SOURCE: Victory Energy Corporation

March 30, 2011 10:00 ET

Victory Energy Corporation Completes Internal Review and Updates SEC Filings With Restated Audited Financial Results

Litigation With Former CEO Settled

$1.5 Million Raised in Private Placements

NEWPORT BEACH, CA--(Marketwire - March 30, 2011) - Victory Energy Corporation (PINKSHEETS: VYEY), an oil and gas exploration and development company, today announced that it has completed an internal review and examination of its financial results for the fiscal years 2007, 2008, and 2009, and has filed its 2009 Annual Report on Form 10-K with the Securities and Exchange Commission. Included in this 10-K filing are audited financial statements for the 2007 (restated), 2008 and 2009 fiscal years.

In April 2009, Victory Energy Corporation (the Company) announced that it planned to restate its annual and interim financial statements for 2007 and interim financial statements for 2008 due to errors contained in the financial statements, and that it expected certain delays in reporting subsequent financial results. At that time the Company also stated that investors should not rely on any of the Company's previously filed financial statements covering 2007 and 2008.

The resulting restatements are a consequence of an internal review conducted by Victory Energy's CFO at the request of the board of directors in which irregularities in the Company's financial statements were identified, examined and reported upon.

The internal review and financial statement restatements were completed on March 29, 2011. In summary, the Company reported the following operating results for the years ended December 31:

   
   
VICTORY ENERGY CORPORATION AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
   
    Years Ended December 31:  
    2009     2008     2007 (Restated)  
                         
REVENUES   $ 512,607     $ 1,642,631     $ -  
                         
COSTS AND EXPENSES                        
  Costs of production     196,520       934,534       -  
  General and administrative expense     935,983       3,519,409       10,320,050  
  Depletion and accretion     291,867       564,377       -  
  Loss from malfeasance     280,647       4,955,793       -  
  Loss from asset impairment     342,366       2,775,696       -  
  Loss (gain) on settlements     (1,199,748 )     390,000       -  
Total costs and expenses     847,635       13,139,809       10,320,050  
                         
LOSS FROM OPERATIONS     (335,028 )     (11,497,178 )     (10,320,050 )
Interest expense     50,111       979       6,639  
                         
NET LOSS   $ (385,139 )   $ (11,498,157 )   $ (10,326,689 )
                         
    Weighted average shares, basic and diluted     136,719,608       95,529,303       23,587,429  
    Net loss per share, basic and diluted   $ (0.00 )   $ (0.12 )   $ (0.44 )
                           
                           

Robert J. Miranda, Victory Energy's chairman, chief executive officer and chief financial officer, stated, "The process of reviewing and restating the financials for the Company has been a lengthy and arduous process. We worked closely with our board of directors, legal counsel, independent public accounting firm, and the Securities and Exchange Commission in an effort to bring our financial reporting into compliance. We are pleased this long process is over and we remain focused on completing the many tasks at hand, including the preparation of the financial results for fiscal 2010 and the continuing process of exploration and development of the various oil and gas properties in which we have invested."

Litigation with Former CEO Settled

On March 22, 2011, the Company, James Capital Energy, LLC, and other related parties entered into a comprehensive Settlement Agreement with Jon Fullenkamp, the Company's former Chairman and CEO. Under the terms of the settlement agreement, Mr. Fullenkamp will: i) dismiss with prejudice the lawsuit he filed against the Company and others in California; ii) transfer to Victory Energy two million shares of Victory Energy preferred stock; iii) transfer to Victory Energy 400 thousand warrants for Victory Energy common stock; iv) transfer to James Capital Energy, LLC approximately 16 million shares of Victory Energy common stock; v) voluntarily appear for his deposition to discuss events that occurred at the Adams-Baggett Ranch; vi) waive the claim he had to a $430 thousand severance payment under his May 15, 2009 separation agreement; and vii) provide Victory Energy and other related parties with a general release.

$1.5 Million of New Capital Raised in Private Placements

As reported in the filings, between October 15, 2010 and March 28, 2011, the Company sold to a group of 20 accredited investors $1.0 million of 10% Senior Secured Convertible Debentures which are convertible into an aggregate of 201 million shares of the Company's common stock at a conversion price of $0.005 per share of common stock. On December 31, 2010, the Company extended $0.5 million of unsecured loans that had been made by a related party into a Senior Secured Convertible Debenture that is convertible into an aggregate of 110.5 million shares of the Company's common stock at a conversion price of $0.005 per share of common stock. The maturity date of the Debentures is September 30, 2013, but may be extended at the discretion of the Company to December 31, 2013. The proceeds of these securities sales are being used for working capital purposes.

