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Trio Petroleum (TPET) - 2023 Q3 - Quarterly Report
Trio Petroleum Trio Petroleum (US:TPET)2023-09-11 20:05

PART I. FINANCIAL INFORMATION Financial Statements Presents unaudited condensed financial statements, highlighting balance sheet changes, continued net losses, and cash flow from operations, investing, and IPO financing Condensed Balance Sheets Condensed Balance Sheet Summary (unaudited) | Account | July 31, 2023 ($) | October 31, 2022 ($) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,506,028 | $73,648 | | Total current assets | $1,630,318 | $1,752,529 | | Total assets | $11,170,601 | $9,488,761 | | Liabilities & Equity | | | | Total current liabilities | $822,704 | $6,710,652 | | Total liabilities | $874,073 | $6,765,637 | | Total stockholders' equity | $10,296,528 | $2,723,124 | - Total liabilities decreased significantly from $6.77 million to $0.87 million, primarily due to the elimination of notes payable to investors and related parties after the IPO11 - Stockholders' equity increased substantially to $10.30 million from $2.72 million, driven by capital raised from the IPO and conversion of debt11 Condensed Statements of Operations - The company generated no revenue in the three and nine months ended July 31, 2023, consistent with prior year periods, as it remains in the exploration stage13 Statement of Operations Highlights (unaudited) | Metric | Three Months Ended July 31, 2023 ($) | Three Months Ended July 31, 2022 ($) | Nine Months Ended July 31, 2023 ($) | Nine Months Ended July 31, 2022 ($) | | :--- | :--- | :--- | :--- | :--- | | Total operating expenses | $2,157,550 | $222,857 | $3,339,858 | $716,318 | | Loss from operations | $(2,157,550) | $(222,857) | $(3,339,858) | $(716,318) | | Net loss | $(2,170,601) | $(708,150) | $(5,224,839) | $(3,085,357) | | Basic and Diluted Net Loss per Share | $(0.08) | $(0.05) | $(0.25) | $(0.21) | - Net loss for the nine months ended July 31, 2023, widened to $(5.2) million from $(3.1) million year-over-year, driven by increased operating expenses, including stock-based compensation and a loss on note conversion13 Condensed Statements of Changes in Stockholders'%20Equity - Stockholders' equity increased from $2.72 million on October 31, 2022, to $10.30 million on July 31, 202315 - Key drivers for the equity increase in the nine months ended July 31, 2023, include net proceeds from the IPO ($3.34 million), conversion of notes ($5.16 million), and proceeds from warrant exercises ($1.81 million), offset by the net loss for the period ($5.22 million)15 Condensed Statements of Cash Flows Cash Flow Summary for the Nine Months Ended July 31 (unaudited) | Cash Flow Activity | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,542,360) | $(425,053) | | Net cash used in investing activities | $(1,804,050) | $0 | | Net cash provided by financing activities | $5,778,790 | $387,700 | | Net change in cash | $1,432,380 | $(37,353) | - Investing activities in 2023 primarily consisted of $2.96 million in drilling costs for an exploratory well and $0.25 million for other capital expenditures on unproved properties18 - Financing activities in 2023 were dominated by $6.0 million in proceeds from the IPO and $1.8 million from the exercise of warrants, offset by repayment of notes payable and offering costs18 Notes to Unaudited Condensed Financial Statements - The company is an exploration-stage enterprise focused on the South Salinas Project (SSP) in Monterey County, California, with no proved reserves as of July 31, 20232021 - The company completed its Initial Public Offering (IPO) on April 20, 2023, selling 2,000,000 shares for gross proceeds of $6.0 million2259 - Management has determined that substantial doubt exists about the company's ability to continue as a going concern due to its accumulated deficit of $9,127,295 and recurring losses from operations57 - Upon the IPO, notes payable with an aggregate principal and interest of $5,164,875 were converted into 5,038,902 shares of common stock8892 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses operational progress, financial results, and liquidity, highlighting the HV-1 well, continued net losses, going concern risk, increased expenses, and improved post-IPO liquidity Overview and Going Concern - In May 2023, the company began drilling the HV-1 confirmation well, which subsequently confirmed a major oil and gas accumulation in the President's Oilfield121123 - Initial tests of the HV-1 well showed production rates up to 125 barrels of oil per day; further testing of other zones is planned123124 - The company has an accumulated deficit of $9,127,295 as of July 31, 2023, and has not generated any revenue, leading management to conclude there is substantial doubt about its ability to continue as a going concern126 Results of Operations Comparison of Operating Results for the Three Months Ended July 31 | Expense Category | 2023 ($) | 2022 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Exploration expenses | $199,637 | $2,638 | $196,999 | 7,467.7% | | General and administrative | $1,171,256 | $219,524 | $951,732 | 433.5% | | Stock-based compensation | $785,962 | $0 | $785,962 | 100.0% | | Net loss | $(2,170,601) | $(708,150) | $(1,462,451) | 206.5% | Comparison of Operating Results for the Nine Months Ended July 31 | Expense Category | 2023 ($) | 2022 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Exploration expenses | $225,052 | $28,669 | $196,383 | 685.0% | | General and administrative | $2,215,775 | $685,565 | $1,530,210 | 223.2% | | Stock-based compensation | $896,947 | $0 | $896,947 | 100.0% | | Net loss | $(5,224,839) | $(3,085,357) | $(2,139,482) | 69.3% | - The increase in G&A expenses for the nine months ended July 31, 2023, was driven by higher advertising/marketing fees ($380k), consulting fees ($406k), legal fees (~$200k), and salaries (~$320k)146 Liquidity and Capital Resources Working Capital Comparison | | July 31, 2023 ($) | October 31, 2022 ($) | | :--- | :--- | :--- | | Current assets | $1,630,318 | $1,752,529 | | Current liabilities | $822,704 | $6,710,652 | | Working capital (deficiency) | $807,614 | $(4,958,123) | - The improvement in working capital was primarily due to the conversion of $4.5 million in debt to equity and the repayment of approximately $1.4 million in notes payable following the IPO150 - For the nine months ended July 31, 2023, net cash provided by financing activities was $5.78 million, mainly from IPO proceeds and warrant exercises151155 - Management believes that cash on hand as of July 31, 2023, is sufficient to meet anticipated capital expenditures and operating expenses for the next twelve months156 Quantitative and Qualitative Disclosures about Market Risk This item is not applicable as the company qualifies as a smaller reporting company - As a smaller reporting company, Trio Petroleum Corp. is not required to provide the information required by this Item176 Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report177 - No changes in internal control over financial reporting occurred during the third fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls178 PART II. OTHER INFORMATION Legal Proceedings The company is not currently subject to any legal proceedings - The company is not currently subject to any legal proceedings180 Risk Factors No material changes to risk factors previously disclosed in the company's S-1 filing - There have been no material changes to the risk factors previously disclosed in the company's S-1, as amended181 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds reported for the period - The company reported 'None' for this item182 Defaults Upon Senior Securities No defaults upon senior securities reported - The company reported 'None' for this item183 Other Information No other information for disclosure in this section - The company reported 'None' for this item185 Exhibits Lists exhibits filed with Form 10-Q, including a drilling contract and Sarbanes-Oxley Act certifications - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002186