UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 
 [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended     December 31, 2010
 
 [  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  __________  to
 
 Commission file number: 000-27739
 
 Royal Quantum Group, Inc.
 (Exact name of small business issuer as specified in its charter)
 
 Nevada
90-0315909(State of incorporation)
(IRS Employer Identification #)
 
 Suite #145, 251 MidPark Blvd
 S.E. Calgary, AB Canada T2X1S3
 Address of Principal Executive Offices
 
 Registrant’s telephone number, including area code   (403) 288-4321
 
 Securities registered under Section 12(b) of the Exchange Act:       None
  Securities registered under Section 12(g) of the Exchange Act:     Common Stock, $0.001 par value
 
 Indicate by check mark if the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act).
 [   ] YES    [X]   NO
 
 Indicate by check mark if the registrant is not required to file reports pursuant to section 13 or section 15(d) of the Act.
 [   ] YES    [X]   NO
 
 Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.  [X] YES    [  ]   NO
 
  Indicate by check mark whether the issuer has submitted electronically and posted on its corporate Website, 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.  [X] YES    [  ]   NO
 
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [  ]
 
 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.
 
 [  ] Large accelerated filer    [  ] Accelerated filer [  ] Non-accelerated filer    [X] 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    [X]   NO
 
 The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed by reference to the price at which the equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, April 30, 2010, was $ 3,010,940.
  The number of shares outstanding of the Registrant's common stock as of April 13, 2011 was 50,182,338.
  1
  
 ROYAL QUANTUM GROUP, INC.TABLE OF CONTENTSPART IITEM 1.
BUSINESS
3ITEM 1.A
RISK FACTORS
7ITEM 2.
PROPERTIES
3ITEM 3.
LEGAL PROCEEDINGS
10ITEM 4.
(REMOVED AND RESERVED)
10ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
10ITEM 6.
SELECTED FINANCIAL DATA
13ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
13ITEM 7.A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
15ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
15ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
37ITEM 9.A
CONTROLS AND PROCEDURES
37ITEM 9.B
OTHER INFORMATION
39ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
39ITEM 11.
EXECUTIVE COMPENSATION
42ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
44ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
44ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
45ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
45SIGNATURES
46
  2
  FORWARD LOOKING STATEMENTS
 
 This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. This report includes statements regarding our plans, goals, strategies, intent, beliefs or current expectations. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished. These forward-looking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.). Items contemplating or making assumptions about actual or potential future revenue, market size, collaborations, and trends or operating results also constitute such forward-looking statements.
  Although forward-looking statements in this report reflect the good faith judgment of management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission (“SEC”) which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.
 
 Item 1. Description of Business.
 
 Our Background.  Royal Quantum Group, Inc. (the “Company”) was incorporated in Nevada in October, 1996, under the name PSM CORP, we then changed the name of the Company to Royal Quantum Group on November 23, 2005.
 
 Our Business. Royal Quantum Group Inc. is a public company trading on the OTCBB market under the symbol RYQG.  Royal Quantum is focused on the acquisition, exploration and development of oil and gas properties located within favorable geo-political climates.
 
 Our Properties.
 
 During the period ending June 30, 2009 the company acquired a 36% interest in the drilling and development of the Gleason #4-16 well located in Noble County, Oklahoma, USA. The company capitalized $167,260 for the drilling of the well during 2009.  The well has been completed and is currently producing.
 
 During the period ending September 30, 2009 the company acquired a 20% interest in the drilling and development of the Bond #1-18 well located in Noble County, Oklahoma, USA. The company raised $137,500 through the sale of 55 units. Each of the 55 units was priced at $2,500 per unit totaling $137,500 cash and consisted of 10,000 restricted common shares, a pro rata share of 60% of the net revenue generated from the production of the well, and warrants to purchase 20,000 shares of the Company’s common stock at $0.25 per share with an expiration date of July 2011. Each unit holder was granted the option to surrender their pro rata interest in the revenue from the well back to the Company in exchange for 10,000 restricted common shares per unit surrendered. This option is exercisable for a period of 36 months from the date that the investor receives the first revenue check. Of the $137,500 received, the Company allocated $36,412 towards the value of the investors’ 60% interest in the Company’s share of the well’s net revenue and credited this amount against the $117,440 it paid and capitalized towards the drilling cost of the well. A consulting fee in connection with offering was paid through the issuance of 5 units. The capitalized cost of the well was further reduced by the Consultant’s allocated share in the well’s net revenue of $3,400. The well has been completed and is currently producing.
 
  3
  In January 2010, the Company acquired a 20% working interest in the Bond #2-18 well in Noble County, Oklahoma, USA.  The Company raised a total of $150,000 for the drilling and completion of the Bond #2-18 well through the issuance of 60 units.  Each of the 60 units was priced at $2,500 per unit totaling $150,000 cash and consisted of 5,000 restricted common shares, a pro rata share of 60% of the net revenue generated from the production of the well, and warrants to purchase 10,000 shares of the Company’s common stock at $0.25 per share with an expiration date of July 2011. Each unit holder was granted the option to surrender their pro rata interest in the revenue from the well back to the Company in exchange for 5,000 restricted common shares per unit surrendered. This option is exercisable for a period of 36 months from the date that the investor receives the first revenue check. Of the $150,000 received, the Company allocated $36,412 towards the value of the investors’ 60% interest in the Company’s share of the well’s net revenue and credited this amount against the $77,151 it paid and capitalized towards the drilling cost of the well. A consulting fee in connection with offering was paid through the issuance of 5.6 units. The capitalized cost of the well was further reduced by the Consultant’s allocated share in the well’s net revenue of $3,400. The well has been completed and is currently producing.
 
 In March 2010, the Company raised a total of $150,000 for the drilling and completion of a 20% participation in the Sattler #1-18 well in Noble County, Oklahoma, USA through the issuance of 60 units.  Each of the 60 units was priced at $2,500 per unit totaling $150,000 cash and consisted of 5,000 restricted common shares, a pro rata share of 60% of the net revenue generated from the production of the well, and warrants to purchase 10,000 shares of the Company’s common stock at $0.25 per share with an expiration date of September 2011. Each unit holder was granted the option to surrender their pro rata interest in the revenue from the well back to the company in exchange for 5,000 restricted common shares per unit surrendered. This option is exercisable for a period of 36 months from the date the investor receives the first revenue check. Of the $150,000 received, the Company allocated $36,412 towards the value of the investors’ 60% interest in the Company’s share of the well’s net revenue and credited this amount against the $100,089 it has currently paid and capitalized towards the drilling cost of the well. A consulting fee in connection with offering was paid through the issuance of 5.6 units. The capitalized cost of the well was further reduced by the Consultant’s allocated share in the well’s net revenue of $3,400. The well has been completed and is currently producing.
 
 In August 2010 the Company closed a private placement unit funding of 60 units totaling $150,000 for a 25% participation in the Bond #3-18 well in Noble County, Oklahoma, USA and for working capital.  60% of the Company’s net revenue received from the Bond #3-18 is allocated proportionally to the unit holders.  Each of the 60 units was priced at $2,500 per unit for gross proceeds totaling $150,000 and consisted of 5,000 restricted common shares and 10,000 share purchase options at $0.25 per share with an expiration date of February 15, 2012. The Company issued a total of 300,000 shares and 600,000 options related to the private placement.  The unit holder also has the option to surrender their interest in the well back to the Company in exchange for 5,000 restricted common shares per unit surrendered for a period of 36 months from the date of receipt of the first revenue check paid to the unit holders.  Of the $150,000 received, the Company allocated $38,945 towards the value of the investors’ 60% interest in the Company’s share of the well’s net revenue and credited this amount against the $90,446 it has currently capitalized towards the drilling cost of the well. A consulting fee in connection with offering was paid through the issuance of 5.6 units. The capitalized cost of the well was further reduced by the Consultant’s allocated share in the well’s net revenue of $3,635.  The Company’s 5.6 units issued to the consultant for commission were valued at $14,000.  The $14,000 was converted to a proportionate interest in the private placement, resulting in the issuance of an additional 28,000 restricted shares and 56,000 options. The well has been completed and is currently in its early testing stages.
 
  4
  In December 2010 the Company closed a private placement unit funding of 40 units totaling $100,000 for a 25% participation in the WC#1-18 well in Noble County, Oklahoma, USA and for working capital.  60% of the Company’s net revenue received from the WC #1-18 is allocated proportionally to the unit holders.  Each of the 60 units was priced at $2,500 per unit for gross proceeds totaling $100,000 and consisted of 5,000 restricted common shares and 10,000 share purchase options at $0.25 per share with an expiration date of May 16, 2012. The Company issued a total of 200,000 shares and 436,000 options related to the private placement.  The unit holder also has the option to surrender their interest in the well back to the Company in exchange for 5,000 restricted common shares per unit surrendered for a period of 36 months from the date of receipt of the first revenue check paid to the unit holders.  Of the $100,000 received, the Company allocated $30,675 towards the value of the investors’ 60% interest in the Company’s share of the well’s net revenue and credited this amount against the $94,747 it has currently capitalized towards the drilling cost of the well. A consulting fee in connection with offering was paid through the issuance of 3.6 units. The capitalized cost of the well was further reduced by the Consultant’s allocated share in the well’s net revenue of $2,761.  The Company’s 3.6 units issued to the consultant for commission were valued at $9,000.  The $9,000 was converted to a proportionate interest in the private placement, resulting in the issuance of an additional 18,000 restricted shares and 36,000 options. The well has been completed and is currently in its early testing stages.
 
 Our Competition.The oil and natural gas industry is intensely competitive, and we compete with other companies that have greater resources. Many of these companies not only explore for and produce oil and natural gas, but also carry on midstream and refining operations and market petroleum and other products on a regional, national or worldwide basis. These companies may be able to pay more for productive oil and natural gas properties and exploratory prospects or define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, these companies may have a greater ability to continue exploration activities during periods of low oil and natural gas market prices. Our larger or integrated competitors may be able to absorb the burden of existing, and any changes to, federal, state, local and tribal laws and regulations more easily than we can, which would adversely affect our competitive position. Our ability to acquire additional properties and to discover reserves in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, because we have fewer financial and human resources than many companies in our industry, we may be at a disadvantage in bidding for exploratory prospects and producing oil and natural gas properties.
 
 Government Regulation.
 
 Existing and Probable Governmental Regulation
 
 We monitor and comply with current government regulations that affect our activities, although our operations may be adversely affected by changes in government policy, regulations or taxation. There can be no assurance that we will be able to obtain all of the necessary licenses and permits that may be required to carry out our exploration and development programs. It is not expected that any of these controls or regulations will affect our operations in a manner materially different than they would affect other natural gas and oil companies operating in the areas in which we operate.
 
 United States Government Regulation
 
 The United States federal government and various state and local governments have adopted laws and regulations regarding the protection of human health and the environment. These laws and regulations may require the acquisition of a permit by operators before drilling commences, prohibit drilling activities on certain lands lying within wilderness areas, wetlands, or where pollution might cause serious harm, and impose substantial liabilities for pollution resulting from drilling operations, particularly with respect to operations in onshore and offshore waters or on submerged lands. These laws and regulations may increase the costs of drilling and operating wells. Because these laws and regulations change frequently, the costs of compliance with existing and future environmental regulations cannot be predicted with certainty.
 
  5
  The transportation and certain sales of natural gas in interstate commerce are heavily regulated by agencies of the federal government. Production of any oil and gas by properties in which we have an interest will be affected to some degree by state regulations. States have statutory provisions regulating the production and sale of oil and gas, including provisions regarding deliverability. Such statutes and the regulations are generally intended to prevent waste of oil and gas and to protect correlative rights to produce oil and gas between owners of a common reservoir.
 
