What changed in this filing

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Item 9A. Controls and Procedures

2026-07-13 compared with 2025-04-09 · 1073 added, 939 removed, 752 unchanged (73% of the section changed)

9A Controls and Procedures

the supervision and with the participation of our management, including our principal executive officer and principal financial officer,

we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) or 15d-15(e) under

the Exchange Act.

Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure

controls and procedures were effective to give reasonable assurance that information required to be publicly disclosed is recorded, processed,

summarized and reported on a timely basis as of the end of the period covered by this annual report.

Management ’ s

Report on Internal Control Over Financial Reporting

is responsible for establishing and maintaining adequate internal control over our financial reporting.

In order to evaluate the effectiveness

of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment,

including testing, using the criteria in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of

the Treadway Commission (“COSO”).

Our system of internal control over financial reporting is designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance

with generally accepted accounting principles.

on our evaluation under the framework in Internal Control-Integrated Framework, our Chief Executive Officer and Chief Financial Officer

concluded that our internal control over financial reporting was not effective as of December 31, 2024 due to the deficiencies described

Weakness and Remediation

material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is

a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected

on a timely basis.

In connection with the audit of our 2019 consolidated financial statements,

management identified a material weakness that existed because we did not maintain effective controls over our financial close and reporting

process, and concluded that the financial close and reporting process needed additional formal procedures to ensure there are appropriate

reviews over all financial reporting analysis.

Management has identified a material weakness that existed due to the lack of segregation

of duties and controls, regarding our financial reporting system.

Updated procedures were implemented through the close process for the

year ended December 31, 2023 and 2024, but the material weakness on our financial close and reporting process was not alleviated.

We will continue to monitor these throughout 2025 to be able to fully

assess whether the procedures and controls are effective.

Report of the Independent Registered Public Accounting Firm.

annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control

over financial reporting.

Management’s report was not subject to attestation by the registered public accounting firm pursuant

to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

in Internal Control over Financial Reporting

than the remedial activities described above, no changes in our internal control over financial reporting occurred during the year ended

December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

10 Directors, Executive Officers and Corporate Governance

of our directors serve one-year terms from the time of their election to the time their successor is elected and qualified.

The following

information is furnished with respect to each director and executive officer who served as such during the fiscal year ended December

First Became Director or

Executive Officer

Item 9A Controls and Procedures

Under the supervision and with the participation of our management,

including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures,

as such term is defined under Rules 13a-15(e) or 15d-15(e) under the Exchange Act.

Based on this evaluation, our principal executive officer

and our principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period

covered by this annual report, as a result of a material weakness in our internal control over financial reporting discussed below.

Management ’ s Report on Internal Control Over Financial

Management is responsible for establishing and maintaining adequate

internal control over our financial reporting.

In order to evaluate the effectiveness of internal control over financial reporting, as

required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in the

2013 Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial

reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Based on our evaluation under the framework in Internal Control-Integrated

Framework, our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was not

effective as of December 31, 2025, due to a material weakness described below.

Material Weakness and Remediation

Management identified a material weakness that existed because we lack

sufficient financial reporting personnel, proper review controls and proper segregation of duties, including within our financial reporting

systems, to produce accurate and complete financial records in accordance with SEC and US GAAP requirements.

The material weakness continues

to exist as of December 31, 2025.

Management is in the process of developing a remediation plan designed to improve its internal control

over financial reporting and address the identified material weakness.

Management will not be able to conclude that it has remediated

the material weakness until controls are implemented, operate for a sufficient period of time, and management is able to conclude, through

formal testing, that the controls are operating effectively.

Item 10 Directors, Executive Officers and Corporate Governance

All of our directors serve one-year terms from the time of their election

to the time their successor is elected and qualified.

The following information is furnished with respect to each director and executive

officer who served as such during the fiscal year ended December 31, 2025:

First Became Director

or Executive Officer

Positions Held

2 unchanged sentences

Jonathan Gregory (2)(3)

Vice-Chair of the

Board of Directors

Vice-Chair of the Board of Directors

Johnny Jordan

Chief Executive and

Operating officer

Chief Executive and Operating officer and Director

Ronald Lipnick

3 unchanged sentences

Stephen Hosmer

of the audit committee

of the compensation committee

of the nominations committee

identified as independent

board has determined that directors John Sullivan, Chris Parada, Jonathan Gregory and Jeff Kerns qualify as independent directors.

following summarizes the business experience of each director and executive officer for the past six years.

Parada – Chairman of the Board

Parada currently serves as Managing Director – Energy Finance for Cornerstone Capital Bank, a position he has held since January

Cornerstone is a privately held financial institution with almost $2.0 billion in assets and over $325 million of regulatory capital.

Members of the audit committee

Members of the compensation committee

Members of the nominations committee

Members indentified as independent

The board has determined that directors John Sullivan, Chris Parada,

and Jeff Kerns qualify as independent directors.

The following summarizes the business experience of each director and

executive officer for the past six years.

Chris Parada – Chairman of the Board

Parada currently serves as Managing Director – Energy Finance

for Cornerstone Capital Bank, a position he has held since January 2023.

With over 30 years of experience in energy finance, Mr.

specializes in providing debt capital and structured solutions to private exploration and production (E&P) and midstream oil

and gas companies throughout the United States.

From April 2021 through December 2022, Mr.

Parada was an energy banker, with the title of Vice President of Business Development for

Finergy Capital/EnRes Resources, an alternative investment fund providing structured capital solutions to upstream oil and gas companies.

For over 25 years, most recently, as Managing Director - Head of Energy Finance for Legacy Texas Bank (2013-2019) where he started

and built the Energy Finance team for Legacy Texas.

While at Legacy Texas, Mr.

Parada and the team successfully closed over $1.5 billion

in transactions while he managed a team of seven professionals.

Parada graduated in 1993 from Texas A&M University with a B.B.A.

Gregory – Vice-Chair of the Board of Directors

Gregory became a director of Royale in March 2014 and served as Royale’s chief executive officer from September 10, 2015, until

June 1, 2018.

Parada was an energy banker, with the title

of Vice President of Business Development for Finergy Capital/EnRes Resources, an alternative investment fund providing structured capital

solutions to upstream oil and gas companies.

From 2013-2019 he served as Managing Director - Head of Energy Finance at LegacyTexas

Bank, where his team executed over $1.5 billion of transactions.

Parada has over 25 years of experience in oil and gas banking

Parada holds a Bachelor of Business Administration in Finance from Texas A&M University.

Jonathan Gregory – Vice-Chair of the board of directors

Gregory became a director of Royale in March 2014 and served as

Royale’s chief executive officer from September 10, 2015, until June 1, 2018.

Prior to becoming Royale’s CEO, Mr.

Gregory, from March 2014 to July 2015, served as Chief Financial Officer and

Chief Business Development Strategist for Americo Energy Resources, a private exploration and production company located in Houston,

from March 2014 to July 2015, served as Chief Financial Officer and Chief Business Development Strategist for Americo Energy Resources,

a private exploration and production company located in Houston, Texas.

Prior to serving as CFO of Americo Energy, Mr.

Gregory was CFO of J&S Oil & Gas, LLC, from April 2012 to February 2014.

Gregory was CFO

of J&S Oil & Gas, LLC, from April 2012 to February 2014.

From December 2004 to April 2012, Mr.

Gregory was head of the energy lending group in Houston, Texas for Texas Capital Bank, N.A.

Gregory is presently CEO of RMX, a private Texas based oil and gas company with oil and gas properties primarily located in California,

in which, Royale holds an equity interest.

Gregory is also a Credit Advisor to Anvil Capital Partners, a private debt capital provider

to upstream energy companies and serves on the advisory board of the Center for Compassionate Leadership.

Gregory graduated from

Lamar University in 1986 with a Bachelor’s degree in Finance.

Sullivan – Director

Sullivan first became a director and began serving as the Chairman of the Board in 2021.

Sullivan is the President of LTD Consulting

Services LLC, which provides consulting and management services to private and public companies in the US and SE Asia, a position he

has held since 2017.

Gregory was head of the energy

lending group in Houston, Texas for Texas Capital Bank, N.A.

Gregory is presently CEO of RMX, a private Texas based oil and gas company

with oil and gas properties primarily located in California, in which, Royale holds an equity interest.

Gregory is also a Credit Advisor

to Anvil Capital Partners, a private debt capital provider to upstream energy companies and serves on the advisory board of the Center

for Compassionate Leadership.

Gregory graduated from Lamar University in 1986 with a Bachelor’s degree in Finance.

John Sullivan – Director

Sullivan first became a director and began serving as the Chairman

of the board in 2021.

Sullivan is the President of LTD Consulting Services LLC, which provides consulting and management services

to private and public companies in the US and SE Asia, a position he has held since 2017.

Previously, he held the position of Sr.

Director at MMI International, a privately held, global supplier to the

Data Storage, Aerospace and Oil and Gas industries from 2011-2017.

In this role, he oversaw the sales and global operations for the Precision

Forming Group, a division of MMI, with $250 million in annual sales.

to this, as Director of Operations, COO and President, he spent eleven years, from 1999 until 2011, with Intri-Plex Technologies Inc.,

a leading design, engineering and manufacturing company to the Data Storage, Semi-conductor and Medical industries.

In his various roles,

he led the development and implementation of strategic sales and operating initiatives that resulted in significant top and bottom line

Overseeing the expansion of the business from a domestic manufacturing company to an international supplier of precision components

with manufacturing facilities located in the US and SE Asia.

as COO and President of KR Precision Public Co.

Ltd., a publicly held, global supplier of precision mechanical components, John was instrumental

in transforming a small privately held company from a niche supplier to a publicly held industry leader listed on the SET 50.

began his career in 1980 as an entrepreneur, spending ten years as a small business owner in the security and life safety industry.

grew his company organically and through acquisition, diversified its offerings and expanded its geographic footprint prior to it being

acquired by ADT International in, a global leader in security and life safety industry, in 1990.

Jordan – Chief Executive Officer, President, Chief Operating Officer and Director

Jordan is a petroleum engineer with expertise in acquisitions, field economics and reserves analysis, bank negotiations, reservoir and

field operations, and multi-team interaction.

Jordan has been Royale Energy’s Chief Executive Officer since 2019.

served on the Board of Directors of Matrix Oil Corporation (“Matrix”) and currently serves on the Board of Directors of both

RMX Resources and CIPA.

Jordan has been active in the oil and gas industry since 1980 beginning as a floor hand on a well service

He has held various staff and supervisory positions for Exxon, Mack Energy, Enron Oil and Gas and Venoco Corporation.

He co-founded

Matrix in 1999 and served as its president until its merger with Royale in 2018.

Jordan is a member of the Society of Petroleum Engineers,

American Petroleum Institute and the Texas Independent Producers and Royalty Owners Association.

Jordan has managed acquisition evaluations

in many of the oil and gas producing basins in the US.

Jordan received a B.S.

in Chemical Engineering from the University of Oklahoma

Kerns – Director

Kerns was a founding partner of Matrix in 1999, which merged with Royale Energy, Inc.

at MMI International, a privately held, global supplier to the Data Storage, Aerospace and Oil and Gas industries from 2011-2017.

role, he oversaw the sales and global operations for the Precision Forming Group, a division of MMI, with $250 million in annual sales.

Prior to this, as Director of Operations, COO and President, he spent

eleven years, from 1999 until 2011, with Intri-Plex Technologies Inc., a leading design, engineering and manufacturing company to the

Data Storage, Semi-conductor and Medical industries.

In his various roles, he led the development and implementation of strategic sales

and operating initiatives that resulted in significant top and bottom line growth.

Overseeing the expansion of the business from a domestic

manufacturing company to an international supplier of precision components with manufacturing facilities located in the US and SE Asia.

Previously, he served as COO and President of KR Precision Public Co.

Ltd., a publicly held, global supplier of precision mechanical components, John was instrumental in transforming a small privately held

company from a niche supplier to a publicly held industry leader listed on the SET 50.

John began his career in 1980 as an entrepreneur, spending ten years

as a small business owner in the security and life safety industry.

He grew his company organically and through acquisition, diversified

its offerings and expanded its geographic footprint prior to it being acquired by ADT International in, a global leader in security and

life safety industry, in 1990.

Johnny Jordan – Chief Executive Officer, President, Chief Operating

Officer and Director

Jordan is a petroleum engineer with expertise in acquisitions,

field economics and reserves analysis, bank negotiations, reservoir and field operations, and multi-team interaction.

Jordan has been

Royale Energy’s Chief Executive Officer since 2019.

Jordan served on the board of directors of Matrix Oil Corporation (“Matrix”)

and currently serves on the board of directors of both RMX Resources and CIPA.

Jordan has been active in the oil and gas industry

since 1980 beginning as a floor hand on a well service rig.

He has held various staff and supervisory positions for Exxon, Mack Energy,

Enron Oil and Gas and Venoco Corporation.

He co-founded Matrix in 1999 and served as its president until its merger with Royale in 2018.

Jordan is a member of the Society of Petroleum Engineers, American Petroleum Institute and the Texas Independent Producers and Royalty

Owners Association.

Jordan has managed acquisition evaluations in many of the oil and gas producing basins in the US.

Jordan received

in Chemical Engineering from the University of Oklahoma in 1983.

Jeff Kerns – Director

Kerns was a founding partner of Matrix in 1999, which merged with

Royale Energy, Inc.

nearly 20 years later in 2018.

As a director and

officer of Matrix, Mr.

Kerns participated in growing the Company from zero production to owning and operating nearly 500 bbls of oil

Kerns was involved in all aspects of the Company’s growth, but his primary focus was day to day operations.

Kerns has served as a consulting engineer to Royale Energy and Matrix from 2018 to present.

Kerns started in the oil and gas business over 40 years ago as a roughneck in North Dakota working on rigs that drilled through the now

famous Bakken Shale heading for deeper targets.

Prior to Matrix, Mr.

Kerns has held various staff and supervisory positions with Mobil

Oil Corp (now ExxonMobil) and Venoco Inc, a small independent company headquartered in Santa Barbara, CA.

He also gained broad skills

working for many years as a consultant in the oil and gas business.

As a director and officer of Matrix, Mr.

Kerns participated in growing Matrix from

zero production to owning and operating nearly 500 bbls of oil per day.

Kerns was involved in all aspects of Matrix’s growth,

but his primary focus was day to day operations.

Kerns has served as a consulting engineer to Royale Energy and

Matrix from 2018 to present.

Kerns started in the oil and gas business over 40 years ago as

a roughneck in North Dakota working on rigs that drilled through the now famous Bakken Shale heading for deeper targets.

Prior to Matrix,

Kerns has held various staff and supervisory positions with Mobil Oil Corp (now ExxonMobil) and Venoco Inc, a small independent company

headquartered in Santa Barbara, CA.

He also gained broad skills working for many years as a consultant in the oil and gas business.

Kerns is a registered Professional Engineer in the state of CA.

He received a BS degree from Stanford University in 1979.

an elected public official for 10 years on the local sanitary district board of directors as well as serving as a past president of a

local Rotary International club and president of the San Joaquin Chapter of the American Petroleum Institute and has maintained a long

term affiliation with SPE.

Hosmer – Director, Corporate Secretary

He served as an elected public official for 10 years on the local sanitary district

board of directors as well as serving as a past president of a local Rotary International club and president of the San Joaquin Chapter

of the American Petroleum Institute and has maintained a long term affiliation with SPE.

Stephen Hosmer – Director, Corporate Secretary

Hosmer first became a director in 1998, and served through 2018.

He was then reappointed in January 2022, following his departure as

the company’s Chief Financial Officer, where he served since 1995.

Hosmer also served as the company’s Co-Chief Executive

Officer from 2008 until September 2015.

his tenure as CFO, Mr.

Hosmer managed the development of over 178 wells, raised capital through a combination of debt and equity sources,

and led the acquisition of more than 200 square miles of 3D seismic data.

Hosmer holds a Bachelor of Science degree in Business Administration

from Oral Roberts University in Tulsa, Oklahoma and an MBA degree from the President/Key Executive program at Pepperdine University.

Hosmer currently serves as the CFO for Owners in Honor, Managing Partner of Provident Ventures, and has also served on the board and/or

consults for a number of not-for-profit organizations, including Venture Expeditions and Exile International, and Wycliffe Bible Translators.

Lipnick – Chief Financial Officer

Lipnick has been with the Company since May 1993 and has been the Chief

Financial Officer since February 2022.

He was then reappointed in January 2022, following his departure as the Company’s Chief Financial Officer, where he served since

Hosmer also served as the Company’s Co-Chief Executive Officer from 2008 until September 2015.

During his tenure as CFO, Mr.

Hosmer managed the development of over

178 wells, raised capital through a combination of debt and equity sources, and led the acquisition of more than 200 square miles of 3D

seismic data.

Hosmer holds a Bachelor of Science degree in Business Administration from Oral Roberts University in Tulsa, Oklahoma

and an MBA degree from the President/Key Executive program at Pepperdine University.

Hosmer currently serves as the CFO for Owners in Honor, Managing

Partner of Provident Ventures, and has also served on the board and/or consults for a number of not-for-profit organizations, including

Venture Expeditions and Exile International, and Wycliffe Bible Translators.

Ronald Lipnick – Chief Financial Officer

Lipnick has been with the Company since May 1993 and has been the

Chief Financial Officer since February 2022.

Prior to that he had been the Controller since February 1994.

6 unchanged sentences

Administration in Finance from Oral Roberts University, Tulsa, Oklahoma.

board has appointed an audit committee to assist the board of directors in carrying out its responsibility as to the independence and

competence of the Company’s independent public accountants.

All members of the audit committee are independent members of the board

of directors.

The audit committee operates pursuant to an audit committee charter, which has been adopted by the board of directors to

define the committee’s responsibilities.

A copy of the audit committee charter is posted on our website, www.royl.com .

board has determined that Chris Parada qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of

Regulation S-K.

the end of 2024, the members of the audit committee were John Sullivan (Chair), Jeff Kerns, Chris Parada and Jonathan Gregory.

2024 there were four meetings of the audit committee, at which all members participated.

the Company is not required to maintain a Compensation Committee, the board has nonetheless appointed a Compensation Committee to assist

the Board of Directors in fulfilling their responsibilities to shareholders, potential shareholders and the investment community related

to executive recruitment, selection, evaluation and compensation.

The Committee reviews and advises on matters involving the personnel/human

resource policies of the Corporation, its compensation program, and corporate strategy in compliance with public policy personnel/employment

regulations in a changing environment.

The Compensation Committee operates pursuant to a charter, which has been adopted by the board

of directors to define the committee’s responsibilities.

The Compensation Committee charter provides that the committee consist

of at least two (2) independent directors.

A copy of the Compensation Committee charter is posted on our website, www.royl.com.

the end of 2024, the members of the Compensation Committee were [Jeff Kerns, John Sullivan, Chris Parada, Jonathan Gregory].

2024, there were 0 meetings of the Compensation Committee, at which all members participated.

the Company is not required to maintain a Nominating Committee, the board has nonetheless appointed a Nominating Committee to assist

the Board of Directors in identifying qualified individuals to become board members, receive and review recommendations by shareholders

for board nominations, and determine whether existing board members should be nominated for re-election.

The Nominating Committee operates

pursuant to a charter, which has been adopted by the board of directors to define the committee’s responsibilities.

The Nominating

Committee charter provides that the committee consist of at least two (2) independent directors.

A copy of the Nominating Committee charter

is posted on our website, www.royl.com.

the end of 2024, the members of the Nominating Committee were Chris Parada, John Sullivan (Chair), and Jeff Kerns, each of whom is an

independent director.

In 2024, there was 1 meeting of the Nominating Committee, at which all

Audit Committee

The board has appointed an audit committee to assist the board of directors

in carrying out its responsibility as to the independence and competence of the Company’s independent public accountants.

of the audit committee are independent members of the board of directors.

The audit committee operates pursuant to an audit committee

charter, which has been adopted by the board of directors to define the committee’s responsibilities.

A copy of the audit committee

charter is posted on our website, www.royl.com .

The board has determined that Chris Parada qualifies as an “audit committee

financial expert” as defined in Item 407(d)(5) of Regulation S-K.

At the end of 2025, the members of the audit committee were John Sullivan

(Chair), Jeff Kerns, Chris Parada and Jonathan Gregory.

In 2025 there were four meetings of the audit committee, at which all

members participated.

Compensation Committee

Although the Company is not required to maintain a compensation committee,

the board has nonetheless appointed a compensation committee to assist the board of directors with respect to executive recruitment, selection,

evaluation and compensation.

This committee reviews and advises the board of directors on matters involving the personnel/human resource

policies, its compensation program, and corporate strategy in compliance with public policy personnel/employment regulations in a changing

The compensation committee operates pursuant to a charter, which has been adopted by the board of directors to define the

committee’s responsibilities.

The compensation committee charter provides that the committee consist of at least two (2) independent

A copy of the compensation committee charter is posted on our website, www.royl.com.

At the end of 2025, the members of the compensation committee were

Jeff Kerns, John Sullivan, Chris Parada, Jonathan Gregory.

In 2025, there was 1 meeting of the compensation committee, at which

all members participated.

Nominating Committee

Although the Company is not required to maintain a nominating committee,

the board has nonetheless appointed a nominating committee to assist the board of directors in identifying qualified individuals to become

board members, receive and review recommendations by shareholders for board nominations, and determine whether existing board members

should be nominated for re-election.

The nominating committee operates pursuant to a charter, which has been adopted by the board of directors

to define the committee’s responsibilities.

The nominating committee charter provides that the committee consist of at least two

independent directors.

A copy of the nominating committee charter is posted on our website, www.royl.com.

At the end of 2025, the members of the nominating committee were Chris

Parada, John Sullivan (Chair), and Jeff Kerns, each of whom is an independent director.

In 2025, there was 1 meeting of the nominating committee, at which

all members participated.

Code of Business Conduct and Ethics

7 unchanged sentences

The following Form 4’s for common

stock issued to current and former board members were filed late or are in process of being filed, each of these filings consisted of

two transactions that occurred in 2024:

stock issued to current and former board members were filed late, each of these filings consisted of two transactions that occurred in

Form 4 2024 Common Stock Issuance - Late Filings:

4 unchanged sentences

officer, chief financial officer and the one other most highly compensated non-executive employee of Royale and its subsidiaries during

the past three years.

the past two years.

SUMMARY COMPENSATION TABLE

Option Awards

Compensation (1)

3 unchanged sentences

Ronald Lipnick

(1) All other compensation consists

of matching contributions to the Company’s simple IRA plan, except for Donald H.

All other compensation consists of matching contributions to the Company’s simple IRA plan, except for Donald H.

Hosmer, who also received a $12,000 car allowance.

(2) Salary represents either direct

payroll or common stock paid in lieu of taking a cash salary.

Jordan became CEO of the Company

in January 2019.

Salary represents either direct payroll or common stock paid in lieu of taking a cash salary.

Jordan became CEO of the Company in January 2019.

Jordan joined the Company as an officer on March 7, 2018.

(4) There was no compensation paid

There was no compensation paid to Mr.

Johnny Jordan for performance (Pay Versus Performance).

19 unchanged sentences

His additional compensation was $5,525, resulting in a total compensation of $189,679.

In 2023, his salary was $194,654, with

a bonus of $10,500.

There were no option awards, but his additional compensation amounted to $5,840, resulting in a total compensation

In 2024, his salary was $184,154.

no option awards.

His additional compensation was $5,525, resulting in a total compensation of $189,679.

Stock Options and Equity Compensation;

3 unchanged sentences

Compensation Committee Report

Our executive compensation committee has reviewed and discussed the

following Compensation Discussion and Analysis with management and, based on its discussion and review, has recommended that the Compensation

Discussion and Analysis be included in this annual report.

Our compensation committee has reviewed and discussed the following

Compensation Discussion and Analysis with management and, based on its discussion and review, has recommended that the Compensation Discussion

and Analysis be included in this annual report.

Members of the compensation committee:

45 unchanged sentences

No cash bonuses were paid to executive officers

in 2024 or 2023, other than those listed for Donald Hosmer and Ronald Lipnick in the table above.

in 2025 or 2024, other than those listed for Donald Hosmer in the table above.

Compensation of Directors

9 unchanged sentences

Jonathan Gregory

Former Board Members

Item 12 Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder Matters

At March 8, 2025, 96,600,302 shares of the registrant’s Common

Stock were outstanding.

At March 31, 2026, 96,600,302 shares of Royale’s common stock

were outstanding.

The following table contains information regarding the ownership of

8 unchanged sentences

Johnny Jordan

Jeff Kerns(5)

John Sullivan

1 unchanged sentence

All officers and directors as a group

(1) The mailing address of each listed stockholder is 1530 Hilton

Head Rd, Suite 205, El Cajon, California 92021.

The mailing address of each listed stockholder is 1530 Hilton Head Rd, Suite 205, El Cajon, California 92021.

Includes 6,000 shares owned by Stephen M.

Hosmer’s minor

Hosmer’s minor children.

Includes 35,000 shares owned by Mr.

3 unchanged sentences

shareholder known by Royale to own beneficially more than 5% of our common stock.

Item 13 Certain Relationships and Related Transactions, and Director

Certain Relationships and Related Transactions, and Director

Our Chief Executive Officer, Johnny Jordan, had accrued certain unpaid

salaries, at December 31, 2023, Mr.

salary, at December 31, 2024, Mr.

Jordan was owed $46,926, in accrued unpaid guaranteed payments.

6 unchanged sentences

At December 31, 2025, the Company

had a receivable balance of $20,926 due from Stephen Hosmer and $10,848 from Donald Hosmer for normal drilling and lease operating expenses.

had a receivable balance of $22,266 due from Stephen Hosmer and $13,149 from Donald Hosmer for normal lease operating expenses.

At December 31, 2025, we had a total payable of $23,087 due to RMX

9 unchanged sentences

predating their joining the Company.

Item 14 Principal Accountant Fees and Services

Horne LLP became our independent auditors for the year end December

The aggregate fees incurred for the years ended December 31, 2024 and 2023 are as follows:

Principal Accountant Fees and Services

HORNE LLP (“HORNE”) was the Company’s independent

registered public accounting firm for the year ended December 31, 2024.

Effective as of November 1, 2025, the partners and professional

staff of HORNE joined BDO USA, P.C.

As a result of this transaction, HORNE resigned as the Company’s independent

registered public accounting firm effective as of November 1, 2025 and the Company, through and with the approval of the Audit Committee,

appointed BDO as its independent registered public accounting firm.

The following table sets forth the aggregate fees incurred by HORNE

for the fiscal year ended December 31, 2024 and by HORNE and BDO for the fiscal year ended December 31, 2025.

Audit fees (1)

All other fees (3)

Audit fees are fees for professional services rendered for the audit of Royale Energy’s annual financial statements, reviews of financial statements included in the Company’s Forms 10-Q, and reviews of documents filed with the U.S.

Securities and Exchange Commission.

7 unchanged sentences

to that year, the audit committee must approve the permitted service before the independent auditor is engaged to perform it.

all such audit services and their fees were pre-approved by the audit committee.

and 2024 all such audit services and their fees were pre-approved by the audit committee.

Item 15 Exhibits and Financial Statement Schedules

4 unchanged sentences

made solely for the benefit of the other parties to the respective agreement, and:

● should not be treated as categorical

statements of fact, but rather as a way of allocating the risk among the parties if those statements prove to be inaccurate;

● have been qualified by disclosures

that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily

reflected in the agreement;

● may apply standards of materiality

in a way that is different from the way investors may view materiality;

● were made only as of the date

of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

should not be treated as categorical statements of fact, but rather as a way of allocating the risk among the parties if those statements prove to be inaccurate;

have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

may apply standards of materiality in a way that is different from the way investors may view materiality;

were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Financial Statements .

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Certificate of Incorporation of Royale Energy, Inc.

(formerly Royale Energy Holdings, Inc.) filed with the Secretary of State of Delaware on November 22, 2016.

(formerly Royale Energy Holdings, Inc.) filed with the Secretary of State of Delaware on November 22, 2016 (Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission on April 9, 2025).

Amendment to the Certificate of Incorporation of Royale Energy, Inc., a Delaware corporation, dated February 28th, 2018 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 12, 2018.)

Bylaws of Royale Energy, Inc.

(Incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission on April 9, 2025).

Royale Energy Holdings, Inc., Certificate of Designation of Series B 3.5% Redeemable Convertible Preferred Stock, filed with the Delaware Secretary of State on February 27, 2018, filed as Exhibit 2.5 to the Company’s Form 8-A, filed March 8, 2018

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Subsidiaries of Registrant

Consent of Horne LLP

Consent of BDO USA, P.C.

Consent of Netherland, Sewell & Associates, Inc.

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Filed herewith.

† Management contract or compensatory

plan or arrangement.

Management contract or compensatory plan or arrangement.

Pursuant to the requirements of Section 13 or 15(d) of the Securities

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Royale Energy, Inc.

