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
ACTOF 1934
 
 For the quarterly period ended:May 31,
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.)
 
 256-260
Broadway, Suite 309, 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. YesxNo ̈
 
 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 (Section 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).  Yes ̈No ̈
 
 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 ̈Accelerated filer ̈Non-accelerated filer ̈Smaller reporting companyx
 
 (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 ̈Nox
 
 State the number of shares outstanding
of each of the issuer's classes of common equity, as of the latest practicable
date: 19,238,731 shares of common stock outstanding as of June 30,
2009.
 
 
  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 theCompany’s Form 10-Kdated August 31, 2008.
 
 TABLE OF CONTENTS
 
 PagePART I – FINANCIAL
      INFORMATIONItem 1:
                        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 Sheet
 May
31, 2009 (unaudited) and August 31, 2008
 
 May 31,
                  
                  
                  August 31,2009
                  
                  
                  2008AssetsCurrent
      assetsCash
      and cash equivalents
                  
                  $
                  78,072
                  
                  
                  $
                  343,739Accounts
      receivable
                  
                  
                  726
                  
                  
                  
                  -Total
      current assets
                  
                  
                  78,798
                  
                  
                  
                  343,739Investment
      in oil and gas properties, net
                  
                  
                  86,386
                  
                  
                  
                  63,097Other
      assetsPrepaid
      drilling costs
                  
                  
                  52,549
                  
                  
                  
                  55,914Investment
      in oil and gas leases
                  
                  
                  35,160
                  
                  
                  
                  33,872Investment
      in uranium properties
                  
                  
                  4,329
                  
                  
                  
                  3,379Deposits
                  
                  
                  1,040
                  
                  
                  
                  440Total
      other assets
                  
                  
                  93,078
                  
                  
                  
                  93,605Total
      assets
                  
                  $
                  258,262
                  
                  
                  $
                  500,441Liabilities
      and Stockholders' EquityCurrent
      liabilitiesAccounts
      payable
                  
                  $
                  3,500
                  
                  
                  $
                  53,343Note
      payable
                  
                  
                  90,000
                  
                  
                  
                  140,000Total
      current liabilities
                  
                  
                  93,500
                  
                  
                  
                  193,343Commitments
      and contingenciesStockholders'
      equityPreferred
      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 shares; 19,238,731 and
      17,267,731 shares issued and outstanding at February 28, 2009 and August
      31, 2008, respectively
                  
                  
                  192
                  
                  
                  
                  173Additional
      paid-in capital
                  
                  
                  2,279,999
                  
                  
                  
                  1,724,978Deferred
      option and stock compensation
                  
                  
                  (59,960
                  )
                  
                  
                  (680,699
                  )Common
      stock subscription receivable
                  
                  
                  (73,610
                  )
                  
                  
                  (72,092
                  )Deficit
      accumulated during the development stage
                  
                  
                  (1,981,860
                  )
                  
                  
                  (665,263
                  )Total
      stockholders' equity
                  
                  
                  164,762
                  
                  
                  
                  307,098Total
      liabilities and stockholders' equity
                  
                  $
                  258,262
                  
                  
                  $
                  500,441
 
 See
accompanying notes to condensed financial statements.
 
 3
  ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Condensed
Statements of Operations
 Three
Months Ended May 31, 2009 and 2008
 (Unaudited)
 
 2009
                              
                              
                              2008Sale
      of oil and gas leases
                              
                              $
                              -
                              
                              
                              $
                              -Oil
      and gas production
                              
                              
                              1,810
                              
                              
                              
                              -Total
      revenues
                              
                              
                              1,810
                              
                              
                              
                              -Cost
      of sales
                              
                              
                              1,623
                              
                              
                              
                              -Gross
      profit
                              
                              
                              187
                              
                              
                              
                              -Costs
      and expenses:Non-cash
      compensation
                              
                              
                              235,995
                              
                              
                              
                              95,892Other
      selling, general and administrative expense
                              
                              
                              48,125
                              
                              
                              
                              20,814Total
      costs and expenses
                              
                              
                              284,120
                              
                              
                              
                              116,706Loss
      from operations
                              
                              
                              (283,933
                              )
                              
                              
                              (116,706
                              )Other
      expenses (income):Loss
      on comodities trading
                              
