U.S.
SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





QUARTERLY
REPORT UNDER SECTION 13 OR 15(d)


OF THE
SECURITIES EXCHANGE ACT OF 1934





For the
quarterly period ended: November 30, 2009





File No.
000-52547





Royal Energy
Resources,
Inc.


(Name
of small business issuer in our charter)





Delaware
                  
                  11-3480036(State
      or other jurisdiction of
                  
                  (IRS
      Employerincorporation
      or organization)
                  
                  Identification
      No.)





543 Bedford
Avenue,#176, Brooklyn,
NY  11211


(Address
of principal executive offices) (Zip Code)





Registrant's
telephone number:  800-620-3029





Indicate
by check mark whether the registrant: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
x No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).  Yes o No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):





Large
accelerated filer o
Accelerated filer o
Non-accelerated filer o Smaller reporting
company x





(Do not
check if a smaller reporting company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes o No x





State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: 23,388,731 shares of common stock outstanding
as of January 8, 2010.










The
accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial reporting
and pursuant to the rules and regulations of the Securities and Exchange
Commission ("Commission"). While these statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary for fair
presentation of the results of the interim period, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the financial statements and footnotes thereto, contained in the Company’s Form
10-K dated August 31, 2009.





TABLE OF
CONTENTS





PagePART
      I – FINANCIAL INFORMATION
              3Item
      1:
              Condensed
      Unaudited Financial Statements
              3Item 2:
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
              18Item
      3:
              Quantitative
      and Qualitative Disclosures About Market Risk
              20Item 4T:
              Controls
      and Procedures
              20PART II - OTHER
INFORMATION
              21Item 1:
              Legal
      Proceedings
              21Item
      1A:
              Risk
      Factors
              21Item 2:
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              21Item 3:
              Defaults
      upon Senior Securities
              21Item 4:
              Submission
      of Matters to a Vote of Security Holders
              21Item 5:
              Other
      Information
              21Item 6:
              Exhibits
              21




2


PART I - FINANCIAL INFORMATION


ITEM 1:  FINANCIAL STATEMENTS





ROYAL
ENERGY RESOURCES, INC.


(A
Development Stage Company)


Condensed
Balance Sheets


November
30, 2009 (unaudited) and August 31, 2009





November
      30,
                
                
                August
      31,2009
                
                
                2009AssetsCurrent
      assetsCash
      and cash equivalents
                
                $
                392
                
                
                $
                18,680Accounts
      receivable
                
                
                974
                
                
                
                908Prepaid
      expenses
                
                
                4,286
                
                
                
                30,000Total
      current assets
                
                
                5,652
                
                
                
                49,588Oil
      and gas properties, on full cost method:Proved
      properties
                
                
                50,335
                
                
                
                50,335Unproved
      properties not being amortized
                
                
                18,929
                
                
                
                15,15269,264
                
                
                
                65,487Accumulated
      depreciation, depletion and amortization
                
                
                (11,725
                )
                
                
                (11,469
                )57,539
                
                
                
                54,018Other
      assetsPrepaid
      drilling costs
                
                
                41,761
                
                
                
                50,343Investment
      in uranium properties
                
                
                4,329
                
                
                
                4,329Deposits
                
                
                1,040
                
                
                
                1,040Total
      other assets
                
                
                47,130
                
                
                
                55,712Total
      assets
                
                $
                110,321
                
                
                $
                159,318Liabilities
      and Stockholders' Equity (Deficit)Current
      liabilitiesAccounts
      payable
                
                $
                40,686
                
                
                $
                30,198Note
      payable
                
                
                80,000
                
                
                
                80,000Total
      current liabilities
                
                
                120,686
                
                
                
                110,198Commitments
      and contingenciesStockholders'
      equity (deficit)Preferred
      stock: $0.00001 par value; authorized 10,000,000 shares; 100,000 at
      November 30, 2008 and at August 31, 2008, issued and outstanding,
      respectively
                
                
                1
                
                
                
                1Common
      stock: $0.00001 par value; authorized 100,000,000 shares; 23,388,731
      and 22,388,731 shares issued and outstanding at November 30, 2009 and
      August 31, 2009, respectively
                
                
                234
                
                
                
                224Additional
      paid-in capital
                
                
                2,939,456
                
                
                
                2,879,466Deferred
      option and stock compensation
                
                
                (95,388
                )
                
                
                (273,807
                )Common
      stock subscription receivable
                
                
                (213,109
                )
                
                
                (151,969
                )Deficit
      accumulated during the development stage
                
                
                (2,641,559
                )
                
                
                (2,404,795
                )Total
      stockholders' equity (deficit)
                
                
                (10,365
                )
                
                
                49,120Total
      liabilities and stockholders' equity (deficit)
                
                $
                110,321
                
                
                $
                159,318





See
accompanying notes to condensed financial statements.




3





ROYAL
ENERGY RESOURCES, INC.


(A
Development Stage Company)


Condensed
Statements of Operations


Three
Months Ended November 30, 2009 and 2008 and


from
inception (July 22, 2005) through November 30, 2009


(Unaudited)





Inception(July
      22, 2005)Three
      Months Ended
                          
                          
                          ThroughNovember
      30,
                          
                          
                          November
      30,2009
                          
                          
                          2008
                          
                          
                          2009Oil
      and gas production
                          
                          $
                          2,045
                          
                          
                          $
                          689
                          
                          
                          $
                          6,355Total
      revenues
                          
                          
                          2,045
                          
                          
                          
                          689
                          
                          
                          
                          6,355Costs
      and expenses:Lease
      operating expense
                          
                          
                          1,362
                          
                          
                          
                          1,404
                          
                          
                          
                          7,073Production
      taxes
                          
                          
                          147
                          
                          
                          
                          50
                          
                          
                          
                          457Depreciation,
      depletion and amortization
                          
                          
                          256
                          
                          
                          
                          189
                          
                          
                          
                          1,450Asset
      impairment
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          36,930Non-cash
      compensation
                          
                          
                          178,419
                          
                          
                          
                          480,984
                          
                          
                          
