Trio Petroleum Corp【TPET】株式ニュース

Thanks for pointing this out

https://app.quotemedia.com/data/downloadFiling?webmasterId=104682&ref=318429429&type=HTML

(Although TPET is currently NYSE compliant, i concur that a RS is likely - see bottom -" Board Recommendation" )

"PROPOSAL NO. 2 — THE REVERSE STOCK SPLIT PROPOSAL

Introduction

Our Board has adopted resolutions (1) declaring that submitting an amendment to the Company’s Certificate of Incorporation to effect a reverse stock split, as described below, was advisable, and (2) directing that a proposal to approve the Reverse Stock Split be submitted to the holders of our Common Stock for their approval.

If approved by our stockholders, the Reverse Stock Split proposal would permit (but not require) our Board to effect a reverse stock split of our Common Stock, if deemed necessary by our Board of Directors, by a ratio of not less than one-for-five (1:5) and not more than one-for-twenty (1:20), with the exact ratio to be set at a whole number within this range as determined by our Board of Directors in its sole discretion. We believe that enabling our Board of Directors to set the ratio within this stated range will provide us with the flexibility to implement the Reverse Stock Split in a manner designed to maximize the anticipated benefits for our stockholders.

The intention of the Board in obtaining approval for the authority to effect a Reverse Stock Split would be to increase the stock price of our Common Stock sufficiently in order to better assure continued compliance with the NYSE American LLC (the “NYSE American”) requirements. Our Common Stock is currently listed on the NYSE American. As further described in the section below entitled “Reasons for the Reverse Stock Split; the NYSE American Requirements for Continued Listing,” on February 26, 2024, we received a notice from the NYSE American (the “Stock Price Noncompliance Notice”) indicating that we were not in compliance with the continued listing requirements set forth in Section 1003(f)(v) of the NYSE American Company Guide because our Common Stock had been selling for a substantial period of time at a lower price than $0.20 per share. On May 1, 2024, we received a second notice from the NYSE American (the “Stock Price Compliance Notice”) informing us that we had resolved the compliance issue with respect to the low price of our Common Stock, because the 30-day average price of our Common Stock was $0.25 as of April 30, 2024. The Stock Price Compliance Notice also provides that the NYSE American can still commence delisting proceedings and immediately suspend trading of our Common Stock if it trades at levels viewed to be abnormally low, which is generally viewed as a price at or below $0.10.

In addition, the effect of the Reverse Stock Split, without a corresponding reduction of the authorized shares of Common Stock, will allow the Board of Directors to issue more shares of Common Stock than the amount that it would have been able to issue prior to the Reverse Stock Split being effectuated. The Board, in its sole discretion, can elect to abandon the Reverse Stock Split in its entirety at any time.

One principal effect of the Reverse Stock Split would be to decrease the number of outstanding shares of our Common Stock. Except for de minimis adjustments that may result from the treatment of fractional shares as described below, the Reverse Stock Split will not have any dilutive effect on our stockholders since each stockholder would hold the same percentage of our Common Stock (in hand or on an as converted basis) and/or the same relative voting rights outstanding immediately following the Reverse Stock Split as such stockholder held immediately prior to the Reverse Stock Split. The relative voting and other rights that accompany the shares would not otherwise be affected by the Reverse Stock Split. The authorized number of shares of Common Stock will not be adjusted as a result of the Reverse Stock Split.

The table below sets forth the number of shares of our Common Stock outstanding before and approximate number of shares outstanding after the Reverse Split based on shares of our Common Stock outstanding as of the Record Date.

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Prior to the Reverse Split Assuming a One-for- Five Reverse Split Assuming a One-for- Ten Reverse Split Assuming a One-for- Twenty Reverse Split
Aggregate Number of Shares of Common Stock Outstanding 50,328,328 10,065,666 5,032,833 2,516,417

The Reverse Split is not part of a broader plan to take us private.