 State regulatory authorities may also regulate the amount of oil and gas produced by assigning allowable rates of production to each well or pro-ration unit.
 
 Any exploration or production on Federal land will have to comply with the Federal Land Management Planning Act which has the effect generally of protecting the environment. Any exploration or production on private property whether owned or leased will have to comply with the Endangered Species Act and the Clean Water Act. The cost of complying with environmental concerns under any of these acts varies on a case by case basis. In many instances the cost can be prohibitive to development. Environmental costs associated with a particular project must be factored into the overall cost evaluation of whether to proceed with the project.
 
 Environmental Regulation
 
 Oil and natural gas exploration, development and production operations are subject to stringent laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Numerous governmental agencies, such as the U.S. Environmental Protection Agency, or EPA, issue regulations which often require difficult and costly compliance measures that carry substantial administrative, civil and criminal penalties and may result in injunctive obligations for failure to comply. These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentrations of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit construction or drilling activities on certain lands lying within wilderness, wetlands, ecologically sensitive and other protected areas, require action to prevent or remediate pollution from current or former operations, such as plugging abandoned wells or closing pits, and impose substantial liabilities for pollution. The strict liability nature of such laws and regulations could impose liability upon us regardless of fault. Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent and costly pollution control or waste handling, storage, transport, disposal or cleanup requirements could materially adversely affect our operations and financial position, as well as the oil and natural gas industry in general.
 
 Comprehensive Environmental Response, Compensation and Liability Act
 
 The Comprehensive Environmental Response, Compensation and Liability Act, also known as CERCLA or the “Superfund” law, generally imposes joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release of a “hazardous substance” into the environment. These persons include the current owner or operator of a contaminated facility, a former owner or operator of the facility at the time of contamination and those persons that disposed or arranged for the disposal of the hazardous substance. Under CERCLA and comparable state statutes, such persons may be subject to strict joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.  Governmental agencies or third parties may seek to hold us responsible under CERCLA and comparable state statutes for all or part of the costs to clean up sites at which such “hazardous substances” have been released.
 
 Compliance with Environmental Laws
 
 We did not incur any costs in connection with the compliance with any federal, state, or local environmental laws. However, costs could occur at any time through industrial accident or in connection with a terrorist act or a new project. Costs could extend into the millions of dollars for which we could be totally liable. In the event of liability, we believe we would be entitled to contribution from other owners so that our percentage share of a particular project would be the percentage share of our liability on that project. However, other owners may not be willing or able to share in the cost of the liability. Even if liability is limited to our percentage share, any significant liability would wipe out our assets and resources.
  6
  We are prepared to engage professionals, if necessary, to ensure regulatory compliance but in the near term expect our activities to require minimal regulatory oversight. If we expand the scope of our activities in the future it is reasonable to expect expenditures on compliance to rise.
 
 Our Research and Development.We are not currently conducting any research and development activities other than property explorations and assessments. We do not anticipate conducting such activities in the near future. If we generate significant revenues, we may expand our product line by entering into relationship additional with third parties.
 
 Our Intellectual Property.We do not presently own any patents, trademarks, licenses, concessions or royalties.
 We own the Internet domain name www.royalquantum.com. Under current domain name registration practices, no one else can obtain an identical domain name, but someone might obtain a similar name, or the identical name with a different suffix, such as “.org”, or with a country designation. The regulation of domain names in the United States and in foreign countries is subject to change, and we could be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our domain names.
 
 Employees. As of December 31, 2010, we have no full-time employees and no part-time employees. We believe we may need to hire three additional employees in the next twelve months. From time-to-time, we anticipate that we may use the services of independent contractors and consultants to support our expansion and business development.
 Our President provides services through his wholly owned corporation, Santeo Financial, which is compensated for these services at $15,000 per month.
 
 Our Facilities.  Royal Quantum has entered into a month-to-month lease agreement for an office space in Calgary, Alberta, Canada.  This lease can be canceled on one month’s written notice. The current lease requires rental payments of approximately $450 (CAD) per month plus applicable taxes.  We believe that our facilities are adequate for our needs and that additional suitable space will be available on acceptable terms as required. We do not own any real estate.
 
 Item 1A. Risk Factors.
 
 Investing in our common stock involves a high degree of risk. Any potential investor should carefully consider the risks and uncertainties described below before purchasing any shares of our common stock. The risks described below are those we currently believe may materially affect us.
 
 Risks Related to our Business:
 
 We derive all our revenues from companies in the oil and natural gas exploration and production industry, a historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of oil and natural gas prices.
 Worldwide political, economic and military events have contributed to oil and natural gas price volatility and are likely to continue to do so in the future. Depending on the market prices of oil and natural gas, oil and natural gas exploration and production companies may cancel or curtail their drilling programs, thereby reducing demand for our services. Oil and natural gas prices have been volatile historically and, we believe, will continue to be so in the future. Many factors beyond our control affect oil and natural gas prices, including:
 
 ·  the cost of exploring for, producing and delivering oil and natural gas;
 ·  the discovery rate of new oil and natural gas reserves;
 ·  the rate of decline of existing and new oil and natural gas reserves;
 ·  available pipeline and other oil and natural gas transportation capacity;
 ·  the ability of oil and natural gas companies to raise capital;
 ·  actions by OPEC, the Organization of Petroleum Exporting Countries;
 ·  political instability in the Middle East and other major oil and natural gas producing regions;
 ·  economic conditions in the United States and elsewhere;
 ·  governmental regulations, both domestic and foreign;
 ·  domestic and foreign tax policy;
 ·  weather conditions in the United States and elsewhere;
  7
  · the pace adopted by foreign governments for the exploration, development and production of their national reserves;
 ·  the price of foreign imports of oil and natural gas; and
 ·  the overall supply and demand for oil and natural gas.
 
 Any prolonged reduction in the overall level of exploration and development activities, whether resulting from changes in oil and natural gas prices or otherwise, can adversely impact us in many ways by negatively affecting:
 
 ·
our revenues, cash flows and profitability;
 ·
our ability to maintain or increase our borrowing capacity;
 ·
our ability to obtain additional capital to finance our business and make acquisitions, and the cost of that capital
 
 Risks Relating to Our Business
 
 Global economic conditions may adversely affect our operating results.
 
 Oil and natural gas prices, and market expectations of potential changes in these prices, significantly impact the level of worldwide drilling and well servicing activities. Oil and natural gas prices steeply declined and the credit markets tightened in late calendar 2008. During this time there was also significant deterioration in the global economic environment. These conditions could have a material adverse effect on our business, financial condition, cash flows and results of operations. The following table depicts the prices for near month delivery contracts for crude oil and natural gas as traded on the NYMEX.
 Natural Gas Priceper Mcf


Oil Price per BblQuarter

High


Low


High


Low2010:Fourth

$
4.61


$
3.29


$
91.51


$
79.49Third

$
4.92


$
3.65


$
82.55


$
71.63Second

$
5.19


$
3.91


$
86.79


$
68.01First

$
6.01


$
3.84


$
83.76


$
71.192009:Fourth

$
5.99


$
4.25


$
81.37


$
69.57Third

$
4.88


$
2.51


$
74.37


$
59.52Second

$
4.45


$
3.25


$
72.68


$
45.88First

$
6.07


$
3.63


$
54.34


$
33.982008:Fourth

$
7.73


$
5.29


$
98.53


$
33.87Third

$
13.58


$
7.22


$
145.29


$
95.71Second

$
13.35


$
9.32


$
140.21


$
100.98First

$
10.23


$
7.62


$
110.33


$
86.99
 
 We have a limited operating history upon which an evaluation of our prospects can be made.
 
 We have recently adopted our current business plan.  Our lack of operating history in our current line of business makes an evaluation of our business and prospects very difficult. Our prospects must be considered speculative, considering the risks, expenses, and difficulties frequently encountered in the establishment of a new business. We cannot be certain that our business will be successful or that we will generate significant revenues and become profitable.
 
 We anticipate that we will need to raise additional capital to continue our operations. Our failure to raise additional capital will significantly affect our ability to fund our proposed activities.
 
 To acquire properties for exploration and development, we will be required to raise additional funds. We do not know if we will be able to acquire additional financing. We anticipate that we will need to spend significant funds on acquiring properties for exploration and development. Our failure to obtain additional funds would significantly limit or eliminate our ability to fund those activities.
  8
   We have incurred a net loss since inception and expect to incur net losses for the foreseeable future.
   As of December 31, 2010, our net loss since inception was $5,472,618. We expect to incur significant operating and capital expenditures and, as a result, we expect significant net losses in the future. We will need to generate significant revenues to achieve and maintain profitability. We may not be able to generate sufficient revenues to achieve profitable operations.
  
 Our future success is highly dependent on the ability of management to locate and acquire oil and gas properties for exploration and development.
 
 The nature of our operations is highly speculative and there is a consequent risk of loss of your investment. The success of our plan of operation will depend to a great extent on the oil and gas properties that we acquire. We cannot assure you that we will be successful in acquiring properties for exploration and development.
 
 The costs to meet our reporting requirements as a public company subject to the Exchange Act of 1934 are substantial and may result in us having insufficient funds to operate our business.
 
 We will incur ongoing expenses associated with professional fees for accounting and legal expenses associated with being a public company. Those fees will be higher if our business volume and activity increases.  Those obligations will reduce our ability to fund our operations and may prevent us from meeting our normal business obligations.
 
 Our auditors have questioned our ability to continue operations as a “going concern.” Investors may lose all of their investment if we are unable to continue operations.
  We hope to obtain revenues from future operations.  In the absence of significant operations, we may seek to raise additional funds to meet our working capital needs principally through the additional sales of our securities.  However, we cannot guarantee that we will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to us. As a result, our auditors believe that substantial doubt exists about our ability to continue operations.
   Risks Related to Owning Our Common Stock
  Our officers, directors and principal shareholders own approximately 43% of our outstanding shares of common stock, allowing these shareholders control matters requiring approval of our shareholders.
 
 Our officers, directors and principal shareholders beneficially own, in the aggregate, approximately 43% of our outstanding shares of common stock.  Our officers, directors and principal shareholders can control matters requiring approval by our security holders, including the election of directors.
  9
   Our common stock may be subject to penny stock regulations which may make it difficult for investors to sell their stock.
  The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks”.  Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the Commission, which specifies information about penny stocks and the nature and significance of risks of the penny stock market.  The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account.  In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.  These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules.  If our common stock becomes subject to the penny stock rules, holders of our shares may have difficulty selling those shares.
 
 Item 3. Legal Proceedings.
 
  No legal proceedings were initiated or served upon the Company in the fiscal year ending December 31, 2010.
 From time to time the Company may be named in claims arising in the ordinary course of business. We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation.  There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
 
 Item 4.(Removed and Reserved)
 
 Item 4 has been removed and reserved for future use.
 
 PART II
 
 Item 5.Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
 
 Market Information
 
 Our common stock is listed on the Over the Counter Bulletin Board (OTC.BB) under the symbol "RYQG". The following table sets forth, for the fiscal quarters indicated, the high and low closing bid prices per share of our common stock, as derived from quotations provided by Pink Sheets, LLC. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
 
 Quarter ended:

High

Low31-Dec-10

0.029

0.02630-Sep-10

0.028

0.02630-Jun-10

0.061

0.05631-Mar-10

0.111

0.09631-Dec-09

0.109

0.09030-Sep-09

0.052

0.05030-Jun-09

0.167

0.14731-Mar-09

0.052

0.044
 
  10
  Reports to Security Holders
 
 We are a reporting company with the Securities and Exchange Commission, or SEC.The public may read and copy any materials filed with the Securities and Exchange Commission at the Security and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330.  The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission. The address of that site is http://www.sec.gov.
 
