Financial Analysis

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. …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 15 Notes Payable Walou Note 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 Companys Chief Executive Officer and a member of the Companys board of directors. Mr. Jordan is also the beneficial owner of approximately 29.2% of the Companys 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 Companys 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 …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

A significant portion of our revenues are derived from the sale of crude oil, condensate, NGL and natural gas under spot and term agreements with our customers as follows: Year Ended December 31, 2025 2024 Oil & Condensate Sales $ 1,664,862 $ 2,010,742 Natural Gas Sales 257,684 231,765 NGL Sales 3,896 3,566 $ 1,926,442 $ 2,246,073

DisaggregationOfRevenueTableTextBlock

NOTE 9 STOCK COMPENSATION PLAN There were no stock options issued for compensation during 2025 and 2024. …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

NOTE 4 INCOME TAXES The components of income (loss) before income taxes were as follows: 2025 2024 U.S. $ (1,251,680 ) $ 92,159,014 ) Non-U.S. $ - $ - 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. 2025 Current tax at U.S. statutory rate $ (222,999 ) 21.00 % State and local income taxes, net of federal taxes (37,891 ) 3.57 % Foreign Tax Effects - - % Effects of Changes in Tax Law or Rates Enacted in the Current Period - - % Effect of cross-border tax law - - % Tax Credits - - % Changes in Valuation Allowance 176,562 16.63 % Nondeductible/nontaxable items Nondeductible/nontaxable items 1,642 (0.15 %) Changes in Unrecognized Tax Benefit - - % Other Adjustments Deferred Adjustment 82,686 79 % 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 2024 Tax (benefit) computed at statutory rate of 21% at December 31, 2024, respectively $ (518,740 ) Increase (decrease) in taxes resulting from: Meals & Entertainment 915 Prior-year true-up for Books 2,380,175 Deferred State Taxes, net of federal benefit (102,681 ) Other non-deductible expenses - Change in valuation allowance (1,759,669 ) Provision (benefit) $ - Deferred tax assets and liabilities reflect the net tax effect …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 7 LEASES During 2024, we had one office lease, 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 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 Operating Lease Obligations Financing Lease Obligations Total Lease Obligations 2026 $ 93,492 $ 19,080 $ 112,572 2027 - 19,080 19,080 2028 - 19,080 19,080 Thereafter - 14,310 14,310 Total undiscounted lease payments 93,492 71,550 165,042 Less: Amount representing interest 4,308 15,110 19,418 Total Operating & Financing lease liabilities 89,184 56,440 145,624 Current lease liabilities as of December 31, 2025 89,184 13,054 102,238 Long-term lease liabilities as of December 31, 2025 $ - $ 43,386 $ 43,386 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. We elected the practical expedient to not separate lease a …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

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 280): Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in the Companys 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 1, 2024. See Note 14 - Segments. The adoption and implementation of this standard did not have a material impact on the Companys disclosures. Recently Issued, Not Yet Adopted 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 Novemb …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

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 employees Simple IRA equal to the employees salary reduction contributions up to a limit of 3% of the employees compensation for the year. The employer contribution for the years ending December 31, 2025 and 2024, were $30,333 and $28,653 respectively. …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

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 o …

RelatedPartyTransactionsDisclosureTextBlock · excerpt; the full note is in the filing

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. 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 follows: 1. 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. 2. 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. 3. 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 …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

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 segments revenues are derived from the Companys 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 Companys chief executive officer, chief operating officer, and chief financial officer together function as the chief operating decision maker (CODM) and manage the Companys 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. …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

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, the Company) is presented to assist in understanding our financial statements. These consolidated financial statements include the accounts of Royale Energy Inc and our controlled subsidiaries. Investments in unincorporated joint ventures and undivided interests in certain operating assets are consolidated on a pro rata basis. The financial statements and notes are representations of our management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. Description of Business We are an independent oil and gas producer and we also perform turnkey drilling operations. 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. Use of Estimates The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

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 Deficit. Common stock was also issued on October 11, 2024, when we completed a significant equity restructuring transaction, see Note 14. …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing

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. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing