As filed with the SEC on June 26, 2002
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3/A
Amendment No. 4 to Form S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
ROYALE ENERGY, INC.
(Exact name of registrant as specified in its charter)
California |
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1311 |
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33-0224120 |
(State or other jurisdiction of |
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(Primary Standard Industrial |
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(I.R.S. Employer |
7676 Hazard Center Drive, Suite 1500
San Diego, CA 92108
(Address of principal executive offices)
Issuer's telephone number: 619-881-2800
Stephen M. Hosmer
Royale Energy, Inc.
7676 Hazard Center Drive, Suite 1500
San Diego, CA 92108
619-881-2800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Lee Polson
Strasburger & Price, LLP
600 Congress Avenue, Suite 2600
Austin, Texas 78701
512-499-3600
(FAX) 512-499-3660
Approximate date of commencement of proposed sale to the public: From time to time after
the registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please
check the following box. [ ]
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities being offered only in connection with dividend or interest reinvestment
plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the
same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS
BEEN FILED WITH THE SECURITIES NAD EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
PART I – INFORMATION REQUIRED IN PROSPECTUS
{Royale Energy Logo}
Subject to Completion, dated June 26, 2002
PRELIMINARY PROSPECTUS
ROYALE ENERGY, INC.
673,177 Shares of Common Stock
This prospectus relates to 673,177 shares of common stock of Royale Energy, Inc. a
California corporation ("Royale Energy"), that may be offered and sold from time to time by the several selling shareholders whose
shares are being registered. The stock was issued by Royale Energy to its Directors, as an additional aspect of reimbursement
for their services.
Royale Energy's securities are listed on the Nasdaq Stock Market under symbol "ROYL."
See "Risk Factors" beginning on page 1 for a discussion of certain factors that should be considered by prospective purchasers of
the stock offered hereby.
These securities have not been approved or disapproved by the Securities and Exchange
Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission
passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this Prospectus is June 26, 2002
TABLE OF CONTENTS
1. |
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Royale Energy |
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1 |
2. |
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Risk Factors |
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1 |
3. |
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Use Of Proceeds |
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6 |
4. |
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Selling Security Holders |
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6 |
5. |
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Plan Of Distribution |
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7 |
6. |
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Experts |
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7 |
7. |
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Material Changes |
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7 |
8. |
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Information Incorporated By Reference |
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8 |
9. |
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Disclosure Of Commission Position On Indemnification |
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8 |
ROYALE ENERGY, INC.
7676 Hazard Center Drive, Suite 1500
San Diego, California 92108
(619) 881-2800
1. ROYALE
ENERGY
We are an independent oil and natural gas producer. We produce and sell natural gas, acquire oil and gas lease interests and
proved reserves, drill both exploratory and development wells, and sell fractional working interests in wells we intend to drill or
participate in drilling. We own wells and leases located mainly in the Sacramento Basin and San Joaquin Basin in
California.
2. RISK FACTORS
2.1 We Depend on Market Conditions and
Pricesin the Oil and Gas Industry.
Our success depends heavily upon our ability to market oil and gas production at favorable prices. In recent decades, there
have been both periods of worldwide overproduction and underproduction of hydrocarbons and periods of increased and relaxed energy
conservation efforts. As a result the world has experienced periods of excess supply of, and reduced demand for, crude oil on
a worldwide basis and for natural gas on a domestic basis; these periods have been followed by periods of short supply of, and
increased demand for, crude oil and, to a lesser extent, natural gas. The excess or short supply of oil and gas has placed
pressures on prices and has resulted in dramatic price fluctuations.
Natural gas demand and the prices paid for gas are seasonal. In recent years, natural gas demand and prices in Northern California
have decreased during the fall and winter and risen in the spring and summer, reflecting increased electricity
consumption. In the winter and spring of 2001, a gas shortage in Northern California caused dramatic rises in the price
we received for our gas production. The high prices in the first half of 2001 materially increased our revenues from gas
production and sales in that period. Gas prices fell again in the summer of 2001. Discussions of a few natural gas
price regulations, including price caps, have taken place at the state and federal levels. The fluctuations in gas prices and
possible new regulations create uncertainty about whether we can continue to produce gas for a profit. We do not expect
natural gas prices to return to their winter 2001 levels in the forseeable future.
Prices for oil and natural gas affect the amount of cash flow available for capital expenditures and our ability to borrow and
raise additional capital. Lower prices may also reduce the amount of oil and natural gas that we can economically
produce. Any substantial and extended decline in the price of oil or natural gas would decrease our cash flows, as well as
the carrying value of our proved reserves, our borrowing capacity and our ability to obtain additional capital.
