieu of cash payments on convertible notes | ||||||||||||||||||||||||
| Issuance
of common shares in lieu of cash payments on promissory notes | ||||||||||||||||||||||||
| Issuance of common shares to consultants | ||||||||||||||||||||||||
| Issuance
of equity warrants related to convertible note | - | |||||||||||||||||||||||
| Issuance
of commitment shares related to April 2024 Financings | ||||||||||||||||||||||||
| Adjustment
to common stock for warrants related to Resale S-1/A | ( | ) | ( | ) | ||||||||||||||||||||
| Issuance
of common shares related to ATM agreement, net | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at October 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||
| Balance at November 1, 2022 | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||
| Issuance of common stock for cash, net | ||||||||||||||||||||||||
| Issuance of conversion shares related to the January 2022 SPA | ||||||||||||||||||||||||
| Issuance of commitment shares related to the January 2022 SPA | ||||||||||||||||||||||||
| Issuance of common shares in IPO, net of underwriting discounts and offering costs | ||||||||||||||||||||||||
| Issuance of pre-funded warrants | - | |||||||||||||||||||||||
| Issuance of common stock upon exercise of warrants, net | ||||||||||||||||||||||||
| Issuance of common stock for services, net | ||||||||||||||||||||||||
| Issuance of restricted stock units under the Equity Incentive Plan | ( | ) | ||||||||||||||||||||||
| Issuance of common stock for warrants that can be exercised per the Resale S-1/A | ( | ) | ||||||||||||||||||||||
| Issuance of equity warrants in connection with convertible debt (Tranche #1) | - | |||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at October 31, 2023 | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
TRIO PETROLEUM CORP.
STATEMENTS OF CASH FLOWS
| For the Years Ended October 31, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Franchise tax fees | ( | ) | ||||||
| Bad debt expense | ||||||||
| Accretion expense | ||||||||
| Conversion of January 2022 SPA | ||||||||
| Debt discount - OID | ( | ) | ( | ) | ||||
| Amortization of debt discounts | ||||||||
| Write-off of January 2022 SPA receivable | ||||||||
| Issuance of common shares for services | ||||||||
| Stock-based compensation | ||||||||
| Loss on issuance of common shares in lieu of cash for debt payments | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other receivables | ( | ) | ( | ) | ||||
| Other current liabilities | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Capital expenditures for unproved oil and gas properties | ( | ) | ( | ) | ||||
| Drilling costs for exploratory well | ( | ) | ||||||
| Advances to operators | ||||||||
| Due to operators | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of common stock, net | ||||||||
| Proceeds from notes payable, related parties | ||||||||
| Proceeds from convertible debt | ||||||||
| Proceeds from promissory notes | ||||||||
| Proceeds from issuance of common shares related to ATM agreement | ||||||||
| Proceeds from issuance of common shares related to IPO | ||||||||
| Proceeds from exercise of warrants, net | ||||||||
| Repayment of debt | ( | ) | ( | ) | ||||
| Payments for debt issuance costs | ( | ) | ( | ) | ||||
| Payments for deferred offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| NET CHANGE IN CASH | ( | ) | ||||||
| Cash - Beginning of period | ||||||||
| Cash - End of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Non-cash investing and financing activities: | ||||||||
| Issuance of warrants | $ | $ | ||||||
| Issuance of RSUs | $ | $ | ||||||
| Issuance of commitment shares | $ | $ | ||||||
| Issuance of common stock for warrants that can be exercised per the Resale S-1/A | $ | $ | ||||||
| Issuance of pre-funded warrants | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| F-6 |
TRIO PETROLEUM CORP.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED OCTOBER 31, 2024 AND 2023
NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS
Company Organization
Trio Petroleum Corp. (“Trio Petroleum”, the “Company” or “TPET”) is a California-based oil and gas exploration and development company headquartered in Bakersfield, California, with its principal executive offices located at 5401 Business Park South, Suite 115, Bakersfield, California 93309, and with operations in Monterey County, California, and Uintah County, Utah. The Company was incorporated on July 19, 2021, under the laws of Delaware to acquire, fund, and operate oil and gas exploration, development and production projects, initially focusing on one major asset in California, the South Salinas Project (“South Salinas Project”). The Company has since acquired interests in the McCool Ranch Oil Field in Monterey County, California, and in the Asphalt Ridge Project in Uintah County, Utah. The Company has had revenue-generating operations since the McCool Ranch Oil Field was restarted on February 22, 2024, and recognized its first revenues in the fiscal quarter ended April 30, 2024, and received the proceeds from these operations in June 2024.
Acquisition of South Salinas Project
The
Company was initially formed to acquire from Trio Petroleum LLC (“Trio LLC”) an approximate
There
are two contiguous areas of notable oil/gas accumulations in the South Salinas Project; the first is the Humpback Area that occurs in
the northern part of the project and the second is the Presidents Area (“Presidents Oil Field”) that occurs in the southern
part of the project. As October 31, 2024 and 2023, there were no proved reserves attributable to the approximate
Initial Public Offering
The
Company’s Registration Statement (Amendment No. 9) on Form S-1/A was filed with the SEC on March 24, 2023; its Initial Public Offering
was declared effective on April 17, 2023 and closed on April 20, 2023 (collectively, the “Offering” or “IPO”).
The Company sold shares of its common stock for total gross proceeds of $
Additional Acquisitions - McCool Ranch Oil Field & Asphalt Ridge Leasehold
In
October 2023, the Company entered into an agreement (“McCool Ranch Purchase Agreement”) with Trio LLC for purchase of a
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
| F-7 |
NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).
