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      &lt;font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"&gt;NOTE

      4 &amp;#8211; STOCK BASED COMPENSATION&lt;/font&gt;

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        the Board of Directors meeting held in December 2010,

        directors and officers of Royale Energy were each granted

        50,000 stock options, a total of 400,000 options, to

        purchase common stock at an exercise price of $3.25 per

        share.&amp;#160;&amp;#160;These options are to vest in two parts;

        the first 200,000 options vested on January 1, 2011; the

        remaining 200,000 options vested on January 1,

        2012.&amp;#160;&amp;#160;The options were granted with a legal life

        of five years, and a service period of two years beginning

        on January 1, 2011.&amp;#160;&amp;#160;During the first six months

        of 2012 Royale recognized costs of $19,630 relating to this

        grant as well as $5,696 in a tax benefit relating to this

        grant.&amp;#160; No stock-based compensation was recognized

        during the first six months of 2013.&lt;/font&gt;&lt;/font&gt;

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