2.2 Variance in Estimates of Oil and Gas
ReservesCould be Material.
The process of estimating oil and gas reserves is complex, requiring significant decisions and assumptions in the evaluation of
available geological, geophysical, engineering and economic data for each reservoir. As a result, such estimates are
inherently imprecise. Actual future production, oil and gas prices, revenues, taxes, development expenditures, operating
expenses and quantities of recoverable oil and gas reserves may vary substantially from those estimated in reserve reports that we
periodically obtain from independent reserve engineers.
You should not construe the present value of proved reserves contained in our annual report as the current market value of the
estimated proved reserves of oil and gas attributable to our properties. In accordance with Securities and Exchange Commission
requirements, we have based the estimated discounted future net cash flows from proved reserves on prices and costs as of the date
of the estimate, whereas actual future prices and costs may vary significantly. The following factors may also affect actual future
net cash flows:
- the
timing of both production and related expenses;
- changes in consumption levels; and
- governmental regulations or taxation.
In addition, the calculation of the present value of the future net cash flows using a 10% discount as required by the Securities
and Exchange Commission is not necessarily the most appropriate discount rate based on interest rates in effect from time to time
and risks associated with our reserves or the oil and gas industry in general. Furthermore, we may need to revise our reserves
downward or upward based upon actual production, results of future development, supply and demand for oil and gas, prevailing oil
and gas prices and other factors.
Any significant variance in these assumptions could materially affect the estimated quantities and present value of our
reserves. In addition, our proved reserves may be revised downward or upward, based upon production history, results of
future exploration and development, prevailing oil and gas prices and other factors, many of which are beyond our control.
Actual production, revenues, taxes, development expenditures and operating expenses with respect to our reserves will likely vary
from the estimates used, and such variances may be material.
2.3 Future Acquisitions and Development Activities May Not Result in
Additional Proved Reserves, and
We May Not be Able to Drill Productive
Wells at Acceptable Costs.
In general, the volume of production from oil and gas properties declines as reserves are depleted. Except to the extent that
we acquire properties containing proved reserves or conduct successful development and exploitation activities, or both, our proved
reserves will decline as reserves are produced. Our future oil and gas production is, therefore, highly dependent upon our
ability to find or acquire additional reserves. The business of acquiring, enhancing or developing reserves is capital
intensive. We require cash flow from operations as well as outside investments to fund our acquisition and development
activities. If our cash flow from operations is reduced and external sources of capital become limited or unavailable, our
ability to make the necessary capital investment to maintain or expand our asset base of oil and gas reserves would be
impaired.
2.4 Market Uncertainties and
Regulatory Risks in California Could Adversely Affect Operations.
During 2001, natural gas prices fluctuated dramatically in California. In winter of 2000 and spring of 2001, gas prices rose
to record highs in Northern California due to a shortage of available production. Beginning in June 2001, gas prices fell
somewhat, but the prices were still far above their historic levels. The high gas prices in 2001 materially improved our
operation results, but we do not expect natural gas prices to return to their early 2001 levels in the forseeable future.
The increase in gas prices and a related short supply of electric power have given rise to calls for increased gas generated and
regulation of the California energy markets. We cannot predict whether any increased regulation of gas production or pricing
will come to pass. The adoption of new regulations could, however, negatively impact our own control over our operations, our
ability to continue drilling new wells, or the price we receive for our production.
Substantially all of our natural gas reserves are located in northern California. Any interruption in the production from
these reserves could materially adversely affect our operations.
2.5 The Oil and Gas Industry has
Mechanical and Environmental Risks.
Oil and gas drilling and production activities are subject to numerous risks. These risks include the risk that no
commercially productive oil or gas reservoirs will be encountered, that operations may be curtailed, delayed or canceled, and that
title problems, weather conditions, compliance with governmental requirements, mechanical difficulties or shortages or delays in
the delivery of drilling rigs and other equipment may limit our ability to develop, produce or market our reserves. New wells we
drill may not be productive and we may not recover all or any portion of our investment in the well. Drilling for oil and gas
may involve unprofitable efforts, not only from dry wells but also from wells that are productive but do not produce sufficient net
revenues to return a profit after drilling, operating and other costs. In addition, our properties may be susceptible to
hydrocarbon drainage from production by other operators on adjacent properties.
Industry operating risks include the risks of fire, explosions, blow‑outs, pipe failure, abnormally pressured formations and
environmental hazards, such as oil spills, natural gas leaks, ruptures or discharges of toxic gases, the occurrence of any of which
could result in substantial losses due to injury or loss of life, severe damage to or destruction of property, natural resources
and equipment, pollution or other environmental damage, clean‑up responsibilities, regulatory investigation and penalties and
suspension of operations. In accordance with customary industry practice, we maintain insurance these kinds of risks, but we
cannot be sure that our level of insurance will cover all losses in the event of a drilling or production catastrophe.
