UNITED STATES SECURITIES
AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



ANNUAL REPORT UNDER
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year
ended August 31, 2011



Commission File Number
000-52547



ROYAL ENERGY RESOURCES,
INC.

(Exact name of small business
issuer in its charter)



|Delaware                                                       |  | 11-3480036                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification No.)
|                                                              







|543 Bedford Avenue, #176 Brooklyn, NY   |            | 11211
|--------------------------------------- | ---------- | -----
|                                       
|(Address of Principal Executive Office) | (Zip Code)





Issuer’s telephone
number (800) 620-3029



Securities registered
under Section 12(b) of the Exchange Act: None



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



COMMON STOCK,
$0.00001 PAR VALUE

(Title of each class)



Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]



Indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ]



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



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



Indicate by check mark
if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained here-in, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]



Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
(Check one)



Large accelerated filer
[ ] Accelerated filer [ ] Non-accelerated filer [ ] 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 ]



The aggregate market value
of the shares of our common stock, par value $0.00001, held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s
most recently completed second fiscal quarter. $4,753,510.



As of December 14, 2011,
the registrant had outstanding 85,763,731 shares of its common stock, par value of $0.00001 and 100,000 shares of its preferred
stock, par value $0.00001.



DOCUMENTS INCORPORATED
BY REFERENCE



No documents are incorporated
by reference into this Report except those Exhibits so incorporated as set forth in the Exhibit index.









ROYAL ENERGY RESOURCES,
INC.



TABLE OF CONTENTS



FORM 10-K



Part I





|         |  |                                                                                                              |  | Page
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|PART I   |  |                                                                                                              |  |     
|Item 1   |  | Business                                                                                                     |  | 4   
|Item 1A  |  | Risk Factors                                                                                                 |  | 11  
|Item 2   |  | Properties                                                                                                   |  | 11  
|Item 3   |  | Legal Proceedings                                                                                            |  | 14  
|Item 4   |  | [Removed and Reserved]                                                                                       |  | 14  
|         |  |                                                                                                              |  |     
|PART II  |  |                                                                                                              |  |     
|Item 5   |  | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 14  
|         | 
|Item 6   |  | Selected Financial Data                                                                                      |  | 16  
|Item 7   |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        |  | 16  
|         | 
|Item 7A  |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 20  
|Item 8   |  | Financial Statements and Supplementary Data                                                                  |  | 21  
|Item 9   |  | Changes in and Disagreements with Accountants on Accounting and Financial  Disclosure                        |  | 44  
|         | 
|Item 9A  |  | Controls and Procedures                                                                                      |  | 44  
|Item 9B  |  | Other Information                                                                                            |  | 45  
|         |  |                                                                                                              |  |     
|PART III |  |                                                                                                              |  |     
|Item 10  |  | Directors, Executive Officers and Corporate Governance                                                       |  | 46  
|Item 11  |  | Executive Compensation                                                                                       |  | 47  
|Item 12  |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 47  
|         | 
|Item 13  |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 50  
|         | 
|Item 14  |  | Principal Accountant Fees and Services                                                                       |  | 51  
|         |  |                                                                                                              |  |     
|PART IV  |  |                                                                                                              |  |     
|Item 15  |  | Exhibits and Financial Statement Schedules                                                                   |  | 52  









From time to time, we
may publish forward-looking statements relative to such matters as anticipated financial results, business prospects, technological
developments and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. The following discussion and analysis should be read in conjunction with the report on the Consolidated Financial Statements
and the accompanying Notes to Consolidated Financial Statements appearing later in this report. All statements other than statements
of historical fact included in this Annual Report on Form 10-K are, or may be deemed to be, forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. Important
factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but
are not limited to, the following: our current liquidity needs, as described in our periodic reports; changes in the economy; our
inability to raise additional capital; our involvement in potential litigation; volatility of our stock price; the variability
and timing of business opportunities; changes in accounting policies and practices; the effect of internal organizational changes;
adverse state and federal regulation and legislation; and the occurrence of extraordinary or catastrophic events and terrorist
acts. These factors and others involve certain risks and uncertainties that could cause actual results or events to differ materially
from management’s views and expectations. Inclusion of any information or statement in this report does not necessarily imply
that such information or statement is material. We do not undertake any obligation to release publicly revised or updated forward-looking
information, and such information included in this report is based on information currently available and may not be reliable after
this date.





PART I



Item
1:	 Business



ORGANIZATION



Royal Energy Resources,
Inc. (“RER” or the “Company”) was originally organized in Delaware on March 22, 1999, with the name Webmarketing,
Inc. (“Webmarketing”). On July 7, 2004, the Company revived its charter and changed its name from Webmarketing to World
Marketing, Inc.



The Company is currently
pursuing gold, silver, copper and rare earth metals mining concessions in Romania, Bulgaria and Canada and mining leases in the
United States. If successful, the Company plans to concentrate its efforts to develop these properties.



On April 1, 2011, the
Company, through its CEO completed the initial stages of forming a Romanian subsidiary to be used to acquire and develop possible
gold, silver and copper mining concessions in Romania. The subsidiary, S.C. Golden Carpathan Resources S.R.L., will be located
in Bucharest, Romania.



On November 5, 2007, the
Company filed its Definitive Information Statement on Schedule 14C to report the following corporate actions:



1. To approve an amendment
to the Company’s Articles of Incorporation to increase the Company’s authorized capital to 110,000,000 shares comprising
100,000,000 shares of common stock par value $0.00001 per share and 10,000,000 shares of preferred stock par value $0.00001 per
share;
2. To specifically delineate
the rights of the holders of common stock $0.00001 par value with respect to dividends, liquidation and voting rights;
3. To confirm the right
of the Company’s board of directors to designate and issue from time to time, in one or more series, shares of preferred
stock par value $0.00001 per share subject to such designations and powers, preferences and rights, and qualifications, limitations
and restrictions thereof hereinafter adopted by the Company’s board of directors;
4. To specifically delineate
the right of the Company’s board of directors to issue shares of common and preferred stock for such consideration as may
be determined by the Company’s board of directors (but not less than par value) and to issue rights or options to acquire
such shares on terms and conditions to be determined by the Company’s board of directors; and
5. To change the name of
the Company to Royal Energy Resources, Inc.



The foregoing became effective
on December 12, 2007, upon filing the amendment with the Delaware Secretary of State.



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



BUSINESS



As a result of the current
real estate market, the Company expects to concentrate the majority of its resources in energy projects.



ENERGY AND MINING

MINING



The Company is currently
pursuing gold, silver, copper and rare earth metals mining concessions in Romania, Bulgaria and Canada and mining leases in the
United States. If successful, the Company plans to concentrate its efforts to develop these properties. At August 31, 2011, the
Company held the lease for 2,100 acres of rare earth and precious metals leases in Crook County, Wyoming. There are leases for
1,280 acres pending. The rare earth and precious metals leases are approximately 5-15 miles from Bear Lodge Mountain near Sundance,
Wyoming. The U.S. Geological Survey has studied Bear Lodge Mountain extensively (USGS Prof. paper #1049-D) and has estimated it
contains one of the largest deposits of disseminated rare earth elements in North America.



In addition, the Company
holds the lease for uranium rights on approximately 960 acres in Laramie County, Wyoming as of August 31, 2011 and August 31, 2010,
respectively. There are leases for 640 acres pending. The uranium rights are located on a trend approximately 25-30 miles from
a proposed uranium mine in Weld County, Colorado which was estimated to have uranium reserves valued at over $500 million.





UNDEVELOPED LEASEHOLD
NOT BEING AMORTIZED



The Company has been the
successful bidder in United States Government auctions to purchase certain oil and gas lease rights. The oil and gas leases currently
comprise approximately 3,000 acres in Weston, Goshen, Converse, Freemont, Laramie and Platt Counties, Wyoming as of August 31,
2011 and August 31, 2010, respectively. As of August 31, 2011, the Company had collected approximately $72,000 from sales of leases
and royalty interests.



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



OIL AND GAS DRILLING PROSPECTS



During 2008, the Company
prepaid $119,011 as estimated drilling and completion costs for a 25% working interest in three wells in Washington County, Oklahoma.
Two of the wells were completed in September and October 2008 and the third well was abandoned in 2010. During 2009, the Company
advanced an additional $42,000, net, to apply toward workover of three additional wells. These workovers proved unsuccessful and
the wells were all abandoned.



REAL ESTATE



Our primary objective
was to acquire, make necessary renovations and resell both residential and commercial real estate. It was anticipated that we might
lease some of the properties while they were being held for sale. We completed the acquisition of our first property on August
25, 2005, a condominium located in Brooklyn, New York, in exchange for $25,000 in cash and 1,900,000 shares of our common stock
which was valued at $190,000. We received a deed to the property and there was no mortgage on the property nor are there any liens
on the property.



In March 2008, the Company
entered into a rescission agreement to return the real estate that it previously held to the individual who originally transferred
the property in exchange for 1,900,000 shares of the Company’s common stock. The original value of the real estate was $215,000
and upon the rescission was valued at $200,000. The Company has recorded a loss of $15,000 on this transaction during this period,
upon transferring the real estate to the original seller and canceling the 1,900,000 shares.



As a result of the current
real estate environment in the United States, we are currently limiting any potential acquisitions to Eastern European countries.
The real estate will be sold directly by us to the extent deemed practical. If necessary, broker services will be used to expedite
a given sale.





OTHER

Mr. Roth, our President,
Chief Executive Officer and Chief Financial Officer, is our sole active employee. Mrs. Taub, our Secretary and Treasurer, will
not be active in our day-to-day operations.



RER does not have any
plans or arrangements to merge with another company or otherwise engage in a transaction that would change the control of RER.



The mailing address of
the Company is 543 Bedford Avenue, #176, Brooklyn, New York 11211 and our telephone number is 800-620-3029.



FINANCIAL POSITION AND
FUTURE FINANCING NEEDS



We are a development stage
company. We have not previously been in the energy business, or in the business of acquiring, renovating and selling or leasing
real estate.



We have not established
sources of revenues sufficient to fund the development of business, projected operating expenses and commitments for our fiscal
year ending August 31, 2012. We have been in the development stage since our inception, March 22, 1999, have accumulated a net
loss of $3,176,267 through August 31, 2010, and incurred a loss of $270,417 for the year then ended.



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



The Company sold its common
stock in private transactions which raised $120,500 in 2006, $80,070 in 2007, $413,172 in 2008 and $3,600 in 2009. The Company
plans to make sales of its common stock in private transactions or to borrow funds as needed to raise sufficient capital to fund
the development of business, projected operating expenses and commitments. However, there can be no assurance that we will be able
to obtain sufficient funding to develop our current business plan.



COMPETITION



ENERGY AND MINING

The Company expects to
concentrate the majority of its resources in oil and gas and mining by acquiring leasehold interests and either selling or farming
them out to other companies for development, while retaining an over-riding royalty interest. The Company had elected to participate
in the development of certain properties in Oklahoma. The Company is much smaller than most participants in this industry and has
limited expertise in operating energy and mining businesses.



REAL ESTATE

The first competitive
consideration is to locate real estate for purchase that is within the Company’s pricing limitations and is considered to
be priced right for the market in that particular area. The competition for real estate is intense, and includes firms as small
as one person working out of their home to multi-national conglomerates.



Once a property is acquired,
the first task is to complete necessary repairs and renovations. When the property is available for sale, the major risk factor
is to conclude a profitable sale. In this regard, a problem with some properties is the individuals who agree to a purchase contract
may not be qualified to receive mortgage financing. The time period of removing the property from the market and then discovering
that the purchaser is not mortgage qualified is costly in terms of reduced profits when a sale is concluded.



The profit potential to
the Company is wholly dependent upon the ability of its officers and employees to purchase property and resell it at a price level
which will provide profits to the Company. There is no assurance that these objectives will be realized. It is reasonable to assume
that any property acquired and prepared for resale will eventually be sold. However, it may be that an eventual resale will be
at a loss.



Because of the nature
of this business there are no statistics that indicate the number of investors in the business or the financial extent of their
activities. The Company will basically be in the same competitive position as any other investor seeking to purchase real estate
in our anticipated price range. The Company rescinded the purchase of the real estate property it had during the quarter ended
May 31, 2008 and currently is limiting any potential real estate acquisitions to Eastern European countries, due to the current
real estate environment in the United States.



GOVERNMENTAL REGULATIONS,
APPROVAL, COMPLIANCE



ENERGY AND MINING

If we elect to participate
directly in development of oil and gas properties, our operations are or will be subject to various types of regulation at the
federal, state and local levels. Such regulations includes requiring permits for the drilling of wells; maintaining bonding requirements
in order to drill or operate wells; implementing spill prevention plans; submitting notification and
receiving permits relating to the presence, use and release of certain materials incidental to oil and gas operations; and regulating
the location of wells, the method of drilling and casing wells, the use, transportation, storage and disposal of fluids and materials
used in connection with drilling and production activities, surface usage and the restoration of properties upon which wells have
been drilled, the plugging and abandoning of wells and the transporting of production. Our operations are or will be also subject
to various conservation matters, including the regulation of the size of drilling and spacing units or pro-ration units, the number
of wells which may be drilled in a unit, and the unitization or pooling of oil and gas properties. In this regard, some states
allow the forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands
and leases, which may make it more difficult to develop oil and gas properties. In addition, state conservation laws establish
maximum rates of production from oil and gas wells, generally limit the venting or flaring of gas, and impose certain requirements
regarding the ratable purchase of production. The effect of these regulations is to limit the amounts of oil and gas we may be
able to produce from our wells and to limit the number of wells or the locations at which we may be able to drill.



