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<B><FONT SIZE=3><P ALIGN="CENTER">UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</FONT><BR>
<FONT SIZE=3>Washington, D.C. 20549</P>
<P ALIGN="CENTER"></P>
</FONT><U><P ALIGN="CENTER">FORM SB-2</P>
</U><FONT SIZE=3><P ALIGN="CENTER">REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</P></B></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD VALIGN="TOP" COLSPAN=3>
<B><U><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B></U></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=3>
<FONT SIZE=1><P ALIGN="CENTER">(Name of small business issuer in its charter)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER">NEVADA<BR>
</B>(State or jurisdiction of<BR>
incorporation or organization)</FONT></TD>
<TD WIDTH="30%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER">1311<BR>
</B>(Primary Standard Industrial<BR>
Classification Code Number)</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER">98-0454144<BR>
</B>(I.R.S.  Employer Identification No.)</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P ALIGN="CENTER"><A NAME="OLE_LINK2"><A NAME="OLE_LINK3">1111 West Hastings Street, Suite 320, Vancouver, British Columbia, Canada, V6E 2J3<BR>
Telephone: </A></A>(604) 628-9904</B></FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=3>
<FONT SIZE=2><P ALIGN="CENTER">(Address and telephone number of principal executive offices)</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P ALIGN="CENTER">Same as above</B></FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=3>
<FONT SIZE=2><P ALIGN="CENTER">(Address of principal place of business or intended principal place of business)</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P ALIGN="CENTER">Randall Reneau<BR>
President, Chief Executive Officer and Principal Executive Officer<BR>
9302 Mystic Oaks Trail, Austin Texas, 78750<BR>
Telephone: (512) 258-8969</B></FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=3>
<FONT SIZE=2><P ALIGN="CENTER">(Name, address and telephone number of agent for service)</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1><P ALIGN="JUSTIFY">Approximate date of proposed sale to the public: From time to time after this Registration Statement is declared effective.</P>
<P ALIGN="JUSTIFY">If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [&nbsp;&nbsp;]</P>
<P ALIGN="JUSTIFY">If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registrations statement number of the earlier effective registration statement for the same offering.  [&nbsp;&nbsp;]</P>
<P ALIGN="JUSTIFY">If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [&nbsp;&nbsp;]</P>
<P ALIGN="JUSTIFY">If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  [&nbsp;&nbsp;]</P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">CALCULATION OF REGISTRATION FEE</P></B></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=734>
<TR><TD WIDTH="30%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">Title of Each Class of<BR>
Securities to be Registered</FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(1)</B></SUP></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Amount to be<BR>
Registered<SUP>(2)</B></SUP></FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">Proposed Maximum<BR>
Offering Price Per Unit<SUP>(3)</B></SUP></FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Proposed Maximum<BR>
Aggregate Offering Price<SUP>(3)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Amount of<BR>
Registration Fee</B></FONT></TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(4)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">2,341,978</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.10</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$234,197.80</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$9.20</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(5)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,259,308</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.10</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$125,930.80</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$4.95</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(6)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">310,000</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.10</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$31,000.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$1.22</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(7)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,022,145 </B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.35</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$357,750.75</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$14.06</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(7)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,022,145 </B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.60</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$613,287.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$24.10</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(8)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,100,000</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.50</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$550,000.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$21.62</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(8)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,100,000</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.60</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$660,000.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$25.94</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(9)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">180,000</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.50</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$90,000.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$3.54</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(9)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">180,000</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.60</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$108,000.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$4.24</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(10)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">683,333</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.60</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$409,999.80</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$16.11</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(10)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">683,333</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$1.00</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$683,333.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$26.85</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(11)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">169,667</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.60</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$101,800.20</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$4.00</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(11)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">169,667</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$1.00</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$169,667.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$6.67</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(12)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">819,171</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.60</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$491,502.60</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$19.32</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(12)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">819,171</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$1.00</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$819,171.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$25.15</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(13)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,680,569</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.60</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$1,008,341.40</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$32.19</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
</TABLE>
</CENTER></P>

<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
<P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=734>
<TR><TD WIDTH="30%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">Title of Each Class of<BR>
Securities to be Registered</FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(1)</B></SUP></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Amount to be<BR>
Registered<SUP>(2)</B></SUP></FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">Proposed Maximum<BR>
Offering Price Per Unit<SUP>(3)</B></SUP></FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Proposed Maximum<BR>
Aggregate Offering Price<SUP>(3)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Amount of<BR>
Registration Fee</B></FONT></TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(13)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">1,680,569</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$1.00</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$1,680,569.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$66.05</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT"><A NAME="OLE_LINK5"><A NAME="OLE_LINK6">Common stock, par value $0.001 per share<SUP>(14)</A></A></SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">185,833</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.60</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$111,499.80</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$4.38</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(14)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">185,833</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$1.00</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$185,833.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$7.30</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(15)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">385,000</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.35</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$134,750.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$5.30</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(16)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">4,000</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.50</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$2,000.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$0.08</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(17)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">163,041</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.60</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$97,824.60</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$3.84</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share<SUP>(18)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">724,666</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.60</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$434,799.60</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$17.09</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Common stock, par value $0.001 per share, underlying common stock purchase warrants<SUP>(18)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">724,666</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$1.00</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$724,666.00</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$28.48</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="30%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Total</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="RIGHT">17,594,095</B></FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.56<SUP>(19)</SUP></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$9,825,923.35</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$386.16</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1><P ALIGN="JUSTIFY">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of a stock split, stock dividend or similar transaction involving the common shares of the registrant, in order to prevent dilution, the number of shares of common stock registered shall be automatically increased to cover additional shares in accordance with Rule 416(a) under the United States Securities Act of 1933, as amended (the "Securities Act").</P>
<P ALIGN="JUSTIFY">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Includes shares of our common stock, par value $0.001 per share, currently owned by the selling stockholders (each a "Selling Stockholder") and shares of common stock which are issuable upon exercise of warrants held by certain of the Selling Stockholders, all of which may be offered pursuant to this registration statement.  In addition to the shares set forth in the table, the amount to be registered includes an indeterminate number of shares issuable upon the exercise of the warrants as such number may be adjusted as a result of stock splits, stock dividends and similar transactions in accordance with Rule 416 of the Securities Act.</P>
<P ALIGN="JUSTIFY">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The proposed maximum offering price per share is calculated in accordance with Rule 457(g) of the Securities Act.</P>
<P ALIGN="JUSTIFY">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These shares represent the 2,341,978 shares of common stock we issued on October 29, 2005 at a price of $0.10 per share to certain of the Selling Stockholders named herein.</P>
<P ALIGN="JUSTIFY">(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These shares represent the 1,259,308 shares of common stock we issued on March 3, 2006 at a price of $0.10 per share to certain of the Selling Stockholders named herein.</P>
<P ALIGN="JUSTIFY">(6)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These shares represent the 310,000 shares of common stock we issued on May 31, 2006 at a price of $0.10 per share to certain of the Selling Stockholders named herein.</P>
<P ALIGN="JUSTIFY">(7)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 7, 2006, we issued an aggregate of 1,022,145 units at a price of $0.35 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $0.60 per share, for the period commencing upon the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market. </P>
<P ALIGN="JUSTIFY">(8)&nbsp;&nbsp;&nbsp;&nbsp;On July 17, 2006, we issued an aggregate of 1,100,000 units at a price of $0.50 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $0.60 per share, for the period commencing upon the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.  </P>
<P ALIGN="JUSTIFY">(9)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October 5, 2006, we issued an aggregate of 180,000 units at a price of $0.50 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $0.60 per share, for the period commencing upon the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.  </P>
<P ALIGN="JUSTIFY">(10)&nbsp;&nbsp;On October 6, 2006, we issued an aggregate of 683,333 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.  </P>
<P ALIGN="JUSTIFY">(11)&nbsp;&nbsp;On November 15, 2006, we issued an aggregate of 169,667 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.  </P>
<P ALIGN="JUSTIFY">(13)&nbsp;&nbsp;On December 6, 2006, we issued 819,171 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.  </P>
<P ALIGN="JUSTIFY">(14)&nbsp;&nbsp;On April 30, 2007, we issued 1,680,569 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.  </P>
<P ALIGN="JUSTIFY">(15)&nbsp;&nbsp;On May 31, 2007, we issued 185,833 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.  </P>
<P ALIGN="JUSTIFY">(16)&nbsp;&nbsp;On July 5, 2007 we issued 385,000 share purchase warrants with each share purchase warrant entitling the warrant holder to purchase one share of our common stock at a price of $0.35 per share, for the period commencing upon the date of issuance of the units and ending on the day which is ten years from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">ii</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=1><P ALIGN="JUSTIFY">(17)&nbsp;&nbsp;On July 5, 2007 we issued 4,000 share purchase warrants with each share purchase warrant entitling the warrant holder to purchase one share of our common stock at a price of $0.50 per share, for the period commencing upon the date of issuance of the units and ending on the day which is ten years from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(18)&nbsp;&nbsp;On July 5, 2007 we issued 163,041 share purchase warrants with each share purchase warrant entitling the warrant holder to purchase one share of our common stock at a price of $0.60 per share, for the period commencing upon the date of issuance of the units and ending on the day which is ten years from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(19)&nbsp;&nbsp;On October 31, 2007, we issued 724,666 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.  </P>
<P ALIGN="JUSTIFY">(20)&nbsp;&nbsp;Weighted average price per share.</P>
<B><P ALIGN="JUSTIFY">The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
</FONT><FONT SIZE=3><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
</B></FONT><FONT SIZE=2><P ALIGN="CENTER">iii</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">SUBJECT TO COMPLETION</P>
<U><P ALIGN="CENTER">PROSPECTUS</P>
</FONT><FONT SIZE=4><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION<BR>
</U></FONT><FONT SIZE=3>a Nevada corporation</P>
<P ALIGN="CENTER">17,594,095 Shares of Common Stock</P>
</B><P ALIGN="JUSTIFY">This prospectus relates to the resale of up to 17,594,095 shares of our common stock that may be sold, from time to time, by the selling stockholders (each, a "Selling Stockholder") named in this prospectus for their own account, consisting of:</P>

<UL>
<P ALIGN="LEFT"><LI>10,476,670 shares of our common stock that has been issued to certain of the Selling Stockholders; and</LI></P>
<P ALIGN="JUSTIFY"><LI>7,117,425 shares of our common stock, issuable upon the exercise of outstanding common stock purchase warrants to acquire shares of our common stock by certain of the Selling Stockholders.  </LI></P></UL>

<P ALIGN="JUSTIFY">We intend to apply to list our shares of common stock for trading on the over-the-counter bulletin board (the "OTC Bulletin Board") at the time the registration statement of which this prospectus forms a part becomes effective.  The Selling Stockholders will sell their shares at a price of $0.60 per share until our shares are quoted on the OTC Bulletin Board or in another quotation medium and, thereafter, at prevailing market prices or privately negotiated prices or otherwise as set forth under "Plan of Distribution" in this prospectus.  There is no relationship whatsoever between the offering price and our assets, earnings, book value, or any other objective criteria of value.  Our common stock is not presently traded on any securities exchange or market.  Accordingly, we have fixed the benchmark offering price by reference to our most recent private placement offering of units, which was effected at $0.60 per unit.</P>
<P ALIGN="JUSTIFY">We will not receive any proceeds from the sales of any of our shares of common stock by the Selling Stockholders.  However, we will receive proceeds upon the exercise of any common stock purchase warrants that may be exercised by the Selling Stockholders.  The proceeds, if any would be used for working capital purposes.</P>
<B><P ALIGN="JUSTIFY">The purchase of the securities offered through this prospectus involves a high degree of risk.  You should invest in our common stock only if you can afford to lose your entire investment.  You should carefully read and consider the section of this prospectus titled "Risk Factors" beginning on page 6 before buying any of our shares of common stock.</P>
<P ALIGN="JUSTIFY">Neither the Securities and Exchange Commission (the "SEC") nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus.  Any representation to the contrary is a criminal offence.</P>
</B><P ALIGN="JUSTIFY">The information in this prospectus is not complete and may be changed.  The Selling Stockholders may not sell or offer these securities until the registration statement of which this prospectus forms a part is declared effective by the SEC.  This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.</P>
<B><P ALIGN="CENTER">The date of this prospectus is <FONT FACE="Wingdings">&#117;</FONT>
, 2008.</P>
</B><P ALIGN="CENTER">__________</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">1</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER"></P>
<P ALIGN="JUSTIFY">The following table of contents has been designed to help you find important information contained in this prospectus.  We encourage you to read the entire prospectus.</P>
</B><P ALIGN="LEFT"></P>
<B><P ALIGN="CENTER">&nbsp;</P></B></FONT>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=696>
<TR><TD VALIGN="TOP" COLSPAN=3>
<B><P ALIGN="CENTER">TABLE OF CONTENTS</B></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="LEFT">Item</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="RIGHT">Page No.</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT"><A NAME="_Toc93826366">SUMMARY</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">3</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">RISK FACTORS</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">6</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">FORWARD-LOOKING STATEMENTS</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">12</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">USE OF PROCEEDS</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">12</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">DETERMINATION OF OFFERING PRICE</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">12</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">DILUTION</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">12</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">SELLING STOCKHOLDERS</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">13</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">PLAN OF DISTRIBUTION</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">19</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">LEGAL PROCEEDINGS</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">21</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">21</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">23</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">DESCRIPTION OF SECURITIES</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">24</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">INTEREST OF NAMED EXPERTS AND COUNSEL</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">25</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">25</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">ORGANIZATION SINCE INCORPORATION</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">25</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">DESCRIPTION OF BUSINESS AND PROPERTIES</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">26</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">35</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">40</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">41</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">EXECUTIVE COMPENSATION</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">42</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">FINANCIAL STATEMENTS</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">46</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">77</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">WHERE YOU CAN FIND MORE INFORMATION</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">77</B></FONT></TD>
</TR>
<TR><TD WIDTH="95%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="LEFT">DEALER PROSPECTUS DELIVERY OBLIGATION</B></FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">77</B></FONT></TD>
</TR>
</TABLE>

<B><FONT SIZE=3><P ALIGN="CENTER">__________</P>
</B></FONT><FONT SIZE=2><P ALIGN="CENTER">2</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY"></A>In this prospectus, unless otherwise specified:  (i) references to "the Company", "our Company", "we", "us" or "our" mean Strategic American Oil Corporation and its wholly-owned subsidiary, Penasco Petroleum, Inc., unless the context otherwise requires, and (ii) references to "Penasco" mean Penasco Petroleum Inc., our wholly-owned subsidiary.  All financial information is stated in United States dollars unless otherwise specified.  Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095626">SUMMARY</A></P>
<I><P ALIGN="JUSTIFY">The following summary highlights selected information contained in this prospectus.  This summary does not contain all the information you should consider before investing in the securities.  Before making an investment decision, you should read the entire prospectus carefully, including the "Risk Factors" section, the financial statements and the notes to the financial statements.</P>
</I><P ALIGN="CENTER">The Company</P>
</B><P ALIGN="JUSTIFY">We are a natural resource exploration and production company engaged in the exploration, acquisition and development of oil and gas properties in the United States.  We currently have an aggregate of approximately 553.90 gross (289.29 net) developed and 12,738.93 gross (2,178.93 net) undeveloped acres pursuant to leases or acquisitions.  Total developed and undeveloped acreage is approximately 13,292.83 gross acres (2,468.22 net). See "Description of Business and Properties" for more information.</P>
<P ALIGN="JUSTIFY">We were incorporated under the laws of Nevada effective April 12, 2005.  Our principal business offices are located at 1111 West Hastings Street, Suite 320, Vancouver, British Columbia, Canada, V6E 2J3 and our telephone number is (604) 682-9775.</P>
<B><P ALIGN="CENTER">The Offering</P></B></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">The Issuer:</FONT></TD>
<TD WIDTH="75%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Strategic American Oil Corporation</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">The Selling Stockholders:</FONT></TD>
<TD WIDTH="75%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">The Selling Stockholders are comprised of certain of our existing stockholders who acquired our shares in private placement transactions as described below.  The Selling Stockholders are named in this prospectus under "Selling Stockholders".</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">Shares Offered by the Selling Stockholders:</FONT></TD>
<TD WIDTH="75%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">The Selling Stockholders are offering up to an aggregate of 17,594,095 shares of our common stock comprised of:</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>2,341,978 shares of common stock issued at a price of $0.10 per share on October 29, 2005;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>1,259,308 shares of common stock issued at a price of $0.10 per share on March 3, 2006;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>310,000 shares of common stock issued at a price of $0.10 per share on May 31, 2006;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>1,022,145 shares of common stock and 1,022,145 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of 1,022,145 units at a price of $0.35 per unit on July 7, 2006;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>1,100,000 shares of common stock and 1,100,000 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 1,100,000 units at a price of $0.50 per unit on July 17, 2006;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>180,000 shares of common stock and 180,000 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 180,000 units at a price of $0.50 per unit on October 5, 2006;</UL>
</FONT></TD>
</TR>
</TABLE>

<P ALIGN="CENTER"></P>
<FONT SIZE=2><P ALIGN="CENTER">3</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="LEFT"></P>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>683,333 shares of common stock and 683,333 shares of common stock issuable upon exercise of warrants issued in connection with the issuance of an aggregate of 683,333 units at a price of $0.60 per unit on October 6, 2006;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>169,667 shares of common stock and 169,667 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 169,667 units at a price of $0.60 per unit on November 15, 2006;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>819,171 shares of common stock and 819,171 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 819,171 units at a price of $0.60 per unit on December 6, 2006;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>1,680,569 shares of common stock and 1,680,569 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 1,680,569 units at a price of $0.60 per unit on April 30, 2007;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>185,833 shares of common stock and 185,833 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 185,833 units at a price of $0.60 per unit on May 31, 2007;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>385,000 shares of common stock issuable upon exercise of warrants at $0.35 per share issued pursuant to finders' fees agreements on July 5, 2007;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>4,000 shares of common stock issuable upon exercise of warrants at $0.50 per share issued pursuant to finders' fees agreements on July 5, 2007;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>163,041 shares of common stock issuable upon exercise of warrants at $0.60 per share issued pursuant to finders' fees agreements on July 5, 2007;</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP">

<UL>
<FONT SIZE=3><P ALIGN="JUSTIFY"><LI>724,666 shares of common stock and 724,666 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 724,666 units at a price of $0.60 per unit on October 31, 2007.</UL>
</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">Offering Price:</FONT></TD>
<TD WIDTH="75%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">The Selling Stockholders will sell their shares offered under this prospectus at a price of $0.60 per share until our shares are quoted on the OTC Bulletin Board or in another quotation medium and, thereafter, at prevailing market prices or privately negotiated prices or otherwise as set forth under "Plan of Distribution" in this prospectus.  We determined this offering price arbitrarily based on our most recent private offering of our units, which we effected at $0.60 per unit.</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">Terms of the Offering:</FONT></TD>
<TD WIDTH="75%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">The selling stockholders will determine when and how they will sell the common stock offered in this prospectus.  Refer to "Plan of Distribution".</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">Termination of the Offering:</FONT></TD>
<TD WIDTH="75%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">The offering will conclude when all of the 17,594,095 shares of common stock have been sold, the shares no longer need to be registered to be sold or we decide to terminate the registration of shares.</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">Use of Proceeds:</FONT></TD>
<TD WIDTH="75%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">We will not receive any proceeds from the sale of the currently outstanding common stock held by the Selling stockholders.  We will receive proceeds in the event that any warrants are exercised.</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">No Present Public Market for Our Common Stock:</FONT></TD>
<TD WIDTH="75%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Our common stock is not presently listed for trading on any securities exchange or market.  We intend to apply to have our shares of common stock quoted on the OTC Bulletin Board at the time the registration statement of which this prospectus forms a part becomes effective.</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER">4</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">Summary of Financial Data</P>
</B><P ALIGN="JUSTIFY">The following consolidated financial data has been derived from and should be read in conjunction with: (i) our unaudited interim consolidated financial statements as at October 31, 2007, or the period from inception (April 12, 2005) to October 31, 2007, together with the notes to these financial statements; (ii) our audited consolidated financial statements as at July 31, 2006 and 2007, or the period from inception (April 12, 2005) to July 31, 2007, together with the notes to these financial statements; and (ii) the section of this prospectus entitled "Management's Discussion and Analysis or Plan of Operations", included elsewhere herein.</P>
<P ALIGN="JUSTIFY">We were incorporated under the laws of Nevada in April 2005.  We began the production of oil in September 2006.  Accordingly, the financial information provided below may not be comparable from period to period.</P>
<B><P ALIGN="LEFT"><A NAME="_Toc128578389">Balance Sheet Data</A></P></B></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">As at<BR>
July 31, 2006</B></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER">As at<BR>
July 31, 2007</B></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">As at<BR>
October 31, 2007</B></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">(Audited)</B></U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">(Audited)</B></U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">(Unaudited)</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Cash</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$     650,204</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$     667,722</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$     562,884</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Working capital</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">623,382</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">652,607</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">571,659</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Total assets</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">906,215</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,945,131</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,910,512</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Total liabilities</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">36,344</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">112,214</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">65,442</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Total stockholders' equity </FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">869,871</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,832,917</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,845,070</FONT></TD>
</TR>
</TABLE>

<B><FONT SIZE=3><P ALIGN="LEFT"><A NAME="_Toc128578390"></P>
<P ALIGN="LEFT">Statement of Operations</A> Data</P></B></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=697>
<TR><TD WIDTH="31%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">For the Period<BR>
from Inception<BR>
(April 12, 2005) to<BR>
October 31, 2007</B></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">Three Months<BR>
Ended<BR>
October 31, 2007</B></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">Year Ended<BR>
July 31, 2007</B></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">Year Ended<BR>
July 31, 2006</B></FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">(Unaudited)</B></U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">(Unaudited)</B></U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">(Audited)</B></U></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">(Audited)</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Oil and gas revenues</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$     895,913</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$     194,173</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$     701,740</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$     Nil</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Direct operating costs</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">813,686</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">150,295</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">663,391</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Impairment of oil and gas properties</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">233,306</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">158,800</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">74,506</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Depreciation and depletion</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">87,925</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">14,437</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">73,383</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">105</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Administrative expenses</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">175,280</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">36,238</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">100,726</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">38,316</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Stock-based compensation</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,138,167</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">82,000</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,056,167</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Net loss</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,899,187</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">327,847</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,170,864</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">400,476</FONT></TD>
</TR>
<TR><TD WIDTH="31%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Net loss per share</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.01</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.13</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.02</FONT></TD>
</TR>
</TABLE>

<B><FONT SIZE=3><P ALIGN="CENTER"><A NAME="_Toc93826367"><A NAME="_Ref128298219"><A NAME="_Ref128298222"><A NAME="_Toc134605441"><A NAME="_Toc188095627"></P>
</B></FONT><FONT SIZE=2><P ALIGN="CENTER">5</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">RISK FACTORS</A></P>
</B><P ALIGN="JUSTIFY"></A></A></A></A>An investment in our common stock involves a high degree of risk.  You should carefully consider the risks described below and the other information in this prospectus before investing in our shares of common stock.  If any of the following risks occur, our business, operating results and financial condition could be seriously harmed.  The risks and uncertainties described below are not the only ones we face.  Additional risks and uncertainties, including those that we do not know about or that we currently deem immaterial, also may adversely affect our business.  The trading price of our shares of common stock, when and if we trade at a later date, could decline due to any of these risks, and you may lose all or part of your investment.</P>
<B><P ALIGN="LEFT"><A NAME="_Toc93826368"><A NAME="_Toc154414161"><A NAME="_Toc154473010"><A NAME="_Toc154473107">Risks Related to Our </A></A></A></A>Company</P>
<I><P ALIGN="JUSTIFY">Because we have only recently commenced business operations, we face a high risk of business failure and this could result in a total loss of your investment.</P>
</B></I><P ALIGN="JUSTIFY">We were incorporated on April 12, 2005, and to date, we have earned limited revenues we have not achieved profitability.  Potential investors should be aware of the difficulties normally encountered by exploration stage companies and the high rate of failure of such enterprises.  These potential problems include, but are not limited to, unanticipated problems relating to costs and expenses that may exceed current estimates.  We have no history upon which to base any assumption as to the likelihood that our business will prove successful, and we can provide no assurance to investors that we will generate any operating revenues or ever achieve profitable operations.  If we are unsuccessful in addressing these risks, our business will likely fail and you will lose your entire investment.</P>
<B><I><P ALIGN="JUSTIFY">Because we have only recently commenced business operations and have earned only limited revenues to date, we expect to incur operating losses for the foreseeable future.</P>
</B></I><P ALIGN="JUSTIFY">We have earned limited revenues and we have never been profitable.  Going forward, we anticipate that we will incur increased operating expenses without realizing any significant revenues.  We therefore expect to incur significant losses into the foreseeable future.  If we are unable to generate significant revenues from our properties, our business will likely fail and you will lose your entire investment.</P>
<B><I><P ALIGN="JUSTIFY">Because our business operations are only about two years old, we may not be able to effectively manage the demands required of a new business in our industry.</P>
</B></I><P ALIGN="JUSTIFY">We have earned limited revenues and we have never been profitable.  There can be no assurance that we will effectively execute our business plan or manage any growth of our business, or that our future operating and financial forecast will be met.  Future development and operating results will depend on many factors, including access to adequate capital, the demand for oil and gas, price competition, our success in setting up and expanding distribution channels and whether we can control costs.  Many of these factors are beyond our control.  In addition, our future prospects must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a new business in the oil and gas industry, which is characterized by intense competition, rapid technological change, highly litigious competitors and significant regulation.  If we are unable to address these matters, or any of them, then we may not be able to successfully implement our business plan or achieve revenues or profitability.</P>
<B><I><P ALIGN="LEFT">Because we have earned limited revenues from operations, all our capital requirements have been met through financing and it is not certain we will be able to continue to find financing to meet our operating requirements.</P>
</B></I><P ALIGN="JUSTIFY">Notwithstanding the recent completion by us of our private placement financings, we will need to obtain additional financing in order to pursue our business plan.  As of October 31, 2007, we had cash on hand of $562,884 and working capital of $571,659.  Our business plan calls for significant expenses in connection with the exploration and development of our properties.  Our capital requirements have been and will continue to be significant.  We will be dependant on future financing to fund our working capital requirements.  We estimate that our current working capital will support our activities for no more than one year.  After that time we will need additional financing.  However, there can be no assurance that such financing will be forthcoming or that it will result in sufficient capital for us to meet our current and expected working capital needs.  It is not anticipated that any of our officers, directors or current stockholders will provide any significant portion of our future financing requirements.  Furthermore, in the event that our plans change, our assumptions change or prove inaccurate, or our capital resources prove to be insufficient to fund operations, we could be required to seek additional financing sooner than currently anticipated, or in greater amounts than is currently anticipated.  Any inability to obtain additional financing when needed would have a material adverse effect on us, including possibly requiring us to significantly curtail or possibly cease our operations.  In addition, any future equity financing may involve substantial dilution to our existing stockholders.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">6</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><I><FONT SIZE=3><P ALIGN="JUSTIFY">Our auditors have expressed substantial doubt about our ability to continue as a going concern.</P>
</B></I><P ALIGN="JUSTIFY">Our unaudited interim consolidated financial statements for the three months ended October 31, 2007 and for the period from inception to October 31, 2007, and our audited financial statements for the years ended July 31, 2006 and 2007 and for the period from inception to July 31, 2007 have been prepared assuming that we will continue as a going concern.  We have incurred operating losses totalling $3,899,187 since inception and, as a result, our auditors have expressed substantial doubt about our ability to continue as a going concern.  Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.</P>
<B><I><P ALIGN="JUSTIFY">Because we have a history of losses and anticipate continued losses until we are able to generate sufficient revenues to support our operations, we may lack the financial stability required to continue operations.</P>
</B></I><P ALIGN="JUSTIFY">Since inception we have suffered recurring losses.  We have funded our operations through the issuance of common stock in order to meet our strategic objectives.  We anticipate that our losses will continue until such time, if ever, as we are able to generate sufficient revenues to support our operations.  Our ability to generate revenue primarily depends on our success in developing our properties.  There can be no assurance that we will be able to adequately develop our properties, that we will attain revenues or that we will ever achieve profitable operations.</P>
<B><I><P ALIGN="JUSTIFY">Oil and gas resources, even if discovered, may not be commercially viable.</P>
</B></I><P ALIGN="JUSTIFY">Even if oil and gas resources are discovered on our properties, there can be no assurance that commercial production will be obtained or that the production will be sufficient to pay drilling and completion costs.  Our properties may not contain commercial quantities of oil and gas.  In addition, the cost of drilling, completing and operating wells is often uncertain.  Drilling operations on our properties or on properties we may acquire in the future may be curtailed, delayed or cancelled as a result of numerous factors, including title problems, weather conditions, compliance with governmental requirements and shortages or delays in the delivery of equipment.  Furthermore, completion of a well does not assure a profit or a recovery of drilling, completion and operating costs.  As a result, our business, results of operations and financial condition may be materially adversely affected.</P>
<B><I><P ALIGN="JUSTIFY">Actual production, revenues and expenditures with respect to reserves will likely vary from estimates.</P>
</B></I><P ALIGN="JUSTIFY">There are numerous uncertainties inherent in estimating oil and natural gas reserves and their estimated values, including many factors beyond the control of the producer.  Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner.  Estimates of economically recoverable oil and natural gas reserves and of future net cash flows necessarily depend upon a number of variable factors and assumptions, such as historical production from the area compared with production from other producing areas, the assumed effects of regulations by governmental agencies and assumptions concerning future oil and natural gas prices, future operating costs, severance and excise taxes, development costs and work-over and remedial costs, all of which may in fact vary considerably from actual results.  For these reasons, estimates of the economically recoverable quantities of oil and natural gas attributable to any particular group of properties, classifications of such reserves based on risk of recovery, and estimates of the future net cash flows expected therefrom prepared by different engineers or by the same engineers but at different times may vary substantially, and such reserve estimates may be subject to downward or upward adjustment based upon such factors.  Actual production, revenues and expenditures with respect to reserves will likely vary from estimates, when and if made, and such variances may be material, which could have a material adverse effect on our business, results of operations and financial condition.</P>
<B><I><P ALIGN="JUSTIFY">Our future oil and natural gas production is highly dependent upon our ability to find or acquire reserves.</P>
</B></I><P ALIGN="JUSTIFY">In general, the volume of production from oil and natural gas properties declines as reserves are depleted, with the rate of decline depending on reservoir characteristics.  Except to the extent we conduct successful exploration and development activities or acquire properties containing proved reserves, or both, our proved reserves, if any, will decline as reserves are produced.  Our future oil and natural gas production is, therefore, highly dependent upon our level of success in finding or acquiring reserves in the future.  The business of exploring for, developing or acquiring reserves is capital intensive.  To the extent cash flow from operations is reduced and external sources of capital become limited or unavailable, our ability to make the necessary capital investment to maintain or expand our asset base of oil and natural gas reserves would be impaired.  The failure of an operator of our wells to adequately perform operations, or such operator's breach of the applicable agreements, could adversely impact us.  In addition, there can be no assurance that our future exploration, development and acquisition activities will result in additional proved reserves or that we will be able to drill productive wells at acceptable costs.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">7</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><I><FONT SIZE=3><P ALIGN="JUSTIFY">Oil and gas resources may contain certain hazards which may, in turn, create certain liabilities or prevent the resources from being commercially viable.</P>
</B></I><P ALIGN="JUSTIFY">Our properties may contain hazards such as unusual or unexpected formations and other conditions.  Our projects may become subject to liability for pollution, fire, explosion, blowouts, cratering and oil spills, against which we cannot insure or against which we may decide to not insure.  Such events could result in substantial damage to oil and gas wells, producing facilities and other property and/or result in personal injury.  Costs or liabilities related to those events would have a material adverse effect on our business, results of operations, financial condition and cash flows.</P>
<B><I><P ALIGN="JUSTIFY">Oil and gas prices are highly volatile.</P>
</B></I><P ALIGN="JUSTIFY">Oil and gas prices and markets are highly volatile.  Prices for oil and gas are subject to significant fluctuation in response to relatively minor changes in supply of and demand for oil and gas, market uncertainty and a variety of additional factors.  Our profitability will be substantially dependent on prevailing prices for natural gas and oil.  The amounts of and prices obtainable for our oil and gas production may be affected by market factors beyond our control, such as:</P>

<UL>
<P ALIGN="JUSTIFY"><LI>the extent of domestic production;</LI></P>
<P ALIGN="JUSTIFY"><LI>the amount of imports of foreign oil and gas;</LI></P>
<P ALIGN="JUSTIFY"><LI>the market demand on a regional, national and worldwide basis;</LI></P>
<P ALIGN="JUSTIFY"><LI>domestic and foreign economic conditions that determine levels of industrial production;</LI></P>
<P ALIGN="JUSTIFY"><LI>political events in foreign oil-producing regions; and</LI></P>
<P ALIGN="JUSTIFY"><LI>variations in governmental regulations and tax laws or the imposition of new governmental requirements upon the oil and gas industry.</LI></P></UL>

<P ALIGN="JUSTIFY">These factors or any one of them could have a material adverse effect on our business, results of operations, financial condition and cash flows.</P>
<B><I><P ALIGN="JUSTIFY">As a result of our intensely competitive industry, we may not gain enough market share to be profitable.</P>
</B></I><P ALIGN="JUSTIFY">We compete in the sale of oil and natural gas on the basis of price and on the ability to deliver products.  The oil and natural gas industry is intensely competitive in all phases, including the exploration for new production and the acquisition of equipment and labor necessary to conduct drilling activities.  The competition comes from numerous major oil companies as well as numerous other independent operators in the United States and elsewhere.  Because we are pursuing potentially large markets, our competitors include major, multinational oil and gas companies.  There is also competition between the oil and natural gas industry and other industries in supplying the energy and fuel requirements of industrial, commercial and individual consumers.  We are a minor participant in the industry and compete in the oil and natural gas industry with many other companies having far greater financial, technical and other resources.  If we are unable to compete successfully, we may never be able to sell enough product at a price sufficient to permit us to generate profits.</P>
<B><I><P ALIGN="JUSTIFY">The oil and natural gas market is heavily regulated.</P>
</B></I><P ALIGN="JUSTIFY">We are subject to various federal, state and local laws and regulations.  These laws and regulations govern safety, exploration, development, taxation and environmental matters that are related to the oil and natural gas industry.  To conserve oil and natural gas supplies, regulatory agencies may impose price controls and may limit our production.  Certain laws and regulations require drilling permits, govern the spacing of wells and the prevention of waste and limit the total number of wells drilled or the total allowable production from successful wells.  Other laws and regulations govern the handling, storage, transportation and disposal of oil and natural gas and any by-products produced in oil and natural gas operations.  These laws and regulations could materially adversely impact our operations and our revenues.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">8</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">Laws and regulations that affect us may change from time to time in response to economic or political conditions.  Thus, we must also consider the impact of future laws and regulations that may be passed in the jurisdictions where we operate.  We anticipate that future laws and regulations related to the oil and natural gas industry will become increasingly stringent and cause us to incur substantial compliance costs.</P>
<B><I><P ALIGN="JUSTIFY">The nature of our operations exposes us to environmental liabilities.</P>
</B></I><P ALIGN="JUSTIFY">Our operations create the risk of environmental liabilities.  We may incur liability to governments or to third parties for any unlawful discharge of oil, gas or other pollutants into the air, soil or water.  We could potentially discharge oil or natural gas into the environment in any of the following ways:</P>

<UL>
<P ALIGN="JUSTIFY"><LI>from a well or drilling equipment at a drill site;</LI></P>
<P ALIGN="JUSTIFY"><LI>from a leak in storage tanks, pipelines or other gathering and transportation facilities;</LI></P>
<P ALIGN="JUSTIFY"><LI>from damage to oil or natural gas wells resulting from accidents during normal operations; or</LI></P>
<P ALIGN="JUSTIFY"><LI>from blowouts, cratering or explosions.</LI></P></UL>

<P ALIGN="JUSTIFY">Environmental discharges may move through the soil to water supplies or adjoining properties, giving rise to additional liabilities.  Some laws and regulations could impose liability for failure to obtain the proper permits for, to control the use of, or to notify the proper authorities of a hazardous discharge.  Such liability could have a material adverse effect on our financial condition and our results of operations and could possibly cause our operations to be suspended or terminated on such property.</P>
<P ALIGN="JUSTIFY">We may also be liable for any environmental hazards created either by the previous owners of properties that we purchase or lease or by acquired companies prior to the date we acquire them.  Such liability would affect the costs of our acquisition of those properties.  In connection with any of these environmental violations, we may also be charged with remedial costs.  Pollution and similar environmental risks generally are not fully insurable.</P>
<P ALIGN="JUSTIFY">Although we do not believe that our environmental risks are materially different from those of comparable companies in the oil and natural gas industry, we cannot assure you that environmental laws will not result in decreased production, substantially increased costs of operations or other adverse effects to our combined operations and financial condition.</P>
<B><I><P ALIGN="JUSTIFY">We could lose or fail to attract the personnel necessary to run our business.</P>
</B></I><P ALIGN="JUSTIFY">Our success depends in large part on our ability to attract and retain key management and operating personnel.  As we develop additional capabilities and expand the scope of our operations, we will require more skilled personnel.  Recruiting personnel for the oil and gas industry is highly competitive.  We cannot guarantee that we will be able to continue to attract and retain qualified executive, managerial and technical personnel needed for our business.  Our failure to attract or retain qualified personnel could delay or result in our inability to complete our business plan.</P>
<B><I><P ALIGN="JUSTIFY">Our directors may experience conflicts of interest which may detrimentally affect our profitability.</P>
</B></I><P ALIGN="JUSTIFY">Certain directors and officers may be engaged in, or may in the future be engaged in, other business activities on their own behalf and on behalf of other companies and, as a result of these and other activities, such directors and officers may become subject to conflicts of interest, which could have a material adverse effect on our business.</P>
<B><I><P ALIGN="JUSTIFY">Some of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.</P>
</B></I><P ALIGN="JUSTIFY">Some of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States.  As a result, it may be difficult for investors to effect service of process on our directors or officers, or enforce within the United States or Canada any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.  Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them.  In addition, investors may not be able to commence an action in a Canadian court predicated upon the civil liability provisions of the securities laws of the United States.  The foregoing risks also apply to those experts identified in this prospectus that are not residents of the United States.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER"><A NAME="_Toc154414162"><A NAME="_Toc154473011"><A NAME="_Toc154473108">9</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="LEFT">Risks Related to Our Common Stock</A></A></A></P>
<I><P ALIGN="JUSTIFY"><A NAME="_Toc170706016"><A NAME="_Toc142132870">There is no active trading market for our common stock, and if a market for our common stock does not develop, our investors will be unable to sell their shares.</A></A></P>
</B></I><P ALIGN="JUSTIFY">There is currently no active trading market for our common stock, and such a market may not develop or be sustained.  We currently plan to have our common stock quoted on the OTC Bulletin Board of the Financial Industry Regulatory Authority ("FINRA") upon the effectiveness of the registration statement of which this prospectus forms a part.  In order to do this, a market maker must file a Form 15c-211 to allow the market maker to make a market in our shares of common stock.  At the date hereof we are not aware that any market maker has any such intention.  We cannot provide our investors with any assurance that our common stock will be traded on the OTC Bulletin Board or, if traded, that a public market will materialize.  Further, the OTC Bulletin Board is not a listing service or exchange, but is instead a dealer quotation service for subscribing members.  If our common stock is not quoted on the OTC Bulletin Board or if a public market for our common stock does not develop, then investors may not be able to resell the shares of our common stock that they have purchased and may lose all of their investment.  If we establish a trading market for our common stock, the market price of our common stock may be significantly affected by factors such as actual or anticipated fluctuations in our operation results, general market conditions and other factors.  In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for the shares of exploration stage companies, which may materially adversely affect the market price of our common stock. <A NAME="_Toc170706017"><A NAME="_Toc142132871"></P>
<B><I><P ALIGN="JUSTIFY">Sales of a substantial number of shares of our common stock into the public market by the selling stockholders may result in significant downward pressure on the price of our common stock and could affect the ability of our stockholders to realize any current trading price of our common stock.</A></A></P>
</B></I><P ALIGN="JUSTIFY">Sales of a substantial number of shares of our common stock in the public market could cause a reduction in the market price of our common stock, when and if such market develops.  When the registration statement of which this prospectus forms a part is declared effective, the selling stockholders may be reselling up to approximately 38.7% of the issued and outstanding shares of our common stock (and, if the share purchase warrants are exercised with respect to the 7,117,425 shares underlying such share purchase warrants being registered, then the selling stockholders may be reselling up to approximately 51.2% of our issued and outstanding shares of common stock).  As a result of such registration statement, a substantial number of our shares of common stock which have been issued may be available for immediate resale when and if a market develops for our common stock, which could have an adverse effect on the price of our common stock.  As a result of any such decreases in price of our common stock, purchasers who acquire shares from the selling stockholders may lose some or all of their investment.  </P>
<P ALIGN="JUSTIFY">Any significant downward pressure on the price of our common stock as the selling stockholders sell the shares of our common stock could encourage short sales by the selling stockholders or others.  Any such short sales could place further downward pressure on the price of our common stock.</P>
<B><I><P ALIGN="JUSTIFY">The trading price of our common stock may be volatile.</P>
</B></I><P ALIGN="JUSTIFY">When listed, the price of our common shares may increase or decrease in response to a number of events and factors, including: trends in the oil and gas markets in which we operate; changes in the market price of oil and gas; current events affecting the economic situation in North America; changes in financial estimates; our acquisitions and financings; quarterly variations in our operating results; the operating and share price performance of other companies that investors may deem comparable; and purchase or sale of blocks of our common shares.  These factors, or any of them, may materially adversely affect the prices of our common shares regardless of our operating performance.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">10</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><I><FONT SIZE=3><P ALIGN="JUSTIFY">A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations.</P>
</B></I><P ALIGN="JUSTIFY">A decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise additional capital for our operations.  Because our operations to date have been principally financed through the sale of equity securities, a decline in the price of our common stock could have an adverse effect upon our liquidity and our continued operations.  A reduction in our ability to raise equity capital in the future would have a material adverse effect upon our business plan and operations, including our ability to continue our current operations.  If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.</P>
<B><I><P ALIGN="JUSTIFY">Re-sale restrictions for British Columbia residents may limit the ability of such residents to resell their shares in the U.S., which will affect the price at which their shares may be sold.</P>
</B></I><P ALIGN="JUSTIFY">Selling stockholders that are residents of British Columbia have to rely on an exemption from prospectus and registration requirements of British Columbia securities laws to sell their shares that are being registered for resale by this prospectus.  Such selling stockholders have to comply with the British Columbia Securities Commission's B.C. Instrument 72-502 "Trade in Securities of U.S. Registered Issuers" to resell their shares.  B.C. Instrument 72-502 requires, among other conditions, that British Columbia residents hold the shares for a period of twelve months and, consequent thereon, limits the volume of shares sold in a twelve-month period to five percent of the issued and outstanding shares of the issuer.  However, if we become a reporting issuer in British Columbia, then our British Columbia stockholders will only have to hold their shares for a period of four months and a day from becoming a reporting issuer in order to resell their shares.  These restrictions will limit the ability of the British Columbia residents to resell the securities in the United States and, therefore, may materially affect the market value of your shares.  If we decide to become a reporting issuer in British Columbia, then it is estimated that becoming such will take approximately three months from our decision to do so subject, at all times, to the prior approval of the British Columbia Securities Commission.  At present we do not intend to become a reporting issuer in British Columbia.<A NAME="_Toc170706018"><A NAME="_Toc142132872"></P>
<B><I><P ALIGN="JUSTIFY">Our stock is a penny stock.  Trading of our stock may be restricted by the SEC's penny stock regulations and FINRA's  sales practice requirements, which may limit a stockholder's ability to buy and sell our stock.</A></A></P>
</B></I><P ALIGN="JUSTIFY">Our common stock will be subject to the "Penny Stock" Rules of the SEC, which will make transactions in our common stock cumbersome and may reduce the value of an investment in our common stock. </P>
<P ALIGN="JUSTIFY">We currently plan to have our common stock quoted on the OTC Bulletin Board of FINRA, which is generally considered to be a less efficient market than markets such as NASDAQ or the national exchanges, and which may cause difficulty in conducting trades and difficulty in obtaining future financing.  Further, our securities will be subject to the "penny stock rules" adopted pursuant to Section 15(g) of the <I>Securities Exchange Act of 1934</I>, as amended (the "Exchange Act").  The penny stock rules apply generally to companies whose common stock trades at less than $5.00 per share, subject to certain limited exemptions.  Such rules require, among other things, that brokers who trade "penny stock" to persons other than "established customers" complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances.  Many brokers have decided not to trade "penny stock" because of the requirements of the "penny stock rules" and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited.  In the event that we remain subject to the "penny stock rules" for any significant period, there may develop an adverse impact on the market, if any, for our securities.  Because our securities are subject to the "penny stock rules", investors will find it more difficult to dispose of our securities.  Further, it is more difficult: (i) to obtain accurate quotations, (ii) to obtain coverage for significant news events because major wire services, such as the Dow Jones News Service, generally do not publish press releases about such companies, and (iii) to obtain needed capital.</P>
<P ALIGN="JUSTIFY">In addition to the "penny stock" rules promulgated by the SEC, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer when recommending the investment to that customer.  Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information.  Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers.  FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">11</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="JUSTIFY">Please read this prospectus carefully.  You should rely only on the information contained in this prospectus.  We have not authorized anyone to provide you with different information.  You should not assume that the information provided by the prospectus is accurate as of any date other than the date on the front of this prospectus.</P>
<P ALIGN="CENTER"><A NAME="_Toc178170749"><A NAME="_Ref170609014"><A NAME="_Toc188095628">FORWARD-LOOKING STATEMENTS</A></A></A></P>
</B><P ALIGN="JUSTIFY">This prospectus contains forward-looking statements that involve risks and uncertainties, including statements regarding our capital needs, business plans and expectations.  Such forward-looking statements involve risks and uncertainties regarding the market price of valuable minerals, availability of funds, government regulations, operating costs, exploration costs, outcomes of exploration programs and other factors.  Forward-looking statements are made, without limitation, in relation to operating plans, property exploration and development, availability of funds, environmental reclamation, operating costs and permit acquisition.  Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology.  Actual events or results may differ materially from any forward-looking statement.  In evaluating these statements, you should consider various factors, including the risks outlined in this prospectus.  These factors may cause our actual results to differ materially from any forward-looking statement.  While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding our business plans, our actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.  We do not intend to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States. </P>
<P ALIGN="JUSTIFY">The safe harbour for forward-looking statements provided in the <I>Private Securities Litigation Reform Act of 1995</I> does not apply to the offering made in this prospectus.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc178170750"><A NAME="_Toc188095629">USE OF PROCEEDS</A></A></P>
</B><P ALIGN="JUSTIFY">We will not receive any proceeds from the sale of the shares of common stock offered through this prospectus by the selling stockholders.  All proceeds from the sale of the shares will be for the account of the selling stockholders, as described below in the sections of this prospectus entitled "Selling Stockholders" and "Plan of Distribution".  We will, however, incur all costs associated with this prospectus and the registration statement of which this prospectus forms a part.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc178170751"><A NAME="_Toc188095630">DETERMINATION OF OFFERING PRICE</A></A></P>
</B><P ALIGN="JUSTIFY">Our common stock is not presently traded on any market or securities exchange, and we have not applied for listing or quotation on any public market.  Accordingly, we have fixed the benchmark offering price by reference to our most recent offering of our units, which was effected at $0.60 per unit.  The selling stockholders will sell their common stock at the price of $0.60 per share until our common stock is quoted on the OTC Bulletin Board or in another quotation medium and, thereafter, at prevailing market prices or at privately negotiated prices.  There is no relationship whatsoever between the offering price and our assets, earnings, book value or any other objective criteria of value. </P>
<P ALIGN="JUSTIFY">If our common stock becomes publicly traded and a market for the stock develops, the actual offering price of the shares that are the subject of this prospectus will be determined by prevailing market prices at the time of sale or by private transactions negotiated by the selling stockholders named in this prospectus.  The offering price would thus be determined by market factors and the independent decisions of the selling stockholders named in this prospectus.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc178170752"><A NAME="_Toc188095631">DILUTION</A></A></P>
</B><P ALIGN="JUSTIFY">The common stock to be sold by the selling stockholders is common stock that is currently issued and outstanding.  Accordingly, there will be no dilution to our existing stockholders.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER"><A NAME="_Toc188095632">12</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">SELLING StockHOLDERS</A></P>
</B><P ALIGN="JUSTIFY">The Selling Stockholders named in this prospectus are offering all of the 17,594,095 shares of common stock offered through this prospectus, consisting of:</P>

<UL>
<P ALIGN="LEFT"><LI>10,476,670 shares of our common stock that has been issued to certain of the Selling Stockholders; and</LI></P></UL>


<UL>
<P ALIGN="JUSTIFY"><LI>7,117,425 shares of our common stock, issuable upon the exercise of outstanding common stock purchase warrants to acquire shares of our common stock by certain of the Selling Stockholders.</LI></P></UL>

<P ALIGN="JUSTIFY">The 17,594,095 shares of our common stock offered by the Selling Stockholders are comprised of:</P>

<UL>
<P ALIGN="JUSTIFY"><LI>2,341,978 shares of common stock issued at a price of $0.10 per share on October 29, 2005;</LI></P>
<P ALIGN="JUSTIFY"><LI>1,259,308 shares of common stock issued at a price of $0.10 per share on March 3, 2006;</LI></P>
<P ALIGN="JUSTIFY"><LI>310,000 shares of common stock issued at a price of $0.10 per share on May 31, 2006;</LI></P>
<P ALIGN="JUSTIFY"><LI>1,022,145 shares of common stock and 1,022,145 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of 1,022,145 units at a price of $0.35 per unit on July 7, 2006;</LI></P>
<P ALIGN="JUSTIFY"><LI>1,100,000 shares of common stock and 1,100,000 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 1,110,000 units at a price of $0.50 per unit on July 17, 2006;</LI></P>
<P ALIGN="JUSTIFY"><LI>180,000 shares of common stock and 180,000 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 180,000 units at a price of $0.50 per unit on October 5, 2006;</LI></P>
<P ALIGN="JUSTIFY"><LI>683,333 shares of common stock and 683,333 shares of common stock issuable upon exercise of warrants issued in connection with the issuance of an aggregate of 683,333 units at a price of $0.60 per unit on October 6, 2006;</LI></P>
<P ALIGN="JUSTIFY"><LI>169,667 shares of common stock and 169,667 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 169,667 units at a price of $0.60 per unit on November 15, 2006;</LI></P>
<P ALIGN="JUSTIFY"><LI>819,171 shares of common stock and 819,171 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 819,171 units at a price of $0.60 per unit on December 6, 2006;</LI></P>
<P ALIGN="JUSTIFY"><LI>1,680,569 shares of common stock and 1,680,569 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 1,680,569 units at a price of $0.60 per unit on April 30, 2007;</LI></P>
<P ALIGN="JUSTIFY"><LI>185,833 shares of common stock and 185,833 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 185,833 units at a price of $0.60 per unit on May 31, 2007;</LI></P>
<P ALIGN="JUSTIFY"><LI>385,000 shares of common stock issuable upon exercise of warrants at $0.35 per share issued pursuant to finders' fees agreements on July 5, 2007;</LI></P>
<P ALIGN="JUSTIFY"><LI>4,000 shares of common stock issuable upon exercise of warrants at $0.50 per share issued pursuant to finders' fees agreements on July 5, 2007;</LI></P>
<P ALIGN="JUSTIFY"><LI>163,041 shares of common stock issuable upon exercise of warrants at $0.60 per share issued pursuant to finders' fees agreements on July 5, 2007;</LI></P>
<P ALIGN="JUSTIFY"><LI>724,666 shares of common stock and 724,666 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 724,666 units at a price of $0.60 per unit on October 31, 2007.</LI></P></UL>