                              
                              (2,568
                              )
                              
                              
                              -Loss
      on disposition of condominium
                              
                              
                              -
                              
                              
                              
                              15,000Interest
      income
                              
                              
                              (419
                              )
                              
                              
                              -Interest
      income - related party
                              
                              
                              (844
                              )
                              
                              
                              -Interest
      expense
                              
                              
                              3,500
                              
                              
                              
                              3,500(331
                              )
                              
                              
                              18,500Loss
      before income taxes
                              
                              
                              (283,602
                              )
                              
                              
                              (135,206
                              )Provision
      for income taxes
                              
                              
                              -
                              
                              
                              
                              -Net
      loss
                              
                              $
                              (283,602
                              )
                              
                              $
                              (135,206
                              )Net
      loss per share, basic and diluted
                              
                              $
                              (0.01
                              )
                              
                              $
                              (0.01
                              )Weighted
      average shares outstanding, basic and diluted
                              
                              
                              19,136,296
                              
                              
                              
                              15,957,778
 
 See
accompanying notes to condensed financial statements.
 
 4
  ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Condensed
Statements of Operations
 Nine
Months Ended May 31, 2009 and 2008 and
 from
inception (July 22, 2005) through May 31, 2009
 (Unaudited)
 
 Inception(July 22, 2005)ThroughNine Months Ended May 31,
                                  
                                  
                                  May 31,2009
                                  
                                  
                                  2008
                                  
                                  
                                  2009Sale
      of oil and gas leases
                                  
                                  $
                                  30,267
                                  
                                  
                                  $
                                  5,626
                                  
                                  
                                  $
                                  47,975Oil
      and gas production
                                  
                                  
                                  2,499
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  2,499Total
      revenues
                                  
                                  
                                  32,766
                                  
                                  
                                  
                                  5,626
                                  
                                  
                                  
                                  50,474Cost
      of sales
                                  
                                  
                                  6,706
                                  
                                  
                                  
                                  449
                                  
                                  
                                  
                                  8,735Gross
      profit
                                  
                                  
                                  26,060
                                  
                                  
                                  
                                  5,177
                                  
                                  
                                  
                                  41,739Costs
      and expenses:Non-cash
      compensation
                                  
                                  
                                  1,137,072
                                  
                                  
                                  
                                  95,892
                                  
                                  
                                  
                                  1,475,619Other
      selling, general and administrative expense
                                  
                                  
                                  173,913
                                  
                                  
                                  
                                  45,953
                                  
                                  
                                  
                                  468,948Total
      costs and expenses
                                  
                                  
                                  1,310,985
                                  
                                  
                                  
                                  141,845
                                  
                                  
                                  
                                  1,944,567Loss
      from operations
                                  
                                  
                                  (1,284,925
                                  )
                                  
                                  
                                  (136,668
                                  )
                                  
                                  
                                  (1,902,828
                                  )Other
      expenses (income):Loss
      on disposition by rescission agreement of condominium
                                  
                                  
                                  -
                                  
                                  
                                  
                                  15,000
                                  
                                  
                                  
                                  15,000Loss
      on commodities trading
                                  
                                  
                                  25,168
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  25,168Interest
      income
                                  
                                  
                                  (2,853
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (4,336
                                  )Interest
      income – related party
                                  
                                  
                                  (2,518
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (6,419
                                  )Interest
      expense
                                  
                                  
                                  11,875
                                  
                                  
                                  
                                  3,500
                                  
                                  
                                  
                                  20,62531,672
                                  
                                  
                                  
                                  18,500
                                  
                                  
                                  
                                  50,038Loss
      before income taxes
                                  
                                  
                                  (1,316,597
                                  )
                                  
                                  
                                  (155,168
                                  )
                                  
                                  
                                  (1,952,866
                                  )Provision
      for income taxes
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Net
      loss
                                  
                                  $
                                  (1,316,597
                                  )
                                  
                                  $
                                  (155,168
                                  )
                                  
                                  $
                                  (1,952,866
                                  )Net
      loss per share, basic and diluted
                                  
                                  $
                                  (0.07
                                  )
                                  
                                  $
                                  (0.01
                                  )
                                  
                                  $
                                  (0.16
                                  )Weighted
      average shares outstanding, basic and diluted
                                  
                                  
                                  18,707,475
                                  
                                  
                                  
                                  14,590,611
                                  
                                  
                                  
                                  12,315,636
 
 See
accompanying notes to condensed financial statements.
 