 We had 50,182,338 shares of common stock issued and outstanding as of December 31, 2010, which were held by approximately 107 shareholders.
 
 There are 1,200,000 shares available to be purchased under option at $0.25/share until March 8, 2011 pursuant to the private placement financing completed in September 2009.  There are 656,000 shares available to be purchased under option at $0.25/share until July 15, 2011 pursuant to the private placement financing completed in January 2010.  There are 656,000 shares available to be purchased under option at $0.25/share until September 26, 2011 pursuant to the private placement financing completed in March 2010.  There are 656,000 shares available to be purchased under option at $0.25/share until February 1, 2012 pursuant to the private placement financing completed in August 2010.  There are 436,000 shares available to be purchased under option at $0.25/share until May 16, 2012 pursuant to the private placement financing completed in November 2010.
 
 The table below shows all options granted and expired during the fiscal year ended December 31, 2010:
 
 Warrants Outstanding


Weighted Average Exercise PriceBalance, December 31, 2009


4,320,000


$
0.23Warrants granted


2,404,000


$
0.25Warrants expired


3,120,000


$
0.23Balance, December 31, 2010


3,604,000


$
0.24
 
 There are no outstanding shares of our common stock that we have agreed to register under the Securities Act for sale by security holders.
 
 Dividend Policy
 
 We have never declared any cash dividends with respect to our common stock. Future payment of dividends is within the discretion of our board of directors and will depend on our earnings, capital requirements, financial condition and other relevant factors. Although there are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our common stock, we presently intend to retain future earnings, if any, for use in our business and have no present intention to pay cash dividends on our common stock.
 
 Recent Sales of Unregistered Securities
 
 There have been no sales of unregistered securities within the last three (3) years which would be required to be disclosed pursuant to Item 701 of Regulation S-B, except for the following:
 
 During the period ending June 30, 2009, Santeo Financial Corporation agreed to forgive $15,000 of debt owed by the Company in exchange for a 4% interest in the Company’s share of the net revenue received from the Gleason #4-16 well.  The $15,000 payable was charged off and credited to equity.
 
  11
  During the period ending June 30, 2009 the company raised a $180,000 for the drilling and completion of the Gleason #4-16 well through the issuance of 72 units.  The Company earned a 36% interest in the well with 67% of the company’s net revenue received being allocated proportionally to the unit holders.  Each of the 72 units was priced at $2,500 per unit totaling $180,000 cash and consisted of 5,000 restricted common shares and 10,000 share purchase options at $0.25 per share with an expiration date of November 15, 2010. The Company issued a total of 360,000 shares and 720,000 options related to the private placement.  The unit holder also has the option to surrender their interest in the well back to the company in exchange for 5,000 restricted common shares per unit surrendered for a period of 36 months from the date of receipt of the first revenue check paid to the unit holders.
 
 During the period ending September 30, 2009 the company raised $137,500 for the drilling of the Bond #1-18 through the issuance of 55 units priced at $2,500 per unit.  Each unit consisted of 10,000 restricted common shares and 20,000 share purchase options at $0.25 per share with an expiration date of March 8, 2011. The Company issued a total of 550,000 shares and 1,100,000 options related to the private placement.  The unit holder has the option to surrender their interest in the well back to the company in exchange for 10,000 restricted common shares per unit surrendered for a period of 36 months from the date of receipt of the first revenue check paid to the unit holders.  The company acquired a 20% interest in this well with 60% of the revenue received from this well being distributed proportionately to the investors.  The company paid a 10% commission to a 3rd party on the portion of the funds raised by the 3rd party relating to the Bond well.  This commission totaled $12,500 which was converted to an interest in the well.  As per the terms of the commission agreement the company issued 50,000 shares valued at $12,500 to the 3rd party for consulting expenses related to the Bond financing and 100,000 options expiring March 8, 2011.
 
 In January 2010 the company raised $150,000 for the drilling of the Bond #2-18 through the issuance of 60 units priced at $2,500 per unit.  Each unit consisted of 5,000 restricted common shares and 10,000 share purchase options at $0.25 per share with an expiration date of July 2011. The Company issued a total of 300,000 shares and 600,000 options related to the private placement.  The unit holder has the option to surrender their interest in the well back to the company in exchange for 5,000 restricted common shares per unit surrendered for a period of 36 months from the date of receipt of the first revenue check paid to the unit holders.  The company acquired a 20% interest in this well with 60% of the revenue received from this well being distributed proportionately to the investors.  The company paid a 10% commission to a 3rd party on the portion of the funds raised by the 3rd party relating to the Bond well.  This commission totaled $14,000 which was converted to an interest in the well.  As per the terms of the commission agreement the company issued 28,000 shares valued at $14,000 to the 3rd party for consulting expenses related to the Bond financing and 56,000 options expiring in July 2011.
 
 In March 2010 the company raised $150,000 for the drilling of the Sattler #1-18 through the issuance of 60 units priced at $2,500 per unit.  Each unit consisted of 5,000 restricted common shares and 10,000 share purchase options at $0.25 per share with an expiration date of September 2011. The Company issued a total of 300,000 shares and 600,000 options related to the private placement.  The unit holder has the option to surrender their interest in the well back to the company in exchange for 5,000 restricted common shares per unit surrendered for a period of 36 months from the date of receipt of the first revenue check paid to the unit holders.  The company acquired a 20% interest in this well with 60% of the revenue received from this well being distributed proportionately to the investors.  The company paid a 10% commission to a 3rd party on the portion of the funds raised by the 3rd party relating to the Bond well.  This commission totaled $14,000 which was converted to an interest in the well.  As per the terms of the commission agreement the company issued 28,000 shares valued at $14,000 to the 3rd party for consulting expenses related to the Bond financing and 56,000 options expiring in September 2011.
 
 In August 2010 the company raised $150,000 for the drilling of the Bond #3-18 through the issuance of 60 units priced at $2,500 per unit.  Each unit consisted of 5,000 restricted common shares and 10,000 share purchase options at $0.25 per share with an expiration date of February 2012. The Company issued a total of 300,000 shares and 600,000 options related to the private placement.  The unit holder has the option to surrender their interest in the well back to the company in exchange for 5,000 restricted common shares per unit surrendered for a period of 36 months from the date of receipt of the first revenue check paid to the unit holders.  The company acquired a 25% interest in this well with 60% of the revenue received from this well being distributed proportionately to the investors.  The company paid a 10% commission to a 3rd party on the portion of the funds raised by the 3rd party relating to the Bond well.  This commission totaled $14,000 which was converted to an interest in the well.  As per the terms of the commission agreement the company issued 28,000 shares valued at $14,000 to the 3rd party for consulting expenses related to the Bond financing and 56,000 options expiring in February 2012.
  12
  
 In December 2010 the company raised $100,000 for the drilling of the WC #1-18 through the issuance of 60 units priced at $2,500 per unit.  Each unit consisted of 5,000 restricted common shares and 10,000 share purchase options at $0.25 per share with an expiration date of May 2012. The Company issued a total of 200,000 shares and 400,000 options related to the private placement.  The unit holder has the option to surrender their interest in the well back to the company in exchange for 5,000 restricted common shares per unit surrendered for a period of 36 months from the date of receipt of the first revenue check paid to the unit holders.  The company acquired a 25% interest in this well with 60% of the revenue received from this well being distributed proportionately to the investors.  The company paid a 10% commission to a 3rd party on the portion of the funds raised by the 3rd party relating to the Bond well.  This commission totaled $9,000 which was converted to an interest in the well.  As per the terms of the commission agreement the company issued 18,000 shares valued at $9,000 to the 3rd party for consulting expenses related to the Bond financing and 36,000 options expiring in May 2012.
 
 The foregoing securities were offered and sold without registration under the Securities Act to sophisticated investors who had access to all information that would have been in a registration statement in reliance on the exemption provided by Section 4(2) under the Securities Act and Regulation D there under.
 
 Item 6.Selected Financial Data
 
 Not applicable to Royal Quantum Group, Inc., a smaller reporting company.
 
 Item 7. Management’s Discussion and Analysis of Financial Condition or Plan of Operation.
 
 For the year ended December 31, 2010 as compared to the year ended December 31, 2009
 
 Results of Operations.
 
 Revenues.The Company had revenue for the year ended December 31, 2010 of $448,564 and production costs of $153,248, as compared to the year ended December 31, 2009 of revenue $48,265 and production costs of $7,702.
 
 Operating Expenses and Net Loss.The Company’s net loss was $253,166 for the year ended December 31, 2010.  This was comprised of general and administrative expenses of $17,229, consulting fees in the amount of $180,345, shareholder royalty expense of $235,645, professional fees in the amount of $69,170 and rent expenses of $5,509. The Company also had $40,584 of interest expense.  In comparison to the year ended December 31, 2009, the Company’s net loss of $342,336 was comprised of general and administrative expenses of $20,352, consulting fees in the amount of $198,845, shareholder royalty expense of $28,822, professional fees of $57,539 and rent expense of $3,982.  The Company also had $73,359 in total other expenses, including $41,865 in foreign currency exchange loss and $31,494 net interest.
 
 Liquidity and Capital Resources.The Company had cash of $205,102 as of December 31, 2010, as compared to $12,022 as of December 31, 2009.  As of the year ended December 31, 2010, the Company also had fixed assets of $186, represented by furniture and fixtures of $1,851 less accumulated depreciation of $1,665 as compared to the year ended December 31, 2009, the Company had fixed assets of $556, represented by furniture and fixtures of $1,851 less accumulated depreciation of $1,295.
 
 For the year ended December 31, 2010, the Company had $846,581 in total current liabilities, which was represented by $171,220 in accounts payable, $46,865 in royalties payable to stockholders, $373,977 in demand notes payable due, $234,674 in related party accounts payable, and $19,845 in shareholder loans.  This is in comparison to the year ended December 31, 2009, the Company had $656,706 in total current liabilities, which was represented by $113,160 in accounts payable, $21,568 in royalties payable to stockholders $309,648 in demand notes payable due, $192,485 in related party accounts payable, and $19,845 in shareholder loans.
 
 The Company had long term liabilities of $10,980 for the year ended December 31, 2010 which consisted of an asset retirement obligation. The Company had total liabilities of $857,561.  This is in comparison to the year ended December 31, 2009, where the Company had total liabilities of $667,686.  The Company is not aware of any other known trends, events or uncertainties which may affect its future liquidity.
  13
  
 Our Plan of Operation for the Next Twelve Months.   Our focus is to acquire oil and gas and resource properties for exploration and development with the intent to bring the projects to feasibility at which time we will either contract out the operations or joint venture the project to qualified interested parties.
 
 We had cash of $205,102 as of December 31, 2010. In the opinion of management, our available funds will not satisfy our working capital requirements for the next twelve months.
 
 Our forecast for the period for which our financial resources will be adequate to support our operations involves risks and uncertainties and actual results could fail as a result of a number of factors. Besides generating revenue from our current operations, we will need to raise additional capital to expand our operations to the point at which we are able to operate profitably. Other than anticipated increases in the legal and accounting costs of becoming a public company, we are not aware of any other known trends, events or uncertainties, which may affect our future liquidity.
 