</FONT><FONT SIZE=2><P ALIGN="CENTER">13</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">The following table sets forth certain information regarding the ownership of our shares of common stock to be sold by the Selling Stockholders as of the date of the registration statement of which this prospectus forms a part.  The number of shares to be offered by the Selling Stockholders include both the shares issued in the private placement transactions and the shares issuable to certain of the Selling Stockholders upon exercise of the warrants.</P>
<P ALIGN="JUSTIFY">Information with respect to ownership is based upon information obtained from the Selling Stockholders.  Information with respect to "Shares Owned Prior to this Offering" includes the shares issuable upon exercise of warrants held by certain of the Selling Stockholders.  The "Shares to be Offered under this Prospectus" includes the shares acquired by the Selling Stockholders in the private placement transactions described above and shares that are issuable upon exercise of the warrants acquired by certain of the Selling Stockholders in such transactions.  Information with respect to "Shares Owned After this Offering" assumes the sale of all of the shares offered by this prospectus and no other purchases or sales of our common stock by the Selling Stockholders.  Except as described below and to our knowledge, the Selling Stockholders own and have sole voting and investment power over all shares or rights to these shares.  Except for their ownership of common stock described below, none of the Selling Stockholders had or have any material relationship with us.  On information and belief based upon query by the Company to the Selling Stockholders, we do not believe that any Selling Stockholder are registered broker-dealers or affiliates of registered broker-dealers.</P>
<P ALIGN="JUSTIFY">Because a Selling Stockholder may offer by this prospectus all or some part of the common shares which it holds, no estimate can be given as at the date hereof as to the number of common shares actually to be offered for sale by a Selling Stockholder or as to the number of common shares that will be held by a Selling Stockholder upon the termination of such offering.</P></FONT>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="35%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Name of Selling Stockholder</B></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Shares Owned<BR>
Prior to this<BR>
Offering</B><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Shares to be<BR>
Offered under this<BR>
Prospectus</B><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="31%" VALIGN="BOTTOM" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Number of Shares Owned After<BR>
Offering and Percentage of Total of<BR>
the Issued and Outstanding</B></FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Shares Owned<BR>
After Offering</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Percentage of<BR>
Issued and<BR>
Outstanding<BR>
Shares</B><SUP>(2)</SUP></FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of shares at $0.10 per share, effective on October 29, 2005</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Surfran Investments<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(3)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Severn Consulting LLC </FONT><B><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(3)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Lomas Invest Enterprises Corp.<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(4)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Liberty Management, LLC Defined Benefit Plan<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(5)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">300,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">300,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="LEFT">Isaiah Capital Trust<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(6)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">450,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">450,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Copper Eagle International Foundation.<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(7)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">400,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">400,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Oliver Lindsay<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(8)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Dain Currie</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Michael Baybak</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">500,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">500,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Rosalind M. Black</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">41,978</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">41,978</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of shares at $0.10 per share, effective on March 3, 2006</B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Raj Chowdhry</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Jaeger Marie-Line</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">30,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">30,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Denis D. Corin </FONT><B><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(9)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Affaires Financieres S.A.<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(10)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Richard Bullock</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">300,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">300,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Canon Bryan</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">105,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">105,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER">14</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="35%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Name of Selling Stockholder</B></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Shares Owned<BR>
Prior to this<BR>
Offering</B><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Shares to be<BR>
Offered under this<BR>
Prospectus</B><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="31%" VALIGN="BOTTOM" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Number of Shares Owned After<BR>
Offering and Percentage of Total of<BR>
the Issued and Outstanding</B></FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Shares Owned<BR>
After Offering</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Percentage of<BR>
Issued and<BR>
Outstanding<BR>
Shares</B><SUP>(2)</SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Thomas J. Deutsch Law Corporation<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(11)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Laura Van Sprang</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">8,577</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">8,577</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">0742239 B.C. Ltd.<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(12)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Jeffrey Antonia</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">8,577</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">8,577</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Brett Grueter</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">8,577</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">8,577</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Michael Walker</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">8,577</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">8,577</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Josie Mann<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(13)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Darren Mann<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(14)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Mehdi Kardan</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Kian Ehsan</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of shares at $0.10 per share, effective on May 31, 2006 </B></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Amir Adnani </FONT><B><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(15)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">110,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">110,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Pascal D'Onofrio</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Steven Narrod</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of 1,022,145 Units </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(16)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Anthony Ress</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Arash Adnani</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">57,144</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">57,144</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Graham Elston</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">342,858</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">342,858</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Greg Bowden</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">30,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">30,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">High Impact Financial Ltd.<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(17)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Jorge Koc</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">25,714</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">25,714</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Kian Ehsan</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">314,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">314,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Mabobeh Afshar</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">57,144</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">57,144</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Mahmoud Mohammadnabi</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">228,572</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">228,572</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Marcus New</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Mehran Ehsan</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">6,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">6,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Michael Price</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">434,286</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">434,286</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Sam Hirji</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">82,856</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">82,856</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Simba Biomed Venture Partners LLC<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(18)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Omid Reza Afham</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">85,716</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">85,716</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of 1,100,000 Units </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(19)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">David Cleave</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">300,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">300,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">David Pritchard</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">1,600,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">1,600,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">David Graham Young</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">80,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">80,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Peter Burningham</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">220,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">220,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER">15</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="35%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Name of Selling Stockholder</B></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Shares Owned<BR>
Prior to this<BR>
Offering</B><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Shares to be<BR>
Offered under this<BR>
Prospectus</B><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="31%" VALIGN="BOTTOM" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Number of Shares Owned After<BR>
Offering and Percentage of Total of<BR>
the Issued and Outstanding</B></FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Shares Owned<BR>
After Offering</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Percentage of<BR>
Issued and<BR>
Outstanding<BR>
Shares</B><SUP>(2)</SUP></FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of 180,000 Units </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(20)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">SMA Developments Ltd.<B> </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(21)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Uwe Koehler</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">260,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">260,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of 683,333 Units </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(22)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Michael Price</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">33,334</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">33,334</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Gary Brierley</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">666,666</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">666,666</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">N.F.G. Blashill</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">666,666</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">666,666</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of 169,667 Units </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(23)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Jamie Jenkins</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">333,334</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">333,334</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Jean-Claude Doucet</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">6,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">6,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of 819,171 Units </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(24)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Stephen McCreery</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">1,638,342</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">1,638,342</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of 1,680,569 Units </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(25)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Omid Reza Afham</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Mahmoud Mohammadna</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">66,666</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">66,666</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">David Hutchinson</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">40,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">40,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Glynn Fisher</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Rod Talaifar</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Sergey Ayvazyan</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Hamid Bakhtiari</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">33,334</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">33,334</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Lila Mohammadnabi</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">33,332</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">33,332</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Hugh Hutchison</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">60,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Omid Reza Afham</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">66,666</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">66,666</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">David Begleiter</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">6,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">6,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Alim Abdulla</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Mahmoud Mohammadna</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">389,332</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">389,332</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Justin Geisler</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Brent Tatford</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">10,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">10,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Kenia Jeanniton</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">10,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">10,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Pamela Capik</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">12,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">12,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Houman Houchmand</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">66,666</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">66,666</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Bradley Kieffer</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">84,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">84,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Lama Al-Azzeh</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">15,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">15,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Margaret Puhacz</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">15,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">15,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Ali Ghassem</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">56,530</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">56,530</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER">16</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="35%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Name of Selling Stockholder</B></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Shares Owned<BR>
Prior to this<BR>
Offering</B><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Shares to be<BR>
Offered under this<BR>
Prospectus</B><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="31%" VALIGN="BOTTOM" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Number of Shares Owned After<BR>
Offering and Percentage of Total of<BR>
the Issued and Outstanding</B></FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Shares Owned<BR>
After Offering</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Percentage of<BR>
Issued and<BR>
Outstanding<BR>
Shares</B><SUP>(2)</SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Nizarali Somji</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">56,530</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">56,530</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Correy Beal</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Suzan El-Khatib</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Dayton Daberkow</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">100,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Toni Ali</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Christian Fauna-Robinson</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">2,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Temeka Tate</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">William Leefe</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">70,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">70,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Nicolas Vergara</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">3,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">3,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Carmela Cupo</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">30,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">30,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Ramin Roohi</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Firouz Adab</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">40,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">40,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Amir Novin</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">83,334</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">83,334</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Freddie Adnousi</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">330,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">330,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Kian Ehsan</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Peter Burningham</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">655,334</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">655,334</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Duncan Gordon</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">40,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">40,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Kristian Andersen</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Rod Talaifar</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">18,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">18,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Dain Currie</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">20,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Norman Mawhinney</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">172,414</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">172,414</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Michael Baybak</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">350,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">350,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Omar Rafeh</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Amanda Patenaude</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">6,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">6,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of 185,833 Units </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(26)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Ron Saperstein</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">105,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">105,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">David Yue</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Howard Roberts</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">216,666</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">216,666</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Issuance of 385,000 Share Purchase Warrants </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(27)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Steven Smart</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">38,857</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">38,857</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Stephen Cooper</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">346,143</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">346,143</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Issuance of 4,000 Share Purchase Warrants </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(28)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Steven Smart</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Issuance of 163,041 Share Purchase Warrants </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(29)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Steven Smart</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">89,483</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">89,483</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER">17</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="35%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Name of Selling Stockholder</B></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Shares Owned<BR>
Prior to this<BR>
Offering</B><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" ROWSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Shares to be<BR>
Offered under this<BR>
Prospectus</B><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="31%" VALIGN="BOTTOM" COLSPAN=2>
<B><FONT SIZE=1><P ALIGN="CENTER">Number of Shares Owned After<BR>
Offering and Percentage of Total of<BR>
the Issued and Outstanding</B></FONT></TD>
</TR>
<TR><TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Shares Owned<BR>
After Offering</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Percentage of<BR>
Issued and<BR>
Outstanding<BR>
Shares</B><SUP>(2)</SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Stephen Cooper</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">30,421</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">30,421</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Arash Adnani</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">14,987</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">14,987</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Oliver Lindsay </FONT><B><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(8)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">10,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">10,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=5 BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Private Placement of 724,666 Units </FONT><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(30)</B></SUP></FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Philip Clayton</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">50,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Aryo Trading Corp. </FONT><B><SUP><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=1>(30)</B></SUP></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Mehdi Kardan</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">666,666</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">666,666</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Mahmoud Mohammadnabi</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">66,666</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">66,666</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="JUSTIFY">Riaz Shariff</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">466,000</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">466,000</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="LEFT">Total</B></FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="RIGHT">17,594,095</B></FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="RIGHT">17,594,095</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="CENTER">Nil</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" BGCOLOR="#ffffff">
<B><FONT SIZE=1><P ALIGN="CENTER">Nil</B></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=1><P ALIGN="JUSTIFY">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares.  Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares).  In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided.  In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.  As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting power with respect to the number of shares of common stock actually outstanding on the date hereof.  Unless otherwise indicated hereinbelow, to our knowledge each Selling Stockholder has sole dispositive and voting power with respect to their shares of common stock owned.  The shares owned consist of the shares issued to the Selling stockholder upon completion of the private placement transaction and shares issuable to certain of the Selling Stockholders upon exercise of the warrants. </P>
<P ALIGN="JUSTIFY">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The applicable percentage of ownership is based on 27,615,351 shares of our common stock issued and outstanding as of February 1, 2008.</P>
<P ALIGN="JUSTIFY">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To our knowledge, A. Gordon exercises dispositive and voting power with respect to these shares.</P>
<P ALIGN="JUSTIFY">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To our knowledge, Gerald Hoop exercises dispositive and voting power with respect to these shares.</P>
<P ALIGN="JUSTIFY">(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To our knowledge, Patrick Kephart exercises dispositive and voting power with respect to these shares.</P>
<P ALIGN="JUSTIFY">(6)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To our knowledge, Sandra Gail Corin exercises dispositive and voting power with respect to these shares. Sandra Gail Corin is the sister of Alan Lindsay, one of our directors.</P>
<P ALIGN="JUSTIFY">(7)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To our knowledge, Mavis Sanchez exercises dispositive and voting power with respect to these shares.</P>
<P ALIGN="JUSTIFY">(8)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oliver Lindsay is the son of Alan Lindsay, one of our directors.</P>
<P ALIGN="JUSTIFY">(9)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Denis Corin is the nephew of Alan Lindsay, one of our directors, and the cousin of Johnathan Lindsay, our Secretary, Treasurer , Chief Financial Officer, Principal Accounting Officer and one of our directors. </P>
<P ALIGN="JUSTIFY">(10)&nbsp;&nbsp;&nbsp;To our knowledge, Roland Luchsinger/Werner Wagemann exercises dispositive and voting power with respect to these shares.</P>
<P ALIGN="JUSTIFY">(11)&nbsp;&nbsp;&nbsp;Thomas J. Deutsch is the principal of Thomas J.  Deutsch Law Corporation and a partner of the law firm of Lang Michener LLP and acts as the solicitor to the Company.</P>
<P ALIGN="JUSTIFY">(12)&nbsp;&nbsp;&nbsp;To our knowledge, Daniel Savard exercises dispositive and voting power with respect to these shares.</P>
<P ALIGN="JUSTIFY">(13)&nbsp;&nbsp;&nbsp;Josie Mann is the step daughter of Alan Lindsay, one of our directors.</P>
<P ALIGN="JUSTIFY">(14)&nbsp;&nbsp;&nbsp;Darren Mann is the step son of Alan Lindsay, one of our directors.</P>
<P ALIGN="JUSTIFY">(15)&nbsp;&nbsp;&nbsp;Amir Adnani is the son-in-law of Alan Lindsay, one of our directors.</P>
<P ALIGN="JUSTIFY">(16)&nbsp;&nbsp;&nbsp;On July 7, 2006, we issued an aggregate of 1,022,145 units at a price of $0.35 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at an exercise price of $0.60 per share, for the period commencing on the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(17)&nbsp;&nbsp;&nbsp;To our knowledge, Imtiyaz Huizami exercises dispositive and voting power with respect to these shares.</P>
<P ALIGN="JUSTIFY">(18)&nbsp;&nbsp;&nbsp;To our knowledge, Mark Landy exercises dispositive and voting power with respect to these shares.</P>
<P ALIGN="JUSTIFY">(19)&nbsp;&nbsp;&nbsp;On July 17, 2006, we issued an aggregate of 1,100,000 units at a price of $0.50 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at an exercise price of $0.60 per share, for the period commencing on the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(20)&nbsp;&nbsp;&nbsp;On October 5, 2006, we issued an aggregate of 180,000 units at a price of $0.50 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $0.60 per share, for the period commencing on the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(21)&nbsp;&nbsp;&nbsp;To our knowledge, Andre St. Marie exercises dispositive and voting power with respect to these shares.</P>
<P ALIGN="JUSTIFY">(22) &nbsp;&nbsp;On October 6, 2006, we issued an aggregate of 683,333 units at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">18</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=1><P ALIGN="JUSTIFY"> (23)&nbsp;&nbsp;&nbsp;On November 15, 2006, we issued an aggregate of 169,667 units at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(24)&nbsp;&nbsp;&nbsp;On December 6, 2006, , we issued 819,171 units, , at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(25)&nbsp;&nbsp;&nbsp;On April 30, 2007, we issued 1,680,569 units at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(26)&nbsp;&nbsp;&nbsp;On May 31, 2007, we issued 185,833 units at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(27) &nbsp;&nbsp;On July 5, 2007, we issued 385,000 share purchase warrants, with each warrant entitling the subscriber to purchase one share a price of $0.35 per share, for the period commencing on the date of issuance of the units and ending on the day which is 18 months from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(28)&nbsp;&nbsp;&nbsp;On July 5, 2007, we issued 4,000 share purchase warrants, with each warrant entitling the subscriber to purchase one share a price of $0.50 per share, for the period commencing on the date of issuance of the units and ending on the day which is 18 months from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(29)&nbsp;&nbsp;&nbsp;On July 5, 2007, we issued 163,041 share purchase warrants, with each warrant entitling the subscriber to purchase one share a price of $0.60 per share, for the period commencing on the date of issuance of the units and ending on the day which is 18 months from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(30)&nbsp;&nbsp;&nbsp;On October 31, 2007, we issued 724,666 units at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(31)&nbsp;&nbsp;&nbsp;To our knowledge, David Craven exercises dispositive and voting power with respect to these shares.</P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER"><A NAME="_Toc188095633">PLAN OF DISTRIBUTION</A></P>
<P ALIGN="LEFT">Timing of Sales</P>
</B><P ALIGN="JUSTIFY">The Selling Stockholders may offer and sell the shares covered by this prospectus at various times.  The Selling Stockholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. </P>
<B><P ALIGN="JUSTIFY">Offering Price</P>
</B><P ALIGN="JUSTIFY">The Selling Stockholders will sell their shares at an offering price of $0.60 per share until our shares are quoted on the OTC Bulletin Board or are listed for trading or quoted on any other public market.  Thereafter, the sales price offered by the Selling Stockholders to the public may be:</P>
<OL>
<OL>

<P ALIGN="JUSTIFY"><LI>the market price prevailing at the time of sale;</LI></P>
<P ALIGN="JUSTIFY"><LI>a price related to such prevailing market price; or</LI></P>
<P ALIGN="JUSTIFY"><LI>such other price as the Selling Stockholders determine from time to time.</LI></P></OL>
</OL>

<P ALIGN="JUSTIFY">Our common stock is not currently listed on any national exchange or electronic quotation system.  To date, no actions have been taken to list our shares on any national exchange or electronic quotation system.  If our common stock becomes publicly traded, then the sales price to the public will vary according to the selling decisions of each Selling Stockholder and the market for our stock at the time of resale.  </P>
<B><P ALIGN="JUSTIFY">Manner of Sale</P>
</B><P ALIGN="JUSTIFY">The shares may be sold by means of one or more of the following methods: </P>
<OL>

<P ALIGN="JUSTIFY"><LI>a block trade in which the broker-dealer so engaged will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;</LI></P>
<P ALIGN="JUSTIFY"><LI>purchases by a broker-dealer as principal and resale by that broker-dealer for its account pursuant to this prospectus;</LI></P>
<P ALIGN="JUSTIFY"><LI>ordinary brokerage transactions in which the broker solicits purchasers; </LI></P>
<P ALIGN="JUSTIFY"><LI>through options, swaps or derivative;</LI></P>
<P ALIGN="JUSTIFY"><LI>privately negotiated transactions; or</LI></P>
<P ALIGN="JUSTIFY"><LI>in a combination of any of the above methods.</LI></P></OL>

</FONT><FONT SIZE=2><P ALIGN="CENTER">19</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">The Selling Stockholders may sell their shares directly to purchasers or may use brokers, dealers, underwriters or agents to sell their shares. Brokers or dealers engaged by the Selling Stockholders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions, discounts or concessions from the Selling Stockholders, or, if any such broker-dealer acts as agent for the purchaser of shares, from the purchaser in amounts to be negotiated immediately prior to the sale. The compensation received by brokers or dealers may, but is not expected to, exceed that which is customary for the types of transactions involved. Broker-dealers may agree with a Selling Stockholder to sell a specified number of shares at a stipulated price per share, and, to the extent the broker-dealer is unable to do so acting as agent for a Selling Stockholder, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment to the Selling Stockholder. Broker-dealers who acquire shares as principal may thereafter resell the shares from time to time in transactions, which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above, in the over-the-counter market or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then-current market price or in negotiated transactions. In connection with resales of the shares, broker-dealers may pay to commissions or receive from commissions the purchasers of shares as described above. </P>
<P ALIGN="JUSTIFY">If our Selling Stockholders enter into arrangements with brokers or dealers, as described above, we are obligated to file a post-effective amendment to the registration statement of which this prospectus forms a part, disclosing such arrangements, including the names of any broker dealers acting as underwriters.</P>
<P ALIGN="JUSTIFY">The Selling Stockholders and any broker-dealers or agents that participate with the Selling Stockholders in the sale of the shares may be deemed to be "underwriters" within the meaning of the Securities Act. In that event, any commissions received by broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. </P>
<B><P ALIGN="JUSTIFY">Sales Pursuant to Rule 144</P>
</B><P ALIGN="JUSTIFY">Any shares of common stock covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act, may be sold under Rule 144 rather than pursuant to this prospectus.</P>
<B><P ALIGN="JUSTIFY">Regulation&nbsp;M</P>
</B><P ALIGN="JUSTIFY">We have advised the selling security holders that the anti-manipulation rules of Regulation&nbsp;M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling security holders and their affiliates.  Regulation&nbsp;M under the Exchange Act prohibits, with certain exceptions, participants in a distribution from bidding for, or purchasing for an account in which the participant has a beneficial interest, any of the securities that are the subject of the distribution. Accordingly, the Selling Stockholder is not permitted to cover short sales by purchasing shares while the distribution is taking place.  Regulation&nbsp;M also governs bids and purchases made in order to stabilize the price of a security in connection with a distribution of the security.  In addition, we will make copies of this prospectus available to the selling security holders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. </P>
<B><P ALIGN="JUSTIFY">State Securities Laws</P>
</B><P ALIGN="JUSTIFY">Under the securities laws of some states, the shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares may not be sold unless the shares have been registered or qualified for sale in the state or an exemption from registration or qualification is available and is complied with. </P>
<B><P ALIGN="JUSTIFY">Sales by Residents of British Columbia</P>
</B><P ALIGN="JUSTIFY">Selling Stockholders that are residents of British Columbia have to rely on an exemption from prospectus and registration requirements of British Columbia securities laws to sell their shares which are being registered for resale by this prospectus.  Such Selling Stockholders have to comply with the British Columbia Securities Commission's B.C. Instrument 72-502 "Trade in Securities of U.S. Registered Issuers" to resell their shares.  B.C. Instrument 72-502 requires, among other conditions, that British Columbia residents hold the shares for a period of twelve months and, consequent thereon, limits the volume of shares sold in a twelve-month period to five percent of the issued and outstanding shares of the issuer.  However, if we become a reporting issuer in British Columbia, then our British Columbia stockholders will only have to hold their shares for a period of four months and a day from becoming a reporting issuer in order to resell their shares.  At present we do not intend to become a reporting issuer in British Columbia and, accordingly, British Columbia resident stockholders who wish to make a public sale of shares through the OTC Bulletin Board or on any market or securities exchange in the United States will be limited to the resale limitations set forth in B.C. Instrument 72-502.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">20</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="JUSTIFY">Expenses of Registration</P>
</B><P ALIGN="JUSTIFY">We are bearing all costs relating to the registration of the common stock.  These expenses are estimated to be $44,805.34, including, but not limited to, legal, accounting, printing and mailing fees.  The Selling Stockholders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095634">LEGAL PROCEEDINGS</A></P>
</B><P ALIGN="JUSTIFY">We currently are not party to any material legal proceedings and, to our knowledge, no such proceedings are threatened or contemplated.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095635">DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS</A></P>
</B><P ALIGN="JUSTIFY">Our directors and executive officers and their respective ages as of the date of this prospectus are as follows:</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=3><P ALIGN="CENTER"><A NAME="_Toc154414136"><A NAME="_Toc154472985"><A NAME="_Toc154473082"><A NAME="_Toc154499347"><A NAME="_Toc154499566">Directors</A></A></A></A></A></P></B></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=361>
<TR><TD WIDTH="64%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="JUSTIFY">Name of director</U></FONT></TD>
<TD WIDTH="36%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="JUSTIFY">Age</U></FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Leonard Garcia</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">58</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">Johnathan Lindsay</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">31</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">Alan P. Lindsay</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">57</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">Randall Reneau</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="LEFT">59</FONT></TD>
</TR>
</TABLE>

<B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=3><P ALIGN="CENTER"><A NAME="_Toc154414137"><A NAME="_Toc154472986"><A NAME="_Toc154473083"><A NAME="_Toc154499348"><A NAME="_Toc154499567">Executive Officers</A></A></A></A></A></P></B></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="33%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="JUSTIFY">Name of Executive Officer</U></FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="JUSTIFY">Age</U></FONT></TD>
<TD WIDTH="48%" VALIGN="TOP">
<U><FONT SIZE=3><P ALIGN="LEFT">Office Held</U></FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="JUSTIFY">Randall Reneau</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="LEFT">59</FONT></TD>
<TD WIDTH="48%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="LEFT">President, Chief Executive Officer and Principal Executive Officer</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="LEFT">Johnathan Lindsay</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="LEFT">31</FONT></TD>
<TD WIDTH="48%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="LEFT">Secretary, Treasurer, Chief Financial Officer and Principal Accounting Officer</FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="LEFT">Steven L. Carter</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="LEFT">49</FONT></TD>
<TD WIDTH="48%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="LEFT">Vice President of Operations</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=3><P ALIGN="JUSTIFY">The following describes the business experience of each of our directors and executive officers, including other directorships held in reporting companies:</P>
<B><I><P ALIGN="JUSTIFY">Leonard G. Garcia</P>
</B></I><P ALIGN="JUSTIFY">Mr. Garcia has been a director since April 17, 2006.  In addition, he served as our President and Chief Executive Officer from April 17, 2006 until August 5, 2007.  Mr. Garcia is an Independent Petroleum Landman with over thirty years experience in oil and gas title research, lease negotiations and acquisitions, contracts, exploration and production.  Mr. Garcia worked under contract for Kerr-McGee Oil &amp; Gas, Harkins &amp; Co., Sun Oil Company, Oryx Energy Co., Texaco, Monsanto Exploration and Production Company, and Trans Texas Energy.  His corporate experience includes serving as Chief Executive Officer of Texas corporations with annual sales in excess of eighteen million dollars.  Mr. Garcia attended the University of Texas-Austin, The University of Texas-Pan American and Texas A&amp;M University-Kingsville.  He currently resides in Austin, Texas.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">21</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><I><FONT SIZE=3><P ALIGN="JUSTIFY">Johnathan Lindsay, Secretary, Treasurer, Chief Financial Officer, Principal Accounting Officer and a director</P>
</B></I><P ALIGN="JUSTIFY">Johnathan Lindsay<B> </B>has been our Secretary since July 11, 2005.  In addition, he served as our President, Treasurer and as our sole director from July 11, 2005 until April 17, 2006.  He was subsequently reappointed as a director on April 17, 2007 and has also served as our Treasurer, Chief Financial Officer and Principal Accounting Officer since that date.  Mr. Lindsay was responsible for organizing initial financing for our Company.  From 2003 to 2006, Mr. Lindsay worked with Uranium Energy Corp., a uranium exploration company publicly traded on the American Stock Exchange, where he helped the company go public.  From 1999 to 2004, Mr. Lindsay was employed by Alan Lindsay and Associates as Vice President, Marketing and Corporate Secretary.  In 1997, Mr. Lindsay worked with the Investor Relations Group and for National Media, two North American public sector marketing firms.  Following his position with National Media, he studied marketing and business management from 1998 to 1999 at the British Columbia Institute of Technology.</P>
<B><I><P ALIGN="JUSTIFY">Alan P. Lindsay, a director</P>
</B></I><P ALIGN="JUSTIFY">Alan Lindsay, who was our founding officer and director, resigned as and officer and director on July 11, 2005.  Alan Lindsay was subsequently reappointed as a director on April 17, 2007.  Mr. Lindsay has extensive experience and expertise in the mining and bio-technology sectors.  From 2003 to the present, he has been the Chairman of Uranium Energy Corp., a uranium exploration company that has been publicly traded on the American Stock Exchange since September 2007.  Since October 2001, Mr. Lindsay has served as Chairman and CEO of MIV Therapeutics Inc, a publicly-listed biomedical company focused on biocompatible coating technology for stents and medical devices.  Since December 2005, Mr. Lindsay has served as a director of TapImmune Inc., a U.S. reporting company.  </P>
<P ALIGN="JUSTIFY">Mr. Lindsay was the founder of AZCO Mining, Inc., a base metals exploration company. Mr. Lindsay served as Azco's Chief Executive Officer and President from 1991 to 1994, its Chairman and Chief Executive Officer from 1994 to 1997 and its President, Chairman and Chief Executive Officer from 1997 to 2000. Azco was listed on the Toronto Stock Exchange in 1993 and on the American Stock Exchange in 1994. Mr. Lindsay currently serves as a director of Hana Mining Ltd., a TSX Venture Exchange reporting company.  Mr. Lindsay also co-founded Anatolia Minerals Development Limited, a junior resource company that trades on the TSX, and New Oroperu Resources Inc., a junior resource company that trades on the TSX Venture Exchange.  </P>
<B><I><P ALIGN="JUSTIFY">Randall Reneau, President, Chief Executive Officer, Principal Executive Officer and a director</P>
</B></I><P ALIGN="JUSTIFY">Mr. Reneau has been a director of our Company since April 17, 2006, and he has served as our President, Chief Executive Officer and Principal Executive Officer since August 5, 2007.  Mr. Reneau is a certified professional geologist and holds licenses to practice geology in the states of Texas, Washington and Alaska.  He has more than 30 years combined mineral and oil and gas experience both domestic and foreign.  Mr. Reneau served as President of Reneau Exploration and Development Company, Inc. ("REDCO") from 1980 to 1988.  REDCO drilled and operated wells in Stephens County, Oklahoma and Navarro, Milam, Wilson and Guadalupe Counties in Texas.  Mr. Reneau served as Chief Exploration Officer and a director of Uranium Energy Corp., a uranium exploration company publicly traded on the American Stock Exchange., from January 2005 to July 2007.   Mr. Reneau has a B.A. in Geology from Central Washington University and an M.S. in Environmental Engineering from Kennedy-Western University.  Mr. Reneau currently resides in Austin, Texas.</P>
<B><I><P ALIGN="JUSTIFY">Steven L. Carter, Vice President of Operations</P>
</B></I><P ALIGN="JUSTIFY">Mr. Carter has served as our Vice President of Operations since December 20, 2006.  Mr. Carter is a registered professional engineer with twenty-five years of management and engineering experience in oil and gas exploration, production operations, reservoir management and drilling.  Mr. Carter served as Operations Manager and Operations Engineer for T-C Oil Company from 1990-2003, where he managed significant production, supervised drilling, provided economic evaluations and designed project workovers, as well as performing numerous other engineering services.  In 2003, Mr. Carter started Carter E&amp;P, LLC, an independent oil and gas company, where he acquired a 100,000 barrel oil producing property and increased production three-fold by re-working the wells.  Mr. Carter has a B.S. in Petroleum Engineering from the University of Texas at Austin.<A NAME="_Toc154414138"><A NAME="_Toc154472987"><A NAME="_Toc154473084"><A NAME="_Toc154499349"><A NAME="_Toc154499568"></P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">22</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="JUSTIFY">Term of Office</A></A></A></A></A></P>
</B><P ALIGN="JUSTIFY">Our directors are appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until they resign or are removed from the board in accordance with our bylaws.  Our officers are appointed by our Board of Directors and hold office until they resign or are removed from office by the Board of Directors.<A NAME="_Toc154414139"><A NAME="_Toc154472988"><A NAME="_Toc154473085"><A NAME="_Toc154499350"><A NAME="_Toc154499569"></P>
<B><P ALIGN="JUSTIFY">Significant Employees</A></A></A></A></A></P>
</B><P ALIGN="JUSTIFY">We have no significant employees other than our executive officers.<A NAME="directors"><A NAME="_Toc154414140"><A NAME="_Toc154472989"><A NAME="_Toc154473086"><A NAME="_Toc154499351"><A NAME="_Toc154499570"></A></P>
<B><P ALIGN="JUSTIFY">Audit Committee</A></A></A></A></A></P>
</B><P ALIGN="JUSTIFY">We have an Audit Committee of our Board of Directors comprised of Leonard Garcia, Alan P. Lindsay and Randall Reneau.  The audit committee operates pursuant to a charter adopted by the board.</P>
<B><P ALIGN="LEFT">Family Relationships</P>
</B><P ALIGN="JUSTIFY">Alan P. Lindsay is the father of Johnathan Lindsay.  There are no other family relationships among our directors and officers.</P>
<B><P ALIGN="LEFT">Involvement in Certain Legal Proceedings</P>
</B><P ALIGN="JUSTIFY">None of our directors, executive officers or control persons has been involved in any of the following events during the past five years:</P>
<OL>

<P ALIGN="JUSTIFY"><LI>any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;</LI></P>
<P ALIGN="JUSTIFY"><LI>any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);</LI></P>
<P ALIGN="JUSTIFY"><LI>being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or</LI></P>
<P ALIGN="JUSTIFY"><LI>being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.</LI></P></OL>

<B><P ALIGN="CENTER"><A NAME="_Toc188095636">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</A></P>
</B><P ALIGN="JUSTIFY">The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of February 1, 2008 by: (i) each person (including any group) known to us to own more than 5% of our shares of common stock; (ii) each of our directors; (iii) each of our officers; and (iv) our officers and directors as a group.  To our knowledge, each holder listed possesses sole voting and investment power with respect to the shares shown.</P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=617>
<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT"></P>
<U><P ALIGN="CENTER">Title of Class</B></U></FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">Name and Address of Beneficial <BR>
<U>Owner</B></U><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">Amount and Nature<BR>
 <U>of Beneficial Owner</B></U></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="CENTER">Percent of Class</B></U><SUP>(2)</SUP></FONT></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="34%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="JUSTIFY">Directors and Officers: </B></FONT></TD>
<TD WIDTH="22%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="22%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Leonard Garcia<BR>
10105 Grand Oak Drive<BR>
Austin, Texas, U.S.A., 78750</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,600,000 <SUP>(3)</SUP></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">5.7%</FONT></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Johnathan Lindsay <BR>
1917 West 12th Avenue<BR>
Vancouver, B.C., Canada, V6J 2G1</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">426,931 <SUP>(4)</SUP></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">1.5%</FONT></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Alan P. Lindsay<BR>
2701 - 1500 Hornby Street<BR>
Vancouver, B.C., Canada, V6Z 2R1</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,061,750 <SUP>(5)</SUP></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">3.8%</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER">23</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=617>
<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">&nbsp;</P>
<U><P ALIGN="CENTER">Title of Class</B></U></FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">Name and Address of Beneficial <BR>
<U>Owner</B></U><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">Amount and Nature<BR>
 <U>of Beneficial Owner</B></U></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="CENTER">Percent of Class</B></U><SUP>(2)</SUP></FONT></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=59>
<FONT SIZE=2><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=59>
<FONT SIZE=2><P ALIGN="LEFT">Randall Reneau <BR>
9302 Mystic Oak Trail<BR>
Austin, Texas, U.S.A., 78750</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=59>
<FONT SIZE=2><P ALIGN="RIGHT">1,600,000 <SUP>(6)</SUP></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=59>
<FONT SIZE=2><P ALIGN="CENTER">5.7%</FONT></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Steven L. Carter<BR>
615 Leopard, Suite 540<BR>
Corpus Christi, Texas, U.S.A., 78476</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,100,000 <SUP>(7)</SUP></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">3.9%</FONT></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">All executive officers and directors as a group<BR>
(5 persons)</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">5,788,681 <SUP>(8)</SUP></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">19.3%</FONT></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="34%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="LEFT">Major Stockholders:  </B></FONT></TD>
<TD WIDTH="22%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="22%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Kepfam Holdings, LLP <SUP>(9)</SUP><BR>
424 East Central Blvd., Suite 324<BR>
Orlando, Florida, U.S.A., 32801</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,600,000</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">5.8%</FONT></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">David Pritchard<BR>
17 Liniyna Street<BR>
Kiev, Ukraine, 03038</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,600,000 <SUP>(10)</SUP></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">5.6%</FONT></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="34%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Steven McCreery<BR>
31 Lisbarnett Road, Lisbane,<BR>
Comder, Newtoundands, Co Down<BR>
Northern Island, United Kingdom, BT23 GAN</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,638,342 <SUP>(11)</SUP></FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">5.8%</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=1><P ALIGN="JUSTIFY">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Rule 13d-3 of the Exchange Act a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and/or (ii) investment power, which includes the power to dispose or direct the disposition of shares.  In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares within 60 days of the date as of which the information is provided.</P>
<P ALIGN="JUSTIFY">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the 27,615,351 shares of our common stock issued and outstanding as of February 1, 2008.</P>
<P ALIGN="JUSTIFY">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This figure includes (i) 1,000,000 shares of common stock, and (ii) stock options to purchase 600,000 shares of our common stock at an exercise price of $0.35 per share.</P>
<P ALIGN="JUSTIFY">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This figure includes (i) 100,000 shares of common stock, (ii) 26,931 shares of common stock held of record by Ocean Tower Productions, a company controlled by Johnathan Lindsay, and (iii) stock options to purchase 300,000 shares of our common stock at an exercise price of $0.33 per share.</P>
<P ALIGN="JUSTIFY">(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This figure includes (i) 661,750 shares of common stock, (ii) 100,000 shares of common stock held of record by Alan P. Lindsay's wife, and (iii) stock options to purchase 300,000 shares of our common stock at an exercise price of $0.33 per share.</P>
<P ALIGN="JUSTIFY">(6)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This figure includes (i) 1,000,000 shares of common stock, and (ii) stock options to purchase 600,000 shares of our common stock at an exercise price of $0.35 per share.</P>
<P ALIGN="JUSTIFY">(7)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This figure includes (i) 500,000 shares of common stock, and (ii) stock options to purchase 600,000 shares of our common stock at an exercise price of $0.35 per share.</P>
<P ALIGN="JUSTIFY">(8)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This figure includes (i) 3,388,681 shares of common stock and (ii) stock options to purchase 2,400,000 shares of our common stock at an exercise price of $0.35 per share.</P>
<P ALIGN="JUSTIFY">(9)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To our knowledge, Patrick Kephart exercises dispositive and voting power with respect to these shares.</P>
<P ALIGN="JUSTIFY">(10)&nbsp;&nbsp;&nbsp;This figure includes (i) 800,000 shares of common stock and (ii) warrants to purchase 800,000 shares of our common stock at a price of $0.60 per share commencing upon the date of issuance and ending on the day which is six months from the day our shares are listed on any stock exchange or over-the-counter market.</P>
<P ALIGN="JUSTIFY">(11)&nbsp;&nbsp;&nbsp;This figure includes (i) 819,171 shares of common stock and (ii) warrants to purchase 819,171 shares of our common stock at a price of $1.00 per share commencing upon the date of issuance and ending on the day which is six months from the day our shares are listed on any stock exchange or over-the-counter market.</P>
</FONT><B><FONT SIZE=3><P ALIGN="JUSTIFY">Changes in Control</P>
</B><P ALIGN="JUSTIFY">We are unaware of any contract, or other arrangement or provision of our Articles or by-laws, the operation of which may at a subsequent date result in a change of control of the Company.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095637">DESCRIPTION OF SECURITIES</A></P>
<P ALIGN="LEFT">General</P>
</B><P ALIGN="JUSTIFY">Our authorized capital stock consists of 500,000,000 shares of common stock at a par value of $0.001 per share.  As of February 1, 2008, there were 27,615,351 shares of our common stock issued and outstanding.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">24</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="JUSTIFY">Common Stock</P>
</B><P ALIGN="JUSTIFY">Holders of our common stock are entitled to one vote for each share held on all matters submitted to a stockholder vote, except that at all elections of directors, each stockholder shall be entitled to as many votes as shall be equal to the number of such stockholder's shares of capital stock entitled to vote, multiplied by the number of directors to be elected, and such stockholder may cast all of such votes for a single director or may cast such votes among several directors.  The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for holding all meetings of stockholders, except as otherwise provided by applicable law or by the Articles of Incorporation.  </P>
<P ALIGN="JUSTIFY">Holders of common stock are entitled to share in all dividends that the Board of Directors, in its discretion, declares from available funds.  The payment of dividends is at the discretion of our Board of Directors.  We have never declared or paid any cash dividends on our common stock.  We currently intend to retain future earnings, if any, to finance the expansion of our business.  As a result, we do not anticipate paying any cash dividends in the foreseeable future.</P>
<P ALIGN="JUSTIFY">In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities.  </P>
<P ALIGN="JUSTIFY">Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095638">INTEREST OF NAMED EXPERTS AND COUNSEL</A></P>
</B><P ALIGN="JUSTIFY">No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock offered hereby was employed on a contingency basis, or had, or is to receive, in connection with such offering, a substantial interest, direct or indirect, in the Company, nor was any such person connected with the Company as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.</P>
<P ALIGN="JUSTIFY">Lang Michener LLP, our independent legal counsel, has provided an opinion on the validity of the share of our common stock that are the subject of this prospectus.</P>
<P ALIGN="JUSTIFY">The audited consolidated financial statements included in this prospectus have been audited by Dale Matheson Carr-Hilton LaBonte LLP, Chartered Accountants, which is an independent registered public accounting firm, to the extent and for the periods set forth in their reports appearing elsewhere in this prospectus.  These financial statements are included in reliance upon the authority of said firm as an expert in auditing and accounting.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095639">DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</A></P>
</B><P ALIGN="JUSTIFY">Our directors and officers are indemnified as provided by the Nevada Revised Statutes, our Articles of Incorporation and our Bylaws.</P>
<P ALIGN="JUSTIFY">Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the act and is, therefore, unenforceable.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095640">ORGANIZATION SINCE INCORPORATION</A></P>
</B><P ALIGN="JUSTIFY">We were incorporated under the laws of the State of Nevada on April 12, 2005 under the name "Carlin Gold Corporation".  On July 19, 2005, we changed our name to "Nevada Gold Corp.".  On October 18, 2005, we changed our name to "Gulf States Energy, Inc." and increased our authorized capital from 100,000,000 shares of common stock to 500,000,000 shares of common stock, par value $0.001 per share.  On September 5, 2006, we changed our name to "Strategic American Oil Corporation".</P>
<P ALIGN="JUSTIFY">We own 100% of the issued and outstanding share capital of Penasco, which was formed under the laws of the State of Nevada on November 23, 2005.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">25</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">Alan Lindsay is our only "independent" director as that term is defined in Rule 121 of the American Stock Exchange listings standards.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095641">DESCRIPTION OF BUSINESS AND PROPERTIES</A></P>
<P ALIGN="JUSTIFY">Name and Incorporation</P>
</B><P ALIGN="JUSTIFY">We were formed under the laws of the State of Nevada on April 12, 2005 under the name "Carlin Gold Corporation".  By an amendment to our Articles of Incorporation, we changed our name to "Nevada Gold Corp." on July 19, 2005, "Gulf States Energy, Inc." on October 18, 2005 and "Strategic American Oil Corporation" on September 5, 2006.  On October 18, 2005, we increased our authorized capital from 100,000,000 shares of common stock to 500,000,000 shares of common stock, par value $0.001 per share.</P>
<P ALIGN="JUSTIFY">Our principal business offices are located at 1111 West Hastings Street, Suite 320, Vancouver, British Columbia, Canada, V6E 2J3, our telephone number is (604) 628-9904 and our facsimile number is (604) 682-3591.</P>
<B><P ALIGN="JUSTIFY">Our Business</P>
</B><P ALIGN="JUSTIFY">We are a natural resource exploration and production company engaged in the exploration, acquisition and development of oil and gas properties in the United States.  We maintain an aggregate of approximately 553.90 gross (289.29 net) developed acres and approximately 12,738.93 gross (2,178.93 net) undeveloped acres pursuant to leases or acquisitions as described below.  Of that acreage, we maintain approximately 255.90 gross (160.85 net) developed acres in Louisiana, 298.00 gross (128.44 net) developed acres in Texas, 1,738.93 gross (1,738.93 net) undeveloped acres in Illinois, and 11,000.00 gross (440.00 net) undeveloped acres in Oklahoma.  Total developed and undeveloped acreage is approximately 13,292.83 gross acres (2,468.22 net).</P>
<B><P ALIGN="JUSTIFY">Exploration Activities</P>
</B><P ALIGN="JUSTIFY">Our oil and gas interests are as follows:</P>
<B><I><P ALIGN="JUSTIFY">South Dehli/Big Creek Field, Louisiana</P>
</B></I><P ALIGN="JUSTIFY">On August 24, 2006, we entered into an assignment of oil and gas interests purchase agreement with Energy Program Accompany, LLC (the "EPA Purchase Agreement").  Under the terms of the EPA Purchase Agreement, we paid $250,000 to acquire the Hold Lease, the Stahan Lease and the McKay Lease, as described below.</P>
<I><P ALIGN="JUSTIFY">The Holt Lease</P>
</I><P ALIGN="JUSTIFY">Pursuant to the EPA Purchase Agreement, we acquired a 97% working interest and an 81.25% net revenue interest in approximately 136 acres in Franklin Parish, Louisiana (the "Holt Lease").  We have assigned a 25% working interest to Tradestar Resources Corporation in conjunction with the acquisition.</P>
<P ALIGN="JUSTIFY">We re-worked the Holt No. 10 well, pulling the well and replacing the rods, tubing and downhole pump.  For Holt No. 24, we pulled the well, replaced the rods, tubing and downhole pump.  On Holt No. 22, we pulled the well, replaced the tubing, rods and downhole pump.  We also installed new surface pumping unit (320 pump jack).  For the salt water disposal well, we cleaned up and installed a new triplex pump.  We built new all weather roads to wells and built new tank battery (oil storage tanks and separators) for Holt No. 22 and 24.  We also buried flow lines (oil and salt water), installed overhead power to all wells with transformer capable of handling additional load (wells), removed old tanks and separators, and built an equipment storage location.</P>
<P ALIGN="JUSTIFY">As of the date of this prospectus, we are producing oil from the Holt No.'s 10, 22 and 24 wells.  The Holt No. 4 well is off-line pending workover or offset drilling.  The Holt No. 15 well is utilized as a salt water disposal well.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">26</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><I><FONT SIZE=3><P ALIGN="JUSTIFY">The Strahan Lease</P>
</I><P ALIGN="JUSTIFY">Pursuant to the EPA Purchase Agreement, we acquired a 100% working interest and an 81.25% net revenue interest in approximately 40 acres in Richland Parish, Louisiana (the "Strahan Lease").  We have assigned a 25% working interest to Tradestar Resources Corporation in conjunction with the acquisition.</P>
<P ALIGN="JUSTIFY">As of the date of this prospectus, we are producing oil from the Strahan No. 1 well.</P>
<I><P ALIGN="JUSTIFY">The McKay Lease</P>
</I><P ALIGN="JUSTIFY">Pursuant to the EPA Purchase Agreement, we acquired a 100% working interest and an 82.08% net revenue interest in approximately 80 acres in Richland Parish, Louisiana (the "McKay Lease").  We have assigned a 25% working interest to Tradestar Resources Corporation in conjunction with the acquisition.</P>
<P ALIGN="JUSTIFY">On the McKay lease, we re-worked the well but did not improve production.  We have been approached by a third party who expressed an interest in taking over the lease and drilling an offset well.  If we accept the offer, we would retain a 6.25% gross overriding interest, all equipment except tanks (moving equipment to storage area on Holt lease) and release from plugging liability.</P>
<P ALIGN="JUSTIFY">As of the date of this prospectus, we are producing oil from the McKay No. 1 well.</P>
<B><I><P ALIGN="JUSTIFY">The Welder Lease (Barge Canal), Texas</P>
</B></I><P ALIGN="JUSTIFY">Effective August 1, 2006, we entered into an assignment and purchase agreement with OPEX Energy, LLC, whereby we acquired a 100% working interest (90% after payout) and a 72.5% net revenue interest (65.25% after payout) in approximately 81 acres of an oil and gas lease (the "Welder Lease") located in Calhoun County, Texas.</P>
<P ALIGN="JUSTIFY">As of the date of this prospectus, two wells are producing gas and oil from the property.  The wells are operated using a gas lift system.  A third well is utilized for salt water disposal.  The wells have additional proven non-producing zones behind pipe.  We intend to develop the proved developed non-producing (PDNP) zones as current producing horizons deplete.</P>
<B><I><P ALIGN="JUSTIFY">Oakdale NE, Donoho, Markum City and DST Prospects, Illinois</P>
</B></I><P ALIGN="JUSTIFY">Through the date of this prospectus, we have entered into numerous oil and gas leases in Jefferson County, Illinois.  Currently these leases total approximately 1,423 gross acres pursuant to which we have a working interest of 100% and a net revenue interest of 87.5%.  We plan to drill one or more wells during 2008 offsetting past producing wells (Oakdale North Field) to a depth of approximately 4,000 feet.</P>
<B><I><P ALIGN="JUSTIFY">Gobbler's Knob Prospect, Illinois</P>
</B></I><P ALIGN="JUSTIFY">Through the date of this prospectus we have entered into several oil and gas leases in Hamilton County, Illinois.  Currently these leases total approximately 214 gross acres pursuant to which we have a working interest of 100% and a net revenue interest of 87.5%.  We plan to re-enter one well (Foreman No. 1) during 2008 to test a potential oil zone (Cyprus Sand) at approximately 2900 feet as indicated on historic drill logs.  The Foreman No. 1 offsets past producing wells (Dale Consolidated Field).  Total depth of the re-entry will be approximately 3000 feet.</P>
<B><I><P ALIGN="JUSTIFY">Janssen Lease, Texas</P>
</B></I><P ALIGN="JUSTIFY">In October 2005, we entered into an agreement to purchase a 25% working interest and an 18.75% net revenue interest in approximately 138 acres of an oil and gas lease (the "Janssen Lease") located in Karnes County, Texas.  This lease interest was acquired from Rockwell Energy.  An unsuccessful attempt was made to re-enter and re-complete a Roeder gas sand at 10,300 feet using side track drilling techniques.  As the original lease was set to expire, we negotiated a new oil and gas lease with the mineral owners and farmed out 100% of the working interest to ETG Energy Resources.  We retained a 3% back in after payment on any producing zones and a 5% non-promoted option to participate in any offset drilling within the leased area.  ETG successfully re-completed in the Roeder Sand and the Janssen A-1 well is currently producing between 250-300 mcf gas per day and approximately six (6) barrels per day of condensate.</P>
<B><I><P ALIGN="JUSTIFY">Koliba Lease, Texas</P>
</B></I><P ALIGN="JUSTIFY">Through the date of this prospectus, we have entered into to several lease agreements with certain mineral owners of a 79 acre tract (the "Koliba Lease") in Victoria County, Texas.  To date, we have has leased over 75% of the minerals with additional leases pending.  The property underlying these lease agreements is located near our Welder lease and has one shut-in oil/gas well.  The well has a proven oil zone behind pipe that previously produced 30 Bbls oil per day plus water.  The well is in close proximity to our Welder gas sales line and salt water disposal system.  Pending completion of leasing, we will determine whether to re-complete and produce the gas zone and oil sands, promote and drill a new well, or sell the lease / well and retain a working interest.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">27</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><I><FONT SIZE=3><P ALIGN="JUSTIFY">Little Mule Creek Project, Oklahoma</P>
</B></I><P ALIGN="JUSTIFY">In October 2007, we entered into an agreement with Marmik Oil Company ("Marmik") of Eldorado, Arkansas to purchase a 4.0% working interest in the Little Mule Creek Project located in Alfalfa and Woods Counties, Oklahoma.  Our interest is subject to a 25% back in after payout, which would reduce our interest to 3.0%.  The prospect consists of nearly 11,000 acres.  An initial horizontal well was spudded in around January 9, 2008 and is at 3,720 feet through the date of this prospectus.  The well is planned to be drilled vertically to 4950 feet and then drilled horizontally approximately 1,867 feet to a total vertical depth of approximately 5350 feet.  The main target zone is the Maquoketa dolomitic shale.  The Maquoketa zone produces from a number of vertical wells in the lease area, but this will be the first horizontal drilling in the field.  There are approximately 170 drilling locations within the current leased area.  In addition to the Maquoketa zone, three other potentially productive zones are present in the prospect area: Tonkawa Sands at 4,500 feet, Mississippian Chat at 4,900 feet and Misner Sand at 5,000 feet.  To date, we have paid $43,086 for our prorate share of land and geology-geophysical costs, $2,824 for exercising (prorate share) additional lease options, and $45,460 for drilling costs.  AFE (Authority for Expenditure) for the drilling and completion of the first well is estimated at $1,341,200, of which we will pay 4% ($53,648).  Marmik and Pulliam Oil &amp; Gas, Inc. ("Pulliam) will back in after payout (BIAPO) for 25% on the initial well.  All subsequent wells will be drilled 75% of cost to the participants and 25% of costs to Marmik and Pulliam.  Savoy Energy, L.P. will be the operator.</P>
<B><P ALIGN="JUSTIFY">Productive Wells</P>
</B><P ALIGN="JUSTIFY">The following table sets forth information regarding the total gross and net productive wells, expressed separately for oil and gas.  All of our productive oil and gas wells were located in Texas and Louisiana.  For the purposes of this subsection: (i) one or more completions in the same bore hole have been counted as one well, and (ii) a well with one or multiple completions at least one of which is an oil completion has been classified as an oil well.  We do not have any wells with multiple completions.</P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="75%" VALIGN="TOP" COLSPAN=4>
<B><U><FONT SIZE=2><P ALIGN="CENTER">Number of Operating Wells</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="CENTER">Oil</B></FONT></TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P ALIGN="CENTER">Gas</B></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">Gross</B></U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">Net</B></U></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">Gross</B></U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="CENTER">Net</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Louisiana</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">5</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">3.75</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP" HEIGHT=24>
<FONT SIZE=2><P ALIGN="JUSTIFY">Texas</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=24>
<U><FONT SIZE=2><P ALIGN="CENTER">2</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=24>
<U><FONT SIZE=2><P ALIGN="CENTER">2.00</U></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=24>
<U><FONT SIZE=2><P ALIGN="CENTER">1</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=24>
<U><FONT SIZE=2><P ALIGN="CENTER">.03</U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="CENTER">7</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="CENTER">5.75</U></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="CENTER">1</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="CENTER">.03</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=3><P ALIGN="JUSTIFY">A productive well is an exploratory well, development well, producing well or well capable of production, but does not include a dry well.  A dry well, or a hole, is an exploratory or a development well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well.</P>
<P ALIGN="JUSTIFY">A gross well is a well in which a working interest is owned, and a net well is the result obtained when the sum of fractional ownership working interests in gross wells equals one.  The number of gross wells is the total number of wells in which a working interest is owned, and the number of net wells is the sum of the fractional working interests owned in gross wells expressed as whole numbers and fractions thereof.  The "completion" of a well means the installation of permanent equipment for the production of oil or gas, or, in the case of a dry hole, to the reporting of abandonment to the appropriate agency.</P>
<B><P ALIGN="JUSTIFY">Production and Price History</P>
</B><P ALIGN="JUSTIFY">We began production of oil in August 2006 with the acquisition of the Holt, Strahan and McKay leases in Franklin and Richland Parish, Louisiana.  In September 2006, we acquired the Welder lease in Calhoun County, Texas, which produces both oil and gas.  The table below sets forth the net quantities of oil and gas production, net of royalties, attributable to us from initial production in August 2006 through October 31, 2007.  For the purposes of this table, the following terms have the following meanings: (i) "Bbl" means one stock tank barrel or 42 U.S. gallons liquid volume; (ii) "MBbls" means one thousand barrels of oil; (iii) "Mcf" means one thousand cubic feet; (iv) "Mcfe" means one thousand cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil; (v) "MMcfe/d" means one million cubic feet equivalent per day, determined by using the ratio of six Mcf of natural gas to one Bbl of oil; and (vi) "MMcf" means one million cubic feet.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">28</P>
</FONT><P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">For the Three<BR>
Months Ended<BR>
<U>October 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">For the Year<BR>
Ended<BR>
<U>July 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Period from<BR>
Inception to<BR>
<U>October 31, 2007</U></FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Production Data</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oil (MBbls)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">2.2</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">9.9</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">12.2</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natural gas (MMcf)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">3.1</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">17.5</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">20.6</U></FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total (MMcfe)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">16.4</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">77.3</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">93.7</U></FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Average Prices:</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oil (per Bbl)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$ 77.88</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$ 60.02</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$ 63.27</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natural gas (per Mcf)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$ 5.23</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$ 5.86</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$ 5.87</U></FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total (per Mcfe)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$ 11.53</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$ 9.07</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$ 9.50</U></FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Average Costs (per Mcfe):</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease operating expenses</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$ 8.75</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$ 8.29</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$ 8.37</FONT></TD>
</TR>
<TR><TD WIDTH="44%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>Production tax expense</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$ 0.43</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$ 0.29</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$ 0.31</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=1><P ALIGN="JUSTIFY">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transportation and administrative expenditures are included in lease operating expenses.</P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">Net production includes only production that is owned by us, whether directly or beneficially, and produced to our interest, less royalties and production due to others.  Production of natural gas includes only marketable production of gas on an "as sold" basis.  Production of natural gas includes only dry, residue and wet gas, depending on whether liquids have been extracted before we passed title, and does not include flared gas, injected gas and gas consumed in operations.  Recovered gas, lift gas and reproduced gas are not included until sold.</P>
<B><P ALIGN="JUSTIFY">Acreage</P>
</B><P ALIGN="JUSTIFY">The following table sets forth information regarding our gross and net developed and undeveloped oil and natural gas acreage under lease through the date of this prospectus:</P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="54%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="23%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="CENTER">Gross </B></U><SUP>(1)</SUP></FONT></TD>
<TD WIDTH="24%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="CENTER">Net</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Developed Acreage</FONT></TD>
<TD WIDTH="23%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Illinois</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Louisiana</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">255.90</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">160.85</FONT></TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oklahoma</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Texas</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">298.00</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">128.44</FONT></TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Undeveloped Acreage</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Illinois</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,738.93</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,738.93</FONT></TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Louisiana</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oklahoma</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">11,000.00</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">440.00</FONT></TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Texas</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="54%" VALIGN="TOP"><DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">Total</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">13,292.83</U></FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">2,468.22</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=1><P ALIGN="JUSTIFY">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The gross acreage cited includes leasehold acreage to be earned under the farm-out agreements.</P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">A developed acre is an acre spaced or assignable to productive wells, a gross acre is an acre in which a working interest is owned, and a net acre is the result that is obtained when the sum of fractional ownership working interests in gross acres equals one.  The number of net acres is the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions thereof.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">29</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">Undeveloped acreage is considered to be those lease acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil or natural gas, regardless of whether or not such acreage contains proved reserves, but does not include undrilled acreage held by production under the terms of a lease.  As is customary in the oil and gas industry, we can retain our interest in undeveloped acreage by drilling activity that establishes commercial production sufficient to maintain the lease or by payment of delay rentals during the remaining primary term of the lease.  The oil and natural gas leases in which we have an interest are for varying primary terms; however, most of our developed lease acreage is beyond the primary term and is held so long as oil or natural gas is produced.</P>
<B><P ALIGN="JUSTIFY">Drilling Activity</P>
</B><P ALIGN="JUSTIFY">As of the date of this prospectus, we have participated in one (1) drilling venture with Brayton Operating Company based in Corpus Christi, Texas.  A 12.5% working interested was purchased in a middle-lower Frio test (Meeks No. B-1), Victoria County, Texas.  The prospect was based on 3-D seismic data and adjacent well information.  The well was drilled, logged and plugged as indicated gas sands were deemed uneconomic.  We have completed five (5) workovers of producing or previously producing wells on our leases in the Delhi South and Big Creek fields in Richland and Franklin Parishes, Louisiana.  We also participated in the side-track re-entry on the Janssen No. A-1 in Karnes County, Texas.  All producing wells in Louisiana are operated for us by PROEX Energy Management Company ("Proex") based in Houston, Texas.  The Welder (Barge Canal) wells are operated for us by Carter E&amp;P, LLC, based in Corpus Christi, Texas.  The Janssen lease (Karnes Co., Texas) is also operated by Proex.  We pay a monthly management fee to both companies for their services.</P>
<P ALIGN="JUSTIFY">As of the date of this prospectus, we are currently drilling one horizontal well in the Little Mule Creek prospect (R&amp;R Cattle No. 1-19) in Section 19, T29N, R12W, Alfalfa County, Oklahoma.</P>
<B><P ALIGN="JUSTIFY">Present Activities</P>
</B><P ALIGN="JUSTIFY">Much of the developed leasehold in Louisiana is adjacent to offset production.  A number of offset in-field drilling locations are indicated.  Additionally, Denbury Resources, Inc. (NYSE: DNR) has acquired a substantial acreage position in the Delhi-Holt-Bryant Unit in the immediate area of our holdings.  Denbury has begun work to institute a tertiary carbon dioxide flood and are shooting 3-D seismic in the immediate area of our leases. </P>
<P ALIGN="JUSTIFY">We are currently negotiating to purchase a 220 acre lease containing five wells and one salt water disposal well in the area of our Strahan and McKay Leases (Richland Parish, Louisiana).  Additionally, we are negotiating on approximately 960 acres of leases adjacent to our Holt lease in Franklin Parish, Louisiana.</P>
<P ALIGN="JUSTIFY">Our undeveloped acreage in the Illinois basin is adjacent to current or past producing wells.  Drilling and completion costs are lower than in many other producing basins and the net revenues are higher.  Our leases in Illinois average 87.5% net revenue interest with 100% working interest.  Multiple pay zones are indicated in leasehold areas including the Cypress, Levias, Aux Vases, Ste. Genevieve, Salem, Saint Lewis and Warsaw formations.  Maximum drill depths will be approximately 4,000 feet.</P>
<P ALIGN="JUSTIFY">Additionally, the potential for "reef" type structures is considered high in several of our leasehold areas.  Negotiations are underway with possible joint venture partners for the funding of 3-D seismic surveys in order to identify possible reef drilling targets.</P>
<P ALIGN="JUSTIFY">We are also currently evaluating oil well logs, maps and other data in the Welder (Barge Canal) lease area (Texas).  Initial reviews indicate the potential for possible offset drilling sites.</P>
<P ALIGN="JUSTIFY">We continue to review and evaluate submittals on properties in Louisiana, Texas, Illinois and other areas of the continental United States.</P>
<B><P ALIGN="JUSTIFY">Plan of Operations</P>
</B><P ALIGN="JUSTIFY">Our plan of operations for the next twelve months is to re-enter the Foreman No. 1 well in Hamilton County, Illinois to test a Cyprus Sand at a depth of approximately 2900 feet.  We also plan to drill one (1) infield offset well in the Delhi South Field in Franklin Parish, Louisiana.  We plan to drill this well to a depth of between 3500 feet and 5000 feet depending on location and lease depth restrictions (if any).  We also plan to acquire additional leases in the Delhi field area.  The majority of the proposed acquisitions (Delhi area) have shut-in or currently non-producing wells within the proposed lease areas as well as salt water disposal wells.  We plan to re-work the wells on the acquired leases in order to restore and/or increase production.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">30</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">Leasing will continue in Illinois with emphasis moving from current targets in the Oakdale, Donoho and Gobbler's Knob prospects (Jefferson and Hamilton Counties), to potential secondary recovery projects (waterflood).  We intend to acquire (lease) at least one waterflood prospect during the next year of operation.  We are also reviewing the use of 3-D seismic in Illinois to located pinnacle reef structures.  We may purchase 2-D and or 3-D seismic or take seismic options and bring in joint venture partners to participate in proprietary seismic shoots.</P>
<P ALIGN="JUSTIFY">In Texas, we plan to continue producing oil and gas from our Welder (Barge Canal) lease and are negotiating to acquire a seismic (3-D) option on the 32,192 acre Welder Ranch (Calhoun County, Texas).  We are also continuing to acquire additional mineral interests in the Koliba lease in Victoria County, Texas.  We will continue to maintain our 3.0% non-operated working interest in the Janssen No. A-1 well (gas and minor condensate) in Karnes County, Texas.</P>
<P ALIGN="JUSTIFY">In connection with the Little Mule Creek Project, we have purchased a 4% working interest in a horizontal well to be drilled to test a Maquoketa dolomitic (fractured) shale prospect in Alfalfa and Woods Counties, Oklahoma.  As there are 170 drilling locations on the 11,000 acre leasehold, participation in additional drilling on this prospect is anticipated.  The initial well commenced drilling on or around January 9, 2008 and is at 3,720 feet as of the date of this prospectus.  Total costs for drilled and completed well (including lease and geology/geophyics) for our 4% working interest will be approximately $100,000.</P>
<P ALIGN="JUSTIFY">Any time it is decided that drilling operations for a new well will be commenced, we will be provided with the following:</P>

<UL>
<P ALIGN="JUSTIFY"><LI>A description of the project and the location and target depth of the well;</LI></P>
<P ALIGN="JUSTIFY"><LI>The lands that will be subject to the well;</LI></P>
<P ALIGN="JUSTIFY"><LI>The royalties, net profit interest or other charges applicable to the subject lands;</LI></P>
<P ALIGN="JUSTIFY"><LI>The estimated cost of any geophysical work contemplated; and</LI></P>
<P ALIGN="JUSTIFY"><LI>The estimated acquisition costs, drilling costs, completion costs and equipping costs of the well.</LI></P></UL>

<P ALIGN="JUSTIFY">It is estimated that the average drilling and completion costs in Illinois will be approximately $400,000 for wells drilled to 4,000 feet.  Offset development drilling in Louisiana to depths of 3,500 to 5,000 feet will be approximately $350,000 to $500,000.  Seismic (3-D) may average $50,000 per square mile for shooting and processing.  Seismic Options (option to lease) in Texas is expected to be in the $40/acre range.  Surface damage payments for the actual shoot are expected to run $10 per acre.  Seismic and land costs vary depending on the geographic area.  For example, Illinois is much lower cost in all aspects than Texas.  We anticipate drilling one to three wells in Louisiana (Delhi-Big Creek field areas) over the next twelve (12) months.  Additionally, three (3) re-entries, or new drilling of new wells, are planned over the same time period in Illinois.  If we are successful in acquiring a seismic option on the Welder Ranch, an additional $3,000,000 will be required for damages, option and upfront leasing costs.  These proposed projects would necessitate an estimated expenditure of $5,700,000 in addition to our normal lease operating costs and general administrative overhead.</P>
<P ALIGN="JUSTIFY">If oil and gas prices remain in today's range, we feel we can maintain present day operations from proceeds of oil and gas sales from our producing leases in Louisiana and Texas.</P>
<P ALIGN="JUSTIFY">To participate in the projects outline above, we estimate that we will need to spend approximately $6,000,000 during the next 12 months.  At October 31, 2007, we had $562,884 of cash on hand and working capital of $571,659.  As such, we estimate that we will need to receive approximately $5,430,000 during the next twelve months, either through the sale of capital stock or from borrowing.  There can be no assurance that we will be able to do so.</P>
<B><P ALIGN="LEFT">Government Regulation</P>
</B><P ALIGN="JUSTIFY">The availability of a ready market for oil and gas production depends upon numerous factors beyond our control.  These factors include local, state, federal and international regulation of oil and gas production and transportation, as well as regulations governing environmental quality and pollution control, state limits on allowable rates of production by a well or proration unit, the amount of oil and gas available for sale, the availability of adequate pipeline and other transportation and processing facilities, and the marketing of competitive fuels.  State and federal regulations are generally intended to prevent waste of oil and gas, protect rights to produce oil and gas between owners in a common reservoir, and control contamination of the environment.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">31</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">Applicable legislation is under constant review for amendment or expansion.  These efforts frequently result in an increase in the regulatory burden on companies in our industry and a consequent increase in the cost of doing business and decrease in profitability.  Numerous federal and state departments and agencies issue rules and regulations imposing additional burdens on the oil and gas industry that are often costly to comply with and carry substantial penalties for non-compliance.  Our production operations may be affected by changing tax and other laws relating to the petroleum industry, constantly changing administrative regulations and possible interruptions or termination by government authorities.</P>
<P ALIGN="JUSTIFY">The transportation and certain sales of natural gas in interstate commerce are heavily regulated by agencies of the federal government and are affected by the availability, terms and cost of transportation.  The price and terms of access to pipeline transportation are subject to extensive federal and state regulation.  The Federal Energy Regulatory Commission (FERC) is continually proposing and implementing new rules and regulations affecting the natural gas industry, most notably interstate natural gas transmission companies that remain subject to the FERC's jurisdiction.  The stated purpose of many of these regulatory changes is to promote competition among the various sectors of the natural gas industry.  Some recent FERC proposals may, however, adversely affect the availability and reliability of interruptible transportation service on interstate pipelines.</P>
<P ALIGN="JUSTIFY">State regulatory authorities have established rules and regulations requiring permits for drilling operations, drilling bonds and reports concerning operations.  Many states have statutes and regulations governing various environmental and conservation matters, including the establishment of maximum rates of production from oil and gas wells, and restricting production to the market demand for oil and gas.  Such statutes and regulations may limit the rate at which oil and gas could otherwise be produced.  Most states impose a production or severance tax with respect to the production and sale of crude oil, natural gas and natural gas liquids within their respective jurisdictions.  State production taxes are generally applied as a percentage of production or sales.</P>
<P ALIGN="JUSTIFY">Oil and gas rights may be held by individuals and corporations, and, in certain circumstances, by governments having jurisdiction over the area in which such rights are located.  As a general rule, parties holding such rights grant licenses or leases to third parties, such as us, to facilitate the exploration and development of these rights.  The terms of the licenses and leases are generally established to require timely development.  Notwithstanding the ownership of oil and gas rights, the government of the jurisdiction in which the rights are located generally retains authority over the manner of development of those rights.</P>
<B><P ALIGN="JUSTIFY">Environmental</P>
</B><I><P ALIGN="JUSTIFY">General</I>.  Our activities are subject to local, state and federal laws and regulations governing environmental quality and pollution control in the United States.  The exploration, drilling and production from wells, natural gas facilities, including the operation and construction of pipelines, plants and other facilities for transporting, processing, treating or storing natural gas and other products, are subject to stringent environmental laws and regulations by state and federal authorities, including the Environmental Protection Agency ("EPA").  These laws and regulations may require the acquisition of a permit by operators before drilling commences, prohibit drilling activities on certain lands lying within wilderness areas, wetlands and other ecologically sensitive and protected areas, and impose substantial remedial liabilities for pollution resulting from drilling operations.  Such regulation can increase our cost of planning, designing, installing and operating such facilities.</P>
<P ALIGN="JUSTIFY">Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of significant investigatory or remedial obligations, and the imposition of injunctive relief that limits or prohibits our operations.  Moreover, some environmental laws provide for joint and several strict liability for remediation of releases of hazardous substances, rendering a person liable for environmental damage without regard to negligence or fault on the part of such person.  In addition, we may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances, such as oil and gas related products.</P>
<P ALIGN="JUSTIFY">Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent and costly waste handling, storage, transport, disposal or cleanup requirements could materially adversely affect our operations and financial position, as well as those of the oil and gas industry in general.  While we believe that we are in substantial compliance with current environmental laws and regulations and have not experienced any material adverse effect from such compliance, there is no assurance that this trend will continue in the future.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">32</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><I><FONT SIZE=3><P ALIGN="JUSTIFY">Waste Disposal</I>.  We currently lease, and intend in the future to own or lease, additional properties that have been used for production of oil and gas for many years.  Although we and our operators utilize operating and disposal practices that are standard in the industry, previous owners or lessees may have disposed of or released hydrocarbons or other wastes on or under the properties that we currently own or lease or properties that we may in the future own or lease.  In addition, many of these properties have been operated in the past by third parties over whom we had no control as to such entities' treatment of hydrocarbons or other wastes or the manner in which such substances may have been disposed of or released.  State and federal laws applicable to oil and gas wastes and properties may require us to remediate property, including ground water, containing or impacted by previously disposed wastes (including wastes disposed of or released by prior owners or operators) or to perform remedial plugging operations to prevent future or mitigate existing contamination.</P>
<P ALIGN="JUSTIFY">We may generate wastes, including hazardous wastes, that are subject to the federal Resource Conservation and Recovery Act ("RCRA") and comparable state statutes.  The EPA has limited the disposal options for certain wastes that are designated as hazardous under RCRA.  Furthermore, it is possible that certain wastes generated by our oil and gas projects that are currently exempt from treatment as hazardous wastes may in the future be designated as hazardous wastes, and therefore be subject to more rigorous and costly operating and disposal requirements.</P>
<I><P ALIGN="JUSTIFY">CERCLA</I>.  The federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also known as the "Superfund" law, generally imposes joint and several liability for costs of investigation and remediation and for natural resource damages, without regard to fault or the legality of the original conduct, on certain classes of persons with respect to the release into the environment of substances designated under CERCLA as hazardous substances.  These classes of persons or so-called potentially responsible parties include the current and certain past owners and operators of a facility where there is or has been a release or threat of release of a hazardous substance and persons who disposed of or arranged for the disposal of the hazardous substances found at such a facility.  CERCLA also authorizes the EPA and, in some cases, third parties to take action in response to threats to the public health or the environment and to seek to recover from the potentially responsible parties the costs of such action.  Although CERCLA generally exempts petroleum from the definition of hazardous substances, we may have generated and may generate wastes that fall within CERCLA's definition of hazardous substances.  We may in the future be an owner of facilities on which hazardous substances have been released by previous owners or operators of our properties that are named as potentially responsible parties related to their ownership or operation of such property.</P>
<I><P ALIGN="JUSTIFY">Air Emissions.</I>  Our projects are subject to local, state and federal regulations for the control of emissions of air pollution.  Major sources of air pollutants are subject to more stringent, federally imposed permitting requirements, including additional permits.  Producing wells, gas plants and electric generating facilities generate volatile organic compounds and nitrogen oxides.  Some of our producing wells may be in counties that are designated as non-attainment for ozone and may be subject to restrictive emission limitations and permitting requirements.  If the ozone problems in the applicable states are not resolved by the deadlines imposed by the federal Clean Air Act, or on schedule to meet the standards, even more restrictive requirements may be imposed, including financial penalties based upon the quantity of ozone producing emissions.  If we fail to comply strictly with air pollution regulations or permits, we may be subject to monetary fines and be required to correct any identified deficiencies.  Alternatively, regulatory agencies could require us to forego construction, modification or operation of certain air emission sources.</P>
<I><P ALIGN="JUSTIFY">Clean Water Act.</I>  The Clean Water Act imposes restrictions and strict controls regarding the discharge of wastes, including produced waters and other oil and natural gas wastes, into waters of the United States, a term broadly defined.  Permits must be obtained to discharge pollutants into federal waters.  The Clean Water Act provides for civil, criminal and administrative penalties for unauthorized discharges of oil, hazardous substances and other pollutants.  It imposes substantial potential liability for the costs of removal or remediation associated with discharges of oil or hazardous substances.  State laws governing discharges to water also provide varying civil, criminal and administrative penalties and impose liabilities in the case of a discharge of petroleum or its derivatives, or other hazardous substances, into state waters.  In addition, the EPA has promulgated regulations that may require us to obtain permits to discharge storm water runoff, including discharges associated with construction activities.  In the event of an unauthorized discharge of wastes, we may be liable for penalties and costs.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">33</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><I><FONT SIZE=3><P ALIGN="JUSTIFY">Oil Pollution Act.</I>  The Oil Pollution Act of 1990 ("OPA"), which amends and augments oil spill provisions of the Clean Water Act, and similar legislation enacted in Texas, Louisiana and other coastal states, impose certain duties and liabilities on certain "responsible parties" related to the prevention of oil spills and damages resulting from such spills in United States waters and adjoining shorelines.  A liable "responsible party" includes the owner or operator of a facility or vessel that is a source of an oil discharge or poses the substantial threat of discharge, or the lessee or permittee of the area in which a facility covered by OPA is located.  OPA assigns joint and several liability, without regard to fault, to each liable party for oil removal costs, remediation of environmental damage and a variety of public and private damages.  OPA also imposes ongoing requirements on a responsible party, including proof of financial responsibility to cover at least some costs of a potential spill.  Few defenses exist to the liability imposed by OPA.  In the event of an oil discharge, or substantial threat of discharge from our properties, vessels and pipelines, we may be liable for costs and damages.</P>
<P ALIGN="JUSTIFY">We believe that we are in substantial compliance with current environmental laws and regulations in each of the jurisdictions in which we operate.  Although we have not experienced any material adverse effect from such compliance, there is no assurance that this trend will continue in the future.</P>
<B><P ALIGN="JUSTIFY">Competition</P>
</B><P ALIGN="JUSTIFY">The oil and natural gas industry is intensely competitive in all phases, including the exploration for new production and the acquisition of equipment and labor necessary to conduct drilling activities.  The competition comes from numerous major oil companies as well as numerous other independent operators.  There is also competition between the oil and natural gas industry and other industries in supplying the energy and fuel requirements of industrial, commercial and individual consumers.  We are a minor participant in the industry and compete in the oil and natural gas industry with many other companies having far greater financial, technical and other resources.</P>
<P ALIGN="JUSTIFY">Competitive conditions may be substantially affected by various forms of energy legislation and/or regulation considered from time to time by the government of the United States and other countries, as well as factors that we cannot control, including international political conditions, overall levels of supply and demand for oil and gas, and the markets for synthetic fuels and alternative energy sources. Intense competition occurs with respect to marketing, particularly of natural gas.</P>
<B><P ALIGN="JUSTIFY"><A NAME="_Toc154414094"><A NAME="_Toc154472943"><A NAME="_Toc154473040"><A NAME="_Toc154499327"><A NAME="_Toc154499456">Employees</A></A></A></A></A></P>
</B><P ALIGN="JUSTIFY">We currently have no full-time or part-time employees with the exception of our officers.</P>
<B><P ALIGN="JUSTIFY"><A NAME="_Toc154414095"><A NAME="_Toc154472944"><A NAME="_Toc154473041"><A NAME="_Toc154499328"><A NAME="_Toc154499457">Subsidiaries</A></A></A></A></A></P>
</B><P ALIGN="JUSTIFY">We own 100% of the issued and outstanding share capital of Penasco, which was formed under the laws of the State of Nevada on November 23, 2005.</P>
<B><P ALIGN="LEFT">Leased Premises</P>
</B><P ALIGN="JUSTIFY">On April 1, 2006, we entered into a long-term office premises lease at Suite 320, 1111 West Hastings Street, Vancouver, British Columbia, Canada, V6E 2J3.  The term is for 7 years expiring March 13, 2013.  The monthly base rent is $1,980 per month and the estimated monthly operating charge is $900 per month.  Additionally, we are renting office space at Suite 2015, 600 Leopard Street, Corpus Christi, Texas, 78473 for $1,200 per month.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095642"></P>
<P ALIGN="CENTER"></P>
</B></FONT><FONT SIZE=2><P ALIGN="CENTER">34</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS</A></P>
</B><P ALIGN="JUSTIFY">The following discussion of our financial condition, changes in financial condition, plan of operations and results of operations should be read in conjunction with (i) our unaudited interim consolidated financial statements as at October 31, 2007 and for the period from inception (April 12, 2005 to October 31, 2007; (ii) our audited consolidated financial statements as at July 31, 2006 and 2007, and for the period from inception (April 12, 2005) to July 31, 2007, and (ii) the section entitled "Description of Business", included in this prospectus.  The discussion contains forward-looking statements that involve risks, uncertainties and assumptions.  Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under "Risk Factors" and elsewhere in this prospectus.</P>
<B><P ALIGN="JUSTIFY"><A NAME="_Toc154499337"><A NAME="_Toc154499466">Plan of Operations</A></A></P>
</B><P ALIGN="JUSTIFY">Our plan of operations for the next twelve months is to continue with the exploration and development of our oil and gas properties in the United States.  Our planned acquisitions and development of existing properties is described in detail in this prospectus under "Description of Business and Properties--Plan of Operations".</P>
<B><P ALIGN="JUSTIFY"><A NAME="_Toc154414123"><A NAME="_Toc154472972"><A NAME="_Toc154473069"><A NAME="_Toc154499338"><A NAME="_Toc154499467">Results of Operations<A NAME="_Toc154414124"><A NAME="_Toc154472973"><A NAME="_Toc154473070"></A></A></A></A></A></P>
</B><P ALIGN="JUSTIFY">The following sets table sets out our consolidated losses for the periods indicated:</P></FONT>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=648>
<TR><TD WIDTH="28%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Three Months<BR>
Ended<BR>
October 31, 2007<BR>
<U>(Unaudited)</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Three Months<BR>
Ended<BR>
October 31, 2006<BR>
<U>(Unaudited)</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Year Ended<BR>
July 31, 2007<BR>
<U>(Audited)</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Year Ended<BR>
July 31, 2006<BR>
<U>(Audited)</U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">For the Period from Inception<BR>
(April 12, 2005) to October 31, 2007<BR>
<U>(Unaudited)</U></FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Oil and Gas Revenues</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$   194,173</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$   33,250</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$   701,740</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$   Nil</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$   895,913</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Administrative Expenses</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;Consulting</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">85,835</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">77,440</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">449,909</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">28,668</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">564,412</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;Consulting, stock-based</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">82,000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">856,167</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">Nil</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">938,167</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;Depreciation and depletion</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">14,437</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,571</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">73,383</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">105</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">87,925</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;Direct operating costs</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">150,295</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">57,469</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">663,391</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">Nil</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">813,686</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;General and administration</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">36,238</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,058</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">100,726</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">38,316</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">175,280</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;Impairment of oil and gas <BR>
&nbsp;&nbsp;&nbsp;properties</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">158,800</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">74,506</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">233,306</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;Management fees</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">91,676</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">57,459</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">195,488</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">167,136</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">454,300</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;Management fees, stock-<BR>
&nbsp;&nbsp;&nbsp;based</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">Nil</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,200,000</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">Nil</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,200,000</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;Professional fees</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">32,669</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8,072</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">68,211</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">31,622</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">132,502</FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;Travel and promotion</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">28,870</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">19,076</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">106,529</U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">60,123</U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">195,522</U></FONT></TD>
</TR>
<TR><TD WIDTH="28%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Net Loss</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$   327,847</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$   206,895</U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$   3,170,864</U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$   400,476</U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$ 3,899,187</U></FONT></TD>
</TR>
</TABLE>

<B><I><FONT SIZE=3><P ALIGN="JUSTIFY">Three Months Ended October 31, 2007 Compared to Three Months Ended October 31, 2006</P>
</B></I><P ALIGN="JUSTIFY">We recorded a net loss of $327,847 during the three months ended October 31, 2007, compared to a net loss of $206,895 for the three months ended October 31, 2006.  </P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">35</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><I><FONT SIZE=3><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">Revenue</P>
</I><P ALIGN="JUSTIFY">Revenue from oil and gas properties was $194,173 in the three months ended October 31, 2007, while direct operating costs were $150,295 over the same period.  Revenue from oil and gas properties was $33,250 in the three months ended October 31, 2006, while direct operating costs were $57,469 over the same period. </P>
<I><P ALIGN="JUSTIFY">Expenses</P>
</I><P ALIGN="JUSTIFY">Consulting fees were $85,835 in the three months ended October 31, 2007, compared to $77,440 in the three months ended October 31, 2006.  Depreciation and depletion expense was $14,437 in the three months ended October 31, 2007, compared to $1,571 in the three months ended October 31, 2006, with the increase resulting from the acquisition and production of oil and gas interests.  General and administrative expenses were $36,238 in the three months ended October 31, 2007, compared to $19,058 in the three months ended October 31, 2006, with the increase resulting primarily from the expansion of operations over the prior period.  We paid management fees of $91,676 in the three months ended October 31, 2007 to certain of our officers and directors, compared to $57,459 in the three months ended October 31, 2006.  We also incurred professional fees of $32,669 and travel and promotion expenses of $28,870 in the three months ended October 31, 2007, compared to $8,072 and $19,076, respectively in the three months ended October 31, 2006, with the increases also relating primarily to expanded operations over the prior period.  We incurred stock-based consulting charges of $82,000 in the three months ended October 31, 2007 resulting from the fair valuation of shares granted during the period.  We did not issue any shares for consulting services or issue option grants in the three months ended October 31, 2006.  </P>
<B><I><P ALIGN="JUSTIFY">Year Ended July 31, 2007 Compared to the Year Ended July 31, 2006</P>
</B></I><P ALIGN="JUSTIFY">We recorded a net loss of $3,170,864 during the year ended July 31, 2007, compared to $400,476 for the year ended July 31, 2006.  </P>
<I><P ALIGN="JUSTIFY">Revenue</P>
</I><P ALIGN="JUSTIFY">Revenue from oil and gas properties was $701,740 in the year ended July 31, 2007, while direct operating costs were $663,391 over the same period.  We did not have any producing properties during the prior year.  </P>
<I><P ALIGN="JUSTIFY">Expenses</P>
</I><P ALIGN="JUSTIFY">Consulting fees were $449,909 in the year ended July 31, 2007, compared to $28,668 in the year ended July 31, 2006, with the increase relating to the use of external consultants to assist with expanding operations and administration in the year ended July 31, 2007.  Depreciation and depletion expense was $73,383 in the year ended July 31, 2007, compared to $105 in the year ended July 31, 2006, with the increase resulting from the acquisition of and production of oil and gas interests.  General and administrative expenses were $100,726 in the year ended July 31, 2007, compared to $38,316 in the year ended July 31, 2006, with the increase resulting primarily from the expansion of operations over the prior year.  Impairment of oil and gas properties was $158,800 in the year ended July 31, 2007 compared with $74,506 in the year ended July 31, 2006.  We paid management fees of $195,488 in the year ended July 31, 2007 to certain of our officers and directors, compared to $167,136 in the year ended July 31, 2006.  We also incurred professional fees of $68,211 and travel and promotion expenses of $106,529 in the year ended July 31, 2007, compared to $31,622 and $60,123, respectively, in the year ended July 31, 2006, with the increases also relating primarily to expanded operations over the prior year.  We incurred stock-based consulting charges of $856,167 and stock-based management fees of $1,200,000 in the year ended July 31, 2007 resulting from the fair valuation of shares and options granted during the year.  We did not issue any shares for consulting services or issue option grants in the prior year.</P>
<B><I><P ALIGN="JUSTIFY">For the Period from Inception (April 12, 2005) to October 31, 2007</P>
</B></I><P ALIGN="JUSTIFY">We recorded a cumulative net loss of $3,899,187 during the period from inception on April 12, 2005 to October 31, 2007.  </P>
<I><P ALIGN="JUSTIFY">Revenue</P>
</I><P ALIGN="JUSTIFY">During this period, oil and gas revenue was $895,913 while direct operating costs were $813,686.  </P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">36</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><I><FONT SIZE=3><P ALIGN="JUSTIFY">Expenses</P>
</I><P ALIGN="JUSTIFY">Consulting fees paid for operations and administration was $564,412 and the fair value of shares and options issued to consultants was $938,167.  Depreciation and depletion expense was $87,925 while impairment of oil and gas properties was $233,306.  General and administrative expenses were $175,280 relating primarily to office administration costs in Vancouver and Texas.  In addition, we paid management fees of $454,300 to certain of our officers and directors and incurred $1,200,000 for the fair value of options issued to certain officers and directors.  We also incurred professional fees of $132,502 and travel and promotion expenses of $195,522 relating to the organization and operations of the Company.</P>
<B><P ALIGN="JUSTIFY"><A NAME="_Toc154414125"><A NAME="_Toc154472974"><A NAME="_Toc154473071"><A NAME="_Toc154499339"><A NAME="_Toc154499468"></A></A></A>Liquidity and Capital Resources</A></A></A></A></A> </P>
</B><P ALIGN="JUSTIFY">The following table sets forth our cash and working capital as of October 31, 2007, July 31, 2007 and July 31, 2006:</P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="27%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">As of October 31, 2007<BR>
<U>(Unaudited)</U></FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">As of July 31, 2007<BR>
<U>(Audited)</U></FONT></TD>
<TD WIDTH="24%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">As of July 31, 2006<BR>
<U>(Audited)</U></FONT></TD>
</TR>
<TR><TD WIDTH="27%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Cash reserves</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">$562,884</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">$667,722</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">$650,204</FONT></TD>
</TR>
<TR><TD WIDTH="27%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Working capital </FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">$571,659</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">$652,607</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">$623,382</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=3><P ALIGN="JUSTIFY">We plan to spend approximately $6,000,000 over the next twelve months in carrying out our plan of operations, subject to the availability of additional financing.  At October 31, 2007, we had $562,884 of cash on hand and working capital of $571,659.  We anticipate that our working capital at October 31, 2007 will be sufficient to enable us to pursue our lease operating costs and to pay our general and administrative expenses for the next 12 months.  However, as discussed in this prospectus under "Description of Business and Properties--Plan of Operations", we anticipate that we will need to receive approximately $5,430,000 in order to pursue our complete plan of operations over the next twelve months.  There can be no assurance that we will be able to obtain additional financing in the amounts required or upon the terms acceptable to us.  If we do not obtain additional financing, we may be forced to abandon our plan of operations and our business.</P>
<P ALIGN="JUSTIFY">Our current sources of revenue are inadequate to provide incoming cash flows to sustain future operations.  Our ability to pursue any planned principal business activity is dependent upon our successful efforts to raise additional equity financing and generate revenue, cash flow and attain profitable operations.  There can be no assurance that we will be able to complete any of the above objectives.  These factors raise substantial doubt regarding our ability to continue as a going concern.  The consolidated financial statements have been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities in the normal course of business.  As at October 31, 2007, we had accumulated losses of $3,899,187 since inception.  The financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.</P>
<I><P ALIGN="JUSTIFY">Operating Activities</P>
</I><P ALIGN="JUSTIFY">Operating activities in the three months ended October 31, 2007 used cash of $255,300 compared to $247,147 in the three months ended October 31, 2006.  Operating activities in the year ended July 31, 2007 used cash of $894,221 compared to $285,150 in the year ended July 31, 2006.  Operating activities in the period from inception on April 12, 2005 to October 31, 2007 used cash of $1,434,671.  Operating activities have primarily used cash as a result of the operating and organizational activities such as consulting fees, direct operating costs, management fees and travel and promotion.</P>
<I><P ALIGN="JUSTIFY">Investing Activities</P>
</I><P ALIGN="JUSTIFY">In the three months ended October 31, 2007, investing activities used cash of $107,538 compared to $349,098 in the three months ended October 31, 2006.  In the year ended July 31, 2007, investing activities used cash of $1,166,004 compared to $321,100 in the year ended July 31, 2007.  In each case, the increase relates primarily to significant acquisition costs of producing oil and gas properties.  In the period from inception to October 31, 2007, investing activities used cash of $1,594,642 relating to the acquisition and exploration of our properties.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">37</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><I><FONT SIZE=3><P ALIGN="JUSTIFY">Financing Activities</P>
</I><P ALIGN="JUSTIFY">As we have had limited revenues since inception, we have primarily financed our operations primarily through private placements of our stock.  Financing activities in the three months ended October 31, 2007 provided cash of $258,000 compared to $551,800 in the three months ended October 31, 2007.  Financing activities in the year ended July 31, 2007 provided cash of $2,077,743 compared to $1,256,454 in the year ended July 31, 2006.  In the period from inception to October 31, 2007, financing activities provided net cash of $3,592,197 from the sale of our equity securities.</P>
<B><P ALIGN="JUSTIFY">Critical Accounting Policies</P>
</B><P ALIGN="JUSTIFY">Our consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis.  The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.</P>
<P ALIGN="JUSTIFY">We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements.  In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.  Actual results could differ from those estimates made by management.</P>
<P ALIGN="JUSTIFY">We believe that our critical accounting policies and estimates include the accounting for accounts receivable, marketable securities and long-lived assets reclamation costs, and accounting for legal contingencies.</P>
<B><I><P ALIGN="JUSTIFY">Use of Estimates</P>
</B></I><P ALIGN="JUSTIFY">The preparation of financial statements in conformity with generally accepted accounting principles 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 period.  Actual results could differ from those estimates.  Significant areas requiring management's estimates and assumptions are determining the fair value of transactions involving common stock and financial instruments.  Other areas requiring estimates include deferred tax balances, valuation allowances, allocations of expenditures to resource property interests and asset impairment tests.</P>
<B><I><P ALIGN="JUSTIFY">Oil and Gas Properties</P>
</B></I><P ALIGN="JUSTIFY">We follow the full cost method of accounting for our oil and gas operations whereby all cost related to the acquisition of petroleum and natural gas interests are capitalized.  Such costs include land and lease acquisition costs, annual carrying charges of non-producing properties, geological and geophysical costs, costs of drilling and equipping productive and non-productive wells, and direct exploration salaries and related benefits.  We operate in one cost center, being the United States.</P>
<P ALIGN="JUSTIFY">All costs included in properties subject to amortization, are amortized on the unit-of-production method using estimates of proved reserves.  Investments in unproved properties and development projects are not amortized until proved reserves associated with the projects can be determined or impairment occurs.  If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.  Abandonment of oil and natural gas properties are charged to the full cost pool and amortized.</P>
<P ALIGN="JUSTIFY">Under the full cost method, the net book value of oil and natural gas properties are subject to a "ceiling" amount.  The ceiling is the estimated after-tax future net cash flows from proved oil and natural gas properties, discounted at 10% per annum plus the lower of cost or fair market value of unevaluated properties.  In calculating future net revenues, prices and costs in effect at the time of the calculation are held constant for the lives of the oil and natural gas reserves, except for changes that are fixed and determinable by existing contracts.  The excess, if any, of the net book value above this ceiling is charged to expense.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">38</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in the statement of operations.</P>
<B><I><P ALIGN="JUSTIFY">Asset Retirement Obligations</P>
</B></I><P ALIGN="JUSTIFY">We have adopted the provisions of SFAS No. 143 "Accounting for Asset Retirement Obligations," which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.  The adoption of this standard has had no effect on our financial position or results of operations.  To October 31, 2007 any potential costs relating to the ultimate disposition of our oil and gas property interests have not yet been determinable.</P>
<B><I><P ALIGN="JUSTIFY">Impairment of Long-Lived Assets</P>
</B></I><P ALIGN="JUSTIFY">We review property, plant, and equipment and certain identifiable intangibles, excluding goodwill, for impairment.  Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.  Recoverability of these assets is measured by comparison of its carrying amount to future undiscounted cash flows the assets are expected to generate.  If property, plant, and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value.</P>
<B><I><P ALIGN="JUSTIFY">Revenue Recognition</P>
</B></I><P ALIGN="JUSTIFY">Oil and natural gas revenues are recorded using the sales method whereby we recognize oil and natural gas revenue based on the amount of oil and gas sold to purchasers when title passes, the amount is determinable and collection is reasonably assured.  Actual sales of gas are based on sales, net of the associated volume charges for processing fees and for costs associated with delivery, transportation, marketing, and royalties in accordance with industry standards.  Operating costs and taxes are recognized in the same period of which revenue is earned.</P>
<B><I><P ALIGN="JUSTIFY">Stock-based Compensation</P>
</B></I><P ALIGN="JUSTIFY">In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment", which replaced SFAS No. 123, "Accounting for Stock-Based Compensation" and superseded APB Opinion No. 25, "Accounting for Stock Issued to Employees".  In January 2005, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 107, "Share-Based Payment", which provides supplemental implementation guidance for SFAS No. 123R.  SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award.  SFAS No. 123R was to be effective for interim or annual reporting periods beginning on or after June 15, 2005, but in April 2005 the SEC issued a rule that will permit most registrants to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period as required by SFAS No. 123R.  The pro-forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition.  Under SFAS No. 123R, we must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption.  The transition methods include prospective and retroactive adoption options.  Under the retroactive options, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented.  The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated.  We have adopted the requirements of SFAS No. 123R from date of inception.</P>
<P ALIGN="JUSTIFY">We account for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services" ("EITF 96-18").  Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.  The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">39</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><I><FONT SIZE=3><P ALIGN="JUSTIFY">Recent Accounting Pronouncements</P>
</B></I><P ALIGN="JUSTIFY"><A NAME="_Toc154499340"><A NAME="_Toc154499469">In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities".  This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value.  Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.  We are currently assessing the impact of SFAS No. 159 on our financial position and results of operations.</P>
<P ALIGN="JUSTIFY">In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51."  This statement requires that noncontrolling or minority interests in subsidiaries be presented in the consolidated statement of financial position within equity, but separate from the parents' equity, and that the amount of the consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income. SFAS No. 160 is effective for the fiscal years beginning on or after December 15, 2008.  Currently the Company does not anticipate that this statement will have an impact on its financial statements.</P>
<P ALIGN="JUSTIFY">In December 2007, the FASB issued SFAS No. 141 (Revised) "Business Combinations". SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree.  The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  The guidance will become effective for the fiscal year beginning after December 15, 2008.  Management is in the process of evaluating the impact, if any, SFAS 141 (Revised) will have on the Company's financial statements upon adoption.</P>
<B><P ALIGN="JUSTIFY">Off-Balance Sheet Arrangements</A></A></P>
</B><P ALIGN="JUSTIFY">We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes of financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095643">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></P>
</B><P ALIGN="JUSTIFY">Except as described below, none of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:</P>
<OL>

<P ALIGN="JUSTIFY"><LI>any of our directors or officers;</LI></P>
<P ALIGN="JUSTIFY"><LI>any person proposed as a nominee for election as a director;</LI></P>
<P ALIGN="JUSTIFY"><LI>any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; or</LI></P>
<P ALIGN="JUSTIFY"><LI>any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the above persons.</LI></P></OL>

<P ALIGN="JUSTIFY">We entered into the following transactions with related parties from April 12, 2005 (date of inception) to October 31, 2007:</P><DIR>

<P ALIGN="JUSTIFY">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded production revenues of $582,059 and incurred production costs of $291,920 for the Barge Canal Property, which is operated by a company that is controlled by Steven Carter, our Vice President of Operations; and</P>
<P ALIGN="JUSTIFY">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We paid rent of $33,731 to a company controlled by Johnathan Lindsay, our Secretary, Treasurer, Chief Financial Officer, Principal Accounting Officer and one of our directors.</P></DIR>

</FONT><FONT SIZE=2><P ALIGN="CENTER">40</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">These transactions were recorded at the exchange amount which is the amount agreed to by the related parties.  All amounts owed were non-interest bearing, unsecured and had no specified terms of repayment.  At October 31, 2007 no amounts are owing to officers or directors of the Company.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc117159933"><A NAME="_Toc188095644">MARKET FOR COMMON EQUITY</A> AND RELATED STOCKHOLDER MATTERS</A></P>
<P ALIGN="LEFT">Market Information</P>
</B><P ALIGN="JUSTIFY">Our common stock is not presently listed for trading on any securities exchange or market.  We intend to apply to list our shares of common stock for trading on the OTC Bulletin Board at the time the registration statement of which this prospectus forms a part becomes effective.<A NAME="_Toc154414105"><A NAME="_Toc154472954"><A NAME="_Toc154473051"></P>
<B><P ALIGN="JUSTIFY">Convertible Securities</P>
</B><P ALIGN="LEFT">As of the date of this prospectus, there are 7,117,425 purchase warrants for our common stock outstanding, which permit the holders thereof to purchase an aggregate of 7,117,425 shares of our common stock.</P>
<P ALIGN="JUSTIFY">In addition, as of the date of this prospectus, there are 3,800,000 options to purchase our common stock outstanding under our 2007 Stock Incentive Plan, which permit the holders thereof to purchase an aggregate of 3,800,000 shares of our common stock.</P>
<B><P ALIGN="JUSTIFY">144 Shares</P>
</B><P ALIGN="JUSTIFY">The SEC has recently enacted changes to Rule 144, which will take effect on February 15, 2008.  In general, under revised Rule 144, the following guidelines will apply:</P></FONT>
<TABLE BORDER=1 BORDERCOLOR=BLACK CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="23%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="38%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="JUSTIFY">Affiliate or person selling on behalf of an affiliate</B></FONT></TD>
<TD WIDTH="39%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="JUSTIFY">Non-affiliate (and has not been an affiliate during the prior three months)</B></FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="JUSTIFY">Restricted Securities of Reporting Issuers</B></FONT></TD>
<TD WIDTH="38%" VALIGN="TOP">
<I><FONT SIZE=2><P ALIGN="JUSTIFY">During six-month holding period</I>--no resales under Rule 144 permitted</P>
<I><P ALIGN="JUSTIFY">After six-month holding period</I>--may resell in accordance with all Rule 144 requirements, including current public information, volume limitations, manner of sale requirements for equity securities, and filing of Form 144</FONT></TD>
<TD WIDTH="39%" VALIGN="TOP">
<I><FONT SIZE=2><P ALIGN="JUSTIFY">During six-month holding period</I>--no resales under Rule 144 permitted</P>
<I><P ALIGN="JUSTIFY">After six-month holding period but before one year</I>--unlimited public resales under Rule 144 except that the current public information requirement still applies</P>
<I><P ALIGN="JUSTIFY">After one year holding period</I>--unlimited public resales under Rule 144, need not comply with any other Rule 144 requirements</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="JUSTIFY">Restricted Securities of Non-Reporting Issuers</B></FONT></TD>
<TD WIDTH="38%" VALIGN="TOP">
<I><FONT SIZE=2><P ALIGN="JUSTIFY">During one-year holding period</I>--no resales under Rule 144 permitted</P>
<I><P ALIGN="JUSTIFY">After one-year holding period</I>--may resell in accordance with all Rule 144 requirements, including current public information, volume limitations, manner of sale requirements for equity securities, and filing of Form 144</FONT></TD>
<TD WIDTH="39%" VALIGN="TOP">
<I><FONT SIZE=2><P ALIGN="JUSTIFY">During one-year holding period</I>--no resales under Rule 144 permitted</P>
<I><P ALIGN="JUSTIFY">After one year holding period</I>--unlimited public resales under Rule 144, need not comply with any other Rule 144 requirements</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=3><P ALIGN="JUSTIFY">As of the date of this prospectus, to the best of our knowledge and belief, the only "affiliates" of the Company (as such term is defined in Rule 144, are our officers and directors.  As disclosed in this prospectus under the heading "Security Ownership of Certain Beneficial Owners and Management", our officers and directors are the beneficial owners of an aggregate of 3,388,681 shares of common stock and stock options to purchase 2,400,000 shares of our common stock, representing 19.3% of our currently issued and outstanding common stock (assuming exercise of such options).  As affiliates, our officers and directors may sell such shares upon satisfaction of the relevant holding period for affiliates indicated above, provided that they comply will all other Rule 144 requirements.</P>
<P ALIGN="JUSTIFY">As of the date of this prospectus, "non-affiliates" of the Company hold all of our securities not held by affiliates.  Such non-affiliates may sell such shares upon satisfaction of the relevant holding period for non-affiliates indicated above, provided that they comply with any other applicable Rule 144 requirements as indicated above.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">41</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="LEFT">Registration Rights</P>
</B><P ALIGN="JUSTIFY">We have not granted registration rights to the selling stockholders or to any other person.</P>
<B><P ALIGN="JUSTIFY">Holders of Our Common Stock</P>
</B><P ALIGN="JUSTIFY">As of the date of this prospectus we had approximately 114 registered holders of our common stock.</P>
<B><P ALIGN="JUSTIFY">Dividend Policy</A></A></A></P>
</B><P ALIGN="JUSTIFY">We have never declared or paid any cash dividends on our common stock.  We currently intend to retain future earnings, if any, to finance the expansion of our business.  As a result, we do not anticipate paying any cash dividends in the foreseeable future.</P>
<P ALIGN="JUSTIFY">There are no restrictions in our Articles or Bylaws that prevent us from declaring dividends.  The <I>Nevada Revised Statutes</I>, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:</P>
<OL>

<P ALIGN="JUSTIFY"><LI>we would not be able to pay our debts as they become due in the usual course of business; or</LI></P>
<P ALIGN="JUSTIFY"><LI>our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.<A NAME="_Toc154414109"><A NAME="_Toc154472958"><A NAME="_Toc154473055"></LI></P></OL>

<B><P ALIGN="JUSTIFY"></A></A></A>Compensation Plans</P>
</B><P ALIGN="JUSTIFY">The following table sets forth information relating to the grant of stock options under our equity compensation plans:</P>
<B><P ALIGN="CENTER">Equity Compensation Plan Information</P></B></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="25%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Number of securities to be issued upon exercise of <U>outstanding options</U></FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted average exercise <U>price of outstanding options</U></FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Number of securities remaining available for future issuance under equity <U>compensation plan</U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">(a)&nbsp;&nbsp;&nbsp;Equity Compensation <BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Plans approved by <BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders (2007 Stock <BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incentive Plan)</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">3,800,000</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">$0.33</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">6,200,000</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">(b)&nbsp;&nbsp;&nbsp;Equity Compensation <BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Plans not approved by <BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stockholders</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">552,041</U> <SUP>(1)</SUP></FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">$0.42</U></FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">Nil</U></FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="BOTTOM"><DIR>

<FONT SIZE=2><P ALIGN="LEFT">Total</DIR>
</FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">4,352,041</U></FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">$0.34</U></FONT></TD>
<TD WIDTH="25%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">6,200,000</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=1><P ALIGN="JUSTIFY"><A NAME="_Toc188095645">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 5, 2007 the Company issued 385,000 share purchase warrants exercisable at $0.35 per share, 4,000 share purchase warrants exercisable at $0.50 per share, and 163,041 share purchase warrants exercisable at $0.60 per share pursuant to finders' fees agreements.  </P>
<P ALIGN="JUSTIFY"></P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">42</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">EXECUTIVE COMPENSATION</A></P>
</B><P ALIGN="JUSTIFY">The following table sets forth the compensation paid to our Chief Executive Officer and those executive officers that earned in excess of $100,000 during our fiscal years ended July 31, 2007 and July 31, 2006 (collectively, the "Named Executive Officers"):</P>
<B><P ALIGN="CENTER">Summary Compensation Table</P></B></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=1 BORDERCOLOR=BLACK CELLSPACING=0 CELLPADDING=7 WIDTH=685>
<TR><TD WIDTH="18%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="JUSTIFY">Name and Principal Position</B></FONT></TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Year</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Salary<BR>
($)</B></FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Bonus<BR>
($)</B></FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Stock Awards<BR>
($)</B></FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Option Awards<BR>
 ($)</B></FONT></TD>
<TD WIDTH="9%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">Non-Equity Incentive Plan Compen-sation <BR>
($)</B></FONT></TD>
<TD WIDTH="9%" VALIGN="TOP">
<B><FONT SIZE=1><P ALIGN="CENTER">Non-qualified Deferred Compen-sation Earnings<BR>
($)</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">All Other Compen-sation<BR>
($)</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Total<BR>
($)</B></FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" ROWSPAN=2>
<FONT SIZE=1><P ALIGN="LEFT">Randall Reneau<BR>
<I>President, CEO &amp; Principal Executive Officer</I></FONT></TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">2007</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">49,738<SUP> (1)</SUP></FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">300,000<SUP>(5)</SUP></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">349,738</FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">2006</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">21,762<SUP> (1)</SUP></FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">21,762</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" ROWSPAN=2>
<FONT SIZE=1><P ALIGN="LEFT">Johnathan Lindsay<BR>
<I>Secretary, Treasurer, CFO &amp; Principal Accounting Officer</I></FONT></TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">2007</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">32,538<SUP> (2)</SUP></FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">150,000<SUP>(5)</SUP></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">182,538</FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">2006</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">28,270<SUP> (2)</SUP></FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">28,270</FONT></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="BOTTOM" ROWSPAN=2>
<FONT SIZE=1><P ALIGN="LEFT">Steven Carter<BR>
<I>Vice President of Operations</I></FONT></TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">2007</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">30,844<SUP> (3)</SUP></FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$175,000<SUP>(4)</SUP></FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">300,000<SUP>(5)</SUP></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">505,844</FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">2006</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1><P ALIGN="JUSTIFY">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Randall Reneau received varying amounts per month through July 31, 2007 for the provision of various management consulting services provided by Mr. Reneau to us on a monthly basis and from time to time.</P>
<P ALIGN="JUSTIFY">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Johnathan Lindsay received varying amounts per month through July 31, 2007 for the provision of various management consulting services provided by Mr. Lindsay to us on a monthly basis and from time to time.</P>
<P ALIGN="JUSTIFY">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Steven Carter received $10,000 per month pursuant to the Carter Professional Services Agreement which is more particularly described below under Employment, Consulting and Services Agreements.</P>
<P ALIGN="JUSTIFY">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This amount represents the fair value of shares issued pursuant to a consulting services agreement, estimated using the Black-Scholes pricing model.</P>
<P ALIGN="JUSTIFY">(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These amounts represent the fair value of these options at the date of grant which was estimated using the Black-Scholes pricing model.</P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">The following table sets forth information as at July 31, 2007 relating to outstanding equity awards for each Named Executive Officer:</P>
<B><P ALIGN="CENTER">Outstanding Equity Awards at Year End Table</P></B></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=1 BORDERCOLOR=BLACK CELLSPACING=0 WIDTH=635>
<TR><TD WIDTH="15%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="46%" VALIGN="TOP" COLSPAN=5>
<B><FONT SIZE=1><P ALIGN="CENTER">Option Awards</B></FONT></TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=4>
<B><FONT SIZE=1><P ALIGN="CENTER">Stock Awards</B></FONT></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Name</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Number of Securities Under-<BR>
lying Unexer-cised Options <BR>
(#) <BR>
Exercise-able</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Number of Securities Under-lying Unexer-cised Options (#) Unexer-ciseable</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Equity Inventive Plan Awards:  Number of Securities Underlying Unexer-cised Unearned Options<BR>
(#)</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Option Exercise Price<BR>
($)</B></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Option Expiration Date</B></FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Number of Shares or Units of Stock That Have Not Vested<BR>
(#)</B></FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Market Value of Shares or Units of Stock That Have Not Vested<BR>
($)</B></FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Equity Incentive Plan Awards:  Number of Unearned Shares, Units or Other Rights That Have Not Vested<BR>
(#)</B></FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Equity Incentive Plan Awards:  Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested<BR>
($)</B></FONT></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Randall Reneau, </FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">600,000</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.35</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="JUSTIFY">Johnathan Lindsay </FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">300,000</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.35</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="JUSTIFY">Steve Carter</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">600,000</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">$0.35</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><P ALIGN="CENTER">43</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">The following table sets forth information relating to compensation paid to our directors in the fiscal years ended July 31, 2007 and July 31, 2006:</P>
<B><P ALIGN="CENTER">Director Compensation Table</P></B></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=1 BORDERCOLOR=BLACK CELLSPACING=0 CELLPADDING=7 WIDTH=654>
<TR><TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Name</B></FONT></TD>
<TD WIDTH="7%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Year</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Fees Earned or Paid<BR>
in Cash <BR>
($)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Stock Awards<BR>
($)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Option Awards<BR>
($)</B></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Non-Equity Incentive Plan Compen-sation Earnings<BR>
($)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER"><BR>
Non-qualified Deferred Compen-sation Earnings<BR>
($)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER"><BR>
<BR>
<BR>
<BR>
All Other Compen-sation<BR>
($)</B></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<B><FONT SIZE=1><P ALIGN="CENTER">Total<BR>
($)</B></FONT></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP" ROWSPAN=2>
<FONT SIZE=1><P ALIGN="LEFT">Leonard Garcia</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">2007</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">48,820 </FONT><SUP><FONT SIZE=1>(1)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">300,000 </FONT><SUP><FONT SIZE=1>(4)</SUP></FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">348,820</FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">2006</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">15,208 </FONT><SUP><FONT SIZE=1>(1)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">15,208</FONT></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP" ROWSPAN=2>
<FONT SIZE=1><P ALIGN="LEFT">Johnathan Lindsay</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">2007</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">32,538 </FONT><SUP><FONT SIZE=1>(2)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">150,000 </FONT><SUP><FONT SIZE=1>(4)</SUP></FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">182,538</FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">2006</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">28,270 </FONT><SUP><FONT SIZE=1>(2)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">28,270</FONT></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP" ROWSPAN=2>
<FONT SIZE=1><P ALIGN="LEFT">Alan Lindsay</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">2007</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">150,000 </FONT><SUP><FONT SIZE=1>(4)</SUP></FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">150,000</FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">2006</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP" ROWSPAN=2>
<FONT SIZE=1><P ALIGN="LEFT">Randall Reneau</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">2007</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">49,738 </FONT><SUP><FONT SIZE=1>(3)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">300,000 </FONT><SUP><FONT SIZE=1>(4)</SUP></FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">349,738</FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">2006</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">21,762 </FONT><SUP><FONT SIZE=1>(3)</SUP></FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Nil</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">N/A</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">21,762</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=1><P ALIGN="JUSTIFY">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Leonard Garcia received varying amounts per month through July 31, 2007 for the provision of various management consulting services provided by Mr. Garcia to us on a monthly basis and from time to time.</P>
<P ALIGN="JUSTIFY">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Johnathan Lindsay received varying amounts per month through July 31, 2007 for the provision of various management consulting services provided by Mr. Lindsay to us on a monthly basis and from time to time.</P>
<P ALIGN="JUSTIFY">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Randall Reneau received varying amounts per month through July 31, 2007 for the provision of various management consulting services provided by Mr. Reneau to us on a monthly basis and from time to time.</P>
<P ALIGN="JUSTIFY">(4) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These amounts represent the fair value of these options at the date of grant which was estimated using the Black-Scholes pricing model.</P>
</FONT><B><FONT SIZE=3><P ALIGN="JUSTIFY">Employment, Consulting and Services Agreements</P>
</B><P ALIGN="JUSTIFY">The following summary of certain material terms of the employment, consulting or services agreements we have entered into with certain of our officers is not complete and is qualified in its entirety to the full text of each such agreement, copies of which are attached as exhibits to the registration statement of which this prospectus forms a part.</P>
<B><I><P ALIGN="JUSTIFY">Management Solutions International Employment Services Agreement</P>
</B></I><P ALIGN="JUSTIFY">On April 1, 2006, our Board of Directors authorized and approved the execution of the "Management Solutions International Employment Services Agreement".  The initial term of the agreement is two years expiring on April 1, 2008.  Pursuant to the terms and provisions of the Management Solutions International Employment Services Agreement:  (i) Steven Narrod agreed to provide duties to us commensurate with his service as our Chief Financial Officer and Principal Accounting Officer and as a member of our Board of Directors; (ii) we agreed to pay Management Solutions International a monthly fee of $8,335; (iii) we approved the granting of an aggregate of not less than 500,000 options to purchase shares of our common stock at $0.25 for a ten year term; and (iv) the Management Solutions International Employment Services Agreement could be terminated without cause by either party by providing prior written notice of the intention to terminate at least 90 days (in the case of our Company after the initial term) or 30 days (in the case of Mr. Narrod) prior to the effective date of such termination.  On October 31, 2006 Mr. Narrod resigned from his positions as our Chief Financial Officer and as a member of our Board of Directors.  No options were issued to Mr. Narrod and at July 31, 2007 no fees are outstanding to Management Solutions International, Inc.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">44</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><I><FONT SIZE=3><P ALIGN="JUSTIFY">Thomas Consulting Services and Option Agreement</P>
</B></I><P ALIGN="JUSTIFY">We have entered into a Consulting Services and Option Agreement dated April 1, 2006 with Jim Thomas, our Chief Geologist.  Under the agreement, Mr. Thomas has agreed to provide geological consulting services to us including, among other things, assisting in the initiation, coordination, implementation and management of all aspects of any program or project in connection with the geological development and maintenance of our various business interests.  In consideration for these consulting services, we have agreed to pay Mr. Thomas a daily fee of $350.  In addition, we issued to Mr. Thomas options to acquire an aggregate of 250,000 shares of our common stock at an exercise price of $0.10 per share exercisable until April 1, 2016.  We have also agreed to reimburse Mr. Thomas for all reasonable expenses incurred by him in connection with the provision of such consulting services.  The initial term of the agreement is 18 months from April 1, 2006 and the agreement renews automatically on a month-to-month basis if not specifically terminated in accordance with the provisions of the agreement.  The agreement may be terminated by either party upon providing not less than 30 calendar days' prior written notice to the other party.  However, either party may terminate the agreement upon not less than ten calendar days' written notice in the event the other party fails to cure a material breach of any of the provisions of the agreement during such ten day period, the other party is non-compliant in the performance of its duties under the agreement and fails to become complaint within five calendar days of receipt of the notice, or a party commits fraud or serious misconduct in the discharge of its duties.</P>
<P ALIGN="JUSTIFY">On October 1, 2007 our Board of Directors authorized and approved the execution of a modified Consulting Services and Option Agreement with Jim Thomas, our Chief Geologist.  The modified agreement has an initial term of 18 months expiring on March 31, 2009.  Pursuant to the terms and provisions of the Consulting Services and Option Agreement: (i) we shall pay a daily fee of $400 on a as requested basis; (ii) we will issue 200,000 shares of our restricted common stock; and (iii) we agreed to grant an aggregate of not less than 250,000 options to purchase shares of our common stock at $0.10 for a ten year term.  The option grant was completed on July 5, 2007.</P>
<B><I><P ALIGN="JUSTIFY">Combest Consulting Services and Option Agreement</P>
</B></I><P ALIGN="JUSTIFY">We have entered into a Consulting Services and Option Agreement dated August 1, 2006 with Kyle Combest, one of our geologists.  Under the agreement, Mr. Combest has agreed to provide geological consulting services to us including, among other things, assisting in the initiation, coordination, implementation and management of all aspects of any program or project in connection with the geological development and maintenance of our various business interests.  In consideration for these consulting services, we have agreed to pay Mr. Combest a daily fee of $400.  In addition, we issued to Mr. Combest options to acquire an aggregate of 250,000 shares of our common stock at an exercise price of $0.35 per share exercisable until April 1, 2016.  We have also agreed to reimburse Mr. Combest for all reasonable expenses incurred by him in connection with the provision of such consulting services.  The initial term of the agreement is 18 months from August 1, 2006 and the agreement renews automatically on a month-to-month basis if not specifically terminated in accordance with the provisions of the agreement.  The agreement may be terminated by either party upon providing not less than 30 calendar days' prior written notice to the other party.  However, either party may terminate the agreement upon not less than ten calendar days' written notice in the event the other party fails to cure a material breach of any of the provisions of the agreement during such ten day period, the other party is non-compliant in the performance of its duties under the agreement and fails to become complaint within five calendar days of receipt of the notice, or a party commits fraud or serious misconduct in the discharge of its duties.</P>
<B><I><P ALIGN="JUSTIFY">Carter Professional Services Agreement</P>
</B></I><P ALIGN="JUSTIFY">On December 20, 2006, our Board of Directors authorized and approved the execution of the "Carter Professional Services Agreement".  The term of the agreement is two years expiring on November 30, 2008.  Pursuant to the terms and provisions of the Carter Professional Services Agreement: (i) Steven Carter shall provide duties to us commensurate with his current executive position as our Vice President of Operations; (ii) we shall pay to Mr. Carter a monthly fee of $10,000; (iii) we approved the issuance of 500,000 shares of our common stock at a price of $0.001 per share; (iv) we approved the granting of an aggregate of not less than 600,000 options to purchase shares of our common stock at $0.35 for a ten year term; and (v) the Carter Professional Services Agreement may be terminated without cause by either of us by providing prior written notice of the intention to terminate at least 90 days (in the case of our Company after the initial term) or 30 days (in the case of Mr. Carter) prior to the effective date of such termination.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER"><A NAME="_Toc188095646">45</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">FINANCIAL STATEMENTS</A></P>
</B><P ALIGN="JUSTIFY">This prospectus includes (i) the unaudited interim consolidated financial statements of Strategic American Oil Corporation as at October 31, 2007, and for the period from inception (April 12, 2005) to October 31, 2007, and (ii) the audited consolidated financial statements of Strategic American Oil Corporation as at July 31, 2006 and 2007, and for the period from inception (April 12, 2005) to July 31, 2007.  These financial statements have been prepared on the basis of accounting principles generally accepted in the United States and are expressed in U.S. dollars.</P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">46</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<B><FONT SIZE=2><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION<BR>
</B>(An Exploration Stage Company)<B><BR>
</P>
<P ALIGN="CENTER">CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</P>
<P ALIGN="CENTER"></P>
<P ALIGN="CENTER">OCTOBER 31, 2007</P>
</B><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<B><P ALIGN="LEFT">CONSOLIDATED BALANCE SHEETS</P>
<P ALIGN="LEFT">CONSOLIDATED STATEMENTS OF OPERATIONS</P>
<P ALIGN="LEFT">CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY</P>
<P ALIGN="LEFT">CONSOLIDATED STATEMENTS OF CASH FLOWS</P>
<P ALIGN="LEFT">NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</P>
</B></FONT><P ALIGN="LEFT"></P>
<FONT SIZE=2><P ALIGN="CENTER">47</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=2><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION<BR>
</B>(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">CONSOLIDATED BALANCE SHEETS</P>
<P ALIGN="CENTER"></P></B></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=679>
<TR><TD WIDTH="61%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="CENTER">October 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2007</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">(Unaudited)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CURRENT ASSETS</B></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$562,884</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$667,722</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">65,848</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">88,730</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current assets</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">8,369</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">8,369</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">637,101</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">764,821</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">RECLAMATION BONDS</B> (Note 3)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">81,192</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">61,875</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">EQUIPMENT</B> (Note 4)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">49,692</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">46,274</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">OIL AND GAS PROPERTIES</B> (Note 5)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proved properties</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">508,691</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">520,385</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unproved properties</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">633,836</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">551,776</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">1,142,527</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">1,072,161</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,910,512</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,945,131</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CURRENT LIABILITIES</B></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$65,442</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$112,214</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">COMMITMENTS</B> (Note 8)</P>
<B><P ALIGN="LEFT">CONTINGENCY</B> (Note 1)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">STOCKHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital stock (Note 7)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock $0.001 par value: 500,000,000 shares</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;authorized, 27,615,351 (July 31, 2007 - 26,690,685) shares</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued and outstanding</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">27,616</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">26,691</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">5,838,429</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">5,344,554</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share subscriptions</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">18,012</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">33,012</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share subscriptions receivable</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(139,800)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deficit accumulated during the exploration stage</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(3,899,187)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(3,571,340)</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">1,845,070</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">1,832,917</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,910,512</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,945,131</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="LEFT"></P>
</FONT><P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="CENTER">The accompanying notes are an integral part of these consolidated financial statements.</P>
<P ALIGN="CENTER">48</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=2><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF OPERATIONS<BR>
(UNAUDITED)</P>
</B><P ALIGN="CENTER"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=679>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">For the Three<BR>
Months Ended<BR>
October 31, 2007</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">For the Three<BR>
Months Ended<BR>
October 31, 2006</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Period from<BR>
April 12, 2005<BR>
(inception) to<BR>
October 31, 2007</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<B><FONT SIZE=2><P ALIGN="LEFT">OIL AND GAS REVENUES</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">$194,173</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">$33,250</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">$895,913</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<B><FONT SIZE=2><P ALIGN="LEFT">EXPENSES</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consulting</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">85,835</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">77,440</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">564,412</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consulting, stock-based (Note 7)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">82,000</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">938,167</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and depletion</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">14,437</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,571</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">87,925</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direct operating costs</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">150,295</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">57,469</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">813,686</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">36,238</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">19,058</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">175,280</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17><DIR>

<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of oil and gas property (Note 5)</DIR>
</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">233,306</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management fees (Note 6)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">91,676</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">57,459</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">454,300</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management fees, stock-based</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,200,000</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional fees</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">32,669</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">8,072</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">132,502</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Travel and promotion</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">28,870</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">19,076</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">195,522</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">522,020</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">240,145</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">4,795,100</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=18>
<B><FONT SIZE=2><P ALIGN="LEFT">NET LOSS </B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$(327,847)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$(206,895)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$(3,899,187)</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=18>
<B><FONT SIZE=2><P ALIGN="LEFT">BASIC AND DILUTED NET LOSS PER SHARE</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$(0.01)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$(0.01)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=18>
<B><FONT SIZE=2><P ALIGN="LEFT">WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">26,755,902</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">22,706,713</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="LEFT"></P>
</FONT><P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">The accompanying notes are an integral part of these consolidated financial statements.</P>
</FONT><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="CENTER">49</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
<B><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY<BR>
(UNAUDITED)</P>
</B><P ALIGN="CENTER"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 WIDTH=912>
<TR><TD WIDTH="26%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Share</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Deficit<BR>
Accumulated<BR>
During the</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Additional</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Share</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Subscriptions</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Exploration</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Stockholders'</FONT></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="CENTER">Shares</U></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="CENTER">Amount</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="CENTER">Paid-in Capital</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="CENTER">Subscriptions</U></FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="CENTER">Receivable</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="CENTER">Stage</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="CENTER">Equity</U></FONT></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Balance, July 31, 2007</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">26,690,685</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$26,691</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$5,344,554</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$33,012</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$(3,571,340)</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$1,832,917</FONT></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM" HEIGHT=4><P></P></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" HEIGHT=4><P></P></TD>
<TD WIDTH="9%" VALIGN="BOTTOM" HEIGHT=4><P></P></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=4><P></P></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=4><P></P></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=4><P></P></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=4><P></P></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=4><P></P></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Issued for services:</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;- $0.41 per share on October 1, 2007</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">200</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">81,800</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">82,000</FONT></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Issued for cash:</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;- $0.60 per share on October 31, 2007</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">724,666</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">725</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">434,075</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(15,000)</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(139,800)</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">280,000</FONT></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Share issuance costs</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(22,000)</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(22,000)</FONT></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Net loss for the period</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(327,847)</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(327,847)</U></FONT></TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="26%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Balance, October 31, 2007</FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">27,615,351</U></FONT></TD>
<TD WIDTH="9%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$27,616</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$5,838,429</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$18,012</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$(139,800)</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$(3,899,187)</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,845,070</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="LEFT"></P>
</FONT><P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="CENTER">The accompanying notes are an integral part of these consolidated financial statements.</P>
</FONT><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="CENTER">50</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
<B><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION<BR>
</B>(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
(UNAUDITED)</P>
<P ALIGN="CENTER"></P></B></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=679>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">For the Three<BR>
Months Ended<BR>
<U>October 31, 2007</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">For the Three<BR>
Months Ended<BR>
<U>October 31, 2006</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Period from<BR>
April 12, 2005<BR>
(inception) to<BR>
<U>October 31, 2007</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CASH FLOWS FROM<BR>
&nbsp;&nbsp;OPERATING ACTIVITIES</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Net loss </FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$(327,847)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$(206,895)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$(3,899,187)</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Adjustments to reconcile net loss to</P>
<P ALIGN="LEFT">net cash from operating activities:</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and depletion</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">14,437</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,466</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">87,925</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment loss properties</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">233,306</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock based compensation</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">82,000</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">2,138,167</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">22,882</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(21,063)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(65,848)</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current assets</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">7,653</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(8,369)</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(46,772)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(9,385)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">65,442</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to related parties</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">-</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(18,923)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">13,893</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">NET CASH USED IN<BR>
&nbsp;&nbsp;OPERATING ACTIVITIES</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(255,300)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(247,147)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(1,434,671)</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CASH FLOWS FROM<BR>
&nbsp;&nbsp;FINANCING ACTIVITIES</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM"><DIR>

<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares for cash</DIR>
</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">295,000</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">500,000</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">3,833,699</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share subscriptions</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(15,000)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">101,800</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">18,012</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financing charges</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(22,000)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(50,000)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(259,514)</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">NET CASH PROVIDED BY<BR>
&nbsp;&nbsp;FINANCING ACTIVITIES</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">258,000</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">551,800</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">3,592,197</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CASH FLOWS FROM<BR>
&nbsp;&nbsp;INVESTING ACTIVITIES</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reclamation bonds</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(19,317)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(21,875)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(81,192)</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of property and equipment</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(6,161)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(34,895)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(61,606)</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oil and gas property acquisitions<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and exploration</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(82,060)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(292,328)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(1,451,844)</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">NET CASH USED IN<BR>
&nbsp;&nbsp;INVESTING ACTIVITIES</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(107,538)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(349,098)</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(1,594,642)</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">INCREASE (Decrease) IN CASH</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(104,838)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(44,445)</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">562,884</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CASH, BEGINNING</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">667,722</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">650,204</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="18%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CASH, ENDING</B></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$562,884</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$605,759</U></FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$562,884</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">SUPPLEMENTAL CASH FLOW INFORMATION AND<BR>
&nbsp;&nbsp;NONCASH INVESTING AND FINANCING ACTIVITIES</B> (Note 9)</P>
</FONT><P ALIGN="LEFT"></P>
<FONT SIZE=2><P ALIGN="CENTER">The accompanying notes are an integral part of these consolidated financial statements.</P>
</FONT><P ALIGN="LEFT"></P>
<FONT SIZE=2><P ALIGN="CENTER">51</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)<BR>
<BR>
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(UNAUDITED)<BR>
OCTOBER 31, 2007</B><BR>
</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 1:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NATURE OF OPERATIONS</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Strategic American Oil Corporation (the "Company") was incorporated as Carlin Gold Corporation on April 12, 2005 in Nevada, U.S.A.  On July 19, 2005 the Company changed its name to Nevada Gold Corp., on October 18, 2005 the Company changed its name to Gulf States Energy Inc. and on September 5, 2006 the Company changed its name to Strategic American Oil Corporation.  The Company is an exploration stage company as it has not generated significant revenues from operations.  The Company was formed for the purpose of oil and gas exploration and development.  The Company owns 100% of Penasco Petroleum Inc. ("Penasco"), a Nevada corporation incorporated on November 23, 2005.</P>
<P ALIGN="JUSTIFY">The accompanying interim consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  At October 31, 2007, the Company had working capital of $571,659 but has incurred significant losses since inception and further losses are anticipated in the development of its oil and gas property interests.  The ability of the Company to continue as a going concern is dependent on raising additional capital to fund ongoing exploration and development and ultimately on generating future profitable operations.</P>
<P ALIGN="JUSTIFY">The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.  Since internally generated cash flow will not fund development and commercialization of the Company's oil and gas properties, the Company will require significant additional financial resources and will be dependent on future financings to fund its ongoing exploration and development as well as other working capital requirements.  The Company's future capital requirements will depend on many factors including the rate and extent of progress in its exploration and development programs.  There can be no assurance the Company will be successful in its efforts to raise additional financing or if financing is available, that it will be on terms that are acceptable to the Company.</P>
<P ALIGN="JUSTIFY">Management is addressing going concern remediation through raising additional sources of capital for operations and planned property acquisitions.  Management's plans are intended to increase the company's financial stability and improve the efficiency of continuing operations.  The Company continues to raise capital through private placements to meet immediate working capital requirements.  Management expects to be able to complete planned property acquisitions and funding of on-going operations.  These measures, if successful, will contribute to reducing the risk of going concern uncertainties for the Company over the next twelve to twenty-four months.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Unaudited Interim Financial Statements</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.  They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements.  The interim unaudited financial statements should be read in conjunction with the audited July 31, 2007 financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made.  Operating results for the three months ended October 31, 2007 are not necessarily indicative of the results that may be expected for the year ending July 31, 2008.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 2: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RECENT ACCOUNTING PRONOUNCEMENTS</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51."  This statement requires that noncontrolling or minority interests in subsidiaries be presented in the consolidated statement of financial position within equity, but separate from the parents' equity, and that the amount of the consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income.  SFAS No. 160 is effective for the fiscal years beginning on or after December 15, 2008.  Currently the Company does not anticipate that this statement will have an impact on its financial statements.</P>
<P ALIGN="CENTER"></P>
<P ALIGN="CENTER">52</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)<BR>
<BR>
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(UNAUDITED)<BR>
OCTOBER 31, 2007</P>
</FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">NOTE 2: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RECENT ACCOUNTING PRONOUNCEMENTS (continued)</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">In December 2007, the FASB issued SFAS No. 141 (Revised) "Business Combinations".  SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree.  The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  The guidance will become effective for the fiscal year beginning after December 15, 2008.  Management is in the process of evaluating the impact, if any, SFAS 141 (Revised) will have on the Company's financial statements upon adoption.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 3: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reclamation bonds</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Reclamation bonds includes interest and non-interest bearing deposits issued in the States of Louisiana ($41,192) and Texas ($40,000) to cover each State's reclamation requirement for producing operations.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 4: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EQUIPMENT</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">October 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">July 31, 2007</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Computer equipment</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$1,588</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Furniture and fixtures</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">7,774</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">3,201</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Leasehold improvements</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">11,294</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">11,294</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Production equipment</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">40,950</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">40,950</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">61,606</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">55,445</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Less: accumulated depreciation</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(11,914)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(9,171)</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$49,692</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$46,274</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 5: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OIL AND GAS PROPERTIES</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
<B><P ALIGN="JUSTIFY">PROVED:</P>
</B><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Barge Canal, Texas</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Effective August 1, 2006 the Company entered into an assignment and purchase agreement with OPEX Energy, LLC.  Under the terms of the agreement, the Company paid $500,000 plus a finder's fee of $50,000 for a 100% working interest (90% after payout) and a 72.5% net revenue interest (65.25% after payout) in approximately 81 acres of an oil and gas lease (the "Welder Lease") located in Calhoun County, Texas.</P>
<B><P ALIGN="LEFT">UNPROVED:<BR>
</P>
</FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">South Delhi / Big Creek Field, Louisiana</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On August 24, 2006 the Company entered into an assignment of oil and gas interest and purchase agreement with Energy Program Accompany, LLC.  Under the terms of the agreement, the Company paid $250,000 to acquire the property.  The agreement includes the following interests:</P><DIR>

<P ALIGN="JUSTIFY">a) &nbsp;&nbsp;&nbsp;&nbsp;a 97% working interest and an 81.25% net revenue interest in approximately 136 acres in Franklin Parish, Louisiana (the "Holt Lease");</P>
<P ALIGN="JUSTIFY">b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a 100% working interest and an 81.25% net revenue interest in approximately 40 acres in Richland Parish, Louisiana (the "Strahan Lease"); and</P>
<P ALIGN="JUSTIFY">c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a 100% working interest and an 82.08% net revenue interest in approximately 80 acres in Richland Parish, Louisiana (the "McKay Lease").</P></DIR>

<P ALIGN="CENTER">53</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)<BR>
<BR>
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(UNAUDITED)<BR>
OCTOBER 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 5: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OIL AND GAS PROPERTIES (continued)</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Effective September 1, 2006 the Company assigned a 12.5% working interest to Tradestar Resources Corporation ("Tradestar") in conjunction with the acquisition.  The Company interest is additionally subject to a back in after payout agreement with Tradestar for an additional 12.5% working interest which went into effect as of January 1, 2007.</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NE Oakdale and DST prospects, Illinois</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Through October 31, 2007 the Company has entered into numerous oil and gas leases in Jefferson County, Illinois.  The leases total approximately 1,423 gross acres pursuant to which the Company has a working interest of 100% and a net revenue interest of 87.5%, for a total cost to October 31, 2007 of $166,528.</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Gobbler</FONT><FONT SIZE=2>'</FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2>s Knob Prospect, Illinois</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Through October 31, 2007 the Company has entered into several oil and gas leases in Hamilton County, Illinois.  The leases total approximately 214 gross acres pursuant to which the Company has a working interest of 100% and a net revenue interest of 87.5%, for a total cost to October 31, 2007 of $9,567.</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Koliba Lease, Texas</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Through October 31, 2007 the Company has entered into several lease agreements with certain mineral owners of a 79 acre tract (the "Koliba Lease") in Victoria County, Texas for a total cost to October 31, 2007 of $4,645.</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Little Mule Creek, Oklahoma</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On October 30, 2007 the Company signed a letter agreement with Marmik Oil Company ("Marmik") whereby the Company acquired a 4% working interest in the Little Mule Creek Project, located in Alfalfa and Woods Counties, Oklahoma.  Under the terms of the letter agreement, the Company paid aggregate acquisition costs of $43,086 in addition to 4% participation in the drilling and completion costs of the initial test well, which are estimated at $1,341,200 (the Company's share would be $53,648).  The participation is subject to a 25% back in after payout, which would reduce the Company's interest to 3%.</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Janssen Lease, Texas</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">In October 2005, the Company entered into an agreement to purchase a 25% working interest and an 18.75% net revenue interest in approximately 138 acres of an oil and gas lease (the "Janssen Lease") located in Karnes County, Texas.  This lease interest was acquired from Rockwell Energy, LLC for $220,000 plus additional payments of $13,800 on July 17, 2006 to the owners after negotiating a new oil, gas and mineral lease.  On December 20, 2006 the Company farmed out 100% of the working interest to ETG Energy Resources, retaining a 3% back in after payout on any producing zones and a 5% non-promoted option to participate in any offset drilling within the leased area.  At July 31, 2007, management determined the recoverable value of its interest to be $75,000, and accordingly, costs of $158,800 were written off to impairment of oil and gas properties.</P>
</FONT><B><I><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Capitalized costs of oil and natural gas producing properties</P>
</B></I></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company's aggregate capitalized costs related to oil and natural gas properties are as follows:</P>
<P ALIGN="CENTER"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">October 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">July 31, 2007</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Proven reserves (Barge Canal)</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$584,702</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$584,702</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Accumulated depletion and amortization</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(76,011)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(64,317)</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">508,691</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">520,385</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Unproven or unevaluated reserves</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">867,142</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">785,082</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Impairment loss</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(233,306)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(233,306)</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">633,836</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">551,776</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,142,527</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,072,161</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER">54</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)<BR>
<BR>
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(UNAUDITED)<BR>
OCTOBER 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 5: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OIL AND GAS PROPERTIES (continued)</P>
<I><P ALIGN="LEFT">Capitalized costs incurred for oil and natural gas producing activities</P>
</B></I></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Costs incurred in oil and natural gas property acquisition, exploration and development activities that have been capitalized are summarized below:</P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">October 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">July 31, 2007</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Acquisition cost</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proven properties</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$572,456</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$572,456</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unproven properties</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">751,510</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">670,676</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,323,966</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,243,132</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Development and exploration costs</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">127,878</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">126,652</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,451,844</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,369,784</U></FONT></TD>
</TR>
</TABLE>

<B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 6: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RELATED PARTY TRANSACTIONS</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company had transactions with certain officers and directors of the Company for the three months ended October 31, 2007 as follows:</P><DIR>

<P ALIGN="JUSTIFY">a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;recorded production revenues of $102,045 (2006 - $Nil) and incurred production costs of $76,009 (2006 - $nil)  for the Barge Canal property which is operated by a company controlled by an officer of the Company;</P>
<P ALIGN="JUSTIFY">b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;incurred management fees of $91,676 (2006 - $57,459) to officers and directors;</P>
<P ALIGN="JUSTIFY">c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;incurred rental charges of $5,400 (2006 - $7,726) to a company owned by a former director of the Company;</P></DIR>

<P ALIGN="JUSTIFY">These transactions were recorded at the exchange amount which is the amount agreed to by the related parties.  All amounts owed were non-interest bearing, unsecured and had no specified terms of repayment.</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 7: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CAPITAL STOCK</P>
<P ALIGN="JUSTIFY">Share Capital</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company's capitalization at October 31, 2007 was 500,000,000 authorized common shares with a par value of $0.001 per share.</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">2008 Share Transactions</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On October 1, 2007, the Company issued 200,000 shares of its common stock pursuant to a Consulting Services Agreement.  The Company recorded the fair value of the shares issued at $0.41 per share (based on an allocation of recent private placements between shares and the connected warrants), or $82,000 as a stock-based consulting expense.</P>
<P ALIGN="JUSTIFY">On October 31, 2007, the Company completed a private placement for 724,666 Units at a subscription price of $0.60 per Unit for gross proceeds of $434,800, of which $139,800 was received on November 1, 2007 and accordingly, has been recorded as share subscriptions receivable at October 31, 2007.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $22,000 in cash.</P>
<P ALIGN="CENTER"></P>
<P ALIGN="CENTER">55</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)<BR>
<BR>
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(UNAUDITED)<BR>
OCTOBER 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 7: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CAPITAL STOCK (continued)</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Share Purchase Warrants</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">A summary of the Company's stock purchase warrants as of October 31, 2007 and changes during the period is presented below:</P>
<P ALIGN="JUSTIFY"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=672>
<TR><TD WIDTH="45%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Number of<BR>
<U>warrants</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted average<BR>
<U>exercise price</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted average<BR>
<U>remaining life</U></FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Balance, July 31, 2007</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6,392,759</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$0.81&nbsp;</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">n/a&nbsp;</FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Issued</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">724,666</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1.00&nbsp;</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">n/a&nbsp;</FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Exercised or expired</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">n/a&nbsp;</U></FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Balance, October 31, 2007</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">7,117,425</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$0.83&nbsp;</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">n/a&nbsp;</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Stock Compensation Plan</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On July 5, 2007 the Company adopted the 2007 Stock Incentive Plan allowing for the issuance of up to 10,000,000 common shares.</P>
<P ALIGN="JUSTIFY">A summary of the Company's stock options as of October 31, 2007 and changes during the period is presented below:</P>
<P ALIGN="CENTER"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Number of<BR>
<U>options</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted average<BR>
<U>exercise price</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted average<BR>
<U>remaining life</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Balance, July 31, 2007</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,800,000</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$0.33</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">9.93</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Issued</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Exercised or expired</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Balance, October 31, 2007</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">3,800,000</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$0.33</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">9.68</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">A summary of the status of the Company's unvested options as of October 31, 2007, and changes during the three months ended October 31, 2007, is presented below: </P>
<P ALIGN="JUSTIFY"></P></FONT>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=672>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">Number of Shares</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted-Average<BR>
Grant-Date<BR>
<U>Fair Value</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Unvested at July 31, 2007</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">66,666</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$0.50</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Granted</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Vested</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Unvested at October 31, 2007</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">66,666</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$0.50</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER">56</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)<BR>
<BR>
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(UNAUDITED)<BR>
OCTOBER 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 8: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;COMMITMENTS</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On December 20, 2006 the Company entered into a Professional Services Agreement with a consultant, who agreed to become an officer of the Company as of May 1, 2007.  The initial term of the agreement is one year expiring on November 1, 2008.  Pursuant to the terms and provisions of the Professional Services Agreement: (i) the Company shall pay a monthly fee of $10,000; (ii) the Company issued 500,000 shares of its restricted common stock; and (iii) the Company granted an aggregate of not less than 600,000 options to purchase shares of its common stock at $0.35 for a ten year term.</P>
<P ALIGN="JUSTIFY">On October 1, 2007 the Company entered into Consulting Services Agreement with a geological consultant with an initial term of 18 months expiring on March 31, 2009.  Pursuant to the terms and provisions of the Consulting Services Agreement: (i) the Company shall pay a daily fee of $400 on a as requested basis; (ii) the Company will issue 200,000 shares of its restricted common stock (refer to Note 7); and (iii) the Company will grant an aggregate of not less than 250,000 options to purchase shares of its common stock at $0.10 for a ten year term.</P>
<P ALIGN="JUSTIFY">The Company has entered into various employment and consulting agreements with both fixed compensation arrangements and established fees paid on a daily basis as needed.  The agreements expire no later than March 31, 2009.  The aggregate outstanding commitment through expiry of all agreements is approximately $10,000.</P>
<P ALIGN="JUSTIFY">During the year ended July 31, 2006, the Company signed a lease agreement for the rental of office space.  The lease expires on March 31, 2013.  The future minimum lease obligations are as follows for the years ending July 31:</P>
<P ALIGN="CENTER"></P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=355>
<TR><TD WIDTH="59%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">2008</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">$</FONT></TD>
<TD WIDTH="32%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,943</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">2009</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,943</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">2010</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,943</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">2011</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,943</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">2012</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,943</FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Thereafter</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">8,309</U></FONT></TD>
</TR>
<TR><TD WIDTH="59%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">$</FONT></TD>
<TD WIDTH="32%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">108,024</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 9:&#9;SUPPLEMENTAL CASH FLOW INFORMATION AND</P>
<P ALIGN="LEFT">&#9;NON-CASH INVESTING AND FINANCING ACTIVITIES</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">For the Three<BR>
Months Ended</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">For the Three<BR>
Months Ended</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="CENTER">October 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">October 31, 2006</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Interest paid</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Income taxes paid</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">During the three months ended October 31, 2007 the Company issued 200,000 shares of its common stock with a fair value of $0.41 per share, or $82,000 pursuant to a consulting services agreement, which was recorded as a stock-based consulting expense (refer to Note 7).</P>
<P ALIGN="CENTER"></P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="CENTER">57</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
<P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">&nbsp;</P>
</FONT><P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<B><FONT SIZE=2><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION<BR>
</B>(An Exploration Stage Company)</P>
<B><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">CONSOLIDATED FINANCIAL STATEMENTS</P>
</B><P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">JULY 31, 2007</P>
</B><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</P>
<P ALIGN="LEFT">CONSOLIDATED BALANCE SHEETS</P>
<P ALIGN="LEFT">CONSOLIDATED STATEMENTS OF OPERATIONS</P>
<P ALIGN="LEFT">CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY</P>
<P ALIGN="LEFT">CONSOLIDATED STATEMENTS OF CASH FLOWS</P>
<P ALIGN="LEFT">NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS</P>
</B></FONT><P ALIGN="LEFT"></P>
<FONT SIZE=2><P ALIGN="CENTER">58</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT"><IMG SRC="image288.jpg" WIDTH=650 HEIGHT=80></P>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=686>
<TR><TD VALIGN="TOP">
<P ALIGN="LEFT">&nbsp;</P>
<B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=3><P ALIGN="CENTER">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</P>
</B></FONT><P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="LEFT">To the Stockholders and Board of Strategic American Oil Corporation:</P>
<P ALIGN="JUSTIFY">We have audited the accompanying consolidated balance sheets of Strategic American Oil Corporation (an exploration stage company) as of July 31, 2007 and 2006 and the consolidated statements of operations, stockholders' equity and cash flows for the years ended July 31, 2007 and 2006, the period from April 12, 2005 (inception) to July 31, 2005 and for the period from April 12, 2005 (inception) through July 31, 2007.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.</P>
<P ALIGN="JUSTIFY">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit 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 audits provide a reasonable basis for our opinion.</P>
<P ALIGN="JUSTIFY">In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 31, 2007 and 2006 and the results of its operations and its cash flows for the years ended, July 31, 2007 and 2006, the period from April 12, 2005 (inception) to July 31, 2005 and for the period from April 12, 2005 (inception) to July 31, 2007, in conformity with accounting principles generally accepted in the United States of America.</P>
<P ALIGN="JUSTIFY">The accompanying financial statements 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 exploration stage and has losses from operations since inception.  These factors raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans in this regard are described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.</P>
</FONT><P ALIGN="LEFT"></P>
<FONT SIZE=2><P ALIGN="RIGHT">"DMCL"</P>
<B><P ALIGN="RIGHT">DALE MATHESON CARR-HILTON LABONTE LLP<BR>
CHARTERED ACCOUNTANTS</P>
</B></FONT><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="LEFT">December 31, 2007<BR>
Vancouver, Canada</P>
</FONT><P ALIGN="LEFT"></TD>
</TR>
</TABLE>

<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT"><IMG SRC="image289.jpg" WIDTH=665 HEIGHT=60></P>
<FONT SIZE=2><P ALIGN="CENTER">59</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT FACE="Times New Roman Bold,Times New Roman"><P ALIGN="CENTER"></P>
</FONT><B><FONT SIZE=2><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">CONSOLIDATED BALANCE SHEETS</P>
<P ALIGN="CENTER"></P></B></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=679>
<TR><TD WIDTH="61%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2006</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CURRENT ASSETS</B></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$667,722</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$650,204</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">88,730</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current assets</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">8,369</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">9,522</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">764,821</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">659,726</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">RECLAMATION BONDS</B> (Note 3)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">61,875</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">EQUIPMENT</B> (Note 4)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">46,274</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">11,189</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">OIL AND GAS PROPERTIES</B> (Note 5)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proved properties</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">520,385</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unproved properties</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">551,776</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">235,300</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">1,072,161</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">235,300</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,945,131</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$906,215</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CURRENT LIABILITIES</B></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued liabilities</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$112,214</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$17,421</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to related parties (Note 6)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">18,923</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">112,214</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">36,344</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">COMMITMENTS</B> (Note 9)</P>
<B><P ALIGN="LEFT">CONTINGENCY</B> (Note 1)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">STOCKHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital Stock (Note 7)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common stock $0.001 par value: 500,000,000 shares</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;authorized, 26,690,685 (2006 - 22,472,112) shares</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;issued and outstanding</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">26,691</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">22,472</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">5,344,554</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,247,875</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share subscriptions (Note 12)</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">33,012</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deficit accumulated during the exploration stage</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(3,571,340)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(400,476)</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">1,832,917</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">869,871</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,945,131</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$906,215</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="LEFT"></P>
</FONT><P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="CENTER">The accompanying notes are an integral part of these consolidated financial statements.</P>
<P ALIGN="CENTER">60</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT FACE="Times New Roman Bold,Times New Roman"><P ALIGN="CENTER"></P>
</FONT><B><FONT SIZE=2><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<B><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF OPERATIONS</P>
</B><P ALIGN="CENTER"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=679>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">For the Year<BR>
Ended<BR>
<U>July 31, 2007</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">For the Year<BR>
Ended<BR>
<U>July 31, 2006</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Period from<BR>
April 12, 2005<BR>
(inception) to<BR>
<U>July 31, 2005</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Period from<BR>
April 12, 2005<BR>
(inception) to<BR>
<U>July 31, 2007</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<B><FONT SIZE=2><P ALIGN="LEFT">OIL AND GAS REVENUES</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">$701,740</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">$701,740</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<B><FONT SIZE=2><P ALIGN="LEFT">EXPENSES</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consulting</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">449,909</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">28,668</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">478,577</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consulting, stock-based (Note 7)</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">856,167</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">856,167</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and depletion</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">73,383</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">105</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">73,488</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direct operating costs</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">663,391</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">663,391</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">100,726</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">38,316</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">139,042</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of oil and gas<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;property (Note 5)</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">158,800</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">74,506</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">233,306</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management fees (Note 6)</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">195,488</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">167,136</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">362,624</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management fees, stock-based (Notes 6 &amp; 7)</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,200,000</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,200,000</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Professional fees</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">68,211</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">31,622</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">99,833</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Travel and promotion</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">106,529</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">60,123</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">-</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=2><P ALIGN="RIGHT">166,652</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">3,872,604</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">400,476</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">-</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">4,273,080</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=18>
<B><FONT SIZE=2><P ALIGN="LEFT">NET LOSS</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$(3,170,864)</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$(400,476)</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$(3,571,340)</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=18>
<B><FONT SIZE=2><P ALIGN="LEFT">BASIC AND DILUTED NET LOSS<BR>
PER SHARE</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$(0.13)</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$(0.02)</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM" HEIGHT=18>
<B><FONT SIZE=2><P ALIGN="LEFT">WEIGHTED AVERAGE NUMBER OF<BR>
COMMON SHARES OUTSTANDING,<BR>
BASIC AND DILUTED</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">24,588,931</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">16,899,030</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18>
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="LEFT"></P>
</FONT><P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="CENTER">The accompanying notes are an integral part of these consolidated financial statements.</P>
</FONT><P ALIGN="LEFT"></P>
<FONT SIZE=2><P ALIGN="CENTER">61</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
<B><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<B><P ALIGN="CENTER">CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY<BR>
FROM APRIL 12, 2005 (INCEPTION) TO JULY 31, 2007</P></B></FONT>
<TABLE BORDER=0 CELLSPACING=2 WIDTH=900>
<TR><TD WIDTH="29%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=1><P ALIGN="CENTER">Deficit<BR>
Accumulated<BR>
During the</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="23%" VALIGN="BOTTOM" COLSPAN=2 HEIGHT=17>
<FONT SIZE=1><P ALIGN="CENTER">Common Stock</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=1><P ALIGN="CENTER">Additional</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=1><P ALIGN="CENTER">Share</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=1><P ALIGN="CENTER">Exploration</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=1><P ALIGN="CENTER">Stockholders'</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=1><P ALIGN="CENTER">Shares</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=1><P ALIGN="CENTER">Amount</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=1><P ALIGN="CENTER">Paid-in Capital</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=1><P ALIGN="CENTER">Subscriptions</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=1><P ALIGN="CENTER">Stage</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=17>
<U><FONT SIZE=1><P ALIGN="CENTER">Equity</U></FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Balance, April 12, 2005 and July 31, 2005</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Issued for cash:</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- $0.001 per share on October 18, 2005</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">16,000,000</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">16,000</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">16,000</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- $0.10 per share on October 29, 2005,<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;March 3 and May 31, 2006</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">4,013,036</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">4,013</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">397,291</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">401,304</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- $0.35 per share on July 7, 2006</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,022,145</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,022</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">356,728</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">357,750</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- $0.50 per share on July 17, 2006</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,100,000</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,100</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">548,900</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">550,000</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Issued on settlement of debts:</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- $0.001 per share on October 18, 2005</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">200,000</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">200</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">200</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- $0.10 per share on May 31, 2006</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">136,931</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">137</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">13,556</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">13,693</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Share issuance costs</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(68,600)</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(68,600)</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Net loss</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">(400,476)</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">(400,476)</U></FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Balance, July 31, 2006</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">22,472,112</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">22,472</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,247,875</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(400,476)</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">869,871</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Issued for cash at:</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- $0.50 per share on October 5, 2006</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">180,000</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">180</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">89,820</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">90,000</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- $0.60 per share on October 6,<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;November 15 and December 6, 2006,<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;April 30 and May 31, 2007</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">3,538,573</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">3,539</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">2,119,606</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">2,123,145</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Subscriptions received</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">33,012</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">33,012</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Issued for services:</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- issued at $0.35 per share on<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 20, 2006</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">500,000</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">500</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">174,500</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">175,000</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Stock based compensation</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,881,667</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,881,667</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Share issuance costs</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(168,914)</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(168,914)</FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Net loss</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">(3,170,864)</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">(3,170,864)</U></FONT></TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="11%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="29%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="LEFT">Balance, July 31, 2007</FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">26,690,685</U></FONT></TD>
<TD WIDTH="11%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">$26,691</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">$5,344,554</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">$33,012</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">$(3,571,340)</U></FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<U><FONT SIZE=1><P ALIGN="RIGHT">$1,832,917</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=1><P ALIGN="LEFT"></P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">The accompanying notes are an integral part of these consolidated financial statements.</P>
</FONT><P ALIGN="LEFT"></P>
<FONT SIZE=2><P ALIGN="CENTER">62</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
<B><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<B><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF CASH FLOWS</P>
</B><P ALIGN="CENTER"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=679>
<TR><TD WIDTH="37%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">For the Year<BR>
Ended<BR>
July 31, 2007</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">For the Year<BR>
Ended<BR>
July 31, 2006</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Period from<BR>
April 12, 2005<BR>
(inception) to<BR>
July 31, 2005</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Period from<BR>
April 12, 2005<BR>
(inception) to<BR>
July 31, 2007</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CASH FLOWS FROM<BR>
&nbsp;&nbsp;OPERATING ACTIVITIES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Net loss </FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$(3,170,864)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$(400,476)</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$(3,571,340)</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Adjustments to reconcile net loss to<BR>
net cash from operating activities:</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and depletion</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">73,383</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">105</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">73,488</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment loss properties</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">158,800</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">74,506</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">233,306</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock based compensation</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">2,056,167</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">2,056,167</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(88,730)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(88,730)</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current assets</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,153</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(9,522)</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(8,369)</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">94,793</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">17,421</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">112,214</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to related parties</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(18,923)</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">32,816</U></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">13,893</U></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">NET CASH USED IN<BR>
&nbsp;&nbsp;OPERATING ACTIVITIES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(894,221)</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(285,150)</U></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(1,179,371)</U></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CASH FLOWS FROM<BR>
&nbsp;&nbsp;FINANCING ACTIVITIES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of shares for cash, net of<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;share issuance costs</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">2,213,645</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">1,325,054</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">3,538,699</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share subscriptions</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">33,012</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">33,012</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financing charges</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(168,914)</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(68,600)</U></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(237,514)</U></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">NET CASH PROVIDED BY<BR>
&nbsp;&nbsp;FINANCING ACTIVITIES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">2,077,743</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">1,256,454</U></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">3,334,197</U></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CASH FLOWS FROM<BR>
&nbsp;&nbsp;INVESTING ACTIVITIES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reclamation bonds</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(61,875)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(61,875)</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase of property and equipment</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(44,151)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(11,294)</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">(55,445)</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oil and gas property acquisitions<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and exploration</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(1,059,978)</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(309,806)</U></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(1,369,784)</U></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">NET CASH USED IN<BR>
&nbsp;&nbsp;INVESTING ACTIVITIES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(1,166,004)</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(321,100)</U></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(1,487,104)</U></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">INCREASE IN CASH</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">17,518</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">650,204</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">667,722</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CASH, BEGINNING</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">650,204</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="17%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="LEFT">CASH, ENDING</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$667,722</U></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$650,204</U></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$667,722</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">SUPPLEMENTAL CASH FLOW INFORMATION AND<BR>
&nbsp;&nbsp;NONCASH INVESTING AND FINANCING ACTIVITIES</B> (Note 10)</P>
</FONT><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="CENTER">The accompanying notes are an integral part of these consolidated financial statements.</P>
</FONT><P ALIGN="LEFT"></P>
<FONT SIZE=2><P ALIGN="CENTER">63</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<P ALIGN="LEFT">NOTE 1: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NATURE OF OPERATIONS</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Strategic American Oil Corporation (the "Company") was incorporated as Carlin Gold Corporation on April 12, 2005 in Nevada, U.S.A.  On July 19, 2005 the Company changed its name to Nevada Gold Corp., on October 18, 2005 the Company changed its name to Gulf States Energy Inc. and on September 5, 2006 the Company changed its name to Strategic American Oil Corporation.  The Company is an exploration stage company as it has not generated significant revenues from operations.  The Company was formed for the purpose of oil and gas exploration and development.  The Company owns 100% of Penasco Petroleum Inc. ("Penasco"), a Nevada corporation incorporated on November 23, 2005.</P>
<P ALIGN="JUSTIFY">The accompanying consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  At July 31, 2007, the Company had working capital of $652,607 but has incurred significant losses since inception and further losses are anticipated in the development of its oil and gas property interests.  The ability of the Company to continue as a going concern is dependent on raising additional capital to fund ongoing exploration and development and ultimately on generating future profitable operations.</P>
<P ALIGN="JUSTIFY">The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.  Since internally generated cash flow will not fund development and commercialization of the Company's oil and gas properties, the Company will require significant additional financial resources and will be dependent on future financings to fund its ongoing exploration and development as well as other working capital requirements.  The Company's future capital requirements will depend on many factors including the rate and extent of progress in its exploration and development programs.  There can be no assurance the Company will be successful in its efforts to raise additional financing or if financing is available, that it will be on terms that are acceptable to the Company.</P>
<P ALIGN="JUSTIFY">Management is addressing going concern remediation through raising additional sources of capital for operations and planned property acquisitions.  Management's plans are intended to increase the company's financial stability and improve the efficiency of continuing operations.  The Company continues to raise capital through private placements to meet immediate working capital requirements.  Management expects to be able to complete planned property acquisitions and funding of on-going operations.  These measures, if successful, will contribute to reducing the risk of going concern uncertainties for the Company over the next twelve to twenty-four months.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 2: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Basis of Presentation</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Principles of Consolidation</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">These financial statements include the accounts of the Company and its wholly-owned subsidiary, Penasco.  All significant intercompany balances and transactions are eliminated upon consolidation.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Use of Estimates</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The preparation of financial statements in conformity with generally accepted accounting principles 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 period.  Actual results could differ from those estimates.  Significant areas requiring management's estimates and assumptions are determining the fair value of transactions involving common stock and financial instruments.  Other areas requiring estimates include deferred tax balances, stock-based compensation, depletion, valuation allowances, allocations of expenditures to oil and gas property interests and asset impairment tests.</P>
<P ALIGN="CENTER"></P>
<P ALIGN="CENTER">64</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 2: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Foreign Currency Translation</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The financial statements are presented in United States dollars.  In accordance with SFAS No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date.  Non-monetary assets and liabilities are translated at the transaction date.  Revenue and expenses are translated at average rates of exchange during the year.  Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Accounts Receivable</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Trade accounts receivable are recorded at the invoiced amount and do not bear any interest.  The Company regularly reviews collectability and establishes or adjusts an allowance for uncollectible amounts as necessary using the specific identification method.  Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.  There were no reserves for uncollectible amounts in the periods presented.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Equipment</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Equipment is recorded at cost and amortized using the straight-line method over the estimated useful life at the following rates:</P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=409>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Furniture and Fixtures</FONT></TD>
<TD WIDTH="47%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Production Equipment</FONT></TD>
<TD WIDTH="47%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Leasehold Improvements</FONT></TD>
<TD WIDTH="47%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">term of the lease</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY"><A NAME="OLE_LINK4">Oil and Gas Properties</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company follows the full cost method of accounting for its oil and gas operations whereby all cost related to the acquisition of petroleum and natural gas interests are capitalized.  Such costs include land and lease acquisition costs, annual carrying charges of non-producing properties, geological and geophysical costs, costs of drilling and equipping productive and non-productive wells, and direct exploration salaries and related benefits.  The Company operates in one cost center, being the United States.</P>
<P ALIGN="JUSTIFY">All costs included in properties subject to amortization, are amortized on the unit-of-production method using estimates of proved reserves.  Investments in unproved properties and development projects are not amortized until proved reserves associated with the projects can be determined or impairment occurs.  If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.  Abandonment of oil and natural gas properties are charged to the full cost pool and amortized.</P>
<P ALIGN="JUSTIFY">Under the full cost method, the net book value of oil and natural gas properties are subject to a "ceiling" amount.  The ceiling is the estimated after-tax future net cash flows from proved oil and natural gas properties, discounted at 10% per annum plus the lower of cost or fair market value of unevaluated properties.  In calculating future net revenues, prices and costs in effect at the time of the calculation are held constant for the lives of the oil and natural gas reserves, except for changes that are fixed and determinable by existing contracts.  The excess, if any, of the net book value above this ceiling is charged to expense.</P>
<P ALIGN="JUSTIFY">Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in the statement of operations.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY"></A>Revenue Recognition</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Oil and natural gas revenues are recorded using the sales method whereby the Company recognizes oil and natural gas revenue based on the amount of oil and gas sold to purchasers when title passes, the amount is determinable and collection is reasonably assured.  Actual sales of gas are based on sales, net of the associated volume charges for processing fees and for costs associated with delivery, transportation, marketing, and royalties in accordance with industry standards.  Operating costs and taxes are recognized in the same period of which revenue is earned.</P>
<P ALIGN="CENTER">65</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 2: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Asset Retirement Obligations</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company has adopted the provisions of SFAS No. 143 "Accounting for Asset Retirement Obligations," which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.  The adoption of this standard has had no effect on the Company's financial position or results of operations.  To July 31, 2007 any potential costs relating to the ultimate disposition of the Company's mineral property interests have not yet been determinable.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Impairment of Long-Lived Assets</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company reviews property and equipment for impairment.  Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.  Recoverability of these assets is measured by comparison of its carrying amount to future undiscounted cash flows the assets are expected to generate.  If property and equipment are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Financial Instruments</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The fair values of cash, accounts receivable, accounts payable and accrued liabilities and amounts due to related parties were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments.  Accordingly, no value has been assigned by management.  The Company's operations and financing activities are conducted primarily in United States dollars, and as a result the Company is not subject to significant exposure to market risks from changes in foreign currency rates.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Concentration of Credit Risk</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Financial instruments, which potentially subject the Company to concentrations of credit risk, consist solely of cash.  The Company places its cash with high quality financial institutions and at times may exceed the federally insured limits.  The Company has not experienced a loss in such accounts nor do they expect any related losses in the near term.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Loss per Common Share</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Basic loss per share includes no dilution and is computed by dividing loss attributable to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted loss per share reflects the potential dilution of securities that could share in the earnings (loss) of the Company.  The common shares potentially issuable on conversion of outstanding warrants and stock options were not included in the calculation of weighted average number of shares outstanding because the effect would be anti-dilutive.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Income Taxes</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company follows the liability method of accounting for income taxes.  Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances.  Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.  As at July 31, 2007, the Company had net operating loss carry forwards; however, due to the uncertainty of realization, the Company has provided a full valuation allowance for the potential deferred tax assets resulting from these losses carry forwards.</P>
<P ALIGN="CENTER"></P>
<P ALIGN="CENTER">66</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 2: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Stock-Based Compensation</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment", which replaced SFAS No. 123, "Accounting for Stock-Based Compensation" and superseded APB Opinion No. 25, "Accounting for Stock Issued to Employees".  In January 2005, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 107, "Share-Based Payment", which provides supplemental implementation guidance for SFAS No. 123R.  SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award.  SFAS No. 123R was to be effective for interim or annual reporting periods beginning on or after June 15, 2005, but in April 2005 the SEC issued a rule that will permit most registrants to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period as required by SFAS No. 123R.  The pro-forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition.</P>
<P ALIGN="JUSTIFY">Under SFAS No. 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption.  The transition methods include prospective and retroactive adoption options.  Under the retroactive options, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented.  The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated.  The Company has adopted the requirements of SFAS No. 123R from date of inception.</P>
<P ALIGN="JUSTIFY">The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services" ("EITF 96-18").  Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.  The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY"><A NAME="OLE_LINK13"><A NAME="OLE_LINK12">Recent Accounting Pronouncements</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities".  This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value.  Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.  The Company is currently assessing the impact of SFAS No. 159 on its financial position and results of operations.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 3: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reclamation bonds</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Reclamation bonds includes interest and non-interest bearing deposits issued in the States of Louisiana ($21,875) and Texas ($40,000) to cover each State's reclamation requirement for producing operations.</P>
<P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 4: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EQUIPMENT</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2006</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Furniture and fixtures</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$3,201</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Leasehold improvements</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">11,294</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">11,294</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Production equipment</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">40,950</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">55,445</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">11,294</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Less: accumulated depreciation</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(9,171)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(105)</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM" HEIGHT=19><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=19>
<U><FONT SIZE=2><P ALIGN="RIGHT">$46,274</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=19>
<U><FONT SIZE=2><P ALIGN="RIGHT">$11,189</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER"></A></A>67</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 5: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OIL AND GAS PROPERTIES</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
<B><P ALIGN="JUSTIFY">PROVED:</P>
</B><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Barge Canal, Texas</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On August 1, 2006 the Company entered into an assignment and purchase agreement with OPEX Energy, LLC.  Under the terms of the agreement, the Company paid $500,000 plus a finder's fee of $50,000 for a 100% working interest (90% after payout) and a 72.5% net revenue interest (65.25% after payout) in approximately 81 acres of an oil and gas lease (the "Welder Lease") located in Calhoun County, Texas.</P>
<B><P ALIGN="JUSTIFY">UNPROVED:</P>
</B><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">South Delhi / Big Creek Field, Louisiana</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On August 24, 2006 the Company entered into an assignment of oil and gas interest and purchase agreement with Energy Program Accompany, LLC.  Under the terms of the agreement, the Company paid $250,000 to acquire the property.  The agreement includes the following interests:</P><DIR>

<P ALIGN="LEFT">(a) &nbsp;&nbsp;&nbsp;a 97% working interest and an 81.25% net revenue interest in approximately 136 acres in Franklin Parish, Louisiana (the "Holt Lease");</P>
<P ALIGN="LEFT">(b)&nbsp;&nbsp;&nbsp;a 100% working interest and an 81.25% net revenue interest in approximately 40 acres in Richland Parish, Louisiana (the "Strahan Lease"); and</P>
<P ALIGN="LEFT">(c)&nbsp;&nbsp;&nbsp;a 100% working interest and an 82.08% net revenue interest in approximately 80 acres in Richland Parish, Louisiana (the "McKay Lease").</P></DIR>

<P ALIGN="JUSTIFY">Effective September 1, 2006 the Company assigned a 12.5% working interest to Tradestar Resources Corporation ("Tradestar") in conjunction with the acquisition.  The Company interest is additionally subject to a back in after payout agreement with Tradestar for an additional 12.5% working interest which went into effect as of January 1, 2007.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">NE Oakdale and DST prospects, Illinois</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">During the 2007 fiscal year, the Company entered into numerous oil and gas leases in Jefferson County, Illinois.  The leases total approximately 1,423 gross acres pursuant to which the Company has a working interest of 100% and a net revenue interest of 87.5%, for a total cost to July 31, 2007 of $137,645.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Gobbler</FONT><FONT SIZE=2>'</FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2>s Knob Prospect, Illinois</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">During the 2006 and 2007 fiscal years, the Company entered into several oil and gas leases in Hamilton County, Illinois.  The leases total approximately 214 gross acres pursuant to which the Company has a working interest of 100% and a net revenue interest of 87.5%, for a total cost to July 31, 2007 of $3,100.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Koliba Lease, Texas</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">During the 2007 fiscal year, the Company entered into several lease agreements with certain mineral owners of a 79 acre tract (the "Koliba Lease") in Victoria County, Texas for a total cost to July 31, 2007 of $3,573.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Janssen Lease, Texas</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">In October 2005, the Company entered into an agreement to purchase a 25% working interest and an 18.75% net revenue interest in approximately 138 acres of an oil and gas lease (the "Janssen Lease") located in Karnes County, Texas.  This lease interest was acquired from Rockwell Energy, LLC for $220,000 plus additional payments of $13,800 on July 17, 2006 to the owners after negotiating a new oil, gas and mineral lease.  On December 20, 2006 the Company farmed out 100% of the working interest to ETG Energy Resources, retaining a 3% back in after payout on any producing zones and a 5% non-promoted option to participate in any offset drilling within the leased area.  At July 31, 2007, management determined the recoverable value of its interest to be $75,000, and accordingly, costs of $158,800 were written off to impairment of oil and gas properties.</P>
<P ALIGN="CENTER">68</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</FONT><FONT SIZE=2><P ALIGN="LEFT">NOTE 5:</B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>OIL AND GAS PROPERTIES (CONTINUED)</P>
</B><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Meek B-1 Property</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">In December 2005 the Company entered into a participation agreement on the Meek B-1 property in the State of Texas in order to earn a 12.5% interest in the property.  The Company spent a total of $3,000 in acquisition costs and $71,506 in exploration costs before deciding to abandon its interest due to poor drilling results.  At July 31, 2006 the value of this interest was determined to be $Nil, and accordingly, cumulative costs of $74,506 have been written off to impairment of oil and gas properties.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><I><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Capitalized costs of oil and natural gas producing properties</P>
</B></I></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company's aggregate capitalized costs related to oil and natural gas properties are as follows:</P>
<P ALIGN="CENTER"></P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2006</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Proven reserves (Barge Canal)</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$584,702</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Accumulated depletion and amortization</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(64,317)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">520,385</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Unproven or unevaluated reserves</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">785,082</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">309,806</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Impairment loss</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(233,306)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(74,506)</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">551,776</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">235,300</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,072,161</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$235,300</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><I><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Capitalized costs incurred for oil and natural gas producing activities</P>
</B></I></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">Costs incurred in oil and natural gas property acquisition, exploration and development activities that have been capitalized are summarized below:</P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2006</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Acquisition cost</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proven properties</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$572,456</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unproven properties</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">670,676</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">238,300</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,243,132</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">238,300</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Development and exploration costs</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">126,652</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">71,506</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,369,784</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">309,806</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 6: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RELATED PARTY TRANSACTIONS</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">The Company had transactions with certain officers and directors of the Company for the fiscal year ended July 31, 2007 as follows:</P><DIR>

<P ALIGN="LEFT">(a)&nbsp;&nbsp;&nbsp;recorded production revenues of $480,014 (2006 - $Nil) and incurred production costs of $215,911 (2006 - $nil)  for the Barge Canal property which is operated by a company controlled by an officer of the Company;</P>
<P ALIGN="LEFT">(b)&nbsp;&nbsp;&nbsp;incurred management fees of $195,488 (2006 - $167,136) and recorded stock-based compensation charges of $1,200,000 (2006 - $nil) to officers and directors;</P>
<P ALIGN="LEFT">(c)&nbsp;&nbsp;&nbsp;incurred rental charges of $20,851 (2006 - $6,400)  to a company owned by a former director of the Company;</P>
<P ALIGN="LEFT">(d)&nbsp;&nbsp;&nbsp;repaid $18,923 (2006 - $Nil) in amounts owing to officers and directors as of July 31, 2006; and</P>
<P ALIGN="LEFT">(e)&nbsp;&nbsp;&nbsp;incurred web development charges of $7,463 (2006 - $Nil) to a company owned by a former director of the Company.</P></DIR>