                          1,955,827Other
      selling, general and administrative expense
                          
                          
                          56,149
                          
                          
                          
                          28,920
                          
                          
                          
                          551,579Total
      costs and expenses
                          
                          
                          236,333
                          
                          
                          
                          511,547
                          
                          
                          
                          2,553,316Loss
      from operations
                          
                          
                          (234,288
                          )
                          
                          
                          (510,858
                          )
                          
                          
                          (2,546,961
                          )Other
      expenses (income):Loss
      on disposition by rescission agreement of condominium
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          15,000Loss
      on comodities trading
                          
                          
                          719
                          
                          
                          
                          18,023
                          
                          
                          
                          36,557Interest
      income
                          
                          
                          -
                          
                          
                          
                          (1,497
                          )
                          
                          
                          (4,414
                          )Interest
      income - related party
                          
                          
                          (1,243
                          )
                          
                          
                          (848
                          )
                          
                          
                          (8,690
                          )Interest
      expense
                          
                          
                          3,000
                          
                          
                          
                          4,500
                          
                          
                          
                          27,1502,476
                          
                          
                          
                          20,178
                          
                          
                          
                          65,603Loss
      before income taxes
                          
                          
                          (236,764
                          )
                          
                          
                          (531,036
                          )
                          
                          
                          (2,612,564
                          )Provision
      for income taxes
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Net
      loss
                          
                          $
                          (236,764
                          )
                          
                          $
                          (531,036
                          )
                          
                          $
                          (2,612,564
                          )Net
      loss per share, basic and diluted
                          
                          $
                          (0.01
                          )
                          
                          $
                          (0.03
                          )
                          
                          $
                          (0.20
                          )Weighted
      average shares outstanding, basic and diluted
                          
                          
                          22,454,665
                          
                          
                          
                          18,241,797
                          
                          
                          
                          13,369,421





See
accompanying notes to condensed financial statements.




4





ROYAL
ENERGY RESOURCES, INC.


(A
Development Stage Company)


Condensed
Statements of Stockholders' Equity (Deficit)


Inception
of Development Stage, July 22, 2005, through November 30, 2009





AdditionalPreferred
      stock
                                      
                                      
                                      Common
      stock
                                      
                                      
                                      Paid-inShares
                                      
                                      
                                      Amount
                                      
                                      
                                      Shares
                                      
                                      
                                      Amount
                                      
                                      
                                      CapitalInception,
      July 22, 2005
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      5,930,300
                                      
                                      
                                      
                                      59
                                      
                                      
                                      
                                      22,426Sale
      of common stock for cash
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      320,000
                                      
                                      
                                      
                                      3
                                      
                                      
                                      
                                      31,997Common
      stock issued forreal
      estate investment
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,900,000
                                      
                                      
                                      
                                      19
                                      
                                      
                                      
                                      189,981Contribution
      to capital
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      6,560Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Balance
      August 31, 2005
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      8,150,300
                                      
                                      
                                      
                                      81
                                      
                                      
                                      
                                      250,964Sale
      of common stock for cash
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,086,667
                                      
                                      
                                      
                                      12
                                      
                                      
                                      
                                      120,488Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Balance,
      August 31, 2006
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      9,236,967
                                      
                                      
                                      
                                      93
                                      
                                      
                                      
                                      371,452Sale
      of common stock
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      4,670,060
                                      
                                      
                                      
                                      46
                                      
                                      
                                      
                                      161,614Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Balance,
      August 31, 2007
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      13,907,027
                                      
                                      
                                      
                                      139
                                      
                                      
                                      
                                      533,066Sale
      of preferred stock
                                      
                                      
                                      100,000
                                      
                                      
                                      
                                      1
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      999Sale
      of common stock
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      2,295,704
                                      
                                      
                                      
                                      23
                                      
                                      
                                      
                                      413,149Common
      stock issued forconsulting
      contracts
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      2,965,000
                                      
                                      
                                      
                                      30
                                      
                                      
                                      
                                      977,745Cash
      portion of consultingcontracts
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Rescission
      of real estatepurchase
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (1,900,000
                                      )
                                      
                                      
                                      (19
                                      )
                                      
                                      
                                      (199,981
                                      )Amortization
      of prepaidconsulting
      contracts:Non-cash
      portion
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Cash
      portion
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Stock
      subscription receivable:Payments
      received
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Interest
      accrued
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Balance,
      August 31, 2008
                                      
                                      
                                      100,000
                                      
                                      
                                      
                                      1
                                      
                                      
                                      
                                      17,267,731
                                      
                                      
                                      
                                      173
                                      
                                      
                                      
                                      1,724,978Sale
      of common stock for cash
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      20,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      3,600Common
      stock issued forconsulting
      contracts
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      3,551,000
                                      
                                      
                                      
                                      36
                                      
                                      
                                      
                                      887,403Cash
      portion of consulting contracts
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Amortization
      of prepaidconsulting
      contracts:Non-cash
      portion
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Cash
      portion
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Stock
      subscription receivable:Sold
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,550,000
                                      
                                      
                                      
                                      15
                                      
                                      
                                      
                                      263,485Payments
      received
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Interest
      accrued
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Balance,
      August 31, 2009
                                      
                                      
                                      100,000
                                      
                                      
                                      
                                      1
                                      
                                      
                                      
                                      22,388,731
                                      
                                      
                                      
                                      224
                                      
                                      
                                      
                                      2,879,466Amortization
      of prepaidconsulting
      contracts
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Stock
      subscription receivable:Sold
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,000,000
                                      
                                      
                                      
                                      10
                                      
                                      
                                      
                                      59,990Payments
      received
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Interest
      accrued
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Balance,
      November 30, 2009
                                      
                                      
                                      100,000
                                      
                                      
                                      $
                                      1
                                      
                                      
                                      
                                      23,388,731
                                      
                                      
                                      $
                                      234
                                      
                                      
                                      $
                                      2,939,456





(Continued)


See
accompanying notes to condensed financial statements.




5





ROYAL
ENERGY RESOURCES, INC.


(A
Development Stage Company)


Condensed
Statements of Stockholders' Equity (Deficit), continued


Inception
of Development Stage, July 22, 2005, through November 30, 2009





DeficitAccumulatedDuringSubscription
                                      
                                      
                                      Deferred
                                      
                                      
                                      Accumulated
                                      
                                      
                                      DevelopmentReceivable
                                      
                                      
                                      Expenses
                                      
                                      
                                      Deficit
                                      
                                      
                                      Stage
                                      
                                      
                                      TotalInception,
      July 22, 2005
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (28,995
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (6,510
                                      )Sale
      of common stock for cash
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      32,000Common
      stock issued forreal
      estate investment
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      190,000Contribution
      to capital
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      6,560Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (7,739
                                      )
                                      
                                      
                                      (7,739
                                      )Balance
      August 31, 2005
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (28,995
                                      )
                                      
                                      
                                      (7,739
                                      )
                                      
                                      
                                      214,311Sale
      of common stock for cash
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      120,500Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (80,825
                                      )
                                      
                                      
                                      (80,825
                                      )Balance,
      August 31, 2006
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (28,995
                                      )
                                      
                                      
                                      (88,564
                                      )
                                      
                                      
                                      253,986Sale
      of common stock
                                      
                                      
                                      (81,590
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      80,070Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (95,813
                                      )
                                      
                                      
                                      (95,813
                                      )Balance,
      August 31, 2007
                                      
                                      
                                      (81,590
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (28,995
                                      )
                                      
                                      
                                      (184,377
                                      )
                                      
                                      
                                      238,243Sale
      of preferred stock
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,000Sale
      of common stock
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      413,172Common
      stock issued forconsulting
      contracts
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (977,775
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Cash
      portion of consultingcontracts
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (85,000
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (85,000
                                      )Rescission
      of real estatepurchase
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (200,000
                                      )Amortization
      of prepaidconsulting
      contracts:Non-cash
      portion
                                      
                                      
                                      -
                                      
                                      
                                      
                                      338,547
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      338,547Cash
      portion
                                      
                                      
                                      -
                                      
                                      
                                      
                                      43,529
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      43,529Stock
      subscription receivable:Payments
      received
                                      
                                      
                                      13,400
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      13,400Interest
      accrued
                                      
                                      
                                      (3,902
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (3,902
                                      )Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (467,712
                                      )
                                      
                                      
                                      (467,712
                                      )Balance,
      August 31, 2008
                                      
                                      
                                      (72,092
                                      )
                                      
                                      
                                      (680,699
                                      )
                                      
                                      
                                      (28,995
                                      )
                                      
                                      
                                      (652,089
                                      )
                                      
                                      
                                      291,277Sale
      of common stock for cash
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      3,600Common
      stock issued forconsulting
      contracts
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (887,440
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Cash
      portion of consulting contracts
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (40,901
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (40,901
                                      )Amortization
      of prepaidconsulting
      contracts:Non-cash
      portion
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,252,861
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,252,861Cash
      portion
                                      
                                      
                                      -
                                      
                                      
                                      
                                      82,371
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      82,371Stock
      subscription receivable:Sold
                                      
                                      
                                      (77,332
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      186,168Payments
      received
                                      
                                      
                                      1,000
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      1,000Interest
      accrued
                                      
                                      
                                      (3,545
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      (3,545
                                      )Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (1,723,711
                                      )
                                      
                                      
                                      (1,723,711
                                      )Balance,
      August 31, 2009
                                      
                                      
                                      (151,969
                                      )
                                      
                                      
                                      (273,808
                                      )
                                      
                                      
                                      (28,995
                                      )
                                      
                                      
                                      (2,375,800
                                      )
                                      
                                      
                                      49,120Amortization
      of prepaidconsulting
      contracts
                                      
                                      
                                      -
                                      
                                      
                                      
                                      178,419
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      178,419Stock
      subscription receivable:Sold
                                      
                                      
                                      (60,000
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Payments
      received
                                      
                                      
                                      103
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      103Interest
      accrued
                                      
                                      
                                      (1,243
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (1,243
                                      )Net
      loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (236,764
                                      )
                                      
                                      
                                      (236,764
                                      )Balance,
      November 30, 2009
                                      
                                      $
                                      (213,109
                                      )
                                      
                                      $
                                      (95,389
                                      )
                                      
                                      $
                                      (28,995
                                      )
                                      
                                      $
                                      (2,612,564
                                      )
                                      
                                      $
                                      (10,365
                                      )





See
accompanying notes to condensed financial statements.





6





ROYAL
ENERGY RESOURCES, INC.


(A
Development Stage Company)


Condensed
Statements of Cash Flows


Three
Months Ended November 30, 2009 and 2008, and


from
inception (July 22, 2005) through November 30, 2009


(Unaudited)





From
      inceptionJuly
      22, 2005throughThree
      months ended November 30,
                
                
                November
      30,2009
                
                
                2008
                
                
                2009Cash
      flows from operating activitiesNet
      loss
                
                $
                (236,764
                )
                
                $
                (531,036
                )
                
                $
                (2,612,564
                )Adjustment
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and depletion
                
                
                256
                
                
                
                189
                
                
                
                1,450Value
      of common shares issued for services
                
                
                178,419
                
                
                
                480,984
                
                
                
                1,955,827Loss
      on rescission of condominium purchase
                
                
                -
                
                
                
                -
                
                
                
                15,000Interest
      accrued on stock subscription
                
                
                (1,243
                )
                
                
                (848
                )
                
                
                (8,690
                )Asset
      impairment
                
                
                -
                
                
                
                -
                
                
                
                36,930Change
      in other assets and liablities:Accounts
      receivable
                
                
                (66
                )
                
                
                -
                
                
                
                (974
                )Prepaid
      expenses and other assets
                
                
                34,297
                
                
                
                804
                
                
                
                (5,615
                )Accounts
      payable
                
                
                10,487
                
                
                
                (37,500
                )
                
                
                (14,788
                )Net
      cash used in operations
                
                
                (14,614
                )
                
                
                (87,407
                )
                