April 8, 2025

July 10, 2026

/s/ Johnny Jordan

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Chief Executive Officer

April 8, 2025

July 10, 2026

/s/ Ronald Lipnick

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Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this

report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

April 8, 2025

Pursuant to the requirements of the Securities Exchange Act of 1934,

this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

July 10, 2026

/s/ John Sullivan

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Chairman of the board of directors

April 8, 2025

July 10, 2026

/s/ Jonathan Gregory

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Vice-Chair of the board of directors

April 8, 2025

July 10, 2026

/s/ Chris Parada

April 8, 2025

July 10, 2026

/s/ Jeff Kerns

April 8, 2025

July 10, 2026

/s/ Stephen Hosmer

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AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 171 ) F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (BDO USA, P.C.(formerly HORNE, LLP);

Houston, Texas;

PCAOB ID # 243 )

CONSOLIDATED BALANCE SHEETS F-4

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Report of Independent Registered Public Accounting

To the Stockholders and the Board of Directors of Royale Energy, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Royale

and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations,

stockholders’ deficit and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively,

the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial

position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended,

in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that

the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has suffered recurring losses

from operations and its total liabilities exceed its total assets.

This raises substantial doubt about the Company’s ability to continue

as a going concern.

Management’s plans in regard to these matters also are described in Note 1.

The financial statements do not include

any adjustments that might result from the outcome of this uncertainty.

Shareholders and Board of Directors

Royale Energy, Inc.

El Cajon, California

Opinion on the Consolidated

Financial Statements

We have audited the accompanying

consolidated balance sheets of Royale Energy, Inc.

(the “Company”) as of December 31, 2025 and 2024, the related consolidated

statements operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred

to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in

all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its

cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated

financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated

financial statements, the Company has suffered recurring losses from operations and has a working capital deficiency that raise substantial

doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting

firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required

to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free

of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit

of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control

over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over

financial reporting.

These consolidated financial

statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were

we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an

understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the

Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall

presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from

the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements,

taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit

matters or on the accounts or disclosures to which they relate.

Estimation of Proved Reserves of Oil and Gas Properties

Critical Audit Matter Description

As described in Note 1 to the financial statements, the Company accounts

for its oil and gas properties using the successful efforts method of accounting which requires management to make estimates of proved

reserve volumes and future revenues and expenses to calculate depletion expense and measure its oil and gas properties for potential impairment.

To estimate the volume of proved reserves and future revenues, management makes significant estimates and assumptions, including forecasting

the production decline rate of producing properties and the timing and volume of production associated with the Company’s development

plan for proved undeveloped properties.

In addition, the estimation of proved reserves is also impacted by management’s judgments and

estimates regarding the financial performance of wells associated with proved reserves to determine if wells are expected, with reasonable

certainty, to be economical under the appropriate pricing assumptions required in the estimation of depletion expense and potential impairment

measurements.

We identified the estimation of proved reserves of oil and gas properties, due to its impact on depletion expense and impairment

evaluation, as a critical audit matter.

The principal consideration for our determination that the estimation

of proved reserves is a critical audit matter is that changes in certain inputs and assumptions necessary to estimate the volumes and

future net revenues of the Company’s proved reserves require a high degree of subjectivity and could have a significant impact on the

measurement of depletion expense or the impairment assessment.

In turn, auditing those inputs and assumptions required subjective and

complex auditor judgement.

How the Critical Audit Matter was Addressed in the Audit

We obtained an understanding of the design and implementation of management’s

controls related to the estimation of proved reserves by evaluating the level of knowledge, skill, and ability of the Company’s reservoir

engineering specialists and their relationship to the Company, made inquiries of those reservoir engineers regarding the process followed

and judgments made to estimate the Company’s proved reserve volumes, and reviewed the reserve report prepared by the Company’s specialists.

To the extent key, sensitive inputs and assumptions used to determine

proved reserve volumes and other cash flow inputs and assumptions are derived from the Company’s accounting records, such as commodity

pricing, historical pricing differentials, operating costs, estimated capital costs and working and net revenue interests, we evaluated

management’s process for determining the assumptions, including examining the underlying support, on a sample basis.

These audit procedures,

among others included the following:

● Compared the estimated pricing differentials used in the

reserve report to realized prices related to revenue transactions recorded in the current year and examined contractual support for the

pricing differentials;

● Evaluated the models used to estimate the operating costs

at year-end compared to historical operating costs;

● Compared the models used to determine the future capital

expenditures and compared estimated future capital expenditures used in the reserve report to amounts expended for recently drilled and

completed wells with similar locations;

● Evaluated the working and net revenue interests used in the

reserve report by inspecting a sample of ownership interest, historical pricing differentials and operating costs to underlying support

from the Company’s accounting records;

● Evaluated the Company’s evidence supporting the amount of

proved undeveloped properties reflected in the reserve report by examining support for the Company’s or the operator’s ability and intent

to develop the proved undeveloped properties;

● Applied analytical procedures to the reserve report by comparing

to historical actual results and to the prior year reserve report.

Deferred Drilling Obligation and Gain on Turnkey Drilling

Critical Audit Matter Description

As described in Note 1 to the financial statements, the Company sponsors

turnkey drilling arrangements in proved and unproved properties as a pooling of assets in a joint undertaking, whereby proceeds from participants

are reported as deferred drilling obligations.

That obligation is reduced as costs to complete are incurred, with any excess costs booked

as an increase to the Company’s property account.

Gain on turnkey drilling represents funds received from turnkey drilling participants

in excess of all costs the Company incurs during the drilling programs and is recognized only upon making the determination that the Company’s

obligations have been fulfilled in accordance with the turnkey drilling agreement.

The Company’s deferred drilling obligation was approximately

$11.5 million as of December 31, 2024, and the gain on turnkey drilling was approximately $1.6 million for the year ended December 31,

Company management applies significant estimation in determining the

expected cost to drill a well and to develop the well site, and significant judgment in determining when they have fulfilled their obligations

under the turnkey drilling agreement triggering the recognition of turnkey gain.

Both factors may impact the amount and timing of the

recognition of a turnkey gain and involve a high degree of auditor judgement related to the matter.

These factors were the principal considerations

that led us to determine that the deferred drilling obligation and the related gain on turnkey drilling arrangements is a critical audit

How the Critical Audit Matter was Addressed in the Audit

We obtained an understanding of the design and implementation of management’s

controls related to the estimations in determining the expected cost to drill a well, develop the well site, and when obligations under

the turnkey drilling agreements have been fulfilled.

Other audit procedures involved selecting a sample of wells to test management’s

estimates as follows:

● Obtained the master worksheet for each selected well, recalculated

the worksheet for clerical accuracy and selected a sample of direct working interest (“DWI”) investors;

● Obtained the signed field subscription agreement for each

selected investor in each well, verified the investment ownership amount per the signed field subscription agreement agreed to the amount

invested and the number of units within the master worksheet, vouched the cash received from the DWI investors and agreed the significant

terms to the related turnkey drilling agreement;

● Obtained a schedule of costs incurred to drill the selected

well, recalculated the schedule for clerical accuracy and obtained support from management to substantiate the costs incurred;

● Obtained evidence substantiating the timing and amount of

the turnkey gain pertaining to a sample of wells drilled and assessed that the recognized turnkey gain was appropriate as defined under

the terms of the related turnkey drilling agreement.

/s/ HORNE LLP

Our audits included performing procedures to

assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below

is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated

to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter

in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Estimation of Quantities

of Future Production Volumes Used to Estimate Proved Oil and Gas Reserves and the Associated Effect on Depreciation, Depletion and Amortization

(“DD&A”) Expense Related to Proved Oil and Gas Properties

As disclosed by management

and described in Notes 1 and 2 to the consolidated financial statements, the Company uses the successful efforts method of accounting

for its oil and gas producing activities.

Management uses internal and independent petroleum engineers to make significant estimates,

including estimating quantities of proved oil and gas reserves.

The Company’s oil and gas properties, net as of December 31, 2025

was $5.7 million, which includes proved oil and gas properties of $10.5 million and accumulated depletion, depreciation, and amortization

(“DD&A”) of $8.0 million.

DD&A expense was $0.3 million for the year ended December 31, 2025.

identified the estimation of future production volumes used to estimate proved oil and gas reserves and the associated effect on

DD&A expense related to proved oil and gas properties as a critical audit matter.

Estimating future production volumes involves

a high degree of subjectivity from management and their internal and independent petroleum engineers.

Auditing the estimation of

future production volumes required subjective and complex auditor judgement.

The primary procedures we performed

to address this critical audit matter included:

the professional qualifications and objectivity of the internal and independent petroleum

engineers, including their relationship to the Company.

the reasonableness of the future production volumes by comparing estimates of future production

volumes against historical results of production volumes on a summary basis for all wells

and on a detailed basis for a sample of wells.

● Performing a retrospective review over management estimates of future

production volumes made in the prior period as compared to actual results.

/s/ BDO USA, P.C.

(formerly HORNE LLP )

We have served as the Company’s auditor since

Ridgeland, Mississippi

April 8, 2025

Houston, Texas

July 10, 2026

ROYALE ENERGY, INC.

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Prepaid Expenses and Other Current Assets

Deferred Drilling Costs

Total Current Assets

Right of Use Asset - Operating Leases

Right of Use Asset - Leases

Oil and Gas Properties (Successful Efforts Basis), Real Property and Equipment and Fixtures, net

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CONSOLIDATED BALANCE SHEETS (Continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities:

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RMX Resources, LLC

Accrued Liabilities

Operating Leases - Current

Leases - Current

Asset Retirement Obligation - Current

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Notes Payable

Operating Leases - Non-current

Leases - Non-current

Accrued Unpaid Guaranteed Payments

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Total Liabilities

Mezzanine Equity:

Convertible Preferred Stock, Series B, $ 10 par value, 3,000,000 Shares Authorized, 0 and 2,444,885 shares issued and outstanding at December 31, 2024 and 2023, respectively

Commitments and Contingencies (See Note 13)

Stockholders’ Deficit:

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( 12,139,535 )

Total Liabilities, Mezzanine Equity and Stockholders’ Deficit

Total Liabilities, Stockholders’ Deficit

The accompanying notes are an integral part of

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FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024

Sale of Oil and Gas

Supervisory Fees and Other

Oil, NGL and Gas Sales

Other Operating Revenue

Total Revenues

Costs and Expenses:

Lease Operating

Depreciation, Depletion and Amortization

Well Equipment Write down

Oil and Gas Lease Operating

Severance Taxes

Depreciation, Depletion, Amortization, and Accretion

Settlement of Asset Retirement Obligation

General and Administrative

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( 1,918,171 )

( 1,942,945 )

Other Income (Expense):

Interest Expense

Interest Income

Gain on Sale of Assets

Total Other Income (Expense)

Total Other Expense (net)

( 1,251,680 )

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ROYALE ENERGY, INC.

CONSOLIDATED STATEMENTS OF

STOCKHOLDERS ’ DEFICIT

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’

FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024

Comprehensive

Stockholders’

Balance, December 31, 2023

Cashless Warrant Exercise Issuance

Stock issued in lieu of Cash Compensation

Preferred Series B 3.5 % Dividend

Balance, December 31, 2023

$ ( 90,133,509 )

$ ( 35,443,709 )

Stock issued in lieu of Cash Compensation

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Equity and Debt Restructuring

( 2,159,016 )

Balance, December 31, 2024

The accompanying notes are an integral part of

these consolidated financial statements.

( 93,314,689 )

( 12,139,535 )

( 1,251,680 )

Balance, December 31, 2025

$ ( 94,566,369 )

$ ( 13,391,215 )

The accompanying notes are an integral part

of these consolidated financial statements.

ROYALE ENERGY, INC.

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Gain on Sale of Assets

(Gain) Loss on Turnkey Drilling Programs

Gain on Turnkey Drilling Programs

( 1,322,149 )

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Credit Loss Expense

Well Equipment Write Down

Settlement on Asset Retirement Obligation

Stock-Based Compensation

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( 2,699,820 )

( 2,362,855 )

CASH FLOWS FROM INVESTING ACTIVITIES:

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( 4,914,671 )

Acquisition of property

( 1,500,000 )

Proceeds from Turnkey Drilling Programs

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Principal Payments on Long-Term Debt

Net Cash Provided by (Used in) Financing Activities

Net Cash Provided by Financing Activities

Net Increase in Cash, Cash Equivalents, and Restricted Cash

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Cash, Cash Equivalents, and Restricted Cash at End of Year

Supplemental Schedule of Cashflow information

Cash Paid for Interest

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Supplemental Schedule of Non-Cash Investing and Financing Transactions:

Asset Retirement Obligation Addition

(Decrease) Increase in Capital Accrued Balance

Series B Paid-In-Kind Dividends

Conversion of Preferred Stock to Common

Issuance of Notes Payable in Settlement of Liability

Additions to asset retirement obligation

Revisions to asset retirement obligations

The accompanying notes are an integral part of

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Royale Energy, Inc.

(in these notes sometimes called “we”, “us”, “our”) is presented to assist in understanding our financial

This summary of significant accounting policies of Royale Energy,

(in these notes sometimes called “we”, “us”, “our”, “the Company”) is presented

to assist in understanding our financial statements.

These consolidated financial statements include the accounts of Royale

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We own wells and leases in major geological basins located primarily in California, Texas, and Oklahoma, and offer

fractional working interests and seek to minimize the risks of oil and gas drilling by selling multiple well drilling projects which do

not include the use of debt financing.

fractional working interests and seek to minimize the risks of oil and gas drilling by selling multiple well drilling projects which

do not include the use of debt financing.

Use of Estimates

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date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ

from those estimates.

Estimated quantities of crude oil and condensate, NGLs and natural

gas reserves is a significant estimate that requires judgment.

All of the reserve data included in this Form 10-K are estimates.

engineering is a subjective process of estimating underground accumulations of crude oil and condensate, NGLs and natural gas.

numerous uncertainties inherent in estimating quantities of proved crude oil and condensate, NGLs and natural gas reserves.

of any reserves estimate is a function of the quality of available data and of engineering and geological interpretation and judgment.

As a result, reserve estimates may be different from the quantities of crude oil and condensate, NGLs and natural gas that are ultimately

See Note 16 – Supplemental Information About Oil and Gas Producing Activities (Unaudited) to our Consolidated Financial

Statements for further detail.

Actual results could

differ from those estimates.

Estimated quantities of crude oil and condensate, Natural Gas Liquids

(“NGLs”) and natural gas reserves is a significant estimate that requires judgment.