<P ALIGN="JUSTIFY">These transactions were recorded at the exchange amount which is the amount agreed to by the related parties.  All amounts owed were non-interest bearing, unsecured and had no specified terms of repayment.</P>
<P ALIGN="CENTER">69</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 7: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CAPITAL STOCK</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Share Capital</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company's capitalization at July 31, 2007 was 500,000,000 authorized common shares with a par value of $0.001 per share.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">2006 Share Transactions</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On October 18, 2005, the Company completed a private placement of 16,000,000 shares of its common stock at a subscription price of $0.001 per share for gross proceeds to the Company of $16,000, and 200,000 shares of its common stock with a fair value of $0.001 per share for the settlement of debts of $200.</P>
<P ALIGN="JUSTIFY">On October 19, 2005, the Company completed a private placement of 2,441,978 shares of its common stock at a subscription price of $0.10 per share for gross proceeds to the Company of $244,198.</P>
<P ALIGN="JUSTIFY">On March 3, 2006, the Company completed a private placement of 1,259,308 shares of its common stock with a fair value of $0.10 per share for gross proceeds to the Company of $125,931.</P>
<P ALIGN="JUSTIFY">On May 31, 2006, the Company completed a private placement of 311,750 shares of its common stock at a subscription price of $0.10 per share for gross proceeds to the Company of $31,175, and 136,931 shares of its common stock at a subscription price of $0.10 per share for settlement of debts of $13,693.</P>
<P ALIGN="JUSTIFY">On July 7, 2006, the Company completed a private placement of 1,022,145 Units at a subscription price of $0.35 per Unit for gross proceeds to the Company of $357,750.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the shareholder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $13,600 in cash.</P>
<P ALIGN="JUSTIFY">On July 17, 2006, the Company completed a private placement of 1,100,000 Units at a subscription price of $0.50 per Unit for gross proceeds to the Company of $550,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the shareholder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $55,000 in cash.</P>
<P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">2007 Share Transactions</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On October 6, 2006, the Company completed a private placement for 180,000 Units at a subscription price of $0.50 per Unit for gross proceeds of $90,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $9,000 in cash.</P>
<P ALIGN="JUSTIFY">On October 6, 2006, the Company completed a private placement for 683,333 Units at a subscription price of $0.60 per Unit for gross proceeds of $410,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $41,000 in cash.</P>
<P ALIGN="CENTER"></P>
<P ALIGN="CENTER">70</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 7: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CAPITAL STOCK (continued)</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">On November 15, 2006, the Company completed a private placement for 169,667 Units at a subscription price of $0.60 per Unit for gross proceeds of $101,800.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $10,000 in cash.</P>
<P ALIGN="JUSTIFY">On December 6, 2006, the Company completed a private placement for 819,171 Units at a subscription price of $0.60 per Unit for gross proceeds of $491,503.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $49,150 in cash.</P>
<P ALIGN="JUSTIFY">On December 20, 2006, the Company issued 500,000 shares of its restricted common stock pursuant to a Professional Services Agreement (refer to Note 9).  The Company recorded the fair value of the shares issued of $0.35 per share (based on an allocation of recent private placements between shares and the connected warrants), or $175,000 as a stock-based consulting expense during the year.</P>
<P ALIGN="JUSTIFY">On April 30, 2007, the Company completed a private placement for 1,680,569 Units at a subscription price of $0.60 per Unit for gross proceeds of $1,008,341.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $49,414 in cash.</P>
<P ALIGN="JUSTIFY">On May 31, 2007, the Company completed a private placement for 185,833 Units at a subscription price of $0.60 per Unit for gross proceeds of $111,500.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $10,350 in cash.</P>
<P ALIGN="JUSTIFY">On July 5, 2007 the Company issued 385,000 share purchase warrants exercisable at $0.35 per share, 4,000 share purchase warrants exercisable at $0.50 per share, and 163,041 share purchase warrants exercisable at $0.60 per share pursuant to finders' fees agreements.  Each warrant entitles the holder to purchase one common share of the Company for a period commencing upon the date of issuance of the related Units and ending 18 months from the date that the Company's common shares are first listed for trading on any stock exchange or Over-The-Counter Bulletin Board market.  The $209,204 fair value of the common share purchase warrants was recorded as financing fees during the period.  The fair value of these warrants was estimated using the Black-Scholes option pricing model with an expected life of 2 years, a risk free interest rate of 5.25%, a dividend yield of 0%, and an expected volatility of 100%.</P>
<P ALIGN="CENTER"></P>
<P ALIGN="CENTER">71</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 7: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CAPITAL STOCK (continued)</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Share Purchase Warrants</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">A summary of the Company's stock purchase warrants as of July 31, 2007 and changes during the year is presented below:</P>
<P ALIGN="JUSTIFY"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=672>
<TR><TD WIDTH="45%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Number of<BR>
<U>warrants</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted average<BR>
<U>exercise price</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER"><BR>
Weighted average<BR>
<U>remaining life</U></FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Balance, April 12, 2005 and July 31, 2005</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;</FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Issued</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,122,145</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.60&nbsp;</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">n/a&nbsp;</FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Exercised</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U>&nbsp;</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">n/a&nbsp;</U></FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Balance, July 31, 2006</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,122,145</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.60&nbsp;</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">n/a&nbsp;</FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Issued</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,270,614</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.91&nbsp;</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">n/a&nbsp;</FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Exercised</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U>&nbsp;</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">n/a&nbsp;</U></FONT></TD>
</TR>
<TR><TD WIDTH="45%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Balance, July 31, 2007</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">6,392,759</U></FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$0.81</U>&nbsp;</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">n/a&nbsp;</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Stock Compensation Plan</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On July 5, 2007 the Company adopted the 2007 Stock Incentive Plan allowing for the issuance of up to 10,000,000 common shares.</P>
<P ALIGN="JUSTIFY">On July 5, 2007 the Company granted a total of 3,800,000 stock options to consultants, officers and directors, of which 3,700,000 vested immediately and the remaining 100,000 vest over 18 months.  Of the 3,800,000 options granted, 250,000 were granted at an exercise price of $0.10 per share and 3,550,000 were granted at an exercise price of $0.35 per share.  The term of the options is ten years.  The fair value of the vested options at the date of grant of $1,915,000 was estimated using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 5.25%, a dividend yield of 0%, and an expected volatility of 100%.  Of this, $1,881,667 has been recorded as stock based consulting and management fees in the year ended July 31, 2007 and the remaining $33,333 will be expensed on vesting of the stock options.</P>
<P ALIGN="JUSTIFY">A summary of the Company's stock options as of July 31, 2007 and changes during the year is presented below:</P>
<P ALIGN="CENTER"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Number of<BR>
<U>options</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted average<BR>
<U>exercise price</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER"><BR>
Weighted average<BR>
<U>remaining life</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Balance, April 12, 2005 and<BR>
&nbsp;&nbsp;&nbsp;July 31, 2005 and 2006</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT"><BR>
-</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT"><BR>
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT"><BR>
-</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Issued</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,800,000</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.33</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">10.00</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Exercised</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Balance, July 31, 2007</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">3,800,000</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$0.33</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">9.93</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">A summary of the status of the Company's unvested options as of July 31, 2007, and changes during the year ended July 31, 2007, is presented below: </P></FONT>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=672>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">Number of Shares</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted-Average<BR>
Grant-Date<BR>
<U>Fair Value</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Unvested at July 31, 2006 and 2005</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Granted</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,800,000</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">0.50</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Vested</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(3,733,334)</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">0.50</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Unvested at July 31, 2007</FONT></TD>
<TD WIDTH="20%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">66,666</U></FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$0.50</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER"></P>
<P ALIGN="CENTER">72</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 8:&#9;INCOME TAXES</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">As of July 31, 2007, the Company had net operating loss carry forwards of approximately $1,676,341 (2006: $397,621) that may be available to reduce future years' taxable income.  These carry forwards will begin to expire, if not utilized, commencing in 2026.  Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry forwards.</P>
<P ALIGN="JUSTIFY">The Company reviews its valuation allowance requirements on an annual basis based on projected future operations.  When circumstances change and this causes a change in management's judgment about the recoverability of future tax assets, the impact of the change on the valuation allowance is reflected in current income.</P>
<P ALIGN="JUSTIFY">The actual income tax provisions differ from the expected amounts calculated by applying the combined federal and state corporate income tax rates to the Company's loss before income taxes.  The components of these differences are as follows:</P>
<P ALIGN="CENTER"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Year Ended</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Year Ended</FONT></TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2006</U></FONT></TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Loss before income taxes</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$(3,170,864)</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$(400,476)</FONT></TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Corporate tax rate</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">40%</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">40%</U></FONT></TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Expected tax expense (recovery)</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(1,268,346)</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(160,190)</FONT></TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Increase (decrease) resulting from:</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Permanent differences</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">304,191</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,142</FONT></TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change in valuation allowance</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">964,155</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">159,048</U></FONT></TD>
</TR>
<TR><TD WIDTH="62%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Income tax provision (recovery)</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">The Company's deferred tax assets are as follows:</P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Year Ended</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Year Ended</FONT></TD>
</TR>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2006</U></FONT></TD>
</TR>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Deferred tax assets:</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock based compensation</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$452,667</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss carry forwards</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">670,536</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">159,048</FONT></TD>
</TR>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Valuation allowance</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(1,123,203)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(159,048)</U></FONT></TD>
</TR>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Net deferred income tax assets</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">As the criteria for recognizing future income tax assets have not been met due to the uncertainty of realization, a valuation allowance of 100% has been recorded for the current and prior year.</P>
<P ALIGN="JUSTIFY">The Company's net operating loss carryforwards expire as follows:</P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=679>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">July 31, 2026</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$397,621</FONT></TD>
</TR>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">July 31, 2027</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">1,278,720</U></FONT></TD>
</TR>
<TR><TD WIDTH="63%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,676,341</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">73</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 9:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;COMMITMENTS</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">On December 20, 2006 the Company entered into a Professional Services Agreement with a consultant, who agreed to become an officer of the Company as of May 1, 2007.  The initial term of the agreement is one year expiring on November 1, 2008.  Pursuant to the terms and provisions of the Professional Services Agreement: (i) the Company shall pay a monthly fee of $10,000; (ii) the Company issued 500,000 shares of its restricted common stock (refer to Note 7); and (iii) the Company granted an aggregate of not less than 600,000 options to purchase shares of its common stock at $0.35 for a ten year term.</P>
<P ALIGN="JUSTIFY">The Company has entered into various employment and consulting agreements with both fixed compensation arrangements and established fees paid on a daily basis as needed.  The agreements expire no later than December 31, 2007.  The aggregate outstanding commitment through expiry of all agreements is approximately $40,000.</P>
<P ALIGN="JUSTIFY">During the year ended July 31, 2006, the Company signed a lease agreement for the rental of office space.  The lease expires on March 31, 2013.  The future minimum lease obligations are as follows for the years ending July 31:</P>
<P ALIGN="CENTER"></P></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=364>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">2008</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">$</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,943</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">2009</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="26%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,943</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">2010</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="26%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,943</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">2011</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="26%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,943</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">2012</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="26%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,943</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Thereafter</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="26%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">13,295</U></FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">$</FONT></TD>
<TD WIDTH="26%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">113,010</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><P ALIGN="CENTER"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">NOTE 10: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUPPLEMENTAL CASH FLOW INFORMATION AND<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NON-CASH INVESTING AND FINANCING ACTIVITIES</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2006</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Interest paid</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM" HEIGHT=19>
<FONT SIZE=2><P ALIGN="LEFT">Income taxes paid</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=19>
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=19>
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">During the year ended July 31, 2007 the Company issued 500,000 shares of its common stock with a fair value of $0.35 per share, or $175,000 which was as a stock-based consulting expense during the year.  Refer to Note 7.</P>
<P ALIGN="JUSTIFY">The Company issued shares for the settlement of certain accounts payable and related party advances for the year ended July 31, 2006 as follows:</P><DIR>

<P ALIGN="JUSTIFY">(a)&nbsp;&nbsp;&nbsp;consulting fees of $200 were settled with the issuance of 200,000 shares at $0.001 per share (2005 - $Nil); and</P>
<P ALIGN="JUSTIFY">(b)&nbsp;&nbsp;&nbsp;management fees of $13,693 were settled with the issuance of 136,931 shares at $0.10 per share (2005 - $Nil).</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P></DIR>

<P ALIGN="CENTER">74</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">Note 11: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Supplemental Oil and Natural Gas Reserve Information (Unaudited)</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY"></P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">General</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company's estimated net proved oil and gas reserves and the present value of estimated cash flows from those reserves are summarized below.  The reserves were estimated by an independent petroleum engineer.  The present value of estimated cash flows is estimated by management using market prices at the end of each of the periods presented in the financial statements.  Those prices were held constant over the estimated life of the reserves.  There are numerous uncertainties inherent in estimating quantities and values of proved oil and gas reserves and in projecting future rates of production and the timing of development expenditures, including factors involving reservoir engineering, pricing and both operating and regulatory constraints.  All reserves estimates are to some degree speculative, and various classifications of reserves only constitute attempts to define the degree of speculation involved.  Accordingly, oil and gas reserve information represents estimates only and should not be construed as being exact.</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Estimated Oil and Gas Reserve Quantities</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The Company's ownership interests in estimated quantities of proved gas reserves and changes in net proved reserves, all of which are located in the United States, are summarized below:</P>
</FONT><FONT SIZE=1><P ALIGN="CENTER"></P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="CENTER">Oil (barrels)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">Gas (mcf)</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Balance at inception (April 12, 2005) and July 31, 2005 and 2006</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Purchase of reserves-in-place</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">69,340</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">107,500</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Production</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(6,322)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">(17,506)</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Balance, July 31, 2007</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">63,018</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">89,994</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">Amortization per unit of production (mcf) is $1.16.</P>
<P ALIGN="JUSTIFY">There were no revisions of previous estimates of reserves or extensions and discoveries during the period from inception (April 12, 2005) through July 31, 2007.</P>
</FONT><B><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT">Standardized measure of discounted future cash flows</P>
</B></FONT><FONT SIZE=2><P ALIGN="JUSTIFY">The standardized measure of discounted future net cash flows from proved reserves for the periods presented in the financial statements is summarized below.  There were no proved reserves at inception through July 31, 2006.  The standardized measure of future cash flows as of July 31, 2007 is calculated using a price per barrel of oil of $78.82 and a price per Mcf of natural gas of $6.51.  The gas price was the Henry Hub, Louisiana spot gas price on July 31, 2007.  The resulting estimated future cash inflows are reduced by estimated future costs to develop and produce the estimated proved reserves.  These costs are based on year-end cost levels.  Future income taxes are based on year-end statutory rates.  The future net cash flows are reduced to present value by applying a 10% discount rate.  The standardized measure of discounted future cash flows is not intended to represent the replacement cost or fair market value of the Company's oil and gas properties.</P>
<P ALIGN="JUSTIFY">There were no proved reserves at April 12, 2005 (inception) through July 31, 2006:</P></FONT>
<TABLE BORDER=0 CELLSPACING=2 CELLPADDING=7 WIDTH=678>
<TR><TD WIDTH="61%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=14><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=14><P></P></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2007</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="CENTER">July 31, 2006</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM" HEIGHT=8><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=8><P></P></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=8><P></P></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Future production revenues</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$5,552,940</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Future production and development costs</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(2,497,721)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Future cash flows before income taxes</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,055,219</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Future income taxes</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(1,038,774)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Future net cash flows</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,016,445</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">10% annual discount for estimating future net cash flows</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<U><FONT SIZE=2><P ALIGN="RIGHT">(726,139)</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="LEFT">Standardized measure of discounted future net cash flows</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$1,290,306</U></FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<U><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="LEFT"><A NAME="OLE_LINK11"><A NAME="OLE_LINK8"><A NAME="OLE_LINK7"></P>
<P ALIGN="CENTER">75</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><P ALIGN="CENTER"></P>
<B><FONT SIZE=1><P ALIGN="CENTER">STRATEGIC AMERICAN OIL CORPORATION</B><BR>
(An Exploration Stage Company)</P>
<P ALIGN="CENTER"></P>
<B><P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
JULY 31, 2007</P>
</B></FONT><FONT FACE="Times New Roman Bold,Times New Roman" SIZE=2><P ALIGN="LEFT"></P>
<B><P ALIGN="LEFT">NOTE 12: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUBSEQUENT EVENTS</P><DIR>

</B></FONT><FONT SIZE=2><P ALIGN="LEFT"></A></A></A>(a)&nbsp;&nbsp;&nbsp;On October 1, 2007 the Company entered into Consulting Services Agreement with a geological consultant with an initial term of 18 months expiring on March 31, 2009.  Pursuant to the terms and provisions of the Consulting Services Agreement: (i) the Company shall pay a daily fee of $400 on a as requested basis; (ii) the Company will issue 200,000 shares of its restricted common stock; and (iii) the Company will grant an aggregate of not less than 250,000 options to purchase shares of its common stock at $0.10 for a ten year term.</P>
<P ALIGN="LEFT">(b)&nbsp;&nbsp;&nbsp;On October 30, 2007 the Company signed a letter agreement with Marmik Oil Company ("Marmik") whereby the Company acquired a 4% working interest in the Little Mule Creek Project, located in Alfalfa and Woods Counties, Oklahoma.  Under the terms of the letter agreement, the Company paid aggregate acquisition costs of $43,086 and must pay their 4% participation in the drilling and completion costs of the initial test well, which are estimated at $1,341,200 (the Company's share would be $53,648).  The participation is subject to a 25% back in after payout, which would reduce the Company's interest to 3%.</P>
<P ALIGN="LEFT">(c)&nbsp;&nbsp;&nbsp;On October 31, 2007 the Company completed a private placement for 724,666 Units at a subscription price of $0.60 per Unit for gross proceeds of $434,800, of which $15,000 was received in the 2007 fiscal year.  Each Unit is comprised of one common share and one warrant of one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.</P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">&nbsp;</P></DIR>

</B></FONT><FONT SIZE=2><P ALIGN="CENTER">76</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER"><A NAME="_Toc188095647">CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS on accounting and financial disclosure</A></P>
</B><P ALIGN="JUSTIFY">We have had no disagreements with our principal independent accountants.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc117159890"><A NAME="_Toc188095648">WHERE YOU CAN FIND MORE INFORMATION</A></A></P>
</B><P ALIGN="JUSTIFY">We have filed a registration statement on Form SB-2 under the Securities Act with the SEC with respect to the shares of our common stock offered through this prospectus.  This prospectus is filed as a part of that registration statement but does not contain all of the information contained in the registration statement and exhibits.  Statements made in the registration statement are summaries of the material terms of the referenced contracts, agreements or documents of our company.  You may inspect the registration statement, exhibits and schedules filed with the SEC at the SEC's principal office in Washington, D.C.  Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the SEC, at 100 F Street, NE, Washington, D.C. 20549.  Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms.  The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the SEC.  Our registration statement and the referenced exhibits can also be found on this site.</P>
<P ALIGN="JUSTIFY">We are not currently subject to the Exchange Act and currently are not required to, and do not, deliver annual, quarterly or special reports to stockholders.  We will not deliver such reports to our stockholders until after, and if, this offering is declared effective by the SEC. Once such effectiveness is granted, if ever, we plan to file a registration statement pursuant to the Exchange Act in order to register our common stock under Section 12(g) of the Exchange Act.  Upon our common stock becoming registered under the Exchange Act we will be required to file annual, quarterly and current reports, proxy statements and other information with the SEC.  Our SEC filings will be available to the public over the Internet at the SEC's website at </FONT><U><FONT SIZE=3 COLOR="#0000ff">http://www.sec.gov</U></FONT><FONT SIZE=3>.</P>
<B><P ALIGN="CENTER"><A NAME="_Toc188095649">dealer prospectus delivery obligation</A></P>
</B><P ALIGN="LEFT"></P>
<P ALIGN="JUSTIFY">No dealer, salesman or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and, if given or made, such information or representations may not be relied on as having been authorized by us or any of the underwriters.  Neither the delivery of this prospectus nor any sale made hereunder shall under any circumstances create an implication that there has been no change in our affairs since the date of this prospectus.  This prospectus does not constitute any offer to sell, or solicitation of any offer to buy, by any person in any jurisdiction in which it is unlawful for any such person to make such an offer or solicitation.  Neither the delivery of this prospectus nor any offer, solicitation or sale made hereunder, shall under any circumstances create any implication that the information herein is correct as of any time subsequent to the date of the prospectus.</P>
</FONT><P ALIGN="JUSTIFY"></P>
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;</P>
</FONT><P ALIGN="LEFT">&nbsp;</P>
<FONT SIZE=2><P ALIGN="CENTER">77</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER">PART II<BR>
INFORMATION NOT REQUIRED IN PROSPECTUS</P>
<P ALIGN="LEFT">ITEM 24. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INDEMNIFICATION OF OFFICERS AND DIRECTORS</P>
</B><P ALIGN="JUSTIFY">Our officers and directors are indemnified as provided by the Nevada Revised Statutes (the "NRS"), our articles of incorporation and our bylaws.<A NAME="_Toc134331954"></P>
<B><P ALIGN="JUSTIFY">Nevada Revised Statutes</A></P>
</B><P ALIGN="JUSTIFY">Section 78.7502 of the NRS provides as follows:</P><DIR>

<P ALIGN="JUSTIFY">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.</P>
<P ALIGN="JUSTIFY">2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.</P>
<P ALIGN="JUSTIFY">3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.</P></DIR>

<P ALIGN="JUSTIFY">Section 78.751 of the NRS provides as follows:</P><DIR>

<P ALIGN="JUSTIFY">1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any discretionary indemnification under NRS 78.7502 unless ordered by a court or advanced pursuant to subsection 2, may be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances.  The determination must be made:</P><DIR>
<DIR>

<P ALIGN="JUSTIFY">(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By the stockholders;</P>
<P ALIGN="JUSTIFY">(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By the board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding;</P>
<P ALIGN="JUSTIFY">(c) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion; or</P>
<P ALIGN="JUSTIFY">(d) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.</P></DIR>
</DIR>

<P ALIGN="JUSTIFY">2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation.</P></DIR>

</FONT><FONT SIZE=2><P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P><DIR>

</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section:</P><DIR>
<DIR>

<P ALIGN="JUSTIFY">(a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to NRS 78.7502 or for the advancement of expenses made pursuant to subsection 2, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.</P>
<P ALIGN="JUSTIFY">(b) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person.</P></DIR>
</DIR>
</DIR>

<B><P ALIGN="JUSTIFY">Our Articles of Incorporation</P>
</B><P ALIGN="JUSTIFY">Our articles of incorporation do not limit the automatic director immunity from liability under the NRS.</P>
<P ALIGN="JUSTIFY">Our articles of incorporation further provide that, to the fullest extent permitted by NRS 78, a director or officer of the Corporation will not be personally liable to the Corporation or its stockholders for damages for breach of fiduciary duty as a director or officer, provided that this article will not eliminate or limit the liability of a director or officer for:</P><DIR>

<P ALIGN="JUSTIFY">1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;acts or omissions which involve intentional misconduct, fraud or a knowing violation of law; or</P>
<P ALIGN="JUSTIFY">2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the payment of dividends in violation of NRS 78.300.</P></DIR>

<B><P ALIGN="JUSTIFY">Our Bylaws</P>
</B><P ALIGN="JUSTIFY">Article VII of our bylaws provide the following indemnification provisions:</P>
<U><P ALIGN="JUSTIFY">Section 1.  Right to Indemnification.</U><B>  </B>Each person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent permitted by the laws of Nevada as the same exist or may hereafter be amended (but in the case of such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said laws permitted the corporation to provide prior to such amendment) against all costs, charges, expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement and amounts expended in seeking indemnification granted to such person under applicable law, this bylaw or any agreement with the corporation) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; <U>provided</U>, <U>however</U>, that, except as provided in Section 2 of this Article, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was initiated or authorized by one or more members of the Board of Directors of the corporation.  The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; <U>provided</U>, <U>however</U>, that, if the Nevada Revised Statutes, Chapter 78, so requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise.  In no event shall anything herein contained be so construed as to permit the Board to authorize payment of, or the corporation to pay, any amounts for any purpose where the director or officer was engaged in any action or activity known to him or her while so engaged to be unlawful, nor any action or activity constituting willful misfeasance, bad faith, gross negligence, or reckless disregard of his or her duties and obligations to the corporation and the stockholders.  The rights set forth herein shall not be exclusive of other right to which any director or officer may be entitled as a matter of law.  The corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">II-2</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><U><FONT SIZE=3><P ALIGN="JUSTIFY">Section 2.  Right of Claimant to Bring Suit.</U><B>  </B>If a claim under Section&nbsp;1 of this Article is not paid in full by the corporation within thirty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim.  It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has failed to meet a standard of conduct which makes it permissible under Nevada law for the corporation to indemnify the claimant for the amount claimed.  Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is permissible in the circumstances because he or she has met such standard of conduct, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such standard of conduct, shall be a defense to the action or create a presumption that the claimant has failed to meet such standard of conduct.</P>
<U><P ALIGN="JUSTIFY">Section 3.  Non-Exclusivity of Rights.</U><B>  </B>The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise.</P>
<U><P ALIGN="JUSTIFY">Section 4.  Insurance.</U><B>  </B>The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under Nevada law.</P>
<U><P ALIGN="JUSTIFY">Section 5.  Expenses as a Witness.</U><B>  </B>To the extent that any director, officer, employee or agent of the corporation is by reason of such position, or a position with another entity at the request of the corporation, a witness in any action, suit or proceeding, he or she shall be indemnified against all costs and expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith.</P>
<U><P ALIGN="JUSTIFY">Section 6.  Indemnity Agreements.</U><B>  </B>The corporation may enter into indemnity agreements with the persons who are members of its Board of Directors from time to time, and with such officers, employees and agents as the Board may designate, such indemnity agreements to provide in substance that the corporation will indemnify such persons to the full extent contemplated by this Article.</P>
<U><P ALIGN="JUSTIFY">Section 7.  Effect of Amendment.</U><B>  </B>Any amendment, repeal or modification of any provision of this Article&nbsp;VII by the stockholders and the directors of the corporation shall not adversely affect any right or protection of a director or other of the corporation existing at the time of the amendment, repeal or modification.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">II-3</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">ITEM 25.&#9;OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION</P>
</B><P ALIGN="JUSTIFY">The following is a list of the expenses to be incurred by us in connection with the preparation and filing of this registration statement.  All amounts shown are estimates except for the SEC registration fee:</P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=607>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">SEC registration fee:</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="RIGHT">$305.34</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Accounting fees and expenses:</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="RIGHT">$15,000.00</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Legal fees and expenses:</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="RIGHT">$25,000.00</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Transfer agent and registrar fees:</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="RIGHT">$2,000.00</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Fees and expenses for qualification under state securities laws:</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<FONT SIZE=3><P ALIGN="RIGHT">$1,500.00</FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Miscellaneous (including Edgar filing fees):</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT SIZE=3><P ALIGN="RIGHT">$1,000.00</U></FONT></TD>
</TR>
<TR><TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=3><P ALIGN="JUSTIFY">Total:</FONT></TD>
<TD WIDTH="20%" VALIGN="BOTTOM">
<U><FONT SIZE=3><P ALIGN="RIGHT">$44,805.34</U></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=3><P ALIGN="JUSTIFY">We are paying all expenses of the offering listed above.  No portion of these expenses will be borne by the Selling Stockholders.  The Selling Stockholders, however, will pay any other expenses incurred in selling their common stock, including any brokerage or underwriting discounts or commissions paid by the Selling Stockholders to broker-dealers in connection with the sale of their shares.</P>
<B><P ALIGN="LEFT">ITEM 26.&#9;RECENT SALES OF UNREGISTERED SECURITIES</P>
</B><P ALIGN="JUSTIFY">On October 18, 2005, we completed a private placement of 16,000,000 shares of our common stock at a subscription price of $0.001 per share for gross proceeds of $16,000, and an additional 200,000 shares of our common stock with a fair value of $0.001 per share for the settlement of debts of $200.</P>
<P ALIGN="JUSTIFY">On October 19, 2005, we completed a private placement of 2,441,978 shares of our common stock at a subscription price of $0.10 per share for gross proceeds of $244,198.</P>
<P ALIGN="JUSTIFY">On March 3, 2006, we completed a private placement of 1,259,308 shares of our common stock with a fair value of $0.10 per share for gross proceeds of $125,931.</P>
<P ALIGN="JUSTIFY">On May 31, 2006, we completed a private placement of 311,750 shares of our common stock at a subscription price of $0.10 per share for gross proceeds of $31,175, and an additional 136,931 shares of our common stock at a subscription price of $0.10 per share for settlement of debts of $13,693.</P>
<P ALIGN="JUSTIFY">On July 7, 2006, we completed a private placement of 1,022,145 Units at a subscription price of $0.35 per Unit for gross proceeds of $357,750.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the shareholder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.</P>
<P ALIGN="JUSTIFY">On July 17, 2006, we completed a private placement of 1,100,000 Units at a subscription price of $0.50 per Unit for gross proceeds of $550,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the shareholder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.  </P>
<P ALIGN="JUSTIFY">On October 5, 2006, we completed a private placement of 180,000 Units at a subscription price of $0.50 per Unit for gross proceeds of $90,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.  </P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">II-4</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><FONT SIZE=3><P ALIGN="JUSTIFY">On October 6, 2006, we completed a private placement of 683,333 Units at a subscription price of $0.60 per Unit for gross proceeds of $410,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.</P>
<P ALIGN="JUSTIFY">On November 15, 2006, we completed a private placement of 169,667 Units at a subscription price of $0.60 per Unit for gross proceeds of $101,800.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  </P>
<P ALIGN="JUSTIFY">On December 6, 2006, we completed a private placement of 819,171 Units at a subscription price of $0.60 per Unit for gross proceeds of $491,503.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  </P>
<P ALIGN="JUSTIFY">On December 20, 2006, we issued 500,000 shares of our common stock at a price of $0.001 per share pursuant to a professional services agreement.  </P>
<P ALIGN="JUSTIFY">On April 30, 2007, we completed a private placement of 1,680,569 Units at a subscription price of $0.60 per Unit for gross proceeds of $1,008,341.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  </P>
<P ALIGN="JUSTIFY">On May 31, 2007, we completed a private placement of 185,833 Units at a subscription price of $0.60 per Unit for gross proceeds of $111,500.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  </P>
<P ALIGN="JUSTIFY">On July 5, 2007, we issued 385,000 share purchase warrants exercisable at $0.35 per share, 4,000 share purchase warrants exercisable at $0.50 per share, and 163,041 share purchase warrants exercisable at $0.60 per share pursuant to finders' fees agreements.  Each warrant entitles the holder to purchase one common share of the Company for a period commencing upon the date of issuance of the related Units and ending 18 months from the date that the Company's common shares are first listed for trading on any stock exchange or Over-The-Counter Bulletin Board market.  </P>
<P ALIGN="JUSTIFY">On October 1, 2007, we issued 200,000 shares of our common stock at a deemed issue price of $0.60 per share pursuant to a consulting agreement.</P>
<P ALIGN="JUSTIFY">On October 31, 2007, we completed a private placement of 724,666 Units at a subscription price of $0.60 per Unit for gross proceeds of $434,800.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  </P>
<P ALIGN="JUSTIFY">These private placement transactions were completed in reliance of Rule 506 of Regulation D of the Securities Act of 1933, as amended (the "Securities Act"), with respect to investors in the United States, and in reliance of Rule 903 of Regulation S of the Securities Act, with respect to those investors who were not "U.S. Persons", within the meaning of Regulation S, and who were otherwise outside of the United States, based upon representations made to us by the purchasers.  Sales to United States investors pursuant to Rule 506 of Regulation D were limited to investors who qualified as "accredited investors" within the meaning of Rule 501(a) of Regulation D.</P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">II-5</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="LEFT">ITEM 27.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EXHIBITS</P>
</B><P ALIGN="JUSTIFY">The following exhibits are filed with this registration statement on Form SB-2:</P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=696>
<TR><TD WIDTH="20%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="CENTER">Exhibit<BR>
<U>Number</B></U></FONT></TD>
<TD WIDTH="80%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="JUSTIFY">Description of Exhibit</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="80%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">3.1</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Articles of Incorporation and amendments thereto, dated July 19, 2005, October&nbsp;18,&nbsp;2005 and September 5, 2006</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">3.2</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Bylaws</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">5.1</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Opinion of Lang Michener LLP, with consent to use, regarding the validity of the securities being registered</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.1</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Sale Contract for Oil and Gas Leases between Energy Program Accompany, LLC and Penasco Petroleum, Inc., dated August 24, 2006 (regarding the Holt, McKay and Strahan Leases)</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.2</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Letter Agreement between Penasco Petroleum, Inc. and Tradestar Resources Corporation, dated September 1, 2006</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.3</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Assignment, Bill of Sale and Conveyance between OPEX Energy LLC and Penasco Petroleum, Inc., dated effective August 1, 2006 (regarding the Welder Lease)</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.4</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Participation Agreement between Rockwell Energy, LLC and the Company, dated October 2005 (regarding the Janssen Lease) </FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.5</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Oil, Gas and Mineral Lease between Henry J. Janssen Jr. and Penasco Petroleum, Inc., dated July 2006 (regarding the Janssen Lease)</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.6</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Assignment and Bill of Sale between Penasco Petroleum, Inc. and ETG Energy Resources, dated October 2006, and Assignment between ETG Energy Resources and Penasco Petroleum, Inc., dated December 2006 (regarding the Janssen Lease)</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.7</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Ratification Letter between Marmik Oil Company and Penasco Petroleum, Inc., dated October 2007 (regarding Little Mule Creek Project)</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.8</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Assignment between Marmik Oil Company and Penasco Petroleum, Inc., dated November 2007 (regarding Little Mule Creek Project)</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.9</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">2007 Stock Incentive Plan</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.10</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Employment Services Agreement between the Company and Management Solutions International, Inc., dated April 2006</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.11</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Consulting Services and Options Agreement between the Company and Jim Thomas, dated April 2006, and Amended and Restated Consulting Services and Option Agreement between the Company and Jim Thomas, dated November 2007</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.12</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="LEFT">Consulting Services and Options Agreement between the Company and Kyle Combest, dated August 2006</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">10.13</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Professional Services Retainer Contract between the Company and Steven Carter, dated December 2006</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">21.1</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Subsidiaries of the Company</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">23.1</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Consent of Independent Registered Public Accounting Firm</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">23.2</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Consent of Counsel (included in Exhibit 5.1)</FONT></TD>
</TR>
<TR><TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">24.1</FONT></TD>
<TD WIDTH="80%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Power of Attorney (included in the signature page of this registration statement)</FONT></TD>
</TR>
</TABLE>

<B><FONT SIZE=3><P ALIGN="LEFT"></P>
</B></FONT><FONT SIZE=2><P ALIGN="CENTER">II-6</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="LEFT">&nbsp;</P>
<P ALIGN="LEFT">ITEM 28.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;UNDERTAKINGS</P>
</B><P ALIGN="JUSTIFY">The undersigned registrant hereby undertakes that it will:</P><DIR>

<P ALIGN="JUSTIFY">1. &nbsp;&nbsp;&nbsp;File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:</P><DIR>

<P ALIGN="JUSTIFY">(a)&nbsp;&nbsp;&nbsp;Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.</P>
<P ALIGN="JUSTIFY">(b)&nbsp;&nbsp;&nbsp;Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information set forth in this registration statement.  Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.</P>
<P ALIGN="JUSTIFY">(c)&nbsp;&nbsp;&nbsp;Include any material information with respect to the plan of distribution.</P></DIR>

<P ALIGN="JUSTIFY">2.&nbsp;&nbsp;&nbsp;For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.</P>
<P ALIGN="JUSTIFY">3. &nbsp;&nbsp;&nbsp;File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.</P></DIR>

<P ALIGN="JUSTIFY">Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, and is, therefore, unenforceable. </P>
<P ALIGN="JUSTIFY">In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act of 1933, and we will be governed by the final adjudication of such issue.</P>
<P ALIGN="JUSTIFY">Each prospectus filed pursuant to Rule 424(b) of the Securities Act of 1933 as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.</P>
<P ALIGN="CENTER">__________</P>
<P ALIGN="JUSTIFY"></P>
</FONT><FONT SIZE=2><P ALIGN="CENTER">II-7</P>
<P ALIGN="LEFT"><HR NOSHADE SIZE=3 WIDTH="100%"></P>
</FONT><B><FONT SIZE=3><P ALIGN="CENTER"><A NAME="_Toc134964074">SIGNATURES</A></P>
</B><P ALIGN="JUSTIFY">In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned in the City of Vancouver, Province of British Columbia, Canada, on February 1, 2008.</P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=697>
<TR><TD WIDTH="41%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="53%" VALIGN="TOP">
<B><FONT SIZE=3><P ALIGN="LEFT">STRATEGIC AMERICAN OIL CORPORATION<BR>
<BR>
By: </B><I>"Randall Reneau"</I><B><BR>
_______________________________________<BR>
Randall Reneau<BR>
President, Chief Executive Officer and Principal Executive Officer</B></FONT></TD>
</TR>
</TABLE>

<B><FONT SIZE=3><P ALIGN="CENTER">POWER OF ATTORNEY</P>
</B><P ALIGN="JUSTIFY">Know all persons by these presents that that each individual whose signature appears below constitutes and appoints Randall Reneau as a true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing under Rule 462 promulgated under the Securities Act of 1933, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any one of them, or his or their substitutes, may lawfully do or cause to be done by virtue hereof.</P>
<P ALIGN="JUSTIFY">In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.</P></FONT>
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=7 WIDTH=697>
<TR><TD WIDTH="33%" VALIGN="TOP">
<B><U><FONT SIZE=3><P ALIGN="JUSTIFY">Signature</B></U></FONT></TD>
<TD WIDTH="43%" VALIGN="TOP">
<B><U><FONT SIZE=3><P ALIGN="CENTER">Title</B></U></FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<B><U><FONT SIZE=3><P ALIGN="CENTER">Date</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<B><I><FONT SIZE=3><P ALIGN="LEFT"><BR>
</B><U>"Randall Reneau"</I><B><BR>
</U>Randall Reneau</B></FONT></TD>
<TD WIDTH="43%" VALIGN="TOP">
<B><FONT SIZE=3><P ALIGN="LEFT"><BR>
President, Chief Executive Officer, Principal Executive Officer and a director</B></FONT></TD>
<TD WIDTH="23%" VALIGN="MIDDLE">
<B><FONT SIZE=3><P ALIGN="CENTER">February 1, 2008</B></FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<B><I><FONT SIZE=3><P ALIGN="LEFT"><BR>
</B><U>"Johnathan Lindsay"</I><B><BR>
</U>Johnathan Lindsay</B></FONT></TD>
<TD WIDTH="43%" VALIGN="TOP">
<B><FONT SIZE=3><P ALIGN="JUSTIFY"><BR>
Secretary, Treasurer, Chief Financial Officer, Principal Accounting Officer, and a director</B></FONT></TD>
<TD WIDTH="23%" VALIGN="MIDDLE">
<B><FONT SIZE=3><P ALIGN="CENTER">February 1, 2008</B></FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<B><I><FONT SIZE=3><P ALIGN="LEFT"><BR>
</B><U>"Alan P. Lindsay"</I><B><BR>
</U>Alan P. Lindsay</B></FONT></TD>
<TD WIDTH="43%" VALIGN="TOP">
<B><FONT SIZE=3><P ALIGN="JUSTIFY"><BR>
Director</B></FONT></TD>
<TD WIDTH="23%" VALIGN="MIDDLE">
<B><FONT SIZE=3><P ALIGN="CENTER">February 1, 2008</B></FONT></TD>
</TR>
<TR><TD WIDTH="33%" VALIGN="TOP">
<B><I><FONT SIZE=3><P ALIGN="LEFT"><BR>
</B><U>"Leonard Garcia"</I><B><BR>
</U>Leonard Garcia</B></FONT></TD>
<TD WIDTH="43%" VALIGN="TOP">
<B><FONT SIZE=3><P ALIGN="JUSTIFY"><BR>
Director</B></FONT></TD>
<TD WIDTH="23%" VALIGN="MIDDLE">
<B><FONT SIZE=3><P ALIGN="CENTER">February 1, 2008</B></FONT></TD>
</TR>
</TABLE>

<FONT SIZE=3><P ALIGN="CENTER">__________</P></FONT></BODY>
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SB2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
STRATEGIC AMERICAN OIL CORPORATION
(Name of small business issuer in its charter)
NEVADA
(State or jurisdiction of
incorporation or organization)
1311
(Primary Standard Industrial
Classification Code Number)
98-0454144
(I.R.S.  Employer Identification No.)
1111 West Hastings Street, Suite 320, Vancouver, British Columbia, Canada, V6E 2J3
Telephone:
(604) 628-9904
(Address and telephone number of principal executive offices)
Same as above
(Address of principal place of business or intended principal place of business)
Randall Reneau
President, Chief Executive Officer and Principal Executive Officer
9302 Mystic Oaks Trail, Austin Texas, 78750
Telephone: (512) 258-8969
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public: From time to time after this Registration Statement is declared effective.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [  ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registrations statement number of the earlier effective registration statement for the same offering.  [  ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [  ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  [  ]
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
(1)
Amount to be
Registered
(2)
Proposed Maximum
Offering Price Per Unit
(3)
Proposed Maximum
Aggregate Offering Price
(3)
Amount of
Registration Fee
Common stock, par value $0.001 per share
(4)
2,341,978
$0.10
$234,197.80
$9.20
Common stock, par value $0.001 per share
(5)
1,259,308
$0.10
$125,930.80
$4.95
Common stock, par value $0.001 per share
(6)
310,000
$0.10
$31,000.00
$1.22
Common stock, par value $0.001 per share
(7)
1,022,145
$0.35
$357,750.75
$14.06
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(7)
1,022,145
$0.60
$613,287.00
$24.10
Common stock, par value $0.001 per share
(8)
1,100,000
$0.50
$550,000.00
$21.62
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(8)
1,100,000
$0.60
$660,000.00
$25.94
Common stock, par value $0.001 per share
(9)
180,000
$0.50
$90,000.00
$3.54
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(9)
180,000
$0.60
$108,000.00
$4.24
Common stock, par value $0.001 per share
(10)
683,333
$0.60
$409,999.80
$16.11
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(10)
683,333
$1.00
$683,333.00
$26.85
Common stock, par value $0.001 per share
(11)
169,667
$0.60
$101,800.20
$4.00
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(11)
169,667
$1.00
$169,667.00
$6.67
Common stock, par value $0.001 per share
(12)
819,171
$0.60
$491,502.60
$19.32
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(12)
819,171
$1.00
$819,171.00
$25.15
Common stock, par value $0.001 per share
(13)
1,680,569
$0.60
$1,008,341.40
$32.19
Title of Each Class of
Securities to be Registered
(1)
Amount to be
Registered
(2)
Proposed Maximum
Offering Price Per Unit
(3)
Proposed Maximum
Aggregate Offering Price
(3)
Amount of
Registration Fee
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(13)
1,680,569
$1.00
$1,680,569.00
$66.05
Common stock, par value $0.001 per share
(14)
185,833
$0.60
$111,499.80
$4.38
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(14)
185,833
$1.00
$185,833.00
$7.30
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(15)
385,000
$0.35
$134,750.00
$5.30
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(16)
4,000
$0.50
$2,000.00
$0.08
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(17)
163,041
$0.60
$97,824.60
$3.84
Common stock, par value $0.001 per share
(18)
724,666
$0.60
$434,799.60
$17.09
Common stock, par value $0.001 per share, underlying common stock purchase warrants
(18)
724,666
$1.00
$724,666.00
$28.48
Total
17,594,095
$0.56
(19)
$9,825,923.35
$386.16
(1)     In the event of a stock split, stock dividend or similar transaction involving the common shares of the registrant, in order to prevent dilution, the number of shares of common stock registered shall be automatically increased to cover additional shares in accordance with Rule 416(a) under the United States Securities Act of 1933, as amended (the "Securities Act").
(2)     Includes shares of our common stock, par value $0.001 per share, currently owned by the selling stockholders (each a "Selling Stockholder") and shares of common stock which are issuable upon exercise of warrants held by certain of the Selling Stockholders, all of which may be offered pursuant to this registration statement.  In addition to the shares set forth in the table, the amount to be registered includes an indeterminate number of shares issuable upon the exercise of the warrants as such number may be adjusted as a result of stock splits, stock dividends and similar transactions in accordance with Rule 416 of the Securities Act.
(3)     The proposed maximum offering price per share is calculated in accordance with Rule 457(g) of the Securities Act.
(4)     These shares represent the 2,341,978 shares of common stock we issued on October 29, 2005 at a price of $0.10 per share to certain of the Selling Stockholders named herein.
(5)     These shares represent the 1,259,308 shares of common stock we issued on March 3, 2006 at a price of $0.10 per share to certain of the Selling Stockholders named herein.
(6)     These shares represent the 310,000 shares of common stock we issued on May 31, 2006 at a price of $0.10 per share to certain of the Selling Stockholders named herein.
(7)     On July 7, 2006, we issued an aggregate of 1,022,145 units at a price of $0.35 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $0.60 per share, for the period commencing upon the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(8)    On July 17, 2006, we issued an aggregate of 1,100,000 units at a price of $0.50 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $0.60 per share, for the period commencing upon the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(9)     On October 5, 2006, we issued an aggregate of 180,000 units at a price of $0.50 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $0.60 per share, for the period commencing upon the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(10)  On October 6, 2006, we issued an aggregate of 683,333 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(11)  On November 15, 2006, we issued an aggregate of 169,667 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(13)  On December 6, 2006, we issued 819,171 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(14)  On April 30, 2007, we issued 1,680,569 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(15)  On May 31, 2007, we issued 185,833 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(16)  On July 5, 2007 we issued 385,000 share purchase warrants with each share purchase warrant entitling the warrant holder to purchase one share of our common stock at a price of $0.35 per share, for the period commencing upon the date of issuance of the units and ending on the day which is ten years from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
ii
(17)  On July 5, 2007 we issued 4,000 share purchase warrants with each share purchase warrant entitling the warrant holder to purchase one share of our common stock at a price of $0.50 per share, for the period commencing upon the date of issuance of the units and ending on the day which is ten years from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(18)  On July 5, 2007 we issued 163,041 share purchase warrants with each share purchase warrant entitling the warrant holder to purchase one share of our common stock at a price of $0.60 per share, for the period commencing upon the date of issuance of the units and ending on the day which is ten years from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(19)  On October 31, 2007, we issued 724,666 units at a price of $0.60 per unit, with each unit being comprised of one share of common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at a price of $1.00 per share, for the period commencing upon the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(20)  Weighted average price per share.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
iii
SUBJECT TO COMPLETION
PROSPECTUS
STRATEGIC AMERICAN OIL CORPORATION
a Nevada corporation
17,594,095 Shares of Common Stock
This prospectus relates to the resale of up to 17,594,095 shares of our common stock that may be sold, from time to time, by the selling stockholders (each, a "Selling Stockholder") named in this prospectus for their own account, consisting of:
10,476,670 shares of our common stock that has been issued to certain of the Selling Stockholders; and
7,117,425 shares of our common stock, issuable upon the exercise of outstanding common stock purchase warrants to acquire shares of our common stock by certain of the Selling Stockholders.
We intend to apply to list our shares of common stock for trading on the over-the-counter bulletin board (the "OTC Bulletin Board") at the time the registration statement of which this prospectus forms a part becomes effective.  The Selling Stockholders will sell their shares at a price of $0.60 per share until our shares are quoted on the OTC Bulletin Board or in another quotation medium and, thereafter, at prevailing market prices or privately negotiated prices or otherwise as set forth under "Plan of Distribution" in this prospectus.  There is no relationship whatsoever between the offering price and our assets, earnings, book value, or any other objective criteria of value.  Our common stock is not presently traded on any securities exchange or market.  Accordingly, we have fixed the benchmark offering price by reference to our most recent private placement offering of units, which was effected at $0.60 per unit.
We will not receive any proceeds from the sales of any of our shares of common stock by the Selling Stockholders.  However, we will receive proceeds upon the exercise of any common stock purchase warrants that may be exercised by the Selling Stockholders.  The proceeds, if any would be used for working capital purposes.
The purchase of the securities offered through this prospectus involves a high degree of risk.  You should invest in our common stock only if you can afford to lose your entire investment.  You should carefully read and consider the section of this prospectus titled "Risk Factors" beginning on page 6 before buying any of our shares of common stock.
Neither the Securities and Exchange Commission (the "SEC") nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus.  Any representation to the contrary is a criminal offence.
The information in this prospectus is not complete and may be changed.  The Selling Stockholders may not sell or offer these securities until the registration statement of which this prospectus forms a part is declared effective by the SEC.  This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
The date of this prospectus is
u
, 2008.
__________
1
The following table of contents has been designed to help you find important information contained in this prospectus.  We encourage you to read the entire prospectus.
TABLE OF CONTENTS
Item
Page No.
SUMMARY
3
RISK FACTORS
6
FORWARD-LOOKING STATEMENTS
12
USE OF PROCEEDS
12
DETERMINATION OF OFFERING PRICE
12
DILUTION
12
SELLING STOCKHOLDERS
13
PLAN OF DISTRIBUTION
19
LEGAL PROCEEDINGS
21
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
23
DESCRIPTION OF SECURITIES
24
INTEREST OF NAMED EXPERTS AND COUNSEL
25
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
25
ORGANIZATION SINCE INCORPORATION
25
DESCRIPTION OF BUSINESS AND PROPERTIES
26
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
35
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
40
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
41
EXECUTIVE COMPENSATION
42
FINANCIAL STATEMENTS
46
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
77
WHERE YOU CAN FIND MORE INFORMATION
77
DEALER PROSPECTUS DELIVERY OBLIGATION
77
__________
2
In this prospectus, unless otherwise specified:  (i) references to "the Company", "our Company", "we", "us" or "our" mean Strategic American Oil Corporation and its wholly-owned subsidiary, Penasco Petroleum, Inc., unless the context otherwise requires, and (ii) references to "Penasco" mean Penasco Petroleum Inc., our wholly-owned subsidiary.  All financial information is stated in United States dollars unless otherwise specified.  Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.
SUMMARY
The following summary highlights selected information contained in this prospectus.  This summary does not contain all the information you should consider before investing in the securities.  Before making an investment decision, you should read the entire prospectus carefully, including the "Risk Factors" section, the financial statements and the notes to the financial statements.
The Company
We are a natural resource exploration and production company engaged in the exploration, acquisition and development of oil and gas properties in the United States.  We currently have an aggregate of approximately 553.90 gross (289.29 net) developed and 12,738.93 gross (2,178.93 net) undeveloped acres pursuant to leases or acquisitions.  Total developed and undeveloped acreage is approximately 13,292.83 gross acres (2,468.22 net). See "Description of Business and Properties" for more information.
We were incorporated under the laws of Nevada effective April 12, 2005.  Our principal business offices are located at 1111 West Hastings Street, Suite 320, Vancouver, British Columbia, Canada, V6E 2J3 and our telephone number is (604) 682-9775.
The Offering
The Issuer:
Strategic American Oil Corporation
The Selling Stockholders:
The Selling Stockholders are comprised of certain of our existing stockholders who acquired our shares in private placement transactions as described below.  The Selling Stockholders are named in this prospectus under "Selling Stockholders".
Shares Offered by the Selling Stockholders:
The Selling Stockholders are offering up to an aggregate of 17,594,095 shares of our common stock comprised of:
2,341,978 shares of common stock issued at a price of $0.10 per share on October 29, 2005;
1,259,308 shares of common stock issued at a price of $0.10 per share on March 3, 2006;
310,000 shares of common stock issued at a price of $0.10 per share on May 31, 2006;
1,022,145 shares of common stock and 1,022,145 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of 1,022,145 units at a price of $0.35 per unit on July 7, 2006;
1,100,000 shares of common stock and 1,100,000 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 1,100,000 units at a price of $0.50 per unit on July 17, 2006;
180,000 shares of common stock and 180,000 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 180,000 units at a price of $0.50 per unit on October 5, 2006;
3
683,333 shares of common stock and 683,333 shares of common stock issuable upon exercise of warrants issued in connection with the issuance of an aggregate of 683,333 units at a price of $0.60 per unit on October 6, 2006;
169,667 shares of common stock and 169,667 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 169,667 units at a price of $0.60 per unit on November 15, 2006;
819,171 shares of common stock and 819,171 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 819,171 units at a price of $0.60 per unit on December 6, 2006;
1,680,569 shares of common stock and 1,680,569 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 1,680,569 units at a price of $0.60 per unit on April 30, 2007;
185,833 shares of common stock and 185,833 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 185,833 units at a price of $0.60 per unit on May 31, 2007;
385,000 shares of common stock issuable upon exercise of warrants at $0.35 per share issued pursuant to finders' fees agreements on July 5, 2007;
4,000 shares of common stock issuable upon exercise of warrants at $0.50 per share issued pursuant to finders' fees agreements on July 5, 2007;
163,041 shares of common stock issuable upon exercise of warrants at $0.60 per share issued pursuant to finders' fees agreements on July 5, 2007;
724,666 shares of common stock and 724,666 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 724,666 units at a price of $0.60 per unit on October 31, 2007.
Offering Price:
The Selling Stockholders will sell their shares offered under this prospectus at a price of $0.60 per share until our shares are quoted on the OTC Bulletin Board or in another quotation medium and, thereafter, at prevailing market prices or privately negotiated prices or otherwise as set forth under "Plan of Distribution" in this prospectus.  We determined this offering price arbitrarily based on our most recent private offering of our units, which we effected at $0.60 per unit.
Terms of the Offering:
The selling stockholders will determine when and how they will sell the common stock offered in this prospectus.  Refer to "Plan of Distribution".
Termination of the Offering:
The offering will conclude when all of the 17,594,095 shares of common stock have been sold, the shares no longer need to be registered to be sold or we decide to terminate the registration of shares.
Use of Proceeds:
We will not receive any proceeds from the sale of the currently outstanding common stock held by the Selling stockholders.  We will receive proceeds in the event that any warrants are exercised.
No Present Public Market for Our Common Stock:
Our common stock is not presently listed for trading on any securities exchange or market.  We intend to apply to have our shares of common stock quoted on the OTC Bulletin Board at the time the registration statement of which this prospectus forms a part becomes effective.
4
Summary of Financial Data
The following consolidated financial data has been derived from and should be read in conjunction with: (i) our unaudited interim consolidated financial statements as at October 31, 2007, or the period from inception (April 12, 2005) to October 31, 2007, together with the notes to these financial statements; (ii) our audited consolidated financial statements as at July 31, 2006 and 2007, or the period from inception (April 12, 2005) to July 31, 2007, together with the notes to these financial statements; and (ii) the section of this prospectus entitled "Management's Discussion and Analysis or Plan of Operations", included elsewhere herein.
We were incorporated under the laws of Nevada in April 2005.  We began the production of oil in September 2006.  Accordingly, the financial information provided below may not be comparable from period to period.
Balance Sheet Data
As at
July 31, 2006
As at
July 31, 2007
As at
October 31, 2007
(Audited)
(Audited)
(Unaudited)
Cash
$     650,204
$     667,722
$     562,884
Working capital
623,382
652,607
571,659
Total assets
906,215
1,945,131
1,910,512
Total liabilities
36,344
112,214
65,442
Total stockholders' equity
869,871
1,832,917
1,845,070
Statement of Operations
Data
For the Period
from Inception
(April 12, 2005) to
October 31, 2007
Three Months
Ended
October 31, 2007
Year Ended
July 31, 2007
Year Ended
July 31, 2006
(Unaudited)
(Unaudited)
(Audited)
(Audited)
Oil and gas revenues
$     895,913
$     194,173
$     701,740
$     Nil
Direct operating costs
813,686
150,295
663,391
Nil
Impairment of oil and gas properties
233,306
-
158,800
74,506
Depreciation and depletion
87,925
14,437
73,383
105
Administrative expenses
175,280
36,238
100,726
38,316
Stock-based compensation
2,138,167
82,000
2,056,167
Nil
Net loss
3,899,187
327,847
3,170,864
400,476
Net loss per share
0.01
0.13
0.02
5
RISK FACTORS
An investment in our common stock involves a high degree of risk.  You should carefully consider the risks described below and the other information in this prospectus before investing in our shares of common stock.  If any of the following risks occur, our business, operating results and financial condition could be seriously harmed.  The risks and uncertainties described below are not the only ones we face.  Additional risks and uncertainties, including those that we do not know about or that we currently deem immaterial, also may adversely affect our business.  The trading price of our shares of common stock, when and if we trade at a later date, could decline due to any of these risks, and you may lose all or part of your investment.
Risks Related to Our
Company
Because we have only recently commenced business operations, we face a high risk of business failure and this could result in a total loss of your investment.
We were incorporated on April 12, 2005, and to date, we have earned limited revenues we have not achieved profitability.  Potential investors should be aware of the difficulties normally encountered by exploration stage companies and the high rate of failure of such enterprises.  These potential problems include, but are not limited to, unanticipated problems relating to costs and expenses that may exceed current estimates.  We have no history upon which to base any assumption as to the likelihood that our business will prove successful, and we can provide no assurance to investors that we will generate any operating revenues or ever achieve profitable operations.  If we are unsuccessful in addressing these risks, our business will likely fail and you will lose your entire investment.
Because we have only recently commenced business operations and have earned only limited revenues to date, we expect to incur operating losses for the foreseeable future.
We have earned limited revenues and we have never been profitable.  Going forward, we anticipate that we will incur increased operating expenses without realizing any significant revenues.  We therefore expect to incur significant losses into the foreseeable future.  If we are unable to generate significant revenues from our properties, our business will likely fail and you will lose your entire investment.
Because our business operations are only about two years old, we may not be able to effectively manage the demands required of a new business in our industry.
We have earned limited revenues and we have never been profitable.  There can be no assurance that we will effectively execute our business plan or manage any growth of our business, or that our future operating and financial forecast will be met.  Future development and operating results will depend on many factors, including access to adequate capital, the demand for oil and gas, price competition, our success in setting up and expanding distribution channels and whether we can control costs.  Many of these factors are beyond our control.  In addition, our future prospects must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a new business in the oil and gas industry, which is characterized by intense competition, rapid technological change, highly litigious competitors and significant regulation.  If we are unable to address these matters, or any of them, then we may not be able to successfully implement our business plan or achieve revenues or profitability.
Because we have earned limited revenues from operations, all our capital requirements have been met through financing and it is not certain we will be able to continue to find financing to meet our operating requirements.
Notwithstanding the recent completion by us of our private placement financings, we will need to obtain additional financing in order to pursue our business plan.  As of October 31, 2007, we had cash on hand of $562,884 and working capital of $571,659.  Our business plan calls for significant expenses in connection with the exploration and development of our properties.  Our capital requirements have been and will continue to be significant.  We will be dependant on future financing to fund our working capital requirements.  We estimate that our current working capital will support our activities for no more than one year.  After that time we will need additional financing.  However, there can be no assurance that such financing will be forthcoming or that it will result in sufficient capital for us to meet our current and expected working capital needs.  It is not anticipated that any of our officers, directors or current stockholders will provide any significant portion of our future financing requirements.  Furthermore, in the event that our plans change, our assumptions change or prove inaccurate, or our capital resources prove to be insufficient to fund operations, we could be required to seek additional financing sooner than currently anticipated, or in greater amounts than is currently anticipated.  Any inability to obtain additional financing when needed would have a material adverse effect on us, including possibly requiring us to significantly curtail or possibly cease our operations.  In addition, any future equity financing may involve substantial dilution to our existing stockholders.
6
Our auditors have expressed substantial doubt about our ability to continue as a going concern.
Our unaudited interim consolidated financial statements for the three months ended October 31, 2007 and for the period from inception to October 31, 2007, and our audited financial statements for the years ended July 31, 2006 and 2007 and for the period from inception to July 31, 2007 have been prepared assuming that we will continue as a going concern.  We have incurred operating losses totalling $3,899,187 since inception and, as a result, our auditors have expressed substantial doubt about our ability to continue as a going concern.  Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Because we have a history of losses and anticipate continued losses until we are able to generate sufficient revenues to support our operations, we may lack the financial stability required to continue operations.
Since inception we have suffered recurring losses.  We have funded our operations through the issuance of common stock in order to meet our strategic objectives.  We anticipate that our losses will continue until such time, if ever, as we are able to generate sufficient revenues to support our operations.  Our ability to generate revenue primarily depends on our success in developing our properties.  There can be no assurance that we will be able to adequately develop our properties, that we will attain revenues or that we will ever achieve profitable operations.
Oil and gas resources, even if discovered, may not be commercially viable.
Even if oil and gas resources are discovered on our properties, there can be no assurance that commercial production will be obtained or that the production will be sufficient to pay drilling and completion costs.  Our properties may not contain commercial quantities of oil and gas.  In addition, the cost of drilling, completing and operating wells is often uncertain.  Drilling operations on our properties or on properties we may acquire in the future may be curtailed, delayed or cancelled as a result of numerous factors, including title problems, weather conditions, compliance with governmental requirements and shortages or delays in the delivery of equipment.  Furthermore, completion of a well does not assure a profit or a recovery of drilling, completion and operating costs.  As a result, our business, results of operations and financial condition may be materially adversely affected.
Actual production, revenues and expenditures with respect to reserves will likely vary from estimates.
There are numerous uncertainties inherent in estimating oil and natural gas reserves and their estimated values, including many factors beyond the control of the producer.  Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner.  Estimates of economically recoverable oil and natural gas reserves and of future net cash flows necessarily depend upon a number of variable factors and assumptions, such as historical production from the area compared with production from other producing areas, the assumed effects of regulations by governmental agencies and assumptions concerning future oil and natural gas prices, future operating costs, severance and excise taxes, development costs and work-over and remedial costs, all of which may in fact vary considerably from actual results.  For these reasons, estimates of the economically recoverable quantities of oil and natural gas attributable to any particular group of properties, classifications of such reserves based on risk of recovery, and estimates of the future net cash flows expected therefrom prepared by different engineers or by the same engineers but at different times may vary substantially, and such reserve estimates may be subject to downward or upward adjustment based upon such factors.  Actual production, revenues and expenditures with respect to reserves will likely vary from estimates, when and if made, and such variances may be material, which could have a material adverse effect on our business, results of operations and financial condition.
Our future oil and natural gas production is highly dependent upon our ability to find or acquire reserves.
In general, the volume of production from oil and natural gas properties declines as reserves are depleted, with the rate of decline depending on reservoir characteristics.  Except to the extent we conduct successful exploration and development activities or acquire properties containing proved reserves, or both, our proved reserves, if any, will decline as reserves are produced.  Our future oil and natural gas production is, therefore, highly dependent upon our level of success in finding or acquiring reserves in the future.  The business of exploring for, developing or acquiring reserves is capital intensive.  To the extent cash flow from operations is reduced and external sources of capital become limited or unavailable, our ability to make the necessary capital investment to maintain or expand our asset base of oil and natural gas reserves would be impaired.  The failure of an operator of our wells to adequately perform operations, or such operator's breach of the applicable agreements, could adversely impact us.  In addition, there can be no assurance that our future exploration, development and acquisition activities will result in additional proved reserves or that we will be able to drill productive wells at acceptable costs.
7
Oil and gas resources may contain certain hazards which may, in turn, create certain liabilities or prevent the resources from being commercially viable.
Our properties may contain hazards such as unusual or unexpected formations and other conditions.  Our projects may become subject to liability for pollution, fire, explosion, blowouts, cratering and oil spills, against which we cannot insure or against which we may decide to not insure.  Such events could result in substantial damage to oil and gas wells, producing facilities and other property and/or result in personal injury.  Costs or liabilities related to those events would have a material adverse effect on our business, results of operations, financial condition and cash flows.
Oil and gas prices are highly volatile.
Oil and gas prices and markets are highly volatile.  Prices for oil and gas are subject to significant fluctuation in response to relatively minor changes in supply of and demand for oil and gas, market uncertainty and a variety of additional factors.  Our profitability will be substantially dependent on prevailing prices for natural gas and oil.  The amounts of and prices obtainable for our oil and gas production may be affected by market factors beyond our control, such as:
the extent of domestic production;
the amount of imports of foreign oil and gas;
the market demand on a regional, national and worldwide basis;
domestic and foreign economic conditions that determine levels of industrial production;
political events in foreign oil-producing regions; and
variations in governmental regulations and tax laws or the imposition of new governmental requirements upon the oil and gas industry.
These factors or any one of them could have a material adverse effect on our business, results of operations, financial condition and cash flows.
As a result of our intensely competitive industry, we may not gain enough market share to be profitable.
We compete in the sale of oil and natural gas on the basis of price and on the ability to deliver products.  The oil and natural gas industry is intensely competitive in all phases, including the exploration for new production and the acquisition of equipment and labor necessary to conduct drilling activities.  The competition comes from numerous major oil companies as well as numerous other independent operators in the United States and elsewhere.  Because we are pursuing potentially large markets, our competitors include major, multinational oil and gas companies.  There is also competition between the oil and natural gas industry and other industries in supplying the energy and fuel requirements of industrial, commercial and individual consumers.  We are a minor participant in the industry and compete in the oil and natural gas industry with many other companies having far greater financial, technical and other resources.  If we are unable to compete successfully, we may never be able to sell enough product at a price sufficient to permit us to generate profits.
The oil and natural gas market is heavily regulated.
We are subject to various federal, state and local laws and regulations.  These laws and regulations govern safety, exploration, development, taxation and environmental matters that are related to the oil and natural gas industry.  To conserve oil and natural gas supplies, regulatory agencies may impose price controls and may limit our production.  Certain laws and regulations require drilling permits, govern the spacing of wells and the prevention of waste and limit the total number of wells drilled or the total allowable production from successful wells.  Other laws and regulations govern the handling, storage, transportation and disposal of oil and natural gas and any by-products produced in oil and natural gas operations.  These laws and regulations could materially adversely impact our operations and our revenues.
8
Laws and regulations that affect us may change from time to time in response to economic or political conditions.  Thus, we must also consider the impact of future laws and regulations that may be passed in the jurisdictions where we operate.  We anticipate that future laws and regulations related to the oil and natural gas industry will become increasingly stringent and cause us to incur substantial compliance costs.
The nature of our operations exposes us to environmental liabilities.
Our operations create the risk of environmental liabilities.  We may incur liability to governments or to third parties for any unlawful discharge of oil, gas or other pollutants into the air, soil or water.  We could potentially discharge oil or natural gas into the environment in any of the following ways:
from a well or drilling equipment at a drill site;
from a leak in storage tanks, pipelines or other gathering and transportation facilities;
from damage to oil or natural gas wells resulting from accidents during normal operations; or
from blowouts, cratering or explosions.
Environmental discharges may move through the soil to water supplies or adjoining properties, giving rise to additional liabilities.  Some laws and regulations could impose liability for failure to obtain the proper permits for, to control the use of, or to notify the proper authorities of a hazardous discharge.  Such liability could have a material adverse effect on our financial condition and our results of operations and could possibly cause our operations to be suspended or terminated on such property.
We may also be liable for any environmental hazards created either by the previous owners of properties that we purchase or lease or by acquired companies prior to the date we acquire them.  Such liability would affect the costs of our acquisition of those properties.  In connection with any of these environmental violations, we may also be charged with remedial costs.  Pollution and similar environmental risks generally are not fully insurable.
Although we do not believe that our environmental risks are materially different from those of comparable companies in the oil and natural gas industry, we cannot assure you that environmental laws will not result in decreased production, substantially increased costs of operations or other adverse effects to our combined operations and financial condition.
We could lose or fail to attract the personnel necessary to run our business.
Our success depends in large part on our ability to attract and retain key management and operating personnel.  As we develop additional capabilities and expand the scope of our operations, we will require more skilled personnel.  Recruiting personnel for the oil and gas industry is highly competitive.  We cannot guarantee that we will be able to continue to attract and retain qualified executive, managerial and technical personnel needed for our business.  Our failure to attract or retain qualified personnel could delay or result in our inability to complete our business plan.
Our directors may experience conflicts of interest which may detrimentally affect our profitability.
Certain directors and officers may be engaged in, or may in the future be engaged in, other business activities on their own behalf and on behalf of other companies and, as a result of these and other activities, such directors and officers may become subject to conflicts of interest, which could have a material adverse effect on our business.
Some of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.
Some of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States.  As a result, it may be difficult for investors to effect service of process on our directors or officers, or enforce within the United States or Canada any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.  Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them.  In addition, investors may not be able to commence an action in a Canadian court predicated upon the civil liability provisions of the securities laws of the United States.  The foregoing risks also apply to those experts identified in this prospectus that are not residents of the United States.
9
Risks Related to Our Common Stock
There is no active trading market for our common stock, and if a market for our common stock does not develop, our investors will be unable to sell their shares.
There is currently no active trading market for our common stock, and such a market may not develop or be sustained.  We currently plan to have our common stock quoted on the OTC Bulletin Board of the Financial Industry Regulatory Authority ("FINRA") upon the effectiveness of the registration statement of which this prospectus forms a part.  In order to do this, a market maker must file a Form 15c-211 to allow the market maker to make a market in our shares of common stock.  At the date hereof we are not aware that any market maker has any such intention.  We cannot provide our investors with any assurance that our common stock will be traded on the OTC Bulletin Board or, if traded, that a public market will materialize.  Further, the OTC Bulletin Board is not a listing service or exchange, but is instead a dealer quotation service for subscribing members.  If our common stock is not quoted on the OTC Bulletin Board or if a public market for our common stock does not develop, then investors may not be able to resell the shares of our common stock that they have purchased and may lose all of their investment.  If we establish a trading market for our common stock, the market price of our common stock may be significantly affected by factors such as actual or anticipated fluctuations in our operation results, general market conditions and other factors.  In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for the shares of exploration stage companies, which may materially adversely affect the market price of our common stock.
Sales of a substantial number of shares of our common stock into the public market by the selling stockholders may result in significant downward pressure on the price of our common stock and could affect the ability of our stockholders to realize any current trading price of our common stock.
Sales of a substantial number of shares of our common stock in the public market could cause a reduction in the market price of our common stock, when and if such market develops.  When the registration statement of which this prospectus forms a part is declared effective, the selling stockholders may be reselling up to approximately 38.7% of the issued and outstanding shares of our common stock (and, if the share purchase warrants are exercised with respect to the 7,117,425 shares underlying such share purchase warrants being registered, then the selling stockholders may be reselling up to approximately 51.2% of our issued and outstanding shares of common stock).  As a result of such registration statement, a substantial number of our shares of common stock which have been issued may be available for immediate resale when and if a market develops for our common stock, which could have an adverse effect on the price of our common stock.  As a result of any such decreases in price of our common stock, purchasers who acquire shares from the selling stockholders may lose some or all of their investment.
Any significant downward pressure on the price of our common stock as the selling stockholders sell the shares of our common stock could encourage short sales by the selling stockholders or others.  Any such short sales could place further downward pressure on the price of our common stock.
The trading price of our common stock may be volatile.
When listed, the price of our common shares may increase or decrease in response to a number of events and factors, including: trends in the oil and gas markets in which we operate; changes in the market price of oil and gas; current events affecting the economic situation in North America; changes in financial estimates; our acquisitions and financings; quarterly variations in our operating results; the operating and share price performance of other companies that investors may deem comparable; and purchase or sale of blocks of our common shares.  These factors, or any of them, may materially adversely affect the prices of our common shares regardless of our operating performance.
10
A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations.
A decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise additional capital for our operations.  Because our operations to date have been principally financed through the sale of equity securities, a decline in the price of our common stock could have an adverse effect upon our liquidity and our continued operations.  A reduction in our ability to raise equity capital in the future would have a material adverse effect upon our business plan and operations, including our ability to continue our current operations.  If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.
Re-sale restrictions for British Columbia residents may limit the ability of such residents to resell their shares in the U.S., which will affect the price at which their shares may be sold.
Selling stockholders that are residents of British Columbia have to rely on an exemption from prospectus and registration requirements of British Columbia securities laws to sell their shares that are being registered for resale by this prospectus.  Such selling stockholders have to comply with the British Columbia Securities Commission's B.C. Instrument 72-502 "Trade in Securities of U.S. Registered Issuers" to resell their shares.  B.C. Instrument 72-502 requires, among other conditions, that British Columbia residents hold the shares for a period of twelve months and, consequent thereon, limits the volume of shares sold in a twelve-month period to five percent of the issued and outstanding shares of the issuer.  However, if we become a reporting issuer in British Columbia, then our British Columbia stockholders will only have to hold their shares for a period of four months and a day from becoming a reporting issuer in order to resell their shares.  These restrictions will limit the ability of the British Columbia residents to resell the securities in the United States and, therefore, may materially affect the market value of your shares.  If we decide to become a reporting issuer in British Columbia, then it is estimated that becoming such will take approximately three months from our decision to do so subject, at all times, to the prior approval of the British Columbia Securities Commission.  At present we do not intend to become a reporting issuer in British Columbia.
Our stock is a penny stock.  Trading of our stock may be restricted by the SEC's penny stock regulations and FINRA's  sales practice requirements, which may limit a stockholder's ability to buy and sell our stock.
Our common stock will be subject to the "Penny Stock" Rules of the SEC, which will make transactions in our common stock cumbersome and may reduce the value of an investment in our common stock.
We currently plan to have our common stock quoted on the OTC Bulletin Board of FINRA, which is generally considered to be a less efficient market than markets such as NASDAQ or the national exchanges, and which may cause difficulty in conducting trades and difficulty in obtaining future financing.  Further, our securities will be subject to the "penny stock rules" adopted pursuant to Section 15(g) of the
Securities Exchange Act of 1934
, as amended (the "Exchange Act").  The penny stock rules apply generally to companies whose common stock trades at less than $5.00 per share, subject to certain limited exemptions.  Such rules require, among other things, that brokers who trade "penny stock" to persons other than "established customers" complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances.  Many brokers have decided not to trade "penny stock" because of the requirements of the "penny stock rules" and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited.  In the event that we remain subject to the "penny stock rules" for any significant period, there may develop an adverse impact on the market, if any, for our securities.  Because our securities are subject to the "penny stock rules", investors will find it more difficult to dispose of our securities.  Further, it is more difficult: (i) to obtain accurate quotations, (ii) to obtain coverage for significant news events because major wire services, such as the Dow Jones News Service, generally do not publish press releases about such companies, and (iii) to obtain needed capital.
In addition to the "penny stock" rules promulgated by the SEC, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer when recommending the investment to that customer.  Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information.  Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers.  FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
11
Please read this prospectus carefully.  You should rely only on the information contained in this prospectus.  We have not authorized anyone to provide you with different information.  You should not assume that the information provided by the prospectus is accurate as of any date other than the date on the front of this prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and uncertainties, including statements regarding our capital needs, business plans and expectations.  Such forward-looking statements involve risks and uncertainties regarding the market price of valuable minerals, availability of funds, government regulations, operating costs, exploration costs, outcomes of exploration programs and other factors.  Forward-looking statements are made, without limitation, in relation to operating plans, property exploration and development, availability of funds, environmental reclamation, operating costs and permit acquisition.  Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology.  Actual events or results may differ materially from any forward-looking statement.  In evaluating these statements, you should consider various factors, including the risks outlined in this prospectus.  These factors may cause our actual results to differ materially from any forward-looking statement.  While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding our business plans, our actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.  We do not intend to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.
The safe harbour for forward-looking statements provided in the
Private Securities Litigation Reform Act of 1995
does not apply to the offering made in this prospectus.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common stock offered through this prospectus by the selling stockholders.  All proceeds from the sale of the shares will be for the account of the selling stockholders, as described below in the sections of this prospectus entitled "Selling Stockholders" and "Plan of Distribution".  We will, however, incur all costs associated with this prospectus and the registration statement of which this prospectus forms a part.
DETERMINATION OF OFFERING PRICE
Our common stock is not presently traded on any market or securities exchange, and we have not applied for listing or quotation on any public market.  Accordingly, we have fixed the benchmark offering price by reference to our most recent offering of our units, which was effected at $0.60 per unit.  The selling stockholders will sell their common stock at the price of $0.60 per share until our common stock is quoted on the OTC Bulletin Board or in another quotation medium and, thereafter, at prevailing market prices or at privately negotiated prices.  There is no relationship whatsoever between the offering price and our assets, earnings, book value or any other objective criteria of value.
If our common stock becomes publicly traded and a market for the stock develops, the actual offering price of the shares that are the subject of this prospectus will be determined by prevailing market prices at the time of sale or by private transactions negotiated by the selling stockholders named in this prospectus.  The offering price would thus be determined by market factors and the independent decisions of the selling stockholders named in this prospectus.
DILUTION
The common stock to be sold by the selling stockholders is common stock that is currently issued and outstanding.  Accordingly, there will be no dilution to our existing stockholders.
12
SELLING StockHOLDERS
The Selling Stockholders named in this prospectus are offering all of the 17,594,095 shares of common stock offered through this prospectus, consisting of:
10,476,670 shares of our common stock that has been issued to certain of the Selling Stockholders; and
7,117,425 shares of our common stock, issuable upon the exercise of outstanding common stock purchase warrants to acquire shares of our common stock by certain of the Selling Stockholders.
The 17,594,095 shares of our common stock offered by the Selling Stockholders are comprised of:
2,341,978 shares of common stock issued at a price of $0.10 per share on October 29, 2005;
1,259,308 shares of common stock issued at a price of $0.10 per share on March 3, 2006;
310,000 shares of common stock issued at a price of $0.10 per share on May 31, 2006;
1,022,145 shares of common stock and 1,022,145 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of 1,022,145 units at a price of $0.35 per unit on July 7, 2006;
1,100,000 shares of common stock and 1,100,000 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 1,110,000 units at a price of $0.50 per unit on July 17, 2006;
180,000 shares of common stock and 180,000 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 180,000 units at a price of $0.50 per unit on October 5, 2006;
683,333 shares of common stock and 683,333 shares of common stock issuable upon exercise of warrants issued in connection with the issuance of an aggregate of 683,333 units at a price of $0.60 per unit on October 6, 2006;
169,667 shares of common stock and 169,667 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 169,667 units at a price of $0.60 per unit on November 15, 2006;
819,171 shares of common stock and 819,171 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 819,171 units at a price of $0.60 per unit on December 6, 2006;
1,680,569 shares of common stock and 1,680,569 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 1,680,569 units at a price of $0.60 per unit on April 30, 2007;
185,833 shares of common stock and 185,833 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 185,833 units at a price of $0.60 per unit on May 31, 2007;
385,000 shares of common stock issuable upon exercise of warrants at $0.35 per share issued pursuant to finders' fees agreements on July 5, 2007;
4,000 shares of common stock issuable upon exercise of warrants at $0.50 per share issued pursuant to finders' fees agreements on July 5, 2007;
163,041 shares of common stock issuable upon exercise of warrants at $0.60 per share issued pursuant to finders' fees agreements on July 5, 2007;
724,666 shares of common stock and 724,666 shares of common stock issuable upon exercise of warrants issued pursuant to the issuance of an aggregate of 724,666 units at a price of $0.60 per unit on October 31, 2007.
13
The following table sets forth certain information regarding the ownership of our shares of common stock to be sold by the Selling Stockholders as of the date of the registration statement of which this prospectus forms a part.  The number of shares to be offered by the Selling Stockholders include both the shares issued in the private placement transactions and the shares issuable to certain of the Selling Stockholders upon exercise of the warrants.
Information with respect to ownership is based upon information obtained from the Selling Stockholders.  Information with respect to "Shares Owned Prior to this Offering" includes the shares issuable upon exercise of warrants held by certain of the Selling Stockholders.  The "Shares to be Offered under this Prospectus" includes the shares acquired by the Selling Stockholders in the private placement transactions described above and shares that are issuable upon exercise of the warrants acquired by certain of the Selling Stockholders in such transactions.  Information with respect to "Shares Owned After this Offering" assumes the sale of all of the shares offered by this prospectus and no other purchases or sales of our common stock by the Selling Stockholders.  Except as described below and to our knowledge, the Selling Stockholders own and have sole voting and investment power over all shares or rights to these shares.  Except for their ownership of common stock described below, none of the Selling Stockholders had or have any material relationship with us.  On information and belief based upon query by the Company to the Selling Stockholders, we do not believe that any Selling Stockholder are registered broker-dealers or affiliates of registered broker-dealers.
Because a Selling Stockholder may offer by this prospectus all or some part of the common shares which it holds, no estimate can be given as at the date hereof as to the number of common shares actually to be offered for sale by a Selling Stockholder or as to the number of common shares that will be held by a Selling Stockholder upon the termination of such offering.
Name of Selling Stockholder
Shares Owned
Prior to this
Offering
(1)
Shares to be
Offered under this
Prospectus
(1)
Number of Shares Owned After
Offering and Percentage of Total of
the Issued and Outstanding
Shares Owned
After Offering
Percentage of
Issued and
Outstanding
Shares
(2)
Private Placement of shares at $0.10 per share, effective on October 29, 2005
Surfran Investments
(3)
200,000
200,000
Nil
Nil
Severn Consulting LLC
(3)
100,000
100,000
Nil
Nil
Lomas Invest Enterprises Corp.
(4)
200,000
200,000
Nil
Nil
Liberty Management, LLC Defined Benefit Plan
(5)
300,000
300,000
Nil
Nil
Isaiah Capital Trust
(6)
450,000
450,000
Nil
Nil
Copper Eagle International Foundation.
(7)
400,000
400,000
Nil
Nil
Oliver Lindsay
(8)
100,000
100,000
Nil
Nil
Dain Currie
50,000
50,000
Nil
Nil
Michael Baybak
500,000
500,000
Nil
Nil
Rosalind M. Black
41,978
41,978
Nil
Nil
Private Placement of shares at $0.10 per share, effective on March 3, 2006
Raj Chowdhry
100,000
100,000
Nil
Nil
Jaeger Marie-Line
30,000
30,000
Nil
Nil
Denis D. Corin
(9)
50,000
50,000
Nil
Nil
Affaires Financieres S.A.
(10)
200,000
200,000
Nil
Nil
Richard Bullock
300,000
300,000
Nil
Nil
Canon Bryan
105,000
105,000
Nil
Nil
14
Name of Selling Stockholder
Shares Owned
Prior to this
Offering
(1)
Shares to be
Offered under this
Prospectus
(1)
Number of Shares Owned After
Offering and Percentage of Total of
the Issued and Outstanding
Shares Owned
After Offering
Percentage of
Issued and
Outstanding
Shares
(2)
Thomas J. Deutsch Law Corporation
(11)
100,000
100,000
Nil
Nil
Laura Van Sprang
8,577
8,577
Nil
Nil
0742239 B.C. Ltd.
(12)
100,000
100,000
Nil
Nil
Jeffrey Antonia
8,577
8,577
Nil
Nil
Brett Grueter
8,577
8,577
Nil
Nil
Michael Walker
8,577
8,577
Nil
Nil
Josie Mann
(13)
20,000
20,000
Nil
Nil
Darren Mann
(14)
20,000
20,000
Nil
Nil
Mehdi Kardan
100,000
100,000
Nil
Nil
Kian Ehsan
100,000
100,000
Nil
Nil
Private Placement of shares at $0.10 per share, effective on May 31, 2006
Amir Adnani
(15)
110,000
110,000
Nil
Nil
Pascal D'Onofrio
100,000
100,000
Nil
Nil
Steven Narrod
100,000
100,000
Nil
Nil
Private Placement of 1,022,145 Units
(16)
Anthony Ress
60,000
60,000
Nil
Nil
Arash Adnani
57,144
57,144
Nil
Nil
Graham Elston
342,858
342,858
Nil
Nil
Greg Bowden
30,000
30,000
Nil
Nil
High Impact Financial Ltd.
(17)
200,000
200,000
Nil
Nil
Jorge Koc
25,714
25,714
Nil
Nil
Kian Ehsan
314,000
314,000
Nil
Nil
Mabobeh Afshar
57,144
57,144
Nil
Nil
Mahmoud Mohammadnabi
228,572
228,572
Nil
Nil
Marcus New
60,000
60,000
Nil
Nil
Mehran Ehsan
6,000
6,000
Nil
Nil
Michael Price
434,286
434,286
Nil
Nil
Sam Hirji
82,856
82,856
Nil
Nil
Simba Biomed Venture Partners LLC
(18)
60,000
60,000
Nil
Nil
Omid Reza Afham
85,716
85,716
Nil
Nil
Private Placement of 1,100,000 Units
(19)
David Cleave
300,000
300,000
Nil
Nil
David Pritchard
1,600,000
1,600,000
Nil
Nil
David Graham Young
80,000
80,000
Nil
Nil
Peter Burningham
220,000
220,000
Nil
Nil
15
Name of Selling Stockholder
Shares Owned
Prior to this
Offering
(1)
Shares to be
Offered under this
Prospectus
(1)
Number of Shares Owned After
Offering and Percentage of Total of
the Issued and Outstanding
Shares Owned
After Offering
Percentage of
Issued and
Outstanding
Shares
(2)
Private Placement of 180,000 Units
(20)
SMA Developments Ltd.
(21)
100,000
100,000
Nil
Nil
Uwe Koehler
260,000
260,000
Nil
Nil
Private Placement of 683,333 Units
(22)
Michael Price
33,334
33,334
Nil
Nil
Gary Brierley
666,666
666,666
Nil
Nil
N.F.G. Blashill
666,666
666,666
Nil
Nil
Private Placement of 169,667 Units
(23)
Jamie Jenkins
333,334
333,334
Nil
Nil
Jean-Claude Doucet
6,000
6,000
Nil
Nil
Private Placement of 819,171 Units
(24)
Stephen McCreery
1,638,342
1,638,342
Nil
Nil
Private Placement of 1,680,569 Units
(25)
Omid Reza Afham
50,000
50,000
Nil
Nil
Mahmoud Mohammadna
66,666
66,666
Nil
Nil
David Hutchinson
40,000
40,000
Nil
Nil
Glynn Fisher
200,000
200,000
Nil
Nil
Rod Talaifar
20,000
20,000
Nil
Nil
Sergey Ayvazyan
20,000
20,000
Nil
Nil
Hamid Bakhtiari
33,334
33,334
Nil
Nil
Lila Mohammadnabi
33,332
33,332
Nil
Nil
Hugh Hutchison
60,000
60,000
Nil
Nil
Omid Reza Afham
66,666
66,666
Nil
Nil
David Begleiter
6,000
6,000
Nil
Nil
Alim Abdulla
50,000
50,000
Nil
Nil
Mahmoud Mohammadna
389,332
389,332
Nil
Nil
Justin Geisler
4,000
4,000
Nil
Nil
Brent Tatford
10,000
10,000
Nil
Nil
Kenia Jeanniton
10,000
10,000
Nil
Nil
Pamela Capik
12,000
12,000
Nil
Nil
Houman Houchmand
66,666
66,666
Nil
Nil
Bradley Kieffer
84,000
84,000
Nil
Nil
Lama Al-Azzeh
15,000
15,000
Nil
Nil
Margaret Puhacz
15,000
15,000
Nil
Nil
Ali Ghassem
56,530
56,530
Nil
Nil
16
Name of Selling Stockholder
Shares Owned
Prior to this
Offering
(1)
Shares to be
Offered under this
Prospectus
(1)
Number of Shares Owned After
Offering and Percentage of Total of
the Issued and Outstanding
Shares Owned
After Offering
Percentage of
Issued and
Outstanding
Shares
(2)
Nizarali Somji
56,530
56,530
Nil
Nil
Correy Beal
2,000
2,000
Nil
Nil
Suzan El-Khatib
2,000
2,000
Nil
Nil
Dayton Daberkow
100,000
100,000
Nil
Nil
Toni Ali
20,000
20,000
Nil
Nil
Christian Fauna-Robinson
2,000
2,000
Nil
Nil
Temeka Tate
4,000
4,000
Nil
Nil
William Leefe
70,000
70,000
Nil
Nil
Nicolas Vergara
3,000
3,000
Nil
Nil
Carmela Cupo
30,000
30,000
Nil
Nil
Ramin Roohi
4,000
4,000
Nil
Nil
Firouz Adab
40,000
40,000
Nil
Nil
Amir Novin
83,334
83,334
Nil
Nil
Freddie Adnousi
330,000
330,000
Nil
Nil
Kian Ehsan
20,000
20,000
Nil
Nil
Peter Burningham
655,334
655,334
Nil
Nil
Duncan Gordon
40,000
40,000
Nil
Nil
Kristian Andersen
20,000
20,000
Nil
Nil
Rod Talaifar
18,000
18,000
Nil
Nil
Dain Currie
20,000
20,000
Nil
Nil
Norman Mawhinney
172,414
172,414
Nil
Nil
Michael Baybak
350,000
350,000
Nil
Nil
Omar Rafeh
4,000
4,000
Nil
Nil
Amanda Patenaude
6,000
6,000
Nil
Nil
Private Placement of 185,833 Units
(26)
Ron Saperstein
105,000
105,000
Nil
Nil
David Yue
50,000
50,000
Nil
Nil
Howard Roberts
216,666
216,666
Nil
Nil
Issuance of 385,000 Share Purchase Warrants
(27)
Steven Smart
38,857
38,857
Nil
Nil
Stephen Cooper
346,143
346,143
Nil
Nil
Issuance of 4,000 Share Purchase Warrants
(28)
Steven Smart
4,000
4,000
Nil
Nil
Issuance of 163,041 Share Purchase Warrants
(29)
Steven Smart
89,483
89,483
Nil
Nil
17
Name of Selling Stockholder
Shares Owned
Prior to this
Offering
(1)
Shares to be
Offered under this
Prospectus
(1)
Number of Shares Owned After
Offering and Percentage of Total of
the Issued and Outstanding
Shares Owned
After Offering
Percentage of
Issued and
Outstanding
Shares
(2)
Stephen Cooper
30,421
30,421
Nil
Nil
Arash Adnani
14,987
14,987
Nil
Nil
Oliver Lindsay
(8)
10,000
10,000
Nil
Nil
Private Placement of 724,666 Units
(30)
Philip Clayton
50,000
50,000
Nil
Nil
Aryo Trading Corp.
(30)
200,000
200,000
Nil
Nil
Mehdi Kardan
666,666
666,666
Nil
Nil
Mahmoud Mohammadnabi
66,666
66,666
Nil
Nil
Riaz Shariff
466,000
466,000
Nil
Nil
Total
17,594,095
17,594,095
Nil
Nil
(1)     Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares.  Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares).  In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided.  In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.  As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting power with respect to the number of shares of common stock actually outstanding on the date hereof.  Unless otherwise indicated hereinbelow, to our knowledge each Selling Stockholder has sole dispositive and voting power with respect to their shares of common stock owned.  The shares owned consist of the shares issued to the Selling stockholder upon completion of the private placement transaction and shares issuable to certain of the Selling Stockholders upon exercise of the warrants.
(2)     The applicable percentage of ownership is based on 27,615,351 shares of our common stock issued and outstanding as of February 1, 2008.
(3)     To our knowledge, A. Gordon exercises dispositive and voting power with respect to these shares.
(4)     To our knowledge, Gerald Hoop exercises dispositive and voting power with respect to these shares.
(5)     To our knowledge, Patrick Kephart exercises dispositive and voting power with respect to these shares.
(6)     To our knowledge, Sandra Gail Corin exercises dispositive and voting power with respect to these shares. Sandra Gail Corin is the sister of Alan Lindsay, one of our directors.
(7)     To our knowledge, Mavis Sanchez exercises dispositive and voting power with respect to these shares.
(8)     Oliver Lindsay is the son of Alan Lindsay, one of our directors.
(9)     Denis Corin is the nephew of Alan Lindsay, one of our directors, and the cousin of Johnathan Lindsay, our Secretary, Treasurer , Chief Financial Officer, Principal Accounting Officer and one of our directors.
(10)   To our knowledge, Roland Luchsinger/Werner Wagemann exercises dispositive and voting power with respect to these shares.
(11)   Thomas J. Deutsch is the principal of Thomas J.  Deutsch Law Corporation and a partner of the law firm of Lang Michener LLP and acts as the solicitor to the Company.
(12)   To our knowledge, Daniel Savard exercises dispositive and voting power with respect to these shares.
(13)   Josie Mann is the step daughter of Alan Lindsay, one of our directors.
(14)   Darren Mann is the step son of Alan Lindsay, one of our directors.
(15)   Amir Adnani is the son-in-law of Alan Lindsay, one of our directors.
(16)   On July 7, 2006, we issued an aggregate of 1,022,145 units at a price of $0.35 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at an exercise price of $0.60 per share, for the period commencing on the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed on any stock exchange or over-the-counter market.
(17)   To our knowledge, Imtiyaz Huizami exercises dispositive and voting power with respect to these shares.
(18)   To our knowledge, Mark Landy exercises dispositive and voting power with respect to these shares.
(19)   On July 17, 2006, we issued an aggregate of 1,100,000 units at a price of $0.50 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share of our common stock at an exercise price of $0.60 per share, for the period commencing on the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
(20)   On October 5, 2006, we issued an aggregate of 180,000 units at a price of $0.50 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $0.60 per share, for the period commencing on the date of issuance of the units and ending on the day which is six months from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
(21)   To our knowledge, Andre St. Marie exercises dispositive and voting power with respect to these shares.
(22)   On October 6, 2006, we issued an aggregate of 683,333 units at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
18
(23)   On November 15, 2006, we issued an aggregate of 169,667 units at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
(24)   On December 6, 2006, , we issued 819,171 units, , at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
(25)   On April 30, 2007, we issued 1,680,569 units at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
(26)   On May 31, 2007, we issued 185,833 units at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
(27)   On July 5, 2007, we issued 385,000 share purchase warrants, with each warrant entitling the subscriber to purchase one share a price of $0.35 per share, for the period commencing on the date of issuance of the units and ending on the day which is 18 months from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
(28)   On July 5, 2007, we issued 4,000 share purchase warrants, with each warrant entitling the subscriber to purchase one share a price of $0.50 per share, for the period commencing on the date of issuance of the units and ending on the day which is 18 months from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
(29)   On July 5, 2007, we issued 163,041 share purchase warrants, with each warrant entitling the subscriber to purchase one share a price of $0.60 per share, for the period commencing on the date of issuance of the units and ending on the day which is 18 months from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
(30)   On October 31, 2007, we issued 724,666 units at a price of $0.60 per unit, with each unit being comprised of one share of our common stock and one share purchase warrant, with each warrant entitling the subscriber to purchase one share a price of $1.00 per share, for the period commencing on the date of issuance of the units and ending on the day which is one year from the date that our shares of common stock are first listed for trading on any stock exchange or over-the-counter market.
(31)   To our knowledge, David Craven exercises dispositive and voting power with respect to these shares.
PLAN OF DISTRIBUTION
Timing of Sales
The Selling Stockholders may offer and sell the shares covered by this prospectus at various times.  The Selling Stockholders will act independently of us in making decisions with respect to the timing, manner and size of each sale.
Offering Price
The Selling Stockholders will sell their shares at an offering price of $0.60 per share until our shares are quoted on the OTC Bulletin Board or are listed for trading or quoted on any other public market.  Thereafter, the sales price offered by the Selling Stockholders to the public may be:
the market price prevailing at the time of sale;
a price related to such prevailing market price; or
such other price as the Selling Stockholders determine from time to time.
Our common stock is not currently listed on any national exchange or electronic quotation system.  To date, no actions have been taken to list our shares on any national exchange or electronic quotation system.  If our common stock becomes publicly traded, then the sales price to the public will vary according to the selling decisions of each Selling Stockholder and the market for our stock at the time of resale.
Manner of Sale
The shares may be sold by means of one or more of the following methods:
a block trade in which the broker-dealer so engaged will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
purchases by a broker-dealer as principal and resale by that broker-dealer for its account pursuant to this prospectus;
ordinary brokerage transactions in which the broker solicits purchasers;
through options, swaps or derivative;
privately negotiated transactions; or
in a combination of any of the above methods.
19
The Selling Stockholders may sell their shares directly to purchasers or may use brokers, dealers, underwriters or agents to sell their shares. Brokers or dealers engaged by the Selling Stockholders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions, discounts or concessions from the Selling Stockholders, or, if any such broker-dealer acts as agent for the purchaser of shares, from the purchaser in amounts to be negotiated immediately prior to the sale. The compensation received by brokers or dealers may, but is not expected to, exceed that which is customary for the types of transactions involved. Broker-dealers may agree with a Selling Stockholder to sell a specified number of shares at a stipulated price per share, and, to the extent the broker-dealer is unable to do so acting as agent for a Selling Stockholder, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment to the Selling Stockholder. Broker-dealers who acquire shares as principal may thereafter resell the shares from time to time in transactions, which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above, in the over-the-counter market or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then-current market price or in negotiated transactions. In connection with resales of the shares, broker-dealers may pay to commissions or receive from commissions the purchasers of shares as described above.
If our Selling Stockholders enter into arrangements with brokers or dealers, as described above, we are obligated to file a post-effective amendment to the registration statement of which this prospectus forms a part, disclosing such arrangements, including the names of any broker dealers acting as underwriters.
The Selling Stockholders and any broker-dealers or agents that participate with the Selling Stockholders in the sale of the shares may be deemed to be "underwriters" within the meaning of the Securities Act. In that event, any commissions received by broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
Sales Pursuant to Rule 144
Any shares of common stock covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act, may be sold under Rule 144 rather than pursuant to this prospectus.
Regulation M
We have advised the selling security holders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling security holders and their affiliates.  Regulation M under the Exchange Act prohibits, with certain exceptions, participants in a distribution from bidding for, or purchasing for an account in which the participant has a beneficial interest, any of the securities that are the subject of the distribution. Accordingly, the Selling Stockholder is not permitted to cover short sales by purchasing shares while the distribution is taking place.  Regulation M also governs bids and purchases made in order to stabilize the price of a security in connection with a distribution of the security.  In addition, we will make copies of this prospectus available to the selling security holders for the purpose of satisfying the prospectus delivery requirements of the Securities Act.
State Securities Laws
Under the securities laws of some states, the shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares may not be sold unless the shares have been registered or qualified for sale in the state or an exemption from registration or qualification is available and is complied with.
Sales by Residents of British Columbia
Selling Stockholders that are residents of British Columbia have to rely on an exemption from prospectus and registration requirements of British Columbia securities laws to sell their shares which are being registered for resale by this prospectus.  Such Selling Stockholders have to comply with the British Columbia Securities Commission's B.C. Instrument 72-502 "Trade in Securities of U.S. Registered Issuers" to resell their shares.  B.C. Instrument 72-502 requires, among other conditions, that British Columbia residents hold the shares for a period of twelve months and, consequent thereon, limits the volume of shares sold in a twelve-month period to five percent of the issued and outstanding shares of the issuer.  However, if we become a reporting issuer in British Columbia, then our British Columbia stockholders will only have to hold their shares for a period of four months and a day from becoming a reporting issuer in order to resell their shares.  At present we do not intend to become a reporting issuer in British Columbia and, accordingly, British Columbia resident stockholders who wish to make a public sale of shares through the OTC Bulletin Board or on any market or securities exchange in the United States will be limited to the resale limitations set forth in B.C. Instrument 72-502.
20
Expenses of Registration
We are bearing all costs relating to the registration of the common stock.  These expenses are estimated to be $44,805.34, including, but not limited to, legal, accounting, printing and mailing fees.  The Selling Stockholders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock.
LEGAL PROCEEDINGS
We currently are not party to any material legal proceedings and, to our knowledge, no such proceedings are threatened or contemplated.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our directors and executive officers and their respective ages as of the date of this prospectus are as follows:
Directors
Name of director
Age
Leonard Garcia
58
Johnathan Lindsay
31
Alan P. Lindsay
57
Randall Reneau
59
Executive Officers
Name of Executive Officer
Age
Office Held
Randall Reneau
59
President, Chief Executive Officer and Principal Executive Officer
Johnathan Lindsay
31
Secretary, Treasurer, Chief Financial Officer and Principal Accounting Officer
Steven L. Carter
49
Vice President of Operations
The following describes the business experience of each of our directors and executive officers, including other directorships held in reporting companies:
Leonard G. Garcia
Mr. Garcia has been a director since April 17, 2006.  In addition, he served as our President and Chief Executive Officer from April 17, 2006 until August 5, 2007.  Mr. Garcia is an Independent Petroleum Landman with over thirty years experience in oil and gas title research, lease negotiations and acquisitions, contracts, exploration and production.  Mr. Garcia worked under contract for Kerr-McGee Oil & Gas, Harkins & Co., Sun Oil Company, Oryx Energy Co., Texaco, Monsanto Exploration and Production Company, and Trans Texas Energy.  His corporate experience includes serving as Chief Executive Officer of Texas corporations with annual sales in excess of eighteen million dollars.  Mr. Garcia attended the University of Texas-Austin, The University of Texas-Pan American and Texas A&M University-Kingsville.  He currently resides in Austin, Texas.
21
Johnathan Lindsay, Secretary, Treasurer, Chief Financial Officer, Principal Accounting Officer and a director
Johnathan Lindsay
