Royal Energy Resources, Inc. - FORM 10-K/A

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EX-32.1 - Royal Energy Resources, Inc.	v168402_ex32-1.htm
EX-31.1 - Royal Energy Resources, Inc.	v168402_ex31-1.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

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

EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2008

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 Employer
of Incorporation or Organization)		Identification No.)

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

Issuer’s telephone number (800) 620-3029

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

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

COMMON STOCK, $0.00001 PAR VALUE

(Title of each class)

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

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

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

Indicate by check mark 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. $441,124.

As of October 31, 2008, the registrant had outstanding 18,287,731 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.

EXPLANATORY NOTE

We filed our Annual Report on Form 10-K for the year ended August 31, 2008 on November 20, 2008 (the "Original Report"). We are filing this Amendment No. 1 on Form 10-K/A (this "Amendment") to:

correct our commission file number ;

include our non-producing mineral interests in our full cost pool since we adopted the full cost accounting method in 2007 (see Note 11 for related details);

modify our disclosure concerning the commencement date of our current development stage on pages 6, 17 and 27;

modify our disclosure concerning our non-producing mineral interests in Notes 3 and 10;

modify our disclosure concerning income taxes in Note 5; and

Include currently dated Exhibits 31.1 and 32.1.

This Amendment is being filed in response to comments we received from the staff of the Division of Corporate Finance of The Securities and Exchange Commission (the "SEC") in connection with the staff's review of the Original Report. We have made no attempt in this Amendment to modify or update the disclosures presented in the Original Report other than as noted in the previous paragraph. Also, this Amendment does not reflect events occurring after the filing of the Original Report. Accordingly, this Amendment should be read in conjunction with the Original Report and our other filings with the SEC subsequent to the filing of the Original Report.

ROYAL ENERGY RESOURCES, INC.

TABLE OF CONTENTS

FORM 10-K

Part I

		Page
PART I
Item 1	Business	4
Item 1A	Risk Factors	10
Item 2	Properties	10
Item 3	Legal Proceedings	13
Item 4	Submission of Matters to a Vote of Security Holders	13

PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6	Selected Financial Data	16
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	19
Item 8	Financial Statements and Supplementary Data	20
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	45
Item 9AT	Controls and Procedures	45
Item 9B	Other Information	46

PART III
Item 10	Directors, Executive Officers and Corporate Governance	47
Item 11	Executive Compensation	48
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
Item 13	Certain Relationships and Related Transactions, and Director Independence	50
Item 14	Principal Accountant Fees and Services	51

PART IV
Item 15	Exhibits and Financial Statement Schedules	52

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

PART I

ITEM 1: BUSINESS

ORGANIZATION

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

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

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;

To specifically delineate the rights of the holders of common stock $0.00001 par value with respect to dividends, liquidation and voting rights;

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;

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

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.

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 have any revenues and discontinued operations in 2001.

BUSINESS

ENERGY AND MINING

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 12,000 and 2,535 acres in Crook, Banner, Weston, Goshen, Niobrara, Converse, Campbell, Freemont, Laramie, Sublette and Platt Counties, Wyoming as of August 31, 2008 and 2007, respectively. In addition, the Company holds the lease for uranium rights on approximately 3,500 and 1,293 acres in Wyoming as of August 31, 2008 and 2007, 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, 2008, the Company has completed three transactions: 308 acres in Natrona County with Bill Barrett Corporation of Colorado; 75 acres in Weston County, Wyoming with Orion Energy; and 360 acres in Goshen and Platt Counties, Wyoming with Carpenter and Sons. In October 2008, we completed one additional transaction for 80 acres in Niobrara County to Black Diamond Minerals, LLC.

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 being completed at August 31, 2008, and the third well will commence completion in November 2008. See Item 2.

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

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 the 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 256-260 Broadway, Suite 309, 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, 2009. We have been in the development stage since our inception, March 22, 1999, have accumulated a net loss of $665,263 through August 31, 2008, and incurred a loss of $454,174 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 and $413,172 in 2008. 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.

GOVERNMENTAL REGULATIONS, APPROVAL, COMPLIANCE

ENERGY AND MINING

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

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

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

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

ENVIRONMENTAL

ENERGY AND MINING

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

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

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

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

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

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

EMPLOYEES

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

ITEM 1A: RISK FACTORS

Not applicable.

ITEM 2: PROPERTIES

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. As of August 31, 2008, we had prepaid the estimated drilling and completion costs for a 25% interest in three properties in Washington County, Oklahoma. One of the wells was completed in September 2008 and a second well was completed in October 2008. The third well will commence completion in November 2008.

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. As this is our initial period with proved reserves, we have elected to rely on reserve estimates provided by the operator.

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, 2008. 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.

	Total		Proved		Proved
	Proved		Developed		Undeveloped
	Reserves		Reserves		Reserves
Total Reserves
Oil (BBLs)		3,833		3,833		-
Gas (MCF)		12,773		12,773		-
BOE (1)		5,962		5,962		-
Pre-tax future net revenue (2)	$	384,370	$	384,370	$	-
Pre-tax 10% present value (2)		180,180		180,180		-
Standardized measure of discounted future net cash flows (2)(3)	$	180,180	$	180,180	$	-

(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.

