Trio Petroleum (TPET) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Trio Petroleum Corp ITEM 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Trio Petroleum Corp. for the periods ended April 30, 2025, and October 31, 2024, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's financial position, performance, and significant accounting policies Condensed Consolidated Balance Sheets The balance sheet shows an increase in total assets and stockholders' equity, while total liabilities decreased. Cash significantly increased, and oil and gas properties not subject to amortization also grew Condensed Consolidated Balance Sheets | Metric | April 30, 2025 | October 31, 2024 | | :--------------------------------- | :------------- | :--------------- | | Total Assets | $13,770,810 | $11,684,338 | | Total Liabilities | $2,323,141 | $2,641,790 | | Total Stockholders' Equity | $11,447,669 | $9,042,548 | | Cash | $1,457,056 | $285,945 | | Oil and gas properties (non-amort.)| $12,032,132 | $11,119,119 | | Promissory notes, net of discounts | $15,361 | $742,852 | | Convertible note, net of discounts | $573,770 | $- | | Deferred consideration payable | $335,314 | $- | Condensed Consolidated Statements of Operations The company reported a reduced net loss for both the three and six months ended April 30, 2025, compared to the prior year periods, primarily due to lower operating and other expenses, despite a decrease in net revenues Condensed Consolidated Statements of Operations | Metric | Three Months Ended April 30, 2025 | Three Months Ended April 30, 2024 | Six Months Ended April 30, 2025 | Six Months Ended April 30, 2024 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Revenues, net | $23,271 | $72,923 | $34,090 | $72,923 | | Net loss | $(1,563,752) | $(4,045,935) | $(3,179,277) | $(5,747,983) | | Basic Net Loss per Common Share | $(0.22) | $(1.98) | $(0.53) | $(3.18) | | Diluted Net Loss per Common Share | $(0.22) | $(1.98) | $(0.53) | $(3.18) | - Net loss for the three months ended April 30, 2025, improved by 61.4% compared to the prior year, while for the six months, it improved by 44.7%[14] - Revenues, net, decreased by 68.1% for the three months and 53.3% for the six months ended April 30, 2025, compared to the prior year[14] Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased significantly from October 31, 2024, to April 30, 2025, driven by substantial increases in additional paid-in capital from common stock issuances, partially offset by the accumulated deficit Condensed Consolidated Statements of Changes in Stockholders' Equity | Metric | April 30, 2025 | October 31, 2024 | | :--------------------------------- | :------------- | :--------------- | | Total Stockholders' Equity | $11,447,669 | $9,042,548 | | Common Stock Shares Issued | 7,498,855 | 3,203,068 | | Additional Paid-in Capital | $34,675,039 | $29,125,917 | | Accumulated Deficit | $(23,252,956) | $(20,073,679) | - The increase in stockholders' equity was primarily due to the issuance of common shares in connection with an ATM agreement ($3,475,648), promissory note payments ($299,569), asset acquisition ($747,681), and Note Exchange Agreement ($392,688)[15][16] Condensed Consolidated Statements of Cash Flows The company experienced a net increase in cash for the six months ended April 30, 2025, primarily due to significant cash provided by financing activities, which offset cash used in operating and investing activities Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended April 30, 2025 | Six Months Ended April 30, 2024 | | :--------------------------------- | :------------------------------ | :------------------------------ | | Net cash (used in)/provided by operating activities | $(1,660,469) | $682,525 | | Net cash used in investing activities | $(453,616) | $(1,018,704) | | Net cash provided by/(used in) financing activities | $3,250,350 | $(1,005,098) | | Effect of foreign currency exchange | $34,846 | $- | | Net change in cash | $1,171,111 | $(1,341,277) | | Cash - End of period | $1,457,056 | $220,647 | - Net cash provided by financing activities significantly increased from a net use of $(1,005,098) in 2024 to a net provision of $3,250,350 in 2025[19][216] - Cash used in operating activities shifted from a net provision of $682,525 in 2024 to a net use of $(1,660,469) in 2025[19][216] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations of the company's organization, significant accounting policies, financial condition, and specific transactions, including acquisitions, related party dealings, debt, equity, and subsequent events NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS Trio Petroleum Corp. is a California-based oil and gas exploration and development company with operations in California, Utah, and Saskatchewan, Canada. It was formed to acquire and operate oil and gas projects, initially focusing on the South Salinas Project, and has recently expanded with the formation of Trio Petroleum Canada and the acquisition of Novacor assets in Saskatchewan. The company is an "emerging growth company" and has elected to use the extended transition period for new accounting standards - Trio Petroleum Corp. is headquartered in Malibu, California, with operations in Monterey County, California, Uintah County, Utah, and Lloydminster, Saskatchewan, Canada[21] - The company began revenue-generating operations with the McCool Ranch Oil Field restart on February 22, 2024, and recognized its first revenues from Saskatchewan assets in the quarter ended April 30, 2025[21] - On March 28, 2025, the company formed Trio Petroleum Canada, Corp., a wholly-owned subsidiary[22] - The company acquired an approximate 85.775% working interest (68.62% net revenue interest) in the 9,300-acre South Salinas Project, which currently has no proved reserves[23][24] - On