has been our Secretary since July 11, 2005.  In addition, he served as our President, Treasurer and as our sole director from July 11, 2005 until April 17, 2006.  He was subsequently reappointed as a director on April 17, 2007 and has also served as our Treasurer, Chief Financial Officer and Principal Accounting Officer since that date.  Mr. Lindsay was responsible for organizing initial financing for our Company.  From 2003 to 2006, Mr. Lindsay worked with Uranium Energy Corp., a uranium exploration company publicly traded on the American Stock Exchange, where he helped the company go public.  From 1999 to 2004, Mr. Lindsay was employed by Alan Lindsay and Associates as Vice President, Marketing and Corporate Secretary.  In 1997, Mr. Lindsay worked with the Investor Relations Group and for National Media, two North American public sector marketing firms.  Following his position with National Media, he studied marketing and business management from 1998 to 1999 at the British Columbia Institute of Technology.
Alan P. Lindsay, a director
Alan Lindsay, who was our founding officer and director, resigned as and officer and director on July 11, 2005.  Alan Lindsay was subsequently reappointed as a director on April 17, 2007.  Mr. Lindsay has extensive experience and expertise in the mining and bio-technology sectors.  From 2003 to the present, he has been the Chairman of Uranium Energy Corp., a uranium exploration company that has been publicly traded on the American Stock Exchange since September 2007.  Since October 2001, Mr. Lindsay has served as Chairman and CEO of MIV Therapeutics Inc, a publicly-listed biomedical company focused on biocompatible coating technology for stents and medical devices.  Since December 2005, Mr. Lindsay has served as a director of TapImmune Inc., a U.S. reporting company.
Mr. Lindsay was the founder of AZCO Mining, Inc., a base metals exploration company. Mr. Lindsay served as Azco's Chief Executive Officer and President from 1991 to 1994, its Chairman and Chief Executive Officer from 1994 to 1997 and its President, Chairman and Chief Executive Officer from 1997 to 2000. Azco was listed on the Toronto Stock Exchange in 1993 and on the American Stock Exchange in 1994. Mr. Lindsay currently serves as a director of Hana Mining Ltd., a TSX Venture Exchange reporting company.  Mr. Lindsay also co-founded Anatolia Minerals Development Limited, a junior resource company that trades on the TSX, and New Oroperu Resources Inc., a junior resource company that trades on the TSX Venture Exchange.
Randall Reneau, President, Chief Executive Officer, Principal Executive Officer and a director
Mr. Reneau has been a director of our Company since April 17, 2006, and he has served as our President, Chief Executive Officer and Principal Executive Officer since August 5, 2007.  Mr. Reneau is a certified professional geologist and holds licenses to practice geology in the states of Texas, Washington and Alaska.  He has more than 30 years combined mineral and oil and gas experience both domestic and foreign.  Mr. Reneau served as President of Reneau Exploration and Development Company, Inc. ("REDCO") from 1980 to 1988.  REDCO drilled and operated wells in Stephens County, Oklahoma and Navarro, Milam, Wilson and Guadalupe Counties in Texas.  Mr. Reneau served as Chief Exploration Officer and a director of Uranium Energy Corp., a uranium exploration company publicly traded on the American Stock Exchange., from January 2005 to July 2007.   Mr. Reneau has a B.A. in Geology from Central Washington University and an M.S. in Environmental Engineering from Kennedy-Western University.  Mr. Reneau currently resides in Austin, Texas.
Steven L. Carter, Vice President of Operations
Mr. Carter has served as our Vice President of Operations since December 20, 2006.  Mr. Carter is a registered professional engineer with twenty-five years of management and engineering experience in oil and gas exploration, production operations, reservoir management and drilling.  Mr. Carter served as Operations Manager and Operations Engineer for T-C Oil Company from 1990-2003, where he managed significant production, supervised drilling, provided economic evaluations and designed project workovers, as well as performing numerous other engineering services.  In 2003, Mr. Carter started Carter E&P, LLC, an independent oil and gas company, where he acquired a 100,000 barrel oil producing property and increased production three-fold by re-working the wells.  Mr. Carter has a B.S. in Petroleum Engineering from the University of Texas at Austin.
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Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our stockholders or until they resign or are removed from the board in accordance with our bylaws.  Our officers are appointed by our Board of Directors and hold office until they resign or are removed from office by the Board of Directors.
Significant Employees
We have no significant employees other than our executive officers.
Audit Committee
We have an Audit Committee of our Board of Directors comprised of Leonard Garcia, Alan P. Lindsay and Randall Reneau.  The audit committee operates pursuant to a charter adopted by the board.
Family Relationships
Alan P. Lindsay is the father of Johnathan Lindsay.  There are no other family relationships among our directors and officers.
Involvement in Certain Legal Proceedings
None of our directors, executive officers or control persons has been involved in any of the following events during the past five years:
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of February 1, 2008 by: (i) each person (including any group) known to us to own more than 5% of our shares of common stock; (ii) each of our directors; (iii) each of our officers; and (iv) our officers and directors as a group.  To our knowledge, each holder listed possesses sole voting and investment power with respect to the shares shown.
Title of Class
Name and Address of Beneficial
Owner
(1)
Amount and Nature
of Beneficial Owner
Percent of Class
(2)
Directors and Officers:
Common Stock
Leonard Garcia
10105 Grand Oak Drive
Austin, Texas, U.S.A., 78750
1,600,000
(3)
5.7%
Common Stock
Johnathan Lindsay
1917 West 12th Avenue
Vancouver, B.C., Canada, V6J 2G1
426,931
(4)
1.5%
Common Stock
Alan P. Lindsay
2701 - 1500 Hornby Street
Vancouver, B.C., Canada, V6Z 2R1
1,061,750
(5)
3.8%
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Title of Class
Name and Address of Beneficial
Owner
(1)
Amount and Nature
of Beneficial Owner
Percent of Class
(2)
Common Stock
Randall Reneau
9302 Mystic Oak Trail
Austin, Texas, U.S.A., 78750
1,600,000
(6)
5.7%
Common Stock
Steven L. Carter
615 Leopard, Suite 540
Corpus Christi, Texas, U.S.A., 78476
1,100,000
(7)
3.9%
Common Stock
All executive officers and directors as a group
(5 persons)
5,788,681
(8)
19.3%
Major Stockholders:
Common Stock
Kepfam Holdings, LLP
(9)
424 East Central Blvd., Suite 324
Orlando, Florida, U.S.A., 32801
1,600,000
5.8%
Common Stock
David Pritchard
17 Liniyna Street
Kiev, Ukraine, 03038
1,600,000
(10)
5.6%
Common Stock
Steven McCreery
31 Lisbarnett Road, Lisbane,
Comder, Newtoundands, Co Down
Northern Island, United Kingdom, BT23 GAN
1,638,342
(11)
5.8%
(1)     Under Rule 13d-3 of the Exchange Act a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and/or (ii) investment power, which includes the power to dispose or direct the disposition of shares.  In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares within 60 days of the date as of which the information is provided.
(2)     Based on the 27,615,351 shares of our common stock issued and outstanding as of February 1, 2008.
(3)     This figure includes (i) 1,000,000 shares of common stock, and (ii) stock options to purchase 600,000 shares of our common stock at an exercise price of $0.35 per share.
(4)     This figure includes (i) 100,000 shares of common stock, (ii) 26,931 shares of common stock held of record by Ocean Tower Productions, a company controlled by Johnathan Lindsay, and (iii) stock options to purchase 300,000 shares of our common stock at an exercise price of $0.33 per share.
(5)     This figure includes (i) 661,750 shares of common stock, (ii) 100,000 shares of common stock held of record by Alan P. Lindsay's wife, and (iii) stock options to purchase 300,000 shares of our common stock at an exercise price of $0.33 per share.
(6)     This figure includes (i) 1,000,000 shares of common stock, and (ii) stock options to purchase 600,000 shares of our common stock at an exercise price of $0.35 per share.
(7)     This figure includes (i) 500,000 shares of common stock, and (ii) stock options to purchase 600,000 shares of our common stock at an exercise price of $0.35 per share.
(8)     This figure includes (i) 3,388,681 shares of common stock and (ii) stock options to purchase 2,400,000 shares of our common stock at an exercise price of $0.35 per share.
(9)     To our knowledge, Patrick Kephart exercises dispositive and voting power with respect to these shares.
(10)   This figure includes (i) 800,000 shares of common stock and (ii) warrants to purchase 800,000 shares of our common stock at a price of $0.60 per share commencing upon the date of issuance and ending on the day which is six months from the day our shares are listed on any stock exchange or over-the-counter market.
(11)   This figure includes (i) 819,171 shares of common stock and (ii) warrants to purchase 819,171 shares of our common stock at a price of $1.00 per share commencing upon the date of issuance and ending on the day which is six months from the day our shares are listed on any stock exchange or over-the-counter market.
Changes in Control
We are unaware of any contract, or other arrangement or provision of our Articles or by-laws, the operation of which may at a subsequent date result in a change of control of the Company.
DESCRIPTION OF SECURITIES
General
Our authorized capital stock consists of 500,000,000 shares of common stock at a par value of $0.001 per share.  As of February 1, 2008, there were 27,615,351 shares of our common stock issued and outstanding.
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Common Stock
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a stockholder vote, except that at all elections of directors, each stockholder shall be entitled to as many votes as shall be equal to the number of such stockholder's shares of capital stock entitled to vote, multiplied by the number of directors to be elected, and such stockholder may cast all of such votes for a single director or may cast such votes among several directors.  The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for holding all meetings of stockholders, except as otherwise provided by applicable law or by the Articles of Incorporation.
Holders of common stock are entitled to share in all dividends that the Board of Directors, in its discretion, declares from available funds.  The payment of dividends is at the discretion of our Board of Directors.  We have never declared or paid any cash dividends on our common stock.  We currently intend to retain future earnings, if any, to finance the expansion of our business.  As a result, we do not anticipate paying any cash dividends in the foreseeable future.
In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities.
Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock offered hereby was employed on a contingency basis, or had, or is to receive, in connection with such offering, a substantial interest, direct or indirect, in the Company, nor was any such person connected with the Company as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
Lang Michener LLP, our independent legal counsel, has provided an opinion on the validity of the share of our common stock that are the subject of this prospectus.
The audited consolidated financial statements included in this prospectus have been audited by Dale Matheson Carr-Hilton LaBonte LLP, Chartered Accountants, which is an independent registered public accounting firm, to the extent and for the periods set forth in their reports appearing elsewhere in this prospectus.  These financial statements are included in reliance upon the authority of said firm as an expert in auditing and accounting.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our directors and officers are indemnified as provided by the Nevada Revised Statutes, our Articles of Incorporation and our Bylaws.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the act and is, therefore, unenforceable.
ORGANIZATION SINCE INCORPORATION
We were incorporated under the laws of the State of Nevada on April 12, 2005 under the name "Carlin Gold Corporation".  On July 19, 2005, we changed our name to "Nevada Gold Corp.".  On October 18, 2005, we changed our name to "Gulf States Energy, Inc." and increased our authorized capital from 100,000,000 shares of common stock to 500,000,000 shares of common stock, par value $0.001 per share.  On September 5, 2006, we changed our name to "Strategic American Oil Corporation".
We own 100% of the issued and outstanding share capital of Penasco, which was formed under the laws of the State of Nevada on November 23, 2005.
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Alan Lindsay is our only "independent" director as that term is defined in Rule 121 of the American Stock Exchange listings standards.
DESCRIPTION OF BUSINESS AND PROPERTIES
Name and Incorporation
We were formed under the laws of the State of Nevada on April 12, 2005 under the name "Carlin Gold Corporation".  By an amendment to our Articles of Incorporation, we changed our name to "Nevada Gold Corp." on July 19, 2005, "Gulf States Energy, Inc." on October 18, 2005 and "Strategic American Oil Corporation" on September 5, 2006.  On October 18, 2005, we increased our authorized capital from 100,000,000 shares of common stock to 500,000,000 shares of common stock, par value $0.001 per share.
Our principal business offices are located at 1111 West Hastings Street, Suite 320, Vancouver, British Columbia, Canada, V6E 2J3, our telephone number is (604) 628-9904 and our facsimile number is (604) 682-3591.
Our Business
We are a natural resource exploration and production company engaged in the exploration, acquisition and development of oil and gas properties in the United States.  We maintain an aggregate of approximately 553.90 gross (289.29 net) developed acres and approximately 12,738.93 gross (2,178.93 net) undeveloped acres pursuant to leases or acquisitions as described below.  Of that acreage, we maintain approximately 255.90 gross (160.85 net) developed acres in Louisiana, 298.00 gross (128.44 net) developed acres in Texas, 1,738.93 gross (1,738.93 net) undeveloped acres in Illinois, and 11,000.00 gross (440.00 net) undeveloped acres in Oklahoma.  Total developed and undeveloped acreage is approximately 13,292.83 gross acres (2,468.22 net).
Exploration Activities
Our oil and gas interests are as follows:
South Dehli/Big Creek Field, Louisiana
On August 24, 2006, we entered into an assignment of oil and gas interests purchase agreement with Energy Program Accompany, LLC (the "EPA Purchase Agreement").  Under the terms of the EPA Purchase Agreement, we paid $250,000 to acquire the Hold Lease, the Stahan Lease and the McKay Lease, as described below.
The Holt Lease
Pursuant to the EPA Purchase Agreement, we acquired a 97% working interest and an 81.25% net revenue interest in approximately 136 acres in Franklin Parish, Louisiana (the "Holt Lease").  We have assigned a 25% working interest to Tradestar Resources Corporation in conjunction with the acquisition.
We re-worked the Holt No. 10 well, pulling the well and replacing the rods, tubing and downhole pump.  For Holt No. 24, we pulled the well, replaced the rods, tubing and downhole pump.  On Holt No. 22, we pulled the well, replaced the tubing, rods and downhole pump.  We also installed new surface pumping unit (320 pump jack).  For the salt water disposal well, we cleaned up and installed a new triplex pump.  We built new all weather roads to wells and built new tank battery (oil storage tanks and separators) for Holt No. 22 and 24.  We also buried flow lines (oil and salt water), installed overhead power to all wells with transformer capable of handling additional load (wells), removed old tanks and separators, and built an equipment storage location.
As of the date of this prospectus, we are producing oil from the Holt No.'s 10, 22 and 24 wells.  The Holt No. 4 well is off-line pending workover or offset drilling.  The Holt No. 15 well is utilized as a salt water disposal well.
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The Strahan Lease
Pursuant to the EPA Purchase Agreement, we acquired a 100% working interest and an 81.25% net revenue interest in approximately 40 acres in Richland Parish, Louisiana (the "Strahan Lease").  We have assigned a 25% working interest to Tradestar Resources Corporation in conjunction with the acquisition.
As of the date of this prospectus, we are producing oil from the Strahan No. 1 well.
The McKay Lease
Pursuant to the EPA Purchase Agreement, we acquired a 100% working interest and an 82.08% net revenue interest in approximately 80 acres in Richland Parish, Louisiana (the "McKay Lease").  We have assigned a 25% working interest to Tradestar Resources Corporation in conjunction with the acquisition.
On the McKay lease, we re-worked the well but did not improve production.  We have been approached by a third party who expressed an interest in taking over the lease and drilling an offset well.  If we accept the offer, we would retain a 6.25% gross overriding interest, all equipment except tanks (moving equipment to storage area on Holt lease) and release from plugging liability.
As of the date of this prospectus, we are producing oil from the McKay No. 1 well.
The Welder Lease (Barge Canal), Texas
Effective August 1, 2006, we entered into an assignment and purchase agreement with OPEX Energy, LLC, whereby we acquired a 100% working interest (90% after payout) and a 72.5% net revenue interest (65.25% after payout) in approximately 81 acres of an oil and gas lease (the "Welder Lease") located in Calhoun County, Texas.
As of the date of this prospectus, two wells are producing gas and oil from the property.  The wells are operated using a gas lift system.  A third well is utilized for salt water disposal.  The wells have additional proven non-producing zones behind pipe.  We intend to develop the proved developed non-producing (PDNP) zones as current producing horizons deplete.
Oakdale NE, Donoho, Markum City and DST Prospects, Illinois
Through the date of this prospectus, we have entered into numerous oil and gas leases in Jefferson County, Illinois.  Currently these leases total approximately 1,423 gross acres pursuant to which we have a working interest of 100% and a net revenue interest of 87.5%.  We plan to drill one or more wells during 2008 offsetting past producing wells (Oakdale North Field) to a depth of approximately 4,000 feet.
Gobbler's Knob Prospect, Illinois
Through the date of this prospectus we have entered into several oil and gas leases in Hamilton County, Illinois.  Currently these leases total approximately 214 gross acres pursuant to which we have a working interest of 100% and a net revenue interest of 87.5%.  We plan to re-enter one well (Foreman No. 1) during 2008 to test a potential oil zone (Cyprus Sand) at approximately 2900 feet as indicated on historic drill logs.  The Foreman No. 1 offsets past producing wells (Dale Consolidated Field).  Total depth of the re-entry will be approximately 3000 feet.
Janssen Lease, Texas
In October 2005, we entered into an agreement to purchase a 25% working interest and an 18.75% net revenue interest in approximately 138 acres of an oil and gas lease (the "Janssen Lease") located in Karnes County, Texas.  This lease interest was acquired from Rockwell Energy.  An unsuccessful attempt was made to re-enter and re-complete a Roeder gas sand at 10,300 feet using side track drilling techniques.  As the original lease was set to expire, we negotiated a new oil and gas lease with the mineral owners and farmed out 100% of the working interest to ETG Energy Resources.  We retained a 3% back in after payment on any producing zones and a 5% non-promoted option to participate in any offset drilling within the leased area.  ETG successfully re-completed in the Roeder Sand and the Janssen A-1 well is currently producing between 250-300 mcf gas per day and approximately six (6) barrels per day of condensate.
Koliba Lease, Texas
Through the date of this prospectus, we have entered into to several lease agreements with certain mineral owners of a 79 acre tract (the "Koliba Lease") in Victoria County, Texas.  To date, we have has leased over 75% of the minerals with additional leases pending.  The property underlying these lease agreements is located near our Welder lease and has one shut-in oil/gas well.  The well has a proven oil zone behind pipe that previously produced 30 Bbls oil per day plus water.  The well is in close proximity to our Welder gas sales line and salt water disposal system.  Pending completion of leasing, we will determine whether to re-complete and produce the gas zone and oil sands, promote and drill a new well, or sell the lease / well and retain a working interest.
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Little Mule Creek Project, Oklahoma
In October 2007, we entered into an agreement with Marmik Oil Company ("Marmik") of Eldorado, Arkansas to purchase a 4.0% working interest in the Little Mule Creek Project located in Alfalfa and Woods Counties, Oklahoma.  Our interest is subject to a 25% back in after payout, which would reduce our interest to 3.0%.  The prospect consists of nearly 11,000 acres.  An initial horizontal well was spudded in around January 9, 2008 and is at 3,720 feet through the date of this prospectus.  The well is planned to be drilled vertically to 4950 feet and then drilled horizontally approximately 1,867 feet to a total vertical depth of approximately 5350 feet.  The main target zone is the Maquoketa dolomitic shale.  The Maquoketa zone produces from a number of vertical wells in the lease area, but this will be the first horizontal drilling in the field.  There are approximately 170 drilling locations within the current leased area.  In addition to the Maquoketa zone, three other potentially productive zones are present in the prospect area: Tonkawa Sands at 4,500 feet, Mississippian Chat at 4,900 feet and Misner Sand at 5,000 feet.  To date, we have paid $43,086 for our prorate share of land and geology-geophysical costs, $2,824 for exercising (prorate share) additional lease options, and $45,460 for drilling costs.  AFE (Authority for Expenditure) for the drilling and completion of the first well is estimated at $1,341,200, of which we will pay 4% ($53,648).  Marmik and Pulliam Oil & Gas, Inc. ("Pulliam) will back in after payout (BIAPO) for 25% on the initial well.  All subsequent wells will be drilled 75% of cost to the participants and 25% of costs to Marmik and Pulliam.  Savoy Energy, L.P. will be the operator.
Productive Wells
The following table sets forth information regarding the total gross and net productive wells, expressed separately for oil and gas.  All of our productive oil and gas wells were located in Texas and Louisiana.  For the purposes of this subsection: (i) one or more completions in the same bore hole have been counted as one well, and (ii) a well with one or multiple completions at least one of which is an oil completion has been classified as an oil well.  We do not have any wells with multiple completions.
Number of Operating Wells
Oil
Gas
Gross
Net
Gross
Net
Louisiana
5
3.75
Texas
2
2.00
1
.03
7
5.75
1
.03
A productive well is an exploratory well, development well, producing well or well capable of production, but does not include a dry well.  A dry well, or a hole, is an exploratory or a development well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well.
A gross well is a well in which a working interest is owned, and a net well is the result obtained when the sum of fractional ownership working interests in gross wells equals one.  The number of gross wells is the total number of wells in which a working interest is owned, and the number of net wells is the sum of the fractional working interests owned in gross wells expressed as whole numbers and fractions thereof.  The "completion" of a well means the installation of permanent equipment for the production of oil or gas, or, in the case of a dry hole, to the reporting of abandonment to the appropriate agency.
Production and Price History
We began production of oil in August 2006 with the acquisition of the Holt, Strahan and McKay leases in Franklin and Richland Parish, Louisiana.  In September 2006, we acquired the Welder lease in Calhoun County, Texas, which produces both oil and gas.  The table below sets forth the net quantities of oil and gas production, net of royalties, attributable to us from initial production in August 2006 through October 31, 2007.  For the purposes of this table, the following terms have the following meanings: (i) "Bbl" means one stock tank barrel or 42 U.S. gallons liquid volume; (ii) "MBbls" means one thousand barrels of oil; (iii) "Mcf" means one thousand cubic feet; (iv) "Mcfe" means one thousand cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one Bbl of oil; (v) "MMcfe/d" means one million cubic feet equivalent per day, determined by using the ratio of six Mcf of natural gas to one Bbl of oil; and (vi) "MMcf" means one million cubic feet.
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For the Three
Months Ended
October 31, 2007
For the Year
Ended
July 31, 2007
Period from
Inception to
October 31, 2007
Production Data
Oil (MBbls)
2.2
9.9
12.2
Natural gas (MMcf)
3.1
17.5
20.6
Total (MMcfe)
16.4
77.3
93.7
Average Prices:
Oil (per Bbl)
$ 77.88
$ 60.02
$ 63.27
Natural gas (per Mcf)
$ 5.23
$ 5.86
$ 5.87
Total (per Mcfe)
$ 11.53
$ 9.07
$ 9.50
Average Costs (per Mcfe):
Lease operating expenses
$ 8.75
$ 8.29
$ 8.37
Production tax expense
$ 0.43
$ 0.29
$ 0.31
(1)     Transportation and administrative expenditures are included in lease operating expenses.
Net production includes only production that is owned by us, whether directly or beneficially, and produced to our interest, less royalties and production due to others.  Production of natural gas includes only marketable production of gas on an "as sold" basis.  Production of natural gas includes only dry, residue and wet gas, depending on whether liquids have been extracted before we passed title, and does not include flared gas, injected gas and gas consumed in operations.  Recovered gas, lift gas and reproduced gas are not included until sold.
Acreage
The following table sets forth information regarding our gross and net developed and undeveloped oil and natural gas acreage under lease through the date of this prospectus:
Gross
(1)
Net
Developed Acreage
Illinois
-
-
Louisiana
255.90
160.85
Oklahoma
-
-
Texas
298.00
128.44
Undeveloped Acreage
Illinois
1,738.93
1,738.93
Louisiana
-
-
Oklahoma
11,000.00
440.00
Texas
-
-
Total
13,292.83
2,468.22
(1)     The gross acreage cited includes leasehold acreage to be earned under the farm-out agreements.
A developed acre is an acre spaced or assignable to productive wells, a gross acre is an acre in which a working interest is owned, and a net acre is the result that is obtained when the sum of fractional ownership working interests in gross acres equals one.  The number of net acres is the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions thereof.
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Undeveloped acreage is considered to be those lease acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil or natural gas, regardless of whether or not such acreage contains proved reserves, but does not include undrilled acreage held by production under the terms of a lease.  As is customary in the oil and gas industry, we can retain our interest in undeveloped acreage by drilling activity that establishes commercial production sufficient to maintain the lease or by payment of delay rentals during the remaining primary term of the lease.  The oil and natural gas leases in which we have an interest are for varying primary terms; however, most of our developed lease acreage is beyond the primary term and is held so long as oil or natural gas is produced.
Drilling Activity
As of the date of this prospectus, we have participated in one (1) drilling venture with Brayton Operating Company based in Corpus Christi, Texas.  A 12.5% working interested was purchased in a middle-lower Frio test (Meeks No. B-1), Victoria County, Texas.  The prospect was based on 3-D seismic data and adjacent well information.  The well was drilled, logged and plugged as indicated gas sands were deemed uneconomic.  We have completed five (5) workovers of producing or previously producing wells on our leases in the Delhi South and Big Creek fields in Richland and Franklin Parishes, Louisiana.  We also participated in the side-track re-entry on the Janssen No. A-1 in Karnes County, Texas.  All producing wells in Louisiana are operated for us by PROEX Energy Management Company ("Proex") based in Houston, Texas.  The Welder (Barge Canal) wells are operated for us by Carter E&P, LLC, based in Corpus Christi, Texas.  The Janssen lease (Karnes Co., Texas) is also operated by Proex.  We pay a monthly management fee to both companies for their services.
As of the date of this prospectus, we are currently drilling one horizontal well in the Little Mule Creek prospect (R&R Cattle No. 1-19) in Section 19, T29N, R12W, Alfalfa County, Oklahoma.
Present Activities
Much of the developed leasehold in Louisiana is adjacent to offset production.  A number of offset in-field drilling locations are indicated.  Additionally, Denbury Resources, Inc. (NYSE: DNR) has acquired a substantial acreage position in the Delhi-Holt-Bryant Unit in the immediate area of our holdings.  Denbury has begun work to institute a tertiary carbon dioxide flood and are shooting 3-D seismic in the immediate area of our leases.
We are currently negotiating to purchase a 220 acre lease containing five wells and one salt water disposal well in the area of our Strahan and McKay Leases (Richland Parish, Louisiana).  Additionally, we are negotiating on approximately 960 acres of leases adjacent to our Holt lease in Franklin Parish, Louisiana.
Our undeveloped acreage in the Illinois basin is adjacent to current or past producing wells.  Drilling and completion costs are lower than in many other producing basins and the net revenues are higher.  Our leases in Illinois average 87.5% net revenue interest with 100% working interest.  Multiple pay zones are indicated in leasehold areas including the Cypress, Levias, Aux Vases, Ste. Genevieve, Salem, Saint Lewis and Warsaw formations.  Maximum drill depths will be approximately 4,000 feet.
Additionally, the potential for "reef" type structures is considered high in several of our leasehold areas.  Negotiations are underway with possible joint venture partners for the funding of 3-D seismic surveys in order to identify possible reef drilling targets.
We are also currently evaluating oil well logs, maps and other data in the Welder (Barge Canal) lease area (Texas).  Initial reviews indicate the potential for possible offset drilling sites.
We continue to review and evaluate submittals on properties in Louisiana, Texas, Illinois and other areas of the continental United States.
Plan of Operations
Our plan of operations for the next twelve months is to re-enter the Foreman No. 1 well in Hamilton County, Illinois to test a Cyprus Sand at a depth of approximately 2900 feet.  We also plan to drill one (1) infield offset well in the Delhi South Field in Franklin Parish, Louisiana.  We plan to drill this well to a depth of between 3500 feet and 5000 feet depending on location and lease depth restrictions (if any).  We also plan to acquire additional leases in the Delhi field area.  The majority of the proposed acquisitions (Delhi area) have shut-in or currently non-producing wells within the proposed lease areas as well as salt water disposal wells.  We plan to re-work the wells on the acquired leases in order to restore and/or increase production.
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Leasing will continue in Illinois with emphasis moving from current targets in the Oakdale, Donoho and Gobbler's Knob prospects (Jefferson and Hamilton Counties), to potential secondary recovery projects (waterflood).  We intend to acquire (lease) at least one waterflood prospect during the next year of operation.  We are also reviewing the use of 3-D seismic in Illinois to located pinnacle reef structures.  We may purchase 2-D and or 3-D seismic or take seismic options and bring in joint venture partners to participate in proprietary seismic shoots.
In Texas, we plan to continue producing oil and gas from our Welder (Barge Canal) lease and are negotiating to acquire a seismic (3-D) option on the 32,192 acre Welder Ranch (Calhoun County, Texas).  We are also continuing to acquire additional mineral interests in the Koliba lease in Victoria County, Texas.  We will continue to maintain our 3.0% non-operated working interest in the Janssen No. A-1 well (gas and minor condensate) in Karnes County, Texas.
In connection with the Little Mule Creek Project, we have purchased a 4% working interest in a horizontal well to be drilled to test a Maquoketa dolomitic (fractured) shale prospect in Alfalfa and Woods Counties, Oklahoma.  As there are 170 drilling locations on the 11,000 acre leasehold, participation in additional drilling on this prospect is anticipated.  The initial well commenced drilling on or around January 9, 2008 and is at 3,720 feet as of the date of this prospectus.  Total costs for drilled and completed well (including lease and geology/geophyics) for our 4% working interest will be approximately $100,000.
Any time it is decided that drilling operations for a new well will be commenced, we will be provided with the following:
A description of the project and the location and target depth of the well;
The lands that will be subject to the well;
The royalties, net profit interest or other charges applicable to the subject lands;
The estimated cost of any geophysical work contemplated; and
The estimated acquisition costs, drilling costs, completion costs and equipping costs of the well.
It is estimated that the average drilling and completion costs in Illinois will be approximately $400,000 for wells drilled to 4,000 feet.  Offset development drilling in Louisiana to depths of 3,500 to 5,000 feet will be approximately $350,000 to $500,000.  Seismic (3-D) may average $50,000 per square mile for shooting and processing.  Seismic Options (option to lease) in Texas is expected to be in the $40/acre range.  Surface damage payments for the actual shoot are expected to run $10 per acre.  Seismic and land costs vary depending on the geographic area.  For example, Illinois is much lower cost in all aspects than Texas.  We anticipate drilling one to three wells in Louisiana (Delhi-Big Creek field areas) over the next twelve (12) months.  Additionally, three (3) re-entries, or new drilling of new wells, are planned over the same time period in Illinois.  If we are successful in acquiring a seismic option on the Welder Ranch, an additional $3,000,000 will be required for damages, option and upfront leasing costs.  These proposed projects would necessitate an estimated expenditure of $5,700,000 in addition to our normal lease operating costs and general administrative overhead.
If oil and gas prices remain in today's range, we feel we can maintain present day operations from proceeds of oil and gas sales from our producing leases in Louisiana and Texas.
To participate in the projects outline above, we estimate that we will need to spend approximately $6,000,000 during the next 12 months.  At October 31, 2007, we had $562,884 of cash on hand and working capital of $571,659.  As such, we estimate that we will need to receive approximately $5,430,000 during the next twelve months, either through the sale of capital stock or from borrowing.  There can be no assurance that we will be able to do so.
Government Regulation
The availability of a ready market for oil and gas production depends upon numerous factors beyond our control.  These factors include local, state, federal and international regulation of oil and gas production and transportation, as well as regulations governing environmental quality and pollution control, state limits on allowable rates of production by a well or proration unit, the amount of oil and gas available for sale, the availability of adequate pipeline and other transportation and processing facilities, and the marketing of competitive fuels.  State and federal regulations are generally intended to prevent waste of oil and gas, protect rights to produce oil and gas between owners in a common reservoir, and control contamination of the environment.
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Applicable legislation is under constant review for amendment or expansion.  These efforts frequently result in an increase in the regulatory burden on companies in our industry and a consequent increase in the cost of doing business and decrease in profitability.  Numerous federal and state departments and agencies issue rules and regulations imposing additional burdens on the oil and gas industry that are often costly to comply with and carry substantial penalties for non-compliance.  Our production operations may be affected by changing tax and other laws relating to the petroleum industry, constantly changing administrative regulations and possible interruptions or termination by government authorities.
The transportation and certain sales of natural gas in interstate commerce are heavily regulated by agencies of the federal government and are affected by the availability, terms and cost of transportation.  The price and terms of access to pipeline transportation are subject to extensive federal and state regulation.  The Federal Energy Regulatory Commission (FERC) is continually proposing and implementing new rules and regulations affecting the natural gas industry, most notably interstate natural gas transmission companies that remain subject to the FERC's jurisdiction.  The stated purpose of many of these regulatory changes is to promote competition among the various sectors of the natural gas industry.  Some recent FERC proposals may, however, adversely affect the availability and reliability of interruptible transportation service on interstate pipelines.
State regulatory authorities have established rules and regulations requiring permits for drilling operations, drilling bonds and reports concerning operations.  Many states have statutes and regulations governing various environmental and conservation matters, including the establishment of maximum rates of production from oil and gas wells, and restricting production to the market demand for oil and gas.  Such statutes and regulations may limit the rate at which oil and gas could otherwise be produced.  Most states impose a production or severance tax with respect to the production and sale of crude oil, natural gas and natural gas liquids within their respective jurisdictions.  State production taxes are generally applied as a percentage of production or sales.
Oil and gas rights may be held by individuals and corporations, and, in certain circumstances, by governments having jurisdiction over the area in which such rights are located.  As a general rule, parties holding such rights grant licenses or leases to third parties, such as us, to facilitate the exploration and development of these rights.  The terms of the licenses and leases are generally established to require timely development.  Notwithstanding the ownership of oil and gas rights, the government of the jurisdiction in which the rights are located generally retains authority over the manner of development of those rights.
Environmental
General
.  Our activities are subject to local, state and federal laws and regulations governing environmental quality and pollution control in the United States.  The exploration, drilling and production from wells, natural gas facilities, including the operation and construction of pipelines, plants and other facilities for transporting, processing, treating or storing natural gas and other products, are subject to stringent environmental laws and regulations by state and federal authorities, including the Environmental Protection Agency ("EPA").  These laws and regulations may require the acquisition of a permit by operators before drilling commences, prohibit drilling activities on certain lands lying within wilderness areas, wetlands and other ecologically sensitive and protected areas, and impose substantial remedial liabilities for pollution resulting from drilling operations.  Such regulation can increase our cost of planning, designing, installing and operating such facilities.
Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of significant investigatory or remedial obligations, and the imposition of injunctive relief that limits or prohibits our operations.  Moreover, some environmental laws provide for joint and several strict liability for remediation of releases of hazardous substances, rendering a person liable for environmental damage without regard to negligence or fault on the part of such person.  In addition, we may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances, such as oil and gas related products.
Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent and costly waste handling, storage, transport, disposal or cleanup requirements could materially adversely affect our operations and financial position, as well as those of the oil and gas industry in general.  While we believe that we are in substantial compliance with current environmental laws and regulations and have not experienced any material adverse effect from such compliance, there is no assurance that this trend will continue in the future.
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Waste Disposal
.  We currently lease, and intend in the future to own or lease, additional properties that have been used for production of oil and gas for many years.  Although we and our operators utilize operating and disposal practices that are standard in the industry, previous owners or lessees may have disposed of or released hydrocarbons or other wastes on or under the properties that we currently own or lease or properties that we may in the future own or lease.  In addition, many of these properties have been operated in the past by third parties over whom we had no control as to such entities' treatment of hydrocarbons or other wastes or the manner in which such substances may have been disposed of or released.  State and federal laws applicable to oil and gas wastes and properties may require us to remediate property, including ground water, containing or impacted by previously disposed wastes (including wastes disposed of or released by prior owners or operators) or to perform remedial plugging operations to prevent future or mitigate existing contamination.
We may generate wastes, including hazardous wastes, that are subject to the federal Resource Conservation and Recovery Act ("RCRA") and comparable state statutes.  The EPA has limited the disposal options for certain wastes that are designated as hazardous under RCRA.  Furthermore, it is possible that certain wastes generated by our oil and gas projects that are currently exempt from treatment as hazardous wastes may in the future be designated as hazardous wastes, and therefore be subject to more rigorous and costly operating and disposal requirements.
CERCLA
.  The federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also known as the "Superfund" law, generally imposes joint and several liability for costs of investigation and remediation and for natural resource damages, without regard to fault or the legality of the original conduct, on certain classes of persons with respect to the release into the environment of substances designated under CERCLA as hazardous substances.  These classes of persons or so-called potentially responsible parties include the current and certain past owners and operators of a facility where there is or has been a release or threat of release of a hazardous substance and persons who disposed of or arranged for the disposal of the hazardous substances found at such a facility.  CERCLA also authorizes the EPA and, in some cases, third parties to take action in response to threats to the public health or the environment and to seek to recover from the potentially responsible parties the costs of such action.  Although CERCLA generally exempts petroleum from the definition of hazardous substances, we may have generated and may generate wastes that fall within CERCLA's definition of hazardous substances.  We may in the future be an owner of facilities on which hazardous substances have been released by previous owners or operators of our properties that are named as potentially responsible parties related to their ownership or operation of such property.
Air Emissions.
Our projects are subject to local, state and federal regulations for the control of emissions of air pollution.  Major sources of air pollutants are subject to more stringent, federally imposed permitting requirements, including additional permits.  Producing wells, gas plants and electric generating facilities generate volatile organic compounds and nitrogen oxides.  Some of our producing wells may be in counties that are designated as non-attainment for ozone and may be subject to restrictive emission limitations and permitting requirements.  If the ozone problems in the applicable states are not resolved by the deadlines imposed by the federal Clean Air Act, or on schedule to meet the standards, even more restrictive requirements may be imposed, including financial penalties based upon the quantity of ozone producing emissions.  If we fail to comply strictly with air pollution regulations or permits, we may be subject to monetary fines and be required to correct any identified deficiencies.  Alternatively, regulatory agencies could require us to forego construction, modification or operation of certain air emission sources.
Clean Water Act.
The Clean Water Act imposes restrictions and strict controls regarding the discharge of wastes, including produced waters and other oil and natural gas wastes, into waters of the United States, a term broadly defined.  Permits must be obtained to discharge pollutants into federal waters.  The Clean Water Act provides for civil, criminal and administrative penalties for unauthorized discharges of oil, hazardous substances and other pollutants.  It imposes substantial potential liability for the costs of removal or remediation associated with discharges of oil or hazardous substances.  State laws governing discharges to water also provide varying civil, criminal and administrative penalties and impose liabilities in the case of a discharge of petroleum or its derivatives, or other hazardous substances, into state waters.  In addition, the EPA has promulgated regulations that may require us to obtain permits to discharge storm water runoff, including discharges associated with construction activities.  In the event of an unauthorized discharge of wastes, we may be liable for penalties and costs.
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Oil Pollution Act.
The Oil Pollution Act of 1990 ("OPA"), which amends and augments oil spill provisions of the Clean Water Act, and similar legislation enacted in Texas, Louisiana and other coastal states, impose certain duties and liabilities on certain "responsible parties" related to the prevention of oil spills and damages resulting from such spills in United States waters and adjoining shorelines.  A liable "responsible party" includes the owner or operator of a facility or vessel that is a source of an oil discharge or poses the substantial threat of discharge, or the lessee or permittee of the area in which a facility covered by OPA is located.  OPA assigns joint and several liability, without regard to fault, to each liable party for oil removal costs, remediation of environmental damage and a variety of public and private damages.  OPA also imposes ongoing requirements on a responsible party, including proof of financial responsibility to cover at least some costs of a potential spill.  Few defenses exist to the liability imposed by OPA.  In the event of an oil discharge, or substantial threat of discharge from our properties, vessels and pipelines, we may be liable for costs and damages.
We believe that we are in substantial compliance with current environmental laws and regulations in each of the jurisdictions in which we operate.  Although we have not experienced any material adverse effect from such compliance, there is no assurance that this trend will continue in the future.
Competition
The oil and natural gas industry is intensely competitive in all phases, including the exploration for new production and the acquisition of equipment and labor necessary to conduct drilling activities.  The competition comes from numerous major oil companies as well as numerous other independent operators.  There is also competition between the oil and natural gas industry and other industries in supplying the energy and fuel requirements of industrial, commercial and individual consumers.  We are a minor participant in the industry and compete in the oil and natural gas industry with many other companies having far greater financial, technical and other resources.
Competitive conditions may be substantially affected by various forms of energy legislation and/or regulation considered from time to time by the government of the United States and other countries, as well as factors that we cannot control, including international political conditions, overall levels of supply and demand for oil and gas, and the markets for synthetic fuels and alternative energy sources. Intense competition occurs with respect to marketing, particularly of natural gas.
Employees
We currently have no full-time or part-time employees with the exception of our officers.
Subsidiaries
We own 100% of the issued and outstanding share capital of Penasco, which was formed under the laws of the State of Nevada on November 23, 2005.
Leased Premises
On April 1, 2006, we entered into a long-term office premises lease at Suite 320, 1111 West Hastings Street, Vancouver, British Columbia, Canada, V6E 2J3.  The term is for 7 years expiring March 13, 2013.  The monthly base rent is $1,980 per month and the estimated monthly operating charge is $900 per month.  Additionally, we are renting office space at Suite 2015, 600 Leopard Street, Corpus Christi, Texas, 78473 for $1,200 per month.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion of our financial condition, changes in financial condition, plan of operations and results of operations should be read in conjunction with (i) our unaudited interim consolidated financial statements as at October 31, 2007 and for the period from inception (April 12, 2005 to October 31, 2007; (ii) our audited consolidated financial statements as at July 31, 2006 and 2007, and for the period from inception (April 12, 2005) to July 31, 2007, and (ii) the section entitled "Description of Business", included in this prospectus.  The discussion contains forward-looking statements that involve risks, uncertainties and assumptions.  Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under "Risk Factors" and elsewhere in this prospectus.
Plan of Operations
Our plan of operations for the next twelve months is to continue with the exploration and development of our oil and gas properties in the United States.  Our planned acquisitions and development of existing properties is described in detail in this prospectus under "Description of Business and Properties--Plan of Operations".
Results of Operations
The following sets table sets out our consolidated losses for the periods indicated:
Three Months
Ended
October 31, 2007
(Unaudited)
Three Months
Ended
October 31, 2006
(Unaudited)
Year Ended
July 31, 2007
(Audited)
Year Ended
July 31, 2006
(Audited)
For the Period from Inception
(April 12, 2005) to October 31, 2007
(Unaudited)
Oil and Gas Revenues
$   194,173
$   33,250
$   701,740
$   Nil
$   895,913
Administrative Expenses
Consulting
85,835
77,440
449,909
28,668
564,412
Consulting, stock-based
82,000
Nil
856,167
Nil
938,167
Depreciation and depletion
14,437
1,571
73,383
105
87,925
Direct operating costs
150,295
57,469
663,391
Nil
813,686
General and administration
36,238
19,058
100,726
38,316
175,280
Impairment of oil and gas
properties
Nil
Nil
158,800
74,506
233,306
Management fees
91,676
57,459
195,488
167,136
454,300
Management fees, stock-
based
Nil
Nil
1,200,000
Nil
1,200,000
Professional fees
32,669
8,072
68,211
31,622
132,502
Travel and promotion
28,870
19,076
106,529
60,123
195,522
Net Loss
$   327,847
$   206,895
$   3,170,864
$   400,476
$ 3,899,187
Three Months Ended October 31, 2007 Compared to Three Months Ended October 31, 2006
We recorded a net loss of $327,847 during the three months ended October 31, 2007, compared to a net loss of $206,895 for the three months ended October 31, 2006.
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Revenue
Revenue from oil and gas properties was $194,173 in the three months ended October 31, 2007, while direct operating costs were $150,295 over the same period.  Revenue from oil and gas properties was $33,250 in the three months ended October 31, 2006, while direct operating costs were $57,469 over the same period.
Expenses
Consulting fees were $85,835 in the three months ended October 31, 2007, compared to $77,440 in the three months ended October 31, 2006.  Depreciation and depletion expense was $14,437 in the three months ended October 31, 2007, compared to $1,571 in the three months ended October 31, 2006, with the increase resulting from the acquisition and production of oil and gas interests.  General and administrative expenses were $36,238 in the three months ended October 31, 2007, compared to $19,058 in the three months ended October 31, 2006, with the increase resulting primarily from the expansion of operations over the prior period.  We paid management fees of $91,676 in the three months ended October 31, 2007 to certain of our officers and directors, compared to $57,459 in the three months ended October 31, 2006.  We also incurred professional fees of $32,669 and travel and promotion expenses of $28,870 in the three months ended October 31, 2007, compared to $8,072 and $19,076, respectively in the three months ended October 31, 2006, with the increases also relating primarily to expanded operations over the prior period.  We incurred stock-based consulting charges of $82,000 in the three months ended October 31, 2007 resulting from the fair valuation of shares granted during the period.  We did not issue any shares for consulting services or issue option grants in the three months ended October 31, 2006.
Year Ended July 31, 2007 Compared to the Year Ended July 31, 2006
We recorded a net loss of $3,170,864 during the year ended July 31, 2007, compared to $400,476 for the year ended July 31, 2006.
Revenue
Revenue from oil and gas properties was $701,740 in the year ended July 31, 2007, while direct operating costs were $663,391 over the same period.  We did not have any producing properties during the prior year.
Expenses
Consulting fees were $449,909 in the year ended July 31, 2007, compared to $28,668 in the year ended July 31, 2006, with the increase relating to the use of external consultants to assist with expanding operations and administration in the year ended July 31, 2007.  Depreciation and depletion expense was $73,383 in the year ended July 31, 2007, compared to $105 in the year ended July 31, 2006, with the increase resulting from the acquisition of and production of oil and gas interests.  General and administrative expenses were $100,726 in the year ended July 31, 2007, compared to $38,316 in the year ended July 31, 2006, with the increase resulting primarily from the expansion of operations over the prior year.  Impairment of oil and gas properties was $158,800 in the year ended July 31, 2007 compared with $74,506 in the year ended July 31, 2006.  We paid management fees of $195,488 in the year ended July 31, 2007 to certain of our officers and directors, compared to $167,136 in the year ended July 31, 2006.  We also incurred professional fees of $68,211 and travel and promotion expenses of $106,529 in the year ended July 31, 2007, compared to $31,622 and $60,123, respectively, in the year ended July 31, 2006, with the increases also relating primarily to expanded operations over the prior year.  We incurred stock-based consulting charges of $856,167 and stock-based management fees of $1,200,000 in the year ended July 31, 2007 resulting from the fair valuation of shares and options granted during the year.  We did not issue any shares for consulting services or issue option grants in the prior year.
For the Period from Inception (April 12, 2005) to October 31, 2007
We recorded a cumulative net loss of $3,899,187 during the period from inception on April 12, 2005 to October 31, 2007.
Revenue
During this period, oil and gas revenue was $895,913 while direct operating costs were $813,686.
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Expenses
Consulting fees paid for operations and administration was $564,412 and the fair value of shares and options issued to consultants was $938,167.  Depreciation and depletion expense was $87,925 while impairment of oil and gas properties was $233,306.  General and administrative expenses were $175,280 relating primarily to office administration costs in Vancouver and Texas.  In addition, we paid management fees of $454,300 to certain of our officers and directors and incurred $1,200,000 for the fair value of options issued to certain officers and directors.  We also incurred professional fees of $132,502 and travel and promotion expenses of $195,522 relating to the organization and operations of the Company.
Liquidity and Capital Resources
The following table sets forth our cash and working capital as of October 31, 2007, July 31, 2007 and July 31, 2006:
As of October 31, 2007
(Unaudited)
As of July 31, 2007
(Audited)
As of July 31, 2006
(Audited)
Cash reserves
$562,884
$667,722
$650,204
Working capital
$571,659
$652,607
$623,382
We plan to spend approximately $6,000,000 over the next twelve months in carrying out our plan of operations, subject to the availability of additional financing.  At October 31, 2007, we had $562,884 of cash on hand and working capital of $571,659.  We anticipate that our working capital at October 31, 2007 will be sufficient to enable us to pursue our lease operating costs and to pay our general and administrative expenses for the next 12 months.  However, as discussed in this prospectus under "Description of Business and Properties--Plan of Operations", we anticipate that we will need to receive approximately $5,430,000 in order to pursue our complete plan of operations over the next twelve months.  There can be no assurance that we will be able to obtain additional financing in the amounts required or upon the terms acceptable to us.  If we do not obtain additional financing, we may be forced to abandon our plan of operations and our business.
Our current sources of revenue are inadequate to provide incoming cash flows to sustain future operations.  Our ability to pursue any planned principal business activity is dependent upon our successful efforts to raise additional equity financing and generate revenue, cash flow and attain profitable operations.  There can be no assurance that we will be able to complete any of the above objectives.  These factors raise substantial doubt regarding our ability to continue as a going concern.  The consolidated financial statements have been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities in the normal course of business.  As at October 31, 2007, we had accumulated losses of $3,899,187 since inception.  The financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Operating Activities
Operating activities in the three months ended October 31, 2007 used cash of $255,300 compared to $247,147 in the three months ended October 31, 2006.  Operating activities in the year ended July 31, 2007 used cash of $894,221 compared to $285,150 in the year ended July 31, 2006.  Operating activities in the period from inception on April 12, 2005 to October 31, 2007 used cash of $1,434,671.  Operating activities have primarily used cash as a result of the operating and organizational activities such as consulting fees, direct operating costs, management fees and travel and promotion.
Investing Activities
In the three months ended October 31, 2007, investing activities used cash of $107,538 compared to $349,098 in the three months ended October 31, 2006.  In the year ended July 31, 2007, investing activities used cash of $1,166,004 compared to $321,100 in the year ended July 31, 2007.  In each case, the increase relates primarily to significant acquisition costs of producing oil and gas properties.  In the period from inception to October 31, 2007, investing activities used cash of $1,594,642 relating to the acquisition and exploration of our properties.
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Financing Activities
As we have had limited revenues since inception, we have primarily financed our operations primarily through private placements of our stock.  Financing activities in the three months ended October 31, 2007 provided cash of $258,000 compared to $551,800 in the three months ended October 31, 2007.  Financing activities in the year ended July 31, 2007 provided cash of $2,077,743 compared to $1,256,454 in the year ended July 31, 2006.  In the period from inception to October 31, 2007, financing activities provided net cash of $3,592,197 from the sale of our equity securities.
Critical Accounting Policies
Our consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis.  The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our consolidated financial statements.  In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.  Actual results could differ from those estimates made by management.
We believe that our critical accounting policies and estimates include the accounting for accounts receivable, marketable securities and long-lived assets reclamation costs, and accounting for legal contingencies.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 period.  Actual results could differ from those estimates.  Significant areas requiring management's estimates and assumptions are determining the fair value of transactions involving common stock and financial instruments.  Other areas requiring estimates include deferred tax balances, valuation allowances, allocations of expenditures to resource property interests and asset impairment tests.
Oil and Gas Properties
We follow the full cost method of accounting for our oil and gas operations whereby all cost related to the acquisition of petroleum and natural gas interests are capitalized.  Such costs include land and lease acquisition costs, annual carrying charges of non-producing properties, geological and geophysical costs, costs of drilling and equipping productive and non-productive wells, and direct exploration salaries and related benefits.  We operate in one cost center, being the United States.
All costs included in properties subject to amortization, are amortized on the unit-of-production method using estimates of proved reserves.  Investments in unproved properties and development projects are not amortized until proved reserves associated with the projects can be determined or impairment occurs.  If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.  Abandonment of oil and natural gas properties are charged to the full cost pool and amortized.
Under the full cost method, the net book value of oil and natural gas properties are subject to a "ceiling" amount.  The ceiling is the estimated after-tax future net cash flows from proved oil and natural gas properties, discounted at 10% per annum plus the lower of cost or fair market value of unevaluated properties.  In calculating future net revenues, prices and costs in effect at the time of the calculation are held constant for the lives of the oil and natural gas reserves, except for changes that are fixed and determinable by existing contracts.  The excess, if any, of the net book value above this ceiling is charged to expense.
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Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in the statement of operations.
Asset Retirement Obligations
We have adopted the provisions of SFAS No. 143 "Accounting for Asset Retirement Obligations," which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.  The adoption of this standard has had no effect on our financial position or results of operations.  To October 31, 2007 any potential costs relating to the ultimate disposition of our oil and gas property interests have not yet been determinable.
Impairment of Long-Lived Assets
We review property, plant, and equipment and certain identifiable intangibles, excluding goodwill, for impairment.  Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.  Recoverability of these assets is measured by comparison of its carrying amount to future undiscounted cash flows the assets are expected to generate.  If property, plant, and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value.
Revenue Recognition
Oil and natural gas revenues are recorded using the sales method whereby we recognize oil and natural gas revenue based on the amount of oil and gas sold to purchasers when title passes, the amount is determinable and collection is reasonably assured.  Actual sales of gas are based on sales, net of the associated volume charges for processing fees and for costs associated with delivery, transportation, marketing, and royalties in accordance with industry standards.  Operating costs and taxes are recognized in the same period of which revenue is earned.
Stock-based Compensation
In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment", which replaced SFAS No. 123, "Accounting for Stock-Based Compensation" and superseded APB Opinion No. 25, "Accounting for Stock Issued to Employees".  In January 2005, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 107, "Share-Based Payment", which provides supplemental implementation guidance for SFAS No. 123R.  SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award.  SFAS No. 123R was to be effective for interim or annual reporting periods beginning on or after June 15, 2005, but in April 2005 the SEC issued a rule that will permit most registrants to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period as required by SFAS No. 123R.  The pro-forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition.  Under SFAS No. 123R, we must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption.  The transition methods include prospective and retroactive adoption options.  Under the retroactive options, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented.  The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated.  We have adopted the requirements of SFAS No. 123R from date of inception.
We account for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services" ("EITF 96-18").  Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.  The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.
39
Recent Accounting Pronouncements
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities".  This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value.  Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.  We are currently assessing the impact of SFAS No. 159 on our financial position and results of operations.
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51."  This statement requires that noncontrolling or minority interests in subsidiaries be presented in the consolidated statement of financial position within equity, but separate from the parents' equity, and that the amount of the consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income. SFAS No. 160 is effective for the fiscal years beginning on or after December 15, 2008.  Currently the Company does not anticipate that this statement will have an impact on its financial statements.
In December 2007, the FASB issued SFAS No. 141 (Revised) "Business Combinations". SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree.  The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  The guidance will become effective for the fiscal year beginning after December 15, 2008.  Management is in the process of evaluating the impact, if any, SFAS 141 (Revised) will have on the Company's financial statements upon adoption.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes of financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as described below, none of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
any of our directors or officers;
any person proposed as a nominee for election as a director;
any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; or
any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the above persons.
We entered into the following transactions with related parties from April 12, 2005 (date of inception) to October 31, 2007:
(a)       We recorded production revenues of $582,059 and incurred production costs of $291,920 for the Barge Canal Property, which is operated by a company that is controlled by Steven Carter, our Vice President of Operations; and
(b)       We paid rent of $33,731 to a company controlled by Johnathan Lindsay, our Secretary, Treasurer, Chief Financial Officer, Principal Accounting Officer and one of our directors.
40
These transactions were recorded at the exchange amount which is the amount agreed to by the related parties.  All amounts owed were non-interest bearing, unsecured and had no specified terms of repayment.  At October 31, 2007 no amounts are owing to officers or directors of the Company.
MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is not presently listed for trading on any securities exchange or market.  We intend to apply to list our shares of common stock for trading on the OTC Bulletin Board at the time the registration statement of which this prospectus forms a part becomes effective.
Convertible Securities
As of the date of this prospectus, there are 7,117,425 purchase warrants for our common stock outstanding, which permit the holders thereof to purchase an aggregate of 7,117,425 shares of our common stock.
In addition, as of the date of this prospectus, there are 3,800,000 options to purchase our common stock outstanding under our 2007 Stock Incentive Plan, which permit the holders thereof to purchase an aggregate of 3,800,000 shares of our common stock.
144 Shares
The SEC has recently enacted changes to Rule 144, which will take effect on February 15, 2008.  In general, under revised Rule 144, the following guidelines will apply:
Affiliate or person selling on behalf of an affiliate
Non-affiliate (and has not been an affiliate during the prior three months)
Restricted Securities of Reporting Issuers
During six-month holding period
--no resales under Rule 144 permitted
After six-month holding period
--may resell in accordance with all Rule 144 requirements, including current public information, volume limitations, manner of sale requirements for equity securities, and filing of Form 144
During six-month holding period
--no resales under Rule 144 permitted
After six-month holding period but before one year
--unlimited public resales under Rule 144 except that the current public information requirement still applies
After one year holding period
--unlimited public resales under Rule 144, need not comply with any other Rule 144 requirements
Restricted Securities of Non-Reporting Issuers
During one-year holding period
--no resales under Rule 144 permitted
After one-year holding period
--may resell in accordance with all Rule 144 requirements, including current public information, volume limitations, manner of sale requirements for equity securities, and filing of Form 144
During one-year holding period
--no resales under Rule 144 permitted
After one year holding period
--unlimited public resales under Rule 144, need not comply with any other Rule 144 requirements
As of the date of this prospectus, to the best of our knowledge and belief, the only "affiliates" of the Company (as such term is defined in Rule 144, are our officers and directors.  As disclosed in this prospectus under the heading "Security Ownership of Certain Beneficial Owners and Management", our officers and directors are the beneficial owners of an aggregate of 3,388,681 shares of common stock and stock options to purchase 2,400,000 shares of our common stock, representing 19.3% of our currently issued and outstanding common stock (assuming exercise of such options).  As affiliates, our officers and directors may sell such shares upon satisfaction of the relevant holding period for affiliates indicated above, provided that they comply will all other Rule 144 requirements.
As of the date of this prospectus, "non-affiliates" of the Company hold all of our securities not held by affiliates.  Such non-affiliates may sell such shares upon satisfaction of the relevant holding period for non-affiliates indicated above, provided that they comply with any other applicable Rule 144 requirements as indicated above.
41
Registration Rights
We have not granted registration rights to the selling stockholders or to any other person.
Holders of Our Common Stock
As of the date of this prospectus we had approximately 114 registered holders of our common stock.
Dividend Policy
We have never declared or paid any cash dividends on our common stock.  We currently intend to retain future earnings, if any, to finance the expansion of our business.  As a result, we do not anticipate paying any cash dividends in the foreseeable future.
There are no restrictions in our Articles or Bylaws that prevent us from declaring dividends.  The
Nevada Revised Statutes
, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
we would not be able to pay our debts as they become due in the usual course of business; or
our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.
Compensation Plans
The following table sets forth information relating to the grant of stock options under our equity compensation plans:
Equity Compensation Plan Information
Number of securities to be issued upon exercise of
outstanding options
Weighted average exercise
price of outstanding options
Number of securities remaining available for future issuance under equity
compensation plan
(a)   Equity Compensation
Plans approved by
stockholders (2007 Stock
Incentive Plan)
3,800,000
$0.33
6,200,000
(b)   Equity Compensation
Plans not approved by
stockholders
552,041
(1)
$0.42
Nil
Total
4,352,041
$0.34
6,200,000
(1)     On July 5, 2007 the Company issued 385,000 share purchase warrants exercisable at $0.35 per share, 4,000 share purchase warrants exercisable at $0.50 per share, and 163,041 share purchase warrants exercisable at $0.60 per share pursuant to finders' fees agreements.
42
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to our Chief Executive Officer and those executive officers that earned in excess of $100,000 during our fiscal years ended July 31, 2007 and July 31, 2006 (collectively, the "Named Executive Officers"):
Summary Compensation Table
Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock Awards
($)
Option Awards
($)
Non-Equity Incentive Plan Compen-sation
($)
Non-qualified Deferred Compen-sation Earnings
($)
All Other Compen-sation
($)
Total
($)
Randall Reneau
President, CEO & Principal Executive Officer
2007
49,738
(1)
Nil
Nil
300,000
(5)
Nil
Nil
Nil
349,738
2006
21,762
(1)
Nil
Nil
Nil
Nil
Nil
Nil
21,762
Johnathan Lindsay
Secretary, Treasurer, CFO & Principal Accounting Officer
2007
32,538
(2)
Nil
Nil
150,000
(5)
Nil
Nil
Nil
182,538
2006
28,270
(2)
Nil
Nil
Nil
Nil
Nil
Nil
28,270
Steven Carter
Vice President of Operations
2007
30,844
(3)
Nil
$175,000
(4)
300,000
(5)
Nil
Nil
Nil
505,844
2006
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
(1)     Randall Reneau received varying amounts per month through July 31, 2007 for the provision of various management consulting services provided by Mr. Reneau to us on a monthly basis and from time to time.
(2)     Johnathan Lindsay received varying amounts per month through July 31, 2007 for the provision of various management consulting services provided by Mr. Lindsay to us on a monthly basis and from time to time.
(3)     Steven Carter received $10,000 per month pursuant to the Carter Professional Services Agreement which is more particularly described below under Employment, Consulting and Services Agreements.
(4)     This amount represents the fair value of shares issued pursuant to a consulting services agreement, estimated using the Black-Scholes pricing model.
(5)     These amounts represent the fair value of these options at the date of grant which was estimated using the Black-Scholes pricing model.
