Royal Energy Resources, Inc. - FORM 10-K

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EX-31.1 - ROYAL ENERGY RESOURCES, INC. FORM 10-K - Royal Energy Resources, Inc.	ex31.htm
EX-32.1 - ROYAL ENERGY RESOURCES, INC. FORM 10-K - Royal Energy Resources, Inc.	ex32.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________

FORM 10-K

_________________

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: August 31, 2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________

_________________

Royal Energy Resources, Inc.

(Exact name of registrant as specified in its charter)

_________________

Delaware	000-52547	11-3480036
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation or Organization)	File Number)	Identification No.)

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

800-620-3029
(Registrant’s telephone number, including area code)

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

Title of each class - None
Name of each exchange on which registered – N/A

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

Title of each class – Common Stock, $0.00001 Par Value
Name of each exchange on which registered – N/A

_________________

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 þ No o

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 (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes þ No o

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was 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. $216,069.

Note.—If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in the Form.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of December 10, 2012, the registrant had outstanding 179,527 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

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

Royal Energy Resources, Inc.

Table of Contents

Form 10-K

		Page
	PART I
Item 1	Business	2
Item 1A	Risk Factors	7
Item 1B	Unresolved Staff Comments	7
Item 2	Properties	7
Item 3	Legal Proceedings	9
Item 4	[Removed and Reserved]	9

	PART II
Item 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
Item 6	Selected Financial Data	11
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	14
Item 8	Financial Statements and Supplementary Data	14
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	32
Item 9A	Controls and Procedures	32
Item 9B	Other Information	32

	PART III
Item 10	Directors, Executive Officers and Corporate Governance	33
Item 11	Executive Compensation	33
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	34
Item 13	Certain Relationships and Related Transactions, and Director Independence	36
Item 14	Principal Accountant Fees and Services	36

PART IV
Item 15	Exhibits and Financial Statement Schedules	37

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 August 7, 2012, the Company received approval by written consent, in lieu of a special meeting, of the holders of a majority of our outstanding voting power authorizing the Board of Directors of the Company to: (i) effectuate the reverse stock split of our issued and outstanding shares of common stock, par value $0.00001, on a 1 for 500 basis and (ii) increase the authorized shares of common stock, par value $0.00001, from 100,000,000 shares to 500,000,000 shares. The stock split was effectuated on October 1, 2012 upon filing appropriate documentation with FINRA. The increase in authorized shares was completed on October 9, 2012 when the amendment was filed with the Delaware Secretary of State. All share references included herein have been adjusted as if the change took place before the date of the earliest transaction reported.

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

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

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.f the Company to Royal Energy Resources, Inc.

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

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

BUSINESS

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

ENERGY AND MINING

The Company is currently pursuing gold, silver, copper and rare earth metals mining concessions in Romania, Bulgaria and Canada and mining leases in the United States. If successful, the Company plans to concentrate its efforts to develop these properties. At August 31, 2012 and August 31, 2011, the Company held the lease for 2,100 acres of rare earth and precious metals leases in Crook County, Wyoming, respectively. There are leases for 1,280 acres pending. The rare earth and precious metals leases are approximately 5-15 miles from Bear Lodge Mountain near Sundance, Wyoming. The U.S. Geological Survey has studied Bear Lodge Mountain extensively (USGS Prof. paper #1049-D) and has estimated it contains one of the largest deposits of disseminated rare earth elements in North America.

In addition, the Company holds the lease for uranium rights on approximately 960 acres in Laramie County, Wyoming as of August 31, 2012 and August 31, 2011, respectively. The uranium rights are located on a trend approximately 25-30 miles from a proposed uranium mine in Weld County, Colorado which was estimated to have uranium reserves valued at over $500 million.

UNDEVELOPED LEASEHOLD NOT BEING AMORTIZED

The Company has been the successful bidder in United States Government auctions to purchase certain oil and gas lease rights. The oil and gas leases comprised approximately 3,000 acres in Weston, Goshen, Converse, Freemont, Laramie and Platt Counties, Wyoming as of August 31, 2011. At August 31, 2012, all leases covering oil and gas lease rights had been sold with an overriding royalty interest retained. As of August 31, 2012, the Company had collected approximately $89,000 from sales of leases and royalty interests.

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

OIL AND GAS DRILLING PROSPECTS

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

REAL ESTATE

Our primary objective was to acquire, make necessary renovations and resell both residential and commercial real estate. It was anticipated that we might lease some of the properties while they were being held for sale. We completed the acquisition of our first property on August 25, 2005, a condominium located in Brooklyn, New York, in exchange for $25,000 in cash and 3,800 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 preparatory 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 3,800 shares of the Company’s common stock. The original value of the real estate was $215,000 and upon the rescission was valued at $200,000. The Company has recorded a loss of $15,000 on this transaction during this period, upon transferring the real estate to the original seller and canceling the 13,800 shares.

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

OTHER

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

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

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

FINANCIAL POSITION AND FUTURE FINANCING NEEDS

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

We have not established sources of revenues sufficient to fund the development of business, projected operating expenses and commitments for our fiscal year ending August 31, 2013. We have been in the development stage since our inception, March 22, 1999, have accumulated a net loss of $3,302,519 through August 31, 2012, and incurred a loss of $126,252 for the year then ended.

The Company sold its common stock in private transactions which raised $120,500 in 2006, $80,070 in 2007, $413,172 in 2008, $3,600 in 2009 and $7,500 in 2012. The Company plans to make sales of its common stock in private transactions or to borrow funds as needed to raise sufficient capital to fund the development of business, projected operating expenses and commitments. However, there can be no assurance that we will be able to obtain sufficient funding to develop our current business plan.

COMPETITION

ENERGY AND MINING

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

REAL ESTATE

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

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

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

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

GOVERNMENTAL REGULATIONS, APPROVAL, COMPLIANCE

ENERGY AND MINING

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

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

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

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

ENVIRONMENTAL

ENERGY AND MINING

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

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

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

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

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

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

Employees

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

Item 1A: RISK FACTORS

Not applicable.

Item 2: PropertIES

MINING

UNDEVELOPED LEASEHOLD NOT BEING AMORTIZED

OIL AND GAS DRILLING PROSPECTS

During 2008, the Company prepaid $119,011 as estimated drilling and completion costs for a 25% working interest in three wells in Washington County, Oklahoma. Two of the wells were completed in September and October 2008 and the third well was abandoned in 2010. During 2009, the Company advanced an additional $42,000, net, to apply toward workover of three additional wells. The work on the workover wells was completed during 2010 without obtaining commercial production. Effective October 1, 2010, the Company's interest in the two producing wells were sold.

Proved Reserves and Estimated Future Net Revenue

The SEC defines proved oil and gas reserves as the estimated quantities of crude oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e. prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions.

The process of estimating oil and natural gas reserves is complex and requires significant judgment. Our policies regarding booking reserves require proved reserves to be in compliance with the SEC definitions and guidance. With the sale of our only producing reserves effective October 1, 2010, we have no proved reserves at August 31, 2012 and 2011.

Drilling Activities

The following table summarizes the results of our development drilling activity for the years ended August 31, 2012, 2011, 2010, 2009 and 2008. The Company has not had any exploratory drilling activity.

Development Well Activity

	Wells Drilling		Net Wells Completed (2)
	Gross (1)	Net (2)	Productive	Dry

Year ended August 31, 2012	-	-	-	-
Year ended August 31, 2011	-	-	-	-
Year ended August 31, 2010	-	-	-	0.98
Year ended August 31, 2009	2.00	0.98	0.50	-
Year ended August 31, 2008	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 had the right to participate in additional wells in this prospect until the properties were sold effective October 1, 2010.

Operation of Properties

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

Title to Properties

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

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

MINING

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, 2011, we owned oil and gas leases comprising approximately 3,000 acres in Wyoming,. At August 31, 2012, all leases covering oil and gas lease rights had been sold with an overriding royalty interest retained.

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 3,800 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 3,800 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 recorded a loss of $15,000 on this transaction during 2008.

Item 3: LEGAL PROCEEDINGS

There are no pending or threatened lawsuits against us.

Item 4: [REMOVED AND RESERVED]

PART II

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

(a)

MARKET INFORMATION

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

The following table sets forth the quarterly high and low daily close for our common stock as reported by the OTCBB for the two years ended August 31, 2012 and 2010. 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

2012
Quarter ended August 31, 2012	$ 2.00	$ 0.59
Quarter ended May 31, 2012	$ 2.50	$ 1.16
Quarter ended February 29, 2012	$ 2.50	$ 1.94
Quarter ended November 30, 2011	$ 1.94	$ 1.94

2011
Quarter ended August 31, 2011	$ 15.00	$ 5.00
Quarter ended May 31, 2011	$ 40.00	$ 10.00
Quarter ended February 28, 2011	$ 55.00	$ 5.00
Quarter ended November 30, 2010	$ 20.00	$ 5.00

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, 2012, we sold 6,000 shares of our common stock for $7,500 in cash and issued 2,000 shares of our common stock for a consulting agreement valued at $2,500.

(b)

HOLDERS

There are approximately 85 shareholders of record of the Company’s common stock at August 31, 2012.

(c)

DIVIDENDS

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

(d)

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table summarizes certain information as of August 31, 2012, 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	-		8,000
	-		8,000

The Royal Energy Resources, Inc. 2008 Stock Option Plan (“Plan”) was filed on June 27, 2008 and reserves 8,000 shares for Awards under the Plan, of which up to 6,000 may be designated as Incentive Stock Options. The Company’s Compensation Committee is designated to administer the Plan at the direction of the Board of Directors.

Item 6: SELECTED FINANCIAL DATA

Not applicable.

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

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

Oil and gas sales

The Company had $17,000 in oil and gas lease sales in 2012 and none in 2011.

Costs and expenses

Costs and expenses consist of the following for the years ended August 31, 2012 and 2011.

		2012		2011
Cost of leases sold	$	13,260	$	—
Lease operating expense		—		504
Non-cash compensation		55,986		175,309
Other selling, general and administrative expense		71,761		85,268
	$	141,007	$	261,081

Cost of leases sold includes the balance of the Company’s capitalized costs associated with unproved properties not being amortized under the full cost method.