 In the event that we experience a shortfall in our capital, we intend to pursue capital through public or private financing as well as borrowings and other sources, such as our officers, directors and principal shareholders. We cannot guaranty that additional funding will be available on favorable terms, if at all.  If adequate funds are not available, then our ability to expand our operations may be significantly hindered. If adequate funds are not available, we believe that our officers, directors and principal shareholders will contribute funds to pay for our expenses to achieve our objectives over the next twelve months. However, our officers, directors and principal shareholders are not committed to contribute funds to pay for our expenses.
 
 Our belief that our officers, directors and principal shareholders will pay our expenses is based on the fact that our officers, directors and principal shareholders collectively own approximately 43% of our outstanding common stock. We believe that our officers, directors and principal shareholders will continue to pay our expenses as long as they maintain their ownership of our common stock. However, our officers, directors and principal shareholders are not committed to contribute additional capital.
 
 We are not currently conducting any research and development activities.  We do not anticipate conducting such activities in the near future. We do not anticipate that we will purchase or sell any significant equipment. In the event that we expand our property interests or holdings, then we may need to hire additional employees or independent contractors as well as purchase or lease additional equipment.
  Off-Balance Sheet Arrangements.
   We have no off-balance sheet arrangements.
  Critical Accounting Policy and Estimates.Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.
  Cash and Cash Equivalents
  The Company considers all highly liquid debt instruments and other short-term investments with a maturity date of three months or less, when purchased, to be cash equivalents.
  14
   Drilling and Production Costs
  Costs incurred to purchase, lease or otherwise acquire property are capitalized when incurred. General exploration costs and costs to maintain rights and leases are expensed as incurred. Management periodically reviews the recoverability of the capitalized oil and gas properties. Management takes into consideration various information including, but not limited to, historical production records taken from previous oil and gas producing operations, results of exploration activities conducted to date, estimated future prices and reports and opinions of outside consultants. When it is determined that a project or property will be abandoned, or its carrying value has been impaired, a provision is made for any expected loss on the project or property.
  Use of Estimates
  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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
 Fair Value of Financial Instruments
  Pursuant to ASC No. 820, Fair Value Measurements and Disclosures, the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of December 31, 2010. The Company’s financial instruments consist of payables and due to related party.  The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of these financial instruments.
 
 Item 7.A Quantitative and Qualitative Disclosure About Market Risk
 
 Not applicable.
 
 Item 8. Financial Statements and Supplementary Data
 
 The financial statements required by Item 8 are presented in the following order:
 
 1.
Report of Independent Registered Public Accounting Firms
 2.
Financial Statements
 3.
Balance Sheet
 4.
Statement of Operations
 5.
Statement of Cash Flows
 6.
Statement of Changes in Stockholders’ Equity (Deficit)
 7.
Notes to Financial Statements
 8.
Supplemental Oil & Gas Disclosures
   15
 ROBISON, HILL & CO.



Certified Public AccountantsA PROFESSIONAL CORPORATIONBRENT M. DAVIES, CPADAVID O. SEAL, CPAW. DALE WESTENSKOW, CPABARRY D. LOVELESS, CPASTEPHEN M. HALLEY, CPA
 
 
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the Board of Directors and
 Stockholders of Royal Quantum Group, Inc.
 
 We have audited the accompanying balance sheets of Royal Quantum Group, Inc. as of December 31, 2010 and 2009, and the related statements of income, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2010. Royal Quantum Group, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
 
 We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Royal Quantum Group, Inc. as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company has incurred net losses of approximately $5,473,000 and has a working capital deficit, which raises substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
 
 
 /s/ Robison, Hill & Co.
 Robison, Hill & Co.
 Certified Public Accountants
 
 Salt Lake City, UT
 April 13, 2011
  16
  ROYAL QUANTUM GROUP, INC.CONDENSED BALANCE SHEETSDecember 31,


December 31,2010


2009ASSETSCurrent assets:Cash and cash equivalents

$
205,102


$
12,022Accounts receivable


51,665



31,851Total current assets


256,767



43,873Property and equipment:Furniture and fixtures


1,851



1,851Less: accumulated depreciation


(1,665
)


(1,295
)Total property and equipment, net


186



556Other assets:Proved oil and gas properties, full cost method


462,662



255,868Less: accumulated depletion


(99,363
)


(5,657
)Unproved oil and gas properties


7,507



27,056Total other assets


370,806



277,267Total assets

$
627,759


$
321,696
    17
   ROYAL QUANTUM GROUP, INC.CONDENSED BALANCE SHEETS(Continued)December 31,


December 31,2010


2009LIABILITIES & STOCKHOLDERS' DEFICITCurrent liabilities:Accounts payable

$
171,220


$
113,160Royalties due stockholders


46,865



21,568Related party payables


234,674



192,485Notes payable


373,977



309,648Stockholder loans


19,845



19,845Total current liabilities


846,581



656,706Long-term liabilities:Asset retirement obligation


10,980



10,980Total long-term liabilities


10,980



10,980Total liabilities


857,561



667,686Stockholders' Deficit:Preferred stock, par value $.001authorized 10,000,000 sharesno shares issued at December 31, 2010 and


-



-December 31, 2009Common stock, par value $.001Issued 50,182,338 shares at December 31, 2010and 48,980,338 shares at December 31, 2009


50,182



48,980Paid-in capital


5,217,642



4,824,482Accumulated deficit


(5,472,618
)


(5,219,452
)Other comprehensive Gain/(loss)


(25,008
)


-Total stockholders' deficit


(229,802
)


(345,990
)Total liabilities and stockholders' deficit

$
627,759


$
321,696The accompanying notes are an integral part of these financial statements
   18
   ROYAL QUANTUM GROUP, INC.CONDENSED STATEMENTS OF OPERATIONSFor the year endedDecember 31,2010


2009Oil revenue

$
448,564


$
48,265Operating expensesProduction costs


153,248



7,702Royalty expense


235,645



28,822Consulting fees


-



17,336Related party consulting fees


180,345



181,509Related Party Rent Expense


5,509



3,982Professional fees


69,170



57,539General & administrative


17,229



20,352Total operating expenses


(661,146
)


(317,242
)Loss from operations


(212,582
)


(268,977
)Other income (expenses)Foreign exchange gain (loss)


-



(41,865
)Interest expense


(40,584
)


(31,494
)Total other income (expense)


(40,584
)


(73,359
)Net loss

$
(253,166
)

$
(342,336
)Loss per share - Basic and diluted

$
(0.01
)

$
(0.01
)Weighted average shares outstanding


49,703,215



48,431,297The accompanying notes are an integral part of these financial statements
   19
   ROYAL QUANTUM GROUP, INC.CONDENSED STATEMENTS OF CASH FLOWSFor the year endedDecember 31,2010


2009CASH FLOWS FROM OPERATING ACTIVITIES:Net Loss

$
(253,166
)

$
(342,336
)Adjustments to reconcile net income (loss) toNet cash provided by (used in) operating activities:Depreciation


370



370Depletion


93,707



5,657Stock issued for services


-



12,500Impairment of long term assets


-



1Increase (decrease) in accounts receivable


(19,814
)


(31,851
)Increase (decrease) in accrued interest on notes payable


40,305



31,494Increase (decrease) in accounts payable


58,060



49,179Increase (decrease) in royalties due stockholders


25,298



-Increase (decrease) in related party accounts payable


42,190



109,223Net cash provided by (used in) operating activities


(13,050
)


(165,763
)CASH FLOWS FROM INVESTING ACTIVITIES:Investment in oil and unproven gas property interest


-



(27,056
)Investment in oil and gas properties


(342,885
)


(244,887
)Net cash (used in) investing activities


(342,885
)


(271,943
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from sale of units consisting of common stockand oil and gas royalties


550,000



-Stock Issued in Exchange for Cash


-



317,500Net cash provided by financing activities


550,000



317,500Effect of exchange rates on cash


(985
)


41,865Net increase in cash and cash equivalents


193,080



(78,341
)Cash and cash equivalents - beginning of period


12,022



90,363Cash and cash equivalents - end of period

$
205,102


$
12,022SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the year for:Interest

$
-


$
-Income taxes

$
-


$
-SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTINGAND FINANCING ACTIVITIES:Issuance of participating units for services rendered inconnection with private offerings (See Notes 3 and 7)

$
51,000


$
-Stock issued for services

$
-


$
12,500Related party payable converted to paid in capital

$
-


$
15,000The accompanying notes are an integral part of these financial statements
   20
  Royal Quantum Group, Inc.Statement of Changes in Stockholders' Equity (Deficit)For the years ended December 31, 2010 and 2009AdditionalCommon Stock





Paid-in


AccumulatedShares


Amount


Capital


Deficit


TotalsBalance,December 31, 2008


48,020,338


$
48,020


$
4,480,442


$
(4,877,116
)

$
(348,654
)Issuance of common stock for cash


910,000



910



316,590



-



317,500Cancellation of debt due to related party (Santeo)


-



-



15,000



-



15,000Issued stock in exchange for services


50,000



50



12,450



-



12,500Net loss for period


-



-







(342,336
)


(342,336
)Balance, December 31, 2009


48,980,338


$
48,980


$
4,824,482


$
(5,219,452
)


(345,990
)Issuance of common stock for cash


1,202,000



1,202



393,160



-



394,362Comprehensive loss on currency exchange


-



-



-



-



(25,008
)Net loss for period


-



-



-



(253,166
)


(253,166
)Balance, December 31, 2010


50,182,338


$
50,182


$
5,217,642


$
(5,472,618
)

$
(229,802
)The accompanying notes are an integral part of these financial statements
  21
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  
 NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
 
 Royal Quantum Group, Inc. (“the Company”) was incorporated under the laws of the State of Nevada on October 22, 1996 under the name PSM Corp.  The Company changed its emphasis to the exploration and development of natural resources and on November 23, 2005 changed its name to Royal Quantum Group, Inc.
 
 The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies.  Actual results may differ from those estimates. The Company has made assumptions in valuing its oil and natural gas reserves, which may affect the amounts at which oil and natural gas properties are recorded.   The Company has also computed the components of the investments units sold in its private offerings using assumptions such as volatility, expected life and the risk-free interest rate (See Note 7).
 
 Going Concern
 
 The Company’s financial statements have been prepared on a going concern basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business.  The Company has incurred substantial losses from operations and has a working capital deficit, which history and circumstance raise substantial doubt as to the Company’s ability to continue as a going concern. The Company had a net loss of $253,166 for the year ended December 31, 2010 and an accumulated deficit at December 31, 2010 of $5,472,618.  The Company has raised sufficient funds through the private sale of participating units to acquire working interests in six oil and gas wells. Four of the wells are currently producing as of December 31, 2010.  Total gross revenue generated from these four wells during the year ended December 31, 2010 amounted to $448,564. It is anticipated that the fifth and sixth wells will be on-line and producing by mid 2011. Although the Company has been successful in raising the necessary funds to acquire these working interests, and has been able to generate net revenue from these wells, there is no assurance that these wells will continue to generate positive cash flow. Currently the net revenue generated from these wells is not sufficient to fund all of the Company’s operating costs. The Company is seeking to raise additional funds to acquire other oil and gas properties; however, there is no assurance that the necessary funds will be raised or even if the funds are raised, that the working interest acquired in the future will generate sufficient revenue to assist in the financing of the Company’s operations.  Until such funding is obtained and/or positive results from planned property development materialize, doubt about its ability to continue as a going concern may remain.
 
 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Cash and Cash Equivalents
 
 For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
 
 Reclassifications
 Certain reclassifications have been made in the 2009 financial statements to conform with the 2010 presentation.
 