All of the reserve data included in this

Form 10-K are estimates.

Reservoir engineering is a subjective process of estimating underground accumulations of crude oil and condensate,

NGLs and natural gas.

There are numerous uncertainties inherent in estimating quantities of proved crude oil and condensate, NGLs and

natural gas reserves.

The accuracy of any reserves estimate is a function of the quality of available data and of engineering and geological

interpretation and judgment.

As a result, reserve estimates may be different from the quantities of crude oil and condensate, NGLs and

natural gas that are ultimately recovered.

See Note 18 – Supplemental Information About Oil and Gas Producing Activities (Unaudited)

to our Consolidated Financial Statements for further detail.

Other items subject to estimates and assumptions include the carrying

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allowances for deferred tax assets, among others.

Although we believe these estimates are accurate, actual results could differ from these

Although we believe these estimates are accurate, actual results could differ from

these estimates.

Liquidity and Going Concern

The primary sources of liquidity have historically been issuances of

common stock, oil and gas sales through ongoing operations and the sale of oil and gas properties.

There are factors that give rise to

substantial doubt about our ability to meet liquidity demands, and we anticipate that our primary sources of liquidity will be from the

issuance of debt and/or equity, the sale of oil and natural gas property participation interests through our normal course of business

Management evaluated whether conditions and events, considered in

the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after

the date the accompanying consolidated financial statements are issued.

The accompanying financial statements have been prepared

assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in

the normal course of business.

The consolidated financial statements do not include any adjustments related to the recoverability

and classification of recorded asset amounts or the amounts and classifications of liabilities that might result from the outcome of

this uncertainty.

The primary sources of liquidity have historically been issuances

of common stock, oil and gas sales through ongoing operations and the sale of oil and gas properties.

There are factors that give rise

to substantial doubt about our ability to meet liquidity demands, and we anticipate that our primary sources of liquidity will be from

the issuance of debt and/or equity, the sale of oil and natural gas property participation interests through our normal course of business

and the sale of non-strategic assets.

Our 2025 consolidated financial statements reflect a working capital

deficiency of $ 10,010,933 , an accumulated deficit of $ 93,504,469 and a net loss of $ 2,159,016 .

These factors raise substantial doubt about

our ability to continue as a going concern.

The accompanying consolidated financial statements do not include any adjustments that might

be necessary if we are unable to continue as a going concern.

deficiency of $ 11,550,839 , an accumulated deficit of $ 94,566,369 and recurring net losses from operations.

These factors raise substantial

doubt about our ability to continue as a going concern.

The accompanying consolidated financial statements do not include any adjustments

that might be necessary if we are unable to continue as a going concern.

Management’s plans to alleviate the going concern by implementing

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be successful.

Revision of Previously Issued Financial Statements

During the preparation of the 2025 consolidated financial

statements, immaterial errors were identified related to:

● Severance taxes were inappropriately netted against Sale of Oil and Gas Revenue within our statement of operations, resulting in the understatement of Sale of Oil & Gas Revenue and Lease Operating Expense of $ 81 thousand during 2024.

● Errors in the calculation of the tax basis of Oil and Gas Properties resulted in a $ 2.4 million overstatement of the disclosure of deferred tax assets and the related valuation allowance, resulting in zero net impact on Net Deferred Tax Assets.

● An error in the treatment of future income tax expense resulted in an understatement of approximately $ 2 million (unaudited) in our disclosures of the standardized measure of discounted future cash flows as of December 31, 2024.

In addition, there were errors in the calculation of the various changes in the standardized measure (unaudited).

● Accrued liabilities and accumulated deficit were overstated by $ 189 thousand as a result of an error that occurred prior to 2023.

This overaccrual was corrected by the Company during the quarter ended June 30, 2025.

● Settlements of ARO liabilities of approximately $ 152 thousand were incorrectly presented in the statement of cash flows during the year ended December 31, 2024.

We assessed the materiality of the errors, both quantitatively

and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin No.

99 and Staff Accounting Bulletin No.

108, and concluded the errors were not material to any of our previously issued financial statements.

Notwithstanding the

results of the assessment, we have revised the applicable items in our previously issued financial statements to

correct these misstatements.

Accordingly, all consolidated financial information contained in

these consolidated financial statements and the accompanying notes have been revised to reflect the corrections.

Previously reported financial information will be corrected in future filings, as applicable.

Restricted Cash

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Once the well is drilled, the funds are used to satisfy the drilling cost.

We classify these funds prior to commencement of drilling as

restricted cash based on guidance codified as under the Financial Accounting Standards Board (“FASB”) Accounting Standards

Codification (“ASC”) 230-10-50-8.

We classify these funds prior to commencement of drilling

as restricted cash.

In the event that progress payments are made from these funds;

they are recorded as Prepaid

Expenses and Other Current Assets.

they are recorded as Prepaid Expenses and Other Current

The following table provides a reconciliation of cash, cash equivalents,

and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the statement of

and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the statement

of cash flows.

Year Ended December 31,

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Other Receivables, net

Our other receivables consist of receivables from direct working

interest investors and industry partners.

We account for expected credit losses on receivables using the Current Expected Credit Loss

(CECL) methodology.

Under this standard, an allowance for expected credit losses is established and adjusted based on historical loss

experience, current conditions, and reasonable and supportable forecasts of future economic conditions.

The allowance account is increased

or decreased in response to changes in these factors, reflecting our best estimate of credit losses over the remaining life of the receivables.

Our other receivables consist of receivables from direct working interest

investors and industry partners.

We account for expected credit losses on receivables using the Current Expected Credit Loss (CECL) methodology.

Under this standard, an allowance for expected credit losses is established and adjusted based on historical loss experience, current

conditions, and reasonable and supportable forecasts of future economic conditions.

The allowance account is increased or decreased in

response to changes in these factors, reflecting our best estimate of credit losses over the remaining life of the receivables.

All amounts considered uncollectible are charged against the allowance

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Allowance for Credit Losses

We measure our allowance for losses on other receivables

including, under ASC 326.

The following table summarizes the activity in the balance of allowance for credit losses on other receivables

for the period indicated:

We measure our allowance for losses on other receivables including,

under ASC 326.

The following table summarizes the activity in the balance of allowance for credit losses on other receivables for the

period indicated:

Balance at December 31, 2023

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Equity Method Investments

Investments in entities over which we have significant influence, but

not control, are accounted for using the equity method of accounting.

Income from equity method investments represents our proportionate

share of net income generated by the equity method investees and is reflected in revenue and other income in our consolidated statements

Equity method investments are included as noncurrent assets on the consolidated balance sheets.

Equity method investments are assessed for impairment whenever changes

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is written down to fair value, and the amount of the write-down is included in income.

The Company’s only equity method investment is its holding in the

RMX joint venture.

At December 31, 2025, the Company had no balance related its investment in RMX, due to previously recognized impairments.

Revenue Recognition

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units of hydrocarbons transferred to a customer.

Such allocation reflects the amount of total consideration we expect to collect for completed

deliveries of hydrocarbons and the terms of variable payment relate specifically to our efforts to satisfy the performance obligations

under these contracts.

Our performance obligations under our hydrocarbon sales agreements are to deliver either the entire production

from the dedicated wells or specified contractual volumes of hydrocarbons.

Such allocation reflects the amount of total consideration we expect to collect for

completed deliveries of hydrocarbons and the terms of variable payment relate specifically to our efforts to satisfy the performance

obligations under these contracts.

Our performance obligations under our hydrocarbon sales agreements are to deliver either the entire

production from the dedicated wells or specified contractual volumes of hydrocarbons.

We often serve as the operator for jointly owned oil and gas properties.

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We determined that these activities are not performed as part of customer relationships, and such reimbursements are recorded

as cost reimbursements.

as cost reimbursements of Lease Operating Expense.

We commonly market the share of production belonging to other working

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When monies are received from third parties for future drilling obligations, we record the liability

as Turnkey Drilling Obligations.

as Deferred Drilling Obligations.

Once the contracted depth for the drilling of the well is reached and a determination as to the commercial

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For the crude sales agreements, we satisfy our performance obligations

and recognize revenue once customers take control of the crude at the designated delivery points, which include pipelines, trucks or vessels.

and recognize revenue once customers take control of the crude at the designated delivery points, which include pipelines, trucks or

Natural Gas and NGLs

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We manage these Turnkey Agreements for the participants of the well.

The collections of pre-drilling Authorization for Expenditure (“AFE”) amounts are segregated and the gains and losses on the

Turnkey Agreements are recorded in income or expense at the time of the casing point election in accordance with ASC 932-323-25 and 932-360.

We manage the performance obligation for the well participants and only record revenue or expense at the time the performance obligation

of the Turnkey Agreement has been satisfied.

Supervisory Fees and Other

The collections of pre-drilling Authorization for Expenditure (“AFE”) amounts are segregated and the gains and losses on

the Turnkey Agreements are recorded in income or expense at the time of the casing point election in accordance with ASC 932-323-25 and

We manage the performance obligation for the well participants and only record revenue or expense at the time the performance

obligation of the Turnkey Agreement has been satisfied.

Other Operating Revenue

For the years ended December 31, 2025 and 2024, we recognized $ 20,761

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Successful Efforts

We use the “successful efforts” method to account for our

exploration and production activities.

Under this method, we accumulate our proportionate share of costs on a well-by-well basis with

certain exploratory expenditures and exploratory dry holes being expensed as incurred, and capitalize expenditures for productive wells.

We use the “successful efforts” method to account for

our exploration and production activities.

Under this method, we accumulate our proportionate share of costs on a well-by-well basis

with certain exploratory expenditures and exploratory dry holes being expensed as incurred, and capitalize expenditures for productive

We amortize the costs of productive wells under the unit-of-production method.

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Other exploratory expenditures, including geophysical costs and annual lease rentals, are expensed as incurred.

Acquisition costs of proved

properties are amortized using a unit-of-production method, computed on the basis of total proved oil and gas reserves.

Capitalized exploratory drilling and development costs associated with

productive depletable extractive properties are amortized using unit-of-production rates based on the amount of proved developed reserves

of oil and gas that are estimated to be recoverable from existing facilities using current operating methods.

Acquisition costs of

proved properties are amortized using a unit-of-production method, computed on the basis of total proved oil and gas reserves.

Capitalized exploratory drilling and development costs associated

with productive depletable extractive properties are amortized using unit-of-production rates based on the amount of proved developed

reserves of oil and gas that are estimated to be recoverable from existing facilities using current operating methods.

Under the unit-of-production

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If the sum of the expected undiscounted future cash flows from the use of the asset

and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized based on the fair value of

and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized based on the fair value

of the asset.

Oil and gas producing properties are reviewed for impairment on a field-by-field basis or, in certain instances, by logical

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In 2024 we recorded impairment losses of $ 400,719 .

Of this amount

$ 1,292,502 was impaired as a result of increased abandonment cost estimates and increases working interest in those costs.

Upon the sale or retirement of a complete field of a proved property,

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and accounted for under the “successful efforts” method.

Asset Retirement Obligations

The Asset Retirement and Environmental Obligations Topic of the ASC

410-20 requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible long-lived asset

be recognized as a liability in the period in which it is incurred or becomes determinable (as defined by the standard), with an associated

increase in the carrying amount of the related long-lived asset.

The cost of the tangible asset, including the initially recognized asset

retirement cost, is depreciated over the useful life of the asset.

The ARO is recorded at the estimated fair value, and accretion expense

will be recognized over time as the discounted liability is accreted to its expected settlement value.

Accretion expense is included

as part of Depreciation, Depletion and Amortization in the Consolidated Statement of Operations.

The fair value (as provided in ASC 820

guidance) of the ARO is a Level 3 measurement using expected future cash outflows discounted at our credit-adjusted risk-free interest

The provisions of this Topic apply to legal obligations associated with the retirement of long-lived assets that result from the

acquisition, development, and operation of a long-lived asset.

Long-Lived Assets Classified as Held for Sale

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This criterion is listed below:

● Management has committed to

a plan to sell the asset;

● The asset group is available

for immediate sale in its present condition;

● An active program is underway

to locate potential buyers;

● The sale is probable within

● The asset group is being marketed

at a price that is reasonable relative to its current fair value;

● Actions required to complete

the plan indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn.

Management has committed to a plan to sell the asset;

The asset group is available for immediate sale in its present condition;

An active program is underway to locate potential buyers;

The sale is probable within one year;

The asset group is being marketed at a price that is reasonable relative

to its current fair value;

Actions required to complete the plan indicate that it is unlikely that significant changes to

the plan will be made or the plan will be withdrawn.

Assets held for sale are carried at the lower of cost or fair market

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properties as a pooling of assets in a joint undertaking, whereby proceeds from participants are reported as Deferred Drilling Obligations,

and then reduced as costs to complete our obligations and are incurred with any excess booked against our property account to reduce any

basis in our own interest.

Gains on Turnkey Drilling Programs represent funds received from turnkey drilling participants in excess of

all costs we incur during the drilling programs (e.g., lease acquisition, exploration and development costs), including costs incurred

and then reduced as costs to complete our obligations and are incurred with any excess booked against our property account to reduce

any basis in our own interest.

Gains on Turnkey Drilling Programs represent funds received from turnkey drilling participants in excess

of all costs we incur during the drilling programs (e.g., lease acquisition, exploration and development costs), including costs incurred

on behalf of participants and costs incurred for our own account;

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In these working interest arrangements, the participants are responsible

for sharing in the risk of development, but also sharing in a proportional interest in rights to revenues and proportional liability for

the cost of operations after drilling is completed and the interest is conveyed to the participant.

for sharing in the risk of development, but also sharing in a proportional interest in rights to revenues and proportional liability

for the cost of operations after drilling is completed and the interest is conveyed to the participant.

A certain portion of the turnkey drilling participant’s funds

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During 2025, we disposed of $ 2,755,500

of drilling obligations as we participated in the drilling and completion of four gross (0.0722 net) wells in Texas Permian basin, while

incurring expenses of $ 4,955,044 , resulting in a gain of $ 1,607,677 .

During 2023, we disposed of $ 6,228,038 of drilling obligations as

we completed one gross (0.3176 net) oil well in our Texas Jameson field and participated in drilling and completion of two gross (0.0145

net) successful oil wells in the Texas Permian basin and one gross (0.05679 net) dry well in southern California, while incurring expenses

of $ 4,120,538 , resulting in a gain of $ 2,107,500 .

of drilling obligations as we participated in drilling and completion of one gross (0.0035 net) successful oil well in the Texas Permian

basin, while incurring expenses of $ 1,433,351 , resulting in a gain of $ 1,322,149 .

During 2024, we disposed of $ 6,562,721 of drilling

obligations as we participated in the drilling and completion of four gross (0.0722 net) wells in Texas Permian basin, while incurring

expenses of $ 4,955,044 , resulting in a gain of $ 1,607,677 .

If we are unable to drill the wells, and a suitable replacement well

is not found, we would retain the non-refundable portion of the contract and return the remaining funds to the participant.

restricted cash are amounts for use in completion of turnkey drilling programs in progress.

in restricted cash are amounts for use in completion of turnkey drilling programs in progress.

Equipment and Fixtures

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estimated useful lives of the assets, which range from three to seven years , using the straight-line method.

Repairs and maintenance are

charged to expense as incurred.

When assets are sold or retired, the cost and related accumulated depreciation are removed from the accounts

and any resulting gain or loss is included in income.

Maintenance and repairs, which neither materially add to the value of the property

nor appreciably prolong its life, are charged to expense as incurred.

Repairs and maintenance

are charged to expense as incurred.

When assets are sold or retired, the cost and related accumulated depreciation are removed from the

accounts and any resulting gain or loss is included in income.

Maintenance and repairs, which neither materially add to the value of

the property nor appreciably prolong its life, are charged to expense as incurred.

Loss Per Share

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Weighted average common shares, including Dilutive effect

For the year ended December 31, 2023, Royale Energy had dilutive securities

of 24,448,850 .

These securities were not included in the dilutive loss per share due to their antidilutive nature.

We utilize the asset and liability approach to measure deferred tax

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measurements on earnings for the period.

Fair value is defined as the price that would be received to sell an

asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

In determining fair

value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent

possible as well as consider counterparty credit risk in our assessment of fair value.

Fair value is defined as the price that would be received to sell

an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

In determining

fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to

the extent possible as well as consider counterparty credit risk in our assessment of fair value.

Carrying amounts of our financial instruments,

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the assumptions utilize management’s estimates of market participant assumptions.

As of December 31, 2024, we do not have any financial assets measured

and recognized at fair value on a recurring basis.

However, we have financial liabilities, including outstanding notes, measured at fair

value on a nonrecurring basis.

As part of the Series B Convertible Preferred Stock restructuring transaction,

the Company issued Series 2024 Senior Unsecured Promissory Notes in exchange for approximately 10% of the outstanding Series B shares.

As of December 31, 2025, we have financial liabilities, including

outstanding notes, that have been measured at fair value on a nonrecurring basis.

The carrying values of financial instruments comprising

cash, payables, and receivables, approximate fair values due to the short-term maturities of these instruments and are classified as

Level 1 in the fair value hierarchy.

The carrying amounts of cash and cash equivalents, accounts receivable, and other current assets

approximate their fair values due to the short-term maturities of these instruments.

As part of the Series B Convertible Preferred Stock restructuring

transaction, the Company issued Series 2024 Senior Unsecured Promissory Notes in exchange for approximately 10% of the outstanding Series

These notes have varying interest rate periods:

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The fair value of these notes was determined using a discounted cash

flow model based on an assumed market interest rate of 11.912%, reflecting the Company’s estimated borrowing rate (Wall Street Journal

Prime Rate plus 400 basis points as of October 1, 2024).

Based on this valuation methodology, the fair value of the notes issued in connection

with the restructuring was $1,846,613 for notes related to the Preferred Stock conversion and $211,163 for notes related to liability

extinguishment, which represents a discount to the face value of the notes.

flow model based on an assumed market interest rate of 11.912%, reflecting the Company’s estimated borrowing rate (Wall Street

Journal Prime Rate plus 400 basis points as of October 1, 2024).

Based on this valuation methodology, the following table sets out the

fair value and carrying value of the notes issued.

The fair value measurement of these notes is classified as Level 3

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and cash flow projections.

The carrying amount of these notes will be accreted to their face value over the term using the effective interest

The carrying amount of these notes will be accreted to their face value over the term using the effective

interest rate method.

The carrying values and estimated fair values of these notes were

December 31, 2025

Series 2024 Senior Unsecured Promissory Notes

December 31, 2024

Series 2024 Senior Unsecured Promissory Notes

Additionally, the restructuring included the issuance of 25,000,000

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fair value measurement purposes.

See Note 2 – Oil and Gas Properties, Equipment and Fixtures for

further discussion of our asset retirement obligations and property transactions.

See Note 2 – Oil and Gas Properties, Equipment and Fixtures

for further discussion of our asset retirement obligations and property transactions.

Accounts Payable and Accrued Expenses

At December 31, 2024 and 2023, the components of accounts payable and

accrued expenses consisted of:

Trade Payables including accruals

At December 31, 2025 and 2024, the components of accounts payable

and accrued expenses consisted of:

Trade Payables and accruals

Direct working interest investors related accruals

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Accrued – Non-current

At December 31, 2024, we had non-current accrued liabilities of $ 12,386

and accrued unpaid guaranteed payment of $ 90,000 , compared to accrued liabilities of $ 1,306,605 and accrued unpaid guaranteed payment

of $ 1,616,205 as of December 31, 2023.

These were due to certain Matrix Oil Corp (“Matrix”) principals, from periods prior

to the merger with the Matrix entities during March of 2018.

time-to-time, we acquire businesses in the oil and gas industry.

We primarily target businesses in geological basins that we consider

to be in a focus area.

Businesses are included in the consolidated financial statements from the date of acquisition.

recognize, separately from goodwill, the identifiable assets acquired and liabilities assumed at their estimated acquisition-date fair

We measure and recognize goodwill as of the acquisition date as the excess of:

(1) the aggregate of the fair value of consideration

transferred, the fair value of any noncontrolling interest in the acquiree (if any) and the acquisition date fair value of our previously

held equity interest in the acquiree (if any), over (2) the fair value of assets acquired and liabilities assumed.

If information about

facts and circumstances existing as of the acquisition date is incomplete by the end of the reporting period in which a business combination

occurs, we report provisional amounts for the items for which the accounting is incomplete.

The measurement or allocation period ends

once we receive the information we are seeking;

however, this period will generally not exceed one year from the acquisition date.

material adjustments recognized during the measurement period will be reflected retrospectively in the consolidated financial statements

of the subsequent period.

We recognize third-party transaction-related costs as expense currently in the period in which they are incurred.

in Accounting Standards

At December 31, 2025 and 2024, we had non-current accrued liabilities

of $ 12,386 and accrued unpaid guaranteed payment of $ 90,000 .

These were due to certain Matrix Oil Corp (“Matrix”) principals,

from periods prior to the merger with the Matrix entities during March of 2018.

Business Combinations

From time-to-time, we acquire businesses in the oil and gas industry.

We primarily target businesses in geological basins that we consider to be in a focus area.

Businesses are included in the consolidated

financial statements from the date of acquisition.

We recognize, separately from goodwill, the identifiable assets acquired

and liabilities assumed at their estimated acquisition-date fair values.

We measure and recognize goodwill as of the acquisition date

as the excess of:

(1) the aggregate of the fair value of consideration transferred, the fair value of any noncontrolling interest in

the acquiree (if any) and the acquisition date fair value of our previously held equity interest in the acquiree (if any), over (2) the

fair value of assets acquired and liabilities assumed.

If information about facts and circumstances existing as of the acquisition date

is incomplete by the end of the reporting period in which a business combination occurs, we report provisional amounts for the items

for which the accounting is incomplete.

The measurement or allocation period ends once we receive the information we are seeking;

this period will generally not exceed one year from the acquisition date.

Any material adjustments recognized during the measurement

period will be reflected retrospectively in the consolidated financial statements of the subsequent period.

We recognize third-party

transaction-related costs as expense currently in the period in which they are incurred.

If the set of assets and activities acquired is not considered a business

under GAAP, the acquisition is accounted for as an asset acquisition using a cost accumulation model.

In the cost accumulation model,

the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values,

and no goodwill is recognized.

The Pradera Fuego Acquisition was accounted for as an asset acquisition under GAAP.

Changes in Accounting Standards

Recently Adopted

In December 2023, the FASB issued Accounting Standards Update (“ASU”)

2023-09, Income Taxes (Topic 740) (“ASC 740”):

Improvements to Income Tax Disclosures (“ASU 2023-09”) to expand the

disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective

for annual periods beginning January 1, 2025, with early adoption permitted.

We have adopted ASU 2023-09 for the annual period ended

December 31, 2025 and have conformed our income tax disclosures in Note 4 to reflect the new requirements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic

Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in the Company’s

annual and interim consolidated financial statements.

This ASU is effective retrospectively for fiscal years beginning after December

15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

The Company adopted this update effective January

See Note 14 - Segments.

The adoption and implementation of this standard did not have a material impact on

the Company’s disclosures.

Recently Issued, Not Yet Adopted

In December 2023, FASB issued Accounting Standards Update (ASU) No.

2023-09, “Improvements to Income Tax Disclosures,” issued by the Financial Accounting Standards Board (FASB).

requires enhanced disclosures around income taxes, including additional detail regarding the rate reconciliation and the presentation

of income taxes paid, to provide financial statement users with more transparent information about tax exposures and cash flow implications.

While we are still evaluating the implications of this standard, the adoption of ASU 2023-09 should not materially impact our financial

position, results of operations, or cash flows, as the update affects disclosures only.

2 – OIL AND GAS PROPERTIES, EQUIPMENT AND FIXTURES

and gas properties, equipment and fixtures consist of:

We have reviewed all other recently issued accounting pronouncements

that are not yet effective and have determined that none are currently expected to have a material impact on our consolidated financial

statements upon adoption.

In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic

220-40) Reporting Comprehensive Income-Expense Disaggregation Disclosures, which broadens the disclosures required for certain costs

and expenses in the Company’s annual and interim consolidated financial statements.

This ASU is effective prospectively for fiscal

years beginning after December 15, 2026, and interim reporting periods within fiscal years beginning after December 15, 2027.

is currently evaluating disclosures related to our annual report for fiscal year 2027.

NOTE 2 – OIL AND GAS PROPERTIES, REAL PROPERTY AND

EQUIPMENT AND FIXTURES

Oil and gas properties, real property and equipment and fixtures consist

Year ended December 31,

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Lease and well equipment

Total Oil and Gas Properties

Accumulated depletion, depreciation and amortization

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Furniture and equipment

Total Commercial and Other

Accumulated depreciation

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Net capitalized costs Total

following sets forth costs incurred for oil and gas property acquisition and development activities, whether capitalized or expensed

at December 31:

Year ended December 31,

Acquisition - Proved

Acquisition - Unproved

guidance set forth in the Continued Capitalization of Exploratory Well Costs paragraph of the Extractive Activities Topic of the FASB

ASC requires that we evaluate all existing capitalized exploratory well costs and disclose the extent to which any such capitalized costs

have become impaired and are expensed or reclassified during a fiscal period.

We did not make any additions to capitalized exploratory

well costs pending a determination of proved reserves during 2024 and 2023.

We did not charge any previously capitalized exploratory

well costs to expense upon adoption of Topic.

Undeveloped properties are not subject to depletion, depreciation or amortization.

of Operations from Oil and Gas Producing and Exploration Activities

results of operations from oil and gas producing and exploration activities (excluding corporate overhead and interest costs) are as

Year Ended December 31,

Oil and gas sales

Production related costs (Lease Operating)

( 1,983,173 )

( 1,731,670 )

( 1,599,001 )

Depreciation, depletion and amortization

Results of operations from producing and exploration activities

$ ( 528,175 )

$ ( 1,563,511 )

Income Taxes (Benefit)

$ ( 528,175 )

$ ( 1,563,511 )

3 – ASSET RETIREMENT OBLIGATION

Asset Retirement and Environmental Obligations Topic of the ASC 410-20 requires that an asset retirement obligation (“ARO”)

associated with the retirement of a tangible long-lived asset be recognized as a liability in the period in which it is incurred or becomes

determinable (as defined by the standard), with an associated increase in the carrying amount of the related long-lived asset.

of the tangible asset, including the initially recognized asset retirement cost, is depreciated over the useful life of the asset.

ARO is recorded at the estimated fair value, and accretion expense will be recognized over time as the discounted liability is accreted

to its expected settlement value.

Accretion expense is included as part of Depreciation, Depletion and Amortization in the Consolidated

Statement of Operations.

The fair value (as provided in ASC 820 guidance) of the ARO is measured using expected future cash outflows

discounted at our credit-adjusted risk-free interest rate.

The provisions of this Topic apply to legal obligations associated with the

retirement of long-lived assets that result from the acquisition, development, and operation of a long-lived asset.

There were no changes

in estimates for the years ended December 31, 2024 and 2023.

The guidance set forth in the Continued Capitalization of Exploratory

Well Costs paragraph of the Extractive Activities Topic of the FASB ASC requires that we evaluate all existing capitalized exploratory

well costs and disclose the extent to which any such capitalized costs have become impaired and are expensed or reclassified during a

fiscal period.

We do not have any capitalized exploratory well costs.

Undeveloped properties are not subject to depletion, depreciation

or amortization.

NOTE 3 – ASSET RETIREMENT OBLIGATION

The Asset Retirement and Environmental Obligations Topic of the ASC

410-20 requires that an asset retirement obligation (“ARO”) associated with the retirement of a tangible long-lived asset

be recognized as a liability in the period in which it is incurred or becomes determinable (as defined by the standard), with an associated

increase in the carrying amount of the related long-lived asset.

The cost of the tangible asset, including the initially recognized asset

retirement cost, is depreciated over the useful life of the asset.

There were no changes in estimates for the years ended December 31,

2025 and 2024.

Asset retirement obligation

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Accretion expense

record accretion expense as part of Depreciation, Depletion and Amortization.

Accretion expense was $ 2,015 and $ 43,897 for the years

ended December 31, 2024 and 2023, respectively.

4 – INCOME TAXES

tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities

for financial reporting purposes and amounts used for income tax purposes.

Deferred tax assets are reduced by a valuation allowance when,

in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

components of our deferred assets and liabilities at December 31, 2024 and 2023, respectively, are as follows:

Deferred Tax Assets (Liabilities):

Statutory Depletion Carry Forward

Net Operating Loss

Share-Based Compensation

Capital Loss / AMT Credit Carry Forward

Charitable Contributions Carry Forward

Allowance for Doubtful Accounts

Oil and Gas Properties and Fixed Assets

Investment in RMX Joint Venture

Valuation Allowance

We record accretion expense as part of Depreciation, Depletion and

Amortization.