These amounts were calculated using prices and costs in effect for each individual property as of August 31, 2008. 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 $117.00 per BBL of oil and $4.81 per MCF of natural gas. These prices compare to the August 31, 2008, NYMEX cash price of $117.00 per BBL for crude oil and the Henry Hub spot price of $6.87 per MMBTU for natural gas.

The present value of after-tax future net revenues discounted at 10% per annum (“standardized measure”) was $180,180 at the end of August 2008. 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 $180,180. 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 or agency as this is our initial period with reserves.

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, 2008. 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 year ended August 31, 2008. There was no activity in prior years and the Company has not had any exploratory drilling activity.

Development Well Activity

Wells Drilling at

August 31, 2008

Net Wells Completed (2)

Gross (1)

Net (2)

Productive

Dry

2.00

0.50

(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, 2008, and 2007, we own oil and gas leases comprising approximately 12,000 and 2,538 acres in Wyoming, respectively. In addition, we hold the lease for uranium rights on approximately 3,500 and 1,293 acres in Wyoming as of August 31, 2008 and 2007, 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.

OTHER

The Company began leasing its corporate office effective September 1, 2008, for a period of two years at a monthly rental of $600.

ITEM 3: LEGAL PROCEEDINGS

There are no pending or threatened lawsuits against us.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2008.

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 since we began trading on September 5, 2007. The bids reflect inter dealer prices without adjustments for retail mark-ups, mark-downs or commissions and may not represent actual transactions.

Period	High		Low

2008
Quarter ended August 31, 2008	$	0.45	$	0.36
Quarter ended May 31, 2008	$	0.40	$	0.16
Quarter ended February 29, 2008	$	0.16	$	0.14
Quarter ended November 30, 2007	$	1.01	$	0.10

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

PENNY STOCK CONSIDERATIONS

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

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

Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;

Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;

Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks; and

Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account.

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

RECENT SALES OF UNREGISTERED SECURITIES

During the quarter ended August 31, 2008, we sold 579,000 shares of our common stock in private transactions for $104,160 in cash and issued 240,000 shares pursuant to a consulting contract valued at $88,800.

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 110 shareholders of record of the Company’s common stock at October 31, 2008.

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, 2008, with respect to compensation plans (including individual compensation arrangements) under which our common stock is authorized for issuance:

Number of securities to be

issued upon exercise of

Weighted average exercise

Number of securities

outstanding options,

price of outstanding

remaining available

Plan category

warrants and rights

options, warrants and rights

for future issuance

Equity compensation plans approved by security holders:

2008 Plan

4,000,000

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

ITEM 6: SELECTED FINANCIAL DATA

Not applicable.

ITEM 7:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Non-cash compensation

During 2008 the Company entered into various consulting and financial services agreements as well as a new loan agreement. Included in these agreements was the payment of $85,000 in cash, of which $37,300 was paid as of August 31, 2008. In addition, an aggregate of 2,965,000 shares of the Company’s common stock were issued along with the granting of options to purchase 1,000,000 shares of the Company’s common stock. The agreements cover periods ranging from 8.5 months to 16.5 months and the related fair value of the shares and options as well as the cash component, are being amortized over the life of the agreements. The Company has determined the total cost of the agreements to approximate $1,062,775. As of August 31, 2008, the un-amortized portion of these agreements amounts to approximately $680,699 and is included as a reduction of stockholders equity in the accompanying financial statements.

Other selling, general and administrative expense (“SG&A”)

SG&A increased to $110,658 from $95,813. The 15% increase consisted primarily of increased costs associated with corporate filings and associated professional fees.

Other expense (income):

The Company recognized a loss of $15,000 upon rescission of its real estate purchase as described in Note 2. In addition the Company incurred $8,750 in interest expense on its note payable and earned $1,483 in interest income on its cash balance.

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, 2009. The Company, has accumulated a net loss of $681,084 through August 31, 2008, ($28,995 in an earlier development stage business and $652,089 in the current development stage) and incurred losses of $467,712 for the year then ended.

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.

Our proved reserve information 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. The estimate as of August 31, 2008, is our first reserve estimate.

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

	Payments due by period
	Total		Year 1		Year 2

Office lease	$	14,400	$	7,200	$	7,200

ITEM 7A:

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements of Royal Energy Resources, Inc. (a development stage company) together with the report thereon of Paritz & Company, P.A. for the years ended August 31, 2008 and 2007 and the period from inception (July 22, 2005) through August 31, 2008, is set forth as follows:

INDEX TO FINANCIAL STATEMENTS

	Page

Report of Independent Registered Public Accounting Firm:
Paritz & Company, P.A.	21
Balance Sheet	23
Statements of Operations	24
Statements of Stockholders’ Deficit	25
Statements of Cash Flows	27
Notes to Financial Statements	28-44

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, 2008 and 2007 and the related statements of operations and cash flows for the years ended August 31, 2008 and 2007 and the period from inception (July 22, 2005) through August 31, 2008 and the statement of stockholders’ equity for the years ended August 31, 2008 and 2007. 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.

