U.S. SECURITIES AND EXCHANGE
COMMISSION


Washington,
D.C. 20549





FORM 10-K





ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For
the fiscal year ended December 31, 2009


Commission
file number: 000-27739





ROYAL
QUANTUM GROUP, INC.


(Exact
name of registrant as specified in its charter)





Nevada
            
            90-0315909(State
      of incorporation)
            
            (I.R.S.
      Employer Identification No.)





Suite
#145, 251 MidPark Blvd S.E.


Calgary, AB Canada T2X
1S3


(Address
of principal executive offices)





(403)
288-4321


(Registrant’s
telephone number, including area code)





Securities
registered pursuant to Section 12(b) of the Exchange Act:


None





Securities
registered pursuant to Section 12(g) of the Exchange Act:


Common
Stock, Par Value $0.001





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





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§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.   x





1


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





Large
      accelerated filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈
              (Do
      not check if a smaller reporting company)
            Smaller
      Reporting Company x





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





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity as of a specified
date within the past 60 days.  (See definition of affiliate in Rule
12b-2 of the Exchange Act.)  As of April 13, 2009, approximately
$1858,524.





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date.  As of December 31, 2009, there
were 48,980,338 shares of the issuer’s $.001 par value common stock issued and
outstanding.





Documents
Incorporated By Reference:  None








2





ROYAL
      QUANTUM GROUP, INC.TABLE
      OF CONTENTSPART
      IITEM
      1.
            BUSINESS
            4ITEM
      1.A
            RISK
      FACTORS
            8ITEM
      2.
            PROPERTIES
            9ITEM
      3.
            LEGAL
      PROCEEDINGS
            9ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            10PART
      IIITEM
      5.
            MARKET
      FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
            11ITEM
      6.
            SELECTED
      FINANCIAL DATA
            14ITEM
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            14ITEM
      7.A
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            16ITEM
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
            16ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            45ITEM
      9.A
            CONTROLS
      AND PROCEDURES
            45ITEM
      9.B
            OTHER
      INFORMATION
            45PART
      IIIITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            46ITEM
      11.
            EXECUTIVE
      COMPENSATION
            47ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
            49ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE
            50ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
            50PART
      IVITEM
      15.
            EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
            50SIGNATURES





3


PART
I





Item 1. Description of
Business.





Our Background.  The
Company was incorporated in Nevada in October, 1996, under the name PSM CORP,
and was formed for the purpose of either merging with or acquiring an operating
company with an operating history and assets.  The Company ceased all
operating activities during the period from October 22, 1996 to July 9, 1999 and
was considered dormant. On July 9, 1999, the Company obtained a Certificate of
renewal from the State of Nevada.  On January 11, 2000, the company
changed its name to Mentor On Call, Inc.





On
September 30, 2002, we entered into a Share Exchange Agreement with SuperYachts
Holdings, Inc., a private Nevada corporation (“SuperYachts Holdings”), and its
stockholders, to acquire 100% of the issued and outstanding shares of
SuperYachts Holdings.  In consideration for acquiring all of
SuperYachts Holdings’ issued and outstanding shares, we agreed to issue its
stockholders 15,000,000 shares of our common stock.  Effective as of
October 1, 2002, the Company’s name was changed to Platinum SuperYachts,
Inc.  At that point, our business direction included yacht building,
sales, re-sales and yacht services, such as supplies, maintenance, and delivery
as well as full-scale contracted care of yachts.  The core business
was intended to be the building of yachts in excess of 80 to 200
feet.  We had planned to hire subcontractors on a per job basis for
the construction of the vessels.





We were
not successful in the mega yacht industry due to two important
factors.  First, purchasers of yachts in the price range of our
products were not interested in building with a manufacturer that was relatively
new in the industry.  The preference of the mega yacht buyer is to
work with a builder that has a history in the business with product available
for the client to view.  Second, we were unable to close a financing
large enough to allow the company to build a spec yacht.  The ability
to have a spec yacht available to show our clients the high quality
craftsmanship of which we were capable would have significantly increased our
ability to sell the product.  As the share price of the Company’s
common stock began to decrease, we were faced with the problem of significant
shareholder dilution to secure a funding necessary to build a spec
product.  Management did not feel it was in the best interest of the
shareholders to attempt a multi-million dollar financing while faced with such a
low share price.  Accordingly, we sold all of the Company’s assets
related to the yacht business back to the former stockholders of PR Marine Inc.
on September 29, 2005 in exchange for the former stockholders of PR Marine Inc.
agreeing to cancel all of their outstanding shares of the
Company.  After completing the sale of the assets related to the yacht
business we changed the name of the Company to Royal Quantum Group on January
10, 2006.





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 and
mineral properties located within favorable geo-political
climates.





Our
Properties.





In May
2007, we entered into a Purchase Agreement (“Agreement”) with U3, LLC (“U3”) to
acquire a 100% interest in 1,540 acres that consist of 77 claims of prospective
uranium property located adjacent to the Sheep Mountain Mine in Fremont County,
Central Wyoming, approximately 90 miles southwest of Casper,
Wyoming.  We paid $10,000 to U3 when we executed the Agreement on May
28, 2007.





On July
18, 2007, the Agreement was amended to specify that we make the following
payments to U3 when the claim numbers (“WMC numbers”) were issued by the Bureau
of Land Management (“BLM”) on each claim, and on each of an additional 100
claims within a three-mile radius of the claims:





·
            $50,000
      on or before October 1, 2007;


·
            $50,000
      on or before  November 1,
2007;


·
            $50,000
      on or before December 1, 2007; and


·
            $70,000
      on or before January 15, 2008.





The
Amendment also provided for a closing on or before September 3,
2007.


4


Pursuant
to the Agreement, we also agreed to issue 1,000,000 restricted shares of our
common stock to U3 when the claims were transferred to us, clear of any liens or
encumbrances.  In addition, we agreed to begin a $150,000 work program
on the Sheep Mountain Claim block before June 1, 2008, with the option to
undertake an additional $150,000 work program on the claims if we paid an
additional $200,000 in cash to U3 and issue an additional 500,000 restricted
shares of our common stock to U3. Provided we elect to continue on or before
June 1, 2009, we agreed to pay U3 a final $200,000 and issue an additional
1,250,000 restricted shares of our common stock to U3 and reserve a 2% NSR for
U3 on any production from the claims. The Agreement also provides that we will
register the shares we issued to U3 if we close a financing of more than
$1,000,000. If we drop the claims at any point, the claims are transferred back
to U3.





However,
we later agreed with U3 not to continue to acquire the claims as outlined above,
due to delays in receiving WMC numbers on the claims, and we have requested U3
return the $10,000 as per the agreement terms.  We did not issue any
shares pursuant to this Agreement and as of the date of this report have also
not received the $10,000.  After numerous attempts to collect on the
$10,000, the company has written the debt off as bad debt expense.





In
January of 2008 the company acquired an option to purchase a 6,000 acre Oil
& Gas property located in the state of Ohio. The closing date of
the transaction was extended to July 31, 2008 and was subject to
financing.





In
February of 2008 the company signed an agreement with First Diversified
Financial Services (FDFS) and Launchpad Capital to assist the company in
securing the necessary capital for the Anderson Oil and Gas project
acquisition.  The agreement required payment of USD $100,000 to FDFS
as well as 3% of any cash received and 2% of any debt financing completed as a
result of FDFS’s efforts.  Launchpad Capital was to receive a fee of
3.5% of the debt and/or equity portion of the funding received by the company as
a result of their efforts.





In March
2008, the Company issued 1,820,000 shares in a private placement for $0.10 per
Unit.  Each Unit entitled the holder to acquire 1 common share of the
company’s stock at $0.10 per share and one share Series A purchase warrant,
entitling the holder to purchase one share at a price of $0.15 for a period of
18 months from closing of the private placement,  resulting in the
Company receiving $182,000 in cash.  The shares were issued in a
transaction which the Company believes satisfies the requirements of the
Regulation S exemption from the registration and prospectus delivery
requirements of the Securities Act of 1933. The Company used those funds for
working capital.





In April
of 2008 we issued 125,000 shares of restricted stock recorded at $0.47 per share
along with a $25,000 cash payment in consideration for an extension on the
Anderson Oil & Gas property to May 30, 2008.





In March
of 2008 we issued 50,000 shares to M2 Law in settlement of outstanding legal
invoices totaling $50,000. The shares were recorded at $0.65 per share for a
value of $32,500 and the difference of $17,500 was booked as forgiveness of
debt.





In April
of 2008 the company issued 100,000 shares in a private placement for $.25 per
share which resulted in the Company receiving $25,000 in cash.  The
shares were issued in a transaction which the Company believes satisfies the
requirements of the Regulation S exemption from the registration and prospectus
delivery requirements of the Securities Act of 1933. The Company used those
funds for working capital.





In May
2008, the Company issued 580,000 shares in a private placement for $0.25 per
Unit.  Each Unit entitled the holder to acquire 1 common share of the
company’s stock at $0.25 per share and one share Series B purchase warrant,
entitling the holder to purchase one share at a price of $0.40 for a period of
12 months from closing of the private placement, resulting in the Company
receiving $145,000 in cash.  The shares were issued in a transaction
which the Company believes satisfies the requirements of the Regulation S
exemption from the registration and prospectus delivery requirements of the
Securities Act of 1933. The Company used those funds for working
capital.





5


In June
2008 the company received a loan of $500,000 from a private
investor.  The loan carried an interest rate of 15% and was due and
payable on or before July 31, 2008.  The terms of the note allow for a
1% per week penalty up to a maximum of 10% at which time the note and all
outstanding interest and penalties will be converted into 6,250,000 shares of
the company’s stock. The Lender had the right at his sole discretion, to convert
any unpaid debt, along with any interest due, into free-trading common stock of
the Company at a conversion price of forty cents ($0.40) per share. The funds
from this loan were used for the Ohio Property Extension payment, payment for a
third party engineering evaluation of the Ohio Property and working
capital.





In June
2008 we paid $300,000 in consideration for an extension on the Ohio Oil &
Gas property to July 31, 2008.





In
September 2008 we issued 6,250,000 shares as satisfaction for the $500,000 note,
interest and penalties due to a private investor.





In
October, the company issued notice to the landowner on the Ohio Oil & Gas
property of its intent to not pursue the acquisition of the
project.  The company has also issued a demand letter to the land
owner for the return of the $300,000 paid in June for the
extension.  No response has been received from the land owner to date,
the company will continue to pursue the return of the funds.  Since
the entire amount is deemed  abandoned on December 31, 2008, $475,949
has been written off as an exploration expense.





In April
2009, the company extended the expiration of its Series B warrants to May 8,
2010.





In April
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 was written off of
the payable and booked as additional paid in capital.





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 Oklahoma, USA. The
company capitalized $173,740 for the drilling of the well during 2009.  The
well has been completed and is on production.





In August
2009, the company extended the expiration of its Series A Warrants to September
25, 2010.





During
the period ending September 30, 2009 the company raised $137,500 for the
drilling of the Bond #1-18.  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 issued 550,000 shares
relating to this financing.  The company also agreed to pay a 10%
commission to a 3rd
party on the portion of the funds raised by the 3rd
party relating to the Bond #1-18 well.  This commission totaled
$12,500 which was converted to a proportionate interest in the well along with
50,000 shares.





Our Competition.The
competition for acquiring mineral or oil and gas and resource properties for
exploration and development is intense. We may not be able to compete
successfully against current or future competitors. Our competitors vary in size
and in the scope and breadth of the services they can offer to potential merger
or acquisition candidates. We encounter competition from a variety of companies.
All of these mining companies are seeking properties of merit and availability
of funds. We will have to compete against such companies to acquire the funds to
develop any oil, gas or mineral claims. The availability of funds for
exploration is sometimes limited and we may find it difficult to compete with
larger and more well-known companies for capital. Even though we have the right
to the oil, gas or mineral resources on our claims there is no guarantee we will
be able to raise sufficient funds in the future to maintain the oil, gas or
mineral claims in good standing. Therefore, if we do not have sufficient funds
for exploration our claims might lapse and be claimed by other parties. We might
be forced to seek a joint venture partner to assist in the exploration of our
oil, gas or mineral claims. In this case, there is the possibility that we might
not be able to pay our proportionate share of the exploration costs and might be
diluted to an insignificant carried interest.





6


The
exploration business is highly competitive and highly fragmented, dominated by
both large and small mining or oil and gas companies. Success will largely
depend on our ability to attract talent from the field and our ability to fund
our operations. There is no assurance that our operations and expansion plans
will be realized.





Government Regulation. We are
subject to federal, state and local laws and regulations applied to businesses
generally, such as payroll taxes on the state and federal levels. In general,
our publications are not subject to particular regulatory requirements. We
believe that we are in conformity with all applicable laws in all relevant
jurisdictions. We may be prevented from operating if our activities are not in
compliance and must take action to comply with any federal, state, or local
regulation.





We are
committed to complying with and, to our knowledge, are in compliance with all
governmental and environmental regulations. Permits from a variety of regulatory
authorities are required for many aspects of oil, gas or mine operation and
reclamation. We cannot predict the extent to which future legislation and
regulation could cause additional expense, capital expenditures, restrictions,
and delays in the exploration of our properties.





Our
activities are not only subject to extensive federal, state and local
regulations controlling the mining of and exploration for mineral or oil and gas
properties, but also the possible effects of such activities upon the
environment. Future legislation and regulations could cause additional expense,
capital expenditures, restrictions and delays in the exploration of our
properties, the extent of which cannot be predicted. Permits may also be
required from a variety of regulatory authorities for many aspects of mine
operation and reclamation. In the context of environmental permitting, including
the approval of reclamation plans, we must comply with known standards, existing
laws and regulations that may entail greater or lesser costs and delays
depending on the nature of the activity to be permitted and how stringently the
regulations are implemented by the permitting authority. We are not presently
aware of any specific material environmental constraint affecting our properties
that would preclude the economic development or operation of any specific
property.





It is
reasonable to expect that compliance with environmental regulations will
increase our costs. Such compliance may include feasibility studies on the
surface impact of our proposed exploration operations; costs associated with
minimizing surface impact; water treatment and protection; reclamation
activities, including rehabilitation of various sites; on-going efforts at
alleviating the mining impact on wildlife; and permits or bonds as may be
required to ensure our compliance with applicable regulations. It is possible
that the costs and delays associated with such compliance could become so
prohibitive that we may decide not to proceed with exploration on any of our
mineral or oil and gas properties.





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,
2009, 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.





7


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 ($450 Canadian Dollars) 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.  Our telephone number is
(403) 288-4321.





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
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.




We have incurred a net loss since
inception and expect to incur net losses for the foreseeable
future.






As of
December 31, 2009, our net loss since inception was $5,219,452. 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 mineral 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 mineral 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 ’34 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.





8


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 guaranty 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 45% 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 45% 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.




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 1B. Unresolved Staff
Comments





There are
no unresolved staff comments.





Item 2. Description of
Property.





Property
held by us.





During
the period ending December 30, 2009 the company acquired a 25% interest in the
Bond #1-18 well located in Oklahoma, USA. The well has been completed and is on
production at a rate of approximately 85 Bbls per day.





During
the period ending June 30, 2009 the company acquired a 36 % interest in the
Gleason #4-16 well located in Oklahoma, USA. The well has been completed and is
on production at a rate of approximately 5 Bbls per day.





Item 3. Legal
Proceedings.





There are
currently no legal actions pending against us nor are any legal actions
contemplated by us at this time.


9


Item 4. Submission of
Matters to Vote of Security Holders.





Not
applicable.











10


PART
II





Item 5. Market Price for
Common Equity and Related Stockholder Matters.





Market Information.Our common stock is listed
on the OTC Bulletin Board under the symbol "RYQG". The quotations provided are
for the over the counter market which reflect interdealer prices without retail
mark-up, mark-down or commissions, and may not represent actual transactions.
The bid prices included below have been obtained from sources believed to be
reliable:







Quarter ended:
            
            High
            
            LowDecember
      31, 2009
            
            0.11
            
            0.085September
      30, 2009
            
            0.04
            
            0.04June
      30, 2009
            
            0.07
            
            0.07March
      31, 2009
            
            0.04
            
            0.04December
      31, 2008
            
            0.035
            
            0.035September
      30, 2008
            
            0.08
            
            0.07June
      30, 2008
            
            0.07
            
            0.07March
      31, 2008
            
            0.52
            
            0.43







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
48,980,338 shares of common stock issued and outstanding as of December 31,
2009, which were held by approximately 107 shareholders.





There are
580,000 shares available to be purchased under option at $0.40/share until May
8, 2010 pursuant to the private placement financing completed in April
2008.  There are 1,820,000 shares available to be purchased under
option at $0.15/share until September 25, 2010 pursuant to the private placement
financing completed in March of 2008. There are 720,000 shares available to be
purchased under option at $0.25/share until November 15, 2010 pursuant to the
private placement financing completed in May of 2009.  There are
1,100,000 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
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 not
paid a cash dividend on our common stock in the last two fiscal years.
Management anticipates that earnings, if any, will be retained to fund our
working capital needs and the implementation of our business plan. The payment
of any dividends is at the discretion of the Board of Directors.





Equity Compensation Plan.We
do not have any securities authorized for issuance under any equity compensation
plan.  We also do not have an equity compensation plan.





11


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:





In March
2008, the Company issued 1,820,000 shares in a private placement for $0.10 per
Unit.  Each Unit entitled the holder to acquire 1 common share of the
company’s stock at $0.10 per share and one share Series A purchase warrant,
entitling the holder to purchase one share at a price of $0.15 for a period of
18 months from closing of the private placement,  resulting in the
Company receiving $182,000 in cash.  The shares were issued in a
transaction which the Company believes satisfies the requirements of the
Regulation S exemption from the registration and prospectus delivery
requirements of the Securities Act of 1933. The Company used those funds for
working capital.





In April
of 2008 we issued 125,000 shares of restricted stock recorded at $0.47 per share
along with a $25,000 cash payment in consideration for an extension on the
Anderson Oil & Gas property to May 30, 2008.





In March
of 2008 we issued 50,000 shares to M2 Law in settlement of outstanding legal
invoices totaling $50,000. The shares were recorded at $0.65 per share for a
value of $32,500 and the difference of $17,500 was booked as forgiveness of
debt.





In April
of 2008 the company issued 100,000 shares in a private placement for $.25 per
share which resulted in the Company receiving $25,000 in cash.  The
shares were issued in a transaction which the Company believes satisfies the
requirements of the Regulation S exemption from the registration and prospectus
delivery requirements of the Securities Act of 1933. The Company used those
funds for working capital.





In May
2008, the Company issued 580,000 shares in a private placement for $0.25 per
Unit.  Each Unit entitled the holder to acquire 1 common share of the
company’s stock at $0.25 per share and one share Series B purchase warrant,
entitling the holder to purchase one share at a price of $0.40 for a period of
12 months from closing of the private placement, resulting in the Company
receiving $145,000 in cash.  The shares were issued in a transaction
which the Company believes satisfies the requirements of the Regulation S
exemption from the registration and prospectus delivery requirements of the
Securities Act of 1933. The Company used those funds for working
capital.





In June
2008 the company received a loan of $500,000 from a private
investor.  The loan carried an interest rate of 15% and was due and
payable on or before July 31, 2008.  The terms of the note allow for a
1% per week penalty up to a maximum of 10% at which time the note and all
outstanding interest and penalties will be converted into 6,250,000 shares of
the companies stock. The Lender had the right at his sole discretion, to convert
any unpaid debt, along with any interest due, into free-trading common stock of
the Company at a conversion price of forty cents ($0.40) per share. The funds
from this loan were used for the Ohio Property Extension payment, payment for a
third party engineering evaluation of the Ohio Property and working
capital.