                
                (633,424
                )Cash
      flows from investing activitiesInvestment
      in real estate
                
                
                -
                
                
                
                -
                
                
                
                (11,000
                )Oil
      and gas property expenditures
                
                
                (3,777
                )
                
                
                -
                
                
                
                (142,549
                )Proceeds
      from sale of undeveloped leasehold
                
                
                -
                
                
                
                4,000
                
                
                
                47,975Investment
      in uranium properties
                
                
                -
                
                
                
                -
                
                
                
                (5,673
                )Net
      cash provided by (used in) investing activities
                
                
                (3,777
                )
                
                
                4,000
                
                
                
                (111,247
                )Cash
      flows from financing activitiesProceeds
      of stockholder loans
                
                
                -
                
                
                
                -
                
                
                
                50Proceeds
      from subscription receivable
                
                
                103
                
                
                
                1,000
                
                
                
                14,503Loan
      proceeds (repayment)
                
                
                -
                
                
                
                (30,000
                )
                
                
                80,000Proceeds
      from sale of common stock
                
                
                -
                
                
                
                3,600
                
                
                
                649,510Proceeds
      from sale of preferred stock
                
                
                -
                
                
                
                -
                
                
                
                1,000Net
      cash provided by (used in) financing activities
                
                
                103
                
                
                
                (25,400
                )
                
                
                745,063Net
      increase (decrease) in cash and cash equivalents
                
                
                (18,288
                )
                
                
                (108,807
                )
                
                
                392Cash and cash
      equivalents, beginning of period
                
                
                18,680
                
                
                
                343,739
                
                
                
                -Cash and cash
      equivalents, end of period
                
                $
                392
                
                
                $
                234,932
                
                
                $
                392Supplemental
      cash flow informationCash
      paid for interest
                
                $
                3,000
                
                
                $
                -
                
                
                $
                27,150Cash
      paid for income taxes
                
                
                -
                
                
                
                -
                
                
                
                -Non-cash
      investing and financing activities:Issuance
      of common stock for real estate
                
                $
                -
                
                
                $
                -
                
                
                $
                190,000Contribution
      of stockholder loan to capital
                
                
                -
                
                
                
                -
                
                
                
                6,560Disposition
      of real estate per stock rescission agreement
                
                
                -
                
                
                
                200,000
                
                
                
                200,000





See
accompanying notes to condensed financial statements.





7





ROYAL
ENERGY RESOURCES, INC.


(A
Development Stage Company)





NOTES TO
FINANCIAL STATEMENTS





November
30, 2009


(Unaudited)





1
            ORGANIZATION
      AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





Basis
of presentation





These
financial statements include the accounts of Royal Energy Resources, Inc.
(“RER”) (formerly known as World Marketing, Inc. ("WMI"). RER is a development
stage enterprise within the meaning of Statement of Financial Accounting
Standards No. 7, ("SFAS No. 7") "Accounting and Reporting by Development Stage
Enterprises."





RER was
organized in 1999 and attempted to start a web-based marketing business for
health-care products.  The health-care products business had no
revenue and was discontinued in 2001 and the Company remained inactive until
July 22, 2005 when it commenced its real estate
business.  Accordingly, the current development stage has a
commencement date of July 22, 2005 and all prior losses of $28,995 have been
transferred to accumulated deficit.





The
condensed financial statements included in this report have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission for interim reporting and include all adjustments (consisting only of
normal recurring adjustments) that are, in the opinion of  management,
necessary for a fair presentation. These condensed financial statements have not
been audited.





Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to such rules and
regulations for interim reporting. The Company believes that the disclosures
contained herein are adequate to make the information presented not misleading.
However, these condensed financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report for the year ended August 31, 2009.





In
preparing the accompanying unaudited condensed consolidated financial
statements, the Company has reviewed, as determined necessary by the Company's
management, events that have occurred after November 30, 2009, up until the
issuance of the financial statements, which occurred on January 14,
2010.




8





Organization
and nature of business





RER is a
Delaware corporation which was incorporated on March 22, 1999, under the name
Webmarketing, Inc. ("Webmarketing"). On July 7, 2004, the Company revived its
charter and changed its name from Webmarketing to World Marketing,
Inc.  In December 2007 the Company changed its name to Royal Energy
Resources, Inc.





Commencing
at the end of August 2006, the Company began acquiring oil and gas and uranium
leases and has since resold some of its leases and retained an overriding
royalty interest.  During the last half of fiscal 2008, the Company
invested in three oil & gas drilling prospects in Washington County,
Oklahoma, and has advanced additional funds to participate in three
re-works.  Two wells began initial sales in November 2008 and two
other wells are currently being re-completed.





On July
22, 2005, the Company began selling its common stock to obtain the funds
necessary to begin implementation of its new business plan. The primary
objective of the new business plan was to acquire, make necessary renovations
and resell both residential and commercial real estate. The Company expected to
acquire real estate using cash, mortgage financing or its common stock, or any
combination thereof, and anticipated that the majority of the properties
acquired would be in the New York City area. The Company rescinded the purchase
of the real estate property it had previously acquired during the quarter ended
May 31, 2008 and currently is limiting any potential real estate acquisitions to
Eastern European countries, due to the current real estate environment in the
United States.





Webmarketing
attempted to establish a web-based marketing business for health care products
from its inception in 1999 until 2001. However, the Company did not establish
any revenues and discontinued these operations in 2001.





Going
Concern





The
Company has not established sources of revenues sufficient to fund the
development of business, projected operating expenses and commitments for fiscal
year 2010. The Company, which has been in the development stage since its
inception, March 22, 1999, has accumulated a net loss of $2,641,559 ($28,995 in
a prior development stage) through November 30, 2009, and incurred losses of
$236,764 for the three months then ended.





RER was
organized in 1999 and attempted to start a web-based marketing business for
health-care products.  The health-care products business had no
revenue and was discontinued in 2001 and the Company remained inactive until
July 22, 2005 when it commenced its real estate
business.  Accordingly, the current development stage has a
commencement date of July 22, 2005 and all prior losses of $28,995 have been
transferred to accumulated deficit.