 5
 
 ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Statements
of Stockholders' Equity
 Inception
of Development Stage, July 22, 2005, through May 31, 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 for real 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
                                
                                
                                
                                11
                                
                                
                                
                                120,489Net
      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 for consulting contracts
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                2,965,000
                                
                                
                                
                                30
                                
                                
                                
                                977,745Cash
      portion of consulting contracts
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Rescission
      of real estate purchase
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (1,900,000
                                )
                                
                                
                                (19
                                )
                                
                                
                                (199,981
                                )Amortization
      of prepaid consulting 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
                                
                                
                                
                                1,724,978Stock
      subscription receivable:Payments
      received
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Interest
      accrued
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Common
      stock issued for consulting contracts
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                1,951,000
                                
                                
                                
                                19
                                
                                
                                
                                551,421Cash
      portion of consulting contracts
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Amortization
      of prepaid consulting
      contracts:Non-cash
      portion
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Cash
      portion
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Common
      stock sold for cash
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                20,000
                                
                                
                                
                                -
                                
                                
                                
                                3,600Net
      loss
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Balance,
      May 31, 2009
                                
                                
                                100,000
                                
                                
                                $
                                1
                                
                                
                                
                                19,238,731
                                
                                
                                $
                                192
                                
                                
                                $
                                2,279,999
 
 (Continued)
 See
accompanying notes to financial statements.
 
 6
 
 ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Statements
of Stockholders' Equity, continued
 Inception
of Development Stage, July 22, 2005, through May 31, 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 for real 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
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (93,530
                                    )
                                    
                                    
                                    (93,530
                                    )Balance,
      August 31, 2007
                                    
                                    
                                    (81,590
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (28,995
                                    )
                                    
                                    
                                    (182,094
                                    )
                                    
                                    
                                    240,526Sale
      of preferred stock
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,000Sale
      of common stock
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    413,172Common
      stock issued for consulting contracts
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (977,775
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Cash
      portion of consulting contracts
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (85,000
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (85,000
                                    )Rescission
      of real estate purchase
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (200,000
                                    )Amortization
      of prepaid consulting 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
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (454,174
                                    )
                                    
                                    
                                    (454,174
                                    )Balance,
      August 31, 2008
                                    
                                    
                                    (72,092
                                    )
                                    
                                    
                                    (680,699
                                    )
                                    
                                    
                                    (28,995
                                    )
                                    
                                    
                                    (636,268
                                    )
                                    
                                    
                                    307,098Stock
      subscription receivable:Payments
      received
                                    
                                    
                                    1,000
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,000Interest
      accrued
                                    
                                    
                                    (2,518
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (2,518
                                    )Common
      stock issued for consulting contracts
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (551,440
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Cash
      portion of consulting contracts
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (40,900
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (40,900
                                    )Amortization
      of prepaid consulting contracts:Non-cash
      portion
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,137,072
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,137,072Cash
      portion
                                    
                                    
                                    -
                                    
                                    
                                    
                                    76,007
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    76,007Common
      stock sold for cash
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    3,600Net
      loss
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,316,597
                                    )
                                    
                                    
                                    (1,316,597
                                    )Balance,
      May 31, 2009
                                    
                                    $
                                    (73,610
                                    )
                                    
                                    $
                                    (59,960
                                    )
                                    
                                    $
                                    (28,995
                                    )
                                    
                                    $
                                    (1,952,865
                                    )
                                    
                                    $
                                    164,762
 
 See accompanying notes to financial
statements.
  7
  ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Condensed
Statements of Cash Flows
 Nine
Months Ended May 31, 2009 and 2008, and
 from
inception (July 22, 2005) through May 31, 2009
 (Unaudited)
 
 From inceptionJuly 22, 2005throughNine months ended May 31,
                  
                  
                  May 31,2009
                  
                  
                  2008
                  
                  
                  2009Cash
      flows from operating activitiesNet
      loss
                  
                  $
                  (1,316,597
                  )
                  