In
September 2008 we issued 6,250,000 shares as satisfaction for the $500,000 note
due to a private investor. This included interest and penalties.





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 was written
off of the payable and booked as additional paid in capital.





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 cheque paid to the unit
holders.


12


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 cheque 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 $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.





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
thereunder.





Use of Proceeds of Registered
Securities.There were no sales or proceeds during the calendar year
ended December 31, 2009, for the sale of registered securities.





Penny Stock
Regulation.  Shares of our common stock will probably be
subject to rules adopted the Securities and Exchange Commission that regulate
broker-dealer practices in connection with transactions in “penny
stocks”.  Penny stocks are generally 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 those 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 Securities and
Exchange Commission, which contains the following:





·
            a
      description of the nature and level of risk in the market for penny stocks
      in both public offerings and secondary
trading;


·
            a
      description of the broker’s or dealer’s duties to the customer and of the
      rights and remedies available to the customer with respect to violation to
      such duties or other requirements of securities’
  laws;


·
            a
      brief, clear, narrative description of a dealer market, including "bid"
      and "ask” prices for penny stocks and the significance of the spread
      between the "bid" and "ask" price;


·
            a
      toll-free telephone number for inquiries on disciplinary
      actions;


·
            definitions
      of significant terms in the disclosure document or in the conduct
      of  trading in penny stocks;
and


·
            such
      other information and is in such form (including language, type, size and
      format), as the Securities and Exchange Commission shall require by rule
      or regulation.


Prior to
effecting any transaction in penny stock, the broker-dealer also must provide
the customer the following:





·
            the
      bid and offer quotations for the penny
stock;


·
            the
      compensation of the broker-dealer and its salesperson in the
      transaction;


·
            the
      number of shares to which such bid and ask prices apply, or other
      comparable information relating to the depth and liquidity of the market
      for such stock; and


·
            monthly
      account statements showing 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 acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably
statement.  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.  Holders of shares of our common
stock may have difficulty selling those shares because our common stock will
probably be subject to the penny stock rules.


13


Purchases of Equity Securities.None during the period covered by this report.







Item
6.                      Selected Financial
Data





Not
applicable to smaller reporting companies.





Item 7. Management’s
Discussion and Analysis of Financial Condition or Plan of
Operation.





This
following information specifies certain forward-looking statements of management
of the company. Forward-looking statements are statements that estimate the
happening of future events are not based on historical fact. Forward-looking
statements may be identified by the use of forward-looking terminology, such as
“may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”,
“probable”, “possible”, “should”, “continue”, or similar terms, variations of
those terms or the negative of those terms. The forward-looking statements
specified in the following information have been compiled by our management on
the basis of assumptions made by management and considered by management to be
reasonable. Our future operating results, however, are impossible to predict and
no representation, guaranty, or warranty is to be inferred from those
forward-looking statements.





The
assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to
uncertainty as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. No assurance can be given
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.





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.





Overview
..Our focus is
to acquirenear term cash flow producing mining projects for exploration
and development with the intent to bring the projects to
feasibility.





As of
December 31, 2009, we are in the production stage and have commenced our planned
principal operations. As a development stage company, we had recurring losses
during this phase of operations. Management is currently developing a plan to
raise capital to develop the business plan. No commitments to provide funding to
the Company have been confirmed as of the date of this report.





Our
current focus is on the
acquisition, exploration and development of mineral resource properties located
within favorable geo-political climates.







14


For the year ended December
31, 2009 as compared to the year ended December 31, 2008.





Results
of Operations.





Revenues.The
Company had revenue for the year ended December 31, 2009 of $48,265 and
production costs of $36,524., as compared to the year ended December 31, 2008 of
revenue $0 and production costs of $0.





Operating Expenses and Net Loss.The Company’s net loss is $342,336 for the year ended December 31, 2009
was comprised of general and administrative expenses of $20,352, consulting fees
in the amount of $198,845, professional fees in the amount of $57,539 and rent
expenses of $3,982. The Company also had $73,359 in total other expenses,
including $41,865 in foreign currency exchange loss, $31,494 of net
interest.  In comparison to the year ended December 31,
2008,   The Company’s net loss of $1,217,217 was comprised of
general and administrative expenses of $12,225, consulting fees in the amount of
$237,936, exploration expenses of $475,949, professional fees of $48,029 and
rent expense of $3,000.  The Company also had $440,078 in total other
expenses, including $55,060 in foreign currency exchange gain, $531,658 net
interest, $46,520 gain from forgiveness of debt, and $10,000 write-down of
assets.





Liquidity and Capital
Resources.The Company had cash of $12,022 as of
December 31, 2009, as compared to $90,363 as of December 31, 2008.  As
of the year ended December 31, 2009, the Company also had fixed assets of $556,
represented by furniture and fixtures of $1,851 less accumulated depreciation of
$1,295 as compared to the year ended December 31, 2008, the Company had fixed
assets of $926, represented by furniture and fixtures of $1,851 less accumulated
depreciation of $925.  The Company also had $1 in intangible assets in
2008.





For the
year ended December 31, 2009, the Company had $656,706 in total current
liabilities, which was represented by $134,728 in accounts payable, $309,648 in
demand notes payable, $192,485 in related party accounts payable, and $19,845 in
shareholder loans.  This is in comparison to the year ended December
31, 2008, where the Company had $439,944 in total current liabilities, which was
represented by $86,082 in accounts payable, $235,755 in demand notes payable,
$98,262 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,
2009 which consisted of an asset retirement obligation, The Company had total
liabilities of $667,686.  This is in comparison to the year ended
December 31, 2008, where the Company no long-term  liabilities
and  total liabilities of $439,944.  The Company is not
aware of any other known trends, events or uncertainties which may affect its
future liquidity.





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 $12,022 as of December 31, 2009. 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.





15


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 45% 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.




Item 7A. Quantitative and
Qualitative Disclosure About Market Risk





Not
Applicable.





Item 8. Financial
Statements





The
financial statements required by Item 8 follow:













16





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. (Formerly a
development stage company) as of December 31, 2009 and 2008, and the related
statements of income, stockholders’ equity and cash flows for each of the years
in the two-year period ended December 31, 2009. 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, 2009 and 2008, and the results of its operations and its cash flows
for each of the years in the two-year period ended December 31, 2009 in
conformity with accounting principles generally accepted in the United States of
America.





17








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
$5,219,000, has a liquidity problem and has just recently entered the production
stage in the oil and gas industry, which raise 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.


ertified
Public Accountants





Salt Lake
City, UT


April 15,
2010






18





ROYAL QUANTUM GROUP, INC.(Formerly A Development Stage
      Company)BALANCE SHEETSDecember
      31,
              
              
              December
      31,ASSETS
              
              2009
              
              
              2008Current
      Assets:Cash
      & Cash Equivalents
              
              $
              12,022
              
              
              $
              90,363Accounts
      receivable
              
              
              31,851
              
              
              
              -Total
      Current Assets
              
              
              43,873
              
              
              
              90,363Fixed
      Assets:Furniture
      & Fixtures
              
              
              1,851
              
              
              
              1,851Less:
      Accumulated Depreciation
              
              
              (1,295
              )
              
              
              (925
              )Total
      Fixed Assets
              
              
              556
              
              
              
              926Other
      Assets:Intangible
      Assets
              
              
              -
              
              
              
              1Proved
      Oil & Gas Properties,full cost method
              
              
              255,868
              
              
              
              -Less:
      Accumulated Depletion
              
              
              (5,657
              )
              
              
              -Unproved
      Oil & Gas Properties
              
              
              27,056Total
      Other Assets
              
              
              277,267
              
              
              
              1Total
      Assets
              
              $
              321,696
              
              
              $
              91,290
  19
   ROYAL QUANTUM GROUP, INC.(Formerly A Development Stage
      Company)BALANCE SHEETS(Continued)December
      31,
              
              
              December
      31,2009
              
              
              2008LIABILITIES
      & STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      Payable
              
              $
              134,728
              
              
              $
              86,082Notes
      Payable
              
              
              309,648
              
              
              
              235,755Related
      Party Payables
              
              
              192,485
              
              
              
              98,262Shareholder
      Loans
              
              
              19,845
              
              
              
              19,845Total
      Current Liabilities
              
              
              656,706
              
              
              
              439,944Long-Term
      Liabilities:Asset
      Retirement Obligation
              
              
              10,980
              
              
              
              -Total
      Long-Term Liabilities
              
              
              10,980
              
              
              
              -Total
      Liabilities
              
              
              667,686
              
              
              
              439,944Stockholders'
      Equity:Preferred
      Stock, Par value $.001Authorized
      10,000,000 sharesIssued
      0 shares at December 31, 2009 and 2008
              
              
              -
              
              
              
              -Common
      Stock, Par value $.001Authorized
      500,000,000 sharesIssued
      48,980,338 shares at December 31,2009and
      48,020,338 shares at December 31, 2008
              
              
              48,980
              
              
              
              48,020Paid-in
      Capital
              
              
              4,824,482
              
              
              
              4,480,442Retained
      Deficit
              
              
              (5,219,452
              )
              
              
              (4,877,116
              )Total
      Stockholders' Equity
              
              
              (345,990
              )
              
              
              (348,654
              )Total
      Liabilities and Stockholders' Equity
              
              $
              321,696
              
              
              $
              91,290The
      accompanying notes are an integral part of the financial
      statements
  20
   ROYAL QUANTUM GROUP, INC.(Formerly A Development Stage
      Company)STATEMENTS OF
    OPERATIONSFor
      the year endedDecember
      31,2009
              