  22
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  Use of Estimates
 
 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
 Accounts Receivable
 
 Accounts receivable are reported at the customer’s outstanding balances less any allowance for doubtful accounts.  Interest is not accrued on overdue accounts receivable.
 
 Allowance for Doubtful Accounts
 
 An allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses.  Management determines the adequacy of the allowance based on historical write-off percentages and information collected from individual customers.  Accounts receivable are charged off against the allowance when collectibility is determined to be permanently impaired.  Management has determined that as of December 31, 2010, no allowance is required.
 
 Revenue Recognition
 
 Oil and gas production revenues are recognized at the point of sale.
 
 Oil and Gas Properties
 
 The Company uses the full cost method of accounting under which all costs incurred in the acquisition, exploration and development of oil and natural gas reserves, including costs related to unsuccessful wells and estimated future site restoration and abandonment, are capitalized until such time as the aggregate of such costs net of accumulated depletion and oil and natural gas related deferred income taxes, on a country-by-country basis, equals the sum of 1) the discounted present value (at 10%), using prices as of the end of each reporting period on a constant basis, of the Company’s estimated future net cash flows from estimated production of proved oil and natural gas reserves as determined by independent petroleum consultants, less estimated future expenditures to be incurred in developing and producing the proved reserves but excluding future cash outflows associated with settling asset retirement obligations accrued on the balance sheet; plus 2) the cost of major development projects and unproven properties not subject to depletion, if any; plus 3) the lower of cost or estimated fair value of unproven properties included in costs subject to depletion; less 4) related income tax effects.  If net capitalized costs exceed this limit, the excess is expensed unless subsequent market price changes eliminate or reduce the indicated write-down in accordance with U.S. SEC Staff Accounting Bulletin (“SAB”) Topic 12D.  Depletion is computed using the units-of-production method whereby capitalized costs, net of estimated salvage values, plus estimated future costs to develop proved reserves and satisfy asset retirement obligations, are amortized over the total estimated proved reserves on a country-by-country basis.  Investments in major development projects are not depleted until either proved reserves are associated with the projects or impairment has been determined.
 
  23
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  Property and Equipment
 
 Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided over the five year estimated useful life of the assets computed on the straight-line method.
 
 Gains and losses resulting from sales and dispositions of property and equipment are included in current operations. Maintenance and repairs are charged to operations as incurred. Depreciation expense for the year ended December 31, 2010 and 2009 amounted $370 and $370, respectively.
 
 Foreign Currency Translation
 
 The Company's primary functional currency is the U.S. dollar.  For foreign operations whose functional currency is the local foreign currency, balance sheet accounts are translated at exchange rates in effect at the end of the year and income statement accounts are translated at average exchange rates for the period. Translation gains and losses are included as a separate component of stockholders’ deficit.
 
 Concentrations of Credit Risk
 
 The Company’s revenue is dependent upon the successful efforts of the respective well’s operator. Currently production from the Company’s three wells is sold to one customer. The Company had cash and cash equivalents in the amount of $205,102 and $12,022 as of December 31, 2010 and 2009 all of which was fully covered by federal depository insurance.
 
 Loss per Share of Common Stock
 
  The Company reports earnings (loss) per share in accordance with Accounting Standards Codification “ASC” Topic 260-10, "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since the effect of the assumed conversion of warrants and debt to purchase common shares would have an anti-dilutive effect. Potential common shares as of December 31, 2010 that have been excluded from the computation of diluted net loss per share include warrants to purchase 3,604,000 shares of the Company’s common stock and Unit holders’ option to convert their respective oil revenue interests into a total 1,202,000 shares of the Company’s common stock.
 
  24
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  Asset Retirement Obligations
 
 The Surface Mining Control and Reclamation Act of 1977 and similar state statutes require mine properties to be restored in accordance with specified standards. Accounting Standards Codification (“ASC”) Topic 410-20 requires recognition of an asset retirement obligation (“ARO”) for eventual reclamation of disturbed acreage remaining after mining has been completed. The Company records its reclamation obligations on a permit-by-permit basis using requirements as determined by the Office of Surface Mining of the U.S. Department of the Interior (“OSM”). The liability is calculated based upon the reclamation activities remaining after coal removal ceases, assuming that reclamation activities have been contemporaneous within state and federal guidelines during mining. A liability is recorded for the estimated future cost that a third party would incur to perform the required reclamation and mine closure discounted at the Company’s credit-adjusted risk-free rate. A corresponding increase in the asset carrying value of mineral rights is also recorded. The ARO asset is amortized on the units-of-production method over the proven and probable reserves associated with that permit.
 
 Long-Lived Assets
 
 The Company accounts for its long-lived assets in accordance with ASC No. 360, “Property, Plant and Equipment.” ASC No. 360 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate.  The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition.  If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value. As of December 31, 2010, the Company does not believe there has been any impairment of its long-lived assets.
 
 Fair Value of Financial Instruments
 
 Pursuant to ASC No. 820, “Fair Value Measurements and Disclosures”, the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of December 31, 2010. The Company’s financial instruments consist of cash, accounts receivables, payables, and other obligations.  The Company considers the carrying value of such amounts in the financial statements to approximate their fair value.
 
 Income Taxes
 
 The Company accounts for its income taxes under the provisions of ASC No. 740 ”Income Taxes”. The method of accounting for income taxes under ASC No. 740 is an asset and liability method. The asset and liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and   liabilities.
 
  25
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  Recent Accounting Pronouncements
 
 In December 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-29 (ASU 2010-29), Business Combinations (Topic 805) – Disclosure of Supplementary Pro Forma Information for Business Combinations. This Accounting Standards Update requires a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. The amendments in this Update affect any public entity as defined by Topic 805 that enters into business combinations that are material on an individual or aggregate basis. The amendments in this Update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010.  Early adoption is permitted. The Company does not expect the provisions of ASU 2010-29 to have a material effect on its financial position, results of operations or cash flows.
 
 In August 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update
 2010-22 (ASU 2010-22), Accounting for Various Topics - Technical Corrections to SEC Paragraphs - An announcement made by the staff of the U.S. Securities and Exchange Commission. This Accounting Standards Update amends various SEC paragraphs based on external comments received and the issuance of SAB 112, which amends or rescinds portions of certain SAB topics. The Company does not expect the provisions of ASU 2010-22 to have a material effect on its financial position, results of operations or cash flows.
 
 In August 2010, the FASB issued ASU 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules: Amendments to SEC Paragraphs Pursuant to Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies. The Company does not expect the provisions of ASU 2010-21 to have a material effect on its financial position, results of operations or cash flows.
 
 InJuly 2010, the FASB issued ASU 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses.The amendments in this Update are to provide financial statement users with greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables. The disclosures about activity that occurs during the reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The Company does not expect the provisions of ASU 2010-20 to have a material effect on its financial position, results of operations or cash flows.
 
 InMay 2010, the FASB issued ASU 2010-19, Foreign Currency (Topic 830): Multiple Foreign Currency Exchange Rates.The amendments in this Update are effective for reported balances in an entity’s financial statements that differ from their underlying U.S. dollar denominated values under Subtopic 830-30-S99-1 occurring in the first interim or annual period ending on or after March 15, 2010. The amendments are to be applied retrospectively. The adoption of ASU 2010-19 did not have a material effect on the Company’s financial position, results of operations or cash flows.
 
  26
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  NOTE 3 - INVESTMENT IN OIL & GAS PROPERTY
 
 During the quarter ended June 30, 2009, the Company acquired a 28.80% working interest in the Gleason #4-16 well in Oklahoma. The Company raised a total of $180,000 for the drilling and completion of the Gleason #4-16 well through the issuance of 72 units.  Each of the 72 units was priced at $2,500 per unit totaling $180,000 cash and consisted of 5,000 restricted common shares, a pro rata share of 60% of the net revenue generated from the production of the well, and warrants to purchase 10,000 shares of the Company’s common stock at $0.25 per share with an expiration date of November 15, 2010. The unit holder also has the option to surrender their pro rata interest in the well back to the Company in exchange for 5,000 restricted common shares per unit surrendered for a period of 36 months from the date of receiving their first revenue check. During 2009, the Company capitalized a total of $167,260 in acquisition and exploration costs relating to the Gleason #4-16 well.
 
 Santeo Financial Corporation  (a related party) agreed to forgive $15,000 of debt owed by the Company in exchange for a 4% interest in the Company’s share of the net revenue received from the Gleason #4-16 well.  During 2009, the $15,000 was written off and recorded as additional paid in capital.
 
 During the period ending September 30, 2009 the company acquired a 20% interest in the drilling and development of the Bond #1-18 well in Oklahoma. The Company raised $137,500 through the sale of 55 units. Each of the 55 units was priced at $2,500 per unit totaling $137,500 cash and consisted of 10,000 restricted common shares, a pro rata share of 60% of the net revenue generated from the production of the well, and warrants to purchase 20,000 shares of the Company’s common stock at $0.25 per share with an expiration date of July 2011. Each unit holder was granted the option to surrender their pro rata interest in the revenue from the well back to the Company in exchange for 10,000 restricted common shares per unit surrendered. This option is exercisable for a period of 36 months from the date that the investor receives the first revenue check. Of the $137,500 received, the Company allocated $36,412 towards the value of the investors’ 60% interest in the Company’s share of the well’s net revenue and credited this amount against the $117,440 it paid and capitalized towards the drilling cost of the well. A consulting fee in connection with offering was paid through the issuance of 5 units. The capitalized cost of the well was further reduced by the Consultant’s allocated share in the well’s net revenue of $3,400.
 
 In January 2010, the Company acquired a 20% working interest in the Bond #2-18 well in Oklahoma.  The Company raised a total of $150,000 for the drilling and completion of the Bond #2-18 well through the issuance of 60 units.  Each of the 60 units was priced at $2,500 per unit totaling $150,000 cash and consisted of 5,000 restricted common shares, a pro rata share of 60% of the net revenue generated from the production of the well, and warrants to purchase 10,000 shares of the Company’s common stock at $0.25 per share with an expiration date of July 2011. Each unit holder was granted the option to surrender their pro rata interest in the revenue from the well back to the Company in exchange for 5,000 restricted common shares per unit surrendered. This option is exercisable for a period of 36 months from the date that the investor receives the first revenue check. Of the $150,000 received, the Company allocated $36,412 towards the value of the investors’ 60% interest in the Company’s share of the well’s net revenue and credited this amount against the $77,151 it paid and capitalized towards the drilling cost of the well. A consulting fee in connection with offering was paid through the issuance of 5.6 units. The capitalized cost of the well was further reduced by the Consultant’s allocated share in the well’s net revenue of $3,400.
 
  27
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  In March 2010, the Company raised a total of $150,000 for the drilling and completion of a 20% participation in the Sattler #1 well through the issuance of 60 units.  Each of the 60 units was priced at $2,500 per unit totaling $150,000 cash and consisted of 5,000 restricted common shares, a pro rata share of 60% of the net revenue generated from the production of the well, and warrants to purchase 10,000 shares of the Company’s common stock at $0.25 per share with an expiration date of September 2011. Each unit holder was granted the option to surrender their pro rata interest in the revenue from the well back to the company in exchange for 5,000 restricted common shares per unit surrendered. This option is exercisable for a period of 36 months from the date the investor receives the first revenue check. Of the $150,000 received, the Company allocated $36,412 towards the value of the investors’ 60% interest in the Company’s share of the well’s net revenue and credited this amount against the $100,089 it has currently paid and capitalized towards the drilling cost of the well. A consulting fee in connection with offering was paid through the issuance of 5.6 units. The capitalized cost of the well was further reduced by the Consultant’s allocated share in the well’s net revenue of $3,400.
 