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

Non-cash compensation includes $55,986 and $175,309 in 2012 and 2011, respectively, in compensation to consultants pursuant to consulting agreements. The agreements cover periods ranging from 2.5 months to 16.5 months and the related fair value of the shares and options are being amortized over the life of the agreements.

Other selling, general and administrative expense decreased from $85,268 in 2011 to $71,761 in 2012. The decrease includes a decrease in accounting and auditing of $5,953, a decrease in bad debt expense of $9,619, a decrease in legal and professional costs of $8,022, a decrease in website expense of $5,988 and an increase in cash consulting fees of $26,429.

Other expense (income):

Other expense (income) consists of the following for the years ended August 31, 2012 and 2011.

		2012			2011
Interest expense	$	8,497		$	18,063
Interest income from related parties		(6,252	)		(8,727	)
	$	2,245		$	9,336

Interest expense decreased in 2012 from 2011, primarily due to the 2011 amount including debt with a higher average interest rate.

Interest income was accrued on the stock subscription receivables (related parties) in 2012 and 2011.

Going Concern Factors—Liquidity

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

We have not established sources of revenues sufficient to fund the development of business, projected operating expenses and commitments for our fiscal year ending August 31, 2012. The Company, has accumulated a net loss of $3,302,519 through August 31, 2012, ($28,995 in an earlier development stage business and $3,273,524 in the current development stage) and incurred losses of $126,252 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.

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

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

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

Off-Balance Sheet Arrangements

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

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

Not applicable.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 8: Financial Statements AND SUPPLEMENTARY DATA

The Financial Statements of Royal Energy Resources, Inc. (a development stage company) together with the report thereon of Paritz & Company, P.A. for the years ended August 31, 2012 and 2011 and the period from inception (July 22, 2005) through August 31, 2012, is set forth as follows:

Index to Financial Statements

	Page

Report of Independent Registered Public Accounting Firm:
Paritz & Company, P.A.	15
Balance Sheets	16
Statements of Operations	17
Statements of Stockholders' Deficit	18
Statements of Cash Flows	22
Notes to Financial Statements	24

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, 2012 and 2011 and the related statements of operations and cash flows for the years ended August 31, 2012 and 2011 and the period from inception (July 22, 2005) through August 31, 2012 and the statement of stockholders’ equity for the period from inception (July 22, 2005) through August 31, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Royal Energy Resources, Inc.., (formerly World Marketing, Inc.) (a development stage company) as of August 31, 2012 and 2011, and the results of its operations and its cash flows for the years ended August 31, 2012 and 2011 and the period from inception (July 22, 2005) through August 31, 2012 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.

By: /s/ Paritz & Company, P.A.

Hackensack, New Jersey
December 13, 2012

ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Balance Sheets
August 31, 2012 and 2011
	2012			2011
Assets
Current assets
Cash	$	18,386		$	35
Accounts receivable		—			8,000
Total current assets		18,386			8,035
Properties
Mining properties		12,949			9,729
Unproved properties not being amortized (full cost method)		—			8,462
		12,949			18,191
Accumulated depreciation, depletion and amortization		—			—
Total properties		12,949			18,191
Total assets	$	31,335		$	26,226

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	73,590		$	71,292
Accrued expenses		8,497			—
Notes payable		49,400			—
Convertible note and debenture payable		65,600			80,000
Due to shareholder		8,132			—
Total current liabilities		205,219			151,292

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, 2012 and August 31, 2011		1			1
Common stock: $0.00001 par value; authorized
500,000,000 shares; 179,527 and 171,527 shares issued
and outstanding at August 31, 2012 and 2011, respectively		2			2
Additional paid-in capital		3,510,452			3,500,452
Deferred option and stock compensation		(1,964	)		(52,000	)
Common stock subscription receivable		(379,856	)		(397,254	)
Deficit accumulated during the development stage		(3,302,519	)		(3,176,267	)
Total stockholders' equity		(173,884	)		(125,066	)
Total liabilities and stockholders' equity	$	31,335		$	26,226

See accompanying notes to financial statements.

ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Statements of Operations
Years Ended August 31, 2012 and 2011 and
from inception (July 22, 2005) through August 31, 2012

							Inception
							(July 22, 2005)
							Through
	Years Ended August 31,						August 31,
	2012			2011			2012

Oil and gas sales	$	17,000		$	—		$	29,704
Costs and expenses:
Cost of leases sold		13,260			—			13,260
Lease operating expense		—			504			14,494
Production taxes		—			—			913
Depreciation, depletion and amortization		—			—			2,148
Asset impairment		—			—			75,164
Non-cash compensation		55,986			175,309			2,335,201
Other selling, general and administrative expense		71,761			85,268			762,263
Total costs and expenses		141,007			261,081			3,203,443
Loss from operations		(124,007	)		(261,081	)		(3,173,739	)
Other expenses (income):
Loss on disposition by rescission agreement
on condominium		—			—			15,000
Commodities trading losses		—			—			36,557
Interest expense		8,497			18,063			81,678
Interest income from related party		(6,252	)		(8,727	)		(29,036	)
Interest income		—			—			(4,414	)
		2,245			9,336			99,785
Net loss	$	(126,252	)	$	(270,417	)	$	(3,273,524	)


