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, 2010




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
            (IRS
      Employerof
      Incorporation or Organization)
            Identification
      No.)543
      Bedford Avenue, #176Brooklyn,
      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 ̈Nox





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.  $612,824.





As of
December 14, 2010, the registrant had outstanding 72,713,731 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





PagePART
      IItem
      1
                          Business
                          3Item
      1A
                          Risk
      Factors
                          9Item
      2
                          Properties
                          9Item
      3
                          Legal
      Proceedings
                          13Item
      4
                          [Removed
      and Reserved]
                          13PART
      IIItem
      5
                          Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                          13Item
      6
                          Selected
      Financial Data
                          15Item
      7
                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                          16Item
      7A
                          Quantitative
      and Qualitative Disclosures About Market Risk
                          19Item
      8
                          Financial
      Statements and Supplementary Data
                          20Item
      9
                          Changes
      in and Disagreements with Accountants on Accounting and
      Financial  Disclosure
                          44Item
      9AT
                          Controls
      and Procedures
                          44Item
      9B
                          Other
      Information
                          45PART
      IIIItem
      10
                          Directors,
      Executive Officers and Corporate Governance
                          47Item
      11
                          Executive
      Compensation
                          48Item
      12
                          Security
      Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters
                          48Item
      13
                          Certain
      Relationships and Related Transactions, and Director
      Independence
                          51Item
      14
                          Principal
      Accountant Fees and Services
                          51PART
      IVItem
      15
                          Exhibits
      and Financial Statement Schedules
                          53


2


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.





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;


3





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.





LEASES


The
Company has been the successful bidder in United States Government auctions to
purchase certain oil and gas lease rights.  The oil and gas leases
currently comprise approximately 3,400 and 6,000 acres in Weston, Goshen,
Niobrara, Converse, Campbell, Freemont, Laramie, Sublette and Platt Counties,
Wyoming as of August 31, 2010 and 2009, respectively.  In addition,
the Company holds the lease for uranium rights on approximately 1,000 and 3,500
acres in Wyoming as of August 31, 2010 and 2009, respectively.





The
Company is generally negotiating with energy and mining companies to develop the
potential resources that may be contained in the properties and will typically
either farm-out or sell the lease and retain an over-riding royalty interest on
any potential future production.  As of August 31, 2010, the Company
had completed five transactions: 308 acres in Natrona County with Bill Barrett
Corporation of Colorado; 75 acres in Weston County, Wyoming with Orion Energy;
360 acres in Goshen and Platt Counties, Wyoming with Carpenter and
Sons;  80 acres in Niobrara County to Black Diamond Minerals, LLC; and
1,989 acres in Laramie County, Wyoming to Cirque Resources LP.  In
June 2010, the Company sold its over-riding royalty interest in the Cirque
Resources transaction for $22,300, net of commission.


4


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 our principal executive office 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, 2011. We have been in the development stage since our
inception, March 22, 1999, have accumulated a net loss of $2,905,850 through
August 31, 2010, and incurred a loss of $501,055 for the year then
ended.


5





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 has 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.


6





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.


7


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.


8


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




OIL
AND GAS


The
Company’s oil and gas business includes direct participation in oil and gas
prospects and buying and selling both oil and gas and uranium leases, as
discussed below.  During 2008 we prepaid the estimated drilling and
completion costs for a 25% interest in three properties in Washington County,
Oklahoma and prepaid the estimated workover cost of three additional properties
in 2009.  One of the wells was completed in September 2008 and a
second well was completed in October 2008.  The third well was
abandoned.  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.


9





The
Company has a balance of $28,583 prepaid as of August 31, 2010 and will either
participate in other prospects or attempt to obtain a refund of the
balance.





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, 2010.  We
have only nominal reserves at August 31, 2009 and have internally prepared our
reserve estimates as of that date.





The
following table sets forth our estimated proved reserves and the related
estimated pre-tax future net revenues, pre-tax 10% present value and after-tax
standardized measure of discounted future net cash flows as of August 31, 2010
and 2009.  These estimates correspond with the method used in
presenting the “Supplemental Information on Oil and Gas Operations” in Note 10
to our financial statements included herein.  No value has been
assigned to proved undeveloped reserves.





Proved
      Developed Reserves2010
                  
                  
                  2009Total
      ReservesOil
      (BBLs)
                  
                  
                  -
                  
                  
                  
                  5,137Gas
      (MCF)
                  
                  
                  -
                  
                  
                  
                  -BOE
      (1)
                  
                  
                  -
                  
                  
                  
                  5,137Pre-tax
      future net revenue (2)
                  
                  $
                  -
                  
                  
                  $
                  99,116Pre-tax
      10% present value (2)
                  
                  
                  -
                  
                  
                  
                  38,865Standardized
      measure of discounted future net cash flows (2)(3)
                  
                  $
                  -
                  
                  
                  $
                  38,865





(1)
            Gas
      reserves are converted to barrels of oil equivalent (“BOE”) at the rate of
      six MCF per BBL of oil, based upon the approximate relative energy content
      of natural gas and oil, which rate is not necessarily indicative of the
      relationship of gas and oil prices.


(2)
            Estimated
      pre-tax future net revenue represents estimated future revenue to be
      generated from the production of proved reserves, net of estimated
      production and development costs and site restoration and abandonment
      charges.  The amounts shown do not give effect to depreciation,
      depletion and amortization, or to non-property related expenses such as
      debt service and income tax
expense.


10





These
amounts were calculated using prices and costs in effect for each individual
property as of August 31, 2009.  These prices were not changed except
where different prices were fixed and determinable from applicable
contracts.  These assumptions yield average prices over the life of
our properties of $58.55 per BBL of oil and $1.98 per MCF of natural gas at
August 31, 2009.





The
present value of after-tax future net revenues discounted at 10% per annum
(“standardized measure”) was $38,865 at August 31, 2009.  The
standardized measure did not include discounted future income taxes since the
net operating loss carryforward exceeded the future net revenues.  The
present value of our pre-tax future net revenue (“pre-tax 10% present value”)
was therefore also $38,865.  We believe the pre-tax 10% present value
assists in both the determination of future cash flows of the current reserves
as well as in making relative value comparisons among peer
companies.  The after-tax standardized measure is dependent on the
unique tax situation of each individual company, while the pre-tax 10% present
value is based on prices and discount factors, which are more consistent from
company to company.  We also understand that securities analysts use
the pre-tax 10% present value measure in similar ways.





(3)
            See
      Note 10 to the financial statements included in Item
  8.





No
estimates of our proved reserves have previously been filed with or included in
reports to any federal governmental authority except for our Form 10-K filings
for August 31, 2009 and 2008, which was our initial reserve filing.





The
prices used in calculating the estimated future net revenues attributable to
proved reserves do not necessarily reflect market prices for oil and gas
production subsequent to August 31, 2009.  There can be no assurance
that all of the proved reserves will be produced and sold within the periods
indicated, that the assumed prices will be realized or that existing contracts
will be honored or judicially enforced.