Insurance is not available for all operational risks, such as risks that we will drill a dry hole, fail in an attempt to complete a
well or have problems maintaining production from existing wells.
2.6 Drilling is a Speculative Activity Even With Newer
Technology.
Assessing drilling prospects is uncertain and risky for many reasons. We have grown in the past five years by using 3-D
seismic technology to acquire and develop exploratory projects in northern California, as well as by acquiring producing properties
for further development. The successful acquisition of such properties depends on our ability to assess recoverable reserves,
future oil and gas prices, operating costs, potential environmental and other liabilities and other factors.
Nevertheless, exploratory drilling remains a speculative activity. Even when fully utilized and properly interpreted, 3-D
seismic data and other advanced technologies assist geoscientists in identifying subsurface structures but do not enable the
interpreter to know whether hydrocarbons are in fact present. In addition, 3-D seismic and other advanced technologies
require greater pre-drilling expenditures than traditional drilling strategies, and we could incur losses as a result of these
costs.
Therefore, our assessments of drilling prospects are necessarily inexact and their accuracy inherently uncertain. In
connection with such an assessment, we perform a review of the subject properties that we believe to be generally consistent with
industry practices. Such a review, however, will not reveal all existing or potential problems, nor will it permit us
to become sufficiently familiar with the properties to fully assess their deficiencies and capabilities.
2.7 Breaches of Contract by Sellers of Properties Could Adversely Affect
Operations.
In most cases, we are not entitled to contractual indemnification for pre‑closing liabilities, including environmental
liabilities, and we generally acquire interests in the properties on an "as is" basis with limited remedies for breaches of
representations and warranties. In those circumstances in which we have contractual indemnification rights for pre-closing
liabilities, the seller may not fulfill those obligations and leave us with the costs.
2.8 We May Not be Able to Acquire Producing Oil and Gas Properties Which
Contain Economically
Recoverable Reserves.
Competition for producing oil and gas properties is intense and many of our competitors have substantially greater financial and
other resources than we do. Acquisitions of producing oil and gas properties may be at prices that are too high to be
acceptable.
2.9 We Require Substantial Capitalfor
Exploration and Development.
We make substantial capital expenditures for our exploration and development projects. We will finance these capital
expenditures with cash flow from operations and sales of direct working interests to third party investors. We will need
additional financing in the future to fund our developmental and exploration activities. Additional financing that may be
required may not be available or continue to be available to us. If additional capital resources are not available to us, our
developmental and other activities may be curtailed, which would harm our business, financial condition and results of
operations.
2.10 Profit Depends on the Marketability of
Production.
The marketability of our natural gas production depends in part upon the availability, proximity and capacity of natural gas
gathering systems, pipelines and processing facilities. Most of our natural gas is delivered through natural gas gathering
systems and natural gas pipelines that we do not own. Federal, state and local regulation of oil and gas production and
transportation, tax and energy policies, and/or changes in supply and demand and general economic conditions could adversely affect
our ability to produce and market its oil and gas. Any dramatic change in market factors could have a material adverse effect
on our financial condition and results in operations.
2.11 We Depend on Key Personnel.
Our business will depend on the continued services of our president and chief executive officer, Donald H. Hosmer, and chief
financial officer, Stephen M. Hosmer. We do not have employment agreements with either Donald or Stephen Hosmer. The
loss of the services of either of these individuals would be particularly detrimental to us because of their background and
experience in the oil and gas industry.
2.12 The Hosmer Family Exerts Significant Influence Over Shareholder Matters.
The control positions held by members of the Hosmer family may discourage others from making bids to buy Royale Energy or change
its management without their consent. Donald H. or Stephen M. Hosmer own, directly and through their ownership of Royale
Petroleum Corporation, approximately 39% of our outstanding common stock, including shares issuable on the exercise of outstanding
warrants. Harry E. Hosmer owns an additional 10.2% of our outstanding common stock, including shares issuable on the exercise
of outstanding stock options. So far as we know, no other shareholder or group of shareholders own as much as 5% of our
common stock. Harry E., Donald H. and Stephen M. Hosmer also make up three of the seven members of our board of directors.
The amounts of stock owned by Hosmer family members and Royale Petroleum make it quite likely that they could control the outcome
of any contested vote of the shareholders on matters related to management of the corporation.