              
              2008Oil
      Revenue
              
              $
              48,265
              
              
              $
              -Operating
      ExpensesProduction
      Costs
              
              
              36,524
              
              
              
              -Consulting
      Fees
              
              
              17,336
              
              
              
              146,358Exploration
      Expense
              
              
              -
              
              
              
              475,949General
      & Administrative
              
              
              20,352
              
              
              
              12,225Professional
      Fees
              
              
              57,539
              
              
              
              48,029Related
      Party Consulting
              
              
              181,509
              
              
              
              91,578Related
      Party Rent Expense
              
              
              3,982
              
              
              
              3,000Total
      Operating Expenses
              
              
              (317,242
              )
              
              
              (777,139
              )Other
      Income (Expenses)Write-down
      of Assets
              
              
              -
              
              
              
              (10,000
              )Foreign
      currency exchange gain (loss)
              
              
              (41,865
              )
              
              
              55,060Interest
      (Expense)
              
              
              (31,494
              )
              
              
              (531,658
              )Forgiveness
      of debt
              
              
              -
              
              
              
              46,520Total
      Other Income (Expense)
              
              
              (73,359
              )
              
              
              (440,078
              )Net
      Loss
              
              $
              (342,336
              )
              
              $
              (1,217,217
              )Loss
      per share
              
              $
              (0.01
              )
              
              $
              (0.03
              )Weighted
      Average Shares Outstanding
              
              
              48,431,297
              
              
              
              43,316,636The
      accompanying notes are an integral part of the financial
      statements
  21
   ROYAL QUANTUM GROUP, INC.(Formerly A Development Stage
      Company)STATEMENTS OF STOCKHOLDER'S
      EQUITYPaid-in
              
              
              RetainedShares
              
              
              Par
      Value
              
              
              Capital
              
              
              DeficitBalance
      at December 31, 2007
              
              
              39,095,338
              
              
              $
              39,095
              
              
              $
              3,046,117
              
              
              $
              (3,659,899
              )Stock
      issued for cash
              
              
              2,500,000
              
              
              
              2,500
              
              
              
              349,500
              
              
              
              -Issued
      stock in exchange for accounts payable
              
              
              50,000
              
              
              
              50
              
              
              
              32,450
              
              
              
              -Issued
      stock in exchange for services
              
              
              125,000
              
              
              
              125
              
              
              
              58,625
              
              
              
              -Issued
      stock for cancellation of debt
              
              
              6,250,000
              
              
              
              6,250
              
              
              
              993,750
              
              
              
              -Net
      Loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,217,217
              )Balance
      at December 31, 2008
              
              
              48,020,338
              
              
              
              48,020
              
              
              
              4,480,442
              
              
              
              (4,877,116
              )Stock
      issued for cash
              
              
              910,000
              
              
              
              910
              
              
              
              316,590
              
              
              
              -Cancellation
      of debt due to related party(Santeo)
              
              
              -
              
              
              
              -
              
              
              
              15,000
              
              
              
              -Issued
      stock in exchange for services
              
              
              50,000
              
              
              
              50
              
              
              
              12,450
              
              
              
              -Net
      Loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (342,336
              )Balance
      at December 31, 2009
              
              
              48,980,338
              
              
              $
              48,980
              
              
              $
              4,824,482
              
              
              $
              (5,219,452
              )The
      accompanying notes are an integral part of the financial
      statements
  22
   ROYAL QUANTUM GROUP, INC.(Formerly A Development Stage
      Company)STATEMENTS OF CASH
    FLOWSFor
      the year endedDecember
      31,2009
              
              
              2008CASH FLOWS FROM OPERATING
      ACTIVITIES:Net
      Loss
              
              $
              (342,336
              )
              
              $
              (1,217,217
              )Adjustments
      to reconcile net income (loss) tonet
      cash provided (used in) operating activities:Depreciation
              
              
              370
              
              
              
              370Depletion
              
              
              5,657
              
              
              
              -Write-down
      of mineral property
              
              
              -
              
              
              
              475,949Write-down
      of assets
              
              
              1
              
              
              
              10,000Stock
      issued for interest
              
              
              -
              
              
              
              500,000Stock
      issued for services
              
              
              12,500
              
              
              
              -Forgiveness
      of debt
              
              
              -
              
              
              
              (46,520
              )Foreign
      currency exchange loss (gain)
              
              
              41,865
              
              
              
              (55,060
              )Increase
      (decrease) in accounts receivable
              
              
              (31,851
              )
              
              
              -Increase
      (decrease) in interest on notes payable
              
              
              31,494
              
              
              
              31,658Increase
      (decrease) in accounts payable
              
              
              49,179
              
              
              
              (19,240
              )Increase
      (decrease) in related party accounts payable
              
              
              109,223
              
              
              
              (21,826
              )Net
      cash provided (used in) continuing activities
              
              
              (123,898
              )
              
              
              (341,886
              )CASH FLOWS FROM INVESTING
      ACTIVITIES:Acquisition
      of proven oil and gas property interests
              
              
              (244,887
              )
              
              
              (417,199
              )Investment
      in unproven oil and gas property
              
              
              (27,056
              )
              
              
              -Net
      cash provided by (used in) investing activities
              
              
              (271,943
              )
              
              
              (417,199
              )CASH FLOWS FROM FINANCING
      ACTIVITIES:Payment
      on shareholder loans
              
              
              -
              
              
              
              (6,000
              )Proceeds
      from notes payable
              
              
              -
              
              
              
              500,000Stock
      issued in exchange for cash
              
              
              317,500
              
              
              
              352,000Net
      cash provided by (used in) financing activities
              
              
              317,500
              
              
              
              846,000
  23
   ROYAL QUANTUM GROUP, INC.(Formerly A Development Stage
      Company)STATEMENTS OF CASH
    FLOWS(Continued)For
      the year endedDecember
      31,2009
              
              
              2008Net
      (Decrease) increase in Cash and Cash Equivalents
              
              
              (78,341
              )
              
              
              86,915Cash
      and Cash Equivalents at Beginning of Period
              
              
              90,363
              
              
              
              3,448Cash
      and Cash Equivalents at End of Period
              
              $
              12,022
              
              
              $
              90,363SUPPLEMENTAL DISCLOSURE OF CASH FLOW
      INFORMATION:Cash
      paid during the year for:Interest
              
              $
              -
              
              
              $
              -Income
      taxes
              
              $
              -
              
              
              $
              -SUPPLEMENTAL DISCLOSURE OF NON-CASH
      INVESTINGAND FINANCING
      ACTIVITIES:Stock
      issued in plan of reorganization
              
              $
              -
              
              
              $
              -Stock
      issued in asset acquisition
              
              $
              -
              
              
              $
              -Stock
      issued for services
              
              $
              12,500
              
              
              $
              -Stock
      issued for investment in oil property
              
              $
              -
              
              
              $
              58,750Stock
      issued for cancellation of debt
              
              $
              -
              
              
              $
              500,000Related
      party payable converted to paid in capital
              
              $
              15,000
              
              
              $
              -Stock
      issued for Accounts Payable
              
              $
              -
              
              
              $
              32,500The
      accompanying notes are an integral part of the financial
      statements


24
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 This summary of accounting policies for
Royal Quantum Group, Inc. (the “Company”) is presented to assist in
understanding the Company's financial statements.  The accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial
statements.
 
 Nature of Operations and
Going Concern
 
 The accompanying financial statements
have been prepared on the basis of accounting principles applicable to a “going
concern”, which assume that the Company will continue in operation for at least
one year and will be able to realize its assets and discharge its liabilities in
the normal course of operations.
 
 Several conditions and events cast
doubt about the Company’s ability to continue as a “going
concern”.  The Company has incurred net losses of approximately
$5,200,000, has recently entered the production stage of the oil and gas
industry, and has a liquidity problem.  In the interim, shareholders
of the Company have committed to meeting any shortfall of operational cash
flow.   In addition the company may require increasing equity and
debt financing in order to finance its business activities on an ongoing
basis.
 
 These financial statements do not
reflect adjustments that would be necessary if the Company were unable to
continue as a “going concern”.  While management believes that the
actions already taken or planned, will mitigate the adverse conditions and
events which raise doubt about the validity of the “going concern” assumption
used in preparing these financial statements, there can be no assurance that
these actions will be successful.
 
 If the
Company were unable to continue as a “going concern”, then substantial
adjustments would be necessary to the carrying values of assets, the reported
amounts of its liabilities, the reported expenses, and the balance sheet
classifications used.
 
 Reclassifications
 
 Certain
reclassifications have been made in the 2008 financial statements to conform
with the 2009 presentation.
 
 
  25
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Organization and Basis of
Presentation
 
 The Company was incorporated under the
laws of the State of Nevada on October 22, 1996 under the name PSM
Corp.  The Company ceased all operating activities during the period
from October 22, 1996 to July 9, 1999 and was considered dormant. On July 9,
1999, the Company obtained a Certificate of renewal from the State of
Nevada.  On January 11, 2000, the company changed its name to Mentor
On Call, Inc.
 
 On October 3, 2002, the Company changed
its name to Platinum SuperYachts, Inc. in anticipation of a merger with
SuperYachts Holdings, Inc. (a Nevada Corporation that was incorporated on August
23, 2002).  On November 15, 2002, the shareholders of the Platinum
SuperYachts, Inc. completed a stock exchange agreement with SuperYachts
Holdings, Inc. dated August 8, 2002.  The merger was accounted for as
a reverse merger, with SuperYachts Holdings being treated as the acquiring
entity for financial reporting purposes.  In connection with this
merger, SuperYachts Holdings issued 858,365 shares of common stock (100%) in
exchange for the assets and liabilities of the Platinum SuperYachts,
Inc.
 