9





In March
2006, the Company sold 650,000 shares of its common stock for $65,000 to provide
a portion of the cash required to purchase its first real estate
investment.   Subsequently, the Company continued to sell its
common stock to raise capital to continue operations.  During 2008,
the Company revised its business plan, rescinded its real estate purchase and
began investing in energy leases and oil and gas drilling
prospects.  The Company borrowed $140,000 ($80,000 balance at November
30, 2009) with a note payable and raised $413,172 from the sale of its common
stock during fiscal 2008.  However, while energy prices have improved
the energy business has a high degree of risk and there can be no assurance that
the Company will be able to obtain sufficient funding to develop the Company's
current business plan.





Cash
and cash equivalents





The
Company considers all cash on hand, cash in banks and all highly liquid debt
instruments purchased with a maturity of three months or less to be cash and
cash equivalents.





Revenue
recognition





Revenue
from the sale of oil and gas leases is recognized in accordance with the
provisions of full cost accounting.





Oil and
gas production income will be recognized when the product is delivered to the
purchaser.  We will receive payment from one to three months after
delivery.  At the end of each month, we will estimate the amount of
production delivered to purchasers and the price we will
receive.  Variances between our estimated revenue and actual payment
are recorded in the month the payment is received; however, differences should
be insignificant.





Revenue
from real estate sales is recognized when the related property is subject to a
binding contract and all significant obligations have been
satisfied.





Stock
option plans





The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model.   The Company, during the
three months ended May 31, 2008 granted options to acquire 1,000,000 shares of
its common stock that were fair valued under the Black Scholes model in the
amount of $328,975.  This amount was amortized over the twelve month
option period.  No other options are currently
outstanding.





Property
and equipment





The
Company follows the full cost method of accounting for oil and natural gas
operations.  Under this method all productive and nonproductive costs
incurred in connection with the acquisition, exploration and development of oil
and natural gas reserves are capitalized.  No gains or losses are
recognized upon the sale or other disposition of oil and natural gas properties
except in transactions that would significantly alter the relationship between
capitalized costs and proved reserves.  The costs of unevaluated oil
and natural gas properties are excluded from the amortizable base until the time
that either proven reserves are found or it has determined that such properties
are impaired.  The Company had $18,929 and $15,152 at November 30,
2009 and August 31, 2009, respectively in unproved property costs that have not
been evaluated and are not being amortized.  As properties are
evaluated, the related costs would be transferred to proven oil and natural gas
properties using full cost accounting.  Amortization in the amount of
$256 and $189 was recorded during the three months ended November 30, 2009 and
2008, respectively.


10





Under the
full cost method the net book value of oil and natural gas properties, less
related deferred income taxes, may not exceed the estimated after-tax future net
revenues from proved oil and natural gas properties, discounted at 10% (the
“Ceiling Limitation”).  In arriving at estimated future net revenues,
estimated lease operating expenses, development costs, and certain
production-related taxes are deducted.  In calculating future net
revenues, prices and costs in effect at the time of the calculation are held
constant indefinitely, except for changes that are fixed and determinable by
existing contracts.  The net book value is compared to the ceiling
limitation on a quarterly and yearly basis.  The excess, if any, of
the net book value above the ceiling limitation is charged to expense in the
period in which it occurs and is not subsequently reinstated.  Reserve
estimates used in determining estimated future net revenues have been prepared
by a consultant to the Company.





The
Company assesses the recoverability of the carrying value of its non-oil and gas
long-lived assets when events occur that indicate an impairment in value may
exist.  An impairment loss is indicated if the sum of the expected
undiscounted future net cash flows is less than the carrying amount of the
assets.  If this occurs, an impairment loss is recognized for the
amount by which the carrying amount of the assets exceeds the estimated fair
value of the asset.  No impairments of non-oil and gas long-lived
assets have been recorded as of November 30, 2009.





Depreciation
and amortization





All
capitalized costs of oil and natural gas properties and equipment, including the
estimated future costs to develop proved reserves, are amortized using the
unit-of-production method based on total proved
reserves.  Depreciation of other equipment is computed on the straight
line method over the estimated useful lives of the assets, which range from
three to twenty-five years.





Natural
gas sales and gas imbalances





The
Company follows the entitlement method of accounting for natural gas sales,
recognizing as revenues only its net interest share of all production
sold.  Any amount attributable to the sale of production in excess of
or less than the Company’s net interest is recorded as a gas balancing asset or
liability.  At November 30, 2009 and August 31, 2009, there were no
natural gas imbalances.





Investments
in real estate





Costs
associated with the acquisition, development and construction of real estate
properties are capitalized when incurred. The carrying value of the properties
will be reviewed, at least annually, for impairment. In the event the property
is leased, depreciation will be recorded based upon a thirty-year
life.  The Company rescinded the purchase of the real estate property
it had during the quarter ended May 31, 2008.


11





Oil
and natural gas reserve estimates





The
Company prepared its oil and natural gas reserves with the assistance of a
consultant.  Proved reserves, estimated future net revenues and the
present value of our reserves are estimated based upon a combination of
historical data and estimates of future activity.  Consistent with SEC
requirements, we have based our present value of proved reserves on spot prices
on the date of the estimate.  The reserve estimates are used in
calculating depletion, depreciation and amortization and in the assessment of
the Company’s Ceiling Limitation.  Significant assumptions are
required in the valuation of proved oil and natural gas reserves which, as
described herein, may affect the amount at which oil and natural gas properties
are recorded.  Actual results could differ materially from these
estimates.





Deferred
income taxes





Deferred
income taxes are provided for temporary differences between financial and tax
reporting in accordance with the liability method.  A valuation
allowance is recorded to reduce the carrying amounts of deferred tax assets
unless management believes it is more likely than not that such asset will be
realized.





Earnings
(loss) per common share





RER is
required to report both basic earnings per share, which is based on the
weighted-average number of common shares outstanding, and diluted earnings per
share, which is based on the weighted-average number of common shares
outstanding plus all potential dilutive shares outstanding. At November 30, 2009
and 2008, there were no common stock equivalents. Accordingly, basic and diluted
earnings per share are the same for all periods presented.