                  $
                  (155,168
                  )
                  
                  $
                  (1,952,865
                  )Adjustment
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and depletion
                  
                  
                  783
                  
                  
                  
                  -
                  
                  
                  
                  783Value
      of common shares issued for services
                  
                  
                  1,137,072
                  
                  
                  
                  95,892
                  
                  
                  
                  1,475,619Loss
      on rescission of condominium purchase
                  
                  
                  -
                  
                  
                  
                  15,000
                  
                  
                  
                  15,000Interest
      accrued on stock subscription
                  
                  
                  (2,518
                  )
                  
                  
                  -
                  
                  
                  
                  (6,420
                  )Change
      in other assets and liablities:Accounts
      receivable
                  
                  
                  (726
                  )
                  
                  
                  -
                  
                  
                  
                  (726
                  )Prepaid
      expenses and other assets
                  
                  
                  34,507
                  
                  
                  
                  (700
                  )
                  
                  
                  (21,847
                  )Accounts
      payable
                  
                  
                  (49,843
                  )
                  
                  
                  (7,900
                  )
                  
                  
                  (51,971
                  )Net
      cash used in operations
                  
                  
                  (197,322
                  )
                  
                  
                  (52,876
                  )
                  
                  
                  (542,427
                  )Cash
      flows from investing activitiesInvestment
      in real estate
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (11,000
                  )Investment
      in oil and gas drilling prospects
                  
                  
                  (20,707
                  )
                  
                  
                  (75,673
                  )
                  
                  
                  (83,804
                  )Investment
      in oil and gas leases
                  
                  
                  (1,288
                  )
                  
                  
                  4,538
                  
                  
                  
                  (35,160
                  )Investment
      in uranium properties
                  
                  
                  (950
                  )
                  
                  
                  (3,379
                  )
                  
                  
                  (4,329
                  )Net
      cash used in investing activities
                  
                  
                  (22,945
                  )
                  
                  
                  (74,514
                  )
                  
                  
                  (134,293
                  )Cash
      flows from financing activitiesProceeds
      of stockholder loans
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  50Proceeds
      from subscription receivable
                  
                  
                  1,000
                  
                  
                  
                  10,400
                  
                  
                  
                  14,400Loan
      proceeds (repayment)
                  
                  
                  (50,000
                  )
                  
                  
                  140,000
                  
                  
                  
                  90,000Proceeds
      from sale of common stock
                  
                  
                  3,600
                  
                  
                  
                  309,012
                  
                  
                  
                  649,342Proceeds
      from sale of preferred stock
                  
                  
                  -
                  
                  
                  
                  1,000
                  
                  
                  
                  1,000Net
      cash provided by financing activities
                  
                  
                  (45,400
                  )
                  
                  
                  460,412
                  
                  
                  
                  754,792Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  (265,667
                  )
                  
                  
                  333,022
                  
                  
                  
                  78,072Cash and cash
      equivalents, beginning of period
                  
                  
                  343,739
                  
                  
                  
                  7,611
                  
                  
                  
                  -Cash and cash
      equivalents, end of period
                  
                  $
                  78,072
                  
                  
                  $
                  340,633
                  
                  
                  $
                  78,072Supplemental
      cash flow informationCash
      paid for interest
                  
                  $
                  11,875
                  
                  
                  $
                  -
                  
                  
                  $
                  20,625Cash
      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.
 
 8
  ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 
 NOTES TO
FINANCIAL STATEMENTS
 
 February
8, 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."  Accordingly, the costs associated with the development
stage activities discussed below, have an inception date of July 22,
2005.  Prior costs relating to an attempted internet business which
was discontinued in 2001 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, 2008.
 
 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
during the current quarter.  Two wells began initial sales in November
2008 and a third well will be re-completed.
 
 9
 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 2009. The Company, which has been in the development stage since its
inception, March 22, 1999, has accumulated a net loss of $1981,860 ($28,995 in a
prior development stage) through May 31, 2009, and incurred losses of $1,316,597
for the nine months then ended.
 
 The
Company ceased its plans to begin a web-based marketing business for health-care
products in 2001 and all operations were discontinued. 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.  In the previous
fiscal year, 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 ($90,000 balance at May 31,
2009) with a note payable and raised $413,172 from the sale of its common stock
during fiscal 2008.  However, energy prices are currently much lower
and 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.
 
 10
 Revenue
recognition
 
 Revenue
from the sale of oil and gas and uranium leases is recognized when the
transaction is completed.  The cost of the leases sold is included in
cost of sales at the time of the sale.
 
 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
 
 In
December 2004, the FASB issued SFAS 123 (revised 2004), "Share-Based Payment"
(SFAS 123(R)). Among other things, SFAS 123(R) requires expensing the fair value
of stock options, previously optional accounting. For transition, upon adoption
on September 1, 2005, SFAS 123(R) would require expensing any unvested options
and will also require changing the classification of certain tax benefits from
option deductions to financing rather than operating cash flows. As of August
31, 2006, the Company did not have any unvested options which would require
adjustment upon adoption of SFAS 123(R).  SFAS 123, "Accounting for
Stock Based compensation" (SFAS 123), required the Company to disclose pro forma
information regarding option grants made to its employees until adoption of SFAS
123(R) discussed above. SFAS 123 specifies certain valuation techniques that
produce estimated compensation charges that would be included in the required
pro forma results. These amounts would not have been reflected in the Company's
statements of operations, because APB 25 specifies that no compensation charge
arises when the price of the employees' stock options equal the market value of
the underlying stock at the grant date.
 
 Under
SFAS 123, 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 is being amortized over the
twelve month option period.
 
 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 no capitalized costs related to
unevaluated properties at May 31, 2009.  As properties are evaluated,
the related costs would be transferred to proven oil and natural gas properties
using full cost accounting.  All capitalized costs were included in
the amortization base as of May 31, 2009.  Amortization in the amount
of $783 was recorded during the nine months ended May 31, 2009, based on initial
production.
 
 11
 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.
 
 In
accordance with the impairment provisions of Statement of Financial Accounting
Standards (SFAS) 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets,” 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 have been recorded as of May 31,
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 May 31, 2009 and August 31, 2008, there were no natural
gas imbalances.
  12


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.





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 under the provisions of SFAS
109, "Accounting for Income Taxes." 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





Earnings
(loss) per common share are calculated under the provisions of SFAS 128,
"Earnings per Share," which established new standards for computing and
presenting earnings per share. SFAS 128 requires RER 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 May 31, 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.


13




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.





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





SFAS 143,
“Accounting for Asset Retirement Obligations,” addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs and amends FASB 19,
“Financial Accounting and Reporting by Oil and Gas Producing
Companies.”  SFAS 143 requires that the fair value of a liability for
an asset retirement obligation 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 May
31, 2009 and August 31, 2008, 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





Recent
accounting pronouncements issued by the FASB (including its Emerging Issues Task
Force), the AICPA, and the SEC did not, or are not, believed by management to
have a material impact on the Company's present or future 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





LEASES





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 10,000 acres and 12,000 acres in Crook, Banner,
Weston, Goshen, Niobrara, Converse, Campbell, Freemont, Laramie, Sublette and
Platt Counties, Wyoming as of May 31, 2009 and August 31, 2008,
respectively.  In addition, the Company holds the lease for uranium
rights on approximately 3,500 acres in Wyoming as of May 31, 2009 and August 31,
2008, 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 recorded when the
transaction is completed at which time the cost of the related leases is
included in cost of sales.





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.





Oil and
gas property costs are as follows at May 31, 2009and August
31, 2008:





May
      31,
                    
                    
                    August
      31,2009
                    
                    
                    2008Leasehold
      cost
                    
                    $
                    4,933
                    
                    
                    $
                    4,933Intangible
      development cost
                    
                    
                    49,883
                    
                    
                    
                    40,932Lease
      equipment
                    
                    
                    32,353
                    
                    
                    
                    17,232Total
                    
                    
                    87,169
                    
                    
                    
                    63,097Accumulated
      depreciation and depletion
                    
                    
                    (783
                    )
                    
                    
                    -$
                    86,386
                    
                    
                    $
                    63,097




15





Prepaid
drilling cost includes a balance of $52,549 and $55,914 in prepaid costs for the
initial three wells in Washington County, Oklahoma and three additional wells to
be re-worked as of May 31, 2009and August
31, 2008, 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 September 5,
2009.  The loan has a balance of $90,000 at May 31,
2009.