Our business is affected
by numerous laws and regulations, including energy, environmental, conservation, tax and other laws and regulations relating to
the oil and gas industry. We plan to develop internal procedures and policies to ensure that our operations are conducted in full
and substantial environmental regulatory compliance.



Failure to comply with
any laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of injunctive
relief or both. Moreover, changes in any of these laws and regulations could have a material adverse effect on business. In view
of the many uncertainties with respect to current and future laws and regulations, including their applicability to us, we cannot
predict the overall effect of such laws and regulations on our future operations.



We believe that our operations
comply in all material respects with applicable laws and regulations and that the existence and enforcement of such laws and regulations
have no more restrictive an effect on our operations than on other similar companies in the energy industry. We do not anticipate
any material capital expenditures to comply with federal and state environmental requirements.



ENVIRONMENTAL



ENERGY AND MINING

Operations on properties
in which we have an interest are subject to extensive federal, state and local environmental laws that regulate the discharge or
disposal of materials or substances into the environment and otherwise are intended to protect the environment. Numerous governmental
agencies issue rules and regulations to implement and enforce such laws, which are often difficult and costly to comply with and
which carry substantial administrative, civil and criminal penalties and in some cases injunctive relief for failure to comply.



Some laws, rules and regulations
relating to the protection of the environment may, in certain circumstances, impose “strict liability” for environmental
contamination. These laws render a person or company liable for environmental and natural resource damages, cleanup costs and,
in the case of oil spills in certain states, consequential damages without regard to negligence or fault. Other laws, rules and
regulations may require the rate of oil and gas production to be below the economically optimal rate or may even prohibit exploration
or production activities in environmentally sensitive areas. In addition, state laws often require some form of remedial action,
such as closure of inactive pits and plugging of abandoned wells, to prevent pollution from former or suspended operations.



Legislation has been proposed
in the past and continues to be evaluated in Congress from time to time that would reclassify certain oil and gas exploration and
production wastes as “hazardous wastes.” This reclassification would make these wastes subject to much more stringent
storage, treatment, disposal and clean-up requirements, which could have a significant adverse impact on operating costs. Initiatives
to further regulate the disposal of oil and gas wastes are also proposed in certain states from time to time and may include initiatives
at the county, municipal and local government levels. These various initiatives could have a similar adverse impact on operating
costs.



The regulatory burden
of environmental laws and regulations increases our cost and risk of doing business and consequently affects our profitability.
The federal Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, also known as the “Superfund”
law, imposes liability, without regard to fault, on certain classes of persons with respect to the release of a “hazardous
substance” into the environment. These persons include the current or prior owner or operator of the disposal site or sites
where the release occurred and companies that transported, disposed or arranged for the transport or disposal of the hazardous
substances found at the site. Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject
to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment
and for damages to natural resources, and it is not uncommon for the federal or state government to pursue such claims.



It is also not uncommon
for neighboring landowners and other third parties to file claims for personal injury or property or natural resource damages allegedly
caused by the hazardous substances released into the environment. Under CERCLA, certain oil and gas materials and products are,
by definition, excluded from the term “hazardous substances.” At least two federal courts have held that certain wastes
associated with the production of crude oil may be classified as hazardous substances under CERCLA. Similarly, under the federal
Resource, Conservation and Recovery Act, or RCRA, which governs the generation, treatment, storage and disposal of “solid
wastes” and “hazardous wastes,” certain oil and gas materials and wastes are exempt from the definition of “hazardous
wastes.” This exemption continues to be subject to judicial interpretation and increasingly stringent state interpretation.
During the normal course of operations on properties in which we have an interest, exempt and non-exempt wastes, including hazardous
wastes, that are subject to RCRA and comparable state statutes and implementing regulations are generated or have been generated
in the past. The federal Environmental Protection Agency and various state agencies continue to promulgate regulations that limit
the disposal and permitting options for certain hazardous and non-hazardous wastes.



We plan to establish guidelines
and management systems to ensure compliance with environmental laws, rules and regulations if we participate directly in the development
of oil and gas resources. The existence of these controls cannot, however, guarantee total compliance with environmental laws,
rules and regulations. We will rely on the operator of the properties in which we have an interest to be in substantial compliance
with applicable laws, rules and regulations relating to the control of air emissions at all facilities on those properties. Although
we plan to maintain insurance against some, but not all, of the risks described above, including insuring the costs of clean-up
operations, public liability and physical damage, there is no assurance that our insurance will be adequate to cover all such costs,
that the insurance will continue to be available in the future or that the insurance will be available at premium levels that justify
our purchase. The occurrence of a significant event not fully insured or indemnified against could have a material adverse effect
on our financial condition and operations. Compliance with environmental requirements, including financial assurance requirements
and the costs associated with the cleanup of any spill, could have a material adverse effect on our capital expenditures, earnings
or competitive position. We do believe, however, that our operators are in substantial compliance with current applicable environmental
laws and regulations. Nevertheless, changes in environmental laws have the potential to adversely affect operations. At this time,
we have no plans to make any material capital expenditures for environmental control facilities.



Employees



It is anticipated that
the only active employee of this business in the near future will be its President. All other operative functions, such as repairs
and/or renovations to the real estate or acquiring energy investments will be handled by the President or independent contractors
and consultants.



Item
1A: 	RISK FACTORS



Not applicable.



Item
2: 	PropertIES



MINING



The Company is currently
pursuing gold, silver, copper and rare earth metals mining concessions in Romania, Bulgaria and Canada and mining leases in the
United States. If successful, the Company plans to concentrate its efforts to develop these properties. At August 31, 2011, the
Company held the lease for 2,100 acres of rare earth and precious metals leases in Crook County, Wyoming. There are leases for
1,280 acres pending. The rare earth and precious metals leases are approximately 5-15 miles from Bear Lodge Mountain near Sundance,
Wyoming. The U.S. Geological Survey has studied Bear Lodge Mountain extensively (USGS Prof. paper #1049-D) and has estimated it
contains one of the largest deposits of disseminated rare earth elements in North America.



In addition, the Company
holds the lease for uranium rights on approximately 960 acres in Laramie County, Wyoming as of August 31, 2011 and August 31, 2010,
respectively. There are leases for 640 acres pending. The uranium rights are located on a trend approximately 25-30 miles from
a proposed uranium mine in Weld County, Colorado which was estimated to have uranium reserves valued at over $500 million.





UNDEVELOPED LEASEHOLD
NOT BEING AMORTIZED



The Company has been the
successful bidder in United States Government auctions to purchase certain oil and gas lease rights. The oil and gas leases currently
comprise approximately 3,000 acres in Weston, Goshen, Converse, Freemont, Laramie and Platt Counties, Wyoming as of August 31,
2011 and August 31, 2010, respectively.



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



OIL AND GAS DRILLING PROSPECTS



During 2008, the Company
prepaid $119,011 as estimated drilling and completion costs for a 25% working interest in three wells in Washington County, Oklahoma.
Two of the wells were completed in September and October 2008 and the third well was abandoned in 2010. During 2009, the Company
advanced an additional $42,000, net, to apply toward workover of three additional wells. The work on the workover wells was completed
during 2010 without obtaining commercial production. Effective October 1, 2010, the Company's interest in the two producing wells
were sold. The Company recorded an impairment to its proven reserves to reduce it to the amount received and has reclassified this
balance to accounts receivable at August 31, 2010.



Proved Reserves and
Estimated Future Net Revenue

The SEC defines proved
oil and gas reserves as the estimated quantities of crude oil and natural gas that geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions,
i.e. 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.



The process of estimating
oil and natural gas reserves is complex and requires significant judgment. Our policies regarding booking reserves require proved
reserves to be in compliance with the SEC definitions and guidance. With the sale of our only producing reserves effective October
1, 2010, we have no proved reserves at August 31, 2011 and 2010.



Drilling Activities

The following table summarizes
the results of our development drilling activity for the years ended August 31, 2011, 2010, 2009 and 2008. There was no activity
in prior years and the Company has not had any exploratory drilling activity.





|Development Well Activity  |               
|-------------------------- | --------------
|                           |               
|                           | Wells Drilling
|                           | Gross (1)     
|                           |               
|Year ended August 31, 2011 | -             
|Year ended August 31, 2010 | -             
|Year ended August 31, 2009 | 2.00          
|Year ended August 31, 2008 | 2.00          





(1)Gross wells are the sum of all wells in which we own an interest.

(2)Net wells are gross wells multiplied by our fractional working interests therein.



Both wells drilling at
August 31, 2008, were completed as productive oil wells in September and October 2008.



The initial properties
in which the Company participated involved the well bore only and did not include any acreage. The Company had the right to participate
in additional wells in this prospect until the properties were sold effective October 1, 2010.



Operation of Properties

Currently, the Company
does not have the infrastructure necessary to operate oil and gas properties and relies on other companies to provide operations.







Title to Properties

Title to properties is
subject to contractual arrangements customary in the oil and gas industry, liens for current taxes not yet due and, in some instances,
other encumbrances. We believe that such burdens do not materially detract from the value of such properties or from the respective
interests therein or materially interfere with their use in the operation of the business.



As is customary in the
industry, other than a preliminary review of local records, little investigation of record title is made at the time of acquisitions
of undeveloped properties. Investigations, which generally include a title opinion of outside counsel, are made prior to the consummation
of an acquisition of producing properties and before commencement of drilling operations on undeveloped properties.



MINING

The Company is currently
pursuing gold, silver, copper and rare earth metals mining concessions in Romania, Bulgaria and Canada and mining leases in the
United States. If successful, the Company plans to concentrate its efforts to develop these properties. At August 31, 2011, the
Company held the lease for 2,100 acres of rare earth and precious metals leases in Crook County, Wyoming. There are leases for
1,280 acres pending. The rare earth and precious metals leases are approximately 5-15 miles from Bear Lodge Mountain near Sundance,
Wyoming. The U.S. Geological Survey has studied Bear Lodge Mountain extensively (USGS Prof. paper #1049-D) and has estimated it
contains one of the largest deposits of disseminated rare earth elements in North America.



In addition, the Company
holds the lease for uranium rights on approximately 960 acres in Laramie County, Wyoming as of August 31, 2011 and August 31, 2010,
respectively. There are leases for 640 acres pending. The uranium rights are located on a trend approximately 25-30 miles from
a proposed uranium mine in Weld County, Colorado which was estimated to have uranium reserves valued at over $500 million.





UNDEVELOPED LEASEHOLD NOT BEING AMORTIZED

These leases are separate
from those included above and are being held primarily for resale while retaining an over-riding royalty interest. As of August
31, 2011, and 2010, we own oil and gas leases comprising approximately 3,000 and 3,400 acres in Wyoming, respectively.



REAL ESTATE

On August 25, 2005, we
acquired our first real estate property, a residential condominium located in Brooklyn, New York, in exchange for $25,000 in cash
and 1,900,000 shares of our common stock which was valued at $190,000.



In March 2008, the Company
entered into a rescission agreement to return the real estate that it previously held to the individual from whom we originally
acquired the property in exchange for 1,900,000 shares of the Company’s common stock. The original value of the real estate
was $215,000 and upon the rescission was valued at $200,000. The Company has recorded a loss of $15,000 on this transaction during
the period.





Item
3:	LEGAL PROCEEDINGS



There are no pending or threatened lawsuits
against us.



Item
4: 	[REMOVED AND RESERVED]





PART II



Item
5:	Market for REGISTRANT’S Common Equity, Related Stockholder Matters and issuer purchases of equity securities



(a)	MARKET INFORMATION



Our $0.00001 par value
per share common stock is traded in the over-the-counter market and is quoted on the National Association of Securities Dealers
(“NASD”) Over-The Counter Bulletin Board (“OTCBB”) under the symbol “ROYE.OB.” Until we began
trading on September 5, 2007, there was no public market for our common stock. Previously we traded under the symbol WRLM.OB.



The following table sets
forth the quarterly high and low daily close for our common stock as reported by the OTCBB for the two years ended August 31, 2010
and 2009. The bids reflect inter dealer prices without adjustments for retail mark-ups, mark-downs or commissions and may not represent
actual transactions.





|Period                          |  | High  |  | Low  
|------------------------------- |  | ----- |  | -----
|                                |  |       |  |      
|2011                            |  |       |  |      
|Quarter ended August 31, 2011   |  | $0.03 |  | $0.01
|Quarter ended May 31, 2011      |  | $0.08 |  | $0.02
|Quarter ended February 29, 2011 |  | $0.11 |  | $0.01
|Quarter ended November 30, 2010 |  | $0.04 |  | $0.01
|                                |  |       |  |      
|2010                            |  |       |  |      
|Quarter ended August 31, 2010   |  | $0.06 |  | $0.01
|Quarter ended May 31, 2010      |  | $0.06 |  | $0.02
|Quarter ended February 28, 2010 |  | $0.08 |  | $0.03
|Quarter ended November 30, 2009 |  | $0.20 |  | $0.03





The OTCBB is a quotation
service sponsored by the NASD that displays real-time quotes and volume information in over-the-counter (“OTC”) equity
securities. The OTCBB does not impose listing standards or requirements, does not provide automatic trade executions and does not
maintain relationships with quoted issuers. A company traded on the OTCBB may face loss of market makers and lack of readily available
bid and ask prices for its stock and may experience a greater spread between the bid and ask price of its stock and a general loss
of liquidity with its stock. In addition, certain investors have policies against purchasing or holding OTC securities. Both trading
volume and the market value of our securities have been, and will continue to be, materially affected by the trading on the OTCBB.