2.13 The Oil and Gas Industry is Highly Competitive.
The oil and gas industry is highly competitive in all its phases. Competition is particularly intense with respect to the
acquisition of desirable producing properties, the acquisition of oil and gas prospects suitable for enhanced production efforts,
and the hiring of experienced personnel. Our competitors in oil and gas acquisition, development, and production include the
major oil companies in addition to numerous independent oil and gas companies, individual proprietors and drilling
programs.
Many of our competitors possess and employ financial and personnel resources far greater than those which are available to
us. They may be able to pay more for desirable producing properties and prospects and to define, evaluate, bid for, and
purchase a greater number of producing properties and prospects than we can. We must compete against these larger companies for
suitable producing properties and prospects, to generate future oil and gas reserves.
2.14 Governmental Regulations Can Hinder
Production.
Domestic oil and gas exploration, production and sales are extensively regulated at both the federal and state levels.
Legislation affecting the oil and gas industry is under constant review for amendment or expansion, frequently increasing the
regulatory burden. Also, numerous departments and agencies, both federal and state, have legal authority to issue, and have
issued, rules and regulations affecting the oil and gas industry which often are difficult and costly to comply with and which
carry substantial penalties for noncompliance. State statutes and regulations require permits for drilling operations,
drilling bonds, and reports concerning operations. Most states where we operate also have statutes and regulations governing
conservation matters, including the unitization or pooling of properties. Our operations are also subject to numerous laws
and regulations governing plugging and abandonment, discharging materials into the environment or otherwise relating to
environmental protection. The heavy regulatory burden on the oil and gas industry increases its costs of doing business and
consequently affects its profitability. Changes in the laws, rules or regulations, or the interpretation thereof,
could have a materially adverse effect on our financial condition or results of operation.
2.15 Minority or Royalty Interest PurchasesDo Not
Allow Us to Control Production Completely.
We sometimes acquire less than the controlling working interest in oil and gas properties. In such cases, it is likely that
these properties would not be operated by us. When we do not have controlling interest, the operation on the other co-owners
might take actions we do not agree with and possibly increase costs or reduce production income in ways we do not agree with.
2.16 Environmental Regulations Can Hinder
Production.
Oil and gas activities can result in liability under federal, state and local environmental regulations for activities involving,
among other things, water pollution and hazardous waste transport, storage, and disposal. Such liability can attach not only
to the operator of record of the well, but also to other parties that may be deemed to be current or prior operators or owners of
the wells or the equipment involved. We have inspections performed on our properties to assure environmental law
compliance, but inspections may not always be performed on every well, and structural and environmental problems are not
necessarily observable even when an inspection is undertaken.
2.17 Shares Eligible for Future Sale Could Dilute Our Stock Price.
On June 15, 2002, we had 4,999,641 shares of common stock issued and outstanding. After giving effect to the purchase of
common stock pursuant to the exercise of options to purchase 170,603 shares that are being registered for sale by selling
shareholders in this offering, we would have a total of 5,170,244 shares of common stock issued and outstanding as of June 15,
2002. The stock and warrants to be sold in this offering will be eligible for resale on the open market. The selling
shareholders may also elect to sell their shares in exempt transactions pursuant to the SEC's Rule 144.
Prior to the registration of these shares by this registration statement, the shares sold by the Selling Shareholders who are
affiliated with the Company are subject to volume restrictions under SEC's Rule 144. Thus, during the three month period
prior to a sale, each Selling Shareholder may only sell an amount equal to one percent of the shares of outstanding common stock or
equal to the average weekly reported volume of trading during the four weeks prior to the sale, whichever is greater. After
the registration of the shares on this registration statement, the Selling Shareholders who are affiliated with the Company will no
longer be subject to volume restrictions under SEC's Rule 144 and may sell the shares without being subject to any volume
limitations. If all the shares were offered for sale in the public market at the same time, it would cause an increase in the
number of our common shares in the market and a possible decrease in the price of our common shares, thus resulting in significant
dilution of the beneficial ownership interests of the current holders of our common stock. There is no way of knowing with
any certainty what number, if any, of shares will be actually offered for sale in the public market in the future.
2.18 We Do Not Expect to Pay Cash Dividends.
We do not anticipate paying cash dividends to the holders of our common stock in the foreseeable future. Accordingly, investors
must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on
their investment. Investors seeking cash dividends should not purchase our common stock. On March 18, 2002, our Board
of Directors approved the issuance of a 15% stock dividend to shareholders of record as on May 31, 2002. The dividend
resulted in issuance of a total of 652,127 shares to common shareholders, 1,476 shares of series A preferred stock to series A
preferred shareholders, and 6,468 shares of series AA preferred stock to series AA preferred shareholders. Stock dividends do
not, however, result in the distribution of cash to investors, and the investors who received the stock dividend must still rely on
sales of their common stock at appreciated prices to profit from their investment in our stock.