Reasons for the Reverse Stock Split; the NYSE American Requirements for Continued Listing

On February 26, 2024, we received the Stock Price Noncompliance Notice indicating that we were not in compliance with the continued listing requirements set forth in Section 1003(f)(v) of the NYSE American Company Guide because our Common Stock has been selling for a substantial period of time at a lower price per share than $0.20. The Stock Price Noncompliance Notice informed us that we were being provided 180 days, or until August 26, 2024, to regain compliance with the continued listing requirements which could be satisfied by having our Common Stock trade equal to or above US $0.20 per share within such timeframe. On May 1, 2024, we received the Stock Price Compliance Notice informing us that we had resolved the continued listing deficiency with respect to the low price of our Common Stock and regained compliance with the continued listing requirements, because the 30-day average price of our Common Stock was $0.25 as of April 30, 2024. The Stock Price Compliance Notice also provides that the NYSE American can still commence delisting proceedings and immediately suspend trading of our Common Stock if it trades at levels viewed to be abnormally low, which is generally viewed as a price at or below $0.10. Therefore, we are seeking stockholder approval for the Reverse Stock Split so that our Board has the ability, in its determination to effect the Reverse Stock Split, if it is determined to be necessary to better assure that the stock price continues to be in compliance with the continued listing requirements. If, in the future, the price of our Common Stock falls out of compliance, again, with the continued listing requirements of the NYSE American, this could result in a de-listing of our Common Stock from trading on the NYSE American.

On April 16 2024, the Company entered into a securities purchase agreement (the “April 2024 SPA”) with an institutional investor (the “Initial Investor”), pursuant to which the Company received aggregate gross proceeds in the amount of $360,000. On April 24, 2024, the Company entered into an Amended and Restated Securities Purchase Agreement (the “A&R April 2024 SPA”), pursuant to which an additional institutional investor also provided financing to the Company, on the same terms as provided by the Initial Investor, for gross proceeds in the amount of $360,000. Under the A&R April 2024 SPA, the Company is required, to the extent it is unable to maintain the listing of its Common Stock on the NYSE American, other than by consummating a Reverse Stock Split of its shares of Common Stock, to use its commercially reasonable efforts to consummate such a Reverse Stock Split. Although effecting a Reverse Stock Split is not now required to maintain the listing of the Common Stock on the NYSE American, the Company may still consider doing so for the other reasons set forth herein.

The Board’s primary objective in proposing a potential Reverse Stock Split is to raise the per share trading price of our Common Stock. Our Common Stock currently trades on NYSE American under the symbol “TPET” In order to maintain our listing on NYSE American we may be required to effect the Reverse Stock Split so that our listed shares trade equal to or above US $0.20 per share for an extended period of time. The closing trading price of our Common Stock on June 18, 2024 was $0.2994.

The Reverse Stock Split would increase the availability of such shares, which could then be issued upon conversion or exercise of outstanding convertible securities, for grants under our currently effective stock option plan and in connection with an acquisition of another business or a merger. The Company currently has no plans to acquire another business or enter into a merger transaction.

Our Board concluded that the liquidity and marketability of our Common Stock will be adversely affected if it is not listed on a national securities exchange as investors can find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our Common Stock. Our Board believes that current and prospective investors will view an investment in our Common Stock more favorably if our common stock remains listed on the NYSE American.

Our Board also believes that the Reverse Stock Split and any resulting increase in the per share price of our Common Stock will enhance the acceptability and marketability of our Common Stock to the financial community and investing public. Many institutional investors have policies prohibiting them from holding lower-priced stocks in their portfolios, which reduces the number of potential buyers of our Common Stock, although we have not been told by them that is the reason for not investing in our Common Stock. Additionally, analysts at many brokerage firms are reluctant to recommend lower-priced stocks to their clients or monitor the activity of lower-priced stocks. Brokerage houses frequently have internal practices and policies that discourage individual brokers from dealing in lower-priced stocks. Further, because brokers’ commissions on lower-priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, investors in lower-priced stocks pay transaction costs which are a higher percentage of their total share value, which may limit the willingness of individual investors and institutions to purchase our Common Stock.