4
            INCOME
      TAXES





RER has
not recorded a deferred tax benefit or expense for all prior periods through May
31, 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 nine months ended May 31, 2009 and 2008 as follows:





2009
                      
                      
                      2008"Normally
      expected" income tax benefit
                      
                      $
                      447,600
                      
                      
                      $
                      52,800State
      income taxes net of federal benefit
                      
                      
                      52,700
                      
                      
                      
                      6,200Valuation
      allowance
                      
                      
                      (500,300
                      )
                      
                      
                      (59,000
                      )Actual
      income tax expense
                      
                      $
                      -
                      
                      
                      $
                      -





RER has
available unused net operating loss carryforwards of approximately $2,023,000
which will expire in various periods from 2019 to 2028, 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
May 31, 2009 and August 31, 2008, 19,238,731 and 17,267,731 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.


16


During
fiscal 2008 and September 2008, 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 3,965,000 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.  During fiscal 2009, contracts with a total value
of $668,340 were issued which included issuance of 2,426,000 shares of common
stock and cash of $40,900 to be paid.  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 $1,655,115.  As of May 31, 2009, the un-amortized portion of
these agreements amounts to approximately $59,960 and is included as a reduction
of stockholders equity in the accompanying financial
statements.





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 May 31, 2009 the Company is owed $73,610, including accrued
interest.





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.





7
            CONTINGENCIES





The
Company has a lease for its corporate office which commences September 1, 2008,
for a period of two years at a monthly rental of $600.


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 located in Brooklyn, New York, 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 10,000 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 had sales of $30,267 and $5,626 during the nine
months ended May 31, 2009 and 2008, respectively.





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
$30,000 was advanced to participate in three additional workover prospects
during March 2009.





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 $78,072 and accounts receivable of $726.  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 MAY 31, 2009 AND 2008





We sold
leases covering 1,989 acres, with a cost of $1,989, for $26,267 in February 2009
and retained a 3% overriding royalty interest.  We collected the
proceeds during March 2009.  We had no revenues during the three month
period in fiscal 2008.





Non-cash
compensation amounted to $235,995 in fiscal 2009 as compared to $95,892 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 $48,125 as compared to $20,814 in the year earlier
period.  Increases are primarily due to the increase in cash
consulting fees and higher office expenses.





During
the three-month period in fiscal 2009, we recognized a gain of $2,568 from
commodities trading, recognized interest expense of $3,500 and recorded interest
income in the amount of $1,263 ($844 from a related party).  During
the same period in 2008, we recognized a loss on disposition of a condominium of
$15,000 and had interest expense of $3,500.





COMPARISON
OF NINE MONTHS ENDED MAY 31, 2009 AND 2008





During
the nine-month period in fiscal 2009 we had total revenues of $32,766 as
compared to $5,626 in the comparable fiscal 2008 period.  During the
fiscal 2009 period, $30,267 of our revenues were from leases sales and $2,499
was from our initial oil production.  Our fiscal 2008 period revenues
were all from lease sales.





Non-cash
compensation amounted to $1,137,072 in fiscal 2009 as compared to $95,892 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 fiscal 2009 period, selling, general and administrative expenses amounted to
$173,913 as compared to $45,953 in the year earlier period.  Increases
are primarily due to the increase in cash consulting fees ($101,537), increases
in professional fees associated with public filing requirements ($10,984) and
higher rent and office expenses ($21,258).





During
the fiscal 2009 period, we recognized a loss of $25,168 from commodities
trading, recognized interest expense of $11,875 and recorded interest income in
the amount of $5,371 ($2,518 from a related party).  During the same
period in 2008, we recognized a loss on disposition of a condominium of $15,000
and had interest expense of $3,500.





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 May 31, 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 effective 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 significant changes in internal controls or in other factors that
could significantly affect these controls during the quarter ended May 31, 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 May 31, 2009, the Company issued 124,000 shares of its
common stock, valued at $26,040 to extend a consulting service agreement and a
loan extension agreement.





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 2002Exhibit
      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:  July
      10, 2009By:
      /s/
                                  Jacob RothPresident,
      Chief Executive Officer andChief
      Financial
Officer




22