3.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares sold by selling security holders. We will only receive proceeds
if a selling security holder exercises warrants or options to purchase shares of our common stock being offered with this
prospectus prior to the sale of those shares. If we receive any proceeds from the exercise of options, it will be added to
our working capital. We have agreed to bear certain expenses in connection with the registration of the shares of common stock
being offered and sold by the selling security holders.
4.
SELLING SECURITY HOLDERS
Some directors and employees of Royale Energy received stock or stock options as payment for their services to the
corporation. All selling shareholders who are not listed as officers or directors or Royale Energy are non-executive
employees who received the stock being sold as compensation for their services. A total of 679,790 shares are being
registered.
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Number |
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Percent |
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Percent |
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Donald H. Hosmer (2), (3) |
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President, Secretary and Director. |
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863,643 |
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17.3% |
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21,160 |
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16.9% |
Harry E. Hosmer (3) |
|
Chairman of the Board |
|
510,888 |
|
10.2% |
|
510,888 |
|
0% |
Oscar Hildebrandt (3) |
|
Director |
|
54,781 |
|
1.1% |
|
54,781 |
|
0% |
Stephen M. Hosmer (2), (3) |
|
Chief Financial Officer and Director. |
|
857,242 |
|
17.1% |
|
14,759 |
|
16.9% |
Gilbert C. L. Kemp |
|
Director |
|
6,613 |
|
0.1% |
|
6,613 |
|
0% |
Rodney Nahama (3) |
|
Director |
|
18,515 |
|
0.4% |
|
18,515 |
|
0% |
George M. Watters (3) |
|
Director |
|
39,675 |
|
0.8% |
|
39,675 |
|
0% |
Ron Lipnick |
|
|
1,150 |
|
(5) |
|
1,150 |
|
0% |
|
Bennett Spevack |
|
|
1,150 |
|
(5) |
|
1,150 |
|
0% |
|
Phil Nicoll |
|
|
1,150 |
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(5) |
|
1,150 |
|
0% |
|
Margene Hamer |
|
|
1,150 |
|
(5) |
|
1,150 |
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0% |
|
Bobbie Moore |
|
|
1,150 |
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(5) |
|
1,150 |
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0% |
|
Kimber Tabak |
|
|
575 |
|
(5) |
|
575 |
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0% |
|
Linda Goddard |
|
|
115 |
|
(5) |
|
115 |
|
0% |
|
David Johnson |
|
|
115 |
|
(5) |
|
115 |
|
0% |
|
Richard Ranzoni |
|
|
115 |
|
(5) |
|
115 |
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0% |
|
Rose Simmons |
|
|
58 |
|
(5) |
|
58 |
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0% |
|
Corrin Gallarano |
58 |
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(5) |
|
58 |
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0% |
|||
Total |
2,358,143 |
673,177 |
(1) The address of each
selling shareholder is 7676 Hazard Drive, Suite 1500, San Diego, California 92108.
(2) The shares owned by Donald and Stephen Hosmer each include shares
owned by Royale Petroleum Corporation ("RPC"). RPC owns 1,684,966 (31.5%) of Royale Energy (including shares issuable upon the
exercise of outstanding warrants). Donald and Stephen Hosmer each own and have power to vote 50% of RPC’s equity securities,
so each of them may be deemed to be the beneficial owner of the Common Stock owned by RPC, pursuant to Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended. To illustrate the relative economic and voting interests owned by directions, the
above table attributes 50% (842,483) shares of Royale Energy share owned by RPC to each of Donald and Stephen Hosmer. The total
number of Royale Energy shares owned by RPC (1,684,966) are included in the number of shares both Donald and Stephen Hosmer own and
the in the number of shares owned by all officers and directors as a group.
(3) Includes shares which are issuable upon the sale of options granted
to these directors as compensation for services. The options were granted to the directors in 1992 and 1995. After
giving effect to a reverse stock split in 1994 and stock dividends in 2001 and 2002, the exercise price of the 1992 options are
$2.268 per share, and the exercise price of the 1995 options are $1.437 per share. The 1992 options expire December 18, 2002,
and the 1995 options expire March 10, 2005. The following table indicates the number of options held by each director, whose
underlying shares are being registered for sale by this prospectus.