Use of Estimates
The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity-based transaction and disclosure of contingent assets and liabilities at the date of the financial statements, and the revenue and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Some of the more significant estimates required to be made by management include estimates of oil and natural gas reserves (when and if assigned) and related present value estimates of future net cash flows therefrom, the carrying value of oil and natural gas properties, ARO and the valuation of equity-based transactions. Accordingly, actual results could differ significantly from those estimates.
Cash and cash equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The Company had
Prepaid Expenses
Prepaid
expenses consist primarily of prepaid services which will be expensed as the services are provided within twelve months. As of October
31, 2024 and 2023, the balances of the prepaids account were $
Debt Issuance Costs
Costs
incurred in connection with the issuance of the Company’s debt have been recorded as a direct reduction against the debt and amortized
over the life of the associated debt as a component of interest expense. As of October 31, 2024 and 2023, the Company recorded $
Oil and Gas Assets and Exploration Costs – Successful Efforts
The Company’s projects are in exploration and/or early production stages and the Company began generating revenue from its operations during the quarterly period ended April 30, 2024. It applies the successful efforts method of accounting for crude oil and natural gas properties. Under this method, exploration costs such as exploratory, geological, and geophysical costs, delay rentals and exploratory overhead are expensed as incurred. If an exploratory property provides evidence to justify potential development of reserves, drilling costs associated with the property are initially capitalized, or suspended, pending a determination as to whether a commercially sufficient quantity of proved reserves can be attributed to the area as a result of drilling. At the end of each quarter, management reviews the status of all suspended exploratory property costs considering ongoing exploration activities; in particular, whether the Company is making sufficient progress in its ongoing exploration and appraisal efforts. If management determines that future appraisal drilling or development activities are unlikely to occur, associated exploratory well costs are expensed.
Costs to acquire mineral interests in crude oil and/or natural gas properties, drill and equip exploratory wells that find proved reserves and drill and equip development wells are capitalized. Acquisition costs of unproved leaseholds are assessed for impairment during the holding period and transferred to proven crude oil and/or natural gas properties to the extent associated with successful exploration activities. Significant undeveloped leases are assessed individually for impairment, based on the Company’s current exploration plans, and a valuation allowance is provided if impairment is indicated. Capitalized costs from successful exploration and development activities associated with producing crude oil and/or natural gas leases, along with capitalized costs for support equipment and facilities, are amortized to expense using the unit-of-production method based on proved crude oil and/or natural gas reserves on a field-by-field basis, as estimated by qualified petroleum engineers. The Company currently has four wells that are producing (one well in President’s Field in the South Salinas Project and three wells at the McCool Ranch Oil Field) and is evaluating the impact of production on the reserve determination for those wells and fields. The Company expects to add the reserve value of such fields to the Company’s reserve report after a further period of observation and review of the oil production. As of October 31, 2024 and 2023, all of the Company’s oil and gas properties were classified as unproved properties and were not subject to depreciation, depletion and amortization.
| F-8 |
Unproved oil and natural gas properties
Unproved oil and natural gas properties have unproved lease acquisition costs, which are capitalized until the lease expires or otherwise until the Company specifically identifies a lease that will revert to the lessor, at which time the Company charges the associated unproved lease acquisition costs to exploration costs.
Unproved oil and natural gas properties are not subject to amortization and are assessed periodically for impairment on a property-by-property basis based on remaining lease terms, drilling results or future plans to develop acreage. The Company currently has four wells that are producing (one well in President’s Field in the South Salinas Project and three wells at the McCool Ranch Oil Field) and is evaluating the impact of production on the reserve determination for those wells and fields. The Company expects to add the reserve value of such fields to the Company’s reserve report after a further period of observation and review of the oil production. As of October 31, 2024 and 2023, all of the Company’s oil and gas properties were classified as unproved properties and were not subject to depreciation, depletion and amortization; see further discussion in Note 6.
Impairment of Other Long-lived Assets
The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. The Company assesses the recoverability of the carrying value of the asset by estimating the future net undiscounted cash flows expected to result from the asset, including eventual disposition. If the future net undiscounted cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and estimated fair value. With regards to oil and gas properties, this assessment applies to proved properties.
As
of October 31, 2024 and 2023, the Company had
Asset Retirement Obligations
ARO consists of future plugging and abandonment expenses on oil and natural gas properties. In connection with the South Salinas Project (“SSP”) acquisition described above, the Company acquired the plugging and abandonment liabilities associated with six non-producing wells. The fair value of the ARO was recorded as a liability in the period in which the wells were acquired with a corresponding increase in the carrying amount of oil and natural gas properties not subject to impairment. The Company plans to utilize the six wellbores acquired in the SSP acquisition in future exploration, production and/or disposal (i.e., disposal of produced water or CO2 by injection) activities. The liability is accreted for the change in its present value each period based on the expected dates that the wellbores will be required to be plugged and abandoned. The capitalized cost of ARO is included in oil and gas properties and is a component of oil and gas property costs for purposes of impairment and, if proved reserves are found, such capitalized costs will be depreciated using the units-of-production method. The asset and liability are adjusted for changes resulting from revisions to the timing or the amount of the original estimate when deemed necessary. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized.
Components of the changes in ARO for the years ended October 31, 2023 and 2024 are shown below:
| ARO, ending balance – October 31, 2022 | $ | |||
| Accretion expense | ||||
| ARO, ending balance – October 31, 2023 | ||||
| Accretion expense | ||||
| ARO, ending balance – October 31, 2024 | ||||
| Less: ARO – current | ||||
| ARO, net of current portion – October 31, 2024 | $ |
| F-9 |
Related Parties
Related
parties are directly or indirectly related to the Company, through one or more intermediaries and are in control, controlled by, or under
common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate
families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls
or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might
be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. On September 14, 2021,
the Company acquired an
Income Taxes
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. Deferred tax assets, including tax loss and credit carry forwards, 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.