Drilling
Activities


The
following table summarizes the results of our development drilling activity for
the years ended August 31, 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
                  
                  
                  Net
      Wells Completed (2)Gross (1)
                  
                  
                  Net (2)
                  
                  
                  Productive
                  
                  
                  DryYear
      ended August 31, 2010
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  0.98Year
      ended August 31, 2009
                  
                  
                  2.00
                  
                  
                  
                  0.98
                  
                  
                  
                  0.50
                  
                  
                  
                  -Year
      ended August 31, 2008
                  
                  
                  2.00
                  
                  
                  
                  0.50
                  
                  
                  
                  -
                  
                  
                  
                  -


11





(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 has the right to
participate in additional wells in this prospect.





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.





UNDEVLOPED
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, 2010, and 2009, we own oil and gas leases comprising approximately 3,400 and
6,000 acres in Wyoming, respectively.  In addition, we hold the lease
for uranium rights on approximately 1,000 and 3,500 acres in Wyoming as of
August 31, 2010 and 2009, 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.


12





OTHER


The
Company began leasing its corporate office effective September 1, 2008, for a
period of two years at a monthly rental of $600.  The Company elected
to terminate the lease on October 31, 2009.





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
                      
                      
                      Low2010Quarter
      ended August 31, 2010
                      
                      $
                      0.06
                      
                      
                      $
                      0.01Quarter
      ended May 31, 2010
                      
                      $
                      0.06
                      
                      
                      $
                      0.02Quarter
      ended February 28, 2010
                      
                      $
                      0.08
                      
                      
                      $
                      0.03Quarter
      ended November 30, 2009
                      
                      $
                      0.20
                      
                      
                      $
                      0.032009Quarter
      ended August 31, 2009
                      
                      $
                      0.25
                      
                      
                      $
                      0.16Quarter
      ended May 31, 2009
                      
                      $
                      0.25
                      
                      
                      $
                      0.17Quarter
      ended February 29, 2009
                      
                      $
                      0.20
                      
                      
                      $
                      0.18Quarter
      ended November 30, 2008
                      
                      $
                      0.45
                      
                      
                      $
                      0.20


13


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.


14





RECENT
SALES OF UNREGISTERED SECURITIES





During
the quarter ended August 31, 2010, we did not sell any shares of our common
stock for cash and issued 1,500,000 shares pursuant to a consulting contract
valued at $30,000 and issued 700,000 shares of our common stock valued at
$14,000 for a debt extension fee.  In addition, we issued 13,000,000
shares of our common stock pursuant to stock subscription agreements in the
amount of $225,000 to our chief executive officer.





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





(b) 
HOLDERS





There are
98 shareholders of record of the Company’s common stock at October 31,
2010.





(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
      beissued upon exercise of
                    
                    Weighted average exercise
                    
                    Number of
      securitiesoutstanding options,
                    
                    price of outstanding
                    
                    remaining availablePlan
      category
                    
                    warrants
      and rights
                    
                    options,
      warrants and rights
                    
                    for
      future issuanceEquity
      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.


15


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 $8,394 and $4,310 in oil and gas sales in 2010 and 2009,
respectively, 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, 2010 and
2009.





2010
                  
                  
                  2009Lease
      operating expense
                  
                  $
                  8,279
                  
                  
                  $
                  5,569Production
      taxes
                  
                  
                  603
                  
                  
                  
                  310Depreciation,
      depletion and amortization
                  
                  
                  954
                  
                  
                  
                  1,194Asset
      impairment
                  
                  
                  38,234
                  
                  
                  
                  36,930Non-cash
      compensation
                  
                  
                  326,498
                  
                  
                  
                  1,438,861Other
      selling, general and administrative expense
                  
                  
                  109,804
                  
                  
                  
                  200,395$
                  484,372
                  
                  
                  $
                  1,683,259





Lease
operating expense, production taxes and depreciation, depletion and amortization
relate to the oil and gas revenue which commenced in 2009.





The asset
impairment arose as a result of a ceiling test limitation on the proved oil and
gas reserves.  The reserve calculation at August 31, 2009 was lower
than the calculation at August 31, 2008, primarily due to a decline in price
from $117.00 per barrel to $58.55 per barrel at August 31, 2009.  The
proven reserves were sold effective October 1, 2010 and the properties carrying
value was reduced to the proceeds, which was reclassified to accounts receivable
at August 31, 2010.





Non-cash
compensation includes $326,498 and $1,252,861 in 2010 and 2009, respectively, in
compensation to consultants pursuant to consulting agreements.  The
agreements cover periods ranging from 3 months to 16.5 months and the related
fair value of the shares and options are being amortized over the life of the
agreements.  In addition, in 2009, non-cash compensation also includes
$186,000 in officer compensation which is the difference between the stock sales
price for stock subscriptions and the stock trading price on the date of the
sale.  There was no difference for the stock subscription sales in
2010.





Other
selling, general and administrative expense decreased from $200,395 in 2009 to
$109,804 in 2010.  The majority of the decrease is due to a decrease
of $72,249 in cash consulting fees.


16


Other expense
(income):


Other
expense (income) consists of the following for the years ended August 31, 2010
and 2009.





2009
                    
                    
                    2009Commodities
      trading losses
                    
                    $
                    719
                    
                    
                    $
                    35,838Interest
      expense
                    
                    
                    30,968
                    
                    
                    
                    15,400Interest
      income from related parties
                    
                    
                    (6,610
                    )
                    
                    
                    (3,545
                    )Interest
      income
                    
                    
                    -
                    
                    
                    
                    (2,931
                    )$
                    25,077
                    
                    
                    $
                    44,762





In 2009,
the Company realized a loss of $35,838 from commodities trading
activities.  2009 was the initial year in which the Company
participated in commodities trading.  An additional loss of $719 was
realized in 2010 when the account was closed.





Interest
expense increased in 2010 from 2009, 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
2010 and 2009.  Other interest income received increased primarily
from having higher cash balances during a portion of 2009.





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, 2010. The Company, has accumulated a net loss of $2,905,850
through August 31, 2010, ($28,995 in an earlier development stage business and
$2,876,855 in the current development stage) and incurred losses of $501,055 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.


17


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.


18





Our
proved reserve information for 2009, included in this Annual Report, is based on
estimates prepared by the operator of the properties and has not been prepared
by an independent petroleum engineer.  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.




19




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, 2010 and 2009 and the period from inception (July 22,
2005) through August 31, 2010, is set forth as follows:





INDEX
TO FINANCIAL STATEMENTS





PageReport
      of Independent Registered Public Accounting Firm:Paritz
      & Company, P.A.
                  21Balance
      Sheet
                  22Statements
      of Operations
                  23Statements
      of Stockholders’ Deficit
                  24Statements
      of Cash Flows
                  28Notes
      to Financial Statements
                  30


20











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, 2010 and
2009 and the related statements of operations and cash flows for the years ended
August 31, 2010 and 2009 and the period from inception (July 22, 2005) through
August 31, 2010 and the statement of stockholders’ equity for the period from
inception (July 22, 2005) through August 31, 2010.  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,
2010 and 2009, and the results of its operations and its cash flows for the
years ended August 31, 2010 and 2009 and the period from inception (July 22,
2005) through August 31, 2010 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


December
7, 2010


21


ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Balance
Sheets
 August
31, 2010 and 2009
 
 2010
                        
                        
                        2009AssetsCurrent
      assetsCash
      and cash equivalents
                        
                        $
                        311
                        
                        
                        $
                        18,680Accounts
      receivable
                        
                        
                        10,617
                        
                        
                        