 For financial reporting purposes,
Platinum SuperYachts, Inc. was considered a new reporting entity on November 15,
2002
 
 The merger was recorded as a
recapitalization.  In connection with this recapitalization, the
number of shares outstanding prior to the merger have been restated to their
post merger equivalents (increased from 1,400,000 shares to
14,000,000).  All references in the accompanying financial statements
to the number of Common shares and per-share amounts for 2002 have been restated
to reflect the equivalent number of post merger shares.
 
 On November 23, 2005 holders of a
majority of the Company’s common stock approved an Amendment to change the name
of the Company to Royal Quantum Group, Inc., to increase the number of shares of
common stock the Company is authorized to issue to 500,000,000 and to authorize
the Company to issue up to 10,000,000 shares of preferred stock.
 
 As of
December 31, 2009, the Company is in the production stage of the oil and gas
industry.
 
 
  26
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Nature of
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 resource
and mineral properties located within favorable geo-political
climates.
  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.
 
 Revenue
Recognition
 
 The Company recognizes oil and gas
revenue from its interests in producing wells as oil and gas is produced and
sold from those wells.  Oil and gas sold is not significantly
different from the Company’s share of production.  Revenues from the
purchase, sale and transportation of natural gas are recognized upon completion
of the sale and when transported volumes are delivered.  Shipping and
handling costs in connection with such deliveries are included in production
costs.  Revenue under carried interest agreements is recorded in the
period when the net proceeds become receivable, measurable and collection is
reasonably assured.  The time the net revenues become receivable and
collection is reasonably assured depends on the terms and conditions of the
relevant agreements and the practices followed by the operator.  As a
result, net revenues may lag the production month by one or more
months.
 
 Depreciation and
Amortization
 
 Fixed
assets are recorded at cost and depreciated using the straight-line method over
the estimated useful lives of the assets which range from three to five
years.  Fixed assets consisted of the following at December 31, 2009
and December 31, 2008:
 
 December
      31,
              
              
              December
      31,2009
              
              
              2008Furniture
      & Fixtures
              
              $
              1,851
              
              
              $
              1,851 -Less
      accumulated depreciation
              
              
              (1,296
              )
              
              
              (925
              )Total
              
              $
              555
              
              
              $
              926
 
  27
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Depreciation and
Amortization (continued)
 
 Maintenance
and repairs are charged to operations; betterments are
capitalized.  The cost of property sold or otherwise disposed of and
the accumulated depreciation thereon are eliminated from the property and
related accumulated depreciation accounts, and any resulting gain or loss is
credited or charged to income.
 
 Total depreciation expense for the
twelve months ended December 31, 2009 and 2008 was $370 and $370
respectively.
 
 Intangible
Assets
 
 The
Company has adopted the Financial Accounting Standards Board SFAS No., 142,
“Goodwill and Other Intangible Assets.”  SFAS 142 requires, among
other things, that companies no longer amortize goodwill, but instead test
goodwill for impairment at least annually.  In addition, SFAS 142
requires that the Company identify reporting units for the purposes of assessing
potential future impairments of goodwill, reassess the useful lives of other
existing recognized intangible assets, and cease amortization of intangible
assets with an indefinite useful life.  An intangible asset with an
indefinite useful life should be tested for impairment in accordance with the
guidance in SFAS 142.
 
 Intangible
Assets consisted of the following at December 31, 2009 and December 31,
2008:
 
 December
      31,
              
              
              December
      31,Intangible
      Asset
              
              2009
              
              
              2008
              
              Amortization
      PeriodE-Learning
      System
              
              $
              - 1
              
              
              $
              1
              
              IndefiniteLess
      accumulated amortization
              
              
              -
              
              
              
              -Total
              
              $
              -
              
              
              $
              1
 
 Total amortization expense for the
twelve months ended December 31, 2009 and December 31, 2008 was $0 and $0
respectively.  During the second quarter of 2009, the Company
determined not to pursue the E-Learning System and expensed the impaired
asset.
 
  28
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Oil and Gas
Properties
 
 The Company follows the full cost
method of accounting for its oil and gas properties.  Under this
method, all costs associated with acquisition, exploration, and development of
oil and gas properties are capitalized.  Such costs include land and
lease acquisition costs, annual carrying charges of non-producing properties,
geological and geophysical costs, costs of drilling and equipping productive and
non-productive wells, asset retirement costs, and direct exploration salaries
and related benefits.  Capitalized costs are categorized as being
subject to depletion or not subject to depletion.  The Company
operates in one cost center, the United States.
 
 The capitalized costs of oil and gas
properties are depleted on the unit-of-production method using estimates of
proved reserves as determined by independent engineers.  Investments
in unproved properties are not amortized until proved reserves associated with
projects can be determined or until impairment occurs.  If the results
of an assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be
amortized.  Depletion expense for the years ending December 31, 2009
and 2009 was $5,657 and $0, respectively.
 
 The Company applies a ceiling test to
capitalized costs to ensure that such costs do not exceed estimated future net
revenues from production of proven reserves at year end market prices less
future production, administrative, financing, site restoration, and income tax
costs plus the lower of cost or estimated market value of unproved properties.
If capitalized costs are determined to exceed estimated future net revenues, a
write-down of carrying value is charged to depletion in the period.
 
 Proceeds from the sale of oil and gas
properties are recorded as a reduction of the related capitalized costs without
recognition of a gain or loss unless such sales involve a significant change in
the relationship between costs and the value of proved reserves or the
underlying value of unproved properties, in which case a gain or loss is
recognized.
 
 The Company is in the process of
exploring additional unproved oil and natural gas properties. The recoverability
of amounts shown for oil and natural gas properties is dependent upon the
discovery of economically recoverable reserves, confirmation of the Company’s
interest in the underlying oil and gas leases, the ability of the Company to
obtain necessary financing to complete their exploration and development and
future profitable production or sufficient proceeds from the disposition
thereof.
 
  29
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Pervasiveness of
Estimates
 
 The preparation of financial statements
in conformity with generally accepted accounting principles required management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.
 
 Foreign Currency
Translation
 
 The Company's primary functional
currency is the U.S. dollar.  However, the Company has a few
transactions in Canada. Transaction gains and losses are included in
income.
 
 Concentrations of Credit
Risk
 
 The Company has no significant
off-balance-sheet concentrations of credit risk such as foreign exchange
contracts, options contracts or other foreign hedging
arrangements.  The Company had cash and cash equivalents in the amount
of $12,022 and $90,363 as of December 31, 2009 and 2008 all of which was fully
covered by federal depository insurance.
 
 Earnings (Loss) per
Share
 
 Basic
loss per share has been computed by dividing the loss for the period applicable
to the common stockholders by the weighted average number of common shares
outstanding during the years.  In periods where losses are reported,
the weighted average number of common shares outstanding excludes common stock
equivalents because their inclusion would be anti-dilutive. Diluted loss per
common share for the years ended December 31, 2009 and 2008 are not presented as
it would be anti-dilutive.  At December 31, 2009 and 2008, the total
number of potentially dilutive common stock equivalents was 4,220,000 and
4,220,000, respectively.
 
  30
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Asset Retirement
Obligations
 
 The Company applies SFAS 143, Accounting for Asset Retirement
Obligations.  This statement applies to obligations associated
with the retirement of tangible long-lived assets that result from the
acquisition, construction and development of the assets.  SFAS 143
requires that the fair value of a liability for a retirement obligation be
recognized in the period in which the liability is incurred.  For oil
and gas properties, this is the period in which an oil or gas well is acquired
or drilled.  The asset retirement obligation is capitalized as part of
the carrying amount of our oil and gas properties at its discounted fair
value.  The liability is then accreted each period until the liability
is settled or the well is sold, at which tie the liability is
reversed.
 
 Financial
Instruments
 
 The Company’s financial instruments, as
defined under SFAS No. 107, Disclosure about Fair Value of Financial
Instruments, include its cash and cash equivalents, accounts payable and accrued
liabilities. Except as otherwise noted, it is management’s opinion that the
Company is not exposed to significant interest or credit risks arising from
these financial instruments.  The fair value of these financial
instruments approximates their carrying values due to the short-term maturities
of these instruments.
 
 Income
Taxes
 
 The Company accounts for income taxes
under the provisions of SFAS No.109, “Accounting for Income
Taxes.”  SFAS No.109 requires recognition of deferred income tax
assets and liabilities for the expected future income tax consequences, based on
enacted tax laws, of temporary differences between the financial reporting and
tax bases of assets and liabilities.
 
 Recent Accounting
Standards
 
 In
October 2009, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update 2009-13 (ASU 2009-13), which provided an update to
ASC 605.  ASU 2009-13 addresses how to separate deliverables and how
to measure and allocate arrangement consideration to one or more units of
accounting in multiple-deliverable arrangements. The amendments in this update
will be effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010. The
Company is currently evaluating the impact that this update will have on its
Financial Statements.
 
  31
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Recent Accounting Standards
(continued)
 
 In June 2009, the FASB created the
Accounting Standards Codification, which is codified as ASC 105.  ASC
105 establishes the codification as the single official non-governmental source
of authoritative accounting principles (other than guidance issued by the SEC)
and supersedes and effectively replaces previously issued GAAP hierarchy
framework.  All other literature that is not part of the codification
will be considered non-authoritative.  The codification is effective
for interim and annual periods ending on or after September 15,
2009.  The Company has applied the codification, as required,
beginning with the 2009 Form 10-K.  The adoption of the codification
did not have a material impact on the Company’s financial position, results of
operations or cash flows.
 
 In June
2009, the FASB updated ASC 855, which established principles and requirements
for subsequent events.  This guidance details the period after the
balance sheet date which the Company should evaluate events or transactions that
may occur for potential recognition or disclosure in the financial statements,
the circumstances under which the Company should recognize events or
transactions occurring after the balance sheet date in its financial statements
and the required disclosures for such events.  ASC 855 is effective
for interim and annual periods ending after June 15, 2009.  The
implementation of ASC 855 did not have a material effect on the Company’s
financial statements.  The Company adopted ASC 855, and has evaluated
all subsequent events through April 15, 2010.
 