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We cannot assure you that the Reverse Stock Split will have any of the desired effects described above. More specifically, we cannot assure you that after the Reverse Stock Split, the market price of our Common Stock will increase proportionately to reflect the ratio for the Reverse Stock Split, that the market price of our Common Stock will not decrease to its pre-split level, that our market capitalization will be equal to the market capitalization before the Reverse Stock Split, or that we will be able to maintain our listing on the NYSE American.

Potential Disadvantages of the Reverse Stock Split

As noted above, the principal purpose of the Reverse Stock Split would be to help increase the per share market price of our Common Stock by up to factor of twenty. We cannot assure you, however, that the Reverse Stock Split will accomplish this objective for any meaningful period of time. While we expect that the reduction in the number of outstanding shares of Common Stock will increase the market price of our Common Stock, we cannot assure you that the Reverse Stock Split will increase the market price of our Common Stock proportionately based on the Reverse Stock Split ratio, or result in any permanent increase in the market price of our Common Stock, which is dependent upon many factors, including our business and financial performance, general market conditions and prospects for future success. If the per share market price does not increase proportionately as a result of the Reverse Stock Split, then the value of our Company as measured by our market capitalization will be reduced, perhaps significantly.

Because the number of authorized shares of our Common Stock will not be reduced proportionately with the ratio of the Reverse Stock Split, it may increase the Board of Directors’ ability to issue authorized and unissued shares without further stockholder action, the issuance of which would be dilutive to our existing stockholders and may cause a decline in the trading price of our Common Stock. With respect to authorized but unissued and unreserved shares, the Company could also use such shares to oppose a hostile takeover attempt or delay or prevent changes in control or changes in or removal of management.

The number of shares held by each individual holder of Common Stock would be reduced if the Reverse Stock Split is implemented. This will increase the number of stockholders who hold less than a “round lot,” or 100 shares. Typically, the transaction costs to stockholders selling “odd lots” are higher on a per share basis. Consequently, the Reverse Stock Split could increase the transaction costs to existing holders of Common Stock in the event they wish to sell all or a portion of their position.

Although our Board of Directors believes that the decrease in the number of shares of our Common Stock outstanding as a consequence of the Reverse Stock Split and the anticipated increase in the market price of our Common Stock could encourage interest in our Common Stock and possibly promote greater liquidity for our stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the Reverse Stock Split.

Criteria the Board of Directors May Use to Determine Whether to Implement the Reverse Stock Split

When determining whether to implement the Reverse Stock Split, and which Reverse Stock Split ratio to implement, if any, following the receipt of stockholder approval, the Board of Directors may consider various factors, including:

? The continued listing requirements of the NYSE American;
? the historical trading price and trading volume of our Common Stock;
? the then-prevailing trading price and trading volume of our Common Stock and the expected impact of the Reverse Stock Split on the trading market for our Common Stock in the short- and long-term;
? the listing requirements, other rules and guidance from one or more potential national securities exchanges;
? the number of shares of our Common Stock outstanding;
? the anticipated impact of a particular ratio on the Company’s ability to reduce administrative and transactional costs; and
? prevailing general market, legal and economic conditions.

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Effecting the Reverse Stock Split

Upon receipt of stockholder approval for the Reverse Split Proposal, if our Board of Directors concludes that it is in the best interests of our Company and our stockholders to effect the Reverse Stock Split, the Certificate of Amendment will be filed with the Secretary of State of Delaware. The actual timing of the filing of the Certificate of Amendment with the Secretary of State of Delaware to effect the Reverse Stock Split will be determined by our Board of Directors. In addition, if for any reason our Board of Directors deems it advisable to do so, the Reverse Stock Split may be abandoned at any time prior to the filing of the Certificate of Amendment, without further action by our stockholders. In addition, our Board of Directors may deem it advisable to effect the Reverse Stock Split even if the price of our Common Stock is trading above $0.20 for a sustained period the time. The Reverse Stock Split will be effective as of the date of filing with the Secretary of State of the State of Delaware (the “Effective Time”).