|
|
|
|
|
Total |
|
Donald H. Hosmer |
|
19,838 |
|
- |
|
19,838 |
Harry E. Hosmer |
|
19,838 |
|
33,062 |
|
52,900 |
Stephen M. Hosmer |
|
13,225 |
|
- |
|
13,225 |
George M. Watters |
|
13,225 |
|
26,450 |
|
39,675 |
Oscar A. Hildebrandt |
|
- |
|
26,450 |
|
26,450 |
Rodney Nahama |
|
- |
|
18,515 |
|
18,515 |
All officers and directors |
|
66,126 |
|
111,090 |
|
170,603 |
(4) Under SEC rules, we calculate the percentage of ownership of each
person who owns exercisable options by adding (1) the number of exercisable options for that person only to (2) the number of total
shares outstanding, and dividing that result into (3) the total number of shares and exercisable options owned by that
person. Using this measure, the table includes shares which each listed selling shareholder may acquire on exercise of
options. All outstanding options to officers and directors are listed in footnote 3 above. The percentage calculations
assume that all selling shareholders sell all shares being registered in this offering. The selling shareholders may sell
some or all of their shares from time to time while this registration is in effect. We do not know if they will choose to
sell all of their shares that are being registered. Percentages based on 4,999,641 shares issued and outstanding on June 15,
2002.
(5) Less than 1% of
the outstanding shares.
5. PLAN OF DISTRIBUTION
The selling shareholders may offer the common stock for sale in one or more transactions, including block transactions, at a fixed
price or prices (which may be changed), at market prices prevailing at the time of sale, at prices related to such prevailing
market prices or at prices determined on a negotiated or competitive bid basis. common stock may be sold by a selling
shareholder directly, through agents designated from time to time or to or through broker-dealers designated from time to
time.
The common stock may be sold through a broker-dealer acting as agent or broker for the selling shareholders in ordinary brokerage
transactions and transactions in which the broker solicits purchasers, or to a broker-dealer acting as a principal. In the
latter case, the broker-dealer may then resell such common stock to the public at varying prices to be determined by such
broker-dealer at the time of resale.
The selling shareholders may also transfer the shares of common stock by gift. Royale Energy does not know of any arrangements made
by the selling shareholders for the sale of any shares of common stock. The selling shareholders are not obligated to sell
any of the shares being registered for sale.
The selling shareholders and any agents or broker-dealers that participate with the selling shareholders in the distribution of any
of the common stock may be deemed to be "underwriters" within the meaning of the Securities Act, and any discount or commission
received by them and any profit on the resale of the common stock purchased by them may be deemed to be underwriting discounts or
commissions under the Securities Act.
To the extent required, the number of shares of common stock to be sold, certain information relating to the selling shareholders,
the purchase price, the public offering price, if applicable, the name of any underwriter, agent or broker-dealer, and any
applicable commissions, discounts or other items constituting compensation to such underwriters, agents or broker-dealers with
respect to a particular offering will be sent in an accompanying Prospectus Supplement.
6.
EXPERTS
Our financial statements as of December 31, 2001 and 2000, and for each of the years in the two-year period ending December 31,
2001, incorporated by reference in this prospectus and our registration statement on Form S-3, have been audited by Brown Armstrong
Paulden McCown Hill Starbuck & Keeter, independent public accountants, as indicated in their reports with respect thereto, been
incorporated by reference in Royale Energy's Annual Report on Form 10-KSB for the year ended December 31, 2001, which is
incorporated by reference herein in reliance upon the authority of Brown Armstrong as experts in accounting and auditing in giving
their reports.
Information related to the estimated proved reserves attributable to certain oil and gas properties of Royale Energy as of December
31, 2001, and estimates of future net cash flows and present value of the reserves have been incorporated by reference in Royale
Energy's Annual Report on Form 10-KSB for the year ended December 31, 2001, which is incorporated herein by reference, in reliance
on the reserve report, dated March 6, 2002, prepared by WZI, Inc., independent petroleum engineers.
The validity of the common shares offered pursuant to this prospectus will be passed on by Strasburger & Price, LLP, Austin,
Texas.
7.
MATERIAL CHANGES
On March 18, 2002, our Board of Directors approved the issuance of a 15% stock dividend to shareholders of record as on May 31,
2002. The dividend resulted in issuance of a total of 652,127 shares to common shareholders, 1,476 shares of series A
preferred stock to series A preferred shareholders, and 6,468 shares of series AA preferred stock to series AA preferred
shareholders of record as of May 31, 2002.
Other than declaration of the stock dividend, there have been no material changes since our last filed Annual Report on Form 10-KSB
for the year ended December 31, 2001, which was filed with the SEC on April 11, 2002.
8.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information incorporated by reference is an important part of this
prospectus, and information that we file later with the SEC will automatically update and supersede previously filed information,
including information contained in this document. We incorporate by reference the documents listed below (SEC file No. 0-22750) and
any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
we have sold all shares offered by this Prospectus or until this offering is otherwise completed:
- Our Annual Report on Form 10-KSB for the year
ended December 31, 2001.