PENNY STOCK CONSIDERATIONS



Our shares will be “penny stocks”
as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00.
Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in
certain transactions involving a penny stock.



Under the penny stock regulations, a broker-dealer
selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination
regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale, unless the
broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000, or annual income exceeding
$100,000 individually or $300,000 together with his or her spouse, is considered an accredited investor. In addition, under the
penny stock regulations the broker-dealer is required to:

- Deliver, prior to any transaction involving
a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless
the broker-dealer or the transaction is otherwise exempt;
- Disclose commissions payable to the broker-dealer
and our registered representatives and current bid and offer quotations for the securities;
- Send monthly statements disclosing recent
price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding
the limited market in penny stocks; and
- 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,
prior to conducting any penny stock transaction in the customer’s account.



Because of these regulations,
broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of
selling shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of
trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of
our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decrease, with a
corresponding decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules
and our shareholders will, in all likelihood, find it difficult to sell their securities.



RECENT SALES OF UNREGISTERED SECURITIES



During the quarter ended
August 31, 2011, we did not issue any shares of our common stock.



(b)	HOLDERS



There are 85 shareholders of record of the
Company’s common stock at August 31, 2011.



(c)	DIVIDENDS



The Company has not paid dividends to date
and has no plans to do so in the foreseeable future.



(d)	SECURITIES AUTHORIZED FOR
ISSUANCE UNDER EQUITY COMPENSATION PLANS



The following table summarizes certain information
as of August 31, 2009, with respect to compensation plans (including individual compensation arrangements) under which our common
stock is authorized for issuance:





|                              | Number of securities to be |  |                              |  |                     
|----------------------------- | -------------------------- |  | ---------------------------- |  | --------------------
|                              | issued upon exercise of    |  | Weighted average exercise    |  | Number of securities
|                              | outstanding options,       |  | price of outstanding         |  | remaining available 
|Plan category                 | warrants and rights        |  | options, warrants and rights |  | for future issuance 
|                              |                            |  |                              |  |                     
|Equity compensation plans     |                            |  |                              |  |                     
|approved by security holders: |                            |  |                              |  |                     
|2008 Plan                     | -                          |  |                              |  | 4,000,000           
|                              | -                          |  |                              |  | 4,000,000           





The Royal Energy Resources,
Inc. 2008 Stock Option Plan (“Plan”) was filed on June 27, 2008 and reserves 4,000,000 shares for Awards under the
Plan, of which up to 3,000,000 may be designated as Incentive Stock Options. The Company’s Compensation Committee is designated
to administer the Plan at the direction of the Board of Directors.





Item
6:	SELECTED FINANCIAL DATA



Not applicable.





Item
7:	Management’s Discussion and Analysis OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



This statement contains
forward-looking statements within the meaning of the Securities Act. Discussions containing such forward-looking statements may
be found throughout this statement. Actual events or results may differ materially from those discussed in the forward-looking
statements as a result of various factors, including, without limitation, the matters set forth in this statement.



Oil and gas sales

The Company had $4,310
in oil and gas sales in 2010 from the initial production from two wells completed at the beginning of 2009. These wells were sold
effective October 1, 2010.



Costs and expenses

Costs and expenses consist
of the following for the years ended August 31, 2011 and 2010.





|                                                  | 2011              |  | 2010            
|------------------------------------------------- | ----------------- |  | ----------------
|Lease operating expense                           | $             504 |  | $          8,279
|Production taxes                                  | -                 |  | 603             
|Depreciation, depletion and amortization          | -                 |  | 954             
|Asset impairment                                  | -                 |  | 38,234          
|Non-cash compensation                             | 175,309           |  | 326,498         
|Other selling, general and administrative expense | 85,268            |  | 109,804         
|                                                  | $      261,081    |  | $      484,372  





Lease operating expense,
production taxes and depreciation, depletion and amortization relate to the oil and gas revenue which ceased in 2010.



The asset impairment arose
as a result of a ceiling test limitation on the proved oil and gas reserves. The proven reserves were sold effective October 1,
2010 and the properties carrying value was reduced to the net proceeds, which was reclassified to accounts receivable at August
31, 2010.



Non-cash
compensation includes $175,309 and $326,498 in 2011 and 2010, respectively, in compensation to consultants pursuant to consulting
agreements.The agreements cover periods ranging from 2.5 months to 16.5 months and the related fair value of the shares
and options are being amortized over the life of the agreements.



Other selling, general
and administrative expense decreased from $109,804 in 2010 to $85,268 in 2011. The majority of the decrease is due to a decrease
of $27,781 in cash consulting fees.



Other expense (income):

Other expense (income)
consists of the following for the years ended August 31, 2011 and 2010.





|                                     | 2011                |  | 2010             
|------------------------------------ | ------------------- |  | -----------------
|Commodities trading losses           | $                 - |  | $             719
|Interest expense                     | 18,063              |  | 30,968           
|Interest income from related parties | (8,727)             |  | (6,610)          
|                                     | $          9,336    |  | $        25,077  



Interest expense decreased
in 2011 from 2010, primarily due to the 2010 amount of $30,968 including $14,000 from the issue of common stock to extend a past
due loan.



Interest income was accrued
on the stock subscription receivables (related parties) in 2011 and 2010.



Going
Concern Factors—Liquidity



We are a development stage company. We have
not previously been in the energy business or in the business of acquiring, renovating and selling or leasing real estate.



We have not established
sources of revenues sufficient to fund the development of business, projected operating expenses and commitments for our fiscal
year ending August 31, 2012. The Company, has accumulated a net loss of $3,176,267 through August 31, 2010, ($28,995 in an earlier
development stage business and $3,147,272 in the current development stage) and incurred losses of $270,417 for the year then ended.



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



The Company sold its common
stock in private transactions which raised $120,500 in 2006, $80,070 in 2007, $413,172 in 2008 and $3,600 in 2009. The Company
plans to make sales of its common stock in private transactions or to borrow funds as needed to raise sufficient capital to fund
the development of business, projected operating expenses and commitments. However, there can be no assurance that we will be able
to obtain sufficient funding to develop our current business plan.



New
Accounting Standards



There are several new
accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) which are not yet effective.
Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe any of these
accounting pronouncements has had or will have a material impact on the Company’s financial position or operating results.
See Note 1 to the financial statements.



Critical
Accounting Policies



The SEC issued Financial
Reporting Release No. 60, “Cautionary Advice Regarding Disclosure about Critical Accounting Policies” (“FRR 60”),
suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the SEC
defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial
condition and operating results, and require management to make its most difficult and subjective judgments, often as a result
of the need to make estimates of matters that are inherently uncertain. Based on this definition our most critical accounting policies
are discussed below. The methods, estimates and judgments we use in applying these most critical accounting policies have a significant
impact on the results we report in our financial statements.



REVENUE
RECOGNITION –We have derived our revenue from sale of mineral interests and in the future will predominately derive
our revenue from the sale of produced crude oil and natural gas. Revenue is recorded in the month the product is delivered to the
purchaser. We receive payment from one to three months after delivery. At the end of each month, we estimate the amount of production
delivered to purchasers and the price we will receive. Variances between our estimated revenue and actual payment are recorded
in the month the payment is received; however, the differences should be insignificant.



FULL COST METHOD OF ACCOUNTING
– We account for our oil and natural gas operations using the full cost method of accounting. Under this method, all costs
associated with property acquisition, exploration and development of oil and gas reserves are capitalized. Costs capitalized include
acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and cost of drilling and equipping
productive and non-productive wells. Drilling costs include directly related overhead costs. All of our properties are currently
located within the continental United States.



OIL AND NATURAL GAS RESERVE
QUANTITIES – Reserve quantities and the related estimates of future net cash flows affect our periodic calculations of depletion
and impairment of our oil and natural gas properties. Proved oil and natural gas reserves are the estimated quantities of crude
oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable
in future periods from known reservoirs under existing economic and operating conditions. Reserve quantities and future cash flows
included in this Annual Report are prepared in accordance with guidelines established by the SEC and FASB. The accuracy of our
reserve estimates is a function of:

- The quality and quantity
of available data;
- The accuracy of various
mandated economic assumptions; and
- The judgments of the
person preparing the estimates.



Because these estimates
depend on many assumptions, all of which may differ substantially from actual results, reserve estimates may be different from
the quantities of oil and natural gas that are ultimately recovered. We will make changes to depletion rates and impairment calculations
in the same period that changes in reserve estimates are made.



All capitalized costs
of oil and gas properties, including estimated future costs to develop proved reserves and estimated future costs of site restoration,
are amortized on the unit-of-production method using our estimate of proved reserves. Investments in unproved properties and major
development projects are not amortized until proved reserves associated with the projects can be determined.



IMPAIRMENT OF OIL AND
NATURAL GAS PROPERTIES – We review the value of our oil and natural gas properties whenever management judges that events
and circumstances indicate that the recorded carrying value of properties may not be recoverable. We provide for impairments on
undeveloped property when we determine that the property will not be developed or a permanent impairment in value has occurred.Under the full cost method the net book value of oil and natural gas properties, less related deferred income taxes, may
not exceed the estimated after-tax future net revenues from proved oil and natural gas properties, discounted at 10% (the “Ceiling
Limitation”). In arriving at estimated future net revenues, estimated lease operating expenses, development costs, and certain
production-related taxes are deducted. In calculating future net revenues, prices and costs in effect at the time of the calculation
are held constant indefinitely, except for changes that are fixed and determinable by existing contracts. The net book value is
compared to the ceiling limitation on a quarterly and yearly basis. The excess, if any, of the net book value above the ceiling
limitation is charged to expense in the period in which it occurs and is not subsequently reinstated.





Off-Balance
Sheet Arrangements



We do not have any material off-balance sheet
arrangements.



TABULAR
DISCLOSURE OF CONTRACTUAL OBLIGATIONS



Not applicable.





ITEM
7A:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Not applicable.

Item
8:	Financial Statements AND SUPPLEMENTARY DATA



The Financial Statements of Royal Energy Resources,
Inc. (a development stage company) together with the report thereon of Paritz & Company, P.A. for the years ended August 31,
2011 and 2010 and the period from inception (July 22, 2005) through August 31, 2011, is set forth as follows:



Index
to Financial Statements





|                                                         |  | Page
|-------------------------------------------------------- |  | ----
|                                                         |  |     
|Report of Independent Registered Public Accounting Firm: |  |     
|Paritz & Company, P.A                                    |  | 22  
|Balance Sheet                                            |  | 23  
|Statements of Operations                                 |  | 24  
|Statements of Stockholders’ Deficit                      |  | 25  
|Statements of Cash Flows                                 |  | 29  
|Notes to Financial Statements                            |  | 31  













REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors

Royal Energy Resources,
Inc.

(formerly World Marketing,
Inc.)

(a development stage
company)



We have audited the accompanying
balance sheet of Royal Energy Resources, Inc (formerly World Marketing, Inc.) (a development stage company) as of August 31, 2011
and 2010 and the related statements of operations and cash flows for the years ended August 31, 2011 and 2010 and the period from
inception (July 22, 2005) through August 31, 2011 and the statement of stockholders’ equity for the period from inception
(July 22, 2005) through August 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audit.



We conducted our audit
in accordance with 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.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides 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 Energy Resources, Inc..,
(formerly World Marketing, Inc.) (a development stage company) as of August 31, 2011 and 2010, and the results of its operations
and its cash flows for the years ended August 31, 2011 and 2010 and the period from inception (July 22, 2005) through August 31,
2011 in conformity with accounting principles generally accepted in the United States of America.



The financial statements
referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is in the development stage, and has no established source of revenue and is dependent on its
ability to raise capital from shareholders or other sources to sustain operations. These factors along with other matters as set
forth in Note 1, raise substantial doubt that the Company will be able to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.



/s/ Paritz & Company,
P.A.