Upon the filing of the Certificate of Amendment, without further action on our part or our stockholders, the outstanding shares of Common Stock held by stockholders of record as of the Effective Time would be converted into a lesser number of shares of Common Stock based on a Reverse Stock Split ratio as determined by the Board of Directors. For example, if you presently hold 3,000 shares of our Common Stock, you would hold 300 shares of our Common Stock following the Reverse Stock Split if the ratio is one-for-ten (1:10) or you would hold 150 shares of our Common Stock if the ratio is one-for-twenty (1:20).

Effect on Outstanding Shares, Options and Certain Other Securities

If the Reverse Stock Split is implemented, the percentage of our Common Stock owned by each stockholder will remain unchanged except for any de minimis change resulting from rounding up to the nearest number of whole shares of Common Stock so that we are not obligated to issue cash in lieu of any fractional shares that such common stockholder would have received as a result of the Reverse Stock Split. The number of shares of our Common Stock that may be purchased upon exercise of outstanding options or exercise or conversion of other securities convertible into, or exercisable or exchangeable for, shares of our Common Stock, and the exercise or conversion prices for these securities, will also be ratably adjusted in accordance with their terms as of the Effective Time.

Effect on Registration

Our Common Stock is currently registered under the Securities Act of 1933, as amended (the “Securities Act”), and we are subject to the periodic reporting and other requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The proposed Reverse Stock Split will not affect the registration of our Common Stock.

Fractional Shares

Our Board of Directors does not currently intend to issue fractional shares of Common Stock in connection with the Reverse Stock Split. Therefore, we do not expect to issue fractional shares. In lieu of any fractional shares, we will issue to stockholders of record who would otherwise hold a fractional share because the number of shares of Common Stock they hold of record before the Reverse Stock Split is not evenly divisible by the Reverse Stock Split ratio that number of shares of Common Stock as rounded up to the nearest whole share. For example, if a stockholder holds 150.25 shares of Common Stock following the Reverse Stock Split, that stockholder will receive 151 shares of Common Stock. No stockholders will receive cash in lieu of fractional shares.

As of the Record Date, we had holders of record of our Common Stock (although we have significantly more beneficial holders). We do not expect the Reverse Stock Split and the rounding up of fractional shares to whole shares to result in a reduction in the number of record holders. We presently do not intend to seek any change in our status as a reporting company for federal securities law purposes, either before or after the Reverse Stock Split.

Shares Held in Book-Entry and Through a Broker, Bank or Other Holder of Record

The combination of, and reduction in, the number of our outstanding shares of Common Stock as a result of the Reverse Stock Split occurs automatically at the Effective Time without any additional action on the part of our stockholders.

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Upon the Reverse Stock Split, we intend to treat stockholders holding shares of our Common Stock in “street name” (that is, through a broker, bank or other holder of record) in the same manner as registered stockholders whose shares of our Common Stock are registered in their names. Brokers, banks or other holders of record will be instructed to effect the Reverse Stock Split for their beneficial holders holding shares of our Common Stock in “street name”; however, these brokers, banks or other holders of record may apply their own specific procedures for processing the Reverse Stock Split. If you hold your shares of our Common Stock with a broker, bank or other holder of record, and you have any questions in this regard, we encourage you to contact your holder of record.

If you hold registered shares of our Common Stock in a book-entry form, you do not need to take any action to receive your post-Reverse Stock Split shares of our Common Stock in registered book-entry form. If you are entitled to post-Reverse Stock Split shares of our Common Stock, a transaction statement will automatically be sent to your address of record as soon as practicable after the Effective Time indicating the number of shares of our Common Stock you hold.

Anti-Takeover and Dilutive Effects

The authorized Common Stock will not be diluted as a result of the Reverse Stock Split. The Common Stock that is authorized but unissued provides the Board of Directors with flexibility to effect among other transactions, public or private financings, acquisitions, stock dividends, stock splits and the granting of equity incentive awards. However, these authorized but unissued shares may also be used by our Board of Directors, consistent with and subject to its fiduciary duties, to deter future attempts to gain control of us or make such actions more expensive and less desirable. The Certificate of Amendment would continue to give our Board authority to issue additional shares from time to time without delay or further action by the stockholders except as may be required by applicable law or regulations. The Certificate of Amendment is not being recommended in response to any specific effort of which we are aware to obtain control of us, nor does our Board of Directors have any present intent to use the authorized but unissued Common Stock to impede a takeover attempt. There are no plans or proposals to adopt other provisions or enter into any arrangements that have material anti-takeover effects.

Accounting Consequences

As of the Effective Time, the stated capital attributable to Common Stock on our balance sheet will be reduced proportionately based on the Reverse Stock Split ratio (including a retroactive adjustment of prior periods), and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. Reported per share net income or loss will be higher because there will be fewer shares of our Common Stock outstanding.

Text of Proposed Certificate of Amendment; Effectiveness

The text of the proposed Certificate of Amendment is set forth in substantially final form in Annex A to this Proxy Statement. If and when effected by our Board of Directors, the Certificate of Amendment will become effective upon its filing with the Secretary of State of Delaware.

Vote Required

The affirmative vote of the majority of shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve the Reverse Stock Split Proposal. Abstentions will have no effect on the outcome of the vote.

Recommendation of the Board

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE REVERSE STOCK SPLIT PROPOSAL.

TPET: Interesting information from LaFayette's S-1

Overview

We are an oil and gas exploration and production company headquartered in Lehi, Utah. The Company was incorporated on February 7, 2022 under the laws of Delaware, with the goal of acquiring, funding and developing, primarily crude oil exploration and development. The Company plans to initially focus its attention on certain oil and gas assets located in Eastern Utah which it hopes to acquire pursuant to the Farm-In Agreement (defined and discussed below), and use anticipated cash flow from those operations to fund development of the Imperial Parish Fields (defined and discussed below). As of the date of this prospectus, we have entered into a farm-in agreement providing us the right to acquire an additional approximately net 2,880 acres in the Uinta Basin, Utah and hold options to purchase leases covering approximately 1,487 gross mineral acres in Imperial Parish, Louisiana. We have no revenue-generating operations as of the date of this prospectus, but we do have the cash resources on hand, and anticipate additional capital to be raised through, the expected funding of the second $2.5 million tranche of our Series A Convertible Preferred offering (which as discussed in greater detail below, is required to be funded after we produce at least 100 barrels of oil), to drill and complete our first three wells which if successful are expected to allow us to begin to generate revenues. The first well is scheduled to be drilled and completed at the end of April 2024, and the second and third wells are planned for May and June 2024. Additional funding, including funds from this offering, if successful, will provide additional growth capital.

Asphalt Ridge Option and Farm-In Agreement (Utah)

On November 13, 2023, the Company entered into a Leasehold Acquisition and Development Option Agreement (the “Asphalt Ridge Option Agreement”) with Heavy Sweet Oil, LLC (“Heavy Sweet”). Pursuant to the Asphalt Ridge Option Agreement, we purchased an option to acquire up to a 30% working interest in certain leases in the Uintah Basin, a long-developed oil and gas area of eastern Utah, southwest of Vernal, Utah, totaling 960 acres. Heavy Sweet holds the right to such leases below 500 ft depth from surface (the “Asphalt Ridge Option Leases”) and the option to participate in Heavy Sweet’s initial 960 acre drilling and production program on such Asphalt Ridge Option Leases (the “Asphalt Ridge Option”).