The Company utilizes ASC 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely than not” that a deferred tax asset will not be realized. At October 31, 2024 and 2023, the Company’s net deferred tax asset has been fully reserved.
For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the statements of operations when a determination is made that such expense is likely. The Company is subject to income tax examinations by major taxing authorities since inception.
Fair Value Measurements
The carrying values of financial instruments comprising cash and cash equivalents, payables, and notes payable-related party approximate fair values due to the short-term maturities of these instruments. The notes payable- related party is considered a level 3 measurement. As defined in ASC 820, Fair Value Measurements and Disclosures, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This fair value measurement framework applies to both initial and subsequent measurement.
| Level 1: | Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. |
| Level 2: | Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. |
| Level 3: | Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The significant unobservable inputs used in the fair value measurement for nonrecurring fair value measurements of long-lived assets include pricing models, discounted cash flow methodologies and similar techniques. |
| F-10 |
There are no assets or liabilities measured at fair value on a recurring basis. Assets and liabilities accounted for at fair value on a non-recurring basis in accordance with the fair value hierarchy include the initial allocation of the asset acquisition purchase price, including asset retirement obligations, the fair value of oil and natural gas properties and the assessment of impairment.
The fair value measurements and allocation of assets acquired are measured on a nonrecurring basis on the acquisition date using an income valuation technique based on inputs that are not observable in the market and therefore represent Level 3 inputs. Significant inputs used to determine the fair value include estimates of: (i) reserves; (ii) future commodity prices; (iii) operating and development costs; and (iv) a market-based weighted average cost of capital rate. The underlying commodity prices embedded in the Company’s estimated cash flows are the product of a process that begins with NYMEX forward curve pricing, adjusted for estimated location and quality differentials, as well as other factors that the Company’s management believes will impact realizable prices. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation.
The fair value of additions to the asset retirement obligation liabilities is measured using valuation techniques consistent with the income approach, which converts future cash flows to a single discounted amount. Significant inputs to the valuation include: (i) estimated plug and abandonment cost per well for all oil and natural gas wells and for all disposal wells; (ii) estimated remaining life per well; (iii) future inflation factors; and (iv) the Company’s average credit-adjusted risk-free rate. These assumptions represent Level 3 inputs.
If the carrying amount of its proved oil and natural gas properties, which are assessed for impairment under ASC 360 – Property, Plant and Equipment, exceeds the estimated undiscounted future cash flows, the Company will adjust the carrying amount of the oil and natural gas properties to fair value. The fair value of its oil and natural gas properties is determined using valuation techniques consistent with the income and market approach. The factors used to determine fair value are subject to management’s judgment and expertise and include, but are not limited to, recent sales prices of comparable properties, the present value of future cash flows, net of estimated operating and development costs using estimates of proved reserves, future commodity pricing, future production estimates, anticipated capital expenditures, and various discount rates commensurate with the risk and current market conditions associated with the expected cash flow projected. These assumptions represent Level 3 inputs.
Basic and diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic loss per share, except the weighted average number of common shares outstanding are increased to include additional shares from the assumed exercise of share options, warrants and convertible notes, if dilutive.
| As of October 31, | As of October 31, | |||||||
| 2024 | 2023 | |||||||
| Warrants | (1) | (2) | ||||||
| Total potentially dilutive securities | ||||||||
| (1) | |
| (2) |
| F-11 |
Environmental Expenditures
The operations of the Company have been, and may in the future be, affected from time to time to varying degrees by changes in environmental regulations, including those for future reclamation and site restoration costs. Both the likelihood of new regulations and their overall effect upon the Company vary greatly and are not predictable. The Company’s policy is to meet or, if possible, surpass standards set by relevant legislation by application of technically proven and economically feasible measures.
Environmental expenditures that relate to ongoing environmental and reclamation programs are charged against earnings as incurred or capitalized and amortized depending on their future economic benefits. All of these types of expenditures incurred since inception have been charged against earnings due to the uncertainty of their future recoverability. Estimated future reclamation and site restoration costs, when the ultimate liability is reasonably determinable, are charged against earnings over the estimated remaining life of the related business operation, net of expected recoveries.
Recent Accounting Pronouncements
All recently issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.
Reclassification of Expenses
Certain amounts in the prior periods presented have been reclassified to the current period financial statement presentation. This reclassification has no effect on previously reported net income.
Subsequent Events
The Company evaluated all events and transactions that occurred after October 31, 2024 through the date of the filing of this report. See Note 12 for such events and transactions.
NOTE 3 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
As
of October 31, 2024, the Company had $
The
accompanying financial statements have been prepared on the basis that the Company will continue as a going concern over the next twelve
months from the date of issuance of these financial statements, which assumes the realization of assets and the satisfaction of liabilities
in the normal course of business. As of October 31, 2024, the Company has an accumulated deficit of $
Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| F-12 |
NOTE 4 – INITIAL PUBLIC OFFERING
The
Company’s Registration Statement (Amendment No. 9) on Form S-1/A was filed with the SEC on March 24, 2023; its Initial Public Offering
was declared effective on April 17, 2023 and closed on April 20, 2023 (collectively, the “Offering” or “IPO”).