 In August 2010 the Company closed a private placement unit funding of 60 units totaling $150,000 for a 25% participation in the Bond #3-18 well and for working capital.  60% of the Company’s net revenue received from the Bond #3-18 is allocated proportionally to the unit holders.  Each of the 60 units was priced at $2,500 per unit for gross proceeds totaling $150,000 and consisted of 5,000 restricted common shares and 10,000 share purchase options at $0.25 per share with an expiration date of February 15, 2012. The Company issued a total of 300,000 shares and 600,000 options related to the private placement.  The unit holder also has the option to surrender their interest in the well back to the Company in exchange for 5,000 restricted common shares per unit surrendered for a period of 36 months from the date of receipt of the first revenue check paid to the unit holders.  Of the $150,000 received, the Company allocated $38,945 towards the value of the investors’ 60% interest in the Company’s share of the well’s net revenue and credited this amount against the $90,446 it has currently capitalized towards the drilling cost of the well. A consulting fee in connection with offering was paid through the issuance of 5.6 units. The capitalized cost of the well was further reduced by the Consultant’s allocated share in the well’s net revenue of $3,635.  The Company’s 5.6 units issued to the consultant for commission were valued at $14,000.  The $14,000 was converted to a proportionate interest in the private placement, resulting in the issuance of an additional 28,000 restricted shares and 56,000 options.
 
 In December 2010 the Company closed a private placement unit funding of 40 units totaling $100,000 for a 25% participation in the WC#1-18 well and for working capital.  60% of the Company’s net revenue received from the WC #1-18 is allocated proportionally to the unit holders.  Each of the 60 units was priced at $2,500 per unit for gross proceeds totaling $100,000 and consisted of 5,000 restricted common shares and 10,000 share purchase options at $0.25 per share with an expiration date of May 16, 2012. The Company issued a total of 200,000 shares and 436,000 options related to the private placement.  The unit holder also has the option to surrender their interest in the well back to the Company in exchange for 5,000 restricted common shares per unit surrendered for a period of 36 months from the date of receipt of the first revenue check paid to the unit holders.  Of the $100,000 received, the Company allocated $30,675 towards the value of the investors’ 60% interest in the Company’s share of the well’s net revenue and credited this amount against the $94,747 it has currently capitalized towards the drilling cost of the well. A consulting fee in connection with offering was paid through the issuance of 3.6 units. The capitalized cost of the well was further reduced by the Consultant’s allocated share in the well’s net revenue of $2,761.  The Company’s 3.6 units issued to the consultant for commission were valued at $9,000.  The $9,000 was converted to a proportionate interest in the private placement, resulting in the issuance of an additional 18,000 restricted shares and 36,000 options.
 
 As of December 31, 2010, the Company’s accrued asset retirement obligation totaled $10,980 that was included in the capitalized cost of the oil and gas properties.  Depletion expense for the year ended December 31, 2010 and 2009 amounted to $93,707 and $5,657, respectively.
  28
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  NOTE 4 - RELATED PARTY TRANSACTIONS
 
 The Company has entered into a month-to-month lease agreement with Trio Gold for an office in Calgary, Alberta, Canada. Trio Gold’s President is the father of Ron Ruskowsky, the President and CEO of the Company.  This lease can be canceled on one month’s written notice. The current lease requires rental payments of approximately $450 per month plus applicable taxes.  The Company incurred rent expense of $5,509 in 2010 as compared to $3,981 for the year ended 2009.
 
 The Company’s President provides services through a consulting agreement that the Company has with Santeo Financial for $15,000 a month. The $15,000 monthly fee is accrued by the Company and is reduced by amounts actually paid. As of December 31, 2010, the Company owed Santeo Financial $229,693.  Consulting fees expensed during the year ended December 31, 2010 and 2009 amounted to $180,345 and $181,509, respectively.  Mr. Ruskowsky owns a controlling interest in Santeo Financial.
 
 As of December 31, 2010, the Company owed Roger Janssen, an officer and director of the Company, $1,345 for services previously performed.
 
 As of December 31, 2010, the Company owed Phil Van Angren, an officer and director of the Company, $3,636 for consulting services previously performed.
 
 As of December 31, 2010, certain shareholders have advanced the Company a total of $19,845 that is payable on demand and is non-interest bearing.
 
 NOTE 5 – NOTES PAYABLE
 
 The Company has a note payable to Integrated Business Concepts, Inc. that is due upon demand and is assessed interest at an annual rate of 12%.  As of December 31, 2010, the balance due including accrued interest amounted to $373,977.  Interest accrued and charged to operations for the year ended December 31, 2010 and 2009 amounted to $40,584 and $31,494, respectively.
 
 NOTE 6 – INCOME TAXES
 
 The Company accounts for income taxes under ASC No. 740 (ASC 740).  This statement mandates the liability method of accounting for deferred income taxes and permits the recognition of deferred tax assets subject to an ongoing assessment of realizability.
 
 As of December 31, 2010, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $13,100,000 that may be offset against future taxable income through 2030.  Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs.  Therefore, the amount available to offset future taxable income may be limited.  No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforwards will expire unused.  Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation allowance of the same amount.
 
 2010


2009Net Operating Losses

$
4,454,000


$
4,386,000Accrued Consulting Fees


123,000



62,000Valuation Allowance


(4,577,000
)


(4,448,000
)$
-


$
-
 
  29
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  The provision for income taxes differ from the amount computed using the federal US statutory income tax rate as follows:
 2010


2009Provision (Benefit) at US Statutory Rate

$
(86,076
)

$
(116,394
)Stock Compensation / Interest


17,340



4,250Accrued Consulting Fees


19,380



28,849Other


(79,644
)


50,295Increase (Decrease) in Valuation Allowance


129,000



33,000$
-


$
-
 
 The Company evaluates its valuation allowance requirements based on projected future operations.  When circumstances change and causes a change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation is reflected in current income.
 
 NOTE 7 - COMMON STOCK AND WARRANTS
 
 As discussed in Note 3, during January 2010, the Company received a total of $150,000 through the issuance of 60 participating units. Each unit is sold for $2,500 and consisted of 5,000 restricted shares of the Company’s common stock, a warrant to purchase 10,000 shares of the Company’s common stock at $0.25 per share, expiring 18 months from date of issuance, a pro rata interest in 60% of the total revenue interest that the Company owns in the Bond #2-18 well, and an option to convert the unit holder’s pro rata share in the well revenue into 5,000 shares of the Company’s common stock expiring 36 months after the first revenue check is received by the unit holder. The Company valued the four components of each unit separately.  In the valuation of the common shares issued and the pro rata interest in oil revenue, the Company’s used the trading price of the Company’s common shares on the date of issuance. The common stock warrant and the option to convert the oil revenue interest into shares of the Company’s common stock were valued using the Black-Scholes Option Model using a risk free interest rate ranging from .89% to 1.6%, with volatility ranging from 186% to 208%. Of the $150,000 received, $36,412 was credited allocated against the payments made towards the Company’s well costs. The remaining $113,588 was credited to equity.
 
 As discussed in Note 3, during March 2010, the Company received a total of $150,000 through the issuance of 60 participating units. Each unit is sold for $2,500 and consisted of 5,000 restricted shares of the Company’s common stock, a warrant to purchase 10,000 shares of the Company’s common stock at $0.25 per share, expiring 18 months from date of issuance, a pro rata interest in 60% of the total revenue interest that the Company owns in the Sattler #1 well, and an option to convert the unit holder’s pro rata share in the well revenue into 5,000 shares of the Company’s common stock expiring 36 months after the first revenue check is received by the unit holder. The Company valued the four components of each unit separately.  In the valuation of the common shares issued and the pro rata interest in oil revenue, the Company’s used the trading price of the Company’s common shares on the date of issuance. The common stock warrant and the option to convert the oil revenue interest into shares of common shares were valued using the Black-Scholes Option Model using a risk free interest rate ranging from .95% to 1.69%, with volatility ranging from 186% to 208%. Of the $150,000 received, $36,412 was credited allocated against the payments made towards the Company’s well costs. The remaining $113,588 was credited to equity.
 
 During March 2010, the Company paid a consultant 12.8 participating units in consideration for services rendered in connection with the offerings, of the $28,000 fee, $7,399 was credited against the payments made towards the Company’s well costs.
 
  30
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  As discussed in Note 3, during August 2010, the Company received a total of $150,000 through the issuance of 60 participating units. Each unit is sold for $2,500 and consisted of 5,000 restricted shares of the Company’s common stock, a warrant to purchase 10,000 shares of the Company’s common stock at $0.25 per share, expiring 18 months from date of issuance, a pro rata interest in 60% of the total revenue interest that the Company owns in the Bond #3-18 well, and an option to convert the unit holder’s pro rata share in the well revenue into 5,000 shares of the Company’s common stock expiring 36 months after the first revenue check is received by the unit holder. The Company valued the four components of each unit separately.  In the valuation of the common shares issued and the pro rata interest in oil revenue, the Company’s used the trading price of the Company’s common shares on the date of issuance. The common stock warrant and the option to convert the oil revenue interest into shares of the Company’s common stock were valued using the Black-Scholes Option Model using a risk free interest rate ranging from .53% to .8%, with volatility ranging from 201% to 259%. Of the $150,000 received, $38,945 was credited against the allocated payments made towards the Company’s well costs. The remaining $110,055 was credited to equity.
 
 During August 2010, the Company paid a consultant 5.6 participating units in consideration for services rendered in connection with the offerings.  The units issued were valued at $14,000.  Of the $14,000, $3,635 was credited against the payments made towards the Company’s well costs.
 
 As discussed in Note 3, during December 2010, the Company received a total of $100,000 through the issuance of 40 participating units. Each unit is sold for $2,500 and consisted of 5,000 restricted shares of the Company’s common stock, a warrant to purchase 10,000 shares of the Company’s common stock at $0.25 per share, expiring 18 months from date of issuance, a pro rata interest in 60% of the total revenue interest that the Company owns in the WC #1-18 well, and an option to convert the unit holder’s pro rata share in the well revenue into 5,000 shares of the Company’s common stock expiring 36 months after the first revenue check is received by the unit holder. The Company valued the four components of each unit separately.  In the valuation of the common shares issued and the pro rata interest in oil revenue, the Company’s used the trading price of the Company’s common shares on the date of issuance. The common stock warrant and the option to convert the oil revenue interest into shares of the Company’s common stock were valued using the Black-Scholes Option Model using a risk free interest rate ranging from .26% to .69%, with volatility ranging from 211% to 268%. Of the $100,000 received, $30,675 was credited against the allocated payments made towards the Company’s well costs. The remaining $69,325 was credited to equity.
 
 During December 2010, the Company paid a consultant 3.6 participating units in consideration for services rendered in connection with the offerings.  The units issued were valued at $9,000.  Of the $9,000, $2,761 was credited against the payments made towards the Company’s well costs.
 
 As indicated, during the year ended December 31, 2010, the Company issued warrants to purchase 2,404,000 common shares at $0.25 per share. The warrants expire 18 months from the date of issuance.
 The following table sets forth common share purchase warrants outstanding as of December 31, 2010:
 
 Warrants Outstanding


Weighted Average Exercise PriceBalance, December 31, 2009


4,320,000


$
0.23Warrants granted


2,404,000


$
0.25Warrants expired


3,120,000


$
0.23Balance, December 31, 2010


3,604,000


$
0.24
 
  31
 ROYAL QUANTUM GROUP, INC.
 NOTES TO FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2010 and 2009
  NOTE 8 -  FAIR VALUE
 
 The Company’s financial instruments consist of principally related party payables, stockholder loans and notes payable. The Company believes all of the financial instruments’ recorded values approximate fair market value because of their nature and respective durations.
 