The Asphalt Ridge Option had a term of nine months, through June 28, 2024. The Asphalt Ridge Option Agreement provided that additional development capital was expected to be secured by Heavy Sweet, and made available for the Company’s participation, by way of a reserve base lending facility (RBL), provided that if such RBL could not be obtained or did not cover all subsequent capital costs, Heavy Sweet agreed to fund a maximum of $5,000,000 of the first funding required for the development program, with the parties splitting any costs thereafter according to their ownership interests. The initial target was three wells, with an estimated cost of $5,000,000 for roads, pads, drilling, and above ground steam and storage facilities, and thereafter the parties anticipated working together to fund further well development based on their proportionate ownership thereof.

As consideration for agreeing to the Asphalt Ridge Option, we issued Heavy Sweet 2,688,000 shares of the Company’s restricted common stock, equal to approximately 19.9% of the Company’s then-issued and outstanding shares of common stock (the “Option Shares”). The Option Shares were subject to vesting upon certain terms set forth in a Restricted Stock Agreement, and have fully-vested to date as a result of our entry into the Farm-In Agreement with Heavy Sweet as discussed below.

On November 10, 2023, as amended December 28, 2023, Heavy Sweet entered into a Leasehold Acquisition and Development Option Agreement with Trio Petroleum Corp. (“Trio”), of which Michael Peterson, the Chief Executive Officer and director of the Company, is also the Chief Executive Officer and director, and Frank C. Ingriselli, our Chairman, is also the Vice Chairman and director (the “Trio Option”). The Trio Option has similar terms as the Asphalt Ridge Option Agreement, except that it allows Trio to obtain a 20% interest in the Asphalt Ridge Option Leases, and did not require Trio to pay any equity compensation.

We and Heavy Sweet agreed that, to the extent Trio did not fully exercise the Trio Option, the Company had the right to acquire up to all 20% of the right set forth in the Trio Option from Heavy Sweet for $2,000,000 cash (or such other amount at the rate of $100,000 for each 1% which Trio had not exercised). To date, Trio has paid $225,000 for a 2.25% working interest in 960 acres of the Asphalt Ridge Option Leases.

The exercise of the Trio Option held by Trio is contingent upon certain requirements and deliverables.

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Table of Contents

A Prospective Resource Assessment covering the first 240 acres of the Asphalt Ridge Leases (defined below) that are planned to be developed was issued by Netherland Sewel to Heavy Sweet on November 17, 2023 (as of October 31, 2023), which estimated total oil resources of 58,390,200 barrels (bbls) of oil.

On March 7, 2024 the Company entered into a Farm-In Agreement (the “Farm-In Agreement”) with Heavy Sweet which superseded and terminated in full the Asphalt Ridge Option. According to the Farm-In Agreement, upon certain terms and conditions set forth therein, (i) the Company will farm-into and purchase from Heavy Sweet, and Heavy Sweet will allow the Company to farm-in and sell to the Company, (x) an undivided Ninety-Seven and 3/4th Percent (97.75% of 8/8ths) interest (100% of 8/8ths reduced by the Trio Option exercised amount discussed above) in and to approximately 960 gross and net acres under the Asphalt Ridge Leases (the “Asphalt Ridge Leases”), and (y) an undivided One Hundred Percent (100.00% of 8/8ths) interest in and to approximately 1,920 gross and net acres, in the adjoining acreage located in the western half of Section 23 and Sections 22, 26, and 27 all in township range and section map T4S, R20, 6th PM, Uintah County, Utah (the “Asphalt Ridge Acreage”); and (ii) subject to the Trio Option, we may explore and develop the Subject Acreage and the Asphalt Ridge Leases.

The farm-in price payable pursuant to the terms of the Farm-In Agreement is up to 3,400,000 shares of restricted common stock of the Company, with such number of shares due at closing equal to (x) 3,400,000 shares, multiplied by (y) the total number of acres conveyed at closing, divided by (z) 2,880 (the “Farm-In Shares”).

The closing of the transactions contemplated by the Farm-In Agreement is to occur upon completion of the Company’s due diligence on such Asphalt Ridge Leases and Asphalt Ridge Acreage, but no later than August 4, 2024.

