ROYALE ENERGY FUNDS, INC

ROYALE ENERGY FUNDS, INC deregistered its securities, ending its obligation to file reports with the SEC.

listing compliance notice

The Matrix merger closed on March 1, 2018 (California filings accepted March 7). Royale was merged into a subsidiary of the new Delaware parent, Royale Energy Holdings, and each Royale share became one share of the parent (22,600,185 shares in total). Matrix holders received 15,995,121 shares for the Matrix common stock, plus parent common stock for the partnership and operator interests, and $20,124,000 of Matrix preferred interests became 2,012,400 Series B preferred shares. Some closing conditions were waived, including delivery of evidence that Royale's DWI business assets had been transferred and executed employment agreements. The old Royale registration is being terminated, and the parent's stock continues on the OTC QB as ROYL. This resolves the long-running merger thread. The press release names a new board and says Jonathan Gregory is CEO and Johnny Jordan is President/COO.

asset acquisition disposition

A supplement to the merger proxy discloses that Arena, Matrix's lead secured lender, had said in November 2017 it would not consent, but the parties have now reached a consent agreement. Terms: the loan maturity moves up to April 15, 2018 (from June 30, 2018), Arena waives some existing defaults, the interest rate rises by 5% to the Adjusted LIBO Rate plus 14%, a $200,000 fee is added to the loan, and Parent and Royale assume obligations and pledge their shares and assets as security. By March 15, 2018 the borrowers must either raise $2 million in cash equity or hire an advisor to start a sale of Matrix, Royale and Parent. The supplement also says the Sunny Frog deadline is extended to March 30, 2018 and that the purchase right may be assigned to a new joint venture (the 'Development JV'). It describes a non-binding letter of intent with a private equity investor for $25 million in the Development JV, in exchange for 80% preferred interests and warrants for 4,000,000 Parent shares at $0.01. Parent would keep 20%, and the investor would receive a preferred return. This replaces the earlier $24M preferred and $17.5M credit facility proposals. It resolves the lender-consent hurdle but

business combination

On December 28, 2017 the parties extended the merger's outside termination date from December 31, 2017 to January 31, 2018 (Fifth Amendment), so the merger had not closed despite shareholder approval. Royale also disclosed a non-binding letter of intent with a Dallas private equity firm for up to $24 million of new convertible preferred stock, and a non-binding term sheet from a commercial lender for a $17.5 million senior secured credit facility. The proceeds (up to $41.5 million) are meant to repay and replace Matrix's lenders, fund the Sansinena 50% purchase and pay for 2018 drilling. Neither financing is binding, and the filing says there is no assurance they or the merger will close.

material agreement

On November 27, 2017, after Royale shareholders approved the merger on November 16 (as the filing states), Royale agreed to buy Sunny Frog, LLC's 50% non-operated working interest in the Sansinena and East Los Angeles fields for $15 million cash. Sunny Frog keeps a term overriding royalty on up to 300,000 barrels, starting at 2.75% and rising 1% a year after 2018 to a maximum of 9.75%. Matrix owns the other 50%. Closing is meant to coincide with the merger and depends on Royale arranging acceptable financing. The filing says it adds over 8.7 MBOE of net proved reserves for the merged company.

material agreement

Royale announced that the Matrix merger registration statement (S-4/A) was declared effective on October 16, 2017, and that its shareholder meeting to consider the merger is set for November 16, 2017 (record date September 29, 2017). The release restates the deal terms: Royale shareholders and Matrix holders each get 50% of Royale Energy Holdings common stock, Royale assumes Matrix's $12.4 million senior secured debt, and $20 million of 3.5% Series B preferred is issued. It still needs both shareholder votes and the consent of Matrix's senior secured lender. This moves the long-pending merger to the vote stage.

business combination

Royale and Matrix adopted an amended and restated merger agreement, effective as of December 31, 2016, that includes all earlier changes and moves the outside termination date from June 30 to September 30, 2017. This is the second extension of the deadline, so the Matrix merger had still not closed.