As described in Note 11, “Restatement of Financial Statements”, the Company has restated previously issued financial statements as of August 31, 2008 and 2007 and for the years then ended and from inception (July 22, 2005) through August 31, 2008.

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, 2008 and 2007, and the results of its operations and its cash flows for the years ended August 31, 2008 and 2007 and the period from inception (July 22, 2005) through August 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

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

/s/ Paritz & Company, P.A.

Hackensack, New Jersey

November 13, 2008 except for the restatement discussed in Note 11 to the financial statements as to which the date is September 24, 2009

ROYAL ENERGY RESOURCES, INC.

(A Development Stage Company)

Balance Sheets

August 31, 2008 and 2007

	2008			2007
	(Restated			(Restated
	Note 11)			Note 11)
Assets
Current assets
Cash and cash equivalents	$	343,739		$	7,611
Total current assets		343,739			7,611
Oil and gas properties, on the full cost method:
Proved properties		63,097			-
Undeveloped leasehold not being amortized		18,051			14,288
		81,148			14,288
Other assets and investments
Prepaid drilling costs		55,914			-
Investment in uranium properties		3,379			1,344
Investment in real estate		-			215,000
Deposits		440			-
Total other assets		59,733			216,344
Total assets	$	484,620		$	238,243

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	53,343		$	-
Note payable		140,000			-
Total current liabilities		193,343			-

Commitments and contingencies

Stockholders' equity
Preferred stock: $0.00001 par value; authorized 10,000,000 shares; issued and outstanding - 100,000 shares at August 31, 2008 and no shares at August 31, 2007		1			-
Common stock: $0.00001 par value; authorized 100,000,000 shares; 17,267,731 and 13,907,027 shares issued and outstanding at August 31, 2008 and 2007, respectively		173			139
Additional paid-in capital		1,724,978			533,066
Deferred option and stock compensation		(680,699	)		-
Common stock subscription receivable		(72,092	)		(81,590	)
Deficit accumulated during the development stage		(681,084	)		(213,372	)
Total stockholders' equity		291,277			238,243
Total liabilities and stockholders' equity	$	484,620		$	238,243

See accompanying notes to financial statements.

ROYAL ENERGY RESOURCES, INC.

(A Development Stage Company)

Statements of Operations

Years Ended August 31, 2008 and 2007 and

from inception (July 22, 2005) through August 31, 2008

							Inception
							(July 22, 2005)
							Through
	Years Ended August 31,						August 31,
	2008			2007			2008
	(Restated			(Restated			(Restated
	Note 11)			Note 11)			Note 11)

Sales	$	-		$	-		$	-
Cost of sales		142			-			142
Gross profit		(142	)		-			(142	)
Costs and expenses:		#
Non-cash compensation		338,547			-			338,547
Other selling, general and administrative expense		110,658			95,813			295,035
Total costs and expenses		449,205			95,813			633,582
Loss from operations		(449,347	)		(95,813	)		(633,724	)
Other expenses (income):
Loss on disposition by rescission agreement on condominium		15,000			-			15,000
Interest expense		8,750			-			8,750
Interest income from related party		(3,902	)		-			(3,902	)
Interest income		(1,483	)		-			(1,483	)
		18,365			-			18,365
Loss before income taxes		(467,712	)		(95,813	)		(652,089	)
Provision for income taxes		-			-			-
Net loss	$	(467,712	)	$	(95,813	)	$	(652,089	)

Net loss per share, basic and diluted	$	(0.03	)	$	(0.01	)	$	(0.06	)

Weighted average shares outstanding, basic and diluted		14,687,574			9,974,688			10,779,569

See accompanying notes to financial statements.

ROYAL ENERGY RESOURCES, INC.

(A Development Stage Company)

Statements of Stockholders' Equity

Inception of Development Stage, July 22, 2005, through August 31, 2008

											Additional
	Preferred stock				Common stock						Paid-in
	Shares		Amount		Shares			Amount			Capital

Inception, July 22, 2005		-		-		5,930,300			59			22,426
Sale of common stock for cash		-		-		320,000			3			31,997
Common stock issued for real estate investment		-		-		1,900,000			19			189,981
Contribution to capital		-		-		-			-			6,560
Net loss		-		-		-			-			-
Balance August 31, 2005		-		-		8,150,300			81			250,964
Sale of common stock for cash		-		-		1,086,667			11			120,489
Net loss		-		-		-			-			-
Balance, August 31, 2006		-		-		9,236,967			93			371,452
Sale of common stock		-		-		4,670,060			46			161,614
Net loss		-		-		-			-			-
Balance, August 31, 2007		-		-		13,907,027			139			533,066
Sale of preferred stock		100,000		1		-			-			999
Sale of common stock		-		-		2,295,704			23			413,149
Common stock issued for consulting contracts		-		-		2,965,000			30			977,745
Cash portion of consulting contracts		-		-		-			-			-
Rescission of real estate purchase		-		-		(1,900,000	)		(19	)		(199,981	)
Amortization of prepaid consulting contracts:
Non-cash portion		-		-		-			-			-
Cash portion		-		-		-			-			-
Stock subscription receivable:
Payments received		-		-		-			-			-
Interest accrued		-		-		-			-			-
Net loss		-		-		-			-			-
Balance, August 31, 2008		100,000	$	1		3,360,704		$	173		$	1,724,978

(Continued)

ROYAL ENERGY RESOURCES, INC.

(A Development Stage Company)

Statements of Stockholders' Equity, continued

Inception of Development Stage, July 22, 2005, through August 31, 2008

										Deficit
										Accumulated
										During
	Subscription			Deferred			Accumulated			Development
	Receivable			Expenses			Deficit			Stage			Total
										(Restated
										Note 11)

Inception, July 22, 2005		-			-			(28,995	)		-			(6,510	)
Sale of common stock for cash		-			-			-			-			32,000
Common stock issued for real estate investment		-			-			-			-			190,000
Contribution to capital		-			-			-			-			6,560
Net loss		-			-			-			(7,739	)		(7,739	)
Balance August 31, 2005		-			-			(28,995	)		(7,739	)		214,311
Sale of common stock for cash		-			-			-			-			120,500
Net loss		-			-			-			(80,825	)		(80,825	)
Balance, August 31, 2006		-			-			(28,995	)		(88,564	)		253,986
Sale of common stock		(81,590	)		-			-			-			80,070
Net loss		-			-			-			(95,813	)		(95,813	)
Balance, August 31, 2007		(81,590	)		-			(28,995	)		(184,377	)		238,243
Sale of preferred stock		-			-			-			-			1,000
Sale of common stock		-			-			-			-			413,172
Common stock issued for consulting contracts		-			(977,775	)		-			-			-
Cash portion of consulting contracts		-			(85,000	)		-			-			(85,000	)
Rescission of real estate purchase		-			-			-			-			(200,000	)
Amortization of prepaid consulting contracts:
Non-cash portion		-			338,547			-			-			338,547
Cash portion		-			43,529			-			-			43,529
Stock subscription receivable:
Payments received		13,400			-			-			-			13,400
Interest accrued		(3,902	)		-			-			-			(3,902	)
Net loss		-			-			-			(467,712	)		(467,712	)
Balance, August 31, 2008	$	(72,092	)	$	(680,699	)	$	(28,995	)	$	(652,089	)	$	291,277

See accompanying notes to financial statements.

ROYAL ENERGY RESOURCES, INC.

(A Development Stage Company)

Statements of Cash Flows

Years Ended August 31, 2008 and 2007, and

the period from inception (July 22, 2005) through August 31, 2008

							From inception
							July 22, 2005
							through
	Years Ended August 31,						August 31,
	2008			2007			2008
	(Restated			(Restated			(Restated
	Note 11)			Note 11)			Note 11)

Cash flows from operating activities
Net loss	$	(467,712	)	$	(95,813	)	$	(652,089	)
Adjustment to reconcile net loss to net cash used in operating activities:
Value of common shares issued for services		338,547			-			338,547
Loss on rescission of condominium purchase		15,000			-			15,000
Interest accrued on stock subscription		(3,902	)		-			(3,902	)
Change in other assets and liablities:
Prepaid expenses and other assets		(56,354	)		-			(56,354	)
Accounts payable		11,872			-			(2,128	)
Net cash used in operations		(162,549	)		(95,813	)		(360,926	)

Cash flows from investing activities
Investment in real estate		-			-			(11,000	)
Oil and gas property expenditures		(81,486	)		(12,691	)		(97,512	)
Proceeds from sales of undeveloped leasehold		14,626			3,082			17,708
Investment in uranium properties		(2,035	)		(1,344	)		(4,723	)
Net cash used in investing activities		(68,895	)		(10,953	)		(95,527	)

Cash flows from financing activities
Proceeds of stockholder loans		-			-			50
Proceeds from subscription receivable		13,400			-			13,400
Loan proceeds		140,000			-			140,000
Proceeds from sale of common stock		413,172			80,070			645,742
Proceeds from sale of preferred stock		1,000			-			1,000
Net cash provided by financing activities		567,572			80,070			800,192

Net increase (decrease) in cash and cash equivalents		336,128			(26,696	)		343,739
Cash and cash equivalents, beginning of period		7,611			34,307			-
Cash and cash equivalents, end of period	$	343,739		$	7,611		$	343,739

Supplemental cash flow information
Cash paid for interest	$	8,750		$	-		$	8,750
Cash paid for income taxes		-			-			-

Non-cash investing and financing activities:
Issuance of common stock for real estate	$	-		$	-		$	190,000
Contribution of stockholder loan to capital		-			-			6,560
Disposition of real estate per stock rescission agreement		200,000			-			200,000

ROYAL ENERGY RESOURCES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

AUGUST 31, 2008

1	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

These financial statements include the accounts of Royal Energy Resources, Inc. (“RER”) (formerly known as World Marketing, Inc. ("WMI"). RER is a development stage enterprise within the meaning of Statement of Financial Accounting Standards No. 7, ("SFAS No. 7") "Accounting and Reporting by Development Stage Enterprises."

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, and expects to continue this activity in the future, as funds become available. Two of the wells were completed in September and October 2008 and the third well will commence completion in November 2008.

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 2009. The Company, has accumulated a net loss of $681,084 through August 31, 2008, ($28,995 in an earlier development stage business and $652,089 in the current development stage) and incurred losses of $467,712 for the year then ended.

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 current 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. During 2008, the Company secured $140,000 in long-term debt and has raised $413,172 from the sale of its common stock and has a cash balance of $343,739 at August 31, 2008. However, the energy business has a high degree of risk and there can be no assurance that the Company will be able to obtain sufficient funding to develop the Company's current business plan.

Cash and cash equivalents

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

Revenue recognition

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

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

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

Stock option plans

In December 2004, the FASB issued SFAS 123 (revised 2004), "Share-Based Payment" (SFAS 123(R)). Among other things, SFAS 123(R) requires expensing the fair value of stock options, previously optional accounting. For transition, upon adoption on September 1, 2005, SFAS 123(R) would require expensing any unvested options and will also require changing the classification of certain tax benefits from option deductions to financing rather than operating cash flows. As of August 31, 2006, the Company did not have any unvested options which would require adjustment upon adoption of SFAS 123(R). SFAS No. 123, "Accounting for Stock Based compensation" (SFAS No. 123), required the Company to disclose pro forma information regarding option grants made to its employees until adoption of SFAS 123(R) discussed above. SFAS No. 123 specifies certain valuation techniques that produce estimated compensation charges that would be included in the required pro forma results. These amounts would not have been reflected in the Company's statements of operations, because APB No. 25 specifies that no compensation charge arises when the price of the employees' stock options equal the market value of the underlying stock at the grant date.

Under SFAS No. 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. 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 is being amortized over the twelve month option period.

Property and equipment

The Company follows the full cost method of accounting for oil and natural gas operations. Under this method all productive and nonproductive costs incurred in connection with the acquisition, exploration and development of oil and natural gas reserves are capitalized. No gains or losses are recognized upon the sale or other disposition of oil and natural gas properties except in transactions that would significantly alter the relationship between capitalized costs and proved reserves. The costs of unevaluated oil and natural gas properties are excluded from the amortizable base until the time that either proven reserves are found or it has determined that such properties are impaired. The Company had no capitalized costs related to unevaluated properties at August 31, 2008. As properties are evaluated, the related costs would be transferred to proven oil and natural gas properties using full cost accounting. All capitalized costs were included in the amortization base as of August 31, 2008. However, since production had not commenced until after August 31, 2008, no amortization was recorded in 2008.

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 accordance with the impairment provisions of Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company assesses the recoverability of the carrying value of its non-oil and gas long-lived assets when events occur that indicate an impairment in value may exist. An impairment loss is indicated if the sum of the expected undiscounted future net cash flows is less than the carrying amount of the assets. If this occurs, an impairment loss is recognized for the amount by which the carrying amount of the assets exceeds the estimated fair value of the asset. No impairments were recorded in 2008 or 2007.

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, 2008 and 2007, there were no natural gas imbalances.

Investments in real estate

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

Oil and natural gas reserve estimates

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.

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

Earnings (loss) per common share are calculated under the provisions of SFAS No. 128, "Earnings per Share," which established new standards for computing and presenting earnings per share. SFAS No. 128 requires RER to report both basic earnings per share, which is based on the weighted-average number of common shares outstanding, and diluted earnings per share, which is based on the weighted-average number of common shares outstanding plus all potential dilutive shares outstanding. At August 31, 2008 and 2007, there were no potentially dilutive common stock equivalents. Accordingly, basic and diluted earnings per share are the same for all periods presented.

Use of estimates in the preparation of financial statements

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

Credit risk

In 2008 and 2007, the Company had cash deposits in certain banks that at times exceeded the maximum insured by the Federal Deposit Insurance Corporation. The Company monitors the financial condition of the banks and has experienced no losses on these accounts.

Contingencies

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

Asset retirement obligations

SFAS No. 143, “Accounting for Asset Retirement Obligations,” addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs and amends FASB Statement No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies.” SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, and that the associated retirement costs be capitalized as part of the carrying amount of the long-lived asset. The Company determines its asset retirement obligation by calculating the present value of the estimated cash flows related to the liability. Periodic accretion of the discount of the estimated liability would be recorded in the statement of operations. At August 31, 2008 and 2007, 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

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts-and interpretation of FASB Statement No. 60”. SFAS No. 163 clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement of premium revenue and claims liabilities. This statement also requires expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those years. SFAS No. 163 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 sets forth the level of authority to a given accounting pronouncement or document by category. Where there might be conflicting guidance between two categories, the more authoritative category will prevail. SFAS No. 162 will become effective 60 days after the SEC approves the PCAOB’s amendments to AU Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s financial position, statements of operations, or cash flows at this time.