April 4, 2025, Trio Canada agreed to acquire certain oil and gas assets from Novacor Exploration Ltd. in the Lloydminster, Saskatchewan heavy oil region for US$650,000 cash and 526,536 common shares[25][95][96] - The company is an "emerging growth company" and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[26][27] NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's key accounting policies, including basis of consolidation, presentation, use of estimates, foreign currency translation, cash and cash equivalents, prepaid expenses, loan receivables, debt issuance costs, oil and gas assets (successful efforts method), asset retirement obligations, revenue recognition, related parties, income taxes, fair value measurements, net loss per share, and environmental expenditures - The condensed consolidated financial statements include Trio Petroleum, Corp. and its wholly-owned Canadian subsidiary, Trio Canada[28] - The company applies the successful efforts method of accounting for crude oil and natural gas properties, expensing exploration costs as incurred and capitalizing costs for successful exploratory and development wells[41][42] - Unproved oil and natural gas properties are not subject to amortization and are assessed periodically for impairment, while proved properties are subject to depreciation, depletion, and amortization (DD&A) using the unit-of-production method[45][46] - Asset Retirement Obligations (ARO) for future plugging and abandonment expenses are recorded as a liability at fair value upon acquisition of wells, with a corresponding increase in oil and natural gas properties[49][51] - Revenue from oil sales is recognized when control transfers to the customer at the time of delivery, measured based on the contract price[54][55] - The company's net deferred tax asset has been fully reserved as of April 30, 2025, and October 31, 2024[58] - Fair value measurements for non-recurring items like asset acquisitions and ARO primarily use Level 3 inputs, which are unobservable and require significant management judgment[63][64][65][66][70] NOTE 3 – GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS The company's accumulated deficit of $23,252,956 and ongoing losses raise substantial doubt about its ability to continue as a going concern for the next twelve months. Management plans to address this by generating sufficient sales revenue and/or raising additional capital through equity or debt financing, though there's no assurance of success - As of April 30, 2025, the company had an accumulated deficit of $23,252,956 and a working capital deficit of $531,983[75][76] - The company has experienced losses from continuing operations and its cash balance is insufficient to cover projected operating and capital requirements for the next twelve months[76] - Management plans to raise additional funds by issuing common stock or other equity securities or obtaining additional debt financing, but there is no assurance of successful completion on acceptable terms[76] - These conditions raise substantial doubt about the company's ability to continue as a going concern[76] NOTE 4 – REVENUE FROM CONTRACTS WITH CUSTOMERS The company's revenue is solely from oil sales, which significantly decreased for both the three and six months ended April 30, 2025, compared to the prior year. Revenues are concentrated in California and Saskatchewan, making them susceptible to regional market and regulatory changes Revenue from Contracts with Customers | Revenue Type | Three Months Ended April 30, 2025 | Three Months Ended April 30, 2024 | Six Months Ended April 30, 2025 | Six Months Ended April 30, 2024 | | :----------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Oil sales | $23,271 | $72,923 | $34,090 | $72,923 | - The company's revenue is primarily generated from oil and gas sales in California, United States, and Saskatchewan, Canada[79] - 100% of total revenue comes from customers located in these regions, making it susceptible to changes in state and provincial regulations, market conditions, and environmental policies[79] NOTE 5 – OIL AND NATURAL GAS PROPERTIES The company's oil and gas properties not subject to amortization increased. It incurred exploration costs and capitalized drilling and acquisition costs. Strategic decisions included abandoning certain South Salinas and McCool Ranch leases, while acquiring Novacor assets in Saskatchewan, which now house all five producing wells. The option for additional interest in Asphalt Ridge expired Oil and Gas Properties – Not Subject to Amortization | Property Type | April 30, 2025 | October 31, 2024 | | :--------------------------------- | :------------- | :--------------- | | Oil and gas properties – not subject to amortization | $12,032,132 | $11,119,119 | Exploration Costs | Exploration Costs | Three Months Ended April 30, 2025 | Three Months Ended April 30, 2024 | Six Months Ended April 30, 2025 | Six Months Ended April 30, 2024 | | :---------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Aggregated costs | $11,161 | $40,223 | $35,882 | $124,817 | - The company incurred approximately $1.5 million in capitalized costs for drilling exploratory wells and acquisition costs for the six months ended April 30, 2025[83] - The company abandoned additional oil and gas leases related to the South Salinas Project, expensing $73,806 in associated costs[88] - The McCool Ranch Oil Field leases were abandoned, resulting in a write-off and expense of $500,614 in capitalized costs for the period ended April 30, 2025[90] - The option to acquire an additional 17.75% working interest in the Asphalt Ridge Leases expired on May 10, 2025; the company retains its existing 2.25% interest[94] - The Novacor Acquisition in Saskatchewan was accounted for as an asset acquisition, recording $1,406,081 on the balance sheet, comprising cash, common shares, and deferred consideration[98] NOTE 6 – RELATED PARTY TRANSACTIONS The company has ongoing related party transactions, primarily with Trio LLC for the South Salinas Project operations and past McCool Ranch acquisition (now abandoned). It also details restricted stock units and shares issued to directors, executives, and consultants, as well as a loan from its former CEO (repaid) and a loan to its Canadian subsidiary - Trio LLC operates the South Salinas Project, with the company holding an 85.775% working interest and Trio LLC holding 3.8%[101] - The McCool Ranch Oil Field acquisition from Trio LLC was abandoned, leading to a $500,614 write-off of capitalized costs[102][103] - Stock-based compensation for restricted stock units and shares issued to directors, executives, and consultants totaled $115,652 for the three months and $605,966 for the six months ended April 30, 2025[104][105][106][107][109][110] - A $125,000 unsecured promissory note from former CEO Michael L. Peterson was fully paid off on November 25, 2024, for $143,516[112][113] - On April 4, 2025, the company made a $1,131,000 loan to its wholly-owned subsidiary, Trio Canada, at 12% interest, with $334,081 used for the Novacor acquisition[115][116] NOTE 7 – COMMITMENTS AND CONTINGENCIES The company faces various claims in the ordinary course of business, but management believes they will not materially affect financial position. It details commitments related to unproved property leases (South Salinas, McCool Ranch, Asphalt Ridge), proved property leases (Saskatchewan), Board of Directors compensation, and agreements with advisors - The company holds various unproved property leases for the South Salinas Project, with some additional leases abandoned during the reporting period and associated costs expensed[119][120][121] - All McCool Ranch Oil Field leases (approximately 800 acres) were abandoned as of April 30, 2025, and expensed[122] - The option to acquire an additional 17.75% working interest in the Asphalt Ridge Leases expired on May 10, 2025, due to non-exercise; the company retains its existing 2.25% interest[124][125] - In April 2025, the company acquired oil and gas lease rights for four proved properties (320 net acres) in Saskatchewan, Canada, all held by production[126] - Board of Directors compensation includes an annual retainer of $50,000 cash plus $10,000 per committee, with $102,508 and $161,675 recognized for the three and six months ended April 30, 2025, respectively[127] - The company received a notice from NYSE American on November 5, 2024, regarding a low selling price per share, leading to a trading halt until a reverse stock split is effective[130] NOTE 8 – NOTES PAYABLE The company's total notes payable decreased significantly from October 31, 2024, to April 30, 2025, primarily due to the full satisfaction of promissory notes and related party notes, partially offset by new convertible note debt Notes Payable | Notes Payable Category | April 30, 2025 | October 31, 2024 | | :--------------------------------- | :------------- | :--------------- | | Promissory notes, net of discounts | $15,361 | $742,852 | | Payable – related party | $- | $115,666 | | Convertible note, net of discounts | $573,770 | $- | | Note Payable, related party | $- | $135,000 | | Total Notes payable | $589,131 | $993,518 | - The March 2024 Debt Financing promissory note of $211,500 was fully satisfied by November 30, 2024[133][135] - The Note Payable – Related Party (from former CEO) of $125,000 was fully paid off on November 25, 2024[136][138] - The June 2024 Convertible Debt Financings, totaling $720,000 gross proceeds, were fully satisfied by January 7, 2025, through cash and share conversions, resulting in losses from make-whole payments and share conversions[139][144][145] - The August 6, 2024 Financing promissory note was exchanged for 230,992 common shares on February 10, 2025, resulting in a debt extinguishment loss of $141,534[150] - The April 2025 Financing involved an Amended and Restated Unsecured Original Discount Convertible Promissory Note with an aggregate principal amount of $712,941, resulting in $606,000 in aggregate funding, with a balance of $573,770 as of April 30, 2025[153][155] NOTE 9 – STOCKHOLDERS' EQUITY Stockholders' equity increased due to common share issuances for consulting services, debt exchange, and asset acquisition. The company also details warrant and stock option activity, showing a decrease in outstanding warrants and consistent stock options - On January 1, 2025, 20,000 common shares were issued for consulting services, valued at $28,000[156] - On February 10, 2025, 230,992 common shares were issued for a debt exchange, valued at $392,686, resulting in a $141,534 debt extinguishment loss[157] - On April 11, 2025, 526,536 common shares were issued, valued at $747,681, in connection with the Novacor asset acquisition[158] - Trio Canada issued 1,071,886 Series 1 Preferred shares (redeemable at CAD$1.00) valued at US$754,000 on April 4, 2025[159] Warrant Activity | Warrant Activity | November 1, 2024 | April 30, 2025 | | :--------------------------------- | :--------------- | :------------- | | Warrants Outstanding | 191,994 | 171,994 | | Weighted Average Exercise Price | $15.24 | $13.52 | Stock Option Activity | Stock Option Activity | November 1, 2024 | April 30, 2025 | | :--------------------------------- | :--------------- | :------------- | | Options Outstanding | 6,000 | 6,000 | | Weighted Average Exercise Price | $10.46 | $10.46 | NOTE 10 – SUBSEQUENT EVENTS Key subsequent events include a non-binding Letter of Intent with HSO for a potential acquisition in Utah, the expiration of the Asphalt Ridge leasehold option, the consummation of the second closing of the