material agreement

On March 31, 2017 Royale and Matrix amended the merger agreement to push the outside termination date from March 31 to June 30, 2017, so the deal had not closed by the original deadline. Royale will pay Matrix $100,000 toward its legal fees, and Matrix owes Royale a $100,000 termination fee in certain termination cases not caused by Matrix. The amendment also drops a closing condition requiring Royale to hold cash above 65% of its deferred drilling obligations, which makes closing easier for Royale to satisfy.

material agreement

On November 30, 2016 Royale signed a merger agreement with Matrix Oil Management Corporation under which a new Delaware holding company, Royale Energy Holdings, would own both. Royale shareholders would swap each share one-for-one into the new parent and are meant to hold 50% of its common stock, with Matrix-side holders getting the other 50% plus Series B preferred stock for about $20,124,000 of Matrix debt. It needs shareholder and lender approvals and an S-4 registration, and either side can terminate if it has not closed by March 31, 2017. The filing says Royale was delisted from NASDAQ in January 2016 and trades on the OTC QB, and the company will apply to relist the new stock but approval is not a closing condition. This gives a different answer to the earlier Nasdaq deficiency threads and sets the proposed board (eight members) and officers (Gregory CEO, Johnny Jordan President/COO, Stephen Hosmer CFO).

business combination

On August 2, 2016 Royale raised money in two private deals: 2,392,500 units (one share plus a warrant for one-fifth of a share) at $0.40 each for $957,000, and $1,580,000 of one-year unsecured convertible notes. The notes convert into 3,950,000 shares only if shareholders approve, so existing holders face dilution from the new shares, the note conversion and the warrants (exercisable at $0.80, for 1,185,000 shares on the notes). The filing says the money is for drilling, costs of the proposed merger with Matrix Oil Corporation, and general purposes. This is the first mention of the Matrix merger in the record so far.

capital raising announcement

ROYALE ENERGY FUNDS, INC's exchange filed to remove a class of its securities from listing.

listing compliance notice

On November 10, 2015 Royale agreed to sell its working interest in the Western Block of its Alaska North Slope property (about 39,500 acres) to 70 & 146, LLC for $2 million in cash, keeping a 1⅓% overriding royalty; State of Alaska approval is required. Royale will keep about 57,000 acres and calls the sale a step to strengthen its balance sheet and regain Nasdaq compliance, with part of the proceeds funding a drilling campaign starting December 2015. This appears to replace the earlier Rampart participation agreement on the Western Block; the filing does not mention Rampart.

material agreement

On October 6, 2015 Nasdaq staff said Royale still has not regained the $2.5 million equity requirement (after a June 4 notice and an extension to October 5) and the stock faces delisting unless Royale requests a hearing by October 13, which it intends to do. Royale will hold a November 19, 2015 shareholder meeting to vote on a reverse split between 1.5-for-1 and 5-for-1 and raising authorized shares from 20 million to 30 million. Appointing Ronald Verdier on September 24 as an independent director restored the audit committee, but the majority-independent board requirement is still unmet. The stock stays listed pending the hearing.

listing compliance notice

On August 31, 2015 Nasdaq notified Royale that its stock has failed the $1 minimum bid price rule. Royale has until February 27, 2016 to fix it, possibly with a further 180 days, and says it may consider a reverse stock split. This is a second, separate listing problem on top of the equity shortfall.

listing compliance notice

On May 20, 2015 Royale signed a new at-the-market sales agreement with Roth Capital Partners to sell up to $7,726,103 of common stock, with a 3.5% commission. Proceeds are meant for developing Alaskan properties and working capital; issuance needs Nasdaq approval and Royale need not sell any. It follows the April 2015 equity shortfall notice and the earlier 2014 Roth program, and any sales would dilute shareholders.

material agreement

On April 7, 2015 Nasdaq told Royale it fails the $2.5 million minimum stockholders' equity rule, because the 2014 10-K showed equity of $(1,141,227). Royale has to submit a compliance plan by May 22, 2015, and says it plans to raise equity, having filed a Form S-3 on April 2, 2015. This revives the equity-listing problem seen in 2009.