Use
of estimates in the preparation of financial statements





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.





Credit
risk





The
Company had cash deposits in certain banks that at times exceeded the maximum
insured by the Federal Deposit Insurance Corporation.  The Company
monitors the financial condition of the banks and has experienced no losses on
these accounts.


12


Contingencies





Certain
conditions may exist as of the date financial statements are issued, which may
result in a loss to the Company, but which will only be resolved when one or
more future events occur or fail to occur.  Company management and its
legal counsel assess such contingencies related to legal proceeding that are
pending against the Company or unasserted claims that may result in such
proceedings, the Company’s legal counsel evaluates the perceived merits of any
legal proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought therein.  If the
assessment of a contingency indicates that it is probably that a liability has
been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s financial
statements.  If the assessment indicates that a potentially material
loss contingency is not probable but is reasonably possible, or if probable but
cannot be estimated, then the nature of the contingent liability, together with
an estimate of the range of possible loss if determinable would be
disclosed.





Asset
retirement obligations





The fair
value of a liability for an asset retirement obligation is required to be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made, and that the associated retirement costs be capitalized
as part of the carrying amount of the long-lived asset.  The Company
determines its asset retirement obligation by calculating the present value of
the estimated cash flows related to the liability.  Periodic accretion
of the discount of the estimated liability would be recorded in the statement of
operations.  At November 30, 2009 and August 31, 2009, the Company has
estimated that its share of the salvage value of lease equipment would exceed
its share of the cost of plugging and abandoning its producing
properties.





Recent
accounting pronouncements




On June
29, 2009, the FASB issued an accounting pronouncement establishing the FASB Accounting Standards
Codification (the “ASC”) as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental
entities.  This pronouncement was effective for financial statements
issued for interim and annual periods ending after September 15, 2009, for most
entities.  On the effective date, all non-SEC accounting and reporting
standards will be superseded.  Rules and interpretive releases of the
SEC under the authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. All other accounting literature is
considered non-authoritative. The switch to the ASC affects the away companies
refer to U.S. GAAP in financial statements and accounting policies. Citing
particular content in the ASC involves specifying the unique numeric path to the
content through the Topic, Subtopic, Section and Paragraph
structure.  The Company adopted this new accounting pronouncement for
the quarterly period ended November 30, 2009, as required, and adoption did not
have a material impact on our financial statements taken as a
whole.




FASB ASC Topic 820, “Fair Value
Measurements and Disclosures.”New authoritative accounting guidance
under ASC Topic 820,”Fair Value Measurements and Disclosures,” affirms that the
objective of fair value when the market for an asset is not active is the price
that would be received to sell the asset in an orderly transaction, and
clarifies and includes additional factors for determining whether there has been
a significant decrease in market activity for an asset when the market for that
asset is not active. ASC Topic 820 requires an entity to base its conclusion
about whether a transaction was not orderly on the weight of the evidence. The
new accounting guidance amended prior guidance to expand certain disclosure
requirements. We adopted the new authoritative accounting guidance under ASC
Topic 820 during the first quarter of 2009. Adoption of the new guidance did not
significantly impact our financial statements.


13




Further
new authoritative accounting guidance (Accounting Standards Update
No. 2009-5) under ASC Topic 820 provides guidance for measuring the fair
value of a liability in circumstances in which a quoted price in an active
market for the identical liability is not available. In such instances, a
reporting entity is required to measure fair value utilizing a valuation
technique that uses (i) the quoted price of the identical liability when
traded as an asset, (ii) quoted prices for similar liabilities or similar
liabilities when traded as assets, or (iii) another valuation technique
that is consistent with the existing principles of ASC Topic 820, such as an
income approach or market approach. The new authoritative accounting guidance
also clarifies that when estimating the fair value of a liability, a reporting
entity is not required to include a separate input or adjustment to other inputs
relating to the existence of a restriction that prevents the transfer of the
liability. The forgoing new authoritative accounting guidance under ASC Topic
820 was effective for our financial statements beginning September 1, 2009
and did not have a significant impact on our financial statements.




FASB ASC Topic 825 “Financial
Instruments.” New authoritative accounting guidance under ASC Topic
825,”Financial Instruments,” requires an entity to provide disclosures about the
fair value of financial instruments in interim financial information and amends
prior guidance to require those disclosures in summarized financial information
at interim reporting periods. The new interim disclosures required under Topic
825 had no impact on our financial statements.




FASB ASC Topic 855, “Subsequent
Events.” New authoritative accounting guidance under ASC Topic 855,
“Subsequent Events,” establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. ASC Topic 855 defines
(i) the period after the balance sheet date during which a reporting
entity’s management should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, (ii) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and
(iii) the disclosures an entity should make about events or transactions
that occurred after the balance sheet date. The new authoritative accounting
guidance under ASC Topic 855 became effective for our consolidated financial
statements for periods ending after June 15, 2009 and did not have a
significant impact on our financial statements.





FASB ASC Topic 860, “Transfers and
Servicing.”New authoritative accounting guidance under ASC Topic 860,
“Transfers and Servicing,” amends prior accounting guidance to enhance reporting
about transfers of financial assets, including securitizations, and where
companies have continuing exposure to the risks related to transferred financial
assets. The new authoritative accounting guidance eliminates the concept of a
“qualifying special-purpose entity” and changes the requirements for
derecognizing financial assets. The new authoritative accounting guidance also
requires additional disclosures about all continuing involvements with
transferred financial assets including information about gains and losses
resulting from transfers during the period. The new authoritative accounting
guidance under ASC Topic 860 will be effective January 1, 2010 and is not
expected to have any impact on our financial statements.


14


Fair
value determination





Financial
instruments consist of cash, marketable securities, promissory notes receivable,
accounts payable, accrued expenses and short-term borrowings. The carrying
amount of these financial instruments approximates fair value due to their
short-term nature or the current rates at which the Company could borrow funds
with similar remaining maturities.