Accretion expense was $ 7,300 and $ 2,015 for the years ended December 31, 2025 and 2024, respectively.

NOTE 4 – INCOME TAXES

The components of income (loss) before income taxes were as follows:

$ ( 1,251,680 )

$ 92,159,014 )

Net Deferred Tax Asset

of December 31, 2024, management reviewed the reliability of our net deferred tax assets, and due to our continued cumulative losses,

we concluded it is not “more-likely-than-not” our deferred tax assets will be realized.

As a result, we have continued to

record a full valuation allowance against the deferred tax assets.

We will assess the realizability of the deferred tax assets at least

yearly and make appropriate updates as needed.

We and our subsidiaries have available net operating loss carryforwards of $ 20.5 million

generated in tax years ended before January 1, 2018, which if not utilized, begin to expire in the year 2026.

We have $ 13.1 million net

operating loss carryforwards generated after December 31, 2017, which can be carried forward indefinitely.

reconciliation of our provision for income taxes and the amount computed by applying the statutory income tax rates at December 31, 2024

and 2023, respectively, to pretax income is as follows:

Tax (benefit) computed at statutory rate of 21% at December 31, 2023 and 2022, respectively

The reconciliation between the actual provision for income taxes and

that computed by applying the U.S.

statutory rate to income (loss) before income taxes are outlined below based on the updated requirements

of ASU 2023-09 for 2025.

Current tax at U.S.

statutory rate

$ ( 222,999 )

State and local income taxes, net of federal taxes

Foreign Tax Effects

Effects of Changes in Tax Law or Rates Enacted in the Current Period

Effect of cross-border tax law

Changes in Valuation Allowance

Nondeductible/nontaxable items

Changes in Unrecognized Tax Benefit

Other Adjustments

Deferred Adjustment

Income tax expense

As previously disclosed prior to the adoption of ASU 2023-09, the

effective income tax rate differs from the statutory federal income tax rate as follows

Tax (benefit) computed at statutory rate of 21% at December 31, 2024,

$ ( 518,740 )

5 unchanged sentences

Change in valuation allowance

( 1,759,669 )

Provision (benefit)

of December 31, 2024, we did not recognize a liability for uncertain tax positions.

Currently, the only differences between our financial

statements and our income tax returns relate to normal timing differences such as depreciation, depletion and amortization, which are

recorded as deferred taxes on our balance sheets.

We do not expect our unrecognized tax benefits to change significantly over the next

The tax years of 2019 through 2023 remain open to examination by the tax jurisdictions in which we file income tax returns.

5 – SERIES B PREFERRED STOCK

to the terms of the merger completed in 2018, all Class A limited partnership interests of Matrix Investments, LP (“Matrix Investments”)

were exchanged for our Common stock using conversion ratios according to the relative value of the Class A limited partnership interests,

and $ 20,124,000 of Matrix Investments preferred limited partnership interests were converted into 2,012,400 shares of our Series B Convertible

Preferred Stock.

The Series B Convertible Preferred Stock was convertible at the option of the security holder at the rate of ten shares

of common stock for one share of Series B Convertible Preferred Stock.

2023 and 2024, the board authorized the payment of each quarterly dividend of Series B Convertible Preferred shares, as Paid-In-Kind

shares (“PIK”) to be paid immediately following the end of the quarter.

For the year ended December 31, 2023, we issued 62,899

shares with a value of $ 629,007 .

During 2024 and 2023, no cash was used to pay dividends on Series B preferred shares.

October 11, 2024, we completed a significant equity restructuring transaction, eliminating our Series B, 3.5 % Convertible Preferred Stock.

6 – COMMON STOCK

the years 2024 and 2023, we issued shares of our Common Stock in lieu of cash payments for salaries, fees or incentives to various officers

and board members, including our CEO, as noted in the Statement of Stockholders’ Deficit.

In April 2023, CIC RMX LP (“CIC”)

exercised in full its warrant to purchase shares or our common stock.

CIC elected to make a cashless exercise of warrant and as a result

we issued 3,266,055 shares of our common stock to CIC.

2024, we had one office lease at 1530 Hilton Head Road, El Cajon, California, the location of our corporate offices.

The corporate office

lease was entered into on August 12, 2021, began on January 1, 2022 and expires on December 31, 2026, with initial monthly payments of

$ 6,922 with escalations.

We also rent office space on a month-to-month basis at 104 W.

Anapamu, Santa Barbara, California, the location

of our CEO and engineering team for $ 5,100 per month.

have elected the short-term lease recognition exemption for all leases with an original term of 12 months or less.

This means, for those

leases that qualify, we will not recognize rights of use (“ROU”) assets or lease liabilities, and this includes not recognizing

ROU assets or lease liabilities for existing short-term leases of those assets in transition.

We elected the practical expedient to not

separate lease and non-lease components for all of our finance leases.

For our real estate operating leases, we have only considered

the fixed portion of our lease payment commitment and have excluded the variable components from the capitalized ROU and lease liability.

expense for operating as well as finance leases are included in General and Administrative expense and Interest Expense on the Consolidated

Statement of Operations, while the lease expense for those leases that are short-term are included in Oil and Gas Lease Operating Expenses.

Deferred tax assets and liabilities reflect the net tax effect of

temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income

tax purposes.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not

that some portion or all of the deferred tax assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects

of changes in tax laws and rates on the date of enactment.

Significant components of our deferred assets and liabilities at December

31, 2025 and 2024, respectively, are as follows:

Deferred Tax Assets (Liabilities):

Accrued Expenses

Net Operating Loss

Share-Based Compensation

Charitable Contributions Carry Forward

Allowance for Doubtful Accounts

Interest Expense Limitations

Oil and Gas Properties and Fixed Assets

Investment in RMX Joint Venture

Total deferred tax assets

Valuation Allowance

( 14,286,652 )

( 14,110,089 )

Net Deferred Tax Asset

During the current year audit, it was determined that there were two

immaterial errors in the 2024 income tax disclosures.

The deferred tax asset for Oil and Gas Properties and Fixed Assets was overstated

by $ 2.4 million.

The error was caused by two different items.

The first error was to record a deferred tax liability in work in process

where none should have been recorded.

The second error was to have recorded a deferred tax liability twice related to the book impairment

on oil and gas properties.

Both of these changes are completely offset by an equal offsetting change to the valuation allowance resulting

in a net impact of $ 0 on the face of the financials.

Only the income tax footnote disclosures were impacted by these errors.

As of December 31, 2025, management reviewed the reliability of our

net deferred tax assets, and due to our continued cumulative losses, we concluded it is not “more-likely-than-not” our deferred

tax assets will be realized.

As a result, we have continued to record a full valuation allowance against the deferred tax assets.

will assess the realizability of the deferred tax assets at least yearly and make appropriate updates as needed.

We and our subsidiaries

have available net operating loss carryforwards of $ 20.5 million generated in tax years ended before January 1, 2018, which if not utilized,

expire in varying amounts between 2026 and 2037.

We have $ 13.7 million net operating loss carryforwards generated after December 31,

2017, which can be carried forward indefinitely.

As of December 31, 2025, we did not recognize a liability for uncertain

tax positions.

Currently, the only differences between our financial statements and our income tax returns relate to normal timing differences

such as depreciation, depletion and amortization, which are recorded as deferred taxes on our balance sheets.

We do not expect our unrecognized

tax benefits to change significantly over the next 12 months.

The tax years of 2020 through 2024 remain open to examination by the tax

jurisdictions in which we file income tax returns.

Net income taxes paid (received) during the years ended December 31,

2025 and 2024, by federal and state jurisdiction (all states combined), were as follows:

Total income taxes paid, net

NOTE 5 – SERIES B PREFERRED STOCK

Pursuant to the terms of the merger completed in 2018, all Class A

limited partnership interests of Matrix Investments, LP (“Matrix Investments”) were exchanged for our Common stock using

conversion ratios according to the relative value of the Class A limited partnership interests, and $ 20,124,000 of Matrix Investments

preferred limited partnership interests were converted into 2,012,400 shares of our Series B Convertible Preferred Stock.

B Convertible Preferred Stock was convertible at the option of the security holder at the rate of ten shares of common stock for one

share of Series B Convertible Preferred Stock.

For 2024, the board authorized the payment of each quarterly dividend

of Series B Convertible Preferred shares, as Paid-In-Kind shares (“PIK”) to be paid immediately following the end of the

For the year ended December 31, 2023, we issued 62,899 shares with a value of $ 629,007 .

During 2024, no cash was used to pay

dividends on Series B preferred shares.

On October 11, 2024, we completed a significant equity restructuring

transaction, eliminating our Series B, 3.5 % Convertible Preferred Stock.

NOTE 6 – COMMON STOCK

During 2024, we issued shares of our Common Stock in lieu of cash

payments for salaries, fees or incentives to various officers and board members, including our CEO, as noted in the Statement of Stockholders’

Common stock was also issued on October 11, 2024, when we completed a significant equity restructuring transaction, see Note

NOTE 7 – LEASES

During 2024, we had one office lease, the location of our corporate

The corporate office lease was entered into on August 12, 2021, began on January 1, 2022 and expires on December 31, 2026, with

initial monthly payments of $ 6,922 with escalations.

We also rent office space on a month-to-month basis in Santa Barbara, California,

the location of our CEO for $ 1,000 per month.

In addition, we have a finance lease for miscellaneous small office equipment, which commenced

in the fourth quarter of 2024 with an 84-month term and an original balance of $ 71,622 .

Lease Obligations

Total undiscounted lease payments

Amount representing interest

Total Operating & Financing lease liabilities

Current lease liabilities as of December 31, 2025

Long-term lease liabilities as of December 31, 2025

We have elected the short-term lease recognition exemption for all

leases with an original term of 12 months or less.

This means, for those leases that qualify, we will not recognize rights of use (“ROU”)

assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases.

the practical expedient to not separate lease and non-lease components for all of our finance leases.

For our real estate operating leases,

we have only considered the fixed portion of our lease payment commitment and have excluded the variable components from the capitalized

ROU and lease liability.

The amounts are as follows:

4 unchanged sentences

Total lease expense

following tables summarized the operating and financing lease obligations.

two office leases do not contain implicit interest rates that can be readily determined.

As a result, we used the available risk-free

rate plus 4 basis points.

At December 31, 2024 the weighted average annual discount rate was 4.83 % and the term was 4 years.

8 – RELATED-PARTY TRANSACTIONS

Chief Executive Officer, Johnny Jordan, had accrued certain unpaid salaries, at December 31, 2023, Mr.

Jordan was owed $ 46,926 , in accrued

unpaid guaranteed payments.

These amounts were discharged in the restructuring transaction described in Note 14.

December 31, 2024, we had a receivable balance of $ 20,926 due from Stephen Hosmer, a director and corporate secretary, for normal drilling

and lease operating expenses.

December 31, 2024 and 2023, we had a total payable of $ 23,087 and $ 23,087 , respectively, due to RMX and its subsidiary, Matrix Oil Corporation,

related to certain lease operating expenses for wells operated by RMX.

For the same periods, we also had prepaid expenses and other current

assets, and deferred drilling costs with RMX of $ 556,019 and $ 382,520 , respectively.

In 2023, the prepaid amount was for future plugging

and abandonment costs.

During 2024, RMX operated various oil wells we have interests in, from which we received revenues of approximately

$ 372,000 and incurred lease operating costs of approximately $ 168,390 .

At December 31, 2024 and 2023, we had a total revenue receivables

of $ 108,344 and $ 120,634 , respectively, due from RMX and its subsidiary, Matrix Oil Corporation.

had outstanding accrued unpaid guaranteed payments for unpaid salary due to a certain Matrix employee for periods predating joining our

At December 31, 2024, the balance due was $ 90,000 .

At December 31, 2024, Royale also had accrued unpaid liabilities of $ 12,386

due to a certain former Matrix employee for periods predating his employment.

McCaskey, a former director, and Jeffery Kerns, a current director, and Stephen Hosmer, a current director, each have consulting agreements

to provide services as directed and at our discretion.

At December 31, 2024 and 2023, we had total payables of $ 139,006 and $ 164,669 ,

respectively, owed to current and former board members for directors fees.

February 7, 2024 the board of directors approved a debt facility of up to $ 3 million.

The following tables summarized the operating and financing lease

Right of Use Asset - Leases

Leases - Current

Leases - Non-current

Our two office leases do not contain implicit interest rates that

can be readily determined.

As a result, we used the best estimate of our incremental borrowing rate.

At December 31, 2025 and 2024 the

weighted average annual discount rate for our operating leases was 4.83 % and the weighted average remaining term was 3 and 4 years, respectively.

The weighted average annual discount rate for our finance lease was 11.91 % for 2025 and 2024, and the weighted average remaining term

was 6 and 7 years.

NOTE 8 – RELATED-PARTY TRANSACTIONS

At December 31, 2025, and 2024, we had a receivable balance of $ 22,266

and $ 22,226 respectively, due from Stephen Hosmer, a director and corporate secretary, for normal lease operating expenses, recorded

in Other Receivables, net.

At December 31, 2025 and 2024, we had payables of $ 23,087 and $ 23,087 ,

respectively, due to RMX and its subsidiary, Matrix Oil Corporation, related to certain lease operating expenses for wells operated by

RMX, included in accounts payable and accrued expenses on our Consolidated Balance Sheets..

For the same periods, we also had prepaid

expenses and other current assets, and deferred drilling obligations with RMX of $ 710,590 and $ 556,019 , respectively.

During 2025 and

2024, RMX operated various oil wells we have interests in, from which we received revenues of approximately $ 236,900 and $ 372,028 respectively,

and incurred lease operating costs of approximately $ 129,450 and $ 158,664 respectively.

At December 31, 2025 and 2024, we had a total

revenue receivables of $ 122,262 and $ 108,344 , respectively, due from RMX and its subsidiary, Matrix Oil Corporation.

We had outstanding accrued unpaid guaranteed payments for unpaid salary

due to a certain Matrix employee for periods predating joining our company.

At December 31, 2025 and 2024, the balance due was $ 90,000

which is included in the Noncurrent Liabilities on our Consolidated Balance Sheets.

At December 31, 2025 and 2024, Royale also had accrued

unpaid liabilities of $ 12,386 due to a certain former Matrix employee for periods predating his employment.

Michael McCaskey, Jeffery Kerns, and Stephen Hosmer, current directors,

each provide services as directed and at our discretion directly or through an entity controlled by them.

The following table sets amounts

paid to entities owned or controlled by these individuals:

Michael McCaskey

Jeffery Kerns

Stephen Hosmer

The following table sets amounts owed to entities owned or controlled

by these individuals at December 31, reflected in Accounts Payable and Accrued Expenses on the Consolidated Balance Sheet.