listing compliance notice

On April 4, 2014 Royale signed a sales agreement with Roth Capital Partners to sell up to $10,000,000 of common stock at the market, with Roth taking a 3.5% commission. Proceeds are intended for acquiring and developing Alaskan properties and working capital; Royale need not sell any shares, and issuance needs Nasdaq approval. The amount actually sold is not stated, but any sales would dilute shareholders.

material agreement

On January 16, 2014 Royale said its 2012 and 2011 financial statements (and 2013's first three quarterly reports) should no longer be relied on, after SEC staff comments led it to change how it accounts for sales of working interests to drilling participants. For Dec 31, 2012, total assets fall from $17.5M to $13.1M and stockholders' equity from $662,593 to a deficit of $(3,771,018); 2012 net loss moves only from $(11,961,026) to $(11,908,835). Restated 9/30/2013 equity is $320,201 versus $4,837,119 previously. Restated 10-K is planned before March 31, 2014. This is a second restatement after the 2010 one, and it sharply weakens the equity position tied to the Nasdaq equity requirements.

financial restatement

On May 22, 2013 Royale signed a deal letting Rampart Energy (an Australian company) earn up to 75% of the working interest in two blocks of Royale's Alaska North Slope acreage (up to about 50,875 acres). Rampart earns by paying about $3.4 million (two $1.7 million payments due June 3 and Dec 1, 2013), completing a 3D seismic survey by March 31, 2014, and drilling two wells (up to $30 million, by March 31, 2016); it can add the Central Block with a further ~$1.7 million. Rampart also gives Royale an option on Rampart shares. This advances the Alaska plans first mentioned in 2012, the acreage for which Royale won leases after a December 2011 bid and took in December 2012.

material agreement

On October 28, 2012 Royale agreed to sell convertible notes with $3,333,333.33 principal for $3,000,000 (about 10% discount) to institutional investors, with Series E warrants for 500,000 shares at $3.00. Notes mature December 31, 2014, convert at $4.50 (reset lower on cheaper share issuances), and from 2013 holders can demand redemption of up to 25% of principal each quarter, which Royale may pay in cash at 102.5% or in shares at a discount to market. Default triggers cash redemption at 135%. Royale must hold a shareholder meeting by June 30, 2013 to raise authorized shares to 50 million common and lift the Nasdaq-related caps. C.K. Cooper is placement agent at 5%. This is new debt with potentially heavy dilution, and Cranshire again waived its 2008 warrant adjustment.

debt financing

On February 17, 2012 Royale signed a sales agreement with C.K. Cooper & Company allowing it to sell up to $10 million of common stock over time at market prices, with a 3.5% commission. Royale has no obligation to sell any shares. Proceeds are expected to go to acquiring and developing Alaskan oil and gas properties and working capital, and issuances are subject to Nasdaq Capital Market approval. The shares would come from a shelf registration declared effective February 14, 2012. Shares sold would dilute existing holders; no amount sold is stated. The reference to the Nasdaq Capital Market suggests (inference) the stock is no longer on the Global Market.

material agreement

On August 4, 2010 Royale said its 2009 annual and the September 30, 2009 and March 31, 2010 quarterly financial statements should no longer be relied on, and filed corrected versions. The fix is to record shares of a start-up received in a 2000 legal settlement at market value after that company's September 2009 IPO; Royale says it learned of the public market only in June 2010. This raises current assets, total assets and stockholders' equity, while net income and earnings per share are unchanged.

financial restatement

On October 16, 2009 Royale agreed to sell 623,053 shares at $3.21 to an institutional investor (closed October 20) for about $2.0 million gross and about $1.88 million net, plus warrants for 342,679 shares at $3.53 for 5 years. The placement agent also received warrants for 33,994 shares at $3.53. Royale says the money will speed up drilling after a recent discovery, including the Wylie well starting that week and permitting for the Vann and Magnum prospects. The investor (Cranshire, per the waiver exhibit) again waived the upward share adjustment on its 2008 warrant. This is a second raise after the August placement and adds further dilution potential through the warrants.