 In April
2009, the FASB updated ASC 820 to provide additional guidance for estimating
fair value when the volume and level of activity for the asset or liability have
decreased significantly.  ASC 820 also provides guidance on
identifying circumstances that indicate a transaction is not orderly. The
implementation of ASC 820 did not have a material effect on the Company’s
financial statements.
 
 In April
2009, the FASB updated ASC 825 regarding interim disclosures about fair value of
financial instruments.  ASC 825 requires disclosures about fair value
of financial instruments in interim reporting periods of publicly traded
companies that were previously only required to be disclosed in annual financial
statements. The implementation of ASC 825 did not have a material effect on the
Company’s financial statements.
 
  32
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 1 - ORGANIZATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Recent Accounting Standards
(continued)
 
 In April
2009, the FASB updated ASC 320 for proper recognition and presentation of
other-than-temporary impairments.  ASC 320 provides additional
guidance designed to create greater clarity and consistency in accounting for
and presenting impairment losses on securities.  The implementation of
ASC 320 did not have a material effect on the Company’s consolidated financial
statements.
 
 NOTE 2 - INCOME
TAXES
 
 As of December 31, 2009, the Company
had a net operating loss carry forward for income tax reporting purposes of
approximately $12,513,000 that may be offset against future taxable income
through 2029.  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.
 
 2009
              
              
              2008Net
      Operating Losses
              
              $
              4,254,000
              
              
              $
              4,250,000Accrued
      Consulting Fees
              
              
              62,000
              
              
              
              33,000Valuation
      Allowance
              
              
              (4,316,000
              )
              
              
              (4,283,000
              )$
              -
              
              
              $
              -
 
 The
provision for income taxes differ from the amount computed using the federal US
statutory income tax rate as follows:
 2009
              
              
              2008Provision
      (Benefit) at US Statutory Rate
              
              $
              (116,394
              )
              
              $
              (413,854
              )Stock
      Compensation / Interest
              
              
              4,250
              
              
              
              127,500Excess
      Capital Losses over Capital Gains
              
              
              (-
              )
              
              
              (3,400
              )Accrued
      Consulting Fees
              
              
              28,849
              
              
              
              7,421Other
              
              
              50,295
              
              
              
              2,572Increase
      (Decrease) in Valuation Allowance
              
              
              33,000
              
              
              
              279,761$
              -
              
              
              $
              -
 
 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.
  33
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 3 – INVESTMENT IN
MINERAL PROPERTY
 
 In May 2007, the company entered into a
Purchase Agreement (“Agreement”) to acquire from U3, LLC (“Seller”) 100%
interest in 1,540 acres that consist of 77 claims of prospective Uranium
property located adjacent to the Sheep Mountain Mine in Fremont County, Central
Wyoming, approximately 90 miles SW of Casper Wyoming.  On May 28,
2007, we paid $10,000 to the Seller on the execution of Agreement.
 
 On July
18, 2007, we executed an Amendment to the Agreement (“Amendment”) with the
Seller.  The Amendment revised the Agreement to provide that the
following payments be made to the Seller upon issuance of claim numbers (“WMC
numbers”) from the Bureau of Land Management (“BLM”) on each claim and the
issuance of WMC numbers from the BLM on each of an additional 100 claims within
a 3 mile radius of the claims:
 
 ·
              $50,000
      on or before October 1, 2007;
 ·
              $50,000
      on or before  November 1,
2007;
 ·
              $50,000
      on or before December 1, 2007; and
 ·
              $70,000
      on or before January 15, 2008.
 
 The
Amendment also provides that the closing shall be on or before September 3,
2007.
 
 Pursuant to the Agreement, we also
agreed to issue 1,000,000 restricted shares of our common stock to the Seller
upon transfer of claims to us, clear of any liens or encumbrances.  In
addition, we agreed to a $150,000 work program on the Sheep Mountain Claim block
before June 1, 2008. On or before June 1, 2008 and provided we elect to
continue, we agreed to make an additional $200,000 cash payment to the Seller,
issue an additional 500,000 restricted shares of our common stock to the Seller,
and enter into an additional $150,000 work program on the claims. On or before
June 1, 2009, and provided we elect to continue, we agreed to make a final
$200,000 cash payment to the Seller and issue an additional 1,250,000 restricted
shares of our common stock issued to the Seller and reserve a 2% NSR for Seller
on any production from the claims. The Agreement also provides that we will
register the shares issued to the Seller if we close a financing of more than
$1,000,000. If we drop the claims at any point, the claims are transferred back
to the Seller.
 
 The Company and U3 elected not to
continue with the agreement to acquire the claims as outlined due to delays in
receiving WMC numbers on the claims, and the Company has requested the return of
the $10,000 from U3 as per the agreement terms.  The company did not
issue any shares pursuant to this agreement and as of the date of this report
has not received the $10,000.  After numerous attempts to collect on
the $10,000, the company has written the debt off as bad debt
expense.
  34
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 4 - INVESTMENT IN OIL
& GAS PROPERTY
 
 In January of 2008 the company acquired
an option to purchase a 6,000 acre Oil & Gas property located in the
state of Ohio.  The closing date of the transaction was extended
to July 31, 2008 and was subject to financing.  Pursuant to the
agreement, the Company paid the seller $325,000 in cash and issued 125,000
shares of stock valued at $58,750 for the acquisition and extension of the
agreement.  The Company had capitalized a total of $475,949 related to
this property.
 
 In October, the company issued notice
to the landowner of the Ohio Oil & Gas property of its intent to not pursue
the acquisition of the project.  The company has also issued a demand
letter to the land owner for the return of the $300,000 paid in June for the
extension.  No response has been received from the land owner to date;
the company will continue to pursue the return of the funds.  Since
the entire amount is deemed abandoned on December 31, 2008, $475,949 has been
written off as an exploration expense.
 
 During the period ending June 30,
2009, the Company acquired an interest in the Gleason #4-16 well in Oklahoma,
U.S.A.  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.  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 cheque paid to the unit
holders.
 
 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 was written off of the
payable and booked as additional paid in capital.
 
 During the year ended December 31,
2009, the Company capitalized a total of $173,740 in acquisition and exploration
costs relating to the Gleason #4-16 well.  It has been determined the
Gleason #4-16 well has proved oil reserves.  For the year ended
December 31, 2009, the Company received  revenues of $18,512 from the
Gleason #4-16 well.  As of December 31, 2009, the total capitalized
costs related to the Gleason well was $173,740.  Depletion on the
Gleason well at December 31, 2009 was $4,907.
 
  35
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 4 - INVESTMENT IN OIL
& GAS PROPERTY (continued)
 
 During the period ending September 30,
2009, the Company acquired an interest in the Bond #1-18 well in Oklahoma,
U.S.A.  The company raised a total of $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 cheque 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 $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.
 
 During the year ended December 31,
2009, the Company capitalized a total of $77,628 in acquisition and exploration
costs relating to the Bond #1-18 well.  It has been determined the
Bond #1-18 well has proved oil reserves.  For the year ended December
31, 2009, the Company received  revenues of $29,753 from the Bond
#1-18 well.  As of December 31, 2009, the total capitalized costs
related to the Bond well was $82,128.  Depletion on the Bond well at
December 31, 2009 was $750.
 
 During 2009, the Company acquired an
interest in additional oil property in Oklahoma and has capitalized $27,056 as
part of unproved properties.
 
 NOTE 5 - ASSET RETIREMENT
OBLIGATION
 
 The Company adopted Statement of
Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations(“SFAS 143”). This statement applies to obligations
associated with the retirement of tangible long-lived assets that result from
the acquisition, construction and development of the assets.
 
 SFAS 143 requires that the fair value
of a liability for a retirement obligation be recognized in the period in which
the liability is incurred. For oil and gas properties, this is the period in
which an oil or gas well is acquired or drilled. The asset retirement obligation
is capitalized as part of the carrying amount of the asset at its discounted
fair value. The liability is then accreted each period until the liability is
settled or the asset is sold, at which time the liability is
reversed.
 
 The Company identified and estimated
all of its asset retirement obligations for tangible, long-lived assets as of
December 31, 2009. These obligations were for plugging and abandonment costs for
depleted oil and gas wells.  The Company had no proved reserves in
2008; therefore the Company did not record an asset retirement
obligation.   During the year ended December 31, 2009, the
Company estimated its asset retirement obligation to be $10,980.  Upon
recognition of this asset retirement obligation, a liability of $10,980 was
recorded and the capitalized costs of proved properties was increased by
$10,980.
 
  36
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 6 - LEASE
AGREEMENT
 
 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,
CEO.  This lease can be canceled on one month’s written notice. The
current lease requires rental payments of approximately $450 ($450 Canadian
Dollars) per month plus applicable taxes effective April 1, 2009 after
consolidating leased space.  Prior to April 1, 2009, the lease was
approximately $250 per month plus applicable taxes. For the year ended December
31, 2009 and 2008 the Company had $3,982 and $3,000 respectively in rent
expense.
 
 During
2008, Trio Gold wrote off the entire balance owed to them through March 31,
2008.  The company has recorded $29,020 in forgiveness of debt as of
December 31, 2008.
 
 NOTE 7 - UNCERTAIN TAX
POSITIONS
 
 Effective January 1, 2007, the company
adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN
48”). FIN 48 prescribes a recognition threshold and a measurement attribute for
the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be recognized, a tax
position must be more-likely-than-not to be sustained upon examination by taxing
authorities. The adoption of the provisions of FIN 48 did not have a material
impact on the company’s condensed consolidated financial position and results of
operations. At January 1, 2008, the company had no liability for unrecognized
tax benefits and no accrual for the payment of related interest and penalties.
The Company did not record a cumulative effect adjustment relating to the
adoption of FIN 48.
 