Hackensack, New Jersey

November
28, 2011











|ROYAL ENERGY RESOURCES, INC.                                  |                            |  |                          
|------------------------------------------------------------- | -------------------------- |  | -------------------------
|(A Development Stage Company)                                 |                            |  |                          
|Balance Sheets                                                |                            |  |                          
|August 31, 2011 and 2010                                      |                            |  |                          
|                                                              | 2011                       |  | 2010                     
|Assets                                                        |                            |  |                          
|Current assets                                                |                            |  |                          
|Cash and cash equivalents                                     | $                       35 |  | $                     311
|Accounts receivable                                           | 8,000                      |  | 10,617                   
|Prepaid expenses                                              | -                          |  | 20,571                   
|Total current assets                                          | 8,035                      |  | 31,499                   
|Properties                                                    |                            |  |                          
|Mining properties                                             | 9,729                      |  | 4,329                    
|Unproved properties not being amortized (full cost method)    | 8,462                      |  | 6,350                    
|                                                              | 18,191                     |  | 10,679                   
|Accumulated depreciation, depletion and amortization          | -                          |  | -                        
|                                                              | 18,191                     |  | 10,679                   
|Other assets and investments                                  |                            |  |                          
|Prepaid drilling costs                                        | -                          |  | 28,583                   
|Total other assets                                            | -                          |  | 28,583                   
|Total assets                                                  | $                26,226    |  | $                70,761  
|                                                              |                            |  |                          
|Liabilities and Stockholders' Equity                          |                            |  |                          
|Current liabilities                                           |                            |  |                          
|Accounts payable                                              | $                71,292    |  | $                73,226  
|Accrued expenses                                              | -                          |  | 243                      
|Convertible note and debenture payable                        | 80,000                     |  | 86,000                   
|Total current liabilities                                     | 151,292                    |  | 159,469                  
|                                                              |                            |  |                          
|Commitments and contingencies                                 |                            |  |                          
|                                                              |                            |  |                          
|Stockholders' equity                                          |                            |  |                          
|Preferred stock: $0.00001 par value; authorized               |                            |  |                          
|10,000,000 shares; issued and outstanding - 100,000 shares at |                            |  |                          
|August 31, 2010 and August 31, 2009                           | 1                          |  | 1                        
|Common stock: $0.00001 par value; authorized                  |                            |  |                          
|100,000,000 shares; 85,763,731 and 39,713,731 shares issued   |                            |  |                          
|and outstanding at August 31, 2011 and 2010, respectively     | 858                        |  | 397                      
|Additional paid-in capital                                    | 3,499,596                  |  | 3,267,893                
|Deferred option and stock compensation                        | (52,000)                   |  | (28,809)                 
|Common stock subscription receivable                          | (397,254)                  |  | (422,340)                
|Deficit accumulated during the development stage              | (3,176,267)                |  | (2,905,850)              
|Total stockholders' equity                                    | (125,066)                  |  | (88,708)                 
|Total liabilities and stockholders' equity                    | $                26,226    |  | $                70,761  





See accompanying notes to financial statements.









|ROYAL ENERGY RESOURCES, INC.                           |                        |   |                     |  |                     
|------------------------------------------------------ | ---------------------- | - | ------------------- |  | --------------------
|(A Development Stage Company)                          |                        |   |                     |  |                     
|Statements of Operations                               |                        |   |                     |  |                     
|Years Ended August 31, 2011 and 2010 and               |                        |   |                     |  |                     
|from inception (July 22, 2005) through August 31, 2011 |                        |   |                     | 
|                                                       |                        |   |                     |  |                     
|                                                       |                        |   |                     |  | Inception           
|                                                       |                        |   |                     |  | (July 22, 2005)     
|                                                       |                        |   |                     |  | Through             
|                                                       | Years Ended August 31, |   | August 31,         
|                                                       | 2011                   |   | 2010                |  | 2011                
|                                                       |                        |   |                     |  |                     
|Oil and gas sales                                      | $                   -  |   | $            8,394  |  | $             12,704
|Costs and expenses:                                    |                        | # |                     |  |                     
|Lease operating expense                                | 504                    |   | 8,279               |  | 14,494              
|Production taxes                                       | -                      |   | 603                 |  | 913                 
|Depreciation, depletion and amortization               | -                      |   | 954                 |  | 2,148               
|Asset impairment                                       | -                      |   | 38,234              |  | 75,164              
|Non-cash compensation                                  | 175,309                |   | 326,498             |  | 2,279,215           
|Other selling, general and administrative expense      | 85,268                 |   | 109,804             |  | 690,502             
|Total costs and expenses                               | 261,081                |   | 484,372             |  | 3,062,436           
|Loss from operations                                   | (261,081)              |   | (475,978)           |  | (3,049,732)         
|Other expenses (income):                               |                        |   |                     |  |                     
|Loss on disposition by rescission agreement            |                        |   |                     |  |                     
|on condominium                                         | -                      |   | -                   |  | 15,000              
|Commodities trading losses                             | -                      |   | 719                 |  | 36,557              
|Interest expense                                       | 18,063                 |   | 30,968              |  | 73,181              
|Interest income from related party                     | (8,727)                |   | (6,610)             |  | (22,784)            
|Interest income                                        | -                      |   | -                   |  | (4,414)             
|                                                       | 9,336                  |   | 25,077              |  | 97,540              
|Loss before income taxes                               | (270,417)              |   | (501,055)           |  | (3,147,272)         
|Provision for income taxes                             | -                      |   | -                   |  | -                   
|Net loss                                               | $      (270,417)       |   | $      (501,055)    |  | $      (3,147,272)  
|                                                       |                        |   |                     |  |                     
|                                                       |                        |   |                     |  |                     
|Net loss per share, basic and diluted                  | $            (0.00)    |   | $            (0.02) |  |                     
|                                                       |                        |   |                     |  |                     
|Weighted average shares outstanding,                   |                        |   |                     |  |                     
|basic and diluted                                      | 75,467,019             |   | 27,065,306          |  |                     





See
accompanying notes to financial statements.







|ROYAL ENERGY RESOURCES, INC.                                           |                 |   |                 |  |             |   |               | 
|---------------------------------------------------------------------- | --------------- | - | --------------- |  | ----------- | - | ------------- | 
|(A Development Stage Company)                                          |                 |   |                 |  |             |   |               | 
|Statements of Stockholders' Equity                                     |                 |   |                 |  |             |   |               | 
|Inception of Development Stage, July 22, 2005, through August 31, 2011 |                 |   |                
|                                                                       |                 |   |                 |  |             |   |               | 
|                                                                       | Preferred stock |   | Common stock    |  | Paid-in    
|                                                                       | Shares          |   | Amount          |  | Shares      |   | Amount        | 
|                                                                       |                 |   |                 |  |             |   |               | 
|Inception, July 22, 2005                                               | -               |   | -               |  | 5,930,300   |   | 59            | 
|Sale of common stock for cash                                          | -               |   | -               |  | 320,000     |   | 3             | 
|Common stock issued for                                                |                 |   |                 |  |             |   |               | 
|real estate investment                                                 | -               |   | -               |  | 1,900,000   |   | 19            | 
|Contribution to capital                                                | -               |   | -               |  | -           |   | -             | 
|Net loss                                                               | -               |   | -               |  | -           |   | -             | 
|Balance August 31, 2005                                                | -               |   | -               |  | 8,150,300   |   | 81            | 
|Sale of common stock for cash                                          | -               |   | -               |  | 1,086,667   |   | 12            | 
|Net loss                                                               | -               |   | -               |  | -           |   | -             | 
|Balance, August 31, 2006                                               | -               |   | -               |  | 9,236,967   |   | 93            | 
|Sale of common stock                                                   | -               |   | -               |  | 4,670,060   |   | 46            | 
|Net loss                                                               | -               |   | -               |  | -           |   | -             | 
|Balance, August 31, 2007                                               | -               |   | -               |  | 13,907,027  |   | 139           | 
|Sale of preferred stock                                                | 100,000         |   | 1               |  | -           |   | -             | 
|Sale of common stock                                                   | -               |   | -               |  | 2,295,704   |   | 23            | 
|Common stock issued for                                                |                 |   |                 |  |             |   |               | 
|consulting contracts                                                   | -               |   | -               |  | 2,965,000   |   | 30            | 
|Cash portion of consulting                                             |                 |   |                 |  |             |   |               | 
|contracts                                                              | -               |   | -               |  | -           |   | -             | 
|Rescission of real estate                                              |                 |   |                 |  |             |   |               | 
|purchase                                                               | -               |   | -               |  | (1,900,000) |   | (19)          | 
|Amortization of prepaid                                                |                 |   |                 |  |             |   |               | 
|consulting contracts:                                                  |                 | # |                 |  |             | # |               | 
|Non-cash portion                                                       | -               |   | -               |  | -           |   | -             | 
|Cash portion                                                           | -               |   | -               |  | -           |   | -             | 
|Stock subscription receivable:                                         |                 |   |                 |  |             |   |               | 
|Payments received                                                      | -               |   | -               |  | -           |   | -             | 
|Interest accrued                                                       | -               |   | -               |  | -           |   | -             | 
|Net loss                                                               | -               |   | -               |  | -           |   | -             | 
|Balance, August 31, 2008                                               | 100,000         |   | 1               |  | 17,267,731  |   | 173           | 
|Sale of common stock for cash                                          | -               |   | -               |  | 20,000      |   | -             | 
|Common stock issued for                                                |                 |   |                 |  |             |   |               | 
|consulting contracts                                                   | -               |   | -               |  | 3,551,000   |   | 36            | 
|Cash portion of consulting contracts                                   | -               |   | -               |  | -           |   | -             | 
|Amortization of prepaid                                                |                 |   |                 |  |             |   |               | 
|consulting contracts:                                                  |                 |   |                 |  |             |   |               | 
|Non-cash portion                                                       | -               |   | -               |  | -           |   | -             | 
|Cash portion                                                           | -               |   | -               |  | -           |   | -             | 
|Stock subscription receivable:                                         |                 |   |                 |  |             |   |               | 
|Sold                                                                   | -               |   | -               |  | 1,550,000   |   | 15            | 
|Payments received                                                      | -               |   | -               |  | -           |   | -             | 
|Interest accrued                                                       | -               |   | -               |  | -           |   | -             | 
|Net loss                                                               | -               |   | -               |  | -           |   | -             | 
|Balance, August 31, 2009                                               | 100,000         |   | $             1 |  | 22,388,731  |   | $         224 | 
|                                                                       |                 |   |                 |  |             |   |               | 



See
accompanying notes to financial statements.









|ROYAL ENERGY RESOURCES, INC.                                           |                    |  |                  |  |                    |  |                 |  |                    
|---------------------------------------------------------------------- | ------------------ |  | ---------------- |  | ------------------ |  | --------------- |  | -------------------
|(A Development Stage Company)                                          |                    |  |                  |  |                    |  |                 |  |                    
|Statements of Stockholders' Equity, continued                          |                    |  |                  |  |                    |  |                 | 
|Inception of Development Stage, July 22, 2005, through August 31, 2011 |                    |  |                  | 
|                                                                       |                    |  |                  |  |                    |  |                 |  |                    
|                                                                       |                    |  |                  |  |                    |  | Deficit         |  |                    
|                                                                       |                    |  |                  |  |                    |  | Accumulated     |  |                    
|                                                                       |                    |  |                  |  |                    |  | During          |  |                    
|                                                                       | Subscription       |  | Deferred         |  | Accumulated        |  | Development     |  |                    
|                                                                       | Receivable         |  | Expenses         |  | Deficit            |  | Stage           |  | Total              
|                                                                       |                    |  |                  |  |                    |  | (Restated       |  |                    
|                                                                       |                    |  |                  |  |                    |  | Note 11)        |  |                    
|                                                                       |                    |  |                  |  |                    |  |                 |  |                    
|Inception, July 22, 2005                                               | -                  |  | -                |  | (28,995)           |  | -               |  | (6,510)            
|Sale of common stock for cash                                          | -                  |  | -                |  | -                  |  | -               |  | 32,000             
|Common stock issued for                                                |                    |  |                  |  |                    |  |                 |  |                    
|real estate investment                                                 | -                  |  | -                |  | -                  |  | -               |  | 190,000            
|Contribution to capital                                                | -                  |  | -                |  | -                  |  | -               |  | 6,560              
|Net loss                                                               | -                  |  | -                |  | -                  |  | (7,739)         |  | (7,739)            
|Balance August 31, 2005                                                | -                  |  | -                |  | (28,995)           |  | (7,739)         |  | 214,311            
|Sale of common stock for cash                                          | -                  |  | -                |  | -                  |  | -               |  | 120,500            
|Net loss                                                               | -                  |  | -                |  | -                  |  | (80,825)        |  | (80,825)           
|Balance, August 31, 2006                                               | -                  |  | -                |  | (28,995)           |  | (88,564)        |  | 253,986            
|Sale of common stock                                                   | (81,590)           |  | -                |  | -                  |  | -               |  | 80,070             
|Net loss                                                               | -                  |  | -                |  | -                  |  | (95,813)        |  | (95,813)           
|Balance, August 31, 2007                                               | (81,590)           |  | -                |  | (28,995)           |  | (184,377)       |  | 238,243            
|Sale of preferred stock                                                | -                  |  | -                |  | -                  |  | -               |  | 1,000              
|Sale of common stock                                                   | -                  |  | -                |  | -                  |  | -               |  | 413,172            
|Common stock issued for                                                |                    |  |                  |  |                    |  |                 |  |                    
|consulting contracts                                                   | -                  |  | (977,775)        |  | -                  |  | -               |  | -                  
|Cash portion of consulting                                             |                    |  |                  |  |                    |  |                 |  |                    
|contracts                                                              | -                  |  | (85,000)         |  | -                  |  | -               |  | (85,000)           
|Rescission of real estate                                              |                    |  |                  |  |                    |  |                 |  |                    
|purchase                                                               | -                  |  | -                |  | -                  |  | -               |  | (200,000)          
|Amortization of prepaid                                                |                    |  |                  |  |                    |  |                 |  |                    
|consulting contracts:                                                  |                    |  |                  |  |                    |  |                 |  |                    
|Non-cash portion                                                       | -                  |  | 338,547          |  | -                  |  | -               |  | 338,547            
|Cash portion                                                           | -                  |  | 43,529           |  | -                  |  | -               |  | 43,529             
|Stock subscription receivable:                                         |                    |  |                  |  |                    |  |                 |  |                    
|Payments received                                                      | 13,400             |  | -                |  | -                  |  | -               |  | 13,400             
|Interest accrued                                                       | (3,902)            |  | -                |  | -                  |  | -               |  | (3,902)            
|Net loss                                                               | -                  |  | -                |  | -                  |  | (467,712)       |  | (467,712)          
|Balance, August 31, 2008                                               | (72,092)           |  | (680,699)        |  | (28,995)           |  | (652,089)       |  | 291,277            
|Sale of common stock for cash                                          | -                  |  | -                |  | -                  |  | -               |  | 3,600              
|Common stock issued for                                                |                    |  |                  |  |                    |  |                 |  |                    
|consulting contracts                                                   | -                  |  | (887,440)        |  | -                  |  | -               |  | -                  
|Cash portion of consulting contracts                                   | -                  |  | (40,901)         |  | -                  |  | -               |  | (40,901)           
|Amortization of prepaid                                                |                    |  |                  |  |                    |  |                 |  |                    
|consulting contracts:                                                  |                    |  |                  |  |                    |  |                 |  |                    
|Non-cash portion                                                       | -                  |  | 1,252,861        |  | -                  |  | -               |  | 1,252,861          
|Cash portion                                                           | -                  |  | 82,371           |  | -                  |  | -               |  | 82,371             
|Stock subscription receivable:                                         |                    |  |                  |  |                    |  |                 |  |                    
|Sold                                                                   | (77,500)           |  | -                |  | -                  |  | -               |  | 186,000            
|Payments received                                                      | 1,168              |  |                  |  |                    |  |                 |  | 1,168              
|Interest accrued                                                       | (3,545)            |  |                  |  |                    |  |                 |  | (3,545)            
|Net loss                                                               | -                  |  | -                |  | -                  |  | (1,723,711)     |  | (1,723,711)        
|Balance, August 31, 2009                                               | $        (151,969) |  | $      (273,808) |  | $         (28,995) |  | $   (2,375,800) |  | $            49,120





