SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):

 

August 4, 2009

 

ROYALE ENERGY, INC.

(Exact name of registrant as specified in its charter)

 

 

7676 Hazard Center Drive, Suite 1500

San Diego, CA 92108

(Address of principal executive office)

Issuer's telephone number: (619) 881-2800

 

Section 1 Registrant’s Business and Operations

 

Section 1.01 Entry into a Material Definitive Agreement

 

On August 4, 2009, Royale Energy, Inc., entered into a Securities Purchase Agreement (the “Agreement”), a copy of which is attached to this report, by and between the Company and an institutional investor. The terms of the agreement include the sale of 552,764 shares of common stock at $1.99 per share. The warrants include: (i) Series A Warrants, which are immediately exercisable for a period of 5 years into 329,850 shares at $2.19 per share; (ii) Series A-1 Warrants, which are exercisable beginning 6 months and 1 day after the closing date (which date of exercisability will be February 6, 2010) for a period of 5 years into 1,808 shares at $2.19 per share, (iii) Series B Warrants, which are immediately exercisable for a period of up to 1 year into 511,628 shares at $2.15 per share and (iv) Series C Warrants, which are immediately exercisable for a period of 5 years into 306,977 shares at $2.19 per share but only to the extent that the Series B Warrants are exercised and only in the same percentage that the Series B Warrants are exercised. All of such warrants contain customary adjustments for corporate events such as reorganizations, splits, dividends, and the exercise prices of all such warrants are subject to weighted-average anti-dilution adjustments in the event of additional issuances of common stock below the exercise price then in effect. The exercise price of the Series B Warrants is also subject to increases if the market price of the common stock equals or exceeds $2.40, in which case the exercise price of such Series B warrant will be increased to 90% of the closing sale price of the common stock on the trading day immediately preceding the date of exercise thereof. The Company will also provide customary registration rights in connection with the transaction.

 

Such private placement closed on August 5, 2009 (the “Closing Date”).

 

Section 3 Securities and Trading Markets

 

Item 3.02 Unregistered Sales of Equity Securities

 

The disclosure provided in Item 1.01 of this report is hereby incorporated by reference into this Item 3.02.

 

 

On August 5, 2009, the Company sold 552,764 shares of its Common Stock to an institutional investor for $1.99 per share pursuant to the Agreement. As part of the transaction, the Company also issued to such investor the Warrants described above.

 

The total gross sales proceeds were approximately $1,100,000, and the Company received net proceeds of approximately $999,000 after deduction of fees and expenses associated with the sale, including a cash placement fee. The placement agent also received warrants to purchase up to 33,166 shares of Common Stock at an exercise price of $1.99 per share.

 

The Agreement required the Company to enter into a Registration Rights Agreement, a copy of which is attached to this report, which requires the Company to file a registration statement under the Securities Act of 1933 within 30 days after the Closing Date covering the resale of the Common Stock issued to such investor and the Warrant Shares. The Company will pay all expenses incurred in connection with filing such registration statement.

 

The proceeds of the transaction will be used to continue development of its Sacramento basin properties.

 

The Company sold the Common Stock and Warrants in reliance on the exemption from securities registration requirements contained in Regulation D and Section 4(2) of the Securities Act of 1933.

 

The description of the private placement herein and related documentation disclosed in this report does not purport to be complete and is qualified in its entirety by reference to the Agreement, the forms of the Warrants and the Registration Rights Agreement, which are filed as Exhibits 10.1, 4.1, 4.2, 4.3, 4.4 and 10.2, respectively, to this report and are incorporated herein by reference.

 

The Agreement has been included to provide information regarding its terms. It is not intended to provide any other factual information about the Company. The Agreement contains representations and warranties that the parties thereto made to, and solely for the benefit of, each other. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules that the parties have exchanged in connection with the execution of the Agreement. Accordingly, potential investors and shareholders should not rely on the representations and warranties as characterizations of the actual state of facts, since they were only made as of the date of the Agreement and are modified in important part by the underlying disclosure schedules. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.

 

A copy of the press release announcing the signing of the Agreement is incorporated herein and attached to this report as Exhibit 99.1.

 

Section 8 Other events

 

Item 8.01 Other Events

 

The institutional investor has also agreed to waive the upward share adjustment portion of the anti-dilution provision in an outstanding, previously issued warrant solely in connection with this transaction. The waiver is attached to this report as Exhibit 99.2.

 

Section 9 Financial Statements and Exhibits

 

Item 9.01 Financial Statements and Exhibits

 

Exhibits

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.