 Interest costs related to unrecognized
tax benefits are classified as “Interest expense, net” in the accompanying
condensed consolidated statements of operations. Penalties, if any, would be
recognized as a component of “Selling, general and administrative expenses”. The
Company recognized $0 of interest and penalties expense related to unrecognized
tax benefits during 2009 and 2008. In many cases the company’s uncertain tax
positions are related to tax years that remain subject to examination by
relevant tax authorities. With few exceptions, the company is generally no
longer subject to U.S. federal, state, local or non-U.S. income tax examinations
by tax authorities for years before 2006. The following describes the open tax
years, by major tax jurisdiction, as of January 1, 2009e:
 United
      States (a)
              
              2006
      - Present
 
 (a)
Includes federal as well as state or similar local jurisdictions, as
applicable.
 
  37
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 8 - RELATED PARTY
TRANSACTIONS
 
 As of December 31, 2009 and 2008, the
Company owed Santeo Financial $172,693 and $89,353 respectively for consulting
services.  Ron Ruskowsky, President and CEO of the Company is an
affiliate of Santeo Financial.  Currently the Company has an agreement
with Santeo Financial whereby Santeo Financial provides consulting services in
exchange the Company agrees to pay a consultant fee of $15,000 per month
effective October 1, 2008.
 
 As of December 31, 2009 and 2008, the
Company owed Ron Ruskowsky, President and CEO of the Company, $9,374 and $0
respectively for operating expenses paid for by Ron.
 
 As of December 31, 2009 and 2008, the
Company owed Roger Janssen, an officer and director of the Company, $1,345 and
$1,345 respectively for services performed.
 
 As of December 31, 2009 and 2008, the
Company owed Phil Van Angren, an officer and director of the Company, $9,073 and
$7,564 respectively for consulting services performed as the Exploration
Manager.
 
 As of December 31, 2009 and 2008,
shareholders have advanced the Company $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.
 
 As of December 31, 2009 and 2008, the
Company rented office space from Trio Gold in the amount of $3,982 and $3,000
respectfully. Trio Gold’s president is the father of Ron Ruskowsky, President
and CEO of the Company.
 
 NOTE 9 - COMMON STOCK AND
WARRANTS
 
 In September 2009 the company closed
a unit funding at 55 units totaling $137,500.  The Company has a 25%
participation in the Bond #1-18 well, with 60% of the company’s net revenue
received being allocated proportionally to the unit holders.  The
funds were raised via a unit private placement.  Each of the 55 units
was priced at $2,500 per unit totaling $137,500  and consisted of
10,000 restricted common shares and 20,000 share purchase options at $0.25 per
share with an expiration date of March 10, 2011. The Company issued a total of
550,000 shares and 1,100,000 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 10,000 restricted
common shares per unit surrendered for a period of 36 months from the date of
receipt of the first revenue cheque paid to the unit holders.  The
company issued 50,000 shares valued at $12,500 for consulting expense, related
to the Bond financing, to a 3rd
party.  The $12,500 was converted to a proportionate 5% interest in
the Bond #1-18 well.
 
 In May 2009 the company closed its
intended unit funding at 72 units totaling $180,000.  The Company has
a 36% participation in the Gleason #4-16 well, with 67% of the company’s net
revenue received being allocated proportionally to the unit
holders.  The funds were raised via a unit private
placement.  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 cheque paid to the unit
holders.
 
  38
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 9 - COMMON STOCK AND
WARRANTS (Continued)
 
 In June 2008 the company received a
loan of $500,000 from a private investor.  The loan carried an
interest rate of 15% and was due and payable on or before July 31,
2008.  The terms of the note allow for a 1% per week penalty up to a
maximum of 10%.  As part of the agreement, 6,250,000 shares were
placed into escrow for security.  The Lender had the right at his sole
discretion, to convert any unpaid debt, along with any interest due, into
free-trading common stock of the Company at a conversion price of forth cents
($0.40) per share.  The funds from this loan were used for the Ohio
Property Extension payment, payment for a third party engineering evaluation of
the Ohio Property and working capital.  In September 2008 the company
issued 6,250,000 shares held in escrow as satisfaction for the $500,000 note due
plus interest of $75,000 and penalties of $50,000 to a private investor at a
value of ten cents ($0.10) per share.  The market value of the shares
was sixteen cents ($0.16) the date the loan was satisfied resulting in
additional interest booked on the financial statements of $375,000 at December
31, 2008.
 
 In April
of 2008 the company issued 100,000 shares in a private placement for $.25 per
share which resulted in the Company receiving $25,000 in cash.  The
shares were issued in a transaction which the Company believes satisfies the
requirements of the Regulation S exemption from the registration and prospectus
delivery requirements of the Securities Act of 1933. The Company used those
funds for working capital.
 
 In May 2008, the Company issued 580,000
shares in a private placement for $0.25 per Unit.  Each Unit entitled
the holder to acquire 1 common share of the company’s stock at $0.25 per share
and one share purchase warrant, entitling the holder to purchase one share at a
price of $0.40 for a period of 12 months from closing of the private placement,
resulting in the Company receiving $145,000 in cash.  The shares were
issued in a transaction which the Company believes satisfies the requirements of
the Regulation S exemption from the registration and prospectus delivery
requirements of the Securities Act of 1933. The Company used those funds for
working capital.
 
 In April of 2008 we issued 125,000
shares of restricted stock recorded at $0.47 per share along with a $25,000 cash
payment in consideration for an extension on the Anderson Oil & Gas property
to May 30, 2008
 
 In March of 2008 we issued 50,000
shares to M2 Law in settlement of outstanding legal invoices totaling $50,000.
The shares were recorded at $0.65 per share for a value of $32,500 and the
difference of $17,500 was booked as forgiveness of debt.
 
 In March 2008, the Company issued
1,820,000 shares in a private placement for $0.10 per Unit.  Each Unit
entitled the holder to acquire 1 common share of the company’s stock at $0.10
per share and one share purchase warrant, entitling the holder to purchase one
share at a price of $0.15 for a period of 18 months from closing of the private
placement, resulting in the Company receiving $182,000 in cash.  The
shares were issued in a transaction which the Company believes satisfies the
requirements of the Regulation S exemption from the registration and prospectus
delivery requirements of the Securities Act of 1933. The Company used those
funds for working capital.
  39
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 NOTES TO
THE FINANCIAL STATEMENTS
 FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008
  
 NOTE 9 - COMMON STOCK AND
WARRANTS (Continued)
 
 The
following table sets forth common share purchase warrants outstanding as of
December 31, 2009:
 
 Warrants
      OutstandingBalance,
      December 31, 2008
              
              
              4,220,000Warrants
      granted
              
              
              -Warrants
      expired
              
              
              -Balance,
      December 31, 2009
              
              
              4,220,000
 
 The
following table lists the common share warrants outstanding at December 31,
2009. Each warrant is exchangeable for one common share.
 
 Number
      Outstanding
              Exercise
                Price
              Weighted
      Average Contractual Remaining Life (years)
              Number
      Currently Exercisable
              Exercise
                Price580,000
              $
      0.40
              0.42
              580,000
              $
      0.401,820,000
              $
      0.15
              0.75
              1,820,000
              $
      0.15720,000
              $
      0.25
              0.92
              720,000
              $
      0.251,100,000
              $
      0.25
              1.17
              1,100,000
              $
      0.254,220,000
              
              
              4,220,000
 
 NOTE 10 – NOTES
PAYABLE
 
 The Company has a note payable with
Integrated Business Concepts, Inc. that is due upon demand and carries an
interest rate of 12%.  As of December 31, 2009, the amount owing on
the note is $309,648 which consists of principal in the amount of $203,792 and
interest of $105,856.  The total amount due at December 31, 2008 was
$235,755.
 
 NOTE 11 – SUBSEQUENT
EVENTS
 
 The
Company evaluated all events subsequent to December 31, 2009 through April 15,
2010, the financial statement issuance date, and concluded that there are no
significant or material transactions to be reported for the period from January
1, 2010 to April 15, 2010.




40






ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 SUPPLEMENTAL
INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
 (Unaudited)
 
 
 Net
Capitalized Costs
 
 The
following summarized net capitalized costs as of December 31, 2009 and
2008.
 
 December
      31,
              
              
              December
      31,2009
              
              
              2008Oil
      and Gas PropertiesProved
              
              $
              255,868
              
              
              $
              -Unproved
              
              
              27,056
              
              
              
              -Less:
      Depletion
              
              
              (5,657
              )
              
              
              -Net
      capitalized costs
              
              $
              277,267
              
              
              $
              -
 
 Unproved Property
Costs
 
 The
following summarizes the capitalized unproved property costs excluded from
amortization as of December 31, 2009.  All costs represent investment
in unproved properties and will be evaluated over several years as the
properties are explored.
 
 2009
              
              
              2008
              
              
              TotalProperty
      acquisition costs
              
              $
              27,056
              
              
              $
              -
              
              
              $
              27,056
 
 Costs
Incurred in Oil and Gas Acquisition, Exploration and Development
 
 December
      31,
              
              
              December
      31,2009
              
              
              2008Development
      costs
              
              $
              251,668
              
              
              
              -Exploration
      costs
              
              
              -
              
              
              
              -Acquisition
      costs:
              
              
              
              
              
              
              -Proved
              
              
              4,200
              
              
              
              -Unproved
              
              
              27,056
              
              
              $
              475,949Sales
      of Properties
              
              
              -
              
              
              
              -Totals
              
              $
              282,924
              
              
              $
              475,949
 
  41
 
 ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 SUPPLEMENTAL
INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
 (Unaudited)
 (Continued)
 
 Oil
and Gas Reserve Quantities
 
 The reserve information presented below
is based on reports prepared by independent petroleum engineers, Ramsey Property
Management for the properties Gleason #4-16 and Bond #1-18.
 