 The Company complies with the provisions of ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”).  ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements required under other accounting pronouncements. ASC 820-10-35, “Fair Value Measurements and Disclosures - Subsequent Measurement” (“ASC 820-10-35”), clarifies that fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820-10-35 also requires that a fair value measurement reflect the assumptions market participants would use in pricing an asset or liability based on the best information available. Assumptions include the risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model.  The Company also follows ASC 825 “Interim Disclosures about Fair Value of Financial Instruments”, previously referred to as FAS 107-1 to expand required disclosures.
 
 ASC 820-10-35 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under ASC 820-10-35 are described below:
 
 Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.
 
 Level 2. Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
 
 Level 3. Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
 The Company utilizes the best available information in measuring fair value. The following table summarizes, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as of December 31, 2010:
 
 December 31, 2010Fair Value MeasurementsLevel 1


Level 2


Level 3


Total Fair ValueLiabilitiesRelated parties payable

$
-


$
234,674


$
-


$
234,674Note payable

$
-


$
373,977


$
-


$
373,977Stockholder loan

$
-


$
19,845


$
-


$
19,845
 
 
  32
       All of the Company's continuing operations are directly related to oil and natural gas producing activities located in Oklahoma.  Capitalized Costs Relating to Oil and Gas Producing ActivitiesAs of12/31/2010


12/31/2009Proved propertiesMineral interests

$
462,662


$
255,668Total proved properties


462,662



225,668Unproved propertiesMineral interests


7,507



27,056Uncompleted wells, equipment and facilities


-



-Total unproved properties


7,057



27,056Less accumulated depletion


(99,363
)


(5,657
)Net Capitalized Costs

$
370,806


$
277,067
  Costs Incurred in Oil and Gas Producing ActivitiesTwelve Months Ended12/31/2010


12/31/2009Devlopment costs

$
342,885


$
251,668Acquisition of proved properties


-



4,200Acquisition of unproved properties


-



27,056Exploration costs


-



-Total Costs Incurred

$
342,885


$
282,924
  Results of Operations from Oil and Gas Producing ActivitiesTwelve Months Ended12/31/2010


12/31/2009Oil and gas revenues

$
448,564


$
48,265Production costs


(470,879
)


(233,689
)Depletion


(93,707
)


(5,657
)Result of oil and gas producing operations before income taxes


(116,022
)


(191,081
)Provision for income taxes


-



-Results of Oil and Gas Producing Operations

$
(116,022
)

$
(191,081
)
   33
  Proved ReservesThe Company's proved oil and natural gas reserves have been estimated by the certified independent engineering firm, Ramsey Property Management, LLC.  Proved reserves are the estimated quantities that geologic and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are the quantities expected to be recovered through existing wells with existing equipment and operating methods when the estimates were made. Due to the inherent uncertainties and the limited nature of reservoir data, such estimates are subject to change as additional information becomes available. The reserves actually recovered and the timing of production of these reserves may be substantially different from the original estimate. Revisions result primarily from new information obtained from development drilling and production history; acquisitions of oil and natural gas properties;

and changes in economic factors. Our proved reserves are summarized in the table below:  Oil (Bbls)


Gas (Mcf)**


BOEProved reserves:12/31/2008


21,324



15,378



23,887Revisions(1)


-



-



-Extensions and discoveries


-



-



-Production


(4,147
)


(2,181
)


(4,511
)Purchases (sales) of minerals-in-place


(17,177
)


(13,197
)


(19,376
)12/31/2009


-



-



-Revisions(2)


-



-



-Extensions and discoveries


-



-



-Production


(3,142
)


-



(3,142
)Purchases (sales) of minerals-in-place


13,277



-



13,27712/31/2010


10,135



-



10,135
  ** Gas per Mcf (Thousand cubic feet) includes natural gas liquids (wet gas) if any.(1) The revisions of previous estimates for the fiscal year ended December 31, 2009, resulted from a revised lower estimate of reserve value due to depressed hydrocarbon prices in the energy markets.(2) The revisions of previous estimates for the fiscal year ended December 31, 2010, resulted from a revised lower estimate of reserve value after continued reservoir production.  The Company's proved reserves are as follows:Developed


Developed- Non ProducingOil (Bbls)


Gas (Mcf)


BOE (Bbls)


Oil (Bbls)


Gas (Mcf)


BOE (Bbls)


Total BOE (Bbls)12/31/2010


38,648



—



38,648



23,507



—



23,507



62,15512/31/2009


12,884



9,805



14,518



8,440



5,573



9,369



23,88712/31/2008


—



—



—



—



—



—



—
   34
  Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas ReservesThe following information is based on the Company's best estimate of the required data for the Standardized Measure of Discounted Future Net Cash Flows as of December 31, 2010 and 2009 in accordance with ASC 932, “Extractive Activities – Oil and Gas” which requires the use of a 10% discount rate. This information is not the fair market value, nor does it represent the expected present value of future cash flows of the Company's proved oil and gas reserves. Future cash inflows for the year ended December 31, 2009 were estimated by applying year-end oil prices adjusted for location and quality differentials on a property-by-property basis, to year-end quantities of proved reserves. The resulting net cash flows are reduced to present value by applying a 10% discount factor. Use of a 10% discount rate and year-end prices were required for 2009. At December 31, 2010, as specified by the SEC, the price for oil used in this calculation was the unweighted 12-month average of the first day of the month (12 month unweighted average) cash price quotes.  Twelve Months Ended12/31/2010


12/31/2009Future cash inflows

$
1,812,788


$
912,508Future production costs (1)


(378,567
)


(150,525
)Future development costs


-



-Future income tax expenses (2)


-



-Future net cash flows


1,434,221



761,98310% annual discount for estimated timing of cash flows


(449,376
)


(167,095
)Standardized measure of discounted future net cash flows at the end of the year

$
984,845


$
594,888
  (1) Production costs include oil and gas operations expense, production ad valorem taxes, transportation costs and G&A expense supporting the Company's oil and gas operations.(2) The Company has sufficient tax deductions and allowances related to proved oil and gas reserves to offset future net revenues.  See the following table for average prices.  Average PriceYear Ended

Oil (Bbl)


Gas (Mcf)**12/31/2010

$
75.72


$
4.1612/31/2009

$
58.42


$
3.6712/31/2008

$
93.05


$
7.97
  ** Gas per Mcf (Thousand cubic feet) includes natural gas liquids (wet gas) if any.  Future production and development costs, which include dismantlement and restoration expense, are computed by estimating the expenditures to be incurred in developing and producing the Company's proved crude oil and natural gas reserves at the end of the year, based on year-end costs, and assuming continuation of existing economic conditions.   35
  Sources of Changes in Discounted Future Net Cash FlowsPrincipal changes in the aggregate standardized measure of discounted future net cash flows attributable to the Company's proved crude oil and natural gas reserves, as required by ASC 932, at year end are set forth in the table below.  Twelve Months Ended12/31/2010


12/31/2009Standardized measure of discounted future net cash flows at the beginning of the year

$
594,888


$
-Extensions, discoveries and improved recovery, less related costs


-



-Revisions of previous quantity estimates


458,000



-Changes in estimated future development costs


-



-Purchases of minerals in place


-



-Sales of minerals in place


-



-Net changes in prices and production costs


(68,043
)


-Accretion of discount


-



-Sales of oil and gas produced, net of production costs


-



-Development costs incurred during the period


-



-Changes in future development costs


-



-Changes in timing of future production


-



-Net change in income taxes


-



-Standardized measure of discounted future net cash flows at the end of the year

$
984,845


$
-
  36
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
 
 There have been no changes in or disagreements with our accountants since our formation required to be disclosed pursuant to Item 304 of Regulation S-B.
 
 Item 9A.Controls and Procedures.
 
 (a) Evaluation of disclosure controls and procedures. We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed as of December 31, 2010, the date of this report, our chief executive officer and the principal financial officer concluded that our disclosure controls and procedures were effective.
 
 (b) Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the chief executive officer and principal financial officer.
  37
  
 Our Chief Executive Officer and our Chief Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
 
 ·
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
 
 ·
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and
 
 ·
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
 
 Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
 As part of our compliance efforts relative to Section 404 of the Sarbanes-Oxley Act of 2002, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth in the Internal Control - Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).We evaluated control deficiencies identified through our test of the design and operating effectiveness of controls over financial reporting to determine whether the deficiencies, individually or in combination, are significant deficiencies or material weaknesses. In performing the assessment, our management has identified material weaknesses in internal control over financial reporting existing as of December 31, 2010. Our evaluation of the significance of each deficiency included both quantitative and qualitative factors. Based on that evaluation, our management concluded that as of December 31, 2010, and as of the date that the evaluation of the effectiveness of our internal controls and procedures was completed, our internal controls are not effective, for the reason discussed below:
  1.
We do not yet have written documentation of our internal control policies and procedures.  Written documentation of key internal controls over financial reporting is a requirement Section 404 of the Sarbanes-Oxley Act and may be applicable to us in future years.
 
 2.
We do not have sufficient segregation of duties within accounting functions, which is a basic internal control.  Due to our extremely small size and the fact that we only had one management employee, whom is also an executive officer and director, segregation of all conflicting duties may not always be possible and may not be economically feasible.  However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals.
 
 3.
We currently do not have full-time accounting personnel, which means we lack the requisite expertise in the key functional areas of finance and accounting. In addition, this means we do not have available personnel to properly implement control procedures.
 
 4.
We did not have a functioning audit committee or outside independent directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
 
 5.
We had not established adequate financial reporting monitoring activities to mitigate the risk of management override, specifically because there are no employees and only one officer and director with management functions and therefore there is lack of segregation of duties.
  38
  
 6.
There is a strong reliance on the external auditors and contract accountant to review and adjust the annual and quarterly financial statements, to monitor new accounting principles, and to ensure compliance with GAAP and SEC disclosure requirements.
 
 7.
There is a strong reliance on the external attorneys to review and edit the annual and quarterly filings and to ensure compliance with SEC disclosure requirements.
 
 In light of the material weaknesses described above, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles.  Accordingly, we believe that the financial statements included in this Report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
 
 In addition, although our controls are not effective, these significant weaknesses did not result in any material misstatements in our financial statements. Our management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist us with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which is intended to mitigate the lack of segregation of duties until there are sufficient personnel and (3) has, subsequent to the evaluation period, appointed outside directors and will establish an audit committee in the future.
 
 Changes in Internal Control over Financial Reporting
 
 Other than the weaknesses identified above, there were no other changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 Attestation Report of the Registered Public Accounting Firm
 
 This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
 
 Item 9B. Other Information.
 
 None.
 
 Item 10. Directors, Executive Officers, and Corporate Governance.
 
 Executive Officers and Directors. Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of stockholders and until their successors have been elected and qualified.
  
  39
  The following table sets forth information regarding our executive officer and directors.
 
 Name
Age
PositionRon Ruskowsky

Suite #145, 251 MidPark Blvd S.E. Calgary, AB T2X 1S3 Canada
43
President, CEO and Principal Accounting Officer

DirectorRoger Janssen

Suite #145, 251 MidPark Blvd S.E. Calgary, ABT2X 1S3

Canada
47
Vice-President, Secretary

DirectorPhillip van Angeren

Suite #145, 251 MidPark Blvd S.E. Calgary, ABT2X 1S3

Canada
54
Exploration Manager, Director
 
 Ron Ruskowsky, President, CEO and Principal Accounting Officer, Director.  Mr. Ruskowsky has a diverse and strong background in corporate structure, management and finance. He has been involved in all aspects of management from marketing to finance and acquisitions in both public and private corporations for over 22 years.  Mr. Ruskowsky has been a director of the Company since October 1, 2002.
 