See
accompanying notes to financial statements.











|ROYAL ENERGY RESOURCES, INC.                                           |                 |   |                 |  |             |   |               | 
|---------------------------------------------------------------------- | --------------- | - | --------------- |  | ----------- | - | ------------- | 
|(A Development Stage Company)                                          |                 |   |                 |  |             |   |               | 
|Statements of Stockholders' Equity                                     |                 |   |                 |  |             |   |               | 
|Inception of Development Stage, July 22, 2005, through August 31, 2011 |                 |   |                
|                                                                       |                 |   |                 |  |             |   |               | 
|                                                                       | Preferred stock |   | Common stock    |  | Paid-in    
|                                                                       | Shares          |   | Amount          |  | Shares      |   | Amount        | 
|                                                                       |                 |   |                 |  |             |   |               | 
|Balance August 31, 2009                                                | 100,000         |   | $             1 |  | 22,388,731  |   | $         224 | 
|Common stock issued for:                                               |                 |   |                 |  |             |   |               | 
|Consulting contracts                                                   | -               |   | -               |  | 2,525,000   |   | 25            | 
|Drilling program participation                                         | -               |   | -               |  | 100,000     |   | 1             | 
|Loan extension                                                         | -               |   | -               |  | 700,000     |   | 7             | 
|Amortization of prepaid                                                |                 |   |                 |  |             |   |               | 
|Consulting contracts                                                   | -               |   | -               |  | -           |   | -             | 
|Beneficial conversion feature                                          |                 |   |                 |  |             |   |               | 
|of convertible debt                                                    | -               |   | -               |  | -           |   | -             | 
|Stock subscription receivable:                                         |                 |   |                 |  |             |   |               | 
|Sold                                                                   | -               |   | -               |  | 14,000,000  |   | 140           | 
|Payments received                                                      | -               |   | -               |  | -           |   | -             | 
|Interest accrued                                                       | -               |   | -               |  | -           |   | -             | 
|Net loss                                                               | -               |   | -               |  | -           |   | -             | 
|Balance August 31, 2010                                                | 100,000         |   | 1               |  | 39,713,731  |   | 397           | 
|Amortization of deferred                                               |                 | # |                 |  |             | # |               | 
|expenses                                                               | -               |   | -               |  | -           |   | -             | 
|Common stock issued for:                                               |                 |   |                 |  |             |   |               | 
|Consulting contracts                                                   | -               |   | -               |  | 2,000,000   |   | 20            | 
|Loan and extension fee                                                 | -               |   | -               |  | 5,400,000   |   | 54            | 
|Beneficial conversion feature                                          |                 |   |                 |  |             |   |               | 
|of convertible debt                                                    | -               |   | -               |  | -           |   | -             | 
|Stock subscription receivable:                                         |                 |   |                 |  |             |   |               | 
|Sold                                                                   | -               |   | -               |  | 43,000,000  |   | 430           | 
|Cancelled                                                              | -               |   | -               |  | (4,250,000) |   | (42)          | 
|Payments received                                                      | -               |   | -               |  | -           |   | -             | 
|Interest accrued                                                       | -               |   | -               |  | -           |   | -             | 
|Common stock cancelled for                                             |                 |   |                 |  |             |   |               | 
|rescinded drilling program                                             | -               |   | -               |  | (100,000)   |   | (1)           | 
|Net loss                                                               | -               |   | -               |  | -           |   | -             | 
|Balance August, 31, 2011                                               | 100,000         |   | $             1 |  | 85,763,731  |   | $         858 | 
|                                                                       |                 |   |                 |  |             |   |               | 
|                                                                       |                 |   |                 |  |             |   |               | 







See accompanying notes to financial statements.







|ROYAL ENERGY RESOURCES, INC.                                           |                    |  |                  |  |                    |  |                     |  |                    
|---------------------------------------------------------------------- | ------------------ |  | ---------------- |  | ------------------ |  | ------------------- |  | -------------------
|(A Development Stage Company)                                          |                    |  |                  |  |                    |  |                     |  |                    
|Statements of Stockholders' Equity, continued                          |                    |  |                  |  |                    |  |                     | 
|Inception of Development Stage, July 22, 2005, through August 31, 2010 |                    |  |                  | 
|                                                                       |                    |  |                  |  |                    |  |                     |  |                    
|                                                                       |                    |  |                  |  |                    |  | Deficit             |  |                    
|                                                                       |                    |  |                  |  |                    |  | Accumulated         |  |                    
|                                                                       |                    |  |                  |  |                    |  | During              |  |                    
|                                                                       | Subscription       |  | Deferred         |  | Accumulated        |  | Development         |  |                    
|                                                                       | Receivable         |  | Expenses         |  | Deficit            |  | Stage               |  | Total              
|                                                                       |                    |  |                  |  |                    |  |                     |  |                    
|Balance, August 31, 2009                                               | $        (151,969) |  | $      (273,807) |  | $         (28,995) |  | $       (2,375,800) |  | $            49,120
|Common stock issued for:                                               |                    |  |                  |  |                    |  |                     |  |                    
|Consulting contracts                                                   | -                  |  | (81,500)         |  | -                  |  | -                   |  | -                  
|Drilling program participation                                         | -                  |  | -                |  | -                  |  | -                   |  | 6,000              
|Loan extension                                                         | -                  |  | -                |  | -                  |  | -                   |  | 14,000             
|Amortization of prepaid                                                |                    |  |                  |  |                    |  |                     |  |                    
|consulting contracts:                                                  | -                  |  | 326,498          |  | -                  |  | -                   |  | 326,498            
|Beneficial conversion feature                                          |                    |  |                  |  |                    |  |                     |  |                    
|of convertible debt                                                    | -                  |  | -                |  | -                  |  | -                   |  | 2,100              
|Stock subscription receivable:                                         |                    |  |                  |  |                    |  |                     |  |                    
|Sold                                                                   | (285,000)          |  | -                |  | -                  |  | -                   |  | -                  
|Payments received                                                      | 21,239             |  |                  |  |                    |  |                     |  | 21,239             
|Interest accrued                                                       | (6,610)            |  |                  |  |                    |  |                     |  | (6,610)            
|Net loss                                                               | -                  |  | -                |  | -                  |  | (501,055)           |  | (501,055)          
|Balance August 31, 2010                                                | (422,340)          |  | (28,809)         |  | (28,995)           |  | (2,876,855)         |  | (88,708)           
|Amortization of deferred                                               |                    |  |                  |  |                    |  |                     |  |                    
|expenses                                                               | -                  |  | 152,809          |  | -                  |  | -                   |  | 152,809            
|Common stock issued for:                                               |                    |  |                  |  |                    |  |                     |  |                    
|Consulting contracts                                                   | -                  |  | (20,000)         |  | -                  |  | -                   |  | -                  
|Loan and extension fee                                                 | -                  |  | (156,000)        |  | -                  |  | -                   |  | 22,500             
|Beneficial conversion feature                                          |                    |  |                  |  |                    |  |                     |  |                    
|of convertible debt                                                    | -                  |  | -                |  | -                  |  | -                   |  | 9,000              
|Stock subscription receivable:                                         |                    |  |                  |  |                    |  |                     |  |                    
|Sold                                                                   | (172,000)          |  | -                |  | -                  |  | -                   |  | -                  
|Cancelled                                                              | 147,336            |  | -                |  | -                  |  | -                   |  | -                  
|Payments received                                                      | 58,477             |  | -                |  | -                  |  | -                   |  | 58,477             
|Interest accrued                                                       | (8,727)            |  | -                |  | -                  |  | -                   |  | (8,727)            
|Common stock cancelled for                                             |                    |  |                  |  |                    |  |                     |  |                    
|rescinded drilling program                                             | -                  |  | -                |  | -                  |  | -                   |  | -                  
|Net loss                                                               | -                  |  | -                |  | -                  |  | (270,417)           |  | (270,417)          
|Balance August, 31, 2011                                               | $ (397,254)        |  | $   (52,000)     |  | $   (28,995)       |  | $ (3,147,272)       |  | $ (125,066)        

See
accompanying notes to financial statements.













|ROYAL ENERGY RESOURCES, INC.                                        |                            |  |                       |  |                           
|------------------------------------------------------------------- | -------------------------- |  | --------------------- |  | --------------------------
|(A Development Stage Company)                                       |                            |  |                       |  |                           
|Statements of Cash Flows                                            |                            |  |                       |  |                           
|Years Ended August 31, 2011 and 2010, and                           |                            |  |                       |  |                           
|the period from inception (July 22, 2005) through August 31, 2011   |                            |  |                       | 
|                                                                    |                            |  |                       |  |                           
|                                                                    |                            |  |                       |  | From inception            
|                                                                    |                            |  |                       |  | July 22, 2005             
|                                                                    |                            |  |                       |  | through                   
|                                                                    | Years Ended August 31,     |  | August 31,           
|                                                                    | 2011                       |  | 2010                  |  | 2011                      
|                                                                    |                            |  |                       |  |                           
|Cash flows from operating activities                                |                            |  |                       |  |                           
|Net loss                                                            | $            (270,417)     |  | $        (501,055)    |  | $         (3,147,272)     
|Adjustment to reconcile net loss to net cash used                   |                            |  |                       |  |                           
|in operating activities:                                            |                            |  |                       |  |                           
|Depreciation, depletion and amortization                            | -                          |  | 954                   |  | 2,148                     
|Value of common shares issued for services                          | 71,309                     |  | 326,498               |  | 2,175,215                 
|Loss on rescission of condominium purchase                          | -                          |  | -                     |  | 15,000                    
|Interest accrued on stock subscription                              | (8,727)                    |  | (6,610)               |  | (22,784)                  
|Asset impairment                                                    | -                          |  | 38,234                |  | 75,164                    
|Loan extension paid with common stock                               | 104,000                    |  | 14,000                |  | 118,000                   
|Beneficial conversion feature of convertible                        |                            |  |                       |  |                           
|note payable                                                        | 9,000                      |  | 2,100                 |  | 11,100                    
|Bad debt expense                                                    | 9,619                      |  | -                     |  | 9,619                     
|Change in other assets and liablities:                              |                            |  |                       |  |                           
|Accounts receivable                                                 | -                          |  | (5,959)               |  | (6,867)                   
|Prepaid expenses and other assets                                   | 21,075                     |  | 68,229                |  | 49,392                    
|Accounts payable                                                    | 12,643                     |  | 7,028                 |  | (5,604)                   
|Accrued expenses                                                    | (243)                      |  | 243                   |  | -                         
|Net cash used in operations                                         | (51,741)                   |  | (56,338)              |  | (726,889)                 
|                                                                    |                            |  |                       |  |                           
|Cash flows from investing activities                                |                            |  |                       |  |                           
|Investment in real estate                                           | -                          |  | -                     |  | (11,000)                  
|Oil and gas property expenditures                                   | (2,097)                    |  | (11,570)              |  | (152,439)                 
|Proceeds from sales of undeveloped leasehold                        | -                          |  | 22,300                |  | 70,275                    
|Proceeds from sale of oil and gas properties                        | 6,500                      |  | -                     |  | 6,500                     
|Investment in uranium and rare earth and precious metals properties | (5,400)                    |  | -                     |  | (11,073)                  
|Net cash provided (used) in investing activities                    | (997)                      |  | 10,730                |  | (97,737)                  
|                                                                    |                            |  |                       |  |                           
|Cash flows from financing activities                                |                            |  |                       |  |                           
|Proceeds of stockholder loans                                       | -                          |  | -                     |  | 50                        
|Proceeds from subscription receivable                               | 58,462                     |  | 21,239                |  | 94,269                    
|Loan proceeds                                                       | 18,000                     |  | 6,000                 |  | 164,000                   
|Loan repayment                                                      | (24,000)                   |  | -                     |  | (84,000)                  
|Proceeds from sale of common stock                                  | -                          |  | -                     |  | 649,342                   
|Proceeds from sale of preferred stock                               | -                          |  | -                     |  | 1,000                     
|Net cash provided by (used in) financing activities                 | 52,462                     |  | 27,239                |  | 824,661                   
|                                                                    |                            |  |                       |  |                           
|Net increase (decrease) in cash and cash equivalents                | (276)                      |  | (18,369)              |  | 35                        
|Cash and cash equivalents, beginning of period                      | 311                        |  | 18,680                |  | -                         
|Cash and cash equivalents, end of period                            | $                       35 |  | $                 311 |  | $                       35