 The information is presented in
accordance with regulations prescribed by the Securities and Exchange Commission
and based on Reserve definitions found in Rule 4-10(a) of Regulation S-X.
Reserve estimates are inherently imprecise.
 
 Proved oil and gas reserves are the
estimated quantities of crude oil, natural gas and gas liquids which geological
and engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions, ie., prices and costs as of the date the estimate is made. Prices
include consideration of changes in existing prices provided only by contractual
arrangements, but not on escalations based upon future conditions.
 
 Reservoirs are considered proved if
economic productivity is supported by either actual production or conclusive
formation test. The area of a reservoir considered proved includes (A) that
portion delineated by drilling and defined by gas-oil and/or oil-water contacts,
if any; and (B) the immediately adjoining portions not yet drilled, but which
can be reasonably judged as economically productive on the basis of available
geological and engineering data. In the absence of information on fluid
contacts, the lowest known structural occurrence of hydrocarbons controls the
lower proved limit of the reservoir.
 
 Oil
              
              
              GasMBBL
              
              
              MMcfGross
              
              
              Net
              
              
              Gross
              
              
              NetGleason
      #4-16
              
              
              11.554
              
              
              
              3.328
              
              
              
              12.129
              
              
              
              3.494Bond
      #1-18
              
              
              47.774
              
              
              
              9.556
              
              
              
              31.552
              
              
              
              6.311Totals
              
              
              59.328
              
              
              
              12.884
              
              
              
              43.681
              
              
              
              9.805
 
 Standardized
Measure of Discounted Future Net Cash Flows
 
 The
standardized measure of discounted future net cash flows, related to the above
oil and gas reserves, is calculated in accordance with the requirements of SFAS
No 69. Estimated future cash inflows from production are computed by applying
year-end prices for oil and gas to year-end quantities of estimated proved
reserves. Adjustment in this calculation for future price changes is limited to
those required by contractual arrangements in existence at the end of each
reporting period. Future development and production costs are those estimated
future expenditures necessary to develop and produce year-end proved reserves
based on year-end cost
 
 
  42
  ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 SUPPLEMENTAL
INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
 (Unaudited)
 (Continued)
 
 indices,
assuming continuation of year end economic conditions. Estimated future income
taxes are calculated by applying appropriate year-end statutory tax rates. These
rates reflect allowable deductions and tax credits and are applied to estimated
future pre-tax cash flows, less the tax bases of related assets. Discounted
future net cash flows have been calculated using a 10% discount factor.
Discounting requires a year-by-year estimate of when future expenditures will be
incurred and when reserves will be produced.
 
 The
information provided in tables set out below does not represent management’s
estimate of the Company’s expected future cash flows or of the value Company’s
proved oil and gas reserves. Estimates of proved reserves quantities are
imprecise and change over time, as new information becomes available. Moreover,
probable and possible reserves, which may become proved in the future, are
excluded from the calculations. The arbitrary valuation prescribed under SFAS
No.69 requires assumptions as to the timing and the amount of future development
and production costs. The calculations should not be relied upon as an
indication of the Company’s future cash flows or of the value of its oil and gas
reserves.
 
 2009
              
              
              2008Future
      cash inflows
              
              $
              912,508
              
              
              $
              -Future
      production and development costs
              
              
              (150,525
              )
              
              
              -Future
      income tax expense
              
              
              -
              
              
              
              -Future
      net cash flows
              
              
              761,983
              
              
              
              -Less
      effect of a 10% discount factor
              
              
              (167,095
              )
              
              
              -Discounted
      future net cash flows
              
              $
              594,888
              
              
              $
              -
 
  43
  ROYAL
QUANTUM GROUP, INC.
 (Formerly
a Development Stage Company)
 SUPPLEMENTAL
INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
 (Unaudited)
 (Continued)
 
 Principal
sources of changes in standardized measure of discounted future net cash flows
are as follows:
 
 2009
              
              
              2008Discounted
      present value as at beginning of year
              
              $
              -
              
              
              $
              -Sales
      and transfers of oil and gas, net of production costs
              
              
              -
              
              
              
              -Changes
      in future development costs
              
              
              -
              
              
              
              -Extensions
      and discoveries and revisions, net of futureproduction
      and development costs
              
              
              -
              
              
              
              -Net
      change in price and production costs
              
              
              -
              
              
              
              -Change
      in estimated net profit payments
              
              
              -
              
              
              
              -Accretion
      of discount
              
              
              -
              
              
              
              -Standardized
      measure, end of period
              
              $
              -
              
              
              $
              -
 
  44







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(T)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,
2008, 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.





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.





Our Chief
Executive Officer and our Chief Financial Officer assessed the effectiveness of
our internal control over financial reporting as of December 31, 2009.   In
making this assessment, management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control — Integrated Framework.





Based on
our assessment, our Chief Executive Officer and our Chief Financial Officer
believe that, as of December 31, 2009, our internal control over financial
reporting is effective based on those criteria.





This
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
report.





Item 9B. Other
Information.





None.





45


PART
III





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.







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
            42
            President,
      CEO and Principal Accounting Officer
              DirectorRoger
      Janssen
              Suite
      #145, 251 MidPark Blvd S.E. Calgary, ABT2X 1S3
              Canada
            46
            Vice-President,
      Secretary
              DirectorPhillip
      van Angeren
              Suite
      #145, 251 MidPark Blvd S.E. Calgary, ABT2X 1S3
              Canada
            53
            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. We believe that our officers, directors, and
principal shareholders have filed all reports required to be filed on,
respectively, a Form 3 (Initial Statement of
Beneficial Ownership of Securities), a Form 4 (Statement of Changes of
Beneficial Ownership of Securities), or a Form 5 (Annual Statement of
Beneficial Ownership of Securities).





46


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.





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.





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, 2009 and 2008.


47





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
            2009
            0
            0
            0
            0
            0
            0
            0
            02008
            0
            0
            0
            0
            0
            0
            0
            0Roger
      Janssen Vice-President and Secretary
            2009
            0
            0
            0
            0
            0
            0
            0
            02008
            0
            0
            0
            0
            0
            0
            0
            0





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.





Stock Options/SAR Grants. No
grants of stock options or stock appreciation rights were made since our date of
incorporation in October 1996.





Long-Term Incentive Plans. As
of December 31, 2009, we had no group life, health, hospitalization, or medical
reimbursement or relocation plans in effect. Further, we had no pension plans or
plans or agreements which provide compensation on the event of termination of
employment or change in control of us.





Employment Contracts and Termination
of Employment.We do not anticipate that we will enter into any
employment contracts with any of our employees. We have no plans or arrangements
in respect of remuneration received or that may be received by our executive
officers to compensate such officers in the event of termination of employment
(as a result of resignation or retirement).





Outstanding Equity Awards at Fiscal
Year-end.As of the year ended December 31, 2009, 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





48


Director Compensation.Our
directors received the following compensation for their service as directors
during the fiscal year ended December 31, 2009:





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
            145,000(1)
            0
            0
            0
            0
            0


(1)
            We
      issued Phil van Angeren 500,000 shares of common stock on May 9, 2007 as
      compensation for services rendered as a director and his agreement to
      serve as the Exploration Manager.





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 February 26, 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
            38.5
      %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
            5.2
      %Common
      Stock
            Phil
      van Angeren
              Suite
      #145, 251 MidPark Blvd S.E. Calgary, AB Alberta T2X 1S3
              Canada
            500,000
      Shares
              Exploration
      Manager
              Director
            1.04%Common
      Stock
            All
      directors and named executive officers as a group
            21,470,000
            44.7%
      ( 2)


(1)
            14,970,000
      shares are owned by Santeo, an entity affiliated with Mr.
      Ruskowsky.   Mr. Ruskowsky has sole voting and dispostive
      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.





49


No Equity Compensation Plan.We do not have any securities authorized for issuance under any equity
compensation plan.  We also do not have an equity compensation
plan.





Item 13. Certain
Relationships and Related Transactions, and Director
Independence.





Related
Party Transactions.





Effective
May 9, 2007, we issued 500,000 restricted shares to Phil van Angeren, our
Exploration Manager. These shares have been valued at the market price of $0.29
per share.  Compensation expense of $145,000 has been booked on the
accompanying Statement of Operations.





As of
December 31, 2009, we owed Roger Janssen $1,345 for services paid directly by
Mr. Janssen.





As of
December 31, 2009, the Company owed Phil Van Angren, an officer and director of
the Company, $9,073 for consulting services performed as the Exploration
Manager.





As of
December 31, 2009 and 2008, the Company owed Santeo Financial $172,693 and
$89,353 respectively for consulting services.  Ron Ruskowsky,
President and CEO of the Company, is an affiliate of Santeo
Financial.





As of December 31, 2009 and 2008, the
Company owed Ron Ruskowsky, President and CEO of the Company, $9,374 and $0
respectively for operating expenses paid for by Ron.





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, 2009 and December 31, 2008, 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.





With
regard to any future related party transaction, we plan to fully disclose any
and all related party transactions, including, but not limited to, the
following:





·
            disclose
      such transactions in prospectuses where
  required;


·
            disclose
      in any and all filings with the Securities and Exchange Commission, where
      required;


·
            obtain
      disinterested directors consent;
and


·
            obtain
      shareholder consent where required.





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, 2009 and 2008 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 $21,381 and $16,783, respectively.





Audit-Related Fees. For the
fiscal year ended December 31, 2009, 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, 2009 and December 31, 2008, our accountants rendered services
for tax compliance, tax advice, and tax planning work for which we paid $140 and
$162, 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








50





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 15, 2010





Royal
Quantum Group, Inc.


a Nevada
corporation





By:  __/S/___________________


Ron
Ruskowsky





Its:


Principal
executive officer, Principal accounting officer


President,
CEO and a director








By:  __/S/____________________


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/___________________       April
15, 2010


Ron
Ruskowsky


Its:  Director








By:
___/S/__________________       April 15,
2010


Roger
Janssen


Its:  Director