                        908Prepaid
      expenses
                        
                        
                        20,571
                        
                        
                        
                        30,000Total
      current assets
                        
                        
                        31,499
                        
                        
                        
                        49,588Oil
      and gas properties, on the full cost method:Proved
      properties
                        
                        
                        -
                        
                        
                        
                        50,335Unproved
      properties not being amortized
                        
                        
                        6,350
                        
                        
                        
                        15,1526,350
                        
                        
                        
                        65,487Accumulated
      depreciation, depletion and amortization
                        
                        
                        -
                        
                        
                        
                        (11,469
                        )6,350
                        
                        
                        
                        54,018Other
      assets and investmentsPrepaid
      drilling costs
                        
                        
                        28,583
                        
                        
                        
                        50,343Investment
      in uranium properties
                        
                        
                        4,329
                        
                        
                        
                        4,329Deposits
                        
                        
                        -
                        
                        
                        
                        1,040Total
      other assets
                        
                        
                        32,912
                        
                        
                        
                        55,712Total
      assets
                        
                        $
                        70,761
                        
                        
                        $
                        159,318Liabilities
      and Stockholders' EquityCurrent
      liabilitiesAccounts
      payable
                        
                        $
                        73,226
                        
                        
                        $
                        30,198Accrued
      expenses
                        
                        
                        243
                        
                        
                        
                        -Convertible
      note and debenture payable
                        
                        
                        86,000
                        
                        
                        
                        80,000Total
      current liabilities
                        
                        
                        159,469
                        
                        
                        
                        110,198Commitments
      and contingenciesStockholders'
      equityPreferred
      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
                        
                        
                        
                        1Common
      stock: $0.00001 par value; authorized 100,000,000 shares; 39,713,731 and
      22,388,731 shares issued and outstanding at August 31, 2010 and 2009,
      respectively
                        
                        
                        397
                        
                        
                        
                        224Additional
      paid-in capital
                        
                        
                        3,267,893
                        
                        
                        
                        2,879,466Deferred
      option and stock compensation
                        
                        
                        (28,809
                        )
                        
                        
                        (273,807
                        )Common
      stock subscription receivable
                        
                        
                        (422,340
                        )
                        
                        
                        (151,969
                        )Deficit
      accumulated during the development stage
                        
                        
                        (2,905,850
                        )
                        
                        
                        (2,404,795
                        )Total
      stockholders' equity
                        
                        
                        (88,708
                        )
                        
                        
                        49,120Total
      liabilities and stockholders' equity
                        
                        $
                        70,761
                        
                        
                        $
                        159,318
 
 See
accompanying notes to financial statements.
  22
 
 ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Statements
of Operations
 Years
Ended August 31, 2010 and 2009 and
 from
inception (July 22, 2005) through August 31, 2010
 
 Inception(July
      22, 2005)ThroughYears
      Ended August 31,
                      
                      
                      August
      31,2010
                      
                      
                      2009
                      
                      
                      2010Oil
      and gas sales
                      
                      $
                      8,394
                      
                      
                      $
                      4,310
                      
                      
                      $
                      12,704Costs
      and expenses:Lease
      operating expense
                      
                      
                      8,279
                      
                      
                      
                      5,569
                      
                      
                      
                      13,990Production
      taxes
                      
                      
                      603
                      
                      
                      
                      310
                      
                      
                      
                      913Depreciation,
      depletion and amortization
                      
                      
                      954
                      
                      
                      
                      1,194
                      
                      
                      
                      2,148Asset
      impairment
                      
                      
                      38,234
                      
                      
                      
                      36,930
                      
                      
                      
                      75,164Non-cash
      compensation
                      
                      
                      326,498
                      
                      
                      
                      1,438,861
                      
                      
                      
                      2,103,906Other
      selling, general and administrative expense
                      
                      
                      109,804
                      
                      
                      
                      200,395
                      
                      
                      
                      605,234Total
      costs and expenses
                      
                      
                      484,372
                      
                      
                      
                      1,683,259
                      
                      
                      
                      2,801,355Loss
      from operations
                      
                      
                      (475,978
                      )
                      
                      
                      (1,678,949
                      )
                      
                      
                      (2,788,651
                      )Other
      expenses (income):Loss
      on disposition by rescission agreement on condominium
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      15,000Commodities
      trading losses
                      
                      
                      719
                      
                      
                      
                      35,838
                      
                      
                      
                      36,557Interest
      expense
                      
                      
                      30,968
                      
                      
                      
                      15,400
                      
                      
                      
                      55,118Interest
      income from related party
                      
                      
                      (6,610
                      )
                      
                      
                      (3,545
                      )
                      
                      
                      (14,057
                      )Interest
      income
                      
                      
                      -
                      
                      
                      
                      (2,931
                      )
                      
                      
                      (4,414
                      )25,077
                      
                      
                      
                      44,762
                      
                      
                      
                      88,204Loss
      before income taxes
                      
                      
                      (501,055
                      )
                      
                      
                      (1,723,711
                      )
                      
                      
                      (2,876,855
                      )Provision
      for income taxes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Net
      loss
                      
                      $
                      (501,055
                      )
                      
                      $
                      (1,723,711
                      )
                      
                      $
                      (2,876,855
                      )Net
      loss per share, basic and diluted
                      
                      $
                      (0.02
                      )
                      
                      $
                      (0.09
                      )Weighted
      average shares outstanding, basic and diluted
                      
                      
                      27,065,306
                      
                      
                      
                      19,164,805
 
 See
accompanying notes to financial statements.
  23
 
 ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Statements
of Stockholders' Equity
 Inception
of Development Stage, July 22, 2005, through August 31, 2010
 
 AdditionalPreferred
      stock
                          
                          
                          Common
      stock
                          
                          
                          Paid-inShares
                          
                          
                          Amount
                          
                          
                          Shares
                          
                          
                          Amount
                          
                          
                          CapitalInception,
      July 22, 2005
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          5,930,300
                          
                          
                          
                          59
                          
                          
                          
                          22,426Sale
      of common stock for cash
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          320,000
                          
                          
                          
                          3
                          
                          
                          
                          31,997Common
      stock issued for real estate investment
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,900,000
                          
                          
                          
                          19
                          
                          
                          
                          189,981Contribution
      to capital
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          6,560Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Balance
      August 31, 2005
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          8,150,300
                          
                          
                          
                          81
                          
                          
                          
                          250,964Sale
      of common stock for cash
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,086,667
                          
                          
                          
                          12
                          
                          
                          
                          120,488Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Balance,
      August 31, 2006
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          9,236,967
                          
                          
                          
                          93
                          
                          
                          
                          371,452Sale
      of common stock
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          4,670,060
                          
                          
                          
                          46
                          
                          
                          
                          161,614Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Balance,
      August 31, 2007
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          13,907,027
                          
                          
                          
                          139
                          
                          
                          
                          533,066Sale
      of preferred stock
                          
                          
                          100,000
                          
                          
                          
                          1
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          999Sale
      of common stock
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,295,704
                          
                          
                          
                          23
                          
                          
                          
                          413,149Common
      stock issued forconsulting contracts
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,965,000
                          
                          
                          
                          30
                          
                          
                          
                          977,745Cash
      portion of consulting contracts
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Rescission
      of real estatePurchase
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (1,900,000
                          )
                          