The board of directors of Victory Energy Corporation recognized the efforts undertaken to complete the internal review and restore the Company's reporting status with the SEC. At a board meeting held on March 28, 2011, the board acknowledged the work of the management team and professionals that managed the turnaround. Dr. Ronald Zamber, a member of the board of directors for Victory Energy, has been the key financial sponsor of this corporate turnaround process. The board of directors hired Robert Miranda as the Company's chief financial officer at the end of 2008, and later expanded the scope of his work to lead an internal review and assist the board in identifying suspected financial malfeasance at the Company. Miranda and his accounting firm, Miranda & Associates, brought the Company's financial statements into compliance; investigated and identified the financial malfeasance; assisted legal counsel in prosecuting the malfeasance; corrected the Company's past accounting records; and restored financial controls and integrity in the financial reporting processes of the Company.

Dr. Zamber stated, "The board is grateful to Robert Miranda and his firm for their meticulous efforts in managing the turnaround of Victory Energy Corporation. The process was painstakingly long, but we now see vast improvements in the Company's financial management and reporting processes. During Bob's tenure as interim CEO, the company hired a new management team and established an office in Austin, Texas, where it is successfully searching for and engaging in new oil and gas opportunities. Bob and his accounting firm worked diligently with the independent auditors and the SEC to bring Victory Energy back into compliance."

Robert J. Miranda commented, "Miranda & Associates has worked very closely with the board of directors of Victory Energy to achieve this turnaround. Our legal team, including board member and attorney David McCall in Texas, and attorney Jonathan Michaels in Newport Beach, will continue to focus on the judgment award and continuing legal proceedings in Texas and California. We will continue to work diligently with our independent auditors and with the new members of the management team in Austin. There is still a lot more to be done to recover our assets and we remain focused on doing the right thing for Victory Energy and its shareholders."

Robert J. Miranda is managing director of Miranda & Associates, A Professional Accountancy Corporation. He is a graduate of the University of Southern California and Harvard Business School. He is also a certified public accountant, duly licensed in California. His 35 year career includes five years with KPMG's audit practice, fifteen years as founder/CEO of a regional CPA firm, five years as a national director of Deloitte & Touche, and five years with Jefferson Wells, an international consultancy. His executive management experience includes founding and managing a regional professional services firm that operated multiple offices in the United States and internationally. While associated with Jefferson Wells, an international consultancy, Mr. Miranda served as Global Operations Director and was responsible for managing a team of 250 professionals that implemented an enterprise wide Sarbanes-Oxley compliance program for a major Chicago-based aerospace and defense firm.

About Victory Energy Corporation

Victory Energy Corporation is engaged in the exploration, acquisition, development, and exploitation of oil and gas properties. The Company's current producing assets are located in the state of Texas.

Victory Energy seeks to identify proven development prospects, conduct thorough geological and engineering evaluations and then target suitable farm-in partners for long term development of additional prospects.

For more information, please visit our website www.vyey.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

There are forward-looking statements contained in this news release. They use such words as "intend," "will," "may," "expect," "believe," "plan," or other similar terminology. These statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results to be materially different than those expressed or implied in such statements. These factors include, but are not limited to: risks associated with the implementation of the Company's strategic growth plan; legislation and government regulation including the ability to obtain satisfactory regulatory approvals; conditions beyond the Company's control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting the Company's customer base or acts of war or terrorism; availability and cost of materials and labor; demand for natural gas; cost and availability of capital; competition; the Company's overall marketing, operational and financial performance; economic and political conditions; the continued service of the Company's executive officer; adverse developments in and increased or unforeseen legal costs related to the Company's litigation; the success of the Company's strategic partnerships and joint venture relationships; the Company's ability to pay certain debts; adoption of new, or changes in, accounting policies and practices; adverse court rulings; results of other litigation in which the Company is involved; and other factors discussed from time to time in the Company's news releases, public statements and/or filings with the Securities and Exchange Commission. Forward-looking information is provided by Victory Energy Corporation pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. In addition, the Company disclaims any intent or obligation to update these forward-looking statements.

Contact Information

  • CONTACT:

    Robert J. Miranda
    Chairman and Chief Executive Officer
    714.480.0305

    Investor Relations
    714.227.0391