Novacor Acquisition, and the formal abandonment of McCool Ranch properties - On May 15, 2025, the company entered a non-binding Letter of Intent with HSO for the potential acquisition of 2,000 acres at P.R. Spring, Utah, involving 1,492,272 restricted shares and $850,000 cash at closing, plus a $150,000 non-refundable option payment[166] - Effective May 10, 2025, the option to acquire the remaining 17.75% working interest in the Asphalt Ridge Leases expired due to non-exercise; the company retains its existing 2.25% interest[167] - The Second Closing of the Novacor Acquisition was consummated on May 21, 2025, with $325,000 cash delivered to the seller[168] - As of May 27, 2025, the company executed a Termination Agreement to abandon all operations and leases at the McCool Ranch properties, resulting in a $500,614 write-off expensed in the April 30, 2025 financial statements[169] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, operational results, and future outlook. It highlights a strategic shift from California to more economically viable opportunities in Utah and Saskatchewan, details recent acquisitions and abandonments, discusses going concern issues, and analyzes revenue and expense trends Overview Trio Petroleum Corp. is an oil and gas exploration and development company with operations in California, Utah, and Saskatchewan. It began generating revenue in February 2024 from McCool Ranch and recently from Saskatchewan assets. The company is strategically shifting focus from California due to high costs to more viable opportunities in Utah and Saskatchewan, aiming for immediate cash flow or transformative growth - The company has strategically shifted its geographic focus beyond California to Utah and Saskatchewan due to rising drilling costs and negative profitability impacts in California[180] - Revenue-generating operations began in February 2024 with the McCool Ranch Oil Field and recently from newly acquired properties in Saskatchewan, Canada, during the period ended April 30, 2025[177] - The company's Canadian project has the potential to double production through workovers and boasts low lift costs of $10 per barrel[178] - The company holds an approximate 85.775% working interest (68.62% net revenue interest) in the 9,300-acre South Salinas Project[179] South Salinas Project Efforts to obtain permits for the South Salinas Project are ongoing. Production testing at the HV-3A discovery well restarted in March 2024, with oil production occurring, but the well is currently idled pending assessment to increase production rates and discussions for a joint venture - The company is progressing on obtaining conditional use permits and a full field development permit from Monterey County, as well as a water disposal permit from CalGEM and the California Water Boards for the South Salinas Project[182] - Production testing at the HV-3A discovery well restarted on March 22, 2024, with oil production occurring, but the well is currently idled[182] - The company is assessing steps to increase the HV-3A well's gross production rate and is in discussions with local oil and gas companies for a joint venture[182] McCool Ranch Oil Field The company acquired a 22% working interest in McCool Ranch Oil Field in October 2023, restarting production in February 2024. However, due to high natural gas prices and water disposal costs in California, cyclic-steam operations became uneconomical. Consequently, the company terminated operations and abandoned all leases on May 27, 2025, writing off $500,614 in capitalized costs - The company acquired an approximate 22% working interest in the McCool Ranch Oil Field in October 2023, with initial production restarting on February 22, 2024[183][184] - Operations at McCool Ranch were terminated, and all related leases abandoned on May 27, 2025, due to high natural gas prices and water disposal costs in California making cyclic-steam operations uneconomical[184] - Capitalized costs totaling $500,614 were written off and expensed in the statement of operations for the period ended April 30, 2025[184] Asphalt Ridge Option Agreement and the Lafayette Energy Leasehold Acquisition and Development Option Agreement The company acquired an option for up to a 20% interest in Asphalt Ridge leases, initially funding $225,000 for a 2.25% working interest. However, it decided not to exercise the option for the remaining 17.75% interest, retaining only its existing 2.25% stake - The company acquired an option to purchase up to a 20% working interest in Asphalt Ridge leases in northeastern Utah[185] - An initial funding of $225,000 secured a 2.25% working interest in the initial 960 acres[186] - The company decided not to exercise the option to acquire an additional 17.75% working interest, retaining only its existing 2.25% interest[186] Novacor Asset Purchase Agreement The company, through its subsidiary Trio Canada, acquired Novacor's oil and gas assets in Saskatchewan for US$650,000 cash and 526,536 common shares. The acquisition was completed in two closings, with all five of the company's currently active wells now located in this new property - On April 4, 2025, Trio Petroleum Canada, Corp. (a wholly-owned subsidiary) entered an Asset Purchase Agreement to acquire Novacor Exploration Ltd.'s oil and gas assets in the Lloydminster, Saskatchewan heavy oil region[187] - The total purchase price was US$650,000 in cash and the issuance of 526,536 shares of common stock[187] - The Novacor Acquisition was consummated in two closings, completed on May 22, 2025[187] - All five of the company's currently active wells are located in the newly acquired Novacor property[187] P.R. Spring Letter of Intent and Option The company entered a non-binding LOI with HSO for the potential acquisition of 2,000 acres at P.R. Spring, Utah, involving restricted shares and cash. A non-refundable $150,000 option payment was made, and the LOI is contingent on achieving a minimum sustained production rate from two Asphalt Ridge wells by May 15, 2026 - On May 15, 2025, the company entered a non-binding Letter of Intent (LOI) with Heavy Sweet Oil LLC (HSO) for the potential acquisition of 2,000 acres of oil and gas properties at P.R. Spring, Uintah Basin, Utah[188] - The LOI contemplates the issuance of 1,492,272 restricted shares of common stock and a payment of $850,000 at closing[188] - A non-refundable $150,000 option payment was made to HSO upon signing the LOI[188] - The LOI is contingent on evidence of a minimum sustained production rate of 40 barrels per day for a continuous 30-day period from two wells at Asphalt Ridge by May 15, 2026[188] Carbon Capture and Storage Project as part of Company's South Salinas Project The company is initiating a Carbon Capture and Storage (CCS) project at its South Salinas Project, leveraging deep geologic zones and existing wells for CO2 injection. This initiative aims to reduce its carbon footprint and potentially establish a CO2 storage hub, with discussions ongoing with third parties - The company is taking initial steps to launch a Carbon Capture and Storage (CCS) project as part of the South Salinas Project[189] - The South Salinas Project is considered ideal for CCS due to thick geologic zones (e.g., Vaqueros Sand, ~500' thick) about two miles deep and four existing deep wells suitable for CO2 injection[189] - The CCS project aims to reduce the company's carbon footprint by sequestering CO2 and potentially establish a CO2 storage hub and/or Direct Air Capture (DAC) hub[189] - Discussions have been opened with third parties interested in participating to reduce their greenhouse gas emissions[189] Going Concern Considerations The company's accumulated deficit of $23,252,956 and ongoing operating losses raise substantial doubt about its ability to continue as a going concern. It relies on external financing and equity issuances to fund operations and future development, with no assurance of securing necessary capital on favorable terms - As of April 30, 2025, the company has an accumulated deficit of $23,252,956 and a working capital deficit of $531,983[190] - The company incurred net losses of $1,563,752 for the three months and $3,179,277 for the six months ended April 30, 2025, and used $1,660,469 in cash from operating activities[190] - There is substantial doubt regarding the company's ability to continue as a going concern due to insufficient revenue to cover operating costs and dependence on private equity and external financing[191] - The company expects to require additional funding for drilling, development, and operating costs, with no assurance that future financing can be successfully completed on a timely basis or on acceptable terms[192] Factors and Trends Affecting Our Business and Results of Operations The company acknowledges that global economic trends, commodity price fluctuations, political considerations, and tariffs can impact its cash flow and profitability. It aims to mitigate these factors through low lift costs, cost management, and efficient production, while its growth depends on continued access to capital markets - Global economic trends, fluctuations in global oil prices, political considerations, and tariffs can significantly impact the company's cash flow and profitability[196] - Mitigating factors include the company's relatively low lift costs and a continued commitment to cost management and efficient production techniques[196] - The company's ability to grow its business is largely dependent on continued access to receptive capital markets[196] Emerging Growth Company Status The company is an "emerging growth company" under the JOBS Act, allowing it to take advantage of certain exemptions from reporting requirements, including auditor attestation and executive compensation disclosures. It has elected to use the extended transition period for new accounting standards, which may affect comparability with other public companies - The company is an "emerging growth company" as defined in Section 2(a) of the Securities Act, modified by the JOBS Act[197] - It takes advantage of exemptions from various reporting requirements, such as auditor attestation requirements of Section 404(b) of Sarbanes-Oxley Act and reduced executive compensation disclosures[197] - The company has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards, meaning it adopts them at the same time as private companies[197] - This election may make comparison of its condensed consolidated financial statements with other public companies difficult due to potential differences in accounting standards[197] Results of Operations The company's net loss significantly decreased for both the three and six months ended April 30, 2025, compared to the prior year, primarily due to substantial reductions in operating and other expenses, despite a decline in net revenues Three Months Ended April 30, 2025 compared to the Three Months Ended April 30, 2024 (unaudited) For the three months ended April 30, 2025, the net loss decreased by 61.4% to $(1,563,752), primarily driven by a $1.1 million reduction in total operating expenses and a $1.4 million decrease in other expenses, despite a 68.1% decline in net revenues Three Months Ended April 30, 2025 compared to the Three Months Ended April 30, 2024 | Metric | Three Months Ended April 30, 2025 | Three Months Ended April 30, 2024 | Change ($) | % Change | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :------- | | Revenues, net | $23,271 | $72,923 | $(49,652) | (68.1)% | | Gross profit | $14,009 | $72,923 | $(58,914) | (80.8)% | | Total operating expenses | $882,988 | $2,021,514 | $(1,138,526)| (56.3)% | | Loss from operations | $(868,979) | $(1,948,591) | $1,079,612 | (55.4)% | | Total other expenses | $694,773 | $2,097,344 | $(1,402,571)| (66.9)% | | Net loss | $(1,563,752) | $(4,045,935) | $2,482,183 | (61.4)% | - Revenues decreased due to the termination of McCool Ranch operations, with current revenues from newly acquired Saskatchewan assets[200] - General and administrative expenses decreased by approximately $0.7 million, driven by reductions in advertising and marketing fees ($235,000), legal fees ($165,000), and salaries and wages ($245,000)[203] - Other expenses decreased primarily due to a $1.0 million reduction in non-cash interest expense and a $1.1 million loss on note conversion in the prior period, partially offset by a $0.6 million loss on abandonment of oil and gas properties in the current period[206] Six Months Ended April 30, 2025 compared to the Six Months Ended April 30, 2024 (unaudited) For the six months ended April 30, 2025, the net loss decreased by 44.7% to $(3,179,277), driven by a $1.36 million reduction in total operating expenses and a $1.25 million decrease in other expenses, despite a 53.3% decline in net revenues Six Months Ended April 30, 2025 compared to the Six Months Ended April 30, 2024 | Metric | Six Months Ended April 30, 2025 | Six Months Ended April 30, 2024 | Change ($) | % Change | | :--------------------------------- | :------------------------------ | :------------------------------ | :--------- | :------- | | Revenues, net | $34,090 | $72,923 | $(38,833) | (53.3)% | | Gross profit | $24,828 | $72,923 | $(48,095) | (66.0)% | | Total operating expenses | $2,110,264 | $3,472,111 | $(1,361,847)| (39.2)% | | Loss from operations | $(2,085,436) | $(3,399,188) | $1,313,752 | (38.6)% | | Total other expenses | $1,093,841 | $2,348,795 | $(1,254,954)| (53.4)% | | Net loss | $(3,179,277) | $(5,747,983) | $2,568,706 | (44.7)% | - Revenues decreased due to lower production from McCool Ranch and new revenues from Saskatchewan assets[208] - General and administrative expenses decreased by approximately $1.0 million, primarily due to decreases in salary expenses ($330,000), advertising and marketing fees ($235,000), filing fees ($160,000), and legal fees ($200,000)[211] - Other expenses decreased primarily due to an approximate $0.8 million reduction in non-cash interest expense and a $1.1 million loss on note conversion in the prior period, partially offset by a $0.6 million loss on abandonment of oil and gas properties in the current period[214] Liquidity and Capital Resources The company's working capital deficiency significantly improved, and net cash increased for the six months ended April 30, 2025, primarily due to substantial cash provided by financing activities, which offset cash used in operations and investing. However, the company still faces liquidity issues and relies on future equity and debt financing to meet capital requirements Working Capital/(Deficiency) The company's working capital deficiency improved significantly from $(2,025,480) as of October 31, 2024, to $(531,983) as of April 30, 2025, driven by a substantial increase in cash from share sales and a decrease in current liabilities Working Capital/(Deficiency) | Metric | April 30, 2025 | October 31, 2024 | | :--------------------------------- | :------------- | :--------------- | | Current assets | $1,738,678 | $565,219 | | Current liabilities | $2,270,661 | $2,590,699 | | Working capital (deficiency) | $(531,983) | $(2,025,480) | - Current assets increased by approximately $1.17 million, primarily due to a $3.4 million increase in cash from the sale of shares related to the ATM agreement[215] - Current liabilities decreased by approximately $0.32 million, mainly from reductions in promissory notes ($0.7 million), related party notes ($0.2 million), and other current liabilities ($0.3 million), partially offset by increases in convertible note debt ($0.6 million) and deferred consideration payable ($0.3 million)[215] Cash Flows The company experienced a net increase in cash of $1,171,111 for the six months ended April 30, 2025, a significant improvement from a net decrease of $1,341,277 in the prior year, primarily driven by a large influx of cash from financing activities Net Change in Cash | Metric | Six Months Ended April 30, 2025 | Six Months Ended April 30, 2024 | | :--------------------------------- | :------------------------------ | :------------------------------ | | Net change in cash | $1,171,111 | $(1,341,277) | Cash Flows from Operating Activities Cash used in operating activities for the six months ended April 30, 2025, was $(1,660,469), a shift from cash provided of $682,525 in the prior year. This was mainly due to the net loss, adjusted for non-cash expenses and changes in operating assets and liabilities Net Cash (Used in)/Provided by Operating Activities | Metric | Six Months Ended April 30, 2025 | Six Months Ended April 30, 2024 | | :--------------------------------- | :------------------------------ | :------------------------------ | | Net cash (used in)/provided by operating activities | $(1,660,469) | $682,525 | - Cash used in operations for the six months ended April 30, 2025, was primarily attributable to a net loss of $3,179,277, adjusted for $1,725,452 in non-cash expenses and $206,644 of net cash used for changes in operating assets and liabilities[217] Cash Flows from Investing Activities Cash used in investing activities decreased to $453,616 for the six months ended April 30, 2025, from $1,018,704 in the prior year. The current period's usage was primarily for assets acquired in Saskatchewan, while the prior period included higher capital expenditures for oil and gas properties Net Cash Used in Investing Activities | Metric | Six Months Ended April 30, 2025 | Six Months Ended