Trio Petroleum Corp Commitments Disclosure

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

From time to time, the Company may be subject to claims and legal proceedings arising in the ordinary course of business. Management currently believes that any potential liabilities arising from such matters will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

 

 

Unproved Property Leases

 

South Salinas Project

 

The Company holds various leases related to unproved properties in the South Salinas Project, including two leases with the same lessor:

 

	●	Lease 1 (8,417 acres): Amended on May 27, 2022 to extend force majeure status for an additional uncontested twelve months, releasing the Company from evidencing force majeure conditions during that period. A one-time, non-refundable payment of $252,512 was made and capitalized as part of oil and gas property as of October 31, 2022. The force majeure status was extinguished following the drilling of the HV-1 well. Continued operations and oil production at the HV-3A well maintain the lease’s validity.
	●	Lease 2 (160 acres): Held by delay rental, renewed every three years. The Company is required to pay $30 per acre annually until drilling commences. The delay rental payment for October 2024 through October 2025 has been paid in advance, and the Company remains in compliance.

 

In February and March 2023, the Company entered into additional leases covering unproved properties in the South Salinas Project:

 

	●	Group 1: Covers 360 acres with a 20-year term; annual rental payments of $25 per acre
	●	Group 2: Covers 307.75 acres with a 20-year term; annual rental payments of $30 per acre

 

During the second and third quarters of fiscal 2025, the Company strategically abandoned all additional leases in the South Salinas Project. All associated exploration and development costs, including capitalized expenditures for equipment and facilities, were expensed in accordance with applicable accounting standards. This decision followed a comprehensive evaluation of the leases’ economic viability, market conditions, regulatory factors, and operational constraints.

 

McCool Ranch Oil Field

 

The Company previously held interests in two parcels of unproved leases in the McCool Ranch Oil Field:

 

	●	Parcel 1: Ten leases totaling approximately 480 acres, held by delay rental payments
	●	Parcel 2: One lease totaling approximately 320 acres, held by production

 

As of the second quarter of 2025, the Company elected to terminate all McCool Ranch leases. These leases have been written off and expensed in the statement of operations. No further rental payments or development activities will be pursued.

 

Asphalt Ridge Leases – ARLO Agreement

 

On November 10, 2023, the Company entered into the ARLO Agreement with HSO, granting the exclusive right to acquire up to a 20% working interest in a 960-acre drilling and production program in the Asphalt Ridge leases for $2,000,000. The agreement allowed for investment in tranches, with an initial tranche of no less than $500,000 payable within seven days of HSO satisfying certain conditions.

 

On December 29, 2023, the Company amended the ARLO Agreement and funded $200,000 of the initial $500,000 tranche in advance of HSO satisfying the required conditions. In exchange, the Company acquired a 2% interest in the leases. These funds were designated for infrastructure development, including road construction. As of October 31, 2025, the Company had paid a total of $225,000 to HSO and holds a 2.25% working interest in the leases. These costs have been capitalized and are reflected in the oil and gas property balance as of October 31, 2025.

 

Under the most recent amendment signed in April 2025, the Company had until May 10, 2025 to pay an additional $1,775,000 to exercise its option for the remaining 17.75% interest. The option expired unexercised after the reporting period, and the Company forfeited its right to acquire the additional interest. The Company retains its existing 2.25% interest.

 

 

Proved Property Leases

 

Saskatchewan, Canada

 

In April 2025, the Company acquired oil and gas lease rights for four proved properties located in Saskatchewan, Canada (see Note 5). The leases total 320 net acres and are all held by production.

 

Board of Directors Compensation

 

On July 11, 2022, the Company’s Board of Directors approved a compensation plan for non-employee directors, effective upon the consummation of the Company’s initial public offering (IPO). Under this plan, each non-employee director is entitled to an annual cash retainer of $50,000, plus an additional $10,000 per Board committee served, with all payments made quarterly in arrears. Compensation payments commenced following the successful completion of the IPO in April 2023.

 

For the years ended October 31, 2025 and 2024, the Company recognized director compensation expense of $321,689 and $223,170, respectively.

 

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 $25,000 non-refundable advance upon execution of the agreement and completion of a bridge offering to be credited against the accountable expenses incurred by the Placement Agent upon successful completion of the Company’s IPO, a cash fee of 7.5%, warrants to purchase a number of common shares equal to 5% of the aggregate number of common shares placed in the IPO and reimbursement of other expenses. On April 20, 2023, pursuant to this agreement, the Company issued representative warrants to Spartan to purchase up to an aggregate of 5,000 shares of common stock; such warrants have a 5five-year term with an exercise price of $66.00 and can be exercised any time after the IPO date.

 

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 i) a cash fee 7.5% of the aggregate proceeds raised in the sale and ii) 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; warrants to purchase 4,167 and 2,750 common shares with exercise prices of $26.40 and $11.00 for the first and second tranches, respectively, were issued to Spartan as of January 31, 2024. Such warrants may be exercised beginning 6 months after issuance until four- and one-half years thereafter.