capital raising announcement

On August 4, 2009 Royale agreed to sell 552,764 shares at $1.99 each to one institutional investor, closing August 5, for about $1.1 million gross and about $999,000 net. The investor also received four series of warrants (329,850 at $2.19; 1,808 at $2.19; 511,628 at $2.15; 306,977 at $2.19, the last only if the Series B warrants are exercised), and the placement agent got warrants for 33,166 shares at $1.99. Royale says the money will go to developing its Sacramento basin properties and it must file a resale registration within 30 days of closing. Cranshire Capital waived the upward share adjustment on its June 2008 warrant, whose exercise price resets to $1.99 from $7.30 as a result of this sale. This is the capital raise the board was weighing earlier in the year, and it adds dilution risk through the warrants.

capital raising announcement

On July 20, 2009 Nasdaq determined Royale had not completed the plan it filed April 16 to restore the $10 million equity minimum, and Royale intends to appeal and request a hearing. Royale says it requested SEC approval of an S-3 registration on April 22, 2009 to raise capital, which is part of its compliance plan, and it needs time for the SEC process. This continues the April listing problem and the delisting risk is still open.

listing compliance notice

Nasdaq notified Royale that its stockholders' equity of $7,394,467 at December 31, 2008 is below the $10 million needed to stay on the Nasdaq Global Market. Royale has until about April 16, 2009 to submit a plan or seek a Nasdaq Capital Market listing, and its board has authorized seeking additional equity by issuing stock, so more dilution is possible. The filing text says April 1, 2008, an apparent typo for 2009.

listing compliance notice

Royale terminated its exchange offer for Aspen Exploration shares and asked to withdraw the S-4 registration statement. The filing gives no reason. This ends the thread, so no new Royale shares will be issued for Aspen, and Royale keeps its small existing Aspen stake (353,125 shares per the February filing).

business combination

On February 13, 2009 Royale signed a $15 million revolving credit line with Texas Credit Bank, replacing its Guaranty Bank line. Interest is the greater of the bank's prime rate or the Federal Funds Rate, with a 3% floor. Covenants bar cash dividends and require minimum earnings-to-interest, current-ratio and tangible-net-worth levels. The filing does not say how much is drawn.

material agreement

Royale amended its registration for the Aspen exchange offer: it now offers up to 1,140,798 Royale shares (down from 1,451,925) for up to 3,992,792 Aspen shares at 1 Royale per 3.5 Aspen. The minimum tender is 3,484,619 Aspen shares (51%), down from 3,720,036. Using January 6, 2009 closing prices (Aspen $0.65, Royale $3.36) the filing puts the offer at $0.96 per Aspen share, a 47.8% premium. Fewer new Royale shares would be issued than first planned if it completes.

business combination

Royale filed to register up to 1,451,925 of its own shares for an exchange offer to buy up to 3,992,792 shares of Aspen Exploration Corporation, at 1 Royale share per 2.75 Aspen shares. The offer is conditional on at least 3,720,036 Aspen shares (51%) being tendered, which with Royale's existing Aspen holding would give it a majority; Royale says it plans to use that to elect new Aspen directors and does not intend further offers or a merger. On November 20, 2008 Aspen closed at $0.92 and Royale at $2.31, making the offer worth about $0.84 per Aspen share, an 8.7% discount. If completed, Royale shareholders would be diluted by the new shares issued.

business combination

On August 30, 2008 Royale agreed to sell its interest in the Rio Bravo oil field in Kern County, California to Occidental Petroleum of Elk Hills, Inc. for $4.75 million cash. This is a field the June 2008 press release had named as a place for increased activity, so the sale is a change from that stated plan.

material agreement

On June 10, 2008 Royale sold 547,945 new common shares at $7.30 to one institutional investor for about $4 million gross (about $3.725 million net), and also issued a warrant for 191,781 shares at $7.30 expiring June 10, 2013. The placement agent got warrants for 32,877 shares, and the agreements include provisions for issuing additional shares if later dilutive issuances occur. The company says proceeds are for general corporate purposes including buying oil and gas properties, and its press release mentions more activity in the Rio Bravo and Moon Canyon (Uintah Basin) fields. This dilutes existing shareholders but adds cash.

capital raising announcement