 Roger Janssen, Vice-President, Secretary, Director.  Mr. Janssen has over twenty one years of experience in the manufacturing industry. For the past seventeen years he has owned and operated his own business, which produces aeronautical and marine components, in the greater Seattle area, with clients, including: Boeing, Microsoft, Starbucks Corporation, Precor and Eldec.  Mr. Janssen has guided several manufacturing companies during their start up phase and has traveled internationally as a manufacturing consultant. Mr. Janssen has been a director of the company since October 1, 2002.
 
 Phil van Angeren,P.Geol. -Exploration Manager, Director. Mr. van Angeren is a graduate from McGill University with a BSc. Honors degree in geology.  He has over 25 years of experience in managing exploration and development programs in precious metals and oil and gas throughout North and South America. Mr. van Angeren has been a director of the company since May 2007.
 
 There are no familial relationships between any of the Company’s directors and officers. There are no orders, judgments, or decrees of any governmental agency or administrator, or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining any of our officers or directors from engaging in or continuing any conduct, practice or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security, or any aspect of the securities business or of theft or of any felony. Nor are any of the officers or directors of any corporation or entity affiliated with us so enjoined.
  Section 16(a) Beneficial Ownership Reporting Compliance.
  Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and officers, and persons who own more than ten-percent (10%) of the company’s common stock, to file with the Securities and Exchange Commission reports of ownership on Form 3 and reports of change in ownership on Forms 4 and 5. Such officers, directors and ten-percent stockholders are also required to furnish the company with copies of all Section 16(a) reports they file. Based solely on its review of the copies of such forms received by the company and on written representations from certain reporting persons, the company believes that all Section 16(a) reports applicable to its officers, directors and ten-percent stockholders with respect to the fiscal year ended December 31, 2010 were filed timely; with the exception that the Company believes that initial filings by the currently listed beneficial holders were not filed timely.
 
 CodeofEthics.We have not adopted a corporate code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions in that our sole officer and director serves in all the above capacities.
 
  40
  Our decision to not adopt such a code of ethics results from our having only two officers working closely together managing the Company. We believe that as a result of the limited interaction, which occurs having such a small management team, eliminates the current need for such a code. Further, since the officers also serve as directors there is no one to report violations of such a code to.
 
 Nominating Committee.The Company's entire Board participates in consideration of director nominees. The Board will consider candidates who have experience as a board member or senior officer of a company or who are generally recognized in a relevant field as a well-regarded practitioner, faculty member or senior government officer.  The Board will also evaluate whether the candidates' skills and experience are complementary to the existing Board's skills and experience as well as the Board's need for operational, management, financial, international, technological or other expertise. The Board will interview candidates that meet the criteria and then select nominees that Board believes best suit the Company's needs.
 
 The Board will consider qualified candidates suggested by stockholders for director nominations. Stockholders can suggest qualified candidates for director nominations by writing to the Company's Corporate Secretary, Roger Janssen, at Suite #145, 251 MidPark Blvd S.E. Calgary, Alberta T2X 1S3 Canada. Submissions that are received that meet the criteria described above will be forwarded to the Board for further review and consideration. The Board will not evaluate candidates proposed by stockholders any differently than other candidates
 
 Audit Committee Financial Expert.The Company’s board of directors does not have an “audit committee financial expert,” within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee.  The board of directors believes that all members of its audit committee are financially literate and experienced in business matters, and that one or more members of the audit committee are capable of (I) understanding generally accepted accounting principles (“GAAP”) and financial statements, (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert.  However, the board of directors believes that there are not any audit committee members who has obtained these attributes through the experience specified in the SEC’s definition of “audit committee financial expert.”  Further, like many small companies, it is difficult for the Company to attract and retain board members who qualify as “audit committee financial experts,” as competition for these individuals is significant.  The board believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated “audit committee financial expert.”  We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our start-up operations, we believe the services of a financial expert are not warranted.
 
 Audit Committee.  We do not have an Audit Committee, our Board of Directors, performs some of the same functions of an Audit Committee, such as: recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document.
 
  41
  Item 11. Executive Compensation
 
 Summary Compensation Table.  The table set forth below summarizes the annual and long-term compensation for services in all capacities to us payable to our principal executive officer and our only other executive officer during the years ending December 31, 2010 and 2009.
 
 Name and Principal Position
Year Ended
Salary

$
Bonus

$
Stock Awards

$
Option Awards

$
Non-Equity Incentive Plan Compensation

$
Nonqualified Deferred Compensation Earnings $
All Other Compensation

$
Total

$Ron Ruskowsky President and CEO, Director *
2010
0
0
0
0
0
0
0
02009
0
0
0
0
0
0
0
0Roger Janssen Vice-President and Secretary
2010
0
0
0
0
0
0
0
02009
0
0
0
0
0
0
0
0
 
 * Mr. Ruskowsky provided services to the Company through his wholly owned company, Santeo Financial.  In 2010 Mr. Ruskowsky earned $180,000, of which $123,000 was paid.  In 2009 Mr. Ruskowsky earned $180,000 and of which $40,472 was paid in 2009.
 
 Except as set forth above, none of the Company's officers and/or directors currently receives any compensation for their respective services rendered to the Company.
 
 Long-Term Incentive Plans. There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers may receive stock options at the discretion of our board of directors.  We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.
 
 Employment Agreements.
  No employment agreements are currently in place.
  There are no currently arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.  Our directors and executive officers may receive stock options at the discretion of our board of directors in the future.  We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.
  Involvement in Certain Legal Proceedings.
  Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:
 1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
 2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
 3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated
 
  42
  Outstanding Equity Awards at Fiscal Year-end.As of the year ended December 31, 2010, the following named executive officer had the following unexercised options, stock that has not vested, and equity incentive plan awards:
 
 Option  Awards
Stock AwardsName
Number of Securities Underlying Unexercised Options

# Exercisable
# Un-exercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options
Option Exercise Price
Option Expiration Date
Number of Shares or Units of Stock Not Vested
Market Value of Shares or Units  Not Vested
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights Not Nested
Value of Unearned Shares, Units or Other Rights Not VestedRon Ruskowsky President, CEO, Principal Accounting Officer
0
0
0
0
0
0
0
0
0Roger Janssen, Vice-President, Secretary
0
0
0
0
0
0
0
0
0
 
 Director Compensation.Our directors received the following compensation for their service as directors during the fiscal year ended December 31, 2010:
 
 Name
Fees Earned or Paid in Cash
Stock Awards

$
Option Awards

$
Non-Equity Incentive Plan Compensation

$
Non-Qualified Deferred Compensation Earnings

$
All Other Compensation

$
Total

$Ron Ruskowsky
0
0
0
0
0
0
0Roger Janssen
0
0
0
0
0
0
0Phil van Angeren
0
0
0
0
0
0
0
 
  43
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
 
 The following table sets forth certain information regarding the beneficial ownership of our common stock as of December 31, 2010 by each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock, each of our directors and named executive officers, and all of our directors and executive officers as a group.
 
 Title of Class
Name and Address of Beneficial Owner
Amount and Nature of Beneficial Owner
Percent of ClassCommon Stock
Ron Ruskowsky (1)

Suite #145, 251 MidPark Blvd S.E. Calgary, Alberta T2X 1S3

Canada
18,470,000 Shares

President, CEO and Principal Accounting Officer, Director
36.8 %Common Stock
Roger Janssen

Suite #145, 251 MidPark Blvd S.E. Calgary, AB Alberta T2X 1S3

Canada
2,500,000 Shares

Secretary and Vice-President

Director
5.0 %Common Stock
Phil van Angeren

Suite #145, 251 MidPark Blvd S.E. Calgary, AB Alberta T2X 1S3

Canada
500,000 Shares

Exploration Manager

Director
1.0%Common Stock
All directors and named executive officers as a group
21,470,000
42.8% ( 2)
  (1)
14,970,000 shares are owned by Santeo, an entity affiliated with Mr. Ruskowsky.   Mr. Ruskowsky has sole voting and dispositive power over these shares.
  (2)
Figures vary due to rounding
  Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.  In accordance with Securities and Exchange Commission rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees. Subject to community property laws, where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.
 
 Changes in Control.Ourmanagement is not aware of any arrangements which may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-B.
  Equity Compensation Plan.We currently have no Equity Compensation plans in place.  There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.  Our directors and executive officers may receive stock options at the discretion of our board of directors in the future.  We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.  No options, warrants or other convertible securities have been issued to any officer, directors, or others at this time.
 
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
 
 Related Party Transactions.
 
 As of December 31, 2010, we owed Roger Janssen $1,345 for payments he made on behalf of the Company for services
 
 As of December 31, 2010, the Company owed Phil Van Angren, an officer and director of the Company, $3,636 for consulting services performed as the Exploration Manager.
 
  44
  As of December 31, 2010 and 2009, the Company owed Santeo Financial $229,693 and $182,067 respectively for consulting services. Ron Ruskowsky, President and CEO of the Company, is an affiliate of Santeo Financial.
 
 Currently we have an agreement with Santeo Financial whereby Santeo Financial provides consulting services in exchange for which we pay a consultant fee of $15,000 per month.
 
 As of December 31, 2010 and December 31, 2009, shareholders have advanced us $19,845 and $19,845, respectively, payable on demand and do not carry an interest rate.  This transaction has been recorded in the accompanying financial statements as Shareholder loans.
 
 Director Independence.Members of our Board of Directors are not independent as that term is defined by defined in Rule 4200(a)(15) of the Nasdaq Marketplace Rules.
 
 Item 14. Principal Accountant Fees and Services.
 
 Audit Fees.The aggregate fees billed in each of the fiscal years ended December 31, 2010 and 2009 for professional services rendered by the principal accountant for the audit of our annual financial statements and quarterly review of the financial statements included in our Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $52,145 and $21,381, respectively.
 
 Audit-Related Fees. For the fiscal year ended December 31, 2010, there were no fees billed for services reasonably related to the performance of the audit or review of the financial statements outside of those fees disclosed above under “Audit Fees.”
 
 Tax Fees.For the fiscal years ended December 31, 2010 and December 31, 2009, our accountants rendered services for tax compliance, tax advice, and tax planning work for which we paid $140 and $140, respectively.
 
 All Other Fees.None.
 
 Pre-Approval Policies and Procedures.Prior to engaging our accountants to perform a particular service, our board of directors obtains an estimate for the service to be performed. All of the services described above were approved by the board of directors in accordance with its procedures.
 
 Item 15. Exhibits
 
 3.1           Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer
 3.2           Section 906 Certification by Chief Executive Officer and Chief Financial Officer
 
  45
  
 SIGNATURES
 
 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 in the City of Calgary, Alberta, Canada, on April 13, 2011
 
 Royal Quantum Group, Inc.
 a Nevada corporation
 
 By:  /S/ Ron Ruskowsky
 Ron Ruskowsky
 
 Its:
 Principal executive officer, Principal accounting officer
 President, CEO and a director
 
 
 By:  /s/ Roger Janssen
 Roger Janssen
 
 Its:      Vice-President, Secretary and a director
 
 
 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
 
 By:     /s/ Ron Ruskowsky     April 13, 2011
 Ron Ruskowsky
 Its:     Director
 
 
 By:    /s/ Roger Janssen     April 13, 2011
 Roger Janssen
 Its:     Director