- Our Quarterly Report on Form 10-QSB for the
period ended March 31, 2002.
- Our Statement for our annual meeting
scheduled for July 11, 2002, which was filed with the SEC together
with a Definitive Schedule 14A on May
29, 2002.
You may request free copies of these filings by writing or telephoning us at the following address:
Royale Energy, Inc.
7676 Hazard Centre Drive
Suite 1500
San Diego, CA 92108
619-881-2800
E-mail: www.royl.com
We file annual, quarterly and period reports, proxy statements and other information with
the Securities and Exchange Commission using the SEC's EDGAR system. You can find our SEC filings on the SEC's web
site, www.sec.gov You may read and copy any materials that we file with the SEC at its Public Reference Room at 450 5th
Street, N.W., Washington, D.C. 20549. Our common stock is listed on the Nasdaq National Market System, under the symbol
"ROYL," and all reports, proxy statements and other information that we file with Nasdaq may be inspected at its offices at 1735 K
Street N.W., Washington, D.C. 20006.
We furnish our shareholders with an annual report, which contains audited financial statements, and such other reports as we, from
time to time, deem appropriate or as may be required by law. We use the calendar year as our fiscal year.
Any statement contained in a document incorporated or deemed to be incorporated herein shall be deemed modified or superseded for
purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document that is
deemed to be incorporated herein modifies or supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this prospectus.
You should rely only on the information contained in this document or to which we have referred you. We have not authorized
anyone to provide you with information that is inconsistent with information contained in this document or any document
incorporated herein. This prospectus is not an offer to sell these securities in any state where the offer or sale of these
securities is not permitted. The information in this prospectus is current as of the date it is mailed to security holders,
and not necessarily as of any later date. If any material change occurs during the period that this prospectus is required to
be delivered, this prospectus will be supplemented or amended.
9.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
Under Article IV of our Articles of Incorporation, we have eliminated the potential liability of Directors to us, and we are also
required to indemnify our Directors against any liability for monetary damages, to the extent allowed by California law. The
California Corporations Code allows corporations, including Royale Energy, to eliminate or limit the liability of directors for
monetary damages except to the extent that the acts of the director are in bad faith, constitute intentional or reckless
misconduct, result in an improper personal benefit, or amount to an abdication of the directors' duties. The Corporations
Code provisions do not affect the availability of equitable remedies against directors nor change the standard of duty to which
directors are held. Our Articles of Incorporation also provide that if California law is amended to provide additional
indemnity or relief from liability to directors, such relief or indemnity shall automatically be applied for the benefit of our
Directors.
The Securities and Exchange Commission has stated that, in its opinion, indemnification of officers and directors for violations of
federal securities laws is unenforceable and void as a matter of public policy.
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{ROYALE ENERGY LOGO}
ROYALE ENERGY, INC.
673,177 SHARES OF COMMON STOCK
{Date}
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PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14 Other
Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection with the issuance and distribution of the securities registered
hereby, all of which will be paid by Royale Energy:
Item |
|
Amount (1) |
|
||
SEC registration fee |
|
$ 4,662.03 |
Legal fees and expenses |
|
3,000.00 |
Miscellaneous expenses |
|
500.00 |
|
$ 8,162.03 |
(1) All items other than SEC registration fee are estimates.
Item 15
Indemnification of Directors and Officers
Pursuant to Section 317 of the California Corporations Code, Royale Energy is empowered to indemnify any person who was or is a
party or is threatened to be made a party to any proceeding (other than an action by or in the right of the corporation to procure
a judgment in its favor) by reason of the fact that such person is or was an officer, director, employee or other agent of Royale
Energy or its subsidiaries, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in
connection with such proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in the
best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such
person was unlawful. In addition, Royale Energy may indemnify, subject to certain exceptions, any person who was or is a
party or is threatened to be made a party to any threatened, pending, or completed action by or in the right of Royale Energy to
procure a judgment in its favor by reason of the fact that such person is or was an officer, director, employee or other agent of
Royale Energy or its subsidiaries, against expenses actually and reasonably incurred by such person in connection with the defense
or settlement of such action if such person acted in good faith, in a manner such person believed to be including reasonably
inquiry, as an ordinarily prudent person in a like position would use under similar circumstances, provided that court approval is
obtained in the case of an adverse judgment or settlement. Royale Energy is required to advance expenses incurred by an officer or
director in defending any proceeding prior to final disposition upon receipt of an undertaking to repay, unless it shall be
determined ultimately that the officer or director is entitled to indemnification.