The Company sold shares of common stock at a public offering price of $ per share for gross proceeds of $
NOTE 5 – REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue from Contracts with Customers
The following table disaggregates revenue by significant product type for the periods below:
| As of October 31, | As of October 31, | |||||||
| 2024 | 2023 | |||||||
| Oil sales | $ | $ | ||||||
| Total revenues from customers | $ | $ | ||||||
There
were
Significant concentrations of credit risk
For
the year ended October 31, 2024 (
NOTE 6 – OIL AND NATURAL GAS PROPERTIES
The following tables summarize the Company’s oil and gas activities.
| As of October 31, | As of October 31, | |||||||
| 2024 | 2023 | |||||||
| Oil and gas properties – not subject to amortization | $ | $ | ||||||
| Accumulated impairment | ||||||||
| Oil and gas properties – not subject to amortization, net | $ | $ | ||||||
During
the years ended October 31, 2024 and 2023, the Company incurred aggregated exploration costs of $
Leases
South Salinas Project
As
of October 31, 2024, the Company holds interests in various leases related to the unproved properties of the South Salinas Project (see
Note 8); two of the leases are held with the same lessor. The first lease, which covers
The
second lease covers
During
February and March of 2023, the Company entered into additional leases related to the unproved properties of the South Salinas Project
with two groups of lessors. The first group of leases covers
| F-13 |
McCool Ranch Oil Field
In
October 2023, the Company entered into the McCool Ranch Purchase Agreement with Trio LLC for purchase of a
The
Company holds interests in various leases related to the unproved properties of the McCool Ranch Oil Field; these leases occur in two
parcels, “Parcel 1” and “Parcel 2”. Parcel 1 comprises ten leases and approximately
Optioned Assets – Old Man Prospect
In
October 2023, the Company and Lantos Energy entered into an option agreement, whereby the Company has the option to pay two initial payments
of $
Optioned Assets – Asphalt Ridge Leasehold Acquisition & Development Option Agreement
On
November 10, 2023, the Company entered into the ARLO Agreement with HSO for a term of nine months which gives the Company the exclusive
right to acquire up to a
On
December 29, 2023, the Company entered into an amendment to the ARLO Agreement, whereby the Company funded $
Per
the most recent amendment to the ARLO Agreement signed in September 2024, the Company has until December 10, 2024 to pay HSO an additional
$
| F-14 |
NOTE 7 – RELATED PARTY TRANSACTIONS
South Salinas Project – Related Party
Upon
its formation, the Company acquired from Trio LLC a majority working interest in the South Salinas Project and engaged the services of
certain members of Trio LLC to manage the Company’s assets (see Note 1 and Note 6). Trio LLC operates the South Salinas Project
on behalf of the Company, and as operator, conducts and has full control of the operations within the constraints of the Joint Operating
Agreement, and acts in the capacity of an independent contractor. Trio LLC currently holds a
McCool Ranch Oil Field Asset Purchase – Related Party
On
October 16, 2023, the Company entered into the McCool Ranch Purchase Agreement with Trio LLC for purchase of a
Restricted Stock Units (“RSUs”) issued to Directors
Pursuant
to the 2022 Equity Incentive Plan (“the Plan”), on September 2, 2023, the Company issued an aggregate shares of its
$ par common stock to four outside directors with a fair value of $ per share for a grant date value of $
On
June 19, 2024, the Company agreed to award restricted stock units to a newly appointed director under the Plan; as there were
only shares remaining for issuance under the Plan at that time, RSUs were awarded immediately with a fair value of $
per share for a grant date value of $
On
October 21, 2024, the Company agreed to award restricted stock units to a newly appointed director under the Plan; the RSUs vest
at a rate of % upon the six month anniversary of the commencement date and were recorded at a fair value of $ per share for a
grant date value of $
Restricted Shares issued to Executives and Employees
In February 2022, the Company entered into employment agreements with Frank Ingriselli (former Chief Executive Officer) and Greg Overholtzer (Chief Financial Officer or “CFO”) which, among other things, provided for the grant of restricted shares in the amounts of and , respectively, pursuant to the Plan. Per the terms of the employee agreements, subject to continued employment, the restricted shares vest over a two-year period, under which % will vest upon the earlier of three months after the IPO or six months after the grant date. After this date, the remainder vest in equal tranches every six months until fully vested. As the Plan was not adopted until October 17, 2022, these shares will be recorded as of that date at a fair value of $ per share; such value was calculated via a third-party valuation performed using income and market methods, as well as a discounted cash flow method, with the terminal value using a market multiples method, adjusted for a lack of marketability. As of October 31, 2022, the Company recorded restricted shares at a fair value of $, and for the years ended October 31, 2024 and 2023, the Company recognized stock-based compensation of $ and $, respectively, within stock-based compensation expenses on the income statement, with no unrecognized expense as of October 31, 2024.
In
May 2023, the Company entered into six employee agreements which, among other things, provided for the grant of an aggregate of
restricted shares pursuant to the Plan. Per the terms of the employee agreements, subject to continued employment, the restricted shares
vest as follows: % of the shares vested five months after the issuance date, after which the remainder vest in equal tranches every
six months until fully vested. The shares were recorded on the date of issuance at a fair value of $ per share for an aggregate
fair value of $
On
October 16, 2023, the Company and Michael L. Peterson entered into an employment agreement (the “Peterson Employment Agreement”),
effective as of October 23, 2023, pursuant to which Mr. Peterson will serve as Chief Executive Officer of the Company, replacing Mr.
Ingriselli. Pursuant to the Peterson Employment Agreement, Mr. Peterson will be paid an annual base salary of $
| F-15 |
Pursuant
to the Peterson Employment Agreement, the Company issued Mr. Peterson a grant of shares of restricted stock pursuant to the Company’s
Omnibus Incentive Compensation Plan (the “Plan”) at a fair value of $ per share for a grant date fair value of $
On
the same date as Mr. Peterson’s resignation as the Company’s Chief Executive Officer on July 11, 2024, the Company and Mr.
Peterson entered into a three-month consulting agreement, which includes a monthly cash fee of $
On
July 11, 2024, the Company entered into an employment agreement with Mr. Robin Ross, pursuant to which Mr. Ross will serve as Chief Executive
Officer of the Company, replacing Mr. Peterson. Pursuant to the Ross Employment Agreement, Mr. Ross will be paid an annual base salary
of $
On
October 21, 2024, the Company agreed to award restricted stock units to its CFO under the Plan; the RSUs vest at a rate of %
upon the six month anniversary of the commencement date and were recorded at a fair value of $ per share for a grant date value of
$
Note Payable – Related Party
On
March 26, 2024, the Company borrowed $
On
September 26, 2024 and October 28, 2024, the Company entered into the first and second amendments, respectively, to the Peterson Note;
each amendment extended the maturity dates to October 28, 2024 and November 30, 2024, respectively, and added a $
NOTE 8 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company is subject to various claims that arise in the ordinary course of business. Management believes that any liability of the Company that may arise out of or with respect to these matters will not materially adversely affect the financial position, results of operations, or cash flows of the Company.
Unproved Property Leases
The
Company holds interests in various leases related to the unproved properties of the South Salinas Project (see Note 6); two of the leases
are held with the same lessor. The first lease, which covers
The
second lease covers
| F-16 |
The
Company holds interests in various leases related to the unproved properties of the McCool Ranch Oil Field. These leases occur in two
parcels, “Parcel 1” and “Parcel 2”. Parcel 1 comprises ten leases and approximately
During
February and March of 2023, the Company entered into additional leases related to the unproved properties of the South Salinas Project
with two groups of lessors. The first group of leases covers
On
November 10, 2023, the Company entered into the ARLO Agreement with HSO for a term of nine months which allows the Company the exclusive
right to acquire up to a
On
December 29, 2023, the Company entered into an amendment to the ARLO Agreement, whereby the Company funded $
Per
the most recent amendment to the ARLO Agreement signed in September 2024, the Company has until December 10, 2024 to pay HSO an additional
$
Board of Directors Compensation
On
July 11, 2022, the Company’s Board of Directors approved compensation for each of the non-employee directors of the Company, which
would be effective upon the consummation of the IPO. Such compensation is structured as follows: an annual retainer of $ cash plus
an additional $ for each Board committee upon which the Director serves, each paid quarterly in arrears. Payment for this approved
compensation commenced upon successful completion of the Company’s IPO in April 2023; for the years ended October 31, 2024 and
2023, the Company has recognized $
| F-17 |
Agreements with Advisors
On
July 28, 2022, the Company entered into a placement agent agreement with the Placement Agent with Spartan Capital Securities, LLC (“Spartan”),
whereby Spartan agreed to serve as the exclusive agent, advisor or underwriter in any offering of securities of the Company for a one-year
term. The agreement provided for a $
On
October 4, 2023 and December 29, 2023, the Company entered into additional placement agent agreements with Spartan, whereby Spartan would
serve as the exclusive placement agent in connection with the closing of private placements. The agreements provided the agent with
Compliance with NYSE American
On February 26, 2024, the Company received written notice from the NYSE American LLC (“NYSE American”) indicating that the Company is not in compliance with the continued listing standard set forth in Section 1003(f)(v) of the NYSE American Company Guide (“Section 1003(f)(v)”) because the shares of the Company’s common stock, par value $ per share (the “Common Stock”) have been selling for a substantial period of time at a low price per share. The Notice has no immediate effect on the listing or trading of the Company’s Common Stock and the Common Stock will continue to trade on the NYSE American under the symbol “TPET” with the designation of “. BC” to indicate that the Company is not in compliance with the NYSE American’s continued listing standards. Additionally, the Notice does not result in the immediate delisting of the Company’s Common Stock from the NYSE American.
Pursuant to Section 1003(f)(v), the NYSE American staff (the “Staff”) determined that the Company’s continued listing is predicated on effecting a reverse stock split of its Common Stock or demonstrating sustained price improvement within a reasonable period of time, which the Staff determined to be no later than August 26, 2024.
On May 1, 2024, the NYSE American notified the Company that it had regained compliance with the NYSE American listing requirements with respect to Section 1003(f)(v) of the NYSE American Company Guide due to its shares of common stock demonstrating sustained price improvement.
NOTE 9 – INCOME TAXES
The Company accounts for income taxes under ASC 740-10, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.
Significant components of the Company’s deferred tax assets are summarized below.
| As of October 31, | As of October 31, | |||||||
| 2024 | 2023 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carry forwards | $ | $ | ||||||
| Total deferred tax asset | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| $ | $ | |||||||
As
of October 31, 2024 and 2023, the Company had approximately $
| F-18 |
The
Company recorded a valuation allowance in the full amount of its net deferred tax assets since realization of such tax benefits has been
determined by the Company’s management to be less likely than not. The valuation allowance increased $
A reconciliation of the statutory federal income tax benefit to actual tax benefit is as follows:
| As of October 31, | As of October 31, | |||||||
| 2024 | 2023 | |||||||
| Federal statutory blended income tax rates | ( | )% | ( | )% | ||||
| State statutory income tax rate, net of federal benefit | % | % | ||||||
| Change in valuation allowance | % | % | ||||||
| Effective tax rate | % | % | ||||||
As of the date of this filing, the Company has not filed its 2024 federal and state corporate income tax returns. The Company expects to file these documents as soon as practicable.