Michael McCaskey

Jeffery Kerns

Stephen Hosmer

On February 7, 2024 the board of directors approved a debt facility

of up to $ 3 million.

On February 9, 2024, Royale Energy, Inc.

into a Secured Term Loan Note with Walou Investments, LP, a Texas limited partnership, which is under the direct and indirect control

of Johnny Jordan, the Company’s Chief Executive Officer and a member of the Company’s board of directors.

entered into a Secured Term Loan Note with Walou Investments, LP, a Texas

limited partnership, which is under the direct and indirect control of Johnny Jordan, the Company’s Chief Executive Officer and

a member of the Company’s board of directors.

In addition, Mr.

Jordan is the beneficial owner of 29.2 % of the Company’s issued and outstanding common stock.

The initial loan to the Company was

$ 1,400,000 which was received on February 9, 2024.

The outstanding principal balance of the loan has an annual interest rate of 18.00 %.

Jordan is the beneficial owner of common stock.

The initial loan

to the Company was $ 1,400,000 which was received on February 9, 2024.

The outstanding principal balance of the loan has an annual interest

rate of 18.00 %.

On November 1, 2024 the maturity was extended from August 1, 2025 to January 1, 2026.

9 – STOCK COMPENSATION PLAN

were no stock options issued during 2024 and 2023.

10 – SIMPLE IRA PLAN

April 1998, we established a Simple IRA plan covering all employees.

We will contribute a matching contribution to each eligible employee’s

Simple IRA equal to the employee’s salary reduction contributions up to a limit of 3 % of the employee’s compensation for

The employer contribution for the years ending December 31, 2024 and 2023, were $ 28,653 and $ 26,051 respectively.

11 – ENVIRONMENTAL MATTERS

have established procedures for the continuing evaluation of our operations to identify potential environmental exposures and ensure

compliance with regulatory policies and procedures.

Management monitors these laws and regulations and periodically assesses the propriety

of our operational and accounting policies related to environmental issues.

The nature of our business requires routine day-to-day compliance

with environmental laws and regulations.

We incurred no material environmental investigation, compliance and remediation costs in 2024

are unable to predict whether our future operations will be materially affected by these laws and regulations.

We believe that legislation

and regulations relating to environmental protection will not materially affect our results of operations.

12 – CONCENTRATIONS

bid our gas sales on a month-to-month basis and generally sell to a single customer without commitment to future gas sales to any particular

We normally sell approximately 45 % of our yearly natural gas production to one customer on a month-to-month basis.

are able to sell our natural gas to other readily available customers, we believe the loss of any one customer would not have an adverse

effect on our overall sales operations.

maintain cash in depository institutions that are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $ 250,000 per institution

for our interest-bearing accounts in the years ended December 31, 2023, and 2022.

At December 31, 2024 and 2023, cash in banks exceeded

the FDIC limits by approximately $ 7.6 million and $ 5.3 million, respectively.

Subsequently, on August 29, 2025,

the loan was further extended to April 1, 2027, and the Company executed an additional advance of $ 500,000 on the loan, increasing the

total outstanding principal balance to $ 1,900,000 .

Effective September 1, 2025, the interest rate on the outstanding principal was reduced

from 18.0% to 15.0% per annum.

NOTE 9 – STOCK COMPENSATION PLAN

There were no stock options issued for compensation during 2025 and

NOTE 10 – SIMPLE IRA PLAN

In April 1998, we established a Simple IRA plan covering all employees.

We will contribute a matching contribution to each eligible employee’s Simple IRA equal to the employee’s salary reduction

contributions up to a limit of 3 % of the employee’s compensation for the year.

The employer contribution for the years ending December

31, 2025 and 2024, were $ 30,333 and $ 28,653 respectively.

NOTE 11 – ENVIRONMENTAL MATTERS

We have established procedures for the continuing evaluation of our

operations to identify potential environmental exposures and ensure compliance with regulatory policies and procedures.

Management monitors

these laws and regulations and periodically assesses the propriety of our operational and accounting policies related to environmental

The nature of our business requires routine day-to-day compliance with environmental laws and regulations.

We incurred no material

environmental investigation, compliance and remediation costs in 2025 or 2024.

We are unable to predict whether our future operations will be materially

affected by these laws and regulations.

We believe that legislation and regulations relating to environmental protection will not materially

affect our results of operations.

NOTE 12 – CONCENTRATIONS

We bid our gas sales on a month-to-month basis and generally sell

to a single customer without commitment to future gas sales to any particular customer.

For both years presented we sold approximately

36 % of our yearly natural gas production to one customer on a month-to-month basis.

Since we are able to sell our natural gas to other

readily available customers, we believe the loss of any one customer would not have an adverse effect on our overall sales operations.

We maintain cash in depository institutions that are guaranteed by

the Federal Deposit Insurance Corporation (FDIC) up to $ 250,000 per institution for our interest-bearing accounts in the years ended

December 31, 2025, and 2024.

At December 31, 2025 and 2024, cash in banks exceeded the FDIC limits by approximately $ 8.0 million and

$ 7.6 million, respectively.

We have not experienced any losses on deposits.

13 – COMMITMENTS AND CONTINGENCIES

may become involved from time to time in litigation on various matters, which are routine to the conduct of our business.

that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial position or results

of operations, though any adverse decision in these cases or the costs of defending or settling such claims could have a material effect

on our business.

sponsor turnkey drilling agreement arrangements in proved and unproved properties as a pooling of assets in a joint undertaking, whereby

proceeds from participants are reported as Deferred Drilling Obligations.

The contracts require the participants pay us the full contract

price upon execution of the agreement.

We typically begin the drilling activities within 12 months of funding and reach total depth between

10 and 30 days after drilling begins.

14 – Debt and Equity Restructuring Transaction

On October 11, 2024, we completed a significant equity restructuring transaction,

eliminating our Series B, 3.5 % Convertible Preferred Stock and simplifying our capital structure.

The transaction was executed through

a combination of common stock issuance, stock options, and senior promissory notes in exchange for the retirement of all outstanding

NOTE 13 – COMMITMENTS AND CONTINGENCIES

We may become involved from time to time in litigation on various

matters, which are routine to the conduct of our business.

We believe that none of these actions, individually or in the aggregate, will

have a material adverse effect on our financial position or results of operations, though any adverse decision in these cases or the

costs of defending or settling such claims could have a material effect on our business.

We sponsor turnkey drilling agreement arrangements in proved and unproved

properties as a pooling of assets in a joint undertaking, whereby proceeds from participants are reported as Deferred Drilling Obligations.

The contracts require the participants pay us the full contract price upon execution of the agreement.

We typically begin the drilling

activities within 12 months of funding and reach total depth between 10 and 30 days after drilling begins.

Note 14 – Debt and

Equity Restructuring Transaction

On October 11, 2024, we completed a significant equity restructuring

transaction, eliminating our Series B, 3.5 % Convertible Preferred Stock and simplifying our capital structure.

The transaction was executed

through a combination of common stock issuance, warrants, and senior promissory notes in exchange for the retirement of all outstanding

Series B Preferred Shares as of June 30, 2024.

The preferred holders waived the payment of any unpaid dividends.

restructuring involved the exchange and extinguishment of 2,466,455 shares of Series B Preferred Stock, which carried an aggregate liquidation

preference of $ 24.7 million.

The exchange was structured as follows:

The restructuring involved the exchange and extinguishment of 2,466,455

shares of Series B Preferred Stock, which carried an aggregate liquidation preference of $ 24.7 million.

The exchange was structured as

90% Conversion to Common Stock – Former holders of the Series B Preferred Stock received 22,198,095 shares of Royale common stock at an exchange ratio of 10 shares of common stock for each share of Series B Preferred Stock.

10% Conversion to Notes Payable – The remaining portion of the Series B Preferred Stock was exchanged for Senior Unsecured Promissory Notes, totalling $1.85 million.

These notes bear an interest rate of 0% until December 31, 2025, increasing to 5% through 2027 and 8% through June 30, 2029, when all principal and interest is due.

of Warrants – As part of the exchange, Royale issued 25 million warrants with an exercise

price of $0.10 per share, expiring on June 30, 2029.

The fair value of the warrants was determined

to be $959,637 using a Black-Scholes-Merton model.

of Additional Assets – The Company transferred a 0.5% overriding royalty interest (ORRI)

in an Alaskan property and three parcels of Bellevue, Kern County real estate to a holding

entity controlled by the Preferred Shareholders.

The real estate was assigned a fair value

of $368,434, which was recognized as an inducement to convert the preferred shares.

of Historical Liabilities – Royale also settled approximately $3 million in pre-merger

obligations by issuing additional common stock and promissory notes.

transaction was accounted for as an extinguishment of equity in accordance with ASC 470-50 and ASC 260-10-S99-2, as it represented a

fundamental change in the structure and rights of the preferred stockholders.

No gain or loss was recognized on the conversion of Series

B Preferred Stock, as it was deemed to be an equity transaction per authoritative guidance.

However, the issuance of warrants and asset

transfers was treated as an inducement expense.

The excess of the fair value of the warrants and assets transferred

over the accrued dividend forgiven totaling $ 674,341 was treated as inducement.

The inducement was accounted for as an equity transaction

and increases the net loss attributable to common shareholders in the Loss Per Share computation in Note 1.

of December 31, 2024, the Company had 96,600,302 shares of common stock outstanding, and no preferred shares issued or outstanding.

Company concurrently settled approximately $ 3.47 million of accrued liabilities and unpaid guaranteed payments through the issuance of

common stock and additional promissory notes valued at fair market rates.

The liabilities extinguished included obligations associated

with prior merger activity and were held primarily by related parties.

The exchange of these liabilities was accounted for as a capital

transaction with no gain or loss recognized on extinguishment, in accordance with guidance in ASC 470-50.

The fair value of the new instruments

issued was allocated between notes payable, common stock, and additional paid-in capital.

15 – Notes Payable

February 7, 2024 the board of directors approved a debt facility of up to $ 3 million.

On February 9, 2024, Royale Energy, Inc.

into a Secured Term Loan Note with Walou Investments, LP, a Texas limited partnership, which is under the direct and indirect control

of Johnny Jordan, the Company’s Chief Executive Officer and a member of the Company’s Board of Directors.

In addition, Mr.

Jordan is the beneficial owner of 29.15 % of the Company’s issued and outstanding common stock.

The initial loan to the Company

was $ 1,400,000 which was received on February 9, 2024.

The outstanding principal balance of the loan has an interest rate of 18.00 %.

On November 1, 2024 the maturity was extended from August 1, 2025 to January 1, 2026.

connection with the restructuring transaction described in Note 14, we issued Senior Unsecured Promissory Notes, totaling $1.85 million.

These notes bear an interest rate of 0% until December 31, 2025, increasing to 5% through 2027 and 8% through June 30, 2029.

16 – SUPPLEMENTAL INFORMATION ABOUT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)

following estimates of proved oil and gas reserves, both developed and undeveloped, represent interest we own, which are located solely

in the United States.

Proved reserves represent estimated quantities of crude oil and natural gas which geological and engineering data

demonstrate to be reasonably certain to be recoverable in the future from known reservoirs under existing economic and operating conditions.

Proved developed oil and gas reserves are reserves that can be expected to be recovered through existing wells, with existing equipment

and operating methods.

Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled

acreage, or from existing wells for which relatively major expenditures are required for completion.

of oil and gas reserves, which follow, are based on estimates prepared by independent petroleum engineering consultant Netherland, Sewell

& Associates, Inc.

The net reserve value of our proved developed and undeveloped reserves was approximately $ 11.0 million at December

31, 2024, based on the average Henry Hub natural gas price spot price of $ 2.130 per MCF and for oil volumes, the average West Texas Intermediate

price of $ 76.32 per barrel as applied on a field-by-field basis.

10% Conversion to Notes Payable – The remaining portion of the Series B Preferred Stock was

exchanged for Senior Unsecured Promissory Notes, totaling $1.85 million.

These notes bear an interest rate of 0% until December 31,

2025, increasing to 5% through 2027 and 8% through June 30, 2029, when all principal and interest is due.

Issuance of Warrants – As part of the exchange, Royale issued 25 million warrants with an

exercise price of $0.10 per share, expiring on June 30, 2029.

The fair value of the warrants was determined to be $959,637 using

a Black-Scholes-Merton model.

Transfer of Additional Assets – The Company transferred a 0.5% overriding royalty interest

(ORRI) in an Alaskan property and three parcels of Bellevue, Kern County real estate to a holding entity controlled by the Preferred

Shareholders.

The real estate was assigned a fair value of $368,434, which was recognized as an inducement to convert the preferred

Settlement of Historical Liabilities – Royale also settled approximately $3 million in pre-merger

obligations by issuing 2,508,509 shares common stock and promissory notes for $278,724 on the same terms stated above.

The transaction was accounted for as an extinguishment of equity in

accordance with ASC 470-50 and ASC 260-10-S99-2, as it represented a fundamental change in the structure and rights of the preferred

stockholders.

No gain or loss was recognized on the conversion of Series B Preferred Stock, as it was deemed to be an equity transaction

per authoritative guidance.

However, the issuance of warrants and asset transfers was treated as an inducement expense.

The excess of

the fair value of the warrants and assets transferred over the accrued dividend forgiven totaling $ 674,341 was treated as inducement.

The inducement was accounted for as an equity transaction and increases the net loss attributable to common shareholders in the Loss

Per Share computation in Note 1.

The Company concurrently settled approximately $ 3.47 million of accrued

liabilities and unpaid guaranteed payments through the issuance of common stock and additional promissory notes valued at fair market

The liabilities extinguished included obligations associated with prior merger activity and were held primarily by related parties.

The exchange of these liabilities was accounted for as a capital transaction with no gain or loss recognized on extinguishment, in accordance

with guidance in ASC 470-50.

The fair value of the new instruments issued was allocated between notes payable, common stock, and additional

paid-in capital.

NOTE 15 – Notes

On February 7, 2024, the board of directors of the Company approved

a related-party debt facility of up to $ 3 million.

On February 9, 2024, the Company entered into a Secured Term Loan Note with Walou

Investments, LP, a Texas limited partnership under the control of Johnny Jordan, the Company’s Chief Executive Officer and a member

of the Company’s board of directors.

Jordan is also the beneficial owner of approximately 29.2 % of the Company’s issued

and outstanding common stock.

The initial advance to the Company was $ 1,400,000 on February 9, 2024.