Article IV of Royale Energy's Articles of Incorporation requires Royale Energy to indemnify its officers and directors to the
maximum extent permitted by California law and authorizes Royale Energy to indemnify its officers and directors in excess of the
provisions of Section 317 of the California Corporations Code.
Royale Energy has entered into indemnification agreements with each of Royale Energy's directors and with Donald H. Hosmer and
Stephen M. Hosmer as officers of Royale Energy. In general, the indemnification agreements provide that Royale Energy shall
indemnify such officer or director from any and all expenses in any proceeding or threatened proceeding by reason of an
indemnification event. The term indemnification event shall mean any event or occurrence related to the fact that such
officer or director is an officer or director of Royale Energy or anything done or not done by such officer or director while
serving as such. Expenses shall mean all expenses, including without limitation, attorneys' fees, fines, judgments, interest
or other amounts paid in settlement. In addition, the agreement requires Royale Energy to advance such expenses to such
officer or director if so requested.
Item 16
Exhibits and Financial Statements
See the Exhibit Index which is incorporated herein by reference.
Item 17 Undertakings
The undersigned registrant hereby undertakes:
(a) to file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement:
(1) to include any prospectus required by section 10(a)(3) of the
Securities Act.
(2) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or together,
represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set for the in the "Calculation of Registration Fee" table in the
effective registration statement.
(3) to include any additional material information on the plan of
distribution not previously disclosed in the registration statement or any material change to such information in the registration
statement; provided, however, that paragraphs (a)(1) and (a)(2) do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(b) that, for determining liability under the Securities Act of 1933,
the Registrant will treat each post-effective amendment as a new registration statement of the securities offered, and the offering
of the securities at that time to be the initial bona fide offering.
(c) to remove from registration by means of a post-effective amendment
any of the securities that remain unsold at the end of the offering.
The undersigned Registrant hereby undertakes that, for the purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 shall be
deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the
provisions set forth or described in Item of this Registration Statement, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. If a claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
Pursuant to the requirements of the Securities Act of 1933, Royale Energy, Inc., certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3/A and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of San Diego, State of California, on June 26, 2002.
|
|
ROYALE ENERGY, INC. |
|
|
|
|
|
Stephen M. Hosmer |
|
|
Stephen M. Hosmer, Chief Financial Officer |
Pursuant to the
requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons, in the capacities
and on the dates indicated.
Date: June 26, 2002 |
|
Harry E. Hosmer* |
|
Harry E. Hosmer, Chairman of the Board |
|
|
||
Date: June 26, 2002 |
|
Donald H. Hosmer |
|
Donald H. Hosmer, Chief Executive Officer, President, Secretary, and Director |
|
|
||
Date: June 26, 2002 |
|
Stephen M. Hosmer* |
|
Stephen M. Hosmer, Chief Financial Officer and Director (Chief Accounting Officer) |
|
|
||
Date: June 26, 2002 |
|
Oscar A. Hildebrandt* |
|
Oscar A. Hildebrandt, Director |
|
|
||
Date: June 26, 2002 |
|
Gilbert C.L. Kemp* |
|
Gilbert C.L. Kemp, Director |
|
|
||
Date: June 26, 2002 |
|
Rodney Nahama* |
|
Rodney Nahama, Director |
|
|
||
Date: June 26, 2002 |
|
George M. Watters* |
|
George M. Watters, Director |
|
|
||
Date: June 26, 2002 |
|
Donald H. Hosmer |
|
Donald H. Hosmer |
|
|
||
|
*By: Donald H. Hosmer, Attorney-in-Fact |
EXHIBIT INDEX
Exhibit |
|
Description |
3.1 |
|
Restated Articles of Incorporation of Royale Energy, Inc., incorporated by reference
to |
3.2 |
|
Certificate of Amendment to the Articles of Incorporation of Royale Energy, Inc. |
3.3 |
|
Bylaws of Royale Energy, Inc., incorporated by reference to Exhibit 3.2 of the
Company's |
4.1 |
|
Certificate of Determination of the Series A Convertible Preferred Stock, incorporated
by |
4.2 |
|
Certificate of Determination of the Series AA Convertible Preferred Stock,
incorporated |
5.1* |
|
Opinion of Strasburger & Price, LLP, as to the validity of the shares being
offered |
23.1* |
|
Consent of Brown Armstrong Paulden McCown Hill Starbuck & Keeter, Independent |
23.2* |
|
Consent of Strasburger & Price, LLP (included in Exhibit 5.1) |
23.3* |
|
Consent of WZI, Inc. |
24.1 |
|
Power of Attorney (previously filed) |
|
* Filed Herewith.