April 30, 2024 | | :--------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in investing activities | $(453,616) | $(1,018,704) | - Cash used in investing activities for the six months ended April 30, 2025, was primarily attributable to approximately $0.4 million for assets acquired at the Lloydminster, Saskatchewan properties[218] - The prior year's cash used was attributable to approximately $1.1 million related to capital expenditures for oil and gas properties[218] Cash Flows from Financing Activities Cash provided by financing activities significantly increased to $3,250,350 for the six months ended April 30, 2025, compared to cash used of $(1,005,098) in the prior year. This was driven by proceeds from common share issuances via an ATM agreement and convertible debt, partially offset by debt repayments Net Cash Provided by/(Used in) Financing Activities | Metric | Six Months Ended April 30, 2025 | Six Months Ended April 30, 2024 | | :--------------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by/(used in) financing activities | $3,250,350 | $(1,005,098) | - Cash provided by financing activities in 2025 was primarily from proceeds from common shares issued via an ATM agreement and approximately $0.6 million from convertible debt[219] - These inflows were partially offset by repayments of related party debt (approximately $0.2 million) and promissory notes (approximately $0.6 million)[219] Capital Resources The company has historically relied on equity and debt financing to fund operations and faces liquidity issues. Existing cash and cash flow are projected to meet needs for not more than six months, necessitating additional capital through equity or debt, which may not be available on favorable terms - The company has historically funded operations through equity and debt financing and has experienced liquidity issues[220] - Existing cash and cash flow are projected to be sufficient for not more than six months from the date of the report[220] - Additional capital will be required through equity or debt financings, but there is no assurance that such funds will be available on favorable terms or at all[220] Contractual Obligations and Commitments The company has various contractual obligations, including unproved property leases for the South Salinas Project (some abandoned), abandoned McCool Ranch leases, and an expired option for Asphalt Ridge. It also has proved property leases in Saskatchewan, Board of Directors compensation, and agreements with advisors - The company holds various unproved property leases for the South Salinas Project, with some additional leases abandoned during the current reporting period[221][222][223] - All McCool Ranch Oil Field leases were abandoned as of April 30, 2025, with associated costs expensed[224] - The option to acquire an additional 17.75% working interest in the Asphalt Ridge Leases expired on May 10, 2025; the company retains its existing 2.25% interest[227] - In April 2025, the company acquired oil and gas lease rights for four proved properties (320 net acres) in Saskatchewan, Canada[228] - Board of Directors compensation includes an annual retainer of $50,000 cash plus $10,000 for each committee served[229] Critical Accounting Policies and Estimates This section details the company's critical accounting policies and estimates, emphasizing the use of the successful efforts method for oil and gas properties, the assessment of proved and unproved reserves, impairment of long-lived assets, asset retirement obligations, and fair value measurements, all of which involve significant management judgment and estimates Oil and Gas Assets and Exploration Costs – Successful Efforts The company uses the successful efforts method for oil and gas accounting, expensing exploration costs as incurred and capitalizing drilling costs for proved reserves. Management periodically reviews suspended exploratory costs for viability - The company applies the successful efforts method of accounting for crude oil and natural gas properties, expensing exploration costs as incurred[232] - Costs to acquire mineral interests, drill successful exploratory wells, and development wells are capitalized[233] - Management reviews suspended exploratory property costs quarterly to determine if future appraisal drilling or development activities are likely[232] - As of April 30, 2025, the company had five producing wells in the newly acquired Saskatchewan property, and will estimate DD&A after further observation[234] Proved and unproved oil and natural gas properties Unproved oil and natural gas properties are capitalized and assessed for impairment but not amortized, while proved properties, confirmed by drilling and production, are subject to depreciation, depletion, and amortization (DD&A) using the unit-of-production method. The newly acquired Saskatchewan properties have proved reserves, and DD&A will be estimated - Unproved oil and natural gas properties have capitalized lease acquisition costs, are assessed for impairment, and are not subject to amortization[235][236] - Proved oil and natural gas properties, confirmed through drilling and production, are subject to DD&A using the unit-of-production method based on total proved reserves[237] - As of April 30, 2025, the newly acquired Saskatchewan properties have proved reserves, and the company expects to add their values to its reserve report and estimate necessary DD&A[238] Impairment of Other Long-lived Assets The company annually reviews long-lived assets for impairment, or when circumstances indicate. Impairment loss is recorded if undiscounted future cash flows are less than carrying value, adjusted to fair value. This applies to proved oil and gas properties, while unproved properties are assessed separately - The company reviews the carrying