Net loss per share, basic and diluted	$	(0.73	)	$	(1.79	)

Weighted average shares outstanding,
basic and diluted		172,517			150,934

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, 2012
					Additional
	Preferred stock		Common stock		Paid-in
	Shares	Amount	Shares	Amount	Capital

Inception, July 22, 2005	-	-	11,861	1	22,484
Sale of common stock for cash	-	-	640	-	32,000
Common stock issued for
real estate investment	-	-	3,800	-	190,000
Contribution to capital	-	-	-	-	6,560
Net loss	-	-	-	-	-
Balance August 31, 2005	-	-	16,301	1	251,044
Sale of common stock for cash	-	-	2,173	-	120,500
Net loss	-	-	-	-	-
Balance, August 31, 2006	-	-	18,474	1	371,544
Sale of common stock	-	-	9,340	-	161,660
Net loss	-	-	-	-	-
Balance, August 31, 2007	-	-	27,814	1	533,204
Sale of preferred stock	100,000	1	-	-	999
Sale of common stock	-	-	4,591	-	413,172
Common stock issued for
consulting contracts	-	-	5,930	-	977,775
Cash portion of consulting
contracts	-	-	-	-	-
Rescission of real estate
purchase	-	-	(3,800)	-	(200,000)
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	34,535	1	1,725,150
Sale of common stock for cash	-	-	40	-	3,600
Common stock issued for
consulting contracts	-	-	7,102	-	887,439
Cash portion of consulting contracts	-	-	-	-	-
Amortization of prepaid
consulting contracts:
Non-cash portion	-	-	-	-	-
Cash portion	-	-	-	-	-
Stock subscription receivable:
Sold	-	-	3,100	-	263,500
Payments received	-	-	-	-	-
Interest accrued	-	-	-	-	-
Net loss	-	-	-	-	-
Balance, August 31, 2009	100,000	$ 1	44,777	$ 1	$ 2,879,689
					(Continued)
See accompanying notes to financial statements.

ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity, continued
Inception of Development Stage, July 22, 2005, through August 31, 2012

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

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

See accompanying notes to financial statements.

Statements of Stockholders' Equity
(A Development Stage Company)
Statements of Stockholders' Equity
Inception of Development Stage, July 22, 2005, through August 31, 2012
					Additional
	Preferred stock		Common stock		Paid-in
	Shares	Amount	Shares	Amount	Capital

Balance August 31, 2009	100,000	$ 1	44,777	$ 1	$ 2,879,689
Common stock issued for:
Consulting contracts	-	-	5,050	-	81,500
Drilling program participation	-	-	200	-	6,000
Loan extension	-	-	1,400	-	14,000
Amortization of prepaid
Consulting contracts	-	-	-	-	-
Beneficial conversion feature
of convertible debt	-	-	-	-	2,100
Stock subscription receivable:
Sold	-	-	28,000	-	285,000
Payments received	-	-	-	-	-
Interest accrued	-	-	-	-	-
Net loss	-	-	-	-	-
Balance August 31, 2010	100,000	1	79,427	1	3,268,289
Amortization of deferred
expenses	-	-	-	-	-
Common stock issued for:
Consulting contracts	-	-	4,000	-	20,000
Loan and extension fee	-	-	10,800	-	178,500
Beneficial conversion feature
of convertible debt	-	-	-	-	9,000
Stock subscription receivable:
Sold	-	-	86,000	1	171,999
Cancelled	-	-	(8,500)	-	(147,336)
Payments received	-	-	-	-	-
Interest accrued	-	-	-	-	-
Common stock cancelled for
rescinded drilling program	-	-	(200)	-	-
Net loss	-	-	-	-	-
Balance August, 31, 2011	100,000	1	171,527	2	3,500,452
Stock subscription receivable:
Payments received	-	-	-	-	-
Interest accrued	-	-	-	-	-
Common stock issued for:
Cash	-	-	6,000	-	7,500
Consulting contract	-	-	2,000	-	2,500
Amortization of deferred expense	-	-	-	-	-
Net loss	-	-	-	-	-
Balance August, 31, 2012	100,000	$ 1	179,527	$ 2	$ 3,510,452
					(Continued)
See accompanying notes to financial statements.

ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Statements of Stockholders' Equity, continued
Inception of Development Stage, July 22, 2005, through August 31, 2012

											Deficit
											Accumulated
											During
		Subscription			Deferred			Accumulated			Development
		Receivable			Expenses			Deficit			Stage			Total

Balance, August 31, 2009	$	(151,969	)	$	(273,807	)	$	(28,995	)	$	(2,375,800	)	$	49,120
Common stock issued for:
Consulting contracts		—			(81,500	)		—			—			—
Drilling program participation		—			—			—			—			6,000
Loan extension		—			—			—			—			14,000
Amortization of prepaid
consulting contracts:		—			326,498			—			—			326,498
Beneficial conversion feature
of convertible debt		—			—			—			—			2,100
Stock subscription receivable:
Sold		(285,000	)		—			—			—			—
Payments received		21,239												21,239
Interest accrued		(6,610	)											(6,610	)
Net loss		—			—			—			(501,055	)		(501,055	)
Balance August 31, 2010		(422,340	)		(28,809	)		(28,995	)		(2,876,855	)		(88,708	)
Amortization of deferred
expenses		—			152,809			—			—			152,809
Common stock issued for:
Consulting contracts		—			(20,000	)		—			—			—
Loan and extension fee		—			(156,000	)		—			—			22,500
Beneficial conversion feature
of convertible debt		—			—			—			—			9,000
Stock subscription receivable:
Sold		(172,000	)		—			—			—			—
Cancelled		147,336			—			—			—			—
Payments received		58,477			—			—			—			58,477
Interest accrued		(8,727	)		—			—			—			(8,727	)
Common stock cancelled for
rescinded drilling program		—			—			—			—			—
Net loss		—			—			—			(270,417	)		(270,417	)
Balance August, 31, 2011		(397,254	)		(52,000	)		(28,995	)		(3,147,272	)		(125,066	)
Stock subscription receivable:
Payments received		23,650			—			—			—			23,650
Interest accrued		(6,252	)		—			—			—			(6,252	)
Common stock issued for:
Cash		—			—			—			—			7,500
Consulting contract		—			(2,500	)		—			—			—
Amortization of deferred expense		—			52,536			—			—			52,536
Net loss		—			—			—			(126,252	)		(126,252	)
Balance August, 31, 2012	$	(379,856	)	$	(1,964	)	$	(28,995	)	$	(3,273,524	)	$	(173,884	)


See accompanying notes to financial statements.

ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Statements of Cash Flows
Years Ended August 31, 2012 and 2011, and
the period from inception (July 22, 2005) through August 31, 2012

							From inception
							July 22, 2005
							through
	Years Ended August 31,						August 31,
	2012			2011			2012

Cash flows from operating activities
Net loss	$	(126,252	)	$	(270,417	)	$	(3,273,524	)
Adjustment to reconcile net loss to net cash used
in operating activities:
Depreciation, depletion and amortization		—			—			2,148
Value of common shares issued for services		55,986			71,309			2,231,201
Loss on rescission of condominium purchase		—			—			15,000
Interest accrued on stock subscription		(6,252	)		(8,727	)		(29,036	)
Asset impairment		—			—			75,164
Loan extension paid with common stock		—			104,000			118,000
Beneficial conversion feature of convertible
note payable		—			9,000			11,100
Bad debt expense		—			9,619			9,619
Change in other assets and liablities:
Accounts receivable		8,000			—			1,133
Prepaid expenses and other assets		—			21,075			49,392
Accounts payable		48,248			12,643			42,644
Accrued expenses		8,497			(243	)		8,497
Net cash used in operations		(11,773	)		(51,741	)		(738,662	)

Cash flows from investing activities
Investment in real estate		—			—			(11,000	)
Oil and gas property expenditures		(8,538	)		(2,097	)		(160,977	)
Proceeds from sales of undeveloped leasehold		17,000			—			87,275
Proceeds from sale of oil and gas properties		—			6,500			6,500
Investment in uranium and rare earth and precious metals properties		(3,220	)		(5,400	)		(14,293	)
Net cash provided by (used in) investing activities		5,242			(997	)		(92,495	)

Cash flows from financing activities
Proceeds of stockholder loans		8,132			—			8,182
Proceeds from subscription receivable		23,650			58,462			117,919
Loan proceeds		—			18,000			164,000
Loan repayment		(14,400	)		(24,000	)		(98,400	)
Proceeds from sale of common stock		7,500			—			656,842
Proceeds from sale of preferred stock		—			—			1,000
Net cash provided by (used in) financing activities		24,882			52,462			849,543

Net increase (decrease) in cash		18,351			(276	)		18,386
Cash, beginning of period		35			311			—
Cash, end of period	$	18,386		$	35		$	18,386

								(Continued)

See accompanying notes to financial statements.

ROYAL ENERGY RESOURCES, INC.
(A Development Stage Company)
Statements of Cash Flows, Continued
Years Ended August 31, 2012 and 2011, and
the period from inception (July 22, 2005) through August 31, 2012

					From inception
					July 22, 2005
					through
	Years Ended August 31,				August 31,
	2012		2011		2012


Supplemental cash flow information
Cash paid for interest	$	—	$	9,306	$	32,681
Cash paid for income taxes		—		—		—

Non-cash investing and financing activities:
Issuance of common stock for real estate	$	—	$	—	$	190,000
Contribution of stockholder loan to capital		—		—		6,560
Disposition of real estate per stock rescission
agreement		—		—		200,000
Common stock issued for participation in drilling
program		—		—		6,000
Common stock issued for stock subscription
receivables		—		172,000		615,922
Stock subscription receivables cancelled and common
stock retired		—		147,336		147,336



See accompanying notes to financial statements.

ROYAL ENERGY RESOURCES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

AUGUST 31, 2012

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

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

In preparing the accompanying financial statements, the Company has reviewed, as determined necessary by the Company's management, events that have occurred after August 31, 2012, up until the issuance of the financial statements, which occurred on December 13, 2012.

Organization and nature of business

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

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

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

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

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

Going Concern

The Company has not established sources of revenues sufficient to fund the development of business, projected operating expenses and commitments for fiscal year 2012. The Company, has accumulated a net loss of $3,302,519 through August 31, 2012, ($28,995 in an earlier development stage business and $3,273,524 in the current development stage) and incurred losses of $126,252 for the year then ended.

In March 2006, the Company sold 1,300 shares of its common stock for $65,000 to provide a portion of the cash required to purchase its first real estate investment. Subsequently, the Company continued to sell its common stock to raise capital to continue operations. In the previous fiscal year, the Company revised its business plan, rescinded its real estate purchase and began investing in energy leases and oil and gas drilling prospects. However, the energy business has a high degree of risk and there can be no assurance that the Company will be able to obtain sufficient funding to develop the Company's current business plan.

Cash and cash equivalents

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

Revenue recognition

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

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

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

Stock option plans

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

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

There are no options outstanding at August 31, 2012.

Property and equipment

The Company follows the full cost method of accounting for oil and natural gas operations. Under this method all productive and nonproductive costs incurred in connection with the acquisition, exploration and development of oil and natural gas reserves are capitalized. No gains or losses are recognized upon the sale or other disposition of oil and natural gas properties except in transactions that would significantly alter the relationship between capitalized costs and proved reserves. The costs of unevaluated oil and natural gas properties are excluded from the amortizable base until the time that either proven reserves are found or it has determined that such properties are impaired. The Company had $8,462 in capitalized costs relating to unevaluated properties and leases at August 31, 2011 and none at August 31, 2012. As properties are evaluated, the related costs would be transferred to proven oil and natural gas properties using full cost accounting. There are no capitalized costs for proved properties as of August 31, 2012 and 2011.

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.

The Company assesses the recoverability of the carrying value of its non-oil and gas long-lived assets when events occur that indicate an impairment in value may exist. An impairment loss is indicated if the sum of the expected undiscounted future net cash flows is less than the carrying amount of the assets. If this occurs, an impairment loss is recognized for the amount by which the carrying amount of the assets exceeds the estimated fair value of the asset. No impairments of other assets were recorded in 2012 or 2011.

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, 2012 and 2011, there were no natural gas imbalances

Investments in real estate

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

Oil and natural gas reserve estimates

Proved reserves, estimated future net revenues and the present value of our reserves are estimated based upon a combination of historical data and estimates of future activity. The reserve estimates are used in calculating depletion, depreciation and amortization and in the assessment of the Company’s Ceiling Limitation. Significant assumptions are required in the valuation of proved oil and natural gas reserves which may affect the amount at which oil and natural gas properties are recorded. Actual results could differ materially from these estimates. The Company had no proved reserves at August 31, 2012 and 2011.

Income taxes

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

Earnings (loss) per common share

The Company is required to report both basic earnings per share, which is based on the weighted-average number of common shares outstanding, and diluted earnings per share, which is based on the weighted-average number of common shares outstanding plus all potential dilutive shares outstanding. At August 31, 2012 and 2011, there were no potentially dilutive common stock equivalents. Accordingly, basic and diluted earnings (loss) per share are the same for each of the periods presented.

Use of estimates in the preparation of financial statements

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

Credit risk

In 2012 and 2011, the Company had cash deposits in certain banks that at times may have exceeded the maximum insured by the Federal Deposit Insurance Corporation. The Company monitors the financial condition of the banks and has experienced no losses on these accounts.

Contingencies

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

Asset retirement obligations

The fair value of a liability for an asset retirement obligation is required to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, and that the associated retirement costs be capitalized as part of the carrying amount of the long-lived asset. The Company determines its asset retirement obligation by calculating the present value of the estimated cash flows related to the liability. Periodic accretion of the discount of the estimated liability would be recorded in the statement of operations. At August 31, 2012 and 2011, the Company had no proved producing properties and no asset retirement obligation.

Fair value determination

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

Recent accounting pronouncements

There are several new accounting pronouncements issued by the Financial Accounting Standards Board ("FASB") which are not yet effective. Each of these pronouncements, as applicable, has been or will be adopted by the Company. As of October 31, 2012, none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of the Company.

Fiscal years

The year ended August 31, 2012 is referred to herein as 2012, the year ended August 31, 2011 is referred to herein as 2011 and the year ended August 31, 2010 is referred to herein as 2010.

INVESTMENT IN ENERGY PROPERTIES

Property costs are summarized as follows at August 31, 2012 and 2011.

		2012		2011

Gold, silver, copper and rare earth metals mining	$	8,620	$	5,400
Uranium rights		4,329		4,329
Mining properties		12,949		9,729
Unproved properties not being amortized		—		8,462
Total		12,949		18,191
Accumulated depreciation, depletion and amortization		—		—
	$	12,949	$	18,191

MINING

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 comprised approximately 3,000 acres in Weston, Goshen, Niobrara, Converse, Campbell, Freemont, Laramie, Sublette and Platt Counties, Wyoming as of August 31, 2011. At August 31, 2012, the Company had sold all of its remaining mineral leases and retained a 1% overriding royalty interest. As of August 31, 2012, the Company had collected approximately $89,000 from sales of leases and royalty interests.

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

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 was extended to January 1, 2010 and revised to be convertible into common stock at a conversion price to be reasonably agreed upon by the parties. On March 10, 2011, the Company issued 7,800 shares of its common stock to the note holder and the due date of the note with a balance of $80,000 was extended nine months, to December 10, 2011. The Company issued 42,000 shares of the Company's common stock to a group of individuals who agreed to repay the balance of the $80,000 loan. The sale of the shares is being accounted for as a stock subscription until the note is repaid. At August 31, 2012 and August 31, 2011, the loan balance was $65,600 and $80,000, respectively.

NOTES PAYABLE

Effective September 1, 2011, the Company exchanged accounts payable in the amount of $49,400 for two promissory notes in the same amount. The notes bear interest at 2% per annum and were due on October 31, 2011. The notes are currently past due.

INCOME TAXES

RER has not recorded a deferred tax benefit or expense for all prior periods through August 31, 2012, 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, 2012 and 2011 as follows:

		2012			2011

"Normally expected" income tax benefit	$	42,900		$	91,900
State income taxes less federal tax benefit		5,100			10,800
Valuation allowance		(48,000	)		(102,700	)
Actual income tax expense	$	—		$	—

RER has available unused net operating loss carryforwards of approximately $3,303,000 which will expire in various periods from 2019 to 2031, 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:

		2012			2011

Net operating loss carryforward	$	1,074,900		$	1,206,900
Valuation allowance		(1,074,900	)		(1,206,900	)
Total	$	—		$	—

STOCKHOLDERS’ EQUITY

Common stock

In October 2012, the Company amended its charter to authorize issuance of up to 500,000,000 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, 2012 and 2011, 179,527 and 171,527 shares were issued and outstanding, respectively.

Reverse stock split and increase in authorized shares

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

		2012		2011
Shares issued		2,000		11,800
Value of common stock and options	$	2,500	$	176,000
Unamortized balance, end of year	$	1,964	$	52,000
Terms of agreements		7		2.5-9
		months		months

STOCK SUBSCRIPTION RECEIVABLE

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

			Original	Interest			Balance		Balance
Name	Shares	Date	Balance	Rate			8/31/2012		8/31/2011

Jacob Roth	14,000	6/1/2010	105,000	2	%	$	101,285	$	70,495
Jacob Roth	12,000	6/24/2010	120,000	2	%		119,940		119,940
Jacob Roth	24,000	11/30/2010	60,000	2	%		60,000		60,000
Jacob Roth	20,000	2/17/2011	31,900	2	%		—		31,900
Frimet Taub	1,200	7/28/2009	29,937	2	%		29,937		29,937
							311,162		312,272
Accrued interest							3,094		4,982
Related party total							314,256		317,254
Debt retirement	42,000		80,000				65,600		80,000
						$	379,856	$	397,254

RELATED PARTY TRANSACTIONS

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

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

The President and Chief Executive Officer of the Company was paid approximately $10,000 and $14,600 for office and travel expense reimbursements during the years ended August 31, 2012 and 2011, respectively.

See Note 6 above regarding stock subscription receivables.

supplementary oil and gas reserve information (unaudited)

The Company had no interests in proved oil and natural gas properties during 2012 and 2011. Accordingly, no supplementary oil and gas reserve information is presented.

SUBSEQUENT EVENT

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

Not applicable.

ITEM 9A: CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures

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

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of August 31, 2012. Our management has determined that, as of August 31, 2012, the Company's disclosure controls and procedures are effective.

(b)

Changes in Internal Controls

There were no changes in our internal control over financial reporting during the quarter ended August 31, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(c)

Management’s Annual Report on Internal Control Over Financial Reporting

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in its Internal Control - Integrated Framework. Based on our evaluation under the framework in Internal Control - Integrated Framework, our management has concluded that our internal control over financial reporting was effective as of August 31, 2012.

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

ITEM 9B: OTHER INFORMATION

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

PART III

Item 10: Directors, Executive Officers and corporate governance

Executive Officers and Directors

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

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

			DATE FIRST
NAME	AGE	POSITION	ELECTED/APPOINTED

Jacob Roth	65	President, Chief Executive Officer, Chief Financial Officer and Director	March 22, 1999

Frimet Taub	32	Secretary, Treasurer and Director	March 22, 1999

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

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

Audit Committee

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

Compliance with Section 16(a) Of the Exchange Act

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

Code of Ethics

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

Item 11: Executive Compensation

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

In 2009, Mr. Roth acquired 1,900 shares of the Company's common stock for $47,500 ($0.05 per share) at a time when the closing price for the stock was $0.17 per share. The difference of $114,000 was included in non-cash compensation in the statement of operations.

In 2009, Mrs. Taub acquired 1,200 shares of the Company's common stock for $30,000 (0.05 per share) at a time when the closing price for the stock was $0.17 per share. The difference of $72,000 was included in non-cash compensation in the statement of operations

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

(a)

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The table below lists the beneficial ownership of the Company’s voting securities by each person known to be the beneficial owner of more than 5% of such securities. As of August 31, 2012, there were 179,527 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.


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

Common	Jacob Roth	83,400	46.46%

Series A	Jacob Roth	100,000	100.00%
Preferred

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

(b)

SECURITY OWNERSHIP OF MANAGEMENT

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


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

Common	Jacob Roth	83,400	46.46%

Common	Frimet Taub	1,700	0.94%

Common	All officers and directors	85,100	47.40%
	as a group (2 persons)

Series A	Jacob Roth	100,000	100.00%
Preferred

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

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

Equity Compensation Plan Information

			Number of securities
			remaining available for
			future issuance under
	Number of securities to be	Weighted-average exercise	equity compensation
	issued upon exercise of	price of outstanding	plans (excluding
	outstanding options,	options, warrants	securities reflected
Plan category	warrants and rights	and rights	in the first column

Equity compensation plans
approved by security holders	-		8,000

Equity compensation plans
not approve by security holders	-		-

Total	-		8,000

Item 13: Certain Relationships and Related Transactions and director independence

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

			Original	Interest			Balance		Balance
Name	Shares	Date	Balance	Rate			8/31/2012		8/31/2011

Jacob Roth	14,000	6/1/2010	105,000	2	%	$	101,285	$	70,495
Jacob Roth	12,000	6/24/2010	120,000	2	%		119,940		119,940
Jacob Roth	24,000	11/30/2010	60,000	2	%		60,000		60,000
Jacob Roth	20,000	2/17/2011	31,900	2	%		—		31,900
Frimet Taub	1,200	7/28/2009	29,937	2	%		29,937		29,937
							311,162		312,272
Accrued interest							3,094		4,982
						$	314,256	$	317,254

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 9,800 shares of our common stock for a total consideration of $490 in March 1999. Subsequently, Mr. Roth has acquired shares pursuant to stock subscription agreements as summarized above.

On April 14, 2011, the Company's CEO returned 8,500 shares of the Company's common stock to the Company and it was cancelled, along with the related stock subscription notes with a combined principal balance of $144,866 and accrued interest of $2,470.

Mrs. Taub is the daughter of Mr. Roth. Mrs. Taub acquired 500 shares of our common stock for a total consideration of $25 ($.0001 per share) in March 1999. In July 2009, Mrs. Taub acquired 1,200 shares of common stock in exchange for cash of $63 and a note receivable in the amount of $29,937, as summarized above.

The President and Chief Executive Officer of the Company was paid approximately $10,000 and $14,000 for office and travel expense reimbursements during the years ended August 31, 2012 and 2011, respectively.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees – The aggregate fees billed as of October 31, 2012 and 2011 for professional services rendered by the Company’s accountant was approximately $6,685 and $8,915 for the audit of the Company’s annual financial statements and the quarterly reviews for the fiscal years ended August 31, 2012 and 2011, respectively. The 2011 audit is included in the 2012 amount and the 2010 audit is included in the 2011 amount.

Audit-Related Fees – None.

Tax Fees – None.

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

Audit Committee Policies and Procedures – Not applicable.

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

part iv

ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	The following documents are filed as part of this report:
	1	Financial Statements - The following 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, 2012 and 2011
		• Statements of Operations for the years ended August 31, 2012 and 2011 and from inception (July 22, 2005) through August 31, 2012
		• Statements of Stockholders' Equity From Inception (July 22, 2005) through August 31, 2012
		•Statements of Cash Flows for the years ended August 31, 2012 and 2011 and from inception ( (July 22, 2005) through August 31, 2012
		• Notes to Financial Statements
	2	Financial Statement Schedules were omitted, as they are not required or are not applicable, or the required information is included in the Financial Statements.
	3	Exhibits - The following exhibits are filed with this report or are incorporated herein by reference to a prior filing, in accordance with Rule 12b-32 under the Securities Exchange Act of 1934.


Exhibit			Description
3.1			Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Form SB-2 Registration Statement dated May 19, 2006)
3.2			Amended and Restated By Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Form SB-2 Registration Statement dated May 19, 2006)
10.1			Real estate purchase agreement from Mermelstein dated August 25, 2005 (incorporated by reference to Exhibit 10.1 to the Company's Form SB-2 A/4 Registration Statement dated May 19, 2006)
10.2			Amendment to agreement to purchase real estate dated February 28, 2006 (incorporated by reference to Exhibit 10.2 to the Company's Form SB-2 A/4 Registration Statement dated may 19, 2006)
10.3			Form of Non-Qualified Stock Option Agreement used by the Company in connection with the Company's 2008 Stock Option Plan (incorporated by reference to Exhibit 4.1 to the Company's Form S-8 filed July 14, 2008)
31.1			Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934
32.1			Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: December 14, 201	Royal Energy Resources, Inc.
	By: /s/ Jacob Roth
	Jacob Roth President, CEO and CFO

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Jacob Roth

/s/ Frimet Taub

Director, President, CEO and CFO

Director

December 13, 2012

Royal Energy Resources, Inc. - FORM 10-K - December 14, 2012

Attached files

Royal Energy Resources, Inc. Reports