                          
                          (19
                          )
                          
                          
                          (199,981
                          )Amortization
      of prepaid consulting contracts:Non-cash
      portion
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Cash
      portion
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Stock
      subscription receivable:Payments
      received
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Interest
      accrued
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Balance,
      August 31, 2008
                          
                          
                          100,000
                          
                          
                          
                          1
                          
                          
                          
                          17,267,731
                          
                          
                          
                          173
                          
                          
                          
                          1,724,978Sale
      of common stock for cash
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          20,000
                          
                          
                          
                          -
                          
                          
                          
                          3,600Common
      stock issued for consulting contracts
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          3,551,000
                          
                          
                          
                          36
                          
                          
                          
                          887,403Cash
      portion of consulting contracts
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Amortization
      of prepaid consulting contracts:Non-cash
      portion
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Cash
      portion
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Stock
      subscription receivable:Sold
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,550,000
                          
                          
                          
                          15
                          
                          
                          
                          263,485Payments
      received
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Interest
      accrued
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Balance,
      August 31, 2009
                          
                          
                          100,000
                          
                          
                          $
                          1
                          
                          
                          
                          22,388,731
                          
                          
                          $
                          224
                          
                          
                          $
                          2,879,466
 (Continued)
 See
accompanying notes to financial statements.
  24
 
 ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Statements
of Stockholders' Equity, continued
 Inception
of Development Stage, July 22, 2005, through August 31, 2010
 
 DeficitAccumulatedDuringSubscription
                  
                  
                  Deferred
                  
                  
                  Accumulated
                  
                  
                  DevelopmentReceivable
                  
                  
                  Expenses
                  
                  
                  Deficit
                  
                  
                  Stage
                  
                  
                  Total(RestatedNote
      11)Inception,
      July 22, 2005
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (28,995
                  )
                  
                  
                  -
                  
                  
                  
                  (6,510
                  )Sale
      of common stock for cash
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  32,000Common
      stock issued for real estate investment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  190,000Contribution
      to capital
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,560Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (7,739
                  )
                  
                  
                  (7,739
                  )Balance
      August 31, 2005
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (28,995
                  )
                  
                  
                  (7,739
                  )
                  
                  
                  214,311Sale
      of common stock for cash
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  120,500Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (80,825
                  )
                  
                  
                  (80,825
                  )Balance,
      August 31, 2006
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (28,995
                  )
                  
                  
                  (88,564
                  )
                  
                  
                  253,986Sale
      of common stock
                  
                  
                  (81,590
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  80,070Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (95,813
                  )
                  
                  
                  (95,813
                  )Balance,
      August 31, 2007
                  
                  
                  (81,590
                  )
                  
                  
                  -
                  
                  
                  
                  (28,995
                  )
                  
                  
                  (184,377
                  )
                  
                  
                  238,243Sale
      of preferred stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,000Sale
      of common stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  413,172Common
      stock issued for consulting contracts
                  
                  
                  -
                  
                  
                  
                  (977,775
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Cash
      portion of consulting contracts
                  
                  
                  -
                  
                  
                  
                  (85,000
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (85,000
                  )Rescission
      of real estate purchase
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (200,000
                  )Amortization
      of prepaid consulting contracts:Non-cash
      portion
                  
                  
                  -
                  
                  
                  
                  338,547
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  338,547Cash
      portion
                  
                  
                  -
                  
                  
                  
                  43,529
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  43,529Stock
      subscription receivable:Payments
      received
                  
                  
                  13,400
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  13,400Interest
      accrued
                  
                  
                  (3,902
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (3,902
                  )Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (467,712
                  )
                  
                  
                  (467,712
                  )Balance,
      August 31, 2008
                  
                  
                  (72,092
                  )
                  
                  
                  (680,699
                  )
                  
                  
                  (28,995
                  )
                  
                  
                  (652,089
                  )
                  
                  
                  291,277Sale
      of common stock for cash
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,600Common
      stock issued 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
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,252,861Cash
      portion
                  
                  
                  -
                  
                  
                  
                  82,371
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  82,371Stock
      subscription receivable:Sold
                  
                  
                  (77,500
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  186,000Payments
      received
                  
                  
                  1,168
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,168Interest
      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.
  25
 
 ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Statements
of Stockholders' Equity
 Inception
of Development Stage, July 22, 2005, through August 31, 2010
 
 AdditionalPreferred
      stock
                  
                  
                  Common
      stock
                  
                  
                  Paid-inShares
                  
                  
                  Amount
                  
                  
                  Shares
                  
                  
                  Amount
                  
                  
                  CapitalBalance
      August 31, 2009
                  
                  
                  100,000
                  
                  
                  $
                  1
                  
                  
                  
                  22,388,731
                  
                  
                  $
                  224
                  
                  
                  $
                  2,879,466Common
      stock issued for:Consulting
      contracts
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,525,000
                  
                  
                  
                  25
                  
                  
                  
                  81,475Drilling
      program participation
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  100,000
                  
                  
                  
                  1
                  
                  
                  
                  5,999Loan
      extension
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  700,000
                  
                  
                  
                  7
                  
                  
                  
                  13,993Amortization
      of prepaidConsulting
      contracts
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Beneficial
      conversion feature of convertible debt
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,100Stock
      subscription receivable:Sold
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  14,000,000
                  
                  
                  
                  140
                  
                  
                  
                  284,860Payments
      received
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Interest
      accrued
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Balance
      August 31, 2010
                  
                  
                  100,000
                  
                  
                  $
                  1
                  
                  
                  
                  39,713,731
                  
                  
                  $
                  397
                  
                  
                  $
                  3,267,893
 
 (Continued)
 See
accompanying notes to financial statements.
  26
 
 ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Statements
of Stockholders' Equity, continued
 Inception
of Development Stage, July 22, 2005, through August 31, 2010
 
 DeficitAccumulatedDuringSubscription
                      
                      
                      Deferred
                      
                      
                      Accumulated
                      
                      
                      DevelopmentReceivable
                      
                      
                      Expenses
                      
                      
                      Deficit
                      
                      
                      Stage
                      
                      
                      TotalBalance,
      August 31, 2009
                      
                      $
                      (151,969
                      )
                      
                      $
                      (273,807
                      )
                      
                      $
                      (28,995
                      )
                      
                      $
                      (2,375,800
                      )
                      
                      $
                      49,120Common
      stock issued for:Consulting
      contracts
                      
                      
                      -
                      
                      
                      
                      (81,500
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Drilling
      program participation
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      6,000Loan
      extension
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      14,000Amortization
      of prepaid consulting contracts:
                      
                      
                      -
                      
                      
                      
                      326,498
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      326,498Beneficial
      conversion feature of convertible debt
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,100Stock
      subscription receivable:Sold
                      
                      
                      (285,000
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Payments
      received
                      
                      
                      21,239
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      21,239Interest
      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
                      )
 
 See
accompanying notes to financial statements.
  27
 
 ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Statements
of Cash Flows
 Years
Ended August 31, 2010 and 2009, and
 the
period from inception (July 22, 2005) through August 31, 2010
 
 From
      inceptionJuly
      22, 2005throughYears
      Ended August 31,
                  
                  
                  August
      31,2010
                  
                  
                  2009
                  
                  
                  2010Cash
      flows from operating activitiesNet
      loss
                  
                  $
                  (501,055
                  )
                  