|ROYAL ENERGY RESOURCES, INC.                                      |                              |  |                         |  |                        
|----------------------------------------------------------------- | ---------------------------- |  | ----------------------- |  | -----------------------
|(A Development Stage Company)                                     |                              |  |                         |  |                        
|Statements of Cash Flows, Continued                               |                              |  |                         |  |                        
|Years Ended August 31, 2011 and 2010, and                         |                              |  |                         |  |                        
|the period from inception (July 22, 2005) through August 31, 2011 |                              |  |                         | 
|                                                                  |                              |  |                         |  |                        
|                                                                  |                              |  |                         |  | From inception         
|                                                                  |                              |  |                         |  | July 22, 2005          
|                                                                  |                              |  |                         |  | through                
|                                                                  | Years Ended August 31,       |  | August 31,             
|                                                                  | 2011                         |  | 2010                    |  | 2011                   
|                                                                  |                              |  |                         |  |                        
|                                                                  |                              |  |                         |  |                        
|Supplemental cash flow information                                |                              |  |                         |  |                        
|Cash paid for interest                                            | $                  9,306     |  | $            14,625     |  | $                32,681
|Cash paid for income taxes                                        | -                            |  | -                       |  | -                      
|                                                                  |                              |  |                         |  |                        
|Non-cash investing and financing activities:                      |                              |  |                         |  |                        
|Issuance of common stock for real estate                          | $                          - |  | $                     - |  | $              190,000 
|Contribution of stockholder loan to capital                       | -                            |  | -                       |  | 6,560                  
|Disposition of real estate per stock rescission                   |                              |  |                         |  |                        
|agreement                                                         | -                            |  | -                       |  | 200,000                
|Common stock issued for participation in drilling                 |                              |  |                         |  |                        
|program                                                           | -                            |  | -                       |  | 6,000                  
|Common stock issued for stock subscription                        |                              |  |                         |  |                        
|receivables                                                       | 172,000                      |  | 77,332                  |  | 615,922                
|Stock subscription receivables cancelled and common               |                              |  |                         |  |                        
|stock retired                                                     | 147,336                      |  | -                       |  | 147,336                











ROYAL ENERGY RESOURCES,
INC.

(A Development Stage Company)



NOTES TO FINANCIAL STATEMENTS



AUGUST 31, 2011

|
|



1	ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of presentation



These financial
statements include the accounts of Royal Energy Resources, Inc. (“RER”) (formerly known as World Marketing, Inc. ("WMI").
RER is a development stage enterprise within the meaning of Financial Accounting Standards Board Topic 915.



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



In preparing
the accompanying financial statements, the Company has reviewed, as determined necessary by the Company's management, events that
have occurred after August 31, 2011, up until the issuance of the financial statements, which occurred on November 28, 2011.





Organization and nature of business



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



In 2011, the
Company began pursuing gold, silver, copper and rare earth metals mining concessions in Romania, Bulgaria and Canada and mining
leases in the United States.



At the end of
August 2006, the Company began acquiring oil and gas and uranium leases and has since resold some of its leases and retained an
overriding royalty interest. During 2008 the Company prepaid the estimated drilling and completion costs for interests in three
oil & gas drilling prospects in Washington County, Oklahoma. Two of the wells were completed in September and October 2008
and the third well was abandoned after testing in 2010. During 2009, the Company advanced another $42,000, net, to apply toward
workover of three additional wells. All workover attempts were abandoned in 2010. Effective October 1, 2010, the Company sold its
interest in its remaining proved reserves.



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



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



Going Concern



The Company
has not established sources of revenues sufficient to fund the development of business, projected operating expenses and commitments
for fiscal year 2012. The Company, has accumulated a net loss of $3,176,267 through August 31, 2011, ($28,995 in an earlier development
stage business and $3,147,272 in the current development stage) and incurred losses of $270,417 for the year then ended.



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



In March 2006,
the Company sold 650,000 shares of its common stock for $65,000 to provide a portion of the cash required to purchase its first
real estate investment. Subsequently, the Company continued to sell its common stock to raise capital to continue operations. In
the previous fiscal year, the Company revised its business plan, rescinded its real estate purchase and began investing in energy
leases and oil and gas drilling prospects. However, the energy business has a high degree of risk and there can be no assurance
that the Company will be able to obtain sufficient funding to develop the Company's current business plan.



Cash and cash equivalents



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



Revenue recognition



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



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



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



Stock option plans



The compensation
cost relating to share-based payment transactions (including the cost of all employee stock options) is required to be recognized
in the financial statements. That cost will be measured based on the estimated fair value of the equity or liability instruments
issued. The accounting literature covers a wide range of share-based compensation arrangements including share options, restricted
share plans, performance-based awards, share appreciation rights, and employee share purchase plans.



The Black-Scholes
option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected
stock price volatility. Because the Company's options have characteristics significantly different from those of traded options,
and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion,
the existing models may not necessarily provide a reliable single measure of the fair value of its options. However, the Black-Scholes
option valuation model provides the best available estimate for this purpose.



There are no
options outstanding at August 31, 2011.



Property and equipment



The Company
follows the full cost method of accounting for oil and natural gas operations. Under this method all productive and nonproductive
costs incurred in connection with the acquisition, exploration and development of oil and natural gas reserves are capitalized.
No gains or losses are recognized upon the sale or other disposition of oil and natural gas properties except in transactions that
would significantly alter the relationship between capitalized costs and proved reserves. The costs of unevaluated oil and natural
gas properties are excluded from the amortizable base until the time that either proven reserves are found or it has determined
that such properties are impaired. The Company had $8,462 and $6,350 in capitalized costs relating to unevaluated properties and
leases at August 31, 2011 and 2010, respectively. As properties are evaluated, the related costs would be transferred to proven
oil and natural gas properties using full cost accounting. There are no capitalized costs for proved properties as of August 31,
2011 and 2010.



Under the full
cost method the net book value of oil and natural gas properties, less related deferred income taxes, may not exceed the estimated
after-tax future net revenues from proved oil and natural gas properties, discounted at 10% (the “Ceiling Limitation”).
In arriving at estimated future net revenues, estimated lease operating expenses, development costs, and certain production-related
taxes are deducted. In calculating future net revenues, prices and costs in effect at the time of the calculation are held constant
indefinitely, except for changes that are fixed and determinable by existing contracts. The net book value is compared to the ceiling
limitation on a quarterly and yearly basis. The excess, if any, of the net book value above the ceiling limitation is charged to
expense in the period in which it occurs and is not subsequently reinstated. Reserve estimates used in determining estimated future
net revenues have been prepared by the Company with the assistance of the operator of the properties. In 2010 the Company recognized
an impairment due to the ceiling test limitations of $38,224.



The Company
assesses the recoverability of the carrying value of its non-oil and gas long-lived assets when events occur that indicate an impairment
in value may exist. An impairment loss is indicated if the sum of the expected undiscounted future net cash flows is less than
the carrying amount of the assets. If this occurs, an impairment loss is recognized for the amount by which the carrying amount
of the assets exceeds the estimated fair value of the asset. No impairments of other assets were recorded in 2011 or 2010.



Depreciation
and amortization



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



Natural gas sales
and gas imbalances



The Company
follows the entitlement method of accounting for natural gas sales, recognizing as revenues only its net interest share of all
production sold. Any amount attributable to the sale of production in excess of or less than the Company’s net interest is
recorded as a gas balancing asset or liability. At August 31, 2011 and 2010, there were no natural gas imbalances.



Investments in real estate



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



Oil and natural gas
reserve estimates



Proved reserves,
estimated future net revenues and the present value of our reserves are estimated based upon a combination of historical data and
estimates of future activity. The reserve estimates are used in calculating depletion, depreciation and amortization and in the
assessment of the Company’s Ceiling Limitation. Significant assumptions are required in the valuation of proved oil and natural
gas reserves which may affect the amount at which oil and natural gas properties are recorded. Actual results could differ materially
from these estimates. The Company had no proved reserves at August 31, 2011 and 2010.



Income taxes



Provisions for
income taxes are based on taxes payable or refundable for the current year and deferred taxes. Deferred taxes are provided on differences
between the tax bases of assets and liabilities and their reported amounts in the financial statements, and tax carry forwards.
Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to
the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates
are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.



Earnings (loss) per common share



The Company
is required to report both basic earnings per share, which is based on the weighted-average number of common shares outstanding,
and diluted earnings per share, which is based on the weighted-average number of common shares outstanding plus all potential dilutive
shares outstanding. At August 31, 2011 and 2010, there were no potentially dilutive common stock equivalents. Accordingly, basic
and diluted earnings (loss) per share are the same for each of the periods presented.



Use of estimates in the preparation
of financial statements



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



Credit risk



In 2011 and
2010, the Company had cash deposits in certain banks that at times may have exceeded the maximum insured by the Federal Deposit
Insurance Corporation. The Company monitors the financial condition of the banks and has experienced no losses on these accounts.



Contingencies



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



Asset retirement
obligations



The fair value
of a liability for an asset retirement obligation is required to be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made, and that the associated retirement costs be capitalized as part of the carrying amount of the
long-lived asset. The Company determines its asset retirement obligation by calculating the present value of the estimated cash
flows related to the liability. Periodic accretion of the discount of the estimated liability would be recorded in the statement
of operations. At August 31, 2011 and 2010, the Company had no proved producing properties and no asset retirement obligation.



Fair value
determination



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



Recent accounting pronouncements



There
are several new accounting pronouncements issued by the Financial Accounting Standards Board ("FASB") which are not yet
effective. Each of these pronouncements, as applicable, has been or will be adopted by the Company. As of October 31, 2011, none
of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of
the Company.







Fiscal years



The year ended
August 31, 2011 is referred to herein as 2011, the year ended August 31, 2010 is referred to herein as 2010 and the year ended
August 31, 2009 is referred to herein as 2009.





2	INVESTMENT
IN ENERGY PROPERTIES



Property costs
are summarized as follows at August 31, 2011 and 2010.





|                                                     | 2011        |  | 2010          
|---------------------------------------------------- | ----------- |  | --------------
|                                                     |             |  |               
|Gold, silver, copper and rare earth metals mining    | $     5,400 |  | $            -
|Uranium rights                                       | 4,329       |  | 4,329         
|Mining properties                                    | 9,729       |  | 4,329         
|Unproved properties not being amortized              | 8,462       |  | 6,350         
|Total                                                | 18,191      |  | 10,679        
|Accumulated depreciation, depletion and amortization | -           |  | -             
|                                                     | $   18,191  |  | $   10,679    





MINING



The Company
is currently pursuing gold, silver, copper and rare earth metals mining concessions in Romania, Bulgaria and Canada and mining
leases in the United States. If successful, the Company plans to concentrate its efforts to develop these properties. At August
31, 2011, the Company held the lease for 2,100 acres of rare earth and precious metals leases in Crook County, Wyoming. There are
leases for 1,280 acres pending. The rare earth and precious metals leases are approximately 5-15 miles from Bear Lodge Mountain
near Sundance, Wyoming. The U.S. Geological Survey has studied Bear Lodge Mountain extensively (USGS Prof. paper #1049-D) and has
estimated it contains one of the largest deposits of disseminated rare earth elements in North America.



In addition,
the Company holds the lease for uranium rights on approximately 960 acres in Laramie County, Wyoming as of August 31, 2011 and
August 31, 2010, respectively. There are leases for 640 acres pending. The uranium rights are located on a trend approximately
25-30 miles from a proposed uranium mine in Weld County, Colorado which was estimated to have uranium reserves valued at over $500
million.



UNDEVELOPED LEASEHOLD
NOT BEING AMORTIZED



The Company
has been the successful bidder in United States Government auctions to purchase certain oil and gas lease rights. The oil and gas
leases currently comprise approximately 3,000 and 3,400 acres in Weston, Goshen, Niobrara, Converse, Campbell, Freemont, Laramie,
Sublette and Platt Counties, Wyoming as of August 31, 2011 and 2010, respectively. As of August 31, 2011, the Company had collected
approximately $72,000 from sales of leases and royalty interests.



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



OIL AND GAS
PRODUCING PROPERTIES



During fiscal
2008, the Company prepaid $119,153 as estimated drilling and completion costs for a 25% working interest in three wells in Washington
County, Oklahoma. Two of the wells were completed in September and October 2008 and the third well was abandoned in 2010. During
2009, the Company advanced an additional $42,000, net, to apply toward workover of three additional wells. All workover attempts
were unsuccessful and the properties were abandoned in 2010. All proven reserves were sold effective October 1, 2010 and the net
proceeds was included in accounts receivable at August 31, 2010. The cost in excess of proceeds of $19,308 was included in asset
impairment at August 31, 2010.



Prepaid drilling
costs included $28,583 at August 31, 2010. Upon sale of the proved properties, discussed above, the $28,079 balance in prepaid
drilling costs was transferred to accounts receivable.