value of its long-lived assets annually or when events indicate that the historical cost-carrying value may no longer be appropriate[239] - Recoverability is assessed by estimating future net undiscounted cash flows; an impairment loss is recorded if these are less than the carrying value, adjusted to fair value[239] - This assessment applies to proved oil and gas properties, while unproved properties are assessed for impairment on an individual or group basis[239] Asset Retirement Obligations Asset Retirement Obligations (ARO) for future plugging and abandonment expenses are recorded as a liability at fair value upon acquisition of oil and gas properties, with a corresponding increase in asset carrying amount. The liability is accreted over time, and adjustments are made for revisions to estimates - ARO consists of future plugging and abandonment expenses on oil and natural gas properties[240] - The fair value of ARO is recorded as a liability in the period of acquisition, with a corresponding increase in the carrying amount of oil and natural gas properties[240] - The liability is accreted for changes in its present value each period based on expected plugging and abandonment dates[240] - The asset and liability are adjusted for changes resulting from revisions to the timing or amount of the original estimate[240] Fair Value Measurements The company uses a three-level fair value hierarchy, prioritizing Level 1 (quoted prices in active markets) and using Level 3 (unobservable inputs) for non-recurring measurements like asset acquisitions and asset retirement obligations. These Level 3 measurements involve significant management judgment on inputs such as reserves, commodity prices, and discount rates - The company utilizes a fair value hierarchy (Level 1, 2, 3) that prioritizes unadjusted quoted prices in active markets (Level 1) and uses unobservable inputs (Level 3) for significant estimates[241][242][244] - Non-recurring fair value measurements for asset acquisitions, asset retirement obligations, and impairment of oil and natural gas properties use Level 3 inputs[244] - Significant Level 3 inputs include estimates of reserves, future commodity prices, operating and development costs, market-based weighted average cost of capital, estimated plug and abandonment costs, remaining well life, inflation factors, and credit-adjusted risk-free rates[245][246][247] - These inputs require significant judgments and estimates by management[245][247] Recent Accounting Pronouncements All recently issued but not yet effective accounting pronouncements have been deemed not applicable or immaterial to the company - All recently issued but not yet effective accounting pronouncements have been deemed not applicable or immaterial to the company[248] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Trio Petroleum Corp. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Trio Petroleum Corp. is not required to provide quantitative and qualitative disclosures about market risk[249] ITEM 4. Controls and Procedures Management, with CEO and CFO participation, concluded that the company's disclosure controls and procedures were effective as of April 30, 2025, providing reasonable assurance for timely and accurate reporting. There were no material changes in internal control over financial reporting during the quarter - Management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of April 30, 2025[250] - These controls provide reasonable assurance that required information is recorded, processed, summarized, and reported within specified time periods[250] - There were no changes in internal control over financial reporting during the second fiscal quarter ended April 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[251] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and exhibits ITEM 1. Legal Proceedings The company is not currently subject to any legal proceedings - The company is not currently subject to any legal proceedings[253] ITEM 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Form 10-K/A for the year ended October 31, 2024. Investors should carefully consider these risks - There have been no other material changes to the risk factors set forth in the company's Amendment No. 3 to its Annual Report on Form 10-K/A for the year ended October 31, 2024[254] - Investors should carefully consider the risks and uncertainties described in the 2024 Annual Report and this Quarterly Report on Form 10-Q[254] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds occurred, except as previously reported in Current Reports on Form 8-K - No unregistered sales of equity securities and use of proceeds, except as reported on Current Reports on Form 8-K filed by the company during the quarterly period[255] ITEM 3. Defaults Upon Senior Securities The company has not defaulted upon any senior securities - The company has not defaulted upon senior securities[256] ITEM 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[257] ITEM 5. Other Information No other information is reported under this item - No other information is reported under this item[258] ITEM 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications, XBRL documents, and the interactive data file - Exhibits include certifications of the CEO and CFO (Sections 302 and 906 of Sarbanes-Oxley Act) and various Inline XBRL documents (Instance, Schema, Calculation, Label, Presentation, Definition Linkbase, and Cover Page Interactive Data File)[259] SIGNATURES The report is signed by Robin Ross, Chief Executive Officer, and Greg Overholtzer, Chief Financial Officer, on June 10, 2025, certifying its submission pursuant to the Securities Exchange Act of 1934 - The report is signed by Robin Ross, Chief Executive Officer, and Greg Overholtzer, Chief Financial Officer, on June 10, 2025[263]