The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense.
NOTE 10 – NOTES PAYABLE
Notes payable as of October 31, 2024 and 2023 consisted of the following:
| As of | As of | |||||||
| October 31, 2024 | October 31, 2023 | |||||||
| Convertible note, net of discounts | $ | $ | ||||||
| Promissory notes, net of discounts | ||||||||
| Note payable – related party | ||||||||
| Total Notes payable | $ | $ | ||||||
Convertible note, net of discounts (October 2023 SPA)
On
October 4, 2023, the Company entered into a securities purchase agreement (the “October 2023 SPA”) with an investor; the
October 2023 SPA provides for loans in an aggregate principal amount of up to $
In
consideration for the investor’s funding of the first tranche, the Company issued i) a senior secured convertible promissory note
in the aggregate principal amount of $
Upon
the initial funding on October 4, 2023, the Company recorded gross proceeds of approximately $
On
December 18, 2023, December 29, 2023 and January 12, 2024, the Company made principal payments towards the first tranche in the amounts
of $
On
December 29, 2023, the Company entered into an amendment to the Second Tranche Note of the October 2023 SPA, which reduced the conversion
price of note and exercise price of warrant from $
To
assess for the change in relative fair value, the Company performed a Black Scholes Option Model calculation to quantify the fair value
of the common warrants under their original terms as of the modification date using the following assumptions: a share price of $,
an exercise price of $, an expected term of years, volatility of %, a dividend rate of % and a discount rate of
On
January 2, 2024, the second tranche of the October 2023 SPA was funded, and the Company recorded gross proceeds of approximately $
| F-19 |
On
February 1, 2024, February 16, 2024, March 22, 2024 and April 2, 2024, the Company made principal payments towards the first tranche
in the amounts of $
On
February 5, 2024, the Company entered into the first amendment to the First Tranche Note of the October 2023 SPA; such amendment provides
for
On
February 2, 2024 and February 5, 2024, the Company made principal payments towards the second tranche in the amounts of $
As
of April 2024, both tranches of the October 2023 SPA were fully repaid, and as of October 31, 2024 and 2023, the balance of the convertible
notes, net of discounts, was $ and $
March 2024 Debt Financing
The
Company executed a Securities Purchase Agreement, dated March 27, 2024 (the “SPA”) with an institutional investor (the “March
2024 Investor”), which March 2024 Investor signed and funded on April 5, 2024, and pursuant to which the Company raised gross proceeds
of $
In
connection with the March 2024 Debt Financing, the Company issued an unsecured promissory note to the March 2024 Investor, dated March
27, 2024, in the principal amount of $
On
September 30, 2024 and October 30, 2024, the Company made cash payments in the amounts of $
Note Payable – Related Party
On
March 26, 2024, the Company borrowed $
| F-20 |
On
September 26, 2024 and October 28, 2024, the Company entered into the first and second amendments, respectively, to the Peterson Note;
each amendment extended the maturity dates to October 28, 2024 and November 30, 2024, respectively, and added a $
April 2024 Convertible Debt Financings
On
April 24, 2024, the Company entered into an Amended and Restated Securities Purchase Agreement (the “A&R SPA”), pursuant
to which two institutional investors (the “April 2024 Investors”) provided an aggregate of $
Pursuant
to the provisions of the A&R SPA, the Company granted “piggy-back registration rights” to the April 2024 Investors for
the registration for resale of the Commitment Shares and the Conversion Shares (defined hereafter). Additionally, until 18 months after
the later of (i) August 16, 2024 or the full repayment of the April 2024 Investors Notes (defined hereafter), the Company provided the
April 2024 Investors with the right to jointly participate in future financings in an amount up to
In
connection with the April 2024 Financings, the Company issued Senior Secured Convertible Promissory Notes to the April 2024 Investors
in the aggregate principal amount of $
The
April 2024 Investors Notes are convertible into shares common stock of the Company (the “Conversion Shares”) at a per share
conversion price of $
The Company also granted to the April 2024 Investors a senior security interest in and to all of the Company’s assets and non-real estate properties, subject to certain exceptions, securing repayment of the April 2024 Investors Notes as set forth in an Amended and Restated Security Agreement, dated April 24, 2024, between the Company and the April 2024 Investors (the “A&R Security Agreement”).
On
August 6, 2024, in connection with a financing dated on that date, the Company made two cash payments of $
On
August 14, 2024, the Company entered into an amendment to the April 2024 Debt Financings to extend the maturity dates of the notes from
August 16, 2024 to September 16, 2024; the amendment also provided for the accrual of interest on the outstanding principal balance of
the notes at a rate of
On
October 1, 2024, the Company made aggregate principal payments towards the April 2024 Debt Financings in the amount of $
On
October 18, 2024, the Company made a final principal payment towards the April 2024 Debt Financings in the amount of $
As
of October 31, 2024 and 2023, the balance of the April 2024 Debt Financings was $
| F-21 |
June 2024 Convertible Debt Financings
On
June 27, 2024, the Company entered into a securities purchase agreement (the “June 2024 SPA”) with the same April 2024 Investors
(the “June 2024 Investors”). Pursuant to the terms and conditions of the June 2024 SPA, each June 2024 Investor provided
financing of $
Commencing
on the 90th day following the original issue date of the June 2024 Notes, the Company is required to pay to the June 2024
Investors the outstanding principal balance under the June 2024 Notes in monthly installments, on such date and each one (1) month anniversary
thereof, in an amount equal to
The
Company may repay all or any portion of the outstanding principal amount of the June 2024 Notes, subject to a
On
September 26, 2024, October 1, 2024, and October 30, 2024, the Company made principal payments towards the June 2024 Notes in the amounts
of $
As
of October 31, 2024 and 2023, the balance of the June 2024 Notes was $
August 1, 2024 Financing
On
August 1, 2024, the Company entered into a Securities Purchase Agreement (the “August 1st SPA”) with an investor,
pursuant to which the Company raised gross proceeds of $
As
of October 31, 2024 and 2023, the balance of the August 1, 2024 Financing was $
August 6, 2024 Financing
On
August 6, 2024, the Company entered into a Securities Purchase Agreement (the “August 6th SPA”) with an investor,
pursuant to which the Company raised gross proceeds of $
| F-22 |
Additionally,
in conjunction with two prior investors and the April 2024 Debt Financing, the Company will make two payments of $
As
of October 31, 2024 and 2023, the balance of the August 6, 2024 Financing was $
NOTE 11 – STOCKHOLDERS’ EQUITY
Common Shares
The Company is authorized to issue an aggregate of shares. The authorized capital stock is divided into: (i) shares of common stock having a par value of $ per share and (ii) shares of preferred stock having a par value of $ per share.