The loan originally bore interest at 18.0 % per annum, with monthly

interest-only payments beginning March 1, 2024.

The loan is secured by a deed of trust recorded in Ector County, Texas, covering certain

of the Company’s oil and gas assets located in Ector County.

On November 1, 2024, the maturity date of the loan was extended from

August 1, 2025 to January 1, 2026.

Subsequently, on August 29, 2025, the loan was further extended to April 1, 2027, and the Company

executed an additional advance of $ 500,000 on the loan, increasing the total outstanding principal balance to $ 1,900,000 .

Effective September

1, 2025, the interest rate on the outstanding principal was reduced from 18.0% to 15.0% per annum.

Except as modified by the amendments described above, all other original

terms and conditions of the Secured Term Loan Note remain in full force and effect at December 31, 2025.

Senior Unsecured Promissory Notes

On December 31, 2025 the outstanding balance of the Senior Unsecured

Promissory Notes was $ 2,221,112 and is further discussed in Note 14 – Debt and Equity Restructuring Transaction.

The carrying value

and fair value is further discussed in note 1.

NOTE 16 – SEGMENT REPORTING

The Company has one reportable segment, which encompasses the ownership

and investment in onshore oil and natural gas properties in the United States and turnkey drilling programs.

The segment’s revenues

are derived from the Company’s interests in the sales of crude oil, natural gas, and NGL production.

The Company evaluates performance based on consolidated net income

(loss), as reported in the consolidated statement of operations..

The Company’s chief executive officer, chief operating officer,

and chief financial officer together function as the chief operating decision maker (“CODM”) and manage the Company’s

business activities as a single operating segment.

The accounting policies of the one reportable segment are identical

to those described for the consolidated Company.

The CODM uses income (loss), as reported in the consolidated statement of operations,

to measure segment profitability, assess performance, and manage strategic capital resource allocations.

The measure of segment assets

is reported as “Total assets” on the consolidated balance sheets.

The significant expense categories regularly provided to

and reviewed by the CODM are those presented in the consolidated statements of operations.

NOTE 17 – SUBSEQUENT EVENTS

On March 1, 2026, the Company completed the purchase of 8 gross ( 0.14

net) wells for $ 200,000 .

Other than as disclosed above, the Company has determined that no events or transactions have occurred subsequent

to December 31, 2025 that require recognition or disclosure in these consolidated financial statements.

NOTE 18 – SUPPLEMENTAL INFORMATION ABOUT OIL AND GAS

PRODUCING ACTIVITIES (UNAUDITED)

The following estimates of proved oil and gas reserves, both developed

and undeveloped, represent interest we own, which are located solely in the United States.

Proved reserves represent estimated quantities

of crude oil and natural gas which geological and engineering data demonstrate to be reasonably certain to be recoverable in the future

from known reservoirs under existing economic and operating conditions.

Proved developed oil and gas reserves are reserves that can be

expected to be recovered through existing wells, with existing equipment and operating methods.

Proved undeveloped oil and gas reserves

are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells for which relatively major

expenditures are required for completion.

Disclosures of oil and gas reserves, which follow, are based on estimates

prepared by independent petroleum engineering consultant Netherland, Sewell & Associates, Inc.

The net reserve value of our proved

developed and undeveloped reserves was approximately $ 20.5 million at December 31, 2025, based on the average Henry Hub natural gas price

spot price of $ 3.387 per MCF and for oil volumes, the average West Texas Intermediate price of $ 66.01 per barrel as applied on a field-by-field

Netherland, Sewell & Associates, Inc.

provided reserve estimates

for our California, Texas, and Oklahoma properties.

Such estimates are subject to numerous uncertainties inherent in the estimation of

quantities of proved reserves and in the projection of future rates of production and the timing of development expenditures.

These estimates

do not include probable or possible reserves.

technical persons responsible for preparing the reserves estimates presented in the report of Netherland, Sewell & Associates, Inc.,

meet the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the Standards Pertaining

to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers.

Netherland, Sewell

& Associates, Inc.

is a firm of independent petroleum engineers, geologists, geophysicists, and petrophysicists;

and do not own an

interest in our properties and are not employed on a contingent basis.

All activities and reports performed and completed by Netherland,

Sewell & Associates, Inc.

with regards to our reserve valuation estimates are reviewed by our management.

estimates are furnished and calculated in accordance with requirements of the FASB and the SEC.

Because of unpredictable variances in

expenses and capital forecasts, crude oil and natural gas price changes, and the fact that the bases for such estimates vary significantly,

management believes the usefulness of these projections is limited.

Estimates of future net cash flows presented do not represent our

management’s assessment of future profitability or future cash flows.

Management’s investment and operating decisions are

based upon reserve estimates that include proved reserves prescribed by the SEC as well as probable reserves, and upon different price

and cost assumptions from those used here.

should be recognized that applying current costs and prices and a 10 percent standard discount rate does not convey absolute value.

discounted amounts arrived at are only one measure of the value of proved reserves.

in Estimated Reserve Quantities

net interest in estimated quantities of proved developed reserves of crude oil and natural gas at December 31, 2024 and 2023, and changes

in such quantities during each of the years then ended, were as follows:

provided reserve estimates for our California, Texas, and Oklahoma properties.

estimates are subject to numerous uncertainties inherent in the estimation of quantities of proved reserves and in the projection of

future rates of production and the timing of development expenditures.

These estimates do not include probable or possible reserves.

The technical persons responsible for preparing the reserves estimates

presented in the report of Netherland, Sewell & Associates, Inc., meet the requirements regarding qualifications, independence, objectivity,

and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated

by the Society of Petroleum Engineers.

Netherland, Sewell & Associates, Inc.

is a firm of independent petroleum engineers, geologists,

geophysicists, and petrophysicists;

and do not own an interest in our properties and are not employed on a contingent basis.

All activities

and reports performed and completed by Netherland, Sewell & Associates, Inc.

with regards to our reserve valuation estimates are

reviewed by our management.

These estimates are furnished and calculated in accordance with requirements

of the FASB and the SEC.

Because of unpredictable variances in expenses and capital forecasts, crude oil and natural gas price changes,

and the fact that the bases for such estimates vary significantly, management believes the usefulness of these projections is limited.

Estimates of future net cash flows presented do not represent our management’s assessment of future profitability or future cash

Management’s investment and operating decisions are based upon reserve estimates that include proved reserves prescribed

by the SEC as well as probable reserves, and upon different price and cost assumptions from those used here.

It should be recognized that applying current costs and prices and

a 10 percent standard discount rate does not convey absolute value.

The discounted amounts arrived at are only one measure of the value

of proved reserves.

Changes in Estimated Reserve Quantities

Proved Oil and Gas Reserve Quantities

The Company's proved reserves and changes

in proved reserves are as follows:

Crude Oil (Bbls)

Natural Gas (Mcf)

Total Proved Reserves (Boe)

Proved reserves:

Beginning of period

December 31, 2023

Extensions and discoveries

Revisions of previous estimates

Extensions, discoveries and

improved recovery

Merger Acquisition

Purchase of minerals in place

Sales of minerals in place

Proved reserves end of period

Proved developed

Beginning of period

End of period

Proved undeveloped

Beginning of period

End of period

2024, our overall proved developed and undeveloped oil reserves increased by 9.6 % and our previously estimated proved developed and undeveloped

oil reserve quantities were revised upward by approximately 32 thousand barrels.

This upward revision was mainly the result of an increase

in proved undeveloped oil reserves from drilling locations which the Company had previously estimated.

Our overall proved developed and

undeveloped natural gas reserves decreased by 17.1 % and our previously estimated proved developed and undeveloped natural gas reserve

quantities were revised upward by approximately 4 thousand cubic feet of natural gas.

This upward revision was mainly the result of an

increase in proved undeveloped natural gas reserves from drilling locations which the Company had previously estimated.

Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves

future net cash inflows are developed as follows:

are made of quantities of proved reserves and the future periods during which they are expected to be produced based on year-end economic

estimated future production of proved reserves is priced on the basis of year-end prices.

resulting future gross revenue streams are reduced by estimated future costs to develop and to produce proved reserves, based on year-end

Estimated future development costs by year are as follows:

resulting future net revenue streams are reduced to present value amounts by applying a 10 percent discount.

of principal components of the standardized measure of discounted future net cash flows provides information concerning the factors involved

in making the calculation.

In addition, the disclosure of both undiscounted and discounted net cash flows provides a measure of comparing

proved oil and gas reserves both with and without an estimate of production timing.

The standardized measure of discounted future net

cash flow relating to proved reserves reflects estimated income taxes.

in standardized measure of discounted future net cash flow from proved reserve quantities

standardized measure of discounted future net cash flows is presented below for the years ended December 31, 2024, and 2023.

statement discloses the sources of changes in the standardized measure from year to year.

The amount reported as “Net changes in

prices and production costs” represents the present value of changes in prices and production costs multiplied by estimates of

proved reserves as of the beginning of the year.

The “accretion of discount” was computed by multiplying the 10 percent discount

factor by the standardized measure on a pretax basis as of the beginning of the year.

The “Sales of oil and gas produced, net of

production costs” are expressed in actual dollar amounts.

“Revisions of previous quantity estimates” is expressed at

year-end prices.

The “Net change in income taxes” is computed as the change in present value of future income taxes.

Purchases of reserves in place

December 31, 2024

Extensions and discoveries

Revisions of previous estimates

Purchases of reserves in place

December 31, 2025

Proved developed producing reserves:

December 31, 2024

December 1, 2025

Proved developed non-producing reserves:

December 31, 2024

December 1, 2025

Proved undeveloped reserves:

December 31, 2024

December 1, 2025

Total proved reserves:

December 31, 2024

December 1, 2025

Proved oil and gas reserves are generally those quantities of crude

oil, NGLs and natural gas, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically

producible in future years from known reservoirs under existing economic conditions, operating methods and government regulations.

developed reserves include reserves that can be expected to be produced through existing wells with existing equipment and operating

methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well.

Proved undeveloped reserves

include reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major

expenditure is required for recompletion.

Proved reserve quantities at December 31, 2024, and 2025 and the related

discounted future net cash flows before income taxes are based on estimates prepared by Netherland, Sewell & Associates, Inc.

estimates have been prepared in accordance with guidelines established by the SEC.

All the Company’s proved reserves are attributable

to properties within the United States.

Standardized Measure

The standardized measure of discounted future net cash flows relating to proved reserves is as follows:

Future cash inflows

3 unchanged sentences

Future development costs

Future income tax expense

( 5,411,900 )

( 3,207,240 )

Future income taxes (1)

Future net cash flows

10% annual discount for estimated timing of cash flows

Less 10% annual discount to reflect timing of cash flows

( 9,286,200 )

1 unchanged sentence

Standardized measure of discounted future net cash flows

Sales of oil and gas produced, net of production costs

Revisions of previous quantity estimates

(1) Future income taxes in the calculation of the standardized measure of discounted future net cash flows were zero as of December 31, 2024, and 2025, as the historical tax basis of proved oil and gas properties, net operating loss carryforwards, and future tax deductions exceeded the undiscounted future net cash flows before income taxes of the Company’s proved oil and gas reserves as of December 31, 2024, and 2025.

Proved reserve estimates and future cash flows are based on the average

realized prices for sales of crude oil, NGLs and natural gas on the first calendar day of each month during the year.

The following average

realized prices were used in the calculation of proved reserves and the standardized measure of discounted future net cash flows.

Crude oil ($/Bbl)

Natural gas ($/Mcf)

Future operating and development costs are computed

primarily by the Company’s petroleum engineers by estimating the expenditures to be incurred in developing and producing the Company’s

proved reserves at the end of the year, based on current costs and assuming continuation of existing economic conditions.

factor of 10 % was used to reflect the timing of future net cash flows.

The standardized measure of discounted future net cash

flows is not intended to represent the replacement cost or fair value of the Company’s oil and gas properties.

An estimate of fair

value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future

changes in prices and costs, and a discount factor more representative of the time value of money and the risks inherent in proved reserve

Standardized measure at beginning of year

Revisions to reserves proved in prior years:

Net change in sales prices and production costs related to future production

( 2,084,125 )

Net changes in prices and production costs

Extensions, discoveries and improved recovery

Net change in estimated future development costs

( 4,458,464 )

Net change due to revisions in quantity estimates

Accretion of discount

Net change in income tax

Net increase (decrease)

Changes in production rates (timing) and other

Total revisions to reserves proved in prior years

( 2,499,450 )

Development Costs

order to realize future revenues from our proved reserves estimated in our reserve report, it will be necessary to incur future costs

to develop and produce the proved reserves.

The following table estimates the costs to develop and produce our proved reserves in the

Future development cost of:

Proved developed reserves (PDP)

Proved non-producing reserves (PDNP)

Proved undeveloped reserves (PUD)

assumptions include such matters as the real extent and average thickness of a particular reservoir, the average porosity and permeability

of the reservoir, the anticipated future production from existing and future wells, future development and production costs and the ultimate

hydrocarbon recovery percentage.

As a result, oil and gas reserve estimates and discounted present value estimates are frequently revised

in subsequent periods to reflect production data obtained after the date of the original estimate.

If the reserve estimates are inaccurate,

production rates may decline more rapidly than anticipated, and future production revenues may be less than estimated.

data relating to our oil and natural gas properties is disclosed in Supplemental Information About Oil and Gas Producing Activities (Unaudited),

attached to our Financial Statements, in Note 15.

Development Costs for Proved Reserves

each year we expend funds to drill and develop some of our proved undeveloped reserves.

We have incurred no cost in any of the past three

fiscal years to drill and develop reserves that were classified as proved undeveloped reserves as of December 31 of the immediately preceding

Net change due to extensions and discoveries, net of

estimated future development and production costs

Net change due to purchases of reserves in place

Sales of crude oil, NGLs and natural gas produced, net of production costs

( 1,613,800 )

( 1,874,700 )

Net change in standardized measure of discounted future net cash flows

Standardized measure at end of year

The following sets forth costs incurred for oil and gas property acquisition

and development activities, whether capitalized or expensed at December 31:

Year ended December 31,

Acquisition - Proved

Acquisition - Unproved

Results of Operations from Oil and Gas Producing and Exploration

The results of operations from oil and gas producing and exploration

activities (excluding corporate overhead and interest costs) are as follows:

Year ended December 31,

Oil and gas sales

Production related costs (Lease Operating)

( 1,396,710 )

( 2,065,005 )

Depreciation, depletion, amortization, and accretion

Results of operations from producing and exploration activities

$ ( 528,175 )

Income Taxes (Benefit)

$ ( 528,175 )

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures