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EX-31 - Royal Energy Resources, Inc.v190592_ex31.htm
EX-32 - Royal Energy Resources, Inc.v190592_ex32.htm
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: May 31, 2010

File No. 000-52547

Royal Energy Resources, Inc.
(Name of small business issuer in our charter)

Delaware
 
11-3480036
(State or other jurisdiction of
 
(IRS Employer
incorporation or organization)
 
Identification No.)

543 Bedford Avenue, #176, Brooklyn, NY  11211
(Address of principal executive offices) (Zip Code)

Registrant's telephone number:  800-620-3029

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

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

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

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x

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

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 39,713,731 shares of common stock outstanding as of July 7, 2010.
 
 
 

 

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission ("Commission"). While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto, contained in the Company’s Form 10-K dated August 31, 2009.

TABLE OF CONTENTS

   
Page
     
PART I – FINANCIAL INFORMATION
 
     
Item 1:
Condensed Unaudited Financial Statements
3
     
Management's Discussion and Analysis of Financial Condition and Results of Operations
20
     
Item 3:
Quantitative and Qualitative Disclosures About Market Risk
24
     
Controls and Procedures
24
     
PART II - OTHER INFORMATION
25
     
Legal Proceedings
25
     
Item 1A:
Risk Factors
25
     
Unregistered Sales of Equity Securities and Use of Proceeds
25
     
Defaults upon Senior Securities
25
     
Submission of Matters to a Vote of Security Holders
25
     
Other Information
25
     
Exhibits
25
 
 
2

 

 
ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Condensed Balance Sheets
May 31, 2010  (unaudited) and August 31, 2009

   
May 31,
   
August 31,
 
   
2010
   
2009
 
Assets
           
Current assets
           
Cash and cash equivalents
  $ 5     $ 18,680  
Accounts receivable
    4,990       908  
Prepaid expenses
    -       30,000  
Total current assets
    4,995       49,588  
Oil and gas properties, on full cost method:
               
Proved properties
    56,335       50,335  
Unproved properties not being amortized
    4,878       15,152  
      61,213       65,487  
Accumulated depreciation, depletion and amortization
    (12,182 )     (11,469 )
      49,031       54,018  
Other assets
               
Prepaid drilling costs
    32,558       50,343  
Investment in uranium properties
    4,329       4,329  
Deposits
    1,040       1,040  
Total other assets
    37,927       55,712  
Total assets
  $ 91,953     $ 159,318  
                 
Liabilities and Stockholders' Equity (Deficit)
               
Current liabilities
               
Accounts payable
  $ 42,239     $ 30,198  
Convertible note payable
    80,000       80,000  
Accrued interest
    14,000       -  
Convertible debenture
    4,530       -  
Total current liabilities
    140,769       110,198  
                 
Commitments and contingencies
               
                 
Stockholders' equity (deficit)
               
                 
Preferred stock: $0.00001 par value; authorized 10,000,000 shares; 100,000 shares issued and outstanding
    1       1  
Common stock: $0.00001 par value; authorized 100,000,000 shares; 24,513,731 and 22,388,731 shares issued and outstanding at May 31, 2010 and August 31, 2009, respectively
    245       224  
Additional paid-in capital
    2,999,045       2,879,466  
Deferred option and stock compensation
    (27,045 )     (273,807 )
Common stock subscription receivable
    (197,797 )     (151,969 )
Accumulated deficit
    (28,995 )     (28,995 )
Deficit accumulated during the development stage
    (2,794,270 )     (2,375,800 )
Total stockholders' equity (deficit)
    (48,816 )     49,120  
Total liabilities and stockholders' equity (deficit)
  $ 91,953     $ 159,318  

See accompanying notes to condensed financial statements.

3


ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Condensed Statements of Operations
Three Months Ended May 31, 2010 and 2009
(Unaudited)

   
Three Months Ended
 
   
May 31,
 
   
2010
   
2009
 
             
Oil and gas production
  $ 3,221     $ 1,810  
Total revenues
    3,221       1,810  
Costs and expenses:
               
Lease operating expense
    2,739       899  
Production taxes
    232       130  
Depreciation, depletion and amortization
    336       594  
Asset impairment
    18,676       -  
Non-cash compensation
    24,628       235,995  
Other selling, general and administrative expense
    8,421       48,125  
Total costs and expenses
    55,032       285,743  
Loss from operations
    (51,811 )     (283,933 )
Other expenses (income):
               
Loss on comodities trading
    -       (2,568 )
Interest income
    -       -  
Interest income - related party
    (1,449 )     (1,263 )
Interest expense
    18,755       3,500  
      17,306       (331 )
Loss before income taxes
    (69,117 )     (283,602 )
Provision for income taxes
    -       -  
Net loss
  $ (69,117 )   $ (283,602 )
                 
Net loss per share, basic and diluted
  $ (0.00 )   $ (0.01 )
                 
Weighted average shares outstanding, basic and diluted
    24,193,079       19,136,296  

See accompanying notes to condensed financial statements.
 
4

 
ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Condensed Statements of Operations
Nine Months Ended May 31, 2010 and 2009 and
from inception (July 22, 2005) through May 31, 2010
(Unaudited)

               
Inception
 
                
(July 22, 2005)
 
    
Nine Months Ended
   
Through
 
    
May 31,
   
May 31,
 
    
2010
   
2009
   
2010
 
                   
Oil and gas production
  $ 6,372     $ 2,499     $ 10,682  
Total revenues
    6,372       2,499       10,682  
Costs and expenses:
                       
Lease operating expense
    6,000       3,649       11,711  
Production taxes
    459       180       769  
Depreciation, depletion and amortization
    713       783       1,907  
Asset impairment
    18,676       -       55,606  
Non-cash compensation
    298,262       1,137,072       2,075,670  
Other selling, general and administrative expense
    78,705       173,913       574,135  
Total costs and expenses
    402,815       1,315,597       2,719,798  
Loss from operations
    (396,443 )     (1,313,098 )     (2,709,116 )
Other expenses (income):
                       
Loss on disposition by rescission agreement of condominium
    -       -       15,000  
Loss on comodities trading
    719       25,168       36,557  
Interest income
    -       (2,853 )     (4,414 )
Interest income - related party
    (4,197 )     (2,518 )     (11,644 )
Interest expense
    25,505       11,875       49,655  
      22,027       31,672       85,154  
Loss before income taxes
    (418,470 )     (1,344,770 )     (2,794,270 )
Provision for income taxes
    -       -       -  
Net loss
  $ (418,470 )   $ (1,344,770 )   $ (2,794,270 )
                         
Net loss per share, basic and diluted
  $ (0.02 )   $ (0.07 )        
                         
Weighted average shares outstanding, basic and diluted
    23,372,064       18,707,475          

See accompanying notes to condensed financial statements.

5

 
ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Condensed Statements of Stockholders' Equity (Deficit)
Inception of Development Stage, July 22, 2005, through May 31, 2010

               
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       12       120,488  
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       17,267,731       173       1,724,978  
Sale of common stock for cash
    -       -       20,000       -       3,600  
Common stock issued for consulting contracts
    -       -       3,551,000       36       887,403  
Cash portion of consulting contracts
    -       -       -       -       -  
Amortization of prepaid consulting contracts:
                                       
Non-cash portion
    -       -       -       -       -  
Cash portion
    -       -       -       -       -  
Stock subscription receivable:
                                       
Sold
    -       -       1,550,000       15       263,485  
Payments received
    -       -       -       -       -  
Interest accrued
    -       -       -       -       -  
Net loss
    -       -       -       -       -  
Balance, August 31, 2009
    100,000       1       22,388,731       224       2,879,466  
Common stock issued for consulting contracts
    -       -       1,025,000       10       51,490  
Amortization of prepaid consulting contracts
    -       -       -       -       -  
Stock issued for drilling agreement
    -       -       100,000       1       5,999  
Intrinsic value of beneficial conversion feature of convertible debenture
    -       -       -       -       2,100  
Stock subscription receivable:
                                       
Sold
    -       -       1,000,000       10       59,990  
Payments received
    -       -       -       -       -  
Interest accrued
    -       -       -       -       -  
Net loss
    -       -       -       -       -  
Balance, May 31, 2010
    100,000     $ 1       24,513,731     $ 245     $ 2,999,045  

(Continued)

See accompanying notes to condensed financial statements.

6


ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Condensed Statements of Stockholders' Equity (Deficit), continued
Inception of Development Stage, July 22, 2005, through May 31, 2010

                     
Deficit
       
                     
Accumulated
       
                     
During
       
   
Subscription
   
Deferred
   
Accumulated
   
Development
       
   
Receivable
   
Expenses
   
Deficit
   
Stage
   
Total
 
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 consulting contracts:
    -       -       -       -       (200,000 )
Non-cash portion
    -       338,547       -       -       338,547  
Cash portion
    -       43,529       -       -       43,529  
Stock subscription receivable:
                                       
Payments received
    13,400       -       -       -       13,400  
Interest accrued
    (3,902 )     -       -       -       (3,902 )
Net loss
    -       -       -       (467,712 )     (467,712 )
Balance, August 31, 2008
    (72,092 )     (680,699 )     (28,995 )     (652,089 )     291,277  
Sale of common stock for cash
    -       -       -       -       3,600  
Common stock issued for consulting contracts
    -       (887,440 )     -       -       -  
Cash portion of consulting contracts
    -       (40,900 )     -       -       (40,900 )
Amortization of prepaid consulting contracts:
                                       
Non-cash portion
    -       1,252,861       -       -       1,252,861  
Cash portion
    -       82,371       -       -       82,371  
Stock subscription receivable:
                                       
Sold
    (77,332 )     -       -       -       186,168  
Payments received
    1,000                               1,000  
Interest accrued
    (3,545 )                             (3,545 )
Net loss
    -       -       -       (1,723,711 )     (1,723,711 )
Balance, August 31, 2009
    (151,969 )     (273,807 )     (28,995 )     (2,375,800 )     49,120  
Common stock issued for consulting contracts
    -       (51,500 )     -       -       -  
Amortization of prepaid consulting contracts
    -       298,262       -       -       298,262  
Stock issued for drilling agreement
    -       -       -       -       6,000  
Intrinsic value of beneficial conversion feature of convertible debenture
    -       -       -       -       2,100  
Stock subscription receivable:
                                       
Sold
    (60,000 )     -       -       -       -  
Payments received
    18,369       -       -       -       18,369  
Interest accrued
    (4,197 )     -       -       -       (4,197 )
Net loss
    -       -       -       (418,470 )     (418,470 )
Balance, May 31, 2010
  $ (197,797 )   $ (27,045 )   $ (28,995 )   $ (2,794,270 )   $ (48,816 )

See accompanying notes to condensed financial statements.

7


ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Condensed Statements of Cash Flows
Nine Months Ended May 31, 2010 and 2009, and
from inception (July 22, 2005) through May 31, 2010
(Unaudited)

               
From inception
 
                
July 22, 2005
 
                
through
 
    
Nine months ended May 31,
   
May 31,
 
    
2010
   
2009
   
2010
 
                   
Cash flows from operating activities
                 
Net loss
  $ (418,470 )   $ (1,061,169 )   $ (2,794,270 )
Adjustment to reconcile net loss to net cash used in operating activities:
                       
Depreciation and depletion
    713       189       1,907  
Value of common shares issued for services
    298,262       917,094       2,075,670  
Intrinsic value of beneficial conversion feature of convertible debenture
    630       -       630  
Loss on rescission of condominium purchase
    -       -       15,000  
Interest accrued on stock subscription
    (4,197 )     (1,674 )     (11,644 )
Asset impairment
    18,676       -       55,606  
Change in other assets and liablities:
                       
Accounts receivable
    (4,082 )     (26,267 )     (4,990 )
Prepaid expenses and other assets
    47,785       2,151       7,873  
Accounts payable
    18,041       (12,700 )     (7,234 )
Accrued expenses
    14,000       -       14,000  
Net cash used in operations
    (28,642 )     (182,376 )     (647,452 )
                         
Cash flows from investing activities
                       
Investment in real estate
    -       -       (11,000 )
Oil and gas property expenditures
    (8,402 )     (1,941 )     (147,174 )
Proceeds from sale of undeveloped leasehold
    -       30,267       47,975  
Investment in uranium properties
    -       (950 )     (5,673 )
Net cash provided by (used in) investing activities
    (8,402 )     27,376       (115,872 )
                         
Cash flows from financing activities
                       
Proceeds of stockholder loans
    -       -       50  
Proceeds from subscription receivable
    18,369       1,000       32,769  
Loan proceeds (repayment)
    -       (40,000 )     80,000  
Proceeds from sale of common stock
    -       3,600       649,510  
Proceeds from sale of preferred stock
    -       -       1,000  
Net cash provided by (used in) financing activities
    18,369       (35,400 )     763,329  
                         