In
December 2022, the Company entered into subscription agreements with two accredited investors for the aggregate issuance of common
shares for aggregate gross cash proceeds of $
In
April 2023, the Company consummated its IPO and sold shares of common stock at a public offering price of $ per share for
gross proceeds of $
In
April 2023, upon consummation of its IPO, the Company also issued commitment shares, the number of which was calculated by taking
On April 20, 2023, the Company issued shares of common stock at a fair value of $ per share to consultants in exchange for services rendered; the aggregate amount of $ was recorded as fees for professional services as of the end of the period.
On
May 1, 2023, the Company issued restricted shares to six of its employees pursuant to the Plan (see Note 6); the shares were recorded
at a fair value of $ per share for an aggregate grant date fair value of $
On
May 2, 2023, June 23, 2023 and July 11, 2023, the Company issued , and shares of common stock, par value of $,
respectively, at a fair value of $, $ and $, respectively, to consultants in exchange for services rendered; the aggregate
amounts of $
On
June 30, 2023, the Company issued shares of common stock, par value of $, at a fair value of $ to Marcum, LLP for an
aggregate amount of $
On
June 30, 2023,
On
July 20, 2023, the Company issued restricted shares pursuant to the Plan to Mr. Ingriselli (see Note 6) at a fair value of $
per share for an aggregate fair value of $
On
September 2, 2023, the Company issued shares of its $ par common stock to four outside Directors with a fair value of $
per share for a grant date value of $
On
October 16, 2023, pursuant to the Peterson Employment Agreement, the Company issued Mr. Peterson is a grant of shares of restricted
stock pursuant to the Plan at a fair value of $ per share for a grant date fair value of $
On
November 11, 2023, the Company entered into an agreement with a vendor to provide marketing and distribution services for a period of
six months, with compensation in the form of shares. The Company issued the vendor common shares at a fair market value
price of $ per share for a total amount of $
| F-23 |
On
December 18, 2023, December 29, 2023 and January 12, 2024, the Company issued conversion shares which numbered , and ,
respectively, at fair values per share of $
On
February 1, 2024, February 16, 2024, March 22, 2024 and April 2, 2024, the Company issued conversion shares numbering
On
February 2, 2024 and February 5, 2024, the Company made principal payments towards the second tranche in the amounts of $
On
March 20, 2024, the Company issued shares of common stock to a consultant as a settlement for non-performed marketing services
per an agreement dated November 2021; such shares were issued at a fair value of $ per share for a total value of $
On
March 26, 2024, the Company entered into an agreement with consultants to provide marketing services; the agreement has an effective
date of April 26, 2024 and a term from April 1, 2024 through June 30, 2024. The terms provide for a one-time cash payment of $
On
April 16, 2024 and April 24, 2024, the Company issued shares of common stock and shares of common stock respectively, to
the April 2024 Investors as and for a commitment fee in connection with the April 2024 Financings. The commitment shares were issued
at fair values of $
On
April 29, 2024, the Company entered into an agreement with consultants to provide marketing services; the agreement has a term from April
29, 2024 through October 29, 2024. The terms provide for a $
On
September 9, 2024, the Company entered into a media advertising agreement with a consultant; the agreement has an initial term of sixty
days and provides for a $
On
September 26, 2024, October 1, 2024, and October 30, 2024, the Company made principal payments towards the June 2024 Notes in the amounts
of $
On
October 1, 2024, the Company made aggregate principal payments towards the April 2024 Debt Financings in the amount of $
On
October 18, 2024, the Company made a final principal payment towards the April 2024 Debt Financings in the amount of $
| F-24 |
Warrants
Other Warrants
In December 2022, the Company entered into subscription agreements with two accredited investors for the aggregate issuance of common shares, as well as warrants to purchase additional shares up to the initial subscription amount; the warrants are exercisable for two years and have an exercise price equal to fifty percent of the price per share the Company sells its common shares in its IPO. The warrants were determined to be equity classified and were recorded at fair value in additional paid-in capital on the balance sheet for the period. Their fair value was based on the price the third-party investors paid for the original subscription agreements described above.