The Farm-In Agreement is subject to customary indemnification obligations, confidentiality obligations, representations, warranties and conditions to closing, including satisfactory due diligence by the Company, confirmation by the Company of title information relating to the Asphalt Ridge Leases and Asphalt Ridge Acreage, and determination of the number of net leasehold acres to be acquired.

The Farm-In Agreement also allows us to change our name to Heavy Sweet Oil Corp., or a similar name in our discretion, which name change Heavy Sweet is required to consent to. We have the right to either become the operator or to choose the contract operator for the development of the Asphalt Ridge Leases and Asphalt Ridge Acreage.

The Farm-In Agreement clarifies that the Asphalt Ridge Leases and Asphalt Ridge Acreage are subject to that certain Leasehold Acquisition and Development Agreement, dated November 10, 2023, as amended December 28, 2023, by and between Heavy Sweet and Trio Petroleum Corp (“Trio”) (the “Trio Option”), and as a condition to closing, Heavy Sweet is required to obtain Trio’s agreement to assign the Trio Option to the Company at closing, with the Company assuming operatorship with respect to the Asphalt Ridge Leases and Asphalt Ridge Acreage, and with the Company assuming all rights, duties and responsibilities of Heavy Sweet under the Trio Option, and with the Asphalt Ridge Leases and Asphalt Ridge Acreage remaining subject to the Trio Option in accordance with its terms. Notwithstanding the foregoing, in the event Trio’s agreement to assign the Trio Option to the Company is not obtained on or prior to closing, the Company, in its sole discretion, may waive that condition and close without receiving the assignment of the Trio Option, in which event (i) Heavy Sweet shall retain the 17.75% working interest that is subject to the Trio Option, (ii) the Farm-In Shares shall be proportionately reduced, and (iii) in the event the Trio Option expires without Trio exercising its full option to acquire all Asphalt Ridge Leases and Asphalt Ridge Acreage as contemplated under the Trio Option, the Company shall have the sole and exclusive right to farm-in and acquire such Asphalt Ridge Leases and Asphalt Ridge Acreage that is not acquired by Trio on the same terms and conditions, and at the same proportionate farm-in price, as set forth under the Farm-In Agreement.

Prior to closing, the parties are required to enter into a mutually agreed Operating Agreement to govern all operations in the contacted area.

As consideration for entering the Farm-In Agreement, the Company agreed to vest in full the previously issued but unvested 2,688,000 shares of restricted common stock that were to vest pursuant to the Asphalt Ridge Option Agreement, and the parties agreed that the Asphalt Ridge Option Agreement was terminated and superseded by the Farm-In Agreement.

Prior to closing, the Company has the right to begin development operations on the Asphalt Ridge Acreage, including, but not limited to, building roads, laying pipelines, building drilling pads, drilling wells, and otherwise improving the Asphalt Ridge Acreage. The Company may do so at its sole cost and expense, and the Company shall have the full right and ability to do so in its sole discretion. Any hydrocarbon resources produced from any such wells shall be owned by the Company. The Farm-In Agreement can be terminated prior to closing (a) with the mutual consent of the parties; (b) by us, if Heavy Sweet breaches any representation, warranty or covenant in the Farm-In Agreement, and such breach continues for more than three (3) business days after we provide notice thereof, or if title defects reduce by more than 10% the net acres to be acquired by the Company, or if the closing has not occurred by August 4, 2024; (c) by Heavy Sweet if the closing has not occurred by August 4, 2024. In the event the Farm-In Agreement is terminated for any reason and we have conducted any development activities on the Asphalt Ridge Acreage, Heavy Sweet is required to promptly reimburse us for such costs and expenses.

We currently expect to close the transactions contemplated by the Farm-In Agreement in June 2024, subject to the satisfaction of the conditions to closing set forth therein.

https://www.sec.gov/Archives/edgar/data/1936031/000165495424005045/lafa_s1.htm

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