                  $
                  (1,723,711
                  )
                  
                  $
                  (2,876,855
                  )Adjustment
      to reconcile net loss to net cash used in operating
      activities:Depreciation,
      depletion and amortization
                  
                  
                  954
                  
                  
                  
                  1,194
                  
                  
                  
                  2,148Value
      of common shares issued for services
                  
                  
                  326,498
                  
                  
                  
                  1,438,861
                  
                  
                  
                  2,103,906Loss
      on rescission of condominium purchase
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  15,000Interest
      accrued on stock subscription
                  
                  
                  (6,610
                  )
                  
                  
                  (3,545
                  )
                  
                  
                  (14,057
                  )Asset
      impairment
                  
                  
                  38,234
                  
                  
                  
                  36,930
                  
                  
                  
                  75,164Loan
      extension paid with common stock
                  
                  
                  14,000
                  
                  
                  
                  -
                  
                  
                  
                  14,000Beneficial
      conversion feature of convertible note payable
                  
                  
                  2,100
                  
                  
                  
                  -
                  
                  
                  
                  2,100Change
      in other assets and liablities:Accounts
      receivable
                  
                  
                  (5,959
                  )
                  
                  
                  (908
                  )
                  
                  
                  (6,867
                  )Prepaid
      expenses and other assets
                  
                  
                  68,229
                  
                  
                  
                  16,442
                  
                  
                  
                  28,317Accounts
      payable
                  
                  
                  7,028
                  
                  
                  
                  (23,147
                  )
                  
                  
                  (18,247
                  )Accrued
      expenses
                  
                  
                  243
                  
                  
                  
                  -
                  
                  
                  
                  243Net
      cash used in operations
                  
                  
                  (56,338
                  )
                  
                  
                  (257,884
                  )
                  
                  
                  (675,148
                  )Cash
      flows from investing activitiesInvestment
      in real estate
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (11,000
                  )Oil
      and gas property expenditures
                  
                  
                  (11,570
                  )
                  
                  
                  (41,260
                  )
                  
                  
                  (150,342
                  )Proceeds
      from sales of undeveloped leasehold
                  
                  
                  22,300
                  
                  
                  
                  30,267
                  
                  
                  
                  70,275Investment
      in uranium properties
                  
                  
                  -
                  
                  
                  
                  (950
                  )
                  
                  
                  (5,673
                  )Net
      cash provided (used) in investing activities
                  
                  
                  10,730
                  
                  
                  
                  (11,943
                  )
                  
                  
                  (96,740
                  )Cash
      flows from financing activitiesProceeds
      of stockholder loans
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  50Proceeds
      from subscription receivable
                  
                  
                  21,239
                  
                  
                  
                  1,168
                  
                  
                  
                  35,807Loan
      proceeds
                  
                  
                  6,000
                  
                  
                  
                  -
                  
                  
                  
                  146,000Loan
      repayment
                  
                  
                  -
                  
                  
                  
                  (60,000
                  )
                  
                  
                  (60,000
                  )Proceeds
      from sale of common stock
                  
                  
                  -
                  
                  
                  
                  3,600
                  
                  
                  
                  649,342Proceeds
      from sale of preferred stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,000Net
      cash provided by (used in) financing activities
                  
                  
                  27,239
                  
                  
                  
                  (55,232
                  )
                  
                  
                  772,199Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  (18,369
                  )
                  
                  
                  (325,059
                  )
                  
                  
                  311Cash and cash
      equivalents, beginning of period
                  
                  
                  18,680
                  
                  
                  
                  343,739
                  
                  
                  
                  -Cash and cash
      equivalents, end of period
                  
                  $
                  311
                  
                  
                  $
                  18,680
                  
                  
                  $
                  311
 (Continued)
 
 See
accompanying notes to financial statements.
  28
 
 ROYAL
ENERGY RESOURCES, INC.
 (A
Development Stage Company)
 Statements
of Cash Flows, Continued
 Years
Ended August 31, 2010 and 2009, and
 the
period from inception (July 22, 2005) through August 31, 2010
 
 From
      inceptionJuly
      22, 2005throughYears
      Ended August 31,
                  
                  
                  August
      31,2010
                  
                  
                  2009
                  
                  
                  2010Supplemental
      cash flow informationCash
      paid for interest
                  
                  $
                  14,625
                  
                  
                  $
                  15,400
                  
                  
                  $
                  23,375Cash
      paid for income taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Non-cash
      investing and financing activities:Issuance
      of common stock for real estate
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  190,000Contribution
      of stockholder loan to capital
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,560Disposition
      of real estate per stock rescission agreement
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  200,000Common
      stock issued for participation in drilling program
                  
                  
                  6,000
                  
                  
                  
                  -
                  
                  
                  
                  6,000Common
      stock issued for stock subscription receivables
                  
                  
                  285,000
                  
                  
                  
                  77,332
                  
                  
                  
                  443,922
 
 See
accompanying notes to financial statements.
  29





ROYAL
ENERGY RESOURCES, INC.


(A
Development Stage Company)





NOTES TO
FINANCIAL STATEMENTS





AUGUST
      31, 2010





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, 2009, up until the issuance of the financial statements, which
occurred on November 27, 2009.





Organization
and nature of business





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





Commencing
at the end of August 2006, the Company began acquiring oil and gas and uranium
leases and has since resold some of its leases and retained an overriding
royalty interest.  During 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.


30


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 2011. The Company, has accumulated a net loss of $2,905,850 through August
31, 2010, ($28,995 in an earlier development stage business and $2,876,855 in
the current development stage) and incurred losses of $501,055 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.


31





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.





During
fiscal 2008, the Company granted options to acquire 1,000,000 shares of its
common stock that were fair valued under the Black Scholes model in the amount
of $328,975.  This amount was amortized over the twelve month option
period.





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 $6,350 and $15,152 in capitalized costs
relating to unevaluated properties and leases at August 31, 2010 and 2009,
respectively.  As properties are evaluated, the related costs would be
transferred to proven oil and natural gas properties using full cost
accounting.  All capitalized costs for proved properties were included
in the amortization base as of August 31, 2010 and 2009.  However,
since production had not commenced until after August 31, 2008, no amortization
was recorded in 2008.


32





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 and 2009, the Company recognized an impairment
due to the ceiling test limitations of $38,224 and $36,930,
respectively.





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
2010 or 2009.





Depreciation
and amortization





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





Natural
gas sales and gas imbalances





The
Company follows the entitlement method of accounting for natural gas sales,
recognizing as revenues only its net interest share of all production
sold.  Any amount attributable to the sale of production in excess of
or less than the Company’s net interest is recorded as a gas balancing asset or
liability.  At August 31, 2010 and 2009, there were no natural gas
imbalances.





Investments
in real estate





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


33





Oil
and natural gas reserve estimates





In 2009,
the Company prepared its oil and natural gas reserves with the assistance of the
operator of the properties.  Proved reserves, estimated future net
revenues and the present value of our reserves are estimated based upon a
combination of historical data and estimates of future
activity.  Consistent with SEC requirements, we have based our present
value of proved reserves on spot prices on the date of the
estimate.  The reserve estimates are used in calculating depletion,
depreciation and amortization and in the assessment of the Company’s Ceiling
Limitation.  Significant assumptions are required in the valuation of
proved oil and natural gas reserves which, as described herein, may affect the
amount at which oil and natural gas properties are recorded.  Actual
results could differ materially from these estimates.  The Company had
no proved reserves at August 31, 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, 2010 and 2009, 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.