3	CONVERTIBLE
NOTE AND DEBENTURE PAYABLE



Convertible
note and debenture payable may be summarized as follows.





|                        | 2011       |  | 2010      
|----------------------- | ---------- |  | ----------
|                        |            |  |           
|Loan with an individual | $   80,000 |  | $   80,000
|Convertible debenture   | -          |  | 6,000     
|                        | $   80,000 |  | $   86,000





The Company
has a loan with an individual in the original amount of $140,000, with interest payable monthly at 15% and which was extended to
January 1, 2010 and revised to be convertible into common stock at a conversion price to be reasonably agreed upon by the parties.
On March 10, 2011, the Company issued 3,900,000 shares of its common stock to the note holder and the due date of the note with
a balance of $80,000 was extended nine months, to December 10, 2011. The Company issued 21,000,000 shares of the Company's common
stock to a group of individuals who agreed to repay the balance of the $80,000 loan. The sale of the shares is being accounted
for as a stock subscription until the note is repaid.



On April 13,
2010, the Company issued a convertible debenture in the amount of $6,000. The debenture included interest at the rate of $10% per
annum, was due on September 13, 2010, was convertible into the Company's common stock at a conversion rate of 65% of the lowest
closing bid price of the common stock during the immediately preceding 30 trading days and there was no pre-payment penalty. Accordingly,
at issuance, $2,100 of the proceeds was assigned to the conversion feature. The discount was amortized over the five-month term
of the note. The debenture was repaid in September 2010.





4	INCOME TAXES



RER has not
recorded a deferred tax benefit or expense for all prior periods through August 31, 2011, as all net deferred benefits have a full
valuation allowance.



Actual income
tax expense applicable to earnings before discontinued operations and income taxes is reconciled with the “normally expected”
Federal income tax for the year ended August 31, 2011 and 2010 as follows:





|                                            | 2011            |  | 2010           
|------------------------------------------- | --------------- |  | ---------------
|                                            |                 |  |                
|"Normally expected" income tax benefit      | $    91,900     |  | $  170,400     
|State income taxes less federal tax benefit | 10,800          |  | 20,000         
|Valuation allowance                         | (102,700)       |  | (190,400)      
|Actual income tax expense                   | $             - |  | $             -



RER has available
unused net operating loss carryforwards of approximately $3,177,000 which will expire in various periods from 2019 to 2030, some
of which may be limited as to the amount available on an annual basis.



The Company’s
income tax provision was computed based on the federal statutory rate and the average state rates, net of the related federal benefit.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred
tax assets and liabilities are as follows:





|                                | 2011              |  | 2010             
|------------------------------- | ----------------- |  | -----------------
|                                |                   |  |                  
|Net operating loss carryforward | $ 1,206,900       |  | $ 1,104,200      
|Valuation allowance             | (1,206,900)       |  | (1,104,200)      
|Total                           | $               - |  | $               -









5	STOCKHOLDERS’
EQUITY



Common
stock

In November
2007, the Company amended its charter to authorize issuance of up to 100,000,000 shares of common stock with a par value of $.00001.
The amendment became effective on December 12, 2007, upon filing with the Delaware secretary of state. At August 31, 2011 and 2010,
85,763,731 and 39,713,731 shares were issued and outstanding, respectively.



Series
A preferred stock

In November
2007, the Company amended its charter to authorize issuance of up to 10,000,000 shares of its $0.00001 preferred stock. The amendment
became effective on December 12, 2007, upon filing with the Delaware secretary of state. In December 2007 the Company issued 100,000
shares of its Series A preferred stock to its President and Chief Executive Officer for $1,000. The certificate of designation
of the Series A preferred stock provides: the holders of Series A preferred stock shall be entitled to receive dividends when,
as and if declared by the board of directors of the Company; participates with common stock upon liquidation; convertible into
one share of common stock; and has voting rights such that the Series A preferred stock shall have an aggregate voting right for
54% of the total shares entitled to vote.



Stock
option plan

The Royal Energy
Resources, Inc. 2008 Stock Option Plan (“Plan”) was filed on June 27, 2008 and reserves 4,000,000 shares for Awards
under the Plan, of which up to 3,000,000 may be designated as Incentive Stock Options. The Company’s Compensation Committee
is designated to administer the Plan at the direction of the Board of Directors. No options are outstanding under the Plan at August
31, 2011.



Consulting
and financial services agreements

During 2011
and 2010, the Company entered into various consulting and financial services agreements as well as new loan agreements and amendments
to an existing loan agreement.  The following table summarizes the agreements.





|                                  | 2011              |  | 2010        
|--------------------------------- | ----------------- |  | ------------
|Cash to be paid                   | $               - |  | $     36,000
|Cash paid                         | $               - |  | $     14,600
|Shares issued                     | 5,900,000         |  | 3,225,000   
|Options expired                   | -                 |  | -           
|Value of common stock and options | $   176,000       |  | $     81,500
|Unamortized balance, end of year  | $     52,000      |  | $     28,235
|Terms of agreements               | 2.5-9             |  | 3-12        
|                                  | months            |  | months      





6	STOCK
SUBSCRIPTION RECEIVABLE



The officers
and directors of the Company have acquired common stock from the Company pursuant to note agreements, summarized as follows.





|                    |            |            | Original     | Interest | Balance           |         | Balance      
|------------------- | ---------- | ---------- | ------------ | -------- | ----------------- | ------- | -------------
|Name                | Shares     | Date       | Balance      | Rate     | 8/31/2010         |         | 8/31/2010    
|                    |            |            |              |          |                   |         |              
|Jacob Roth          | 4,100,000  | 8/16/2007  | $     81,590 | 5%       | $               - |         | $      59,587
|Jacob Roth          | 950,000    | 7/14/2009  | 47,395       | 2%       | -                 |         | 47,395       
|Jacob Roth          | 1,000,000  | 11/24/2009 | 60,000       | 2%       | -                 |         | 59,897       
|Jacob Roth          | 7,000,000  | 6/1/2010   | 105,000      | 2%       | 70,495            |         | 104,930      
|Jacob Roth          | 6,000,000  | 6/24/2010  | 120,000      | 2%       | 119,940           |         | 119,940      
|Jacob Roth          | 12,000,000 | 11/30/2010 | 60,000       | 2%       | 60,000            |         | -            
|Jacob Roth          | 10,000,000 | 2/17/2011  | 31,900       | 2%       | 31,900            |         | -            
|Frimet Taub         | 600,000    | 7/28/2009  | 29,937       | 2%       | 29,937            |         | 29,937       
|                    |            |            |              |          | 312,272           |         | 421,686      
|Accrued interest    |            |            |              |          | 4,982             |         | 654          
|Related party total |            |            |              | 317,254  |                   | 422,340
|Debt retirement     | 21,000,000 |            | 80,000       |          | 80,000            |         | -            
|                    |            |            |              |          | 397,254           |         | 422,340      





7	RELATED PARTY TRANSACTIONS



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



In December
2007 the Company issued 100,000 shares of its Series A preferred stock to its President and Chief Executive Officer for $1,000.
The certificate of designation of the Series A preferred stock provides: the holders of Series A preferred stock shall be entitled
to receive dividends when, as and if declared by the board of directors of the Company; participates with common stock upon liquidation;
convertible into one share of common stock; and has voting rights such that the Series A preferred stock shall have an aggregate
voting right for 54% of the total shares entitled to vote.



The President
and Chief Executive Officer of the Company was paid approximately $14,600 and $20,000 for office and travel expense reimbursements
during the years ended August 31, 2011 and 2010, respectively.



See Note 6 above
regarding stock subscription receivables.





8	supplementary
oil and gas reserve information (unaudited)



The Company
had interests in proved oil and natural gas properties that were all located in Washington County, Oklahoma until the Company sold
its interest in the proved properties effective October 1, 2010, impaired the property cost in an amount equal to the loss on the
properties and reclassified the remainder to accounts receivable.



Effective August
31, 2010, the Company had no proved reserves as a result of the sale discussed above. Estimated proved net recoverable reserves
as shown below include only those quantities that can be expected to be commercially recoverable at prices and costs in effect
at the balance sheet dates existing under existing regulatory practices and with conventional equipment and operating methods.



Proved developed
reserves represent only those reserves expected to be recovered through existing wells. Proved undeveloped reserves include those
reserves expected to be recovered from new wells on un-drilled acreage or from existing wells on which a relatively major expenditure
is required for re-completion. The Company has not calculated any proved undeveloped reserves.



Capitalized
costs relating to oil and natural gas producing activities and related accumulated depreciation and amortization at August 31,
2011 and 2010 are included in Note 2.



Costs incurred
in oil and natural gas producing activities for the year ended August 31, 2011 and 2010, are summarized as follows:



|                                     | 2011           |  | 2010          
|------------------------------------ | -------------- |  | --------------
|                                     |                |  |               
|Acquisition of proved properties     | $            - |  | $            -
|Acquisition of undeveloped leasehold | -              |  | -             
|Development costs                    | -              |  | 11,570        
|                                     | $            - |  | $   11,570    
|                                     |                |  |               
|Amortization rate per BOE            | N/A            |  | N/A           



Net quantities of proved and proved
developed reserves of oil and natural gas are summarized as follows.





|                                  | Oil    
|--------------------------------- | -------
|Balance, August 31, 2009          | 5,137  
|Revisions of estimates            | (4,516)
|Production                        | (126)  
|Sale of proved properties         | (495)  
|Balance, August 31, 2011 and 2010 | -      





There is no
standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves at August 31, 2011 and
2010.



The following
are the principal sources of changes in the standardized measure of discounted future net cash flows of the Company for the years
ended August 31, 2010. (None in 2011).





|                                                                                | 2010            
|------------------------------------------------------------------------------- | ----------------
|                                                                                |                 
|Standardized measure of discounted future net cash flows at beginning of period | $    38,865     
|Changes during the period:                                                      |                 
|Sales of natural gas produced, net of production costs                          | 488             
|Net changes in prices and production costs                                      | -               
|Sales of reserves in place                                                      | (3,750)         
|Revision of previous quantity estimates                                         | (35,603)        
|Net change                                                                      | (38,865)        
|Standardized measure of discounted future net cash flows at end of period       | $              -













ITEM 9: 	CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



Not applicable.





ITEM 9A:	CONTROLS AND
PROCEDURES



(a) Evaluation of Disclosure Controls and Procedures



Under the PCAOB standards,
a control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course
of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a deficiency,
or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet
important enough to merit the attention by those responsible for oversight of the company's financial reporting. A material weakness
is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected
on a timely basis.



Under the supervision
and with the participation of our management, including our principal executive officer and principal financial officer, we conducted
an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated
under the Securities Exchange Act of 1934, as amended (Exchange Act), as of August 31, 2011. Our management has determined that,
as of August 31, 2011, the Company's disclosure controls and procedures are effective.





(b) Changes in Internal
Controls



There were no changes
in our internal control over financial reporting during the quarter ended August 31, 2011 that materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.



(c) Management’s
Annual Report on Internal Control Over Financial Reporting



Management of the Company
is responsible for establishing and maintaining effective internal control over financial reporting, as defined in Rule 13a-15(f)
under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance to
the Company's management and Board of Directors regarding the preparation and fair presentation of published financial statements
in accordance with the United States' generally accepted accounting principles (US GAAP), including those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition
of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with authorizations
of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.



Because of its inherent
limitations, 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.



Under the supervision
and with the participation of our management, including our chief executive officer and our chief financial officer, we conducted
an evaluation of the effectiveness of our internal control over financial reporting based on the framework established by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in its Internal Control - Integrated Framework. Based
on our evaluation under the framework in Internal Control - Integrated Framework, our management has concluded that our internal
control over financial reporting was effective as of August 31, 2011.



This annual report does
not include an audit or attestation report of our registered public accounting firm regarding our internal control over financial
reporting. Our management's report was not subject to audit or attestation by our registered public accounting firm pursuant to
temporary rules of the SEC that permit us to provide only management's report in this annual report.





ITEM 9B:	OTHER INFORMATION



Pursuant to General Instruction
B of Form 8-K, any reports previously or in the future submitted under Item 2.02 (Results of Operations and Financial Condition)
are not deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 and the Company is
not subject to the liabilities of that section, unless the Company specifically states that the information is to be considered
“filed” under the Exchange Act or incorporates it by reference into a filing under the Securities Act or Exchange Act.
If a report on Form 8-K contains disclosures under Item 2.02, whether or not the report contains disclosures regarding other items,
all exhibits to such report relating to Item 2.02 will be deemed furnished, and not filed, unless the registrant specifies, under
Item 9.01 (Financial Statements and Exhibits), which exhibits, or portions of exhibits, are intended to be deemed filed rather
than furnished pursuant to this instruction. The Company is not incorporating, and will not incorporate, by reference these reports
into a filing under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended.









PART III



Item
10:	Directors, Executive Officers and corporate governance



Executive Officers and Directors



The following section
sets forth the names, ages and current positions with the Company held by the Directors, Executive Officers and Significant Employees;
together with the year such positions were assumed. Frimet Taub is the daughter of Jacob Roth. We are not aware of any arrangement
or understanding between any Director or Executive Officer and any other person pursuant to which he was elected to his current
position. Each Executive Officer will serve until he or she resigns or is removed or otherwise disqualified to serve, or until
his or her successor is elected and qualified.