In
April 2023, the Company also issued warrants to purchase
October 2023 SPA with Warrants
On
October 4, 2023 and December 29, 2023, the Company entered into placement agent agreements with Spartan (see Note 8 for further information)
for their role in connection with the two tranche fundings related to the October 2023 SPA; among other things, the agreements provide
the agent with equity-classified warrants to purchase a number of common shares equal to 5% of the number of common shares initially
issuable upon conversion of each note tranche. For the first tranche, the Company issued to Spartan warrants to purchase
On
January 2, 2024, the second tranche of the October 2023 SPA was funded (see Note 9 for further information); in connection with this
funding, the Company issued to the investor equity warrants to purchase up to
June 2024 SPA with Warrants
On
June 27, 2024, the Company entered into the June 2024 SPA with the June 2024 Investors (see Note 9 above); pursuant to the terms and
conditions of the agreement, in consideration for providing financing, the Company issued to each June 2024 Investor a warrant to purchase
| F-25 |
A summary of the warrant activity during the years ended October 31, 2024 and 2023 is presented below:
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | |||||||||||||||
| Number of | Exercise | Life in | Intrinsic | |||||||||||||
| Warrants | Price | Years | Value | |||||||||||||
| Outstanding, November 1, 2022 | $ | - | $ | |||||||||||||
| Issued | - | |||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Cancelled | ||||||||||||||||
| Expired | ( | ) | ||||||||||||||
| Outstanding, November 1, 2023 | ||||||||||||||||
| Issued | - | |||||||||||||||
| Exercised | - | - | ||||||||||||||
| Cancelled | - | - | ||||||||||||||
| Expired | - | - | ||||||||||||||
| Outstanding, October 31, 2024 | $ | $ | ||||||||||||||
| Exercisable, October 31, 2024 | $ | $ | ||||||||||||||
A summary of outstanding and exercisable warrants as of October 31, 2024 is presented below:
| Warrants Outstanding | Warrants Exercisable | |||||||||||||
| Weighted | ||||||||||||||
| Average | ||||||||||||||
| Exercise | Number of | Remaining | Number of | |||||||||||
| Price | Shares | Life in Years | Shares | |||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| F-26 |
Stock Options
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | |||||||||||||||
| Number of | Exercise | Life in | Intrinsic | |||||||||||||
| Options | Price | Years | Value | |||||||||||||
| Outstanding, November 1, 2022 | $ | - | $ | |||||||||||||
| Issued | ||||||||||||||||
| Outstanding, November 1, 2023 | ||||||||||||||||
| Issued | - | |||||||||||||||
| Exercised | - | - | ||||||||||||||
| Cancelled | - | - | ||||||||||||||
| Expired | - | - | ||||||||||||||
| Outstanding, October 31, 2024 | $ | $ | ||||||||||||||
| Exercisable, October 31, 2024 | $ | $ | ||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||
| Weighted | ||||||||||||||
| Average | ||||||||||||||
| Exercise | Number of | Remaining | Number of | |||||||||||
| Price | Shares | Life in Years | Shares | |||||||||||
| $ | ||||||||||||||
On August 15, 2023, the Company issued five-year options to purchase shares of the Company’s common stock to a consultant of the Company, pursuant to the Plan. The options have an exercise price of $ per share and vest monthly over a period of months, beginning on the vesting commencement date. The options have a grant date fair value of $, which will be recognized over the vesting term.
| Risk free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Expected dividends | % |
| F-27 |
NOTE 12 – SUBSEQUENT EVENTS
In accordance with ASC 855 – Subsequent Events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events and transactions that occurred after October 31, 2024, through the date the financial statements were issued. Except for the following, there are no subsequent events identified that would require disclosure in the financial statements.
Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard from the NYSE American
On November 5, 2024, the Company received notice from NYSE American that NYSE American had halted trading in the shares of the Common Stock until the effectiveness of the reverse stock split the Company intended to effect because its common stock was consistently selling at a low selling price per share in violation of Section 1003(f)(v) of the NYSE American Company Guide. NYSE American informed the Company that it would attempt to reopen trading in the Common Stock on November 15, 2024, which is when the common stock is expected to begin trading on a post-split basis, provided that NYSE American no longer deems the selling price of the Common Stock to be too low.
Reverse Stock Split
On November 14, 2024, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a Reverse Stock Split; once effective, every twenty (20) shares of the Company’s issued and outstanding common stock will automatically be converted into one share of common stock, without any change in the par value per share. In addition, (i) a proportionate adjustment will be made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options and warrants to purchase shares of common stock, to the extent that the exercise price of such warrants is not based solely on the market price of the common stock at the time of exercise, (ii) a proportionate adjustment will be made to any fixed conversion prices for other convertible securities of the Company, including any conversion floor prices and (iii) the number of shares reserved for issuance pursuant to the Company’s equity incentive plans will also be reduced proportionately. Any fraction of a share of common stock that would be created as a result of the Reverse Stock Split will be rounded up to the nearest whole share.
The Reverse Stock Split became effective as of 4:30 p.m., Eastern Time, on November 14, 2024, and the Company’s common stock began trading on a split-adjusted basis when the market opened on November 15, 2024.
Letter of Intent for Working Interest in NovaCor Exploration Ltd.
On December 19, 2024, the Company issued a press release announcing that it entered into a non-binding letter of intent relating to the acquisition of a 100% working interest in certain petroleum and natural gas assets held by NovaCor Exploration Ltd., which are located in the Lloydminster, Saskatchewan heavy oil region in Canada.
Independent Contractor Agreement with Greg Overholtzer
On December 31,
2024, the employment agreement between the Company and Mr. Overholtzer ended and on January 1, 2025, the Company entered into an independent
contractor agreement with Mr. Overholtzer, under which he continues to serve as the Chief Financial Officer of the Company and is paid
a monthly fee of $
Consulting Agreement with Redwood Empire Financial Communications, LLC
On January 1, 2025, the Company entered into a
consulting agreement with Redwood Empire Financial Communications, LLC for investor communications services; the agreement includes monthly
compensation of $
| F-28 |