34


Credit
risk





In 2010
and 2009, 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, 2010 and 2009, the Company has estimated
that its share of the salvage value of lease equipment would exceed its share of
the cost of plugging and abandoning its producing properties.





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





Below is
a listing of the most recent accounting standards and their effect on the
Company.


35




In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting
Standards Update 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures
(Topic 820): Improving Disclosures about Fair Value
Measurements.  This amendment to Topic 820 has improved disclosures
about fair value measurements on the basis of input received from the users of
financial statements.  This is effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures
about purchases, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measurements.  Those disclosures are
effective for fiscal years beginning after December 15, 2010, and for interim
periods within those fiscal years.  Early adoption is
permitted.  The Company adopted the provisions of ASU 2010-06 on
February 28, 2010,and it did not have a material effect on the financial
position, results of operations or cash flows of the Company.





In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting
Standards Update 2010-03 (ASU 2010-03), Extractive Activities—Oil and Gas (Topic
932): Oil and Gas Reserve Estimation and Disclosures.  This amendment
to Topic 932 has improved the reserve estimation and disclosure requirements by
(1) updating the reserve estimation requirements for changes in practice and
technology that have occurred over the last several decades and (2) expanding
the disclosure requirements for equity method investments.  This is
effective for annual reporting periods ending on or after December 31,
2009.  However, an entity that becomes subject to the disclosures
because of the change to the definition oil- and gas- producing activities may
elect to provide those disclosures in annual periods beginning after December
31, 2009.  Early adoption is not permitted.  The Company
adopted the provisions of ASU 2010-03 on August 31, 2010 which did not have a
material effect on the financial position, results of operations or cash flows
of the Company.





Fiscal
years





The year
ended August 31, 2010 is referred to herein as 2010, the year ended August 31,
2009 is referred to herein as 2009 and the year ended August 31, 2008 is
referred to herein as 2008.




2
            INVESTMENTS
      IN REAL ESTATE





On August
25, 2005, the Company acquired its first real estate property, a condominium, in
exchange for $25,000 in cash and 1,900,000 shares of its common stock which was
valued at $190,000.





The real
estate was appraised at $240,000 shortly after the purchase.





In March
2008, the Company entered into a rescission agreement to return the real estate
that it previously held to the individual who originally contributed 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.


36





3
            INVESTMENT
      IN ENERGY PROPERTIES





UNDEVELOPED
LEASEHOLD NOT BEING AMORTIZED





The
Company has been the successful bidder in United States Government auctions to
purchase certain oil and gas lease rights.  The oil and gas leases
currently comprise approximately 3,400 and 6,000 acres in Weston, Goshen,
Niobrara, Converse, Campbell, Freemont, Laramie, Sublette and Platt Counties,
Wyoming as of August 31, 2010 and 2009, respectively.  In addition,
the Company holds the lease for uranium rights on approximately 1,000 and 3,500
acres in Wyoming as of August 31, 2010 and 2009, respectively.





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





Oil and
gas property costs are as follows at August 31, 2010 and 2009:





2010
                    
                    
                    2009Proved
      properties
                    
                    $
                    -
                    
                    
                    $
                    50,335Unproved
      properties not being amortized
                    
                    
                    6,350
                    
                    
                    
                    15,152Total
                    
                    
                    6,350
                    
                    
                    
                    65,487Accumulated
      depreciation, depletion and amortization
                    
                    
                    -
                    
                    
                    
                    (11,469
                    )$
                    6,350
                    
                    
                    $
                    54,018





The oil
and gas wells were not completed until the beginning of 2009.  Prepaid
drilling costs includes $28,583 and $50,343 in prepaid costs at August 31, 2010
and 2009, respectively.


37


4
            CONVERTIBLE
      NOTES PAYABLE





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.  The loan is currently past due
and has a balance of $80,000 at August 31, 2010.  The loan was paid in
full in September 2010 with 21,000,000 shares of the Company's common
stock.





On April
13, 2010, the Company issued a convertible debenture in the amount of
$6,000.  The debenture bears interest at the rate of $10% per annum,
is due on September 13, 2010, is 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 is 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.





Face
      amount of the debenture
                          
                          $
                          6,000Unamortized
      balance of the intrinsic value ofthe
      conversion feature
                          
                          
                          -Carrying
      value of the debenture
                          
                          $
                          6,000





The
debenture was repaid in September 2010.





5
            INCOME
      TAXES





RER has
not recorded a deferred tax benefit or expense for all prior periods through
August 31, 2010, 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, 2010 and 2009 as follows:





2010
                    
                    
                    2009"Normally
      expected" income tax benefit
                    
                    $
                    170,400
                    
                    
                    $
                    586,100State
      income taxes less federal tax benefit
                    
                    
                    20,000
                    
                    
                    
                    68,900Valuation
      allowance
                    
                    
                    (190,400
                    )
                    
                    
                    (655,000
                    )Actual
      income tax expense
                    
                    $
                    -
                    
                    
                    $
                    -





RER has
available unused net operating loss carryforwards of approximately $2,907,000
which will expire in various periods from 2019 to 2029, some of which may be
limited as to the amount available on an annual basis.


38





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:





2010
                  
                  
                  2009Net
      operating loss carryforward
                  
                  $
                  1,104,200
                  
                  
                  $
                  917,200Depreciable/depletable
      property, plant and equipment
                  
                  
                  -
                  
                  
                  
                  (3,400
                  )Valuation
      allowance
                  
                  
                  (1,104,200
                  )
                  
                  
                  (913,800
                  )Total
                  
                  $
                  -
                  
                  
                  $
                  -





6
            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, 2010 and 2009, 39,713,731 and
22,388,731 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, 2010.


39


Consulting and financial services
agreements




During
2010 and 2009, the Company entered into various consulting and financial
services agreements as well as a new loan agreement.  The following table
summarizes the agreements.





2010
                        
                        
                        2009Cash
      to be paid
                        
                        $
                        36,000
                        
                        
                        $
                        40,900Cash
      paid
                        
                        $
                        14,600
                        
                        
                        $
                        89,900Shares
      issued
                        
                        
                        3,225,000
                        
                        
                        
                        3,551,000Options
      expired
                        
                        
                        -
                        
                        
                        
                        1,000,000Value
      of common stock and options
                        
                        $
                        81,500
                        
                        
                        $
                        887,440Unamortized
      balance, end of year
                        
                        $
                        28,235
                        
                        
                        $
                        273,807Terms
      of agreements
                        
                        3-12
                        
                        
                        1-13months
                        
                        
                        months




7
            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
                      
                      
                      BalanceName
                      
                      Shares
                      
                      Date
                      
                      Balance
                      
                      
                      Rate
                      
                      
                      8/31/2010
                      
                      
                      8/31/2009Jacob
      Roth
                      
                      
                      4,100,000
                      
                      8/16/2007
                      
                      $
                      81,590
                      
                      
                      
                      5
                      %
                      
                      $
                      59,587
                      
                      
                      $
                      67,190Jacob
      Roth
                      
                      
                      950,000
                      
                      7/14/2009
                      
                      
                      47,395
                      
                      
                      