2
            INVESTMENT
      IN ENERGY PROPERTIES





UNDEVELOPED
LEASEHOLD NOT BEING AMORTIZED





The
Company has been the successful bidder in United States Government auctions to
purchase certain oil and gas lease rights.  The oil and gas leases
currently comprise approximately 6,000 acres and 6,000 acres in Crook, Banner,
Weston, Goshen, Niobrara, Converse, Campbell, Freemont, Laramie, Sublette and
Platt Counties, Wyoming as of November 30, 2009 and August 31, 2009,
respectively.  In addition, the Company holds the lease for uranium
rights on approximately 3,500 acres in Wyoming as of November 30, 2009 and
August 31, 2009, respectively.





The
Company is negotiating with energy companies to develop the potential resources
that may be contained in these properties.  The Company has entered
into agreements and then sold, by assignment, the rights, title and interest in
certain of these leases and retained an over-riding royalty
interest.  Revenue from these transactions is accounted for using the
full cost method of accounting.





OIL
AND GAS PRODUCING PROPERTIES





During
fiscal 2008, the Company prepaid $119,153 as estimated drilling and completion
costs for a 25% working interest in three wells in Washington County,
Oklahoma.  Two of the wells began initial sales in November 2008 and
the third well is being re-completed.





Prepaid
drilling cost includes a balance of $41,761 and $50,343 in prepaid costs for the
initial three wells in Washington County, Oklahoma and three additional wells to
be re-worked as of November 30, 2009and August
31, 2009, respectively.





3
            NOTE
      PAYABLE





The
Company has a loan with an individual in the original amount of $140,000, with
interest payable monthly at 15% and which has been extended to January 20,
2010.  The loan has a balance of $80,000 at November 30,
2009.


15


4
            INCOME
      TAXES





RER has
not recorded a deferred tax benefit or expense for all prior periods through
November 30, 2009, as all net deferred benefits have a full valuation
allowance.





Actual
income tax expense applicable to earnings before discontinued operations and
income taxes is reconciled with the “normally expected” Federal income tax for
the three months ended November 30, 2009 and 2008 as follows:





2009
                  
                  
                  2008"Normally
      expected" income tax benefit
                  
                  $
                  80,500
                  
                  
                  $
                  180,600State
      income taxes net of federal benefit
                  
                  
                  9,500
                  
                  
                  
                  21,200Valuation
      allowance
                  
                  
                  (90,000
                  )
                  
                  
                  (201,800
                  )Actual
      income tax expense
                  
                  $
                  -
                  
                  
                  $
                  -





RER has
available unused net operating loss carryforwards of approximately $2,642,000
which will expire in various periods from 2019 to 2029, some of which may be
limited as to the amount available on an annual basis.





5
            STOCKHOLDERS’
      EQUITY





In
November 2007, the Company amended its charter to authorize issuance of up to
100,000,000 shares of common stock with a par value of $.00001.  At
November 30, 2009 and August 31, 2009, 23,388,731 and 22,388,731 shares were
issued and outstanding, respectively.





At this
same time, the Company was authorized to issue 10,000,000 shares of its $0.00001
preferred stock.  In December 2007 the Company issued 100,000 shares
of its preferred stock for $1,000 to the Company's chief executive
officer.





During
fiscal 2008 and 2009, the Company entered into various consulting and financial
services agreements as well as a new loan agreement.  Included in these
agreements was the payment of $85,000 in cash, which has been paid.  In
addition, an aggregate of 6,516,000 shares of the Company’s common stock were
issued along with the granting of options to purchase 1,000,000 shares of the
Company’s common stock.  The agreements cover periods ranging from 1 to
16.5 months and the related fair value of the shares and options as well as the
cash component, are being amortized over the life of the agreements.  The
Company has determined the total cost of the agreements is approximately
$1,865,215.  As of November 30, 2009, the un-amortized portion of these
agreements amounts to approximately $95,388 and is included as a reduction of
stockholders equity in the accompanying financial statements.


16


6
            RELATED
      PARTY TRANSACTIONS





Stock subscription receivable
- On August 16, 2007, the President and Chief Executive Officer of the Company
purchased 4,100,000 shares of the Company’s $0.00001 par value common shares for
$0.02 per share.  The Company received a cash payment of $410 and a
note receivable in the amount of $81,590 for this purchase.  The note
bears interest at 5% per annum and payments of principal and interest are due on
August 15, 2012.  Payments of $14,400 have been received by the
Company and at November 30, 2009 the Company is owed $75,295, including accrued
interest for this note.





On July
14, 2009, the President and Chief Executive Officer of the Company purchased
950,000 shares of the Company's $0.00001 par value common shares for $0.05 per
share.  The Company received a cash payment of $105 and a note
receivable in the amount of $47,395 for this purchase.  The note bears
interest at 2% per annum and payments of principal and interest are due on July
14, 2014.  At November 30, 2009 the Company is owed $47,756, including
accrued interest for this note.





On July
28, 2009, the Secretary and Treasurer of the Company purchased 600,000 shares of
the Company's $0.00001 par value common shares for $0.05 per
share.  The Company received a cash payment of $63 and a note
receivable in the amount of $29,937 for this purchase.  The note bears
interest at 2% per annum and payments of principal and interest are due on July
28, 2014.  At November 30, 2009 the Company is owed $30,142, including
accrued interest for this note.





On
November 24, 2009, the President and Chief Executive Officer of the Company
purchased 1,000,000 shares of the Company's $0.00001 par value common shares for
$0.06 per share.  The Company received a cash payment of $103 and a
note receivable in the amount of $59,897 for this purchase.  The note
bears interest at 2% per annum and payments of principal and interest are due on
November 24, 2014.  At November 30, 2009 the Company is owed $59,917,
including accrued interest for this note.





Equity contribution - The
President and Chief Executive Officer of the Company made loans and advances to
the Company since its inception. During fiscal 2005, the total amount of $6,560
was contributed to the capital of the Company.





Reimbursements - The Company's
Chief Executive Officer received $5,424 and $9,400 during the three months ended
November 30, 2009 and 2008, respectively, as reimbursements for travel and
office expenses.