Each Director will serve
until he or she resigns or is removed or otherwise disqualified to serve or until his or her successor is elected. The Company
currently has two Directors. The Board of Directors does not expect to appoint additional Directors until a potential acquisition
is identified.





|            |  |     |  |                          |  | DATE FIRST       
|----------- |  | --- |  | ------------------------ |  | -----------------
|NAME        |  | AGE |  | POSITION                 |  | ELECTED/APPOINTED
|Jacob Roth  |  | 64  |  | President,               |  | March 22, 1999   
|            |  |     |  | Chief Executive Officer, |  |                  
|            |  |     |  | Chief Financial Officer  |  |                  
|            |  |     |  | and Director             |  |                  
|            |  |     |  |                          |  | March 22, 1999   
|Frimet Taub |  | 31  |  | Secretary,               |  |                  
|            |  |     |  | Treasurer                |  |                  
|            |  |     |  | and Director             |  |                  





JACOB ROTH was named President,
Chief Executive Officer, Chief Financial Officer and Director of RER on March 22, 1999. Previously, Mr. Roth was Chief Executive
Officer of Virilitec Industries, Inc., a public company engaged in attempting to distribute a line of bioengineered virility nutritional
supplements, from July 1, 2002, until December 1, 2003. Additionally, Mr. Roth was the President of JR Consulting, a public company
engaged in consulting for other corporations, from 1982 until 1995. When not otherwise employed, Mr. Roth is a financial consultant
to corporations.



FRIMET TAUB was named Secretary, Treasurer
and Director of the Company on March 22, 1999. Mrs. Taub was a teacher at UTA in Brooklyn, New York from 1999 through 2002 and
is not currently employed outside her home.



Audit Committee



The Board of Directors of the Company serves
as the audit committee.







Compliance with Section 16(a) Of the Exchange
Act



Section 16(a) of the Securities
Exchange Act of 1934, as amended, requires the Company’s executive officers, directors and persons who own more than ten
percent of the Company’s common stock to file initial reports of ownership and changes in ownership with the SEC. Additionally,
SEC regulations require that the Company identify any individuals for whom one of the referenced reports was not filed on a timely
basis during the most recent fiscal year or prior fiscal years. To the Company’s knowledge, based solely on a review of reports
furnished to it, all required reports have been filed when due.



Code of Ethics



The Company has not yet
adopted a code of ethics to apply to its principal executive officer, principal financial officer, principal accounting officer
and controller, or persons performing similar functions.





Item
11:	 Executive Compensation



Jacob Roth currently serves
as President, Chief Executive Officer and Chief Financial Officer of the Company and Frimet Taub serves as Secretary and Treasurer
of the Company. There are no other individuals involved in the management or administration of the Company. Neither Mr. Roth nor
Mrs. Taub previously received any form of compensation, either direct or indirect, and no compensation is being accrued on the
books of the Company.



In 2009, Mr. Roth acquired
950,000 shares of the Company's common stock for $47,500 ($0.05 per share) at a time when the closing price for the stock was $0.17
per share. The difference of $114,000 is included in non-cash compensation in the statement of operations.



In 2009, Mrs. Taub acquired
600,000 shares of the Company's common stock for $30,000 (0.05 per share) at a time when the closing price for the stock was $0.17
per share. The difference of $72,000 is included in non-cash compensation in the statement of operations.





Item
12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters



(a)	SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS



The table below lists
the beneficial ownership of the Company’s voting securities by each person known to be the beneficial owner of more than
5% of such securities. As of August 31, 2011, there were 85,763,731 shares of the Company’s common stock issued and outstanding.
To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise
noted. There are not any pending or anticipated arrangements that may cause a change in control.



The information presented
below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities
and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed
to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the
security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security
as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion
or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial
owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing
the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right
to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number
of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator
used for calculating such percentage may be different for each beneficial owner. We believe that the beneficial owners of our common
stock listed below have sole voting and investment power with respect to the shares shown. There are currently no outstanding convertible
securities, warrants, options or other rights.







|          |  | Name and   |  | Amount and |  |         
|--------- |  | ---------- |  | ---------- |  | --------
|          |  | address of |  | nature of  |  |         
|Title     |  | beneficial |  | beneficial |  | Percent 
|of class  |  | owner **   |  | owner      |  | of class
|          |  |            |  |            |  |         
|Common    |  | Jacob Roth |  | 41,700,000 |  | 48.62%  
|          |  |            |  |            |  |         
|Series A  |  | Jacob Roth |  | 100,000    |  | 100.00% 
|Preferred |  |            |  |            |  |         





** The address for each of the named
is in care of the Company at 543 Bedford Ave., #176, Brooklyn, New York 11211.





(b)	SECURITY OWNERSHIP OF MANAGEMENT



The following information lists, as to each
class, equity securities beneficially owned by all officers and directors, and of the directors and officers of the issuer, as
a group as of August 31, 2011.





|          |  | Name and                   |   | Amount and |  |         
|--------- |  | -------------------------- | - | ---------- |  | --------
|          |  | address of                 |   | nature of  |  |         
|Title     |  | beneficial                 |   | beneficial |  | Percent 
|of class  |  | owner **                   |   | owner      |  | of class
|          |  |                            |   |            |  |         
|Common    |  | Jacob Roth                 |   | 41,700,000 |  | 48.62%  
|          |  |                            |   |            |  |         
|Common    |  | Frimet Taub                |   | 850,000    |  | 0.99%   
|          |  |                            |   |            |  |         
|Common    |  | All officers and directors |   | 42,550,000 |  | 49.61%  
|          |  | as a group (2 persons)     |   |            |  |         
|          |  |                            |   |            |  |         
|Series A  |  | Jacob Roth                 | # | 100,000    |  | 100.00% 
|Preferred |  |                            |   |            |  |         





** The address for each of the
named is in care of the Company at 543 Bedford Ave., #176, Brooklyn, New York 11211.



# Convertible into one common share
and has voting rights such that the Series A preferred stock shall have an aggregate voting right for 54% of the total shares entitled
to vote.



Equity Compensation
Plan Information





|                                |                            |  |                           |  | Number of securities   
|------------------------------- | -------------------------- |  | ------------------------- |  | -----------------------
|                                |                            |  |                           |  | remaining available for
|                                |                            |  |                           |  | future issuance under  
|                                | Number of securities to be |  | Weighted-average exercise |  | equity compensation    
|                                | issued upon exercise of    |  | price of outstanding      |  | plans (excluding       
|                                | outstanding options,       |  | options, warrants         |  | securities reflected   
|Plan category                   | warrants and rights        |  | and rights                |  | in the first column    
|                                |                            |  |                           |  |                        
|Equity compensation plans       |                            |  |                           |  |                        
|approved by security holders    | -                          |  |                           |  | 4,000,000              
|                                |                            |  |                           |  |                        
|Equity compensation plans       |                            |  |                           |  |                        
|not approve by security holders | -                          |  |                           |  | -                      
|                                |                            |  |                           |  |                        
|Total                           | -                          |  |                           |  | 4,000,000              





The Royal Energy Resources,
Inc. 2008 Stock Option Plan (“Plan”) was filed on June 27, 2008 and reserves 4,000,000 shares for Awards under the
Plan, of which up to 3,000,000 may be designated as Incentive Stock Options. The Company’s Compensation Committee is designated
to administer the Plan at the direction of the Board of Directors.









Item
13: 	Certain Relationships and Related Transactions and director independence



The officers and directors
of the Company have acquired common stock from the Company pursuant to note agreements, summarized as follows.





|                 |            |            | Original     | Interest | Balance           |  | Balance      
|---------------- | ---------- | ---------- | ------------ | -------- | ----------------- |  | -------------
|Name             | Shares     | Date       | Balance      | Rate     | 8/31/2010         |  | 8/31/2010    
|                 |            |            |              |          |                   |  |              
|Jacob Roth       | 4,100,000  | 8/16/2007  | $     81,590 | 5%       | $               - |  | $      59,587
|Jacob Roth       | 950,000    | 7/14/2009  | 47,395       | 2%       | -                 |  | 47,395       
|Jacob Roth       | 1,000,000  | 11/24/2009 | 60,000       | 2%       | -                 |  | 59,897       
|Jacob Roth       | 7,000,000  | 6/1/2010   | 105,000      | 2%       | 70,495            |  | 104,930      
|Jacob Roth       | 6,000,000  | 6/24/2010  | 120,000      | 2%       | 119,940           |  | 119,940      
|Jacob Roth       | 12,000,000 | 11/30/2010 | 60,000       | 2%       | 60,000            |  | -            
|Jacob Roth       | 10,000,000 | 2/17/2011  | 31,900       | 2%       | 31,900            |  | -            
|Frimet Taub      | 600,000    | 7/28/2009  | 29,937       | 2%       | 29,937            |  | 29,937       
|                 |            |            |              |          | 312,272           |  | 421,686      
|Accrued interest |            |            |              |          | 4,982             |  | 654          
|                 |            |            |              |          | $    317,254      |  | $    422,340 





Jacob Roth is our only
promoter. He has never received anything of value, tangible or intangible, directly or indirectly, from us, other than reimbursements
of expenses incurred in the ordinary course of business. Mr. Roth acquired 4,900,000 shares of our common stock for a total consideration
of $490 in March 1999. Subsequently, Mr. Roth has acquired shares pursuant to stock subscription agreements as summarized above.



On April 14, 2011, the
Company's CEO returned 4,250,000 shares of the Company's common stock to the Company and it was cancelled, along with the related
stock subscription notes with a combined principal balance of $144,866 and accrued interest of $2,470.



In December 2007 the Company
issued 100,000 shares of its Series A preferred stock to its President and Chief Executive Officer for $1,000. The certificate
of designation of the Series A preferred stock provides: the holders of Series A preferred stock shall be entitled to receive dividends
when, as and if declared by the board of directors of the Company; participates with common stock upon liquidation; convertible
into one share of common stock; and has voting rights such that the Series A preferred stock shall have an aggregate voting right
for 54% of the total shares entitled to vote.



Mrs. Taub is the daughter
of Mr. Roth. Mrs. Taub acquired 250,000 shares of our common stock for a total consideration of $25 ($.0001 per share) in March
1999. In July 2009, Mrs. Taub acquired 600,000 shares of common stock in exchange for cash of $63 and a note receivable in the
amount of $29,937, as summarized above.



The President and Chief
Executive Officer of the Company was paid approximately $14,600 and $20,000 for office and travel expense reimbursements during
the years ended August 31, 2011 and 2010, respectively.





ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES



Audit Fees – The
aggregate fees billed as of October 31, 2011 and 2010 for professional services rendered by the Company’s accountant was
approximately $8,915 and $14,385 for the audit of the Company’s annual financial statements and the quarterly reviews for
the fiscal years ended August 31, 2011 and 2010, respectively. The 2010 audit is included in the 2011 amount and the 2009 audit
is included in the 2010 amount.



Audit-Related Fees – None.



Tax Fees – None.



All Other Fees –
Other than the services described above, no other fees were billed for services rendered by the principal accountant.



Audit Committee Policies
and Procedures – Not applicable.



If greater than 50 percent,
disclose the percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial
statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s
full-time, permanent employees – Not applicable.







part
iv



ITEM 15:	EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES



(a)The following documents are filed as part of this report:

1.Financial Statements – The following consolidated financial statements of Royal Energy
Resources, Inc. are contained in Item 8 of this Form 10-K:

·Report of Independent Registered Public Accountant

·Balance Sheets at August 31, 2011 and 2010

·Consolidated Statements of Operations – For the years ended August 31, 2011 and 2010
and from inception (July 22, 2005) through August 31, 2011

·Statements of Stockholders’ Equity - From inception (July 22, 2005) through August 31,
2011

·Statements of Cash Flows – For the years ended August 31, 2011 and 2010 and from inception
(July 22, 2005) through August 31, 2011

·Notes to the Financial Statements



2.Financial Statement Schedules were omitted, as they are not required or are not applicable,
or the required information is included in the Financial Statements.



3.Exhibits – The following exhibits are filed with this report or are incorporated herein
by reference to a prior filing, in accordance with Rule 12b-32 under the Securities Exchange Act of 1934.



Exhibit	Description



3.1	Restated
Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Form SB-2 Registration Statement
dated May 19, 2006)



3.2	Amended
and Restated By laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Form SB-2 Registration Statement
dated May 19, 2006)



10.1	Real
estate purchase agreement from Mermelstein dated August 25, 2005 (incorporated by reference to Exhibit 10.1 to the Company's Form
SB-2 A/4 Registration Statement dated May 19, 2006)



10.2	Amendment
to agreement to purchase real estate dated February 28, 2006 (incorporated by reference to Exhibit 10.2 to the Company's Form SB-2
A/4 Registration Statement dated May 19, 2006)



10.3	Form
of Non-Qualified Stock Option Agreement used by the Company in connection with the Company's 2008 Stock Option Plan (incorporated
by reference to Exhibit 4.1 to the Company's Form S-8 filed July 14, 2008)



31.1Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange
Act of 1934



31.2	Certification
of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350







SIGNATURES



In accordance with the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



ROYAL ENERGY RESOURCES, INC.





November 28, 2011	/s/ Jacob Roth

Jacob Roth, President, CEO and CFO





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.





November 28, 2011	/s/ Jacob Roth

Jacob Roth, Director, President,

CEO and CFO





November 28, 2011	/s/ Frimet Taub

Frimet Taub, Director