                      2
                      %
                      
                      
                      47,395
                      
                      
                      
                      47,395Jacob
      Roth
                      
                      
                      1,000,000
                      
                      11/24/2009
                      
                      
                      60,000
                      
                      
                      
                      2
                      %
                      
                      
                      59,897Jacob
      Roth
                      
                      
                      7,000,000
                      
                      6/1/2010
                      
                      
                      105,000
                      
                      
                      
                      2
                      %
                      
                      
                      104,930Jacob
      Roth
                      
                      
                      6,000,000
                      
                      6/24/2010
                      
                      
                      120,000
                      
                      
                      
                      2
                      %
                      
                      
                      119,940Frimet
      Taub
                      
                      
                      600,000
                      
                      7/28/2009
                      
                      
                      29,937
                      
                      
                      
                      2
                      %
                      
                      
                      29,937
                      
                      
                      
                      29,937421,686
                      
                      
                      
                      144,522Accrued
      interest
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      654
                      
                      
                      
                      7,447$
                      422,340
                      
                      
                      $
                      151,969




8
            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.


40





The
President and Chief Executive Officer of the Company was paid approximately
$20,000 and $31,000 for office and travel expense reimbursements during the
years ended August 31, 2010 and 2009, respectively.





See Note
7 above regarding stock subscription receivables.





9           SUBSEQUENT
EVENTS





During
September 2010, the Company repaid its convertible note payable in the amount of
$6,000 plus accrued interest.





During
September 2010, the Company issued 21,000,000 shares of its common stock in
complete satisfaction of its convertible note payable in the amount of
$80,000.





Effective
October 1, 2010, the Company sold its proven oil reserves after determining the
operating costs were too high to generate any positive cash flow.





On
November 30, 2010, the President and Chief Executive Officer of the Company
acquired 12,000,000 shares of the Company's common stock in exchange for $120 in
cash and a note for $59,880 with interest at 2%.  The note is due
November 29, 2015.





10
            SUPPLEMENTARY
      OIL AND GAS RESERVE INFORMATION
(UNAUDITED)





The
Company has interest in proved oil and natural gas properties that are all
located in Washington County, Oklahoma at August 31, 2010 and
2009.  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.





The
Company prepared its own year-end estimates of future net recoverable oil and
natural gas reserves as of August 31, 2009.  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, 2010 and 2009 are
included in Note 3.


41




Costs
incurred in oil and natural gas producing activities for the year ended August
31, 2010 and 2009, are summarized as follows:




2010
                  
                  
                  2009Acquisition
      of proved properties
                  
                  $
                  -
                  
                  
                  $
                  -Acquisition
      of undeveloped leasehold
                  
                  
                  -
                  
                  
                  
                  4,902Development
      costs
                  
                  
                  11,570
                  
                  
                  
                  36,358$
                  11,570
                  
                  
                  $
                  41,260Amortization
      rate per BOE
                  
                  
                  N/A
                  
                  
                  $
                  7.57





Net
quantities of proved and proved developed reserves of oil and natural gas are
summarized as follows (as a result of low gas prices, no value was assigned to
gas reserves):





Oil
                          
                          
                          Natural
      GasBalance,
      August 31, 2008
                          
                          
                          3,833
                          
                          
                          
                          12,773Extensions
      and discoveries
                          
                          
                          -
                          
                          
                          
                          -Revisions
      of estimates
                          
                          
                          1,399
                          
                          
                          
                          (12,773
                          )Production
                          
                          
                          (95
                          )
                          
                          
                          -Balance,
      August 31, 2009
                          
                          
                          5,137
                          
                          
                          
                          -Revisions
      of estimates
                          
                          
                          (4,516
                          )
                          
                          
                          -Production
                          
                          
                          (126
                          )
                          
                          
                          -Sale
      of proved properties
                          
                          
                          (495
                          )
                          
                          
                          --
                          
                          
                          
                          -





The
following is a summary of a standardized measure of discounted net cash flows
related to the Company’s proved oil and natural gas reserves.  For
these calculations, estimated future cash flows from estimated future production
of proved reserves were computed using oil and natural gas spot prices as of the
end of the period presented.  Future development and production costs
attributable to the proved reserves were estimated assuming that existing
conditions would continue over the economic lives of the individual leases and
costs were not escalated for the future.  Estimated future income tax
expenses were calculated by applying future statutory tax rates (based on the
current tax law adjusted for permanent differences and tax credits) to the
estimated future pretax net cash flows related to proved oil and natural gas
reserves, less the tax basis of the properties involved.





The
Company cautions against using this data to determine the fair value of its oil
and natural gas properties.  To obtain the best estimate of the fair
value of the oil and natural gas properties, forecasts of future economic
conditions, varying discount rates, and consideration of other than proved
reserves would have to be incorporated into the calculation.  In
addition, there are significant uncertainties inherent in estimating quantities
of proved reserves and in projection rates of production that impair the
usefulness of the data.


42





The
standardized measure of discounted future net cash flows relating to proved oil
and natural gas reserves at August 31, 2010 and 2009 is summarized as follows
(none at August 31, 2010).





2010
                    
                    
                    2009Future
      cash inflows
                    
                    $
                    -
                    
                    
                    $
                    300,772Future
      production costs
                    
                    
                    -
                    
                    
                    
                    (201,656
                    )Future
      development costs
                    
                    
                    -
                    
                    
                    
                    -Future
      income tax expenses
                    
                    
                    -
                    
                    
                    
                    -Future
      net cash flows
                    
                    
                    -
                    
                    
                    
                    99,11610%
      annual discount for estimated timing of cash flows
                    
                    
                    -
                    
                    
                    
                    (60,251
                    )Standardized
      measure of discounted future net cash flows
                    
                    $
                    -
                    
                    
                    $
                    38,865




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 and 2009.





2010
                    
                    
                    2009Standardized
      measure of discounted future net cash flows at beginning of
      period
                    
                    $
                    38,865
                    
                    
                    $
                    180,180Changes
      during the period:Sales
      of natural gas produced, net of production costs
                    
                    
                    488
                    
                    
                    
                    1,569Net
      changes in prices and production costs
                    
                    
                    -
                    
                    
                    
                    (82,729
                    )Sales
      of reserves in place
                    
                    
                    (3,750
                    )
                    
                    
                    -Revision
      of previous quantity estimates
                    
                    
                    (35,603
                    )
                    
                    
                    (60,155
                    )Net
      change
                    
                    
                    (38,865
                    )
                    
                    
                    (141,315
                    )Standardized
      measure of discounted future net cash flows at end of
    period
                    
                    $
                    -
                    
                    
                    $
                    38,865





Prices
used in computing these calculations of future production of proved reserves
were $58.55 per barrel (BBL) of oil and $1.98 per thousand cubic feet (MCF) of
natural gas at August 31, 2009.


43


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




Not
applicable.