17


ITEM
2: MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





This
statement contains forward-looking statements within the meaning of the
Securities Act.  Discussions containing such forward-looking
statements may be found throughout this statement.  Actual events or
results may differ materially from those discussed in the forward-looking
statements as a result of various factors, including the matters set forth in
this statement.





At the
present time we have only nominal overhead costs.  Our officers do not
receive any payroll and our administrative assistance is now being provided on a
reimbursement basis.  This situation will remain constant until such
time as we have sufficient capital to afford to pay salaries.





We
completed the acquisition of our first property on August 25, 2005; a
condominium in exchange for $25,000 in cash and 1,900,000 shares of our common
stock which was valued at $190,000.  In March 2008, we entered into a
rescission agreement, the result of which was the cancellation of 1,900,000
common shares in exchange for the condominium property.  At the time
of the exchange, the condominium was appraised at a fair market value of
$200,000 and we recorded a loss of $15,000 on the transaction.  As a
result of the current real estate environment in the United States, we are
currently limiting any potential acquisitions to Eastern European
countries.





The
Company was the successful bidder in United States Government auctions to
purchase certain oil and gas lease rights.  The oil and gas leases
currently represent approximately 6,000 acres of property located in Crook,
Banner, Weston, Goshen, Niobrara, Converse, Campbell, Freemont, Laramie,
Sublette and Platt County Wyoming.  The Company also holds leases for
the uranium rights on approximately 3,500 acres in Wyoming.  The
Company is negotiating with energy companies to develop the potential resources
that may be contained in these properties.  The Company has completed
several transactions wherein the Company sold the lease rights and retained a
royalty interest.  No exploration activities have yet taken
place.  The Company has received proceeds of $47,975 from these
transactions.





During
fiscal 2008, we prepaid $119,153 as estimated drilling and completion costs for
a 25% working interest in three wells in Washington County,
Oklahoma.  Two of the wells began initial sales in November 2008 and
the third well is in process of being re-completed.  An additional net
$36,700 has been advanced to participate in three additional workover
prospects.





We have
had only nominal revenues since inception.  Our auditors have
expressed substantial doubt about our ability to continue as a going
concern.  Our current assets at May 31, 2009, consist of our cash
balance of $392, accounts receivable of $974 and prepaid expenses of
$4,286.  Our ability to continue as a going concern is contingent upon
our ability to raise funds through private placements of our common stock and
obtaining loans until we establish sufficient business to support our operating
costs.





We
anticipate requiring substantial capital for investments in energy leases and
oil and gas drilling prospects and our operating costs have increased for
consultants finding prospects.  There can be no assurance that we will
be able to continue to find sufficient funding to support our current business
plan.


18


COMPARISON
OF THREE MONTHS ENDED NOVEMBER 30, 2009 AND 2008





We had
revenue from oil and gas production of $2,045 and $689 during the three months
ended November 30, 2009 and 2008, respectively.  Our revenue is all
from oil production for which prices had improved during 2009.  In
addition, production did not commence until the middle of the 2008
period.





Non-cash
compensation amounted to $178,419 in fiscal 2009 as compared to $480,984 in
fiscal 2008.  Non-cash compensation is from the amortization of the
calculated value of common shares issued for consulting
agreements.  (Note 5).





During
the three-month period in fiscal 2009, selling, general and administrative
expenses amounted to $56,149 as compared to $28,920 in the year earlier
period.  Increases are primarily due to the increase in cash
consulting fees and higher professional services.





During
the three-month period in fiscal 2009, we recognized a loss of $719 from
commodities trading, recognized interest expense of $3,000 and recorded interest
income in the amount of $1,243 from related parties.  During the same
period in 2008, we recognized a loss from commodities trading of $18,023 had
interest expense of $4,500 and recorded interest income of $2,345 ($848 from a
related party).





OFF-BALANCE
SHEET ARRANGEMENTS





None.


19


ITEM
      3:
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.





ITEM
      4T:
            CONTROLS
      AND PROCEDURES




1 (a) Evaluation of Disclosure
Controls and Procedures





The
Company’s Chief Executive Officer has reviewed and evaluated the effectiveness
of the Company’s disclosure controls and procedures (as defined in Rules
240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of
1934) as of November 30, 2009.  Based on that review and evaluation,
which included inquiries made to certain consultants of the Company, the CEO
concluded that the Company’s current disclosure controls and procedures, as
designed and implemented, are not effective, primarily due to a lack of
segregation of duties, in ensuring that information relating to the Company
required to be disclosed in the reports the Company files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s
rules and forms, including insuring that such information is accumulated and
communicated to the Company’s management, including the CEO, as appropriate to
allow timely decisions regarding required disclosure.





(b)  Changes in
Internal Controls





There
have been no changes in internal controls over financial reporting or in other
factors that could significantly affect these controls that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting during the quarter ended November 30, 2009, including
any corrective actions with regard to significant deficiencies and material
weaknesses.


20


PART
II - OTHER INFORMATION





ITEM
      1:
            LEGAL
      PROCEEDINGS





None





ITEM
      1A:
            RISK
      FACTORS





Not applicable.





ITEM
      2:
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





During
the three months ended November 30, 2009, the Company issued 1,000,000 shares of
its common stock, valued at $60,000 to its Chief Executive Officer for $103 in
cash and a note in the amount of $59,897.





The
shares issued were sold pursuant to an exemption from registration under Section
4(2) promulgated under the Securities Act of 1933, as amended.





ITEM
      3:
              DEFAULTS
      UPON SENIOR SECURITIES.





None





ITEM
      4:
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS.





None





ITEM
      5:
              OTHER
      INFORMATION.




None





ITEM
      6:
            EXHIBITS




Exhibit
      31
              Certification
      pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act
      of 2002
  Exhibit
      32
              Certification
      pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act
      of 2002


21


SIGNATURE





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, thereunto
duly authorized.





ROYAL
      ENERGY RESOURCES, INC.Date:  January
      14, 2010By:  /s/
                  Jacob RothPresident,
      Chief Executive Officer andChief
      Financial
Officer


22