In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. This standard requires companies to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has not yet adopted the provisions of SFAS No. 161, but does not expect it to have a material impact on its financial position, results of operations or cash flows.

In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in developing an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular, the staff indicated in SAB 107 that it will accept a company's election to use the simplified method, regardless of whether the company has sufficient information to make more refined estimates of expected term. At the time SAB 107 was issued, the staff believed that more detailed external information about employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies) would, over time, become readily available to companies. Therefore, the staff stated in SAB 107 that it would not expect a company to use the simplified method for share option grants after December 31, 2007. The staff understands that such detailed information about employee exercise behavior may not be widely available by December 31, 2007. Accordingly, the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company currently uses the simplified method for “plain vanilla” share options and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is not believed that this will have an impact on the Company’s financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This statement improves comparability by eliminating that diversity. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The effective date of this statement is the same as that of the related Statement 141 (revised 2007). The Company will adopt this Statement beginning September 1, 2009. It is not believed that this will have an impact on the Company’s financial position, results of operations or cash flows.

In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations. This Statement replaces FASB Statement No. 141, Business Combinations, but retains the fundamental requirements in Statement 141. This Statement establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The effective date of this statement is the same as that of the related FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements. The Company will adopt this statement beginning September 1, 2009. It is not believed that this will have an impact on the Company’s financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities—Including an Amendment of FASB Statement No. 115. This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. This option is available to all entities. Most of the provisions in FAS 159 are elective; however, an amendment to FAS 115 Accounting for Certain Investments in Debt and Equity Securities applies to all entities with available for sale or trading securities. Some requirements apply differently to entities that do not report net income. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the entity makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157 Fair Value Measurements. The Company will adopt SFAS No. 159 beginning September 1, 2008 and is currently evaluating the potential impact the adoption of this pronouncement will have on its financial statements.

Fiscal years

The year ended August 31, 2008 is referred to herein as 2008 and the year ended August 31, 2007 is referred to herein as 2007.

2	INVESTMENTS IN REAL ESTATE

On August 25, 2005, the Company acquired its first real estate property, a condominium located in Brooklyn, New York, 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.

3	INVESTMENT IN ENERGY PROPERTIES

UNDEVELOPED LEASEHOLD NOT BEING AMORTIZED

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 pursuant to 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 will commence completion in November 2008.

Oil and gas property costs are as follows at August 31, 2008 and 2007:

	2008		2007

Leasehold cost	$	4,933	$	-
Intangible development cost		40,932		-
Lease equipment		17,232		-
Total proved properties		63,097		-
Undeveloped leasehold not being amortized		18,051		14,288
	$	81,148	$	14,288

The oil and gas wells were not completed until after year-end. Accordingly, no depreciation or amortization has been recorded. Prepaid drilling costs includes $55,914 in prepaid costs the balance of the second well and the entire third well.

4	NOTE PAYABLE

The Company has a loan with an individual in the amount of $140,000 at May 31, 2008 which is due July 29, 2009. Interest is payable monthly at the rate of 15%.

5	INCOME TAXES

RER has not recorded a deferred tax benefit or expense for all prior periods through August 31, 2008, 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, 2008 and 2007 as follows:

	2008			2007

"Normally expected" income tax benefit	$	159,000		$	32,600
State income taxes less federal tax benefit		18,700			3,800
Valuation allowance		(177,700	)		(36,400	)
Actual income tax expense	$	-		$	-

RER has available unused net operating loss carryforwards of approximately $706,000 which will expire in various periods from 2019 to 2028, some of which may be limited as to the amount available on an annual basis.

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:

	2008			2007

Net operating loss carryforward	$	271,200		$	81,100
Depreciable/depletable property, plant and equipment		(12,400	)		-
Valuation allowance		(258,800	)		(81,100	)
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, 2008 and 2007, 17,267,731 and 13,907,027 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

Consulting and financial services agreements

During 2008, the Company entered into various consulting and financial services agreements as well as a new loan agreement. Included in these agreements was the payment of $85,000 in cash, of which $36,000 was paid as of August 31, 2008. In addition, an aggregate of 2,965,000 shares of the Company’s common stock were issued along with the granting of options to purchase 1,000,000 shares of the Company’s common stock. The agreements cover periods ranging from 8.5 months to 16.5 months and the related fair value of the shares and options as well as the cash component, are being amortized over the life of the agreements. The Company has determined the total cost of the agreements to approximate $1,062,775. As of August 31, 2008, the un-amortized portion of these agreements amounts to approximately $680,699 and is included as a reduction of stockholders equity in the accompanying financial statements.

7	STOCK SUBSCRIPTION RECEIVABLE

On August 16, 2007, the President and Chief Executive Officer of the Company purchased 4,100,000 shares of the Company’s $0.00001 par value common shares for $0.02 per share. The Company received a cash payment of $410 and a note receivable in the amount of $81,590 for this purchase. The note bears interest at 5% per annum and payments of principal and interest are due on August 15, 2012. Payments of $13,400 were received by the Company during the year ended August 31, 2008. Interest in the amount of $3,902 was accrued during 2008.

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.

9	COMMITMENTS AND CONTINGENCIES

The Company entered into an investor relations contract on September 3, 2008, which provides for monthly compensation of $3,000 in cash and 1,000,000 restricted common shares. The shares were valued at $360,000, the price at which the Company’s common stock last traded before the transaction. This amount will be amortized over the six month contract period.

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

10	SUPPLEMENTARY OIL AND GAS RESERVE INFORMATION (UNAUDITED)

The Company has interest in oil and natural gas properties that are all located in Washington County, Oklahoma at August 31, 2008.

The Company prepared its own year-end estimates of future net recoverable oil and natural gas reserves. 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.

Capitalized costs relating to oil and natural gas producing activities and related accumulated depreciation and amortization at August 31, 2008 and 2007 are included in Note 3.

Costs incurred in oil and natural gas producing activities for the year ended August 31, 2008 and 2007, are summarized as follows:

	2008		2007

Acquisition of proved properties	$	-	$	-
Acquisition of undeveloped leasehold		18,389		12,691
Development costs		63,097		-
	$	81,486	$	12,691

Amortization rate per BOE	$	12.58		N/A

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

	Oil		Natural Gas
Balance, August 31, 2007		-		-
Extensions and discoveries		3,833		12,773
Production		-		-
Balance, August 31, 2008		3,833		12,773

Proved developed reserves:
August 31, 2008		3,833		12,773

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.

The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves at August 31, 2008 is summarized as follows (none at August 31, 2007):

	2008

Future cash inflows	$	509,780
Future production costs		(125,410	)
Future development costs		-
Future income tax expenses		-
Future net cash flows		384,370
10% annual discount for estimated timing of cash flows		(204,190	)
Standardized measure of discounted future net cash flows	$	180,180

The following are the principal sources of changes in the standardized measure of discounted future net cash flows of the Company for the year ended August 31, 2008 (none for the year ended August 31, 2007):

	2008

Standardized measure of discounted future net cash flows at beginning of period	$	-
Changes during the period:
Sales of natural gas produced, net of production costs		-
Net changes in prices and production costs		-
Development costs incurred and revisions		180,180
Sales of reserves in place		-
Purchase of reserves in place		-
Revision of previous quantity estimates		-
Net change		180,180
Standardized measure of discounted future net cash flows at end of period	$	180,180

Prices used in computing these calculations of future production of proved reserves were $117.00 per barrel (BBL) of oil and $4.81 per thousand cubic feet (MCF) of natural gas at August 31, 2008.

11	RESTATEMENT

We adopted the full cost method of accounting for our oil and gas exploration and development activities effective with our first acquisition of oil and gas properties in 2007. Prior to adopting the full cost method of accounting, we had been the successful bidder in United States Government auctions to purchase certain oil and lease rights and had recognized revenue from the sale of leases. In our original reports for the years ended August 31, 2008 and 2007, we included sales and cost of sales in the statement of operations that, under the full cost method, should have been recorded as a reduction of the related cost included in the full cost pool. The following summarizes the effect of the adjustment:

	As Originally
	Reported			Adjustment			As Restated
Year ended August 31, 2007

Balance sheet
Investment in oil and gas leases	$	17,915		$	(17,915	)	$	-
Investment in uranium leases		-			1,344			1,344
Oil and gas properties, on the full cost method:
Proved properties		-			-			-
Undeveloped leasehold not being amortized		-			14,288			14,288
					-
Deficit accumulated during development stage		(211,089	)		(2,283	)		(213,372	)

Statements of operations
Sales of oil and gas leases		3,082			(3,082	)		-
Cost of sales		799			(799	)		-
Net loss		(93,530	)		(2,283	)		(95,813	)
Net loss per share, basic and diluted	$	(0.01	)	$	-		$	(0.01	)

Statements of cash flows
Net loss		(93,530	)		(2,283	)		(95,813	)
Investment in oil and gas leases		(13,236	)		13,236			-
Oil and gas property expenditures		-			(12,691	)		(12,691	)
Investment in uranium leases		-			(1,344	)		(1,344	)
Proceeds from sale of undeveloped leasehold		-			3,082			3,082

	As Originally
	Reported			Adjustment			As Restated
Year ended August 31, 2008

Balance sheet
Investment in oil and gas properties, net	$	63,097		$	(63,097	)	$	-
Investment in oil and gas leases		33,872			(33,872	)		-
Oil and gas properties, on the full cost method:
Proved properties		-			63,097			63,097
Undeveloped leasehold not being amortized		-			18,051			18,051
					-
Deficit accumulated during development stage		(665,263	)		(15,821	)		(681,084	)

Statements of operations
Sales of oil and gas leases		14,626			(14,626	)		-
Cost of sales		1,230			(1,088	)		142
Net loss		(454,174	)		(13,538	)		(467,712	)
Net loss per share, basic and diluted	$	(0.03	)	$	-		$	(0.03	)

Statements of cash flows
Net loss		(454,174	)		(13,538	)		(467,712	)
Investment in oil and gas drilling prospects		(63,097	)		63,097			-
Investment in oil and gas leases		(17,301	)		17,301			-
Oil and gas property expenditures		-			(81,486	)		(81,486	)
Proceeds from sale of undeveloped leasehold		-			14,626			14,626

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, 2008, and, based on its evaluation, our principal executive officer and our principal financial officer have concluded that these controls and procedures are effective.

(b) Changes in Internal Controls

There were no changes in our internal control over financial reporting during the quarter ended August 31, 2008 that materially affected, or are reasonably likely to materially affect, our 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.

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, 2008. 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, 2008, 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.

PART III

ITEM 10:

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers and Directors

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

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

			DATE FIRST
NAME	AGE	POSITION	ELECTED/APPOINTED

Jacob Roth	61	President,	March 22, 1999
		Chief Executive Officer,
		Chief Financial Officer
		and Director

Frimet Taub	28	Secretary, Treasurer	March 22, 1999
		and Director

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

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

Audit Committee

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

Compliance with Section 16(a) Of the Exchange Act

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

Code of Ethics

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

ITEM 11:

EXECUTIVE COMPENSATION

Jacob Roth currently serves as President, Chief Executive Officer and Chief Financial Officer of the Company and Frimet Taub serves as Secretary and Treasurer of the Company. There are no other individuals involved in the management or administration of the Company. Neither Mr. Roth nor Mrs. Taub currently receives any form of compensation, either direct or indirect, and no compensation is being accrued on the books of the Company. Accordingly, all disclosure items of executive compensation are currently not applicable.

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 October 31, 2008, there were 18,287,731 shares of the Company’s common stock issued and outstanding. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not any pending or anticipated arrangements that may cause a change in control.

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

	Name and	Amount and
	address	nature of
	of beneficial	beneficial	Percent
Title of class	owner	owner	of class

Common	Jacob Roth	9,000,000	49.2%
	256-260 Broadway, Suite 309
	Brooklyn, NY 11211

Common	Dor Ldor	1,100,000	6.0%
	C/O Zarchi
	650 Montgomery St.
	Brooklyn, NY 11213

Common	LIB Holdings	1,000,000	5.5%
	332 Bleecker St. #K-56
	New York, NY 10014

Series A	Jacob Roth	100,000	100.0%
Preferred	256-260 Broadway, Suite 309
	Brooklyn, NY 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 October 31, 2008.

	Name and	Amount and
	address	nature of
	of beneficial	beneficial	Percent
Title of class	owner	owner	of class

Common	Jacob Roth	9,000,000	49.2%
	256-260 Broadway, Suite 309
	Brooklyn, NY 11211

Common	Frimet Taub	250,000	1.3%
	256-260 Broadway, Suite 309
	Brooklyn, NY 11211

Common	All officers and directors	9,250,000	50.5%
	as a group (2 persons)

Series A	Jacob Roth	100,000	100.0%
Preferred (a)	256-260 Broadway, Suite 309
	Brooklyn, NY 11211

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

Equity Compensation Plan Information

Number of securities

remaining available for

future issuance under

Number of securities to be

Weighted-average exercise

equity compensation

issued upon exercise of

price of outstanding

plans (excluding

outstanding options,

options, warrants

securities reflected

Plan category

warrants and rights

and rights

in the first column

Equity compensation plans approved by security holders

4,000,000

Equity compensation plans not approve by security holders

Total

4,000,000

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. During 2008, payments of $13,400 were received by the Company and $3,902 was accrued for interest.

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.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees – The aggregate fees billed as of October 31, 2008 and 2007 for professional services rendered by the Company’s accountant was approximately $6,400 and $5,800 for the audit of the Company’s annual financial statements and the quarterly reviews for the fiscal years ended August 31, 2008 and 2007.

Audit-Related Fees – None.

Tax Fees – None for 2007 or 2006.

All Other Fees – Other than the services described above, no other fees were billed for services rendered by the principal accountant during fiscal 2007 or fiscal 2006.

Audit Committee Policies and Procedures – Not applicable.

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

PART IV

ITEM 15:

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

The following documents are filed as part of this report:

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, 2008 and 2007

Consolidated Statements of Operations – For the years ended August 31, 2008 and 2007 and from inception (July 22, 2005) through August 31, 2008

Statements of Stockholders’ Equity - For the years ended August 31, 2008 and 2007

Statements of Cash Flows – For the years ended August 31, 2008 and 2007 and from inception (July 22, 2005) through August 31, 2008

Notes to the Financial Statements

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

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

Exhibit		Description

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

32.1		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 7, 2009	/s/ Jacob Roth
	Jacob Roth, President, CEO and CFO

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

December 7, 2009	/s/ Jacob Roth
	Jacob Roth, Director, President, CEO and CFO

December 7, 2009	/s/ Frimet Taub
	Frimet Taub, Director

Attached files

Royal Energy Resources, Inc. Reports

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