ITEM
9AT:    CONTROLS AND PROCEDURES





(a)
Evaluation of Disclosure Controls and Procedures





Disclosure
controls and procedures are designed to ensure that information required to be
disclosed in the reports that are filed or submitted under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission’s rules and
forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in the reports that are filed under the Exchange Act is
accumulated and communicated to management, including the principal executive
officer, as appropriate to allow timely decisions regarding required
disclosure.  Under the supervision of and with the participation of
management, including the principal executive officer and principal financial
officer, the Company has evaluated the effectiveness of the design and operation
of its disclosure controls and procedures as of August 31, 2010, and, based on
its evaluation, our principal executive officer and our principal financial
officer have concluded that these controls and procedures are not effective due
primarily to a lack of segregation of duties.





(b)  Changes
in Internal Controls





There
were no changes in our internal control over financial reporting during the
quarter ended August 31, 2010 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





The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting.  As
defined by the SEC, internal control over financial reporting is defined in Rule
13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed
by, or under the supervision of, the Company’s principal executive and principal
financial officers and effected by the Company’s board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles.  The Company’s internal control over financial reporting
is supported by written policies and procedures that:  (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the Company’s assets; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the Company are
being made only in accordance with authorizations of the Company’s management
and directors; and (3) 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.


44





The
Company’s internal control system was designed to provide reasonable assurance
to the Company’s management and board of directors regarding the preparation and
fair presentation of published financial statements.  All internal
control systems, no matter how well designed, have inherent limitations which
may not prevent or detect misstatements.  Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and
presentation.  Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.





Management
conducted an evaluation of the effectiveness of the Company’s internal control
over financial reporting as of August 31, 2010.  In making this
assessment, management used the framework set forth in the report entitled
“Internal Control-Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission, or COSO.  The COSO framework
summarizes each of the components of a company’s internal control system,
including (i) the control environment, (ii) risk assessment, (iii) control
activities, (iv) information and communication, and (v)
monitoring.  Based on this evaluation, management concluded that the
Company’s internal control over financial reporting was not effective as of
August 31, 2010, due primarily to a lack of segregation of duties.





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permits 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.





During
September 2010, the Company issued 21,000,000 shares of its common stock in
complete satisfaction of its convertible note payable in the amount of
$80,000.


45





Effective
October 1, 2010, the Company sold its proven oil reserves after determining the
operating costs were too high to generate any positive cash flow.




46


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
      FIRSTNAME
              
              AGE
              
              POSITION
              
              ELECTED/APPOINTEDJacob
      Roth
              
              63
              
              President,
              
              March
      22, 1999Chief
      Executive Officer,Chief
      Financial Officerand
      DirectorFrimet
      Taub
              
              30
              
              Secretary,
      Treasurer
              
              March
      22, 1999and
      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.


47


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 December 14, 2010, there were 72,713,731 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.


48




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
      andaddress
      of
                        
                        nature
      ofTitle
                        
                        beneficial
                        
                        beneficial
                        
                        
                        Percentof class
                        
                        owner **
                        
                        owner
                        
                        
                        of classCommon
                        
                        Jacob
      Roth
                        
                        
                        35,950,000
                        
                        
                        
                        49.44
                        %Common
                        
                        John
      Maisey
                        
                        
                        5,525,000
                        
                        
                        
                        7.60
                        %Common
                        
                        Bryce
      Boucher
                        
                        
                        5,600,000
                        
                        
                        
                        7.70
                        %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 December 14, 2010.


49





Name
      and
                          
                          Amount
      andaddress
      of
                          
                          nature
      ofTitle
                          
                          beneficial
                          
                          beneficial
                          
                          
                          Percentof class
                          
                          owner **
                          
                          owner
                          
                          
                          of classCommon
                          
                          Jacob
      Roth
                          
                          
                          35,950,000
                          
                          
                          
                          49.44
                          %Common
                          
                          Frimet
      Taub
                          
                          
                          850,000
                          
                          
                          
                          1.17
                          %Common
                          
                          All
      officers and directors
                          
                          
                          36,800,000
                          
                          
                          
                          67.11
                          %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 securitiesremaining
      available forfuture
      issuance underNumber
      of securities to be
                            
                            
                            Weighted-average
      exercise
                            
                            
                            equity
      compensationissued
      upon exercise of
                            
                            
                            price
      of outstanding
                            
                            
                            plans
      (excludingoutstanding
      options,
                            
                            
                            options,
      warrants
                            
                            
                            securities
      reflectedPlan category
                            
                            warrants and rights
                            
                            
                            and rights
                            
                            
                            in the first columnEquity
      compensation plansapproved
      by security holders
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            
                            4,000,000Equity
      compensation plansnot
      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.




50


ITEM
      13:
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE




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 $490
($.0001 per share) in March 1999.  In August 2007, Mr. Roth acquired
4,100,000 shares of our common stock in exchange for $410 in cash and a note
receivable in the amount of $81,590.  The note bears interest at 5%
per annum and payments of principal and interest are due on August 15,
2012.  In July 2009, Mr. Roth acquired an additional 950,000 shares in
exchange for cash of $105 and a note receivable in the amount of
$47,395.  This note bears interest at the rate of 2% per annum and is
due July 14, 2014.  In November 2009, Mr. Roth acquired 1,000,000
shares for cash of $103 and a note receivable of $59,897.  The note
bears interest at 2% per annum and is due November 24, 2014.  In June
2010, Mr. Roth acquired an additional 6,000,000 shares in exchange for cash of
$70 and a note receivable of $104,930.  The note bears interest at 2%
per annum and is due June 1, 2015.  In June 2010, Mr. Roth acquired an
additional 7,000,000 shares in exchange for cash of $60 and a note receivable of
$119,940.  The note bears interest at 2% per annum and is due June 23,
2015.  All notes, including accrued interest, have a combined balance
of $391,749 and $121,976 at August 31, 2010 and 2009,
respectively.  Mr. Roth made payments of $21,239 during 2010 in
principal and interest payments.





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.  The note bears interest at 2% and is due July 28,
2014.  The balance at August 31, 2010 and 2009, including accrued
interest, is $30,591 and $29,993, respectively.





The
President and Chief Executive Officer of the Company was paid approximately
$20,000 and $31,000 for office and travel expense reimbursements during the
years ended August 31, 2010 and 2009, respectively.




ITEM
14.       PRINCIPAL ACCOUNTANT FEES AND
SERVICES





Audit
Fees – The aggregate fees billed as of October 31, 2010 and 2009 for
professional services rendered by the Company’s accountant was approximately
$15,885 for the audit of the Company’s annual financial statements and the
quarterly reviews for the fiscal years ended August 31, 2010 and
2009.


51




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.


52


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, 2010 and 2009


·
            Consolidated
      Statements of Operations – For the years ended August 31, 2010 and 2009
      and from inception (July 22, 2005) through August 31,
  2010


·
            Statements
      of Stockholders’ Equity - From inception (July 22, 2005) through August
      31, 2010


·
            Statements
      of Cash Flows – For the years ended August 31, 2010 and 2009 and from
      inception (July 22, 2005) through August 31,
  2010


·
            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
                        
                        Description3.1
                        
                        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)




53


31.1
            
            Certification
      of the Chief Executive Officer pursuant to Rule 13a-14 of the Securities
      Exchange Act of 193431.2
            
            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.December
      13, 2010
                    /s/ Jacob RothJacob
      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.





December
      13, 2010
                  /s/ Jacob RothJacob
      Roth, Director, President,CEO
      and CFODecember
      13, 2010
                  /s/ Frimet TaubFrimet
      Taub, Director




54