Net increase (decrease) in cash and cash equivalents
    (18,675 )     (190,400 )     5  
Cash and cash equivalents, beginning of period
    18,680       343,739       -  
Cash and cash equivalents, end of period
  $ 5     $ 153,339     $ 5  
                         
Supplemental cash flow information
                       
Cash paid for interest
  $ 6,750     $ 4,500     $ 30,900  
Cash paid for income taxes
    -       -       -  
                         
Non-cash investing and financing activities:
                       
Issuance of common stock for real estate
  $ -     $ -     $ 190,000  
Contribution of stockholder loan to capital
    -       -       6,560  
Disposition of real estate per stock rescission agreement
    -       -       200,000  
Common stock issued for drilling participation agreement
    6,000       -       6,000  

See accompanying notes to condensed financial statements.
 
8

 
ROYAL ENERGY RESOURCES, INC.
 (A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

May 31, 2010
(Unaudited)
 

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 the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 915, "Development Stage Entities."

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 condensed financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of  management, necessary for a fair presentation. These condensed financial statements have not been audited.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. However, these condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report for the year ended August 31, 2009.

In preparing the accompanying unaudited condensed consolidated financial statements, the Company has reviewed, as determined necessary by the Company's management, events that have occurred after May 31, 2010, up until the issuance of the financial statements, which occurred on July 14, 2010.
 
 
9

 

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 the last half of fiscal 2008, the Company invested in three oil & gas drilling prospects in Washington County, Oklahoma, and has advanced additional funds to participate in three re-works.  Two wells began initial sales in November 2008.  Two other wells have been determined to be commercially uneconomical and the related costs have been included in the full cost pool.  The Company recorded an asset impairment of $18,676 as a result of a ceiling test limitation.

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 Company rescinded the purchase of the real estate property it had previously acquired 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 the next twelve months. The Company, which has been in the development stage since its inception, March 22, 1999, has accumulated a net loss of $2,823,265 ($28,995 in a prior development stage) through May 31, 2010, and incurred losses of $418,470 for the nine months then ended.  The Company's convertible note payable in the amount of $80,000 is currently past due.

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.
 
 
10

 

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.  During 2008, the Company revised its business plan, rescinded its real estate purchase and began investing in energy leases and oil and gas drilling prospects.  The Company borrowed $140,000 ($80,000 balance at May 31, 2010) with a note payable and raised $413,172 from the sale of its common stock during fiscal 2008.  However, while energy prices have improved 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 provisions of full cost accounting.

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

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

Stock option plans

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model.   The Company, during the three months ended May 31, 2008 granted options to acquire 1,000,000 shares of its common stock that were fair valued under the Black Scholes model in the amount of $328,975.  This amount was amortized over the twelve month option period and the option expired.  No options are currently outstanding.
 
 
11

 

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 $4,878 and $15,152 at May 31, 2010 and August 31, 2009, respectively in unproved property costs that have not been evaluated and are not being amortized.  As properties are evaluated, the related costs would be transferred to proven oil and natural gas properties using full cost accounting.  At May 31, 2010, the Company transferred $18,676 in unproved property costs to the full cost pool when it was determined the properties were not capable of commercial production.  In addition, the Company recorded an asset impairment of $18,676 due to a ceiling test limitation.  Amortization in the amount of $336 and $594 was recorded during the three months ended May 31, 2010 and 2009 and $713 and $783 in the nine months ended May 31, 2010 and 2009, respectively.

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 a consultant to the Company.

The Company assesses the recoverability of the carrying value of its non-oil and gas long-lived assets when events occur that indicate an impairment in value may exist.  An impairment loss is indicated if the sum of the expected undiscounted future net cash flows is less than the carrying amount of the assets.  If this occurs, an impairment loss is recognized for the amount by which the carrying amount of the assets exceeds the estimated fair value of the asset.  No impairments of non-oil and gas long-lived assets have been recorded as of May 31, 2010.

Depreciation and amortization

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

Natural gas sales and gas imbalances

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

12

 
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 prepares its oil and natural gas reserves with the assistance of a consultant.  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 as of August 31, 2009.  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.

Deferred income taxes

Deferred income taxes are provided for temporary differences between financial and tax reporting in accordance with the liability method.  A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless management believes it is more likely than not that such asset will be realized.

Earnings (loss) per common share

RER is required to report both basic earnings per share, which is based on the weighted-average number of common shares outstanding, and diluted earnings per share, which is based on the weighted-average number of common shares outstanding plus all potential dilutive shares outstanding. At May 31, 2010 and 2009, there were no 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.
 
 
13

 

Credit risk

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 probable 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.  There are no contingencies of which the Company is aware at May 31, 2010.

Asset retirement obligations

The fair value of a liability for an asset retirement obligation is required to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, and that the associated retirement costs be capitalized as part of the carrying amount of the long-lived asset.  The Company determines its asset retirement obligation by calculating the present value of the estimated cash flows related to the liability.  Periodic accretion of the discount of the estimated liability would be recorded in the statement of operations.  At May 31, 2010 and August 31, 2009, the Company has estimated that its share of the salvage value of lease equipment would exceed its share of the cost of plugging and abandoning its producing properties.

Recent accounting pronouncements

Below is a listing of the most recent accounting standards and their effect on the Company, as issued by the Financial Accounting Standards Board ("FASB") in the form of Accounting Standards Updates ("ASU").  We have evaluated all recent accounting pronouncements through July 13, 200 and find none that would have a material impact on the financial statements of the Company, except for those detailed below.

In April 2010, the FASB issued ASU 2010-14, "Accounting for Extractive Activities — Oil & Gas."  ASU 2010-14 amends paragraph 932-10-S99-1 due to SEC Release No. 33-8995, "Modernization of Oil and Gas Reporting."  The amendments to the guidance on oil and gas accounting are effective August 31, 2010, and are not expected to have a significant impact on the Company's financial position.

 
14

 

In February 2010, the FASB issued Accounting Standards Update 2010-09 (ASU 2010-09), "Subsequent Events (Topic 855)."  The amendments remove the requirements for an SEC filer to disclose a date, in both issued and revised financial statements, through which subsequent events have been reviewed.  Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP.  ASU 2010-09 is effective for interim or annual financial periods ending after June 15, 2010.  The Company does not expect the provisions of ASU 2010-09 to have a material effect on the financial position, results of operations or cash flows of the Company.

In January 2010, the FASB issued ASU 2010-03, Extractive Activities—Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures.  This amendment to Topic 932 has improved the reserve estimation and disclosure requirements by (1) updating the reserve estimation requirements for changes in practice and technology that have occurred over the last several decades and (2) expanding the disclosure requirements for equity method investments.  This is effective for annual reporting periods ending on or after December 31, 2009.  However, an entity that becomes subject to the disclosures because of the change to the definition oil- and gas- producing activities may elect to provide those disclosures in annual periods beginning after December 31, 2009.  Early adoption is not permitted.  The Company does not expect the provisions of ASU 2010-09 to have a material effect on the financial position, results of operations or cash flows of the Company.

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.

2
INVESTMENT IN ENERGY PROPERTIES

UNDEVELOPED LEASEHOLD NOT BEING AMORTIZED

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

The Company is negotiating with energy companies to develop the potential resources that may be contained in these properties.  The Company has entered into agreements and then sold, by assignment, the rights, title and interest in certain of these leases and retained an over-riding royalty interest.  Revenue from these transactions is accounted for using the full cost method of accounting.
 
 
15

 

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 began initial sales in November 2008 and the third well was determined to not have commercially economic production and the related costs were transferred to the full cost pool.  The Company recorded an asset impairment during the quarter ended May 31, 2010, of $18,676 due to a ceiling test limitation.

Prepaid drilling cost includes a balance of $32,558 and $50,343 in prepaid costs for the initial three wells in Washington County, Oklahoma and three additional wells to be re-worked as of May 31, 2010 and August 31, 2009, respectively.
 
3
CONVERTIBLE NOTE PAYABLE

The Company has a loan with an individual in the original amount of $140,000, with interest payable monthly at 15% and which has been extended to January 1, 2010 and revised to be convertible into common stock at a conversion price to be reasonably agreed upon by the parties.  The loan is currently past due and has a balance of $80,000 at May 31, 2010.
 
4
CONVERTIBLE DEBENTURE

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

Face amount of the debenture
  $ 6,000  
Unamortized balance of the intrinsic value of the conversion feature
    (1,470 )
Carrying value of the debenture
  $   4,530  
 
During the period ended May 31, 2010, $630 of the proceeds assigned to the conversion feature was included in interest expense and added back to the debenture carrying value.

 
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5
INCOME TAXES

RER has not recorded a deferred tax benefit or expense for all prior periods through November 30, 2009, 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 nine months ended May 31, 2010 and 2009 as follows:

   
2010
   
2009
 
             
"Normally expected" income tax benefit
  $ 142,300     $ 457,200  
State income taxes net of federal benefit
    16,700       53,800  
Valuation allowance
    (159,000 )     (511,000 )
Actual income tax expense
  $ -     $ -  
 
RER has available unused net operating loss carryforwards of approximately $2,817,000 which will expire in various periods from 2019 to 2030, some of which may be limited as to the amount available on an annual basis.

6
STOCKHOLDERS’ EQUITY

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.  At May 31, 2010 and August 31, 2009, 24,513,731 and 22,388,731 shares were issued and outstanding, respectively.

At this same time, the Company was authorized to issue 10,000,000 shares of its $0.00001 preferred stock.  In December 2007 the Company issued 100,000 shares of its preferred stock for $1,000 to the Company's chief executive officer.

During the past two years, 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 $125,900 in cash, which has been paid.  In addition, an aggregate of 7,541,000 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 1 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 is approximately $2,042,615.  As of May 31, 2010, the un-amortized portion of these agreements amounts to $27,045 and is included as a reduction of stockholders equity in the accompanying financial statements.

During February 2010, we issued 100,000 shares of our common stock, valued at $6,000, for the right of first refusal to acquire a 25% participation interest in the next 25 wells to be drilled by North American Energy Resources, Inc. in Washington County, Oklahoma.  The cost was added to the full cost pool.
 
 
17

 

During February 2010, we issued 525,000 shares of our common stock valued at $31,500 and during April 2010, we issued 500,000 shares of our common stock valued at $20,000 for consulting agreements, the cost of which is being amortized over the lives of the agreements.
 
7
RELATED PARTY TRANSACTIONS

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.  At May 31, 2010  the Company is owed $60,065, including accrued interest for this note.

On July 14, 2009, the President and Chief Executive Officer of the Company purchased 950,000 shares of the Company's $0.00001 par value common shares for $0.05 per share.  The Company received a cash payment of $105 and a note receivable in the amount of $47,395 for this purchase.  The note bears interest at 2% per annum and payments of principal and interest are due on July 14, 2014.  At May 31, 2010 the Company is owed $47,395, including accrued interest for this note.

On July 28, 2009, the Secretary and Treasurer of the Company purchased 600,000 shares of the Company's $0.00001 par value common shares for $0.05 per share.  The Company received a cash payment of $63 and a note receivable in the amount of $29,937 for this purchase.  The note bears interest at 2% per annum and payments of principal and interest are due on July 28, 2014.  At May 31, 2010 the Company is owed $30,440, including accrued interest for this note.

On November 24, 2009, the President and Chief Executive Officer of the Company purchased 1,000,000 shares of the Company's $0.00001 par value common shares for $0.06 per share.  The Company received a cash payment of $103 and a note receivable in the amount of $59,897 for this purchase.  The note bears interest at 2% per annum and payments of principal and interest are due on November 24, 2014.  At May 31, 2010  the Company is owed $59,897, including accrued interest for this note.

Reimbursements - The Company's Chief Executive Officer received $9,210 and $21,083 during the nine months ended May 31, 2010 and 2009, respectively, as reimbursements for travel and office expenses.
 
 
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8
SUBSEQUENT EVENTS

On June 1, 2010, the Company's CEO acquired 7,000,000 shares of the Company's $0.00001 par value common stock for cash in the amount of $70 and a promissory note in the amount of $104,930 bearing interest at 2% per annum and due on June 1, 2015.

On June 2, 2010, the Board of Directors of the Company approved issuing 700,000 shares of the Company's $0.00001 par value common stock to the holder of the convertible note payable with an unpaid balance of $80,000 at May 31, 2010, as additional consideration for the past due note.  The Company's common stock was valued at $14,000 based on the closing price on that date.  This amount was accrued at May 31, 2010 as interest expense.

On June 2, 2010, the Company entered into an agreement with a consultant for services to be provided in Romania and Hungry in energy resources and mining and for assistance in raising funds.  The agreement provides for cash compensation in the amount of $36,000 and 1,500,000 shares of the Company's $0.00001 par value common stock for services to be provided between June 2, 2010 and December 28, 2010.

 On June 24, 2010, the Company's CEO acquired 6,000,000 shares of the Company's $0.00001 par value common stock for cash in the amount of $60 and a promissory note in the amount of $119,940 bearing interest at 2% per annum and due on June 23, 2015.
 
 
19

 

ITEM 2:          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 the matters set forth in this statement.

At the present time we have only nominal overhead costs.  Our officers do not receive any payroll and our administrative assistance is now being provided on a reimbursement basis.  This situation will remain constant until such time as we have sufficient capital to afford to pay salaries.

The Company was the successful bidder in United States Government auctions to purchase certain oil and gas lease rights.  The oil and gas leases currently represent approximately 6,000 acres of property located in Crook, Banner, Weston, Goshen, Niobrara, Converse, Campbell, Freemont, Laramie, Sublette and Platt County Wyoming.  The Company also holds leases for the uranium rights on approximately 3,500 acres in Wyoming.  The Company is negotiating with energy companies to develop the potential resources that may be contained in these properties.  The Company has completed several transactions wherein the Company sold the lease rights and retained a royalty interest.  No exploration activities have yet taken place.  The Company has received proceeds of $47,975 from these transactions.

During fiscal 2008, we 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 began initial sales in November 2008. The third well was determined to not have commercially economic production and the related costs were expensed as an asset impairment at May 31, 2010.  An additional net $36,700 has been advanced to participate in three additional workover prospects.

During February 2010, we issued 100,000 shares of our common stock, valued at $6,000, for the right of first refusal to acquire a 25% participation interest in the next 25 wells to be drilled by North American Energy Resources, Inc. in Washington County, Oklahoma.

We have had only nominal revenues since inception.  Our auditors have expressed substantial doubt about our ability to continue as a going concern.  Our current assets at May 31, 2010 consist of our cash balance of $5 and accounts receivable of $4,990.  Our convertible note payable has a balance of $80,000 which is past due at May 31, 2010.  We expect to convert at least a portion of this balance to common stock before the end of the fiscal year.  Our ability to continue as a going concern is contingent upon our ability to raise funds through private placements of our common stock and obtaining loans until we establish sufficient business to support our operating costs.

We anticipate requiring substantial capital for investments in energy leases and oil and gas drilling prospects and our operating costs have increased for consultants finding prospects.  There can be no assurance that we will be able to continue to find sufficient funding to support our current business plan.
 
 
20

 

COMPARISON OF THREE MONTHS ENDED MAY 31, 2010 AND 2009

Revenues - We had revenue from oil and gas production of $3,221 and $1,810 during the three months ended May 31, 2010 and 2009, respectively.  Our revenue is all from oil production for which prices have improved during the past twelve months.  The Company had initial production during the first quarter of the 2009 period and were shut-in completing production facilities during the second quarter.  The wells were put back on line during the third quarter of 2009.  During the 2010 quarter, the Company the wells produced for the full period.

Costs and expenses - Our costs and expenses were as follows for the three months ended May 31, 2010 and 2009.

   
2010
   
2009
 
             
Lease operating expense
  $ 2,739     $ 899  
Production taxes
    232       130  
Depreciation, depletion and amortization
    336       594  
Asset impairment
    18,676       -  
Non-cash compensation
    24,628       235,995  
Other selling, general and administrative expense
    8,421       48,125  
    $ 55,032     $ 285,743  
 
Asset impairment expense is a result of an impairment due to a ceiling test limitation as discussed above.

Non-cash compensation amounted to $24,628 and $235,995 during the three months ended May 31, 2010 and 2009, respectively.  Non-cash compensation is from the amortization of the calculated value of common shares issued for consulting agreements.  (Note 6).

Other selling, general and administrative expenses have decreased primarily as a result of cost cutting measures put in place by the Company while they explore money raising options.

Other expenses (income) - consist of the following during the three months ended May 31, 2010 and 2009.

   
2010
   
2009
 
             
Gain on comodities trading
  $ -     $ (2,568 )
Interest income - related party
    (1,449 )     (1,263 )
Interest expense
    18,755       3,500  
    $ 17,306     $ (331 )
 
During the three-month period in fiscal 2009, we recognized a gain of $2,568 from commodities trading, recognized interest expense of $3,500 and recorded interest income in the amount of $1,263 from related parties.  During the same period in 2010, we had closed the commodities trading account, had interest expense of $18,755 and recorded interest income of $1,449 from a related party.  Interest expense included $14,000 in the 2010 period which was paid in June 2010 with the issue of 700,000 shares of our common stock.
 
 
21

 

COMPARISON OF NINE MONTHS ENDED MAY 31, 2010 AND 2009

Revenues - We had revenue from oil and gas production of $6,372 and $2,499 during the nine months ended May 31, 2010 and 2009, respectively.  Our revenue is all from oil production for which prices had improved during the past twelve months.  The Company had initial production during the first quarter of the 2009 period and were shut-in completing production facilities during the second quarter.  During the 2010 period, the Company was shut-in for approximately 1/2 of the second quarter for repairs which were delayed due to the weather.

Costs and expenses - Our costs and expenses were as follows for the nine months ended May 31, 2010 and 2009.

   
2010
   
2009
 
             
Lease operating expense
  $ 6,000     $ 3,649  
Production taxes
    459       180  
Depreciation, depletion and amortization
    713       783  
Asset impairment
    18,676       -  
Non-cash compensation
    298,262       1,137,072  
Other selling, general and administrative expense
    78,705       173,913  
    $ 402,815     $ 1,315,597  
 
Asset impairment expense is a result of an impairment due to a ceiling test limitation as discussed above.

Non-cash compensation amounted to $298,262 and $1,137,072 during the nine months ended May 31, 2010 and 2009, respectively.  Non-cash compensation is from the amortization of the calculated value of common shares issued for consulting agreements.  (Note 6).

Other selling, general and administrative expenses have decreased primarily as a result of cost cutting measures put in place by the Company while they explore money raising options.

Other expenses (income) - consist of the following during the nine months ended May 31,  2010 and 2009.

   
2010
   
2009
 
             
Loss on comodities trading
  $ 719     $ 25,168  
Interest income
    -       (2,853 )
Interest income - related party
    (4,197 )     (2,518 )
Interest expense
    25,505       11,875  
    $ 22,027     $ 31,672  

 
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During the nine-month period in fiscal 2009, we recognized a loss of $25,168 from commodities trading, recognized interest expense of $11,875 and recorded interest income in the amount of $2,853 from unrelated parties and $2,518 from related parties.  During the same period in 2010, we had closed the commodities trading account in the first quarter and recognized a loss of $719, had interest expense of $25,505 and recorded interest income of $4,197 from a related party.  Interest expense included $14,000 in the 2010 period which was paid in June 2010 with the issue of 700,000 shares of our common stock.

OFF-BALANCE SHEET ARRANGEMENTS

None.

 
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ITEM 3:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4T:
CONTROLS AND PROCEDURES
 

The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of May 31, 2010.  Based on that review and evaluation, which included inquiries made to certain consultants of the Company, the CEO and CFO concluded that the Company’s current disclosure controls and procedures, as designed and implemented, are not effective, primarily due to a lack of segregation of duties, in ensuring that information relating to the Company required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including insuring that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

(b)  Changes in Internal Controls

There have been no changes in internal controls over financial reporting or in other factors that could significantly affect these controls that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting during the quarter ended May 31, 2010, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
 
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PART II - OTHER INFORMATION

ITEM 1:
LEGAL PROCEEDINGS

None

ITEM 1A:
RISK FACTORS


ITEM 2:
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During April 2010, the Company issued 500,000 shares of its common stock, valued at $20,000, as consideration for a consulting agreement.

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

ITEM 3:
DEFAULTS UPON SENIOR SECURITIES.

None
 
ITEM 4:
 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
None
 
ITEM 5:
OTHER INFORMATION.

None

ITEM 6:
EXHIBITS
 
 
Exhibit 31
Certification pursuant to 18 U.S.C. Section 1350
 
Section 302 of the Sarbanes-Oxley Act of 2002

 
Exhibit 32
Certification pursuant to 18 U.S.C. Section 1350
 
Section 906 of the Sarbanes-Oxley Act of 2002

 
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

   
ROYAL ENERGY RESOURCES, INC.
     
Date:  July 14, 2010
   
     
 
By: /s/ 
Jacob Roth
   
President, Chief Executive Officer and
   
Chief Financial Officer
 
 
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