The following table sets forth information as at July 31, 2007 relating to outstanding equity awards for each Named Executive Officer:
Outstanding Equity Awards at Year End Table
Option Awards
Stock Awards
Name
Number of Securities Under-
lying Unexer-cised Options
(#)
Exercise-able
Number of Securities Under-lying Unexer-cised Options (#) Unexer-ciseable
Equity Inventive Plan Awards:  Number of Securities Underlying Unexer-cised Unearned Options
(#)
Option Exercise Price
($)
Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested
(#)
Market Value of Shares or Units of Stock That Have Not Vested
($)
Equity Incentive Plan Awards:  Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
Equity Incentive Plan Awards:  Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
Randall Reneau,
600,000
Nil
Nil
$0.35
N/A
N/A
N/A
N/A
N/A
Johnathan Lindsay
300,000
Nil
Nil
$0.35
N/A
N/A
N/A
N/A
N/A
Steve Carter
600,000
Nil
Nil
$0.35
N/A
N/A
N/A
N/A
N/A
43
The following table sets forth information relating to compensation paid to our directors in the fiscal years ended July 31, 2007 and July 31, 2006:
Director Compensation Table
Name
Year
Fees Earned or Paid
in Cash
($)
Stock Awards
($)
Option Awards
($)
Non-Equity Incentive Plan Compen-sation Earnings
($)
Non-qualified Deferred Compen-sation Earnings
($)
All Other Compen-sation
($)
Total
($)
Leonard Garcia
2007
48,820
(1)
Nil
300,000
(4)
N/A
N/A
N/A
348,820
2006
15,208
(1)
Nil
Nil
N/A
N/A
N/A
15,208
Johnathan Lindsay
2007
32,538
(2)
Nil
150,000
(4)
N/A
N/A
N/A
182,538
2006
28,270
(2)
Nil
Nil
N/A
N/A
N/A
28,270
Alan Lindsay
2007
Nil
Nil
150,000
(4)
N/A
N/A
N/A
150,000
2006
Nil
Nil
Nil
N/A
N/A
N/A
Nil
Randall Reneau
2007
49,738
(3)
Nil
300,000
(4)
N/A
N/A
N/A
349,738
2006
21,762
(3)
Nil
Nil
N/A
N/A
N/A
21,762
(1)     Leonard Garcia received varying amounts per month through July 31, 2007 for the provision of various management consulting services provided by Mr. Garcia to us on a monthly basis and from time to time.
(2)     Johnathan Lindsay received varying amounts per month through July 31, 2007 for the provision of various management consulting services provided by Mr. Lindsay to us on a monthly basis and from time to time.
(3)     Randall Reneau received varying amounts per month through July 31, 2007 for the provision of various management consulting services provided by Mr. Reneau to us on a monthly basis and from time to time.
(4)      These amounts represent the fair value of these options at the date of grant which was estimated using the Black-Scholes pricing model.
Employment, Consulting and Services Agreements
The following summary of certain material terms of the employment, consulting or services agreements we have entered into with certain of our officers is not complete and is qualified in its entirety to the full text of each such agreement, copies of which are attached as exhibits to the registration statement of which this prospectus forms a part.
Management Solutions International Employment Services Agreement
On April 1, 2006, our Board of Directors authorized and approved the execution of the "Management Solutions International Employment Services Agreement".  The initial term of the agreement is two years expiring on April 1, 2008.  Pursuant to the terms and provisions of the Management Solutions International Employment Services Agreement:  (i) Steven Narrod agreed to provide duties to us commensurate with his service as our Chief Financial Officer and Principal Accounting Officer and as a member of our Board of Directors; (ii) we agreed to pay Management Solutions International a monthly fee of $8,335; (iii) we approved the granting of an aggregate of not less than 500,000 options to purchase shares of our common stock at $0.25 for a ten year term; and (iv) the Management Solutions International Employment Services Agreement could be terminated without cause by either party by providing prior written notice of the intention to terminate at least 90 days (in the case of our Company after the initial term) or 30 days (in the case of Mr. Narrod) prior to the effective date of such termination.  On October 31, 2006 Mr. Narrod resigned from his positions as our Chief Financial Officer and as a member of our Board of Directors.  No options were issued to Mr. Narrod and at July 31, 2007 no fees are outstanding to Management Solutions International, Inc.
44
Thomas Consulting Services and Option Agreement
We have entered into a Consulting Services and Option Agreement dated April 1, 2006 with Jim Thomas, our Chief Geologist.  Under the agreement, Mr. Thomas has agreed to provide geological consulting services to us including, among other things, assisting in the initiation, coordination, implementation and management of all aspects of any program or project in connection with the geological development and maintenance of our various business interests.  In consideration for these consulting services, we have agreed to pay Mr. Thomas a daily fee of $350.  In addition, we issued to Mr. Thomas options to acquire an aggregate of 250,000 shares of our common stock at an exercise price of $0.10 per share exercisable until April 1, 2016.  We have also agreed to reimburse Mr. Thomas for all reasonable expenses incurred by him in connection with the provision of such consulting services.  The initial term of the agreement is 18 months from April 1, 2006 and the agreement renews automatically on a month-to-month basis if not specifically terminated in accordance with the provisions of the agreement.  The agreement may be terminated by either party upon providing not less than 30 calendar days' prior written notice to the other party.  However, either party may terminate the agreement upon not less than ten calendar days' written notice in the event the other party fails to cure a material breach of any of the provisions of the agreement during such ten day period, the other party is non-compliant in the performance of its duties under the agreement and fails to become complaint within five calendar days of receipt of the notice, or a party commits fraud or serious misconduct in the discharge of its duties.
On October 1, 2007 our Board of Directors authorized and approved the execution of a modified Consulting Services and Option Agreement with Jim Thomas, our Chief Geologist.  The modified agreement has an initial term of 18 months expiring on March 31, 2009.  Pursuant to the terms and provisions of the Consulting Services and Option Agreement: (i) we shall pay a daily fee of $400 on a as requested basis; (ii) we will issue 200,000 shares of our restricted common stock; and (iii) we agreed to grant an aggregate of not less than 250,000 options to purchase shares of our common stock at $0.10 for a ten year term.  The option grant was completed on July 5, 2007.
Combest Consulting Services and Option Agreement
We have entered into a Consulting Services and Option Agreement dated August 1, 2006 with Kyle Combest, one of our geologists.  Under the agreement, Mr. Combest has agreed to provide geological consulting services to us including, among other things, assisting in the initiation, coordination, implementation and management of all aspects of any program or project in connection with the geological development and maintenance of our various business interests.  In consideration for these consulting services, we have agreed to pay Mr. Combest a daily fee of $400.  In addition, we issued to Mr. Combest options to acquire an aggregate of 250,000 shares of our common stock at an exercise price of $0.35 per share exercisable until April 1, 2016.  We have also agreed to reimburse Mr. Combest for all reasonable expenses incurred by him in connection with the provision of such consulting services.  The initial term of the agreement is 18 months from August 1, 2006 and the agreement renews automatically on a month-to-month basis if not specifically terminated in accordance with the provisions of the agreement.  The agreement may be terminated by either party upon providing not less than 30 calendar days' prior written notice to the other party.  However, either party may terminate the agreement upon not less than ten calendar days' written notice in the event the other party fails to cure a material breach of any of the provisions of the agreement during such ten day period, the other party is non-compliant in the performance of its duties under the agreement and fails to become complaint within five calendar days of receipt of the notice, or a party commits fraud or serious misconduct in the discharge of its duties.
Carter Professional Services Agreement
On December 20, 2006, our Board of Directors authorized and approved the execution of the "Carter Professional Services Agreement".  The term of the agreement is two years expiring on November 30, 2008.  Pursuant to the terms and provisions of the Carter Professional Services Agreement: (i) Steven Carter shall provide duties to us commensurate with his current executive position as our Vice President of Operations; (ii) we shall pay to Mr. Carter a monthly fee of $10,000; (iii) we approved the issuance of 500,000 shares of our common stock at a price of $0.001 per share; (iv) we approved the granting of an aggregate of not less than 600,000 options to purchase shares of our common stock at $0.35 for a ten year term; and (v) the Carter Professional Services Agreement may be terminated without cause by either of us by providing prior written notice of the intention to terminate at least 90 days (in the case of our Company after the initial term) or 30 days (in the case of Mr. Carter) prior to the effective date of such termination.
45
FINANCIAL STATEMENTS
This prospectus includes (i) the unaudited interim consolidated financial statements of Strategic American Oil Corporation as at October 31, 2007, and for the period from inception (April 12, 2005) to October 31, 2007, and (ii) the audited consolidated financial statements of Strategic American Oil Corporation as at July 31, 2006 and 2007, and for the period from inception (April 12, 2005) to July 31, 2007.  These financial statements have been prepared on the basis of accounting principles generally accepted in the United States and are expressed in U.S. dollars.
46
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2007
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
47
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
October 31, 2007
July 31, 2007
(Unaudited)
CURRENT ASSETS
Cash
$562,884
$667,722
Accounts receivable
65,848
88,730
Other current assets
8,369
8,369
637,101
764,821
RECLAMATION BONDS
(Note 3)
81,192
61,875
EQUIPMENT
(Note 4)
49,692
46,274
OIL AND GAS PROPERTIES
(Note 5)
Proved properties
508,691
520,385
Unproved properties
633,836
551,776
1,142,527
1,072,161
$1,910,512
$1,945,131
CURRENT LIABILITIES
Accounts payable and accrued liabilities
$65,442
$112,214
COMMITMENTS
(Note 8)
CONTINGENCY
(Note 1)
STOCKHOLDERS' EQUITY
Capital stock (Note 7)
Common stock $0.001 par value: 500,000,000 shares
authorized, 27,615,351 (July 31, 2007 - 26,690,685) shares
issued and outstanding
27,616
26,691
Additional paid-in capital
5,838,429
5,344,554
Share subscriptions
18,012
33,012
Share subscriptions receivable
(139,800)
-
Deficit accumulated during the exploration stage
(3,899,187)
(3,571,340)
1,845,070
1,832,917
$1,910,512
$1,945,131
The accompanying notes are an integral part of these consolidated financial statements.
48
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three
Months Ended
October 31, 2007
For the Three
Months Ended
October 31, 2006
Period from
April 12, 2005
(inception) to
October 31, 2007
OIL AND GAS REVENUES
$194,173
$33,250
$895,913
EXPENSES
Consulting
85,835
77,440
564,412
Consulting, stock-based (Note 7)
82,000
-
938,167
Depreciation and depletion
14,437
1,571
87,925
Direct operating costs
150,295
57,469
813,686
General and administrative
36,238
19,058
175,280
Impairment of oil and gas property (Note 5)
-
-
233,306
Management fees (Note 6)
91,676
57,459
454,300
Management fees, stock-based
-
-
1,200,000
Professional fees
32,669
8,072
132,502
Travel and promotion
28,870
19,076
195,522
522,020
240,145
4,795,100
NET LOSS
$(327,847)
$(206,895)
$(3,899,187)
BASIC AND DILUTED NET LOSS PER SHARE
$(0.01)
$(0.01)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED
26,755,902
22,706,713
The accompanying notes are an integral part of these consolidated financial statements.
49
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Share
Deficit
Accumulated
During the
Common Stock
Additional
Share
Subscriptions
Exploration
Stockholders'
Shares
Amount
Paid-in Capital
Subscriptions
Receivable
Stage
Equity
Balance, July 31, 2007
26,690,685
$26,691
$5,344,554
$33,012
$         -
$(3,571,340)
$1,832,917
Issued for services:
- $0.41 per share on October 1, 2007
200,000
200
81,800
-
-
-
82,000
Issued for cash:
- $0.60 per share on October 31, 2007
724,666
725
434,075
(15,000)
(139,800)
-
280,000
Share issuance costs
-
-
(22,000)
-
-
-
(22,000)
Net loss for the period
-
-
-
-
-
(327,847)
(327,847)
Balance, October 31, 2007
27,615,351
$27,616
$5,838,429
$18,012
$(139,800)
$(3,899,187)
$1,845,070
The accompanying notes are an integral part of these consolidated financial statements.
50
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three
Months Ended
October 31, 2007
For the Three
Months Ended
October 31, 2006
Period from
April 12, 2005
(inception) to
October 31, 2007
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss
$(327,847)
$(206,895)
$(3,899,187)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and depletion
14,437
1,466
87,925
Impairment loss properties
-
-
233,306
Stock based compensation
82,000
-
2,138,167
Changes in operating assets and liabilities:
Accounts receivable
22,882
(21,063)
(65,848)
Other current assets
-
7,653
(8,369)
Accounts payable
(46,772)
(9,385)
65,442
Due to related parties
-
(18,923)
13,893
NET CASH USED IN
OPERATING ACTIVITIES
(255,300)
(247,147)
(1,434,671)
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of shares for cash
295,000
500,000
3,833,699
Share subscriptions
(15,000)
101,800
18,012
Financing charges
(22,000)
(50,000)
(259,514)
NET CASH PROVIDED BY
FINANCING ACTIVITIES
258,000
551,800
3,592,197
CASH FLOWS FROM
INVESTING ACTIVITIES
Reclamation bonds
(19,317)
(21,875)
(81,192)
Purchase of property and equipment
(6,161)
(34,895)
(61,606)
Oil and gas property acquisitions
and exploration
(82,060)
(292,328)
(1,451,844)
NET CASH USED IN
INVESTING ACTIVITIES
(107,538)
(349,098)
(1,594,642)
INCREASE (Decrease) IN CASH
(104,838)
(44,445)
562,884
CASH, BEGINNING
667,722
650,204
-
CASH, ENDING
$562,884
$605,759
$562,884
SUPPLEMENTAL CASH FLOW INFORMATION AND
NONCASH INVESTING AND FINANCING ACTIVITIES
(Note 9)
The accompanying notes are an integral part of these consolidated financial statements.
51
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 2007
NOTE 1:               NATURE OF OPERATIONS
Strategic American Oil Corporation (the "Company") was incorporated as Carlin Gold Corporation on April 12, 2005 in Nevada, U.S.A.  On July 19, 2005 the Company changed its name to Nevada Gold Corp., on October 18, 2005 the Company changed its name to Gulf States Energy Inc. and on September 5, 2006 the Company changed its name to Strategic American Oil Corporation.  The Company is an exploration stage company as it has not generated significant revenues from operations.  The Company was formed for the purpose of oil and gas exploration and development.  The Company owns 100% of Penasco Petroleum Inc. ("Penasco"), a Nevada corporation incorporated on November 23, 2005.
The accompanying interim consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  At October 31, 2007, the Company had working capital of $571,659 but has incurred significant losses since inception and further losses are anticipated in the development of its oil and gas property interests.  The ability of the Company to continue as a going concern is dependent on raising additional capital to fund ongoing exploration and development and ultimately on generating future profitable operations.
The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.  Since internally generated cash flow will not fund development and commercialization of the Company's oil and gas properties, the Company will require significant additional financial resources and will be dependent on future financings to fund its ongoing exploration and development as well as other working capital requirements.  The Company's future capital requirements will depend on many factors including the rate and extent of progress in its exploration and development programs.  There can be no assurance the Company will be successful in its efforts to raise additional financing or if financing is available, that it will be on terms that are acceptable to the Company.
Management is addressing going concern remediation through raising additional sources of capital for operations and planned property acquisitions.  Management's plans are intended to increase the company's financial stability and improve the efficiency of continuing operations.  The Company continues to raise capital through private placements to meet immediate working capital requirements.  Management expects to be able to complete planned property acquisitions and funding of on-going operations.  These measures, if successful, will contribute to reducing the risk of going concern uncertainties for the Company over the next twelve to twenty-four months.
Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information.  They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements.  The interim unaudited financial statements should be read in conjunction with the audited July 31, 2007 financial statements.  In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made.  Operating results for the three months ended October 31, 2007 are not necessarily indicative of the results that may be expected for the year ending July 31, 2008.
NOTE 2:                RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51."  This statement requires that noncontrolling or minority interests in subsidiaries be presented in the consolidated statement of financial position within equity, but separate from the parents' equity, and that the amount of the consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income.  SFAS No. 160 is effective for the fiscal years beginning on or after December 15, 2008.  Currently the Company does not anticipate that this statement will have an impact on its financial statements.
52
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 2007
NOTE 2:                RECENT ACCOUNTING PRONOUNCEMENTS (continued)
In December 2007, the FASB issued SFAS No. 141 (Revised) "Business Combinations".  SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree.  The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  The guidance will become effective for the fiscal year beginning after December 15, 2008.  Management is in the process of evaluating the impact, if any, SFAS 141 (Revised) will have on the Company's financial statements upon adoption.
NOTE 3:                Reclamation bonds
Reclamation bonds includes interest and non-interest bearing deposits issued in the States of Louisiana ($41,192) and Texas ($40,000) to cover each State's reclamation requirement for producing operations.
NOTE 4:                EQUIPMENT
October 31, 2007
July 31, 2007
Computer equipment
$1,588
$       -
Furniture and fixtures
7,774
3,201
Leasehold improvements
11,294
11,294
Production equipment
40,950
40,950
61,606
55,445
Less: accumulated depreciation
(11,914)
(9,171)
$49,692
$46,274
NOTE 5:                OIL AND GAS PROPERTIES
PROVED:
Barge Canal, Texas
Effective August 1, 2006 the Company entered into an assignment and purchase agreement with OPEX Energy, LLC.  Under the terms of the agreement, the Company paid $500,000 plus a finder's fee of $50,000 for a 100% working interest (90% after payout) and a 72.5% net revenue interest (65.25% after payout) in approximately 81 acres of an oil and gas lease (the "Welder Lease") located in Calhoun County, Texas.
UNPROVED:
South Delhi / Big Creek Field, Louisiana
On August 24, 2006 the Company entered into an assignment of oil and gas interest and purchase agreement with Energy Program Accompany, LLC.  Under the terms of the agreement, the Company paid $250,000 to acquire the property.  The agreement includes the following interests:
a)     a 97% working interest and an 81.25% net revenue interest in approximately 136 acres in Franklin Parish, Louisiana (the "Holt Lease");
b)     a 100% working interest and an 81.25% net revenue interest in approximately 40 acres in Richland Parish, Louisiana (the "Strahan Lease"); and
c)     a 100% working interest and an 82.08% net revenue interest in approximately 80 acres in Richland Parish, Louisiana (the "McKay Lease").
53
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 2007
NOTE 5:                OIL AND GAS PROPERTIES (continued)
Effective September 1, 2006 the Company assigned a 12.5% working interest to Tradestar Resources Corporation ("Tradestar") in conjunction with the acquisition.  The Company interest is additionally subject to a back in after payout agreement with Tradestar for an additional 12.5% working interest which went into effect as of January 1, 2007.
NE Oakdale and DST prospects, Illinois
Through October 31, 2007 the Company has entered into numerous oil and gas leases in Jefferson County, Illinois.  The leases total approximately 1,423 gross acres pursuant to which the Company has a working interest of 100% and a net revenue interest of 87.5%, for a total cost to October 31, 2007 of $166,528.
Gobbler
'
s Knob Prospect, Illinois
Through October 31, 2007 the Company has entered into several oil and gas leases in Hamilton County, Illinois.  The leases total approximately 214 gross acres pursuant to which the Company has a working interest of 100% and a net revenue interest of 87.5%, for a total cost to October 31, 2007 of $9,567.
Koliba Lease, Texas
Through October 31, 2007 the Company has entered into several lease agreements with certain mineral owners of a 79 acre tract (the "Koliba Lease") in Victoria County, Texas for a total cost to October 31, 2007 of $4,645.
Little Mule Creek, Oklahoma
On October 30, 2007 the Company signed a letter agreement with Marmik Oil Company ("Marmik") whereby the Company acquired a 4% working interest in the Little Mule Creek Project, located in Alfalfa and Woods Counties, Oklahoma.  Under the terms of the letter agreement, the Company paid aggregate acquisition costs of $43,086 in addition to 4% participation in the drilling and completion costs of the initial test well, which are estimated at $1,341,200 (the Company's share would be $53,648).  The participation is subject to a 25% back in after payout, which would reduce the Company's interest to 3%.
Janssen Lease, Texas
In October 2005, the Company entered into an agreement to purchase a 25% working interest and an 18.75% net revenue interest in approximately 138 acres of an oil and gas lease (the "Janssen Lease") located in Karnes County, Texas.  This lease interest was acquired from Rockwell Energy, LLC for $220,000 plus additional payments of $13,800 on July 17, 2006 to the owners after negotiating a new oil, gas and mineral lease.  On December 20, 2006 the Company farmed out 100% of the working interest to ETG Energy Resources, retaining a 3% back in after payout on any producing zones and a 5% non-promoted option to participate in any offset drilling within the leased area.  At July 31, 2007, management determined the recoverable value of its interest to be $75,000, and accordingly, costs of $158,800 were written off to impairment of oil and gas properties.
Capitalized costs of oil and natural gas producing properties
The Company's aggregate capitalized costs related to oil and natural gas properties are as follows:
October 31, 2007
July 31, 2007
Proven reserves (Barge Canal)
$584,702
$584,702
Accumulated depletion and amortization
(76,011)
(64,317)
508,691
520,385
Unproven or unevaluated reserves
867,142
785,082
Impairment loss
(233,306)
(233,306)
633,836
551,776
$1,142,527
$1,072,161
54
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 2007
NOTE 5:                OIL AND GAS PROPERTIES (continued)
Capitalized costs incurred for oil and natural gas producing activities
Costs incurred in oil and natural gas property acquisition, exploration and development activities that have been capitalized are summarized below:
October 31, 2007
July 31, 2007
Acquisition cost
Proven properties
$572,456
$572,456
Unproven properties
751,510
670,676
1,323,966
1,243,132
Development and exploration costs
127,878
126,652
$1,451,844
$1,369,784
NOTE 6:                RELATED PARTY TRANSACTIONS
The Company had transactions with certain officers and directors of the Company for the three months ended October 31, 2007 as follows:
a)     recorded production revenues of $102,045 (2006 - $Nil) and incurred production costs of $76,009 (2006 - $nil)  for the Barge Canal property which is operated by a company controlled by an officer of the Company;
b)     incurred management fees of $91,676 (2006 - $57,459) to officers and directors;
c)     incurred rental charges of $5,400 (2006 - $7,726) to a company owned by a former director of the Company;
These transactions were recorded at the exchange amount which is the amount agreed to by the related parties.  All amounts owed were non-interest bearing, unsecured and had no specified terms of repayment.
NOTE 7:                CAPITAL STOCK
Share Capital
The Company's capitalization at October 31, 2007 was 500,000,000 authorized common shares with a par value of $0.001 per share.
2008 Share Transactions
On October 1, 2007, the Company issued 200,000 shares of its common stock pursuant to a Consulting Services Agreement.  The Company recorded the fair value of the shares issued at $0.41 per share (based on an allocation of recent private placements between shares and the connected warrants), or $82,000 as a stock-based consulting expense.
On October 31, 2007, the Company completed a private placement for 724,666 Units at a subscription price of $0.60 per Unit for gross proceeds of $434,800, of which $139,800 was received on November 1, 2007 and accordingly, has been recorded as share subscriptions receivable at October 31, 2007.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $22,000 in cash.
55
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 2007
NOTE 7:                CAPITAL STOCK (continued)
Share Purchase Warrants
A summary of the Company's stock purchase warrants as of October 31, 2007 and changes during the period is presented below:
Number of
warrants
Weighted average
exercise price
Weighted average
remaining life
Balance, July 31, 2007
6,392,759
$0.81
n/a
Issued
724,666
1.00
n/a
Exercised or expired
-
-
n/a
Balance, October 31, 2007
7,117,425
$0.83
n/a
Stock Compensation Plan
On July 5, 2007 the Company adopted the 2007 Stock Incentive Plan allowing for the issuance of up to 10,000,000 common shares.
A summary of the Company's stock options as of October 31, 2007 and changes during the period is presented below:
Number of
options
Weighted average
exercise price
Weighted average
remaining life
Balance, July 31, 2007
3,800,000
$0.33
9.93
Issued
-
-
-
Exercised or expired
-
-
-
Balance, October 31, 2007
3,800,000
$0.33
9.68
A summary of the status of the Company's unvested options as of October 31, 2007, and changes during the three months ended October 31, 2007, is presented below:
Number of Shares
Weighted-Average
Grant-Date
Fair Value
Unvested at July 31, 2007
66,666
$0.50
Granted
-
-
Vested
-
-
Unvested at October 31, 2007
66,666
$0.50
56
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 2007
NOTE 8:                COMMITMENTS
On December 20, 2006 the Company entered into a Professional Services Agreement with a consultant, who agreed to become an officer of the Company as of May 1, 2007.  The initial term of the agreement is one year expiring on November 1, 2008.  Pursuant to the terms and provisions of the Professional Services Agreement: (i) the Company shall pay a monthly fee of $10,000; (ii) the Company issued 500,000 shares of its restricted common stock; and (iii) the Company granted an aggregate of not less than 600,000 options to purchase shares of its common stock at $0.35 for a ten year term.
On October 1, 2007 the Company entered into Consulting Services Agreement with a geological consultant with an initial term of 18 months expiring on March 31, 2009.  Pursuant to the terms and provisions of the Consulting Services Agreement: (i) the Company shall pay a daily fee of $400 on a as requested basis; (ii) the Company will issue 200,000 shares of its restricted common stock (refer to Note 7); and (iii) the Company will grant an aggregate of not less than 250,000 options to purchase shares of its common stock at $0.10 for a ten year term.
The Company has entered into various employment and consulting agreements with both fixed compensation arrangements and established fees paid on a daily basis as needed.  The agreements expire no later than March 31, 2009.  The aggregate outstanding commitment through expiry of all agreements is approximately $10,000.
During the year ended July 31, 2006, the Company signed a lease agreement for the rental of office space.  The lease expires on March 31, 2013.  The future minimum lease obligations are as follows for the years ending July 31:
2008
$
19,943
2009
19,943
2010
19,943
2011
19,943
2012
19,943
Thereafter
8,309
$
108,024
NOTE 9:	SUPPLEMENTAL CASH FLOW INFORMATION AND
NON-CASH INVESTING AND FINANCING ACTIVITIES
For the Three
Months Ended
For the Three
Months Ended
October 31, 2007
October 31, 2006
Interest paid
$         -
$         -
Income taxes paid
$         -
$         -
During the three months ended October 31, 2007 the Company issued 200,000 shares of its common stock with a fair value of $0.41 per share, or $82,000 pursuant to a consulting services agreement, which was recorded as a stock-based consulting expense (refer to Note 7).
57
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
58
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Strategic American Oil Corporation:
We have audited the accompanying consolidated balance sheets of Strategic American Oil Corporation (an exploration stage company) as of July 31, 2007 and 2006 and the consolidated statements of operations, stockholders' equity and cash flows for the years ended July 31, 2007 and 2006, the period from April 12, 2005 (inception) to July 31, 2005 and for the period from April 12, 2005 (inception) through July 31, 2007.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 31, 2007 and 2006 and the results of its operations and its cash flows for the years ended, July 31, 2007 and 2006, the period from April 12, 2005 (inception) to July 31, 2005 and for the period from April 12, 2005 (inception) to July 31, 2007, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements 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 exploration stage and has losses from operations since inception.  These factors raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans in this regard are described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
"DMCL"
DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED ACCOUNTANTS
December 31, 2007
Vancouver, Canada
59
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
July 31, 2007
July 31, 2006
CURRENT ASSETS
Cash
$667,722
$650,204
Accounts receivable
88,730
-
Other current assets
8,369
9,522
764,821
659,726
RECLAMATION BONDS
(Note 3)
61,875
-
EQUIPMENT
(Note 4)
46,274
11,189
OIL AND GAS PROPERTIES
(Note 5)
Proved properties
520,385
-
Unproved properties
551,776
235,300
1,072,161
235,300
$1,945,131
$906,215
CURRENT LIABILITIES
Accounts payable and accrued liabilities
$112,214
$17,421
Due to related parties (Note 6)
18,923
112,214
36,344
COMMITMENTS
(Note 9)
CONTINGENCY
(Note 1)
STOCKHOLDERS' EQUITY
Capital Stock (Note 7)
Common stock $0.001 par value: 500,000,000 shares
authorized, 26,690,685 (2006 - 22,472,112) shares
issued and outstanding
26,691
22,472
Additional paid-in capital
5,344,554
1,247,875
Share subscriptions (Note 12)
33,012
-
Deficit accumulated during the exploration stage
(3,571,340)
(400,476)
1,832,917
869,871
$1,945,131
$906,215
The accompanying notes are an integral part of these consolidated financial statements.
60
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year
Ended
July 31, 2007
For the Year
Ended
July 31, 2006
Period from
April 12, 2005
(inception) to
July 31, 2005
Period from
April 12, 2005
(inception) to
July 31, 2007
OIL AND GAS REVENUES
$701,740
$          -
$          -
$701,740
EXPENSES
Consulting
449,909
28,668
-
478,577
Consulting, stock-based (Note 7)
856,167
-
-
856,167
Depreciation and depletion
73,383
105
-
73,488
Direct operating costs
663,391
-
-
663,391
General and administrative
100,726
38,316
-
139,042
Impairment of oil and gas
property (Note 5)
158,800
74,506
-
233,306
Management fees (Note 6)
195,488
167,136
-
362,624
Management fees, stock-based (Notes 6 & 7)
1,200,000
-
-
1,200,000
Professional fees
68,211
31,622
-
99,833
Travel and promotion
106,529
60,123
-
166,652
3,872,604
400,476
-
4,273,080
NET LOSS
$(3,170,864)
$(400,476)
$          -
$(3,571,340)
BASIC AND DILUTED NET LOSS
PER SHARE
$(0.13)
$(0.02)
$          -
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING,
BASIC AND DILUTED
24,588,931
16,899,030
-
The accompanying notes are an integral part of these consolidated financial statements.
61
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FROM APRIL 12, 2005 (INCEPTION) TO JULY 31, 2007
Deficit
Accumulated
During the
Common Stock
Additional
Share
Exploration
Stockholders'
Shares
Amount
Paid-in Capital
Subscriptions
Stage
Equity
Balance, April 12, 2005 and July 31, 2005
-
$         -
$         -
$         -
$         -
$         -
Issued for cash:
- $0.001 per share on October 18, 2005
16,000,000
16,000
-
-
-
16,000
- $0.10 per share on October 29, 2005,
March 3 and May 31, 2006
4,013,036
4,013
397,291
-
-
401,304
- $0.35 per share on July 7, 2006
1,022,145
1,022
356,728
-
-
357,750
- $0.50 per share on July 17, 2006
1,100,000
1,100
548,900
-
-
550,000
Issued on settlement of debts:
- $0.001 per share on October 18, 2005
200,000
200
-
-
-
200
- $0.10 per share on May 31, 2006
136,931
137
13,556
-
-
13,693
Share issuance costs
-
-
(68,600)
-
-
(68,600)
Net loss
-
-
-
-
(400,476)
(400,476)
Balance, July 31, 2006
22,472,112
22,472
1,247,875
-
(400,476)
869,871
Issued for cash at:
- $0.50 per share on October 5, 2006
180,000
180
89,820
-
-
90,000
- $0.60 per share on October 6,
November 15 and December 6, 2006,
April 30 and May 31, 2007
3,538,573
3,539
2,119,606
-
-
2,123,145
Subscriptions received
-
-
-
33,012
-
33,012
Issued for services:
- issued at $0.35 per share on
December 20, 2006
500,000
500
174,500
-
-
175,000
Stock based compensation
-
-
1,881,667
-
-
1,881,667
Share issuance costs
-
-
(168,914)
-
-
(168,914)
Net loss
-
-
-
-
(3,170,864)
(3,170,864)
Balance, July 31, 2007
26,690,685
$26,691
$5,344,554
$33,012
$(3,571,340)
$1,832,917
The accompanying notes are an integral part of these consolidated financial statements.
62
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year
Ended
July 31, 2007
For the Year
Ended
July 31, 2006
Period from
April 12, 2005
(inception) to
July 31, 2005
Period from
April 12, 2005
(inception) to
July 31, 2007
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss
$(3,170,864)
$(400,476)
$         -
$(3,571,340)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and depletion
73,383
105
-
73,488
Impairment loss properties
158,800
74,506
-
233,306
Stock based compensation
2,056,167
-
-
2,056,167
Changes in operating assets and liabilities:
Accounts receivable
(88,730)
-
-
(88,730)
Other current assets
1,153
(9,522)
-
(8,369)
Accounts payable
94,793
17,421
-
112,214
Due to related parties
(18,923)
32,816
-
13,893
NET CASH USED IN
OPERATING ACTIVITIES
(894,221)
(285,150)
-
(1,179,371)
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of shares for cash, net of
share issuance costs
2,213,645
1,325,054
-
3,538,699
Share subscriptions
33,012
-
-
33,012
Financing charges
(168,914)
(68,600)
-
(237,514)
NET CASH PROVIDED BY
FINANCING ACTIVITIES
2,077,743
1,256,454
-
3,334,197
CASH FLOWS FROM
INVESTING ACTIVITIES
Reclamation bonds
(61,875)
-
-
(61,875)
Purchase of property and equipment
(44,151)
(11,294)
-
(55,445)
Oil and gas property acquisitions
and exploration
(1,059,978)
(309,806)
-
(1,369,784)
NET CASH USED IN
INVESTING ACTIVITIES
(1,166,004)
(321,100)
-
(1,487,104)
INCREASE IN CASH
17,518
650,204
-
667,722
CASH, BEGINNING
650,204
-
-
-
CASH, ENDING
$667,722
$650,204
$         -
$667,722
SUPPLEMENTAL CASH FLOW INFORMATION AND
NONCASH INVESTING AND FINANCING ACTIVITIES
(Note 10)
The accompanying notes are an integral part of these consolidated financial statements.
63
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 1:                NATURE OF OPERATIONS
Strategic American Oil Corporation (the "Company") was incorporated as Carlin Gold Corporation on April 12, 2005 in Nevada, U.S.A.  On July 19, 2005 the Company changed its name to Nevada Gold Corp., on October 18, 2005 the Company changed its name to Gulf States Energy Inc. and on September 5, 2006 the Company changed its name to Strategic American Oil Corporation.  The Company is an exploration stage company as it has not generated significant revenues from operations.  The Company was formed for the purpose of oil and gas exploration and development.  The Company owns 100% of Penasco Petroleum Inc. ("Penasco"), a Nevada corporation incorporated on November 23, 2005.
The accompanying consolidated financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  At July 31, 2007, the Company had working capital of $652,607 but has incurred significant losses since inception and further losses are anticipated in the development of its oil and gas property interests.  The ability of the Company to continue as a going concern is dependent on raising additional capital to fund ongoing exploration and development and ultimately on generating future profitable operations.
The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.  Since internally generated cash flow will not fund development and commercialization of the Company's oil and gas properties, the Company will require significant additional financial resources and will be dependent on future financings to fund its ongoing exploration and development as well as other working capital requirements.  The Company's future capital requirements will depend on many factors including the rate and extent of progress in its exploration and development programs.  There can be no assurance the Company will be successful in its efforts to raise additional financing or if financing is available, that it will be on terms that are acceptable to the Company.
Management is addressing going concern remediation through raising additional sources of capital for operations and planned property acquisitions.  Management's plans are intended to increase the company's financial stability and improve the efficiency of continuing operations.  The Company continues to raise capital through private placements to meet immediate working capital requirements.  Management expects to be able to complete planned property acquisitions and funding of on-going operations.  These measures, if successful, will contribute to reducing the risk of going concern uncertainties for the Company over the next twelve to twenty-four months.
NOTE 2:                SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America.
Principles of Consolidation
These financial statements include the accounts of the Company and its wholly-owned subsidiary, Penasco.  All significant intercompany balances and transactions are eliminated upon consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 period.  Actual results could differ from those estimates.  Significant areas requiring management's estimates and assumptions are determining the fair value of transactions involving common stock and financial instruments.  Other areas requiring estimates include deferred tax balances, stock-based compensation, depletion, valuation allowances, allocations of expenditures to oil and gas property interests and asset impairment tests.
64
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 2:                SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Translation
The financial statements are presented in United States dollars.  In accordance with SFAS No. 52, "Foreign Currency Translation", foreign denominated monetary assets and liabilities are translated into their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date.  Non-monetary assets and liabilities are translated at the transaction date.  Revenue and expenses are translated at average rates of exchange during the year.  Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear any interest.  The Company regularly reviews collectability and establishes or adjusts an allowance for uncollectible amounts as necessary using the specific identification method.  Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.  There were no reserves for uncollectible amounts in the periods presented.
Equipment
Equipment is recorded at cost and amortized using the straight-line method over the estimated useful life at the following rates:
Furniture and Fixtures
5 years
Production Equipment
5 years
Leasehold Improvements
term of the lease
Oil and Gas Properties
The Company follows the full cost method of accounting for its oil and gas operations whereby all cost related to the acquisition of petroleum and natural gas interests are capitalized.  Such costs include land and lease acquisition costs, annual carrying charges of non-producing properties, geological and geophysical costs, costs of drilling and equipping productive and non-productive wells, and direct exploration salaries and related benefits.  The Company operates in one cost center, being the United States.
All costs included in properties subject to amortization, are amortized on the unit-of-production method using estimates of proved reserves.  Investments in unproved properties and development projects are not amortized until proved reserves associated with the projects can be determined or impairment occurs.  If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.  Abandonment of oil and natural gas properties are charged to the full cost pool and amortized.
Under the full cost method, the net book value of oil and natural gas properties are subject to a "ceiling" amount.  The ceiling is the estimated after-tax future net cash flows from proved oil and natural gas properties, discounted at 10% per annum plus the lower of cost or fair market value of unevaluated properties.  In calculating future net revenues, prices and costs in effect at the time of the calculation are held constant for the lives of the oil and natural gas reserves, except for changes that are fixed and determinable by existing contracts.  The excess, if any, of the net book value above this ceiling is charged to expense.
Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in the statement of operations.
Revenue Recognition
Oil and natural gas revenues are recorded using the sales method whereby the Company recognizes oil and natural gas revenue based on the amount of oil and gas sold to purchasers when title passes, the amount is determinable and collection is reasonably assured.  Actual sales of gas are based on sales, net of the associated volume charges for processing fees and for costs associated with delivery, transportation, marketing, and royalties in accordance with industry standards.  Operating costs and taxes are recognized in the same period of which revenue is earned.
65
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 2:                SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Asset Retirement Obligations
The Company has adopted the provisions of SFAS No. 143 "Accounting for Asset Retirement Obligations," which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.  The adoption of this standard has had no effect on the Company's financial position or results of operations.  To July 31, 2007 any potential costs relating to the ultimate disposition of the Company's mineral property interests have not yet been determinable.
Impairment of Long-Lived Assets
The Company reviews property and equipment for impairment.  Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.  Recoverability of these assets is measured by comparison of its carrying amount to future undiscounted cash flows the assets are expected to generate.  If property and equipment are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value.
Financial Instruments
The fair values of cash, accounts receivable, accounts payable and accrued liabilities and amounts due to related parties were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments.  Accordingly, no value has been assigned by management.  The Company's operations and financing activities are conducted primarily in United States dollars, and as a result the Company is not subject to significant exposure to market risks from changes in foreign currency rates.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist solely of cash.  The Company places its cash with high quality financial institutions and at times may exceed the federally insured limits.  The Company has not experienced a loss in such accounts nor do they expect any related losses in the near term.
Loss per Common Share
Basic loss per share includes no dilution and is computed by dividing loss attributable to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted loss per share reflects the potential dilution of securities that could share in the earnings (loss) of the Company.  The common shares potentially issuable on conversion of outstanding warrants and stock options were not included in the calculation of weighted average number of shares outstanding because the effect would be anti-dilutive.
Income Taxes
The Company follows the liability method of accounting for income taxes.  Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances.  Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.  As at July 31, 2007, the Company had net operating loss carry forwards; however, due to the uncertainty of realization, the Company has provided a full valuation allowance for the potential deferred tax assets resulting from these losses carry forwards.
66
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 2:                SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation
In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment", which replaced SFAS No. 123, "Accounting for Stock-Based Compensation" and superseded APB Opinion No. 25, "Accounting for Stock Issued to Employees".  In January 2005, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 107, "Share-Based Payment", which provides supplemental implementation guidance for SFAS No. 123R.  SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the grant date fair value of the award.  SFAS No. 123R was to be effective for interim or annual reporting periods beginning on or after June 15, 2005, but in April 2005 the SEC issued a rule that will permit most registrants to implement SFAS No. 123R at the beginning of their next fiscal year, instead of the next reporting period as required by SFAS No. 123R.  The pro-forma disclosures previously permitted under SFAS No. 123 no longer will be an alternative to financial statement recognition.
Under SFAS No. 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption.  The transition methods include prospective and retroactive adoption options.  Under the retroactive options, prior periods may be restated either as of the beginning of the year of adoption or for all periods presented.  The prospective method requires that compensation expense be recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R, while the retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first period restated.  The Company has adopted the requirements of SFAS No. 123R from date of inception.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services" ("EITF 96-18").  Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.  The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.
Recent Accounting Pronouncements
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities".  This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value.  Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.  The Company is currently assessing the impact of SFAS No. 159 on its financial position and results of operations.
NOTE 3:                Reclamation bonds
Reclamation bonds includes interest and non-interest bearing deposits issued in the States of Louisiana ($21,875) and Texas ($40,000) to cover each State's reclamation requirement for producing operations.
NOTE 4:                EQUIPMENT
July 31, 2007
July 31, 2006
Furniture and fixtures
$3,201
$         -
Leasehold improvements
11,294
11,294
Production equipment
40,950
-
55,445
11,294
Less: accumulated depreciation
(9,171)
(105)
$46,274
$11,189
67
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 5:                OIL AND GAS PROPERTIES
PROVED:
Barge Canal, Texas
On August 1, 2006 the Company entered into an assignment and purchase agreement with OPEX Energy, LLC.  Under the terms of the agreement, the Company paid $500,000 plus a finder's fee of $50,000 for a 100% working interest (90% after payout) and a 72.5% net revenue interest (65.25% after payout) in approximately 81 acres of an oil and gas lease (the "Welder Lease") located in Calhoun County, Texas.
UNPROVED:
South Delhi / Big Creek Field, Louisiana
On August 24, 2006 the Company entered into an assignment of oil and gas interest and purchase agreement with Energy Program Accompany, LLC.  Under the terms of the agreement, the Company paid $250,000 to acquire the property.  The agreement includes the following interests:
(a)    a 97% working interest and an 81.25% net revenue interest in approximately 136 acres in Franklin Parish, Louisiana (the "Holt Lease");
(b)   a 100% working interest and an 81.25% net revenue interest in approximately 40 acres in Richland Parish, Louisiana (the "Strahan Lease"); and
(c)   a 100% working interest and an 82.08% net revenue interest in approximately 80 acres in Richland Parish, Louisiana (the "McKay Lease").
Effective September 1, 2006 the Company assigned a 12.5% working interest to Tradestar Resources Corporation ("Tradestar") in conjunction with the acquisition.  The Company interest is additionally subject to a back in after payout agreement with Tradestar for an additional 12.5% working interest which went into effect as of January 1, 2007.
NE Oakdale and DST prospects, Illinois
During the 2007 fiscal year, the Company entered into numerous oil and gas leases in Jefferson County, Illinois.  The leases total approximately 1,423 gross acres pursuant to which the Company has a working interest of 100% and a net revenue interest of 87.5%, for a total cost to July 31, 2007 of $137,645.
Gobbler
'
s Knob Prospect, Illinois
During the 2006 and 2007 fiscal years, the Company entered into several oil and gas leases in Hamilton County, Illinois.  The leases total approximately 214 gross acres pursuant to which the Company has a working interest of 100% and a net revenue interest of 87.5%, for a total cost to July 31, 2007 of $3,100.
Koliba Lease, Texas
During the 2007 fiscal year, the Company entered into several lease agreements with certain mineral owners of a 79 acre tract (the "Koliba Lease") in Victoria County, Texas for a total cost to July 31, 2007 of $3,573.
Janssen Lease, Texas
In October 2005, the Company entered into an agreement to purchase a 25% working interest and an 18.75% net revenue interest in approximately 138 acres of an oil and gas lease (the "Janssen Lease") located in Karnes County, Texas.  This lease interest was acquired from Rockwell Energy, LLC for $220,000 plus additional payments of $13,800 on July 17, 2006 to the owners after negotiating a new oil, gas and mineral lease.  On December 20, 2006 the Company farmed out 100% of the working interest to ETG Energy Resources, retaining a 3% back in after payout on any producing zones and a 5% non-promoted option to participate in any offset drilling within the leased area.  At July 31, 2007, management determined the recoverable value of its interest to be $75,000, and accordingly, costs of $158,800 were written off to impairment of oil and gas properties.
68
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 5:
OIL AND GAS PROPERTIES (CONTINUED)
Meek B-1 Property
In December 2005 the Company entered into a participation agreement on the Meek B-1 property in the State of Texas in order to earn a 12.5% interest in the property.  The Company spent a total of $3,000 in acquisition costs and $71,506 in exploration costs before deciding to abandon its interest due to poor drilling results.  At July 31, 2006 the value of this interest was determined to be $Nil, and accordingly, cumulative costs of $74,506 have been written off to impairment of oil and gas properties.
Capitalized costs of oil and natural gas producing properties
The Company's aggregate capitalized costs related to oil and natural gas properties are as follows:
July 31, 2007
July 31, 2006
Proven reserves (Barge Canal)
$584,702
$        -
Accumulated depletion and amortization
(64,317)
-
520,385
-
Unproven or unevaluated reserves
785,082
309,806
Impairment loss
(233,306)
(74,506)
551,776
235,300
$1,072,161
$235,300
Capitalized costs incurred for oil and natural gas producing activities
Costs incurred in oil and natural gas property acquisition, exploration and development activities that have been capitalized are summarized below:
July 31, 2007
July 31, 2006
Acquisition cost
Proven properties
$572,456
$         -
Unproven properties
670,676
238,300
1,243,132
238,300
Development and exploration costs
126,652
71,506
$1,369,784
309,806
NOTE 6:                RELATED PARTY TRANSACTIONS
The Company had transactions with certain officers and directors of the Company for the fiscal year ended July 31, 2007 as follows:
(a)   recorded production revenues of $480,014 (2006 - $Nil) and incurred production costs of $215,911 (2006 - $nil)  for the Barge Canal property which is operated by a company controlled by an officer of the Company;
(b)   incurred management fees of $195,488 (2006 - $167,136) and recorded stock-based compensation charges of $1,200,000 (2006 - $nil) to officers and directors;
(c)   incurred rental charges of $20,851 (2006 - $6,400)  to a company owned by a former director of the Company;
(d)   repaid $18,923 (2006 - $Nil) in amounts owing to officers and directors as of July 31, 2006; and
(e)   incurred web development charges of $7,463 (2006 - $Nil) to a company owned by a former director of the Company.
These transactions were recorded at the exchange amount which is the amount agreed to by the related parties.  All amounts owed were non-interest bearing, unsecured and had no specified terms of repayment.
69
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 7:                CAPITAL STOCK
Share Capital
The Company's capitalization at July 31, 2007 was 500,000,000 authorized common shares with a par value of $0.001 per share.
2006 Share Transactions
On October 18, 2005, the Company completed a private placement of 16,000,000 shares of its common stock at a subscription price of $0.001 per share for gross proceeds to the Company of $16,000, and 200,000 shares of its common stock with a fair value of $0.001 per share for the settlement of debts of $200.
On October 19, 2005, the Company completed a private placement of 2,441,978 shares of its common stock at a subscription price of $0.10 per share for gross proceeds to the Company of $244,198.
On March 3, 2006, the Company completed a private placement of 1,259,308 shares of its common stock with a fair value of $0.10 per share for gross proceeds to the Company of $125,931.
On May 31, 2006, the Company completed a private placement of 311,750 shares of its common stock at a subscription price of $0.10 per share for gross proceeds to the Company of $31,175, and 136,931 shares of its common stock at a subscription price of $0.10 per share for settlement of debts of $13,693.
On July 7, 2006, the Company completed a private placement of 1,022,145 Units at a subscription price of $0.35 per Unit for gross proceeds to the Company of $357,750.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the shareholder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $13,600 in cash.
On July 17, 2006, the Company completed a private placement of 1,100,000 Units at a subscription price of $0.50 per Unit for gross proceeds to the Company of $550,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the shareholder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $55,000 in cash.
2007 Share Transactions
On October 6, 2006, the Company completed a private placement for 180,000 Units at a subscription price of $0.50 per Unit for gross proceeds of $90,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $9,000 in cash.
On October 6, 2006, the Company completed a private placement for 683,333 Units at a subscription price of $0.60 per Unit for gross proceeds of $410,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $41,000 in cash.
70
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 7:                CAPITAL STOCK (continued)
On November 15, 2006, the Company completed a private placement for 169,667 Units at a subscription price of $0.60 per Unit for gross proceeds of $101,800.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $10,000 in cash.
On December 6, 2006, the Company completed a private placement for 819,171 Units at a subscription price of $0.60 per Unit for gross proceeds of $491,503.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $49,150 in cash.
On December 20, 2006, the Company issued 500,000 shares of its restricted common stock pursuant to a Professional Services Agreement (refer to Note 9).  The Company recorded the fair value of the shares issued of $0.35 per share (based on an allocation of recent private placements between shares and the connected warrants), or $175,000 as a stock-based consulting expense during the year.
On April 30, 2007, the Company completed a private placement for 1,680,569 Units at a subscription price of $0.60 per Unit for gross proceeds of $1,008,341.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $49,414 in cash.
On May 31, 2007, the Company completed a private placement for 185,833 Units at a subscription price of $0.60 per Unit for gross proceeds of $111,500.  Each Unit is comprised of one common share and one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.  The Company has paid finders' fees in conjunction with the completion of the private placement in the amount of $10,350 in cash.
On July 5, 2007 the Company issued 385,000 share purchase warrants exercisable at $0.35 per share, 4,000 share purchase warrants exercisable at $0.50 per share, and 163,041 share purchase warrants exercisable at $0.60 per share pursuant to finders' fees agreements.  Each warrant entitles the holder to purchase one common share of the Company for a period commencing upon the date of issuance of the related Units and ending 18 months from the date that the Company's common shares are first listed for trading on any stock exchange or Over-The-Counter Bulletin Board market.  The $209,204 fair value of the common share purchase warrants was recorded as financing fees during the period.  The fair value of these warrants was estimated using the Black-Scholes option pricing model with an expected life of 2 years, a risk free interest rate of 5.25%, a dividend yield of 0%, and an expected volatility of 100%.
71
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 7:                CAPITAL STOCK (continued)
Share Purchase Warrants
A summary of the Company's stock purchase warrants as of July 31, 2007 and changes during the year is presented below:
Number of
warrants
Weighted average
exercise price
Weighted average
remaining life
Balance, April 12, 2005 and July 31, 2005
-
$         -
-
Issued
2,122,145
0.60
n/a
Exercised
-
-
n/a
Balance, July 31, 2006
2,122,145
0.60
n/a
Issued
4,270,614
0.91
n/a
Exercised
-
-
n/a
Balance, July 31, 2007
6,392,759
$0.81
n/a
Stock Compensation Plan
On July 5, 2007 the Company adopted the 2007 Stock Incentive Plan allowing for the issuance of up to 10,000,000 common shares.
On July 5, 2007 the Company granted a total of 3,800,000 stock options to consultants, officers and directors, of which 3,700,000 vested immediately and the remaining 100,000 vest over 18 months.  Of the 3,800,000 options granted, 250,000 were granted at an exercise price of $0.10 per share and 3,550,000 were granted at an exercise price of $0.35 per share.  The term of the options is ten years.  The fair value of the vested options at the date of grant of $1,915,000 was estimated using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 5.25%, a dividend yield of 0%, and an expected volatility of 100%.  Of this, $1,881,667 has been recorded as stock based consulting and management fees in the year ended July 31, 2007 and the remaining $33,333 will be expensed on vesting of the stock options.
A summary of the Company's stock options as of July 31, 2007 and changes during the year is presented below:
Number of
options
Weighted average
exercise price
Weighted average
remaining life
Balance, April 12, 2005 and
July 31, 2005 and 2006
-
$         -
-
Issued
3,800,000
0.33
10.00
Exercised
-
-
-
Balance, July 31, 2007
3,800,000
$0.33
9.93
A summary of the status of the Company's unvested options as of July 31, 2007, and changes during the year ended July 31, 2007, is presented below:
Number of Shares
Weighted-Average
Grant-Date
Fair Value
Unvested at July 31, 2006 and 2005
-
$         -
Granted
3,800,000
0.50
Vested
(3,733,334)
0.50
Unvested at July 31, 2007
66,666
$0.50
72
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 8:	INCOME TAXES
As of July 31, 2007, the Company had net operating loss carry forwards of approximately $1,676,341 (2006: $397,621) that may be available to reduce future years' taxable income.  These carry forwards will begin to expire, if not utilized, commencing in 2026.  Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry forwards.
The Company reviews its valuation allowance requirements on an annual basis based on projected future operations.  When circumstances change and this causes a change in management's judgment about the recoverability of future tax assets, the impact of the change on the valuation allowance is reflected in current income.
The actual income tax provisions differ from the expected amounts calculated by applying the combined federal and state corporate income tax rates to the Company's loss before income taxes.  The components of these differences are as follows:
Year Ended
Year Ended
July 31, 2007
July 31, 2006
Loss before income taxes
$(3,170,864)
$(400,476)
Corporate tax rate
40%
40%
Expected tax expense (recovery)
(1,268,346)
(160,190)
Increase (decrease) resulting from:
Permanent differences
304,191
1,142
Change in valuation allowance
964,155
159,048
Income tax provision (recovery)
$         -
$         -
The Company's deferred tax assets are as follows:
Year Ended
Year Ended
July 31, 2007
July 31, 2006
Deferred tax assets:
Stock based compensation
$452,667
$         -
Loss carry forwards
670,536
159,048
Valuation allowance
(1,123,203)
(159,048)
Net deferred income tax assets
$         -
$         -
As the criteria for recognizing future income tax assets have not been met due to the uncertainty of realization, a valuation allowance of 100% has been recorded for the current and prior year.
The Company's net operating loss carryforwards expire as follows:
July 31, 2026
$397,621
July 31, 2027
1,278,720
$1,676,341
73
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 9:               COMMITMENTS
On December 20, 2006 the Company entered into a Professional Services Agreement with a consultant, who agreed to become an officer of the Company as of May 1, 2007.  The initial term of the agreement is one year expiring on November 1, 2008.  Pursuant to the terms and provisions of the Professional Services Agreement: (i) the Company shall pay a monthly fee of $10,000; (ii) the Company issued 500,000 shares of its restricted common stock (refer to Note 7); and (iii) the Company granted an aggregate of not less than 600,000 options to purchase shares of its common stock at $0.35 for a ten year term.
The Company has entered into various employment and consulting agreements with both fixed compensation arrangements and established fees paid on a daily basis as needed.  The agreements expire no later than December 31, 2007.  The aggregate outstanding commitment through expiry of all agreements is approximately $40,000.
During the year ended July 31, 2006, the Company signed a lease agreement for the rental of office space.  The lease expires on March 31, 2013.  The future minimum lease obligations are as follows for the years ending July 31:
2008
$
19,943
2009
19,943
2010
19,943
2011
19,943
2012
19,943
Thereafter
13,295
$
113,010
NOTE 10:              SUPPLEMENTAL CASH FLOW INFORMATION AND
NON-CASH INVESTING AND FINANCING ACTIVITIES
July 31, 2007
July 31, 2006
Interest paid
$         -
$         -
Income taxes paid
$         -
$         -
During the year ended July 31, 2007 the Company issued 500,000 shares of its common stock with a fair value of $0.35 per share, or $175,000 which was as a stock-based consulting expense during the year.  Refer to Note 7.
The Company issued shares for the settlement of certain accounts payable and related party advances for the year ended July 31, 2006 as follows:
(a)   consulting fees of $200 were settled with the issuance of 200,000 shares at $0.001 per share (2005 - $Nil); and
(b)   management fees of $13,693 were settled with the issuance of 136,931 shares at $0.10 per share (2005 - $Nil).
74
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
Note 11:              Supplemental Oil and Natural Gas Reserve Information (Unaudited)
General
The Company's estimated net proved oil and gas reserves and the present value of estimated cash flows from those reserves are summarized below.  The reserves were estimated by an independent petroleum engineer.  The present value of estimated cash flows is estimated by management using market prices at the end of each of the periods presented in the financial statements.  Those prices were held constant over the estimated life of the reserves.  There are numerous uncertainties inherent in estimating quantities and values of proved oil and gas reserves and in projecting future rates of production and the timing of development expenditures, including factors involving reservoir engineering, pricing and both operating and regulatory constraints.  All reserves estimates are to some degree speculative, and various classifications of reserves only constitute attempts to define the degree of speculation involved.  Accordingly, oil and gas reserve information represents estimates only and should not be construed as being exact.
Estimated Oil and Gas Reserve Quantities
The Company's ownership interests in estimated quantities of proved gas reserves and changes in net proved reserves, all of which are located in the United States, are summarized below:
Oil (barrels)
Gas (mcf)
Balance at inception (April 12, 2005) and July 31, 2005 and 2006
-
-
Purchase of reserves-in-place
69,340
107,500
Production
(6,322)
(17,506)
Balance, July 31, 2007
63,018
89,994
Amortization per unit of production (mcf) is $1.16.
There were no revisions of previous estimates of reserves or extensions and discoveries during the period from inception (April 12, 2005) through July 31, 2007.
Standardized measure of discounted future cash flows
The standardized measure of discounted future net cash flows from proved reserves for the periods presented in the financial statements is summarized below.  There were no proved reserves at inception through July 31, 2006.  The standardized measure of future cash flows as of July 31, 2007 is calculated using a price per barrel of oil of $78.82 and a price per Mcf of natural gas of $6.51.  The gas price was the Henry Hub, Louisiana spot gas price on July 31, 2007.  The resulting estimated future cash inflows are reduced by estimated future costs to develop and produce the estimated proved reserves.  These costs are based on year-end cost levels.  Future income taxes are based on year-end statutory rates.  The future net cash flows are reduced to present value by applying a 10% discount rate.  The standardized measure of discounted future cash flows is not intended to represent the replacement cost or fair market value of the Company's oil and gas properties.
There were no proved reserves at April 12, 2005 (inception) through July 31, 2006:
July 31, 2007
July 31, 2006
Future production revenues
$5,552,940
$         -
Future production and development costs
(2,497,721)
-
Future cash flows before income taxes
3,055,219
-
Future income taxes
(1,038,774)
-
Future net cash flows
2,016,445
-
10% annual discount for estimating future net cash flows
(726,139)
-
Standardized measure of discounted future net cash flows
$1,290,306
$         -
75
STRATEGIC AMERICAN OIL CORPORATION
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2007
NOTE 12:              SUBSEQUENT EVENTS
(a)   On October 1, 2007 the Company entered into Consulting Services Agreement with a geological consultant with an initial term of 18 months expiring on March 31, 2009.  Pursuant to the terms and provisions of the Consulting Services Agreement: (i) the Company shall pay a daily fee of $400 on a as requested basis; (ii) the Company will issue 200,000 shares of its restricted common stock; and (iii) the Company will grant an aggregate of not less than 250,000 options to purchase shares of its common stock at $0.10 for a ten year term.
(b)   On October 30, 2007 the Company signed a letter agreement with Marmik Oil Company ("Marmik") whereby the Company acquired a 4% working interest in the Little Mule Creek Project, located in Alfalfa and Woods Counties, Oklahoma.  Under the terms of the letter agreement, the Company paid aggregate acquisition costs of $43,086 and must pay their 4% participation in the drilling and completion costs of the initial test well, which are estimated at $1,341,200 (the Company's share would be $53,648).  The participation is subject to a 25% back in after payout, which would reduce the Company's interest to 3%.
(c)   On October 31, 2007 the Company completed a private placement for 724,666 Units at a subscription price of $0.60 per Unit for gross proceeds of $434,800, of which $15,000 was received in the 2007 fiscal year.  Each Unit is comprised of one common share and one warrant of one non-transferable share purchase warrant of the Company.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.
76
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS on accounting and financial disclosure
We have had no disagreements with our principal independent accountants.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 under the Securities Act with the SEC with respect to the shares of our common stock offered through this prospectus.  This prospectus is filed as a part of that registration statement but does not contain all of the information contained in the registration statement and exhibits.  Statements made in the registration statement are summaries of the material terms of the referenced contracts, agreements or documents of our company.  You may inspect the registration statement, exhibits and schedules filed with the SEC at the SEC's principal office in Washington, D.C.  Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the SEC, at 100 F Street, NE, Washington, D.C. 20549.  Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms.  The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the SEC.  Our registration statement and the referenced exhibits can also be found on this site.
We are not currently subject to the Exchange Act and currently are not required to, and do not, deliver annual, quarterly or special reports to stockholders.  We will not deliver such reports to our stockholders until after, and if, this offering is declared effective by the SEC. Once such effectiveness is granted, if ever, we plan to file a registration statement pursuant to the Exchange Act in order to register our common stock under Section 12(g) of the Exchange Act.  Upon our common stock becoming registered under the Exchange Act we will be required to file annual, quarterly and current reports, proxy statements and other information with the SEC.  Our SEC filings will be available to the public over the Internet at the SEC's website at
http://www.sec.gov
.
dealer prospectus delivery obligation
No dealer, salesman or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and, if given or made, such information or representations may not be relied on as having been authorized by us or any of the underwriters.  Neither the delivery of this prospectus nor any sale made hereunder shall under any circumstances create an implication that there has been no change in our affairs since the date of this prospectus.  This prospectus does not constitute any offer to sell, or solicitation of any offer to buy, by any person in any jurisdiction in which it is unlawful for any such person to make such an offer or solicitation.  Neither the delivery of this prospectus nor any offer, solicitation or sale made hereunder, shall under any circumstances create any implication that the information herein is correct as of any time subsequent to the date of the prospectus.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24.              INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our officers and directors are indemnified as provided by the Nevada Revised Statutes (the "NRS"), our articles of incorporation and our bylaws.
Nevada Revised Statutes
Section 78.7502 of the NRS provides as follows:
1.         A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
2.          A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.
3.          To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.
Section 78.751 of the NRS provides as follows:
1.          Any discretionary indemnification under NRS 78.7502 unless ordered by a court or advanced pursuant to subsection 2, may be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances.  The determination must be made:
(a)          By the stockholders;
(b)          By the board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding;
(c)          If a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion; or
(d)          If a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.
2.          The articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation.
3.          The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section:
(a)          Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to NRS 78.7502 or for the advancement of expenses made pursuant to subsection 2, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.
(b)          Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person.
Our Articles of Incorporation
Our articles of incorporation do not limit the automatic director immunity from liability under the NRS.
Our articles of incorporation further provide that, to the fullest extent permitted by NRS 78, a director or officer of the Corporation will not be personally liable to the Corporation or its stockholders for damages for breach of fiduciary duty as a director or officer, provided that this article will not eliminate or limit the liability of a director or officer for:
1.          acts or omissions which involve intentional misconduct, fraud or a knowing violation of law; or
2.          the payment of dividends in violation of NRS 78.300.
Our Bylaws
Article VII of our bylaws provide the following indemnification provisions:
Section 1.  Right to Indemnification.
Each person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent permitted by the laws of Nevada as the same exist or may hereafter be amended (but in the case of such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said laws permitted the corporation to provide prior to such amendment) against all costs, charges, expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement and amounts expended in seeking indemnification granted to such person under applicable law, this bylaw or any agreement with the corporation) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators;
provided
,
however
, that, except as provided in Section 2 of this Article, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was initiated or authorized by one or more members of the Board of Directors of the corporation.  The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition;
provided
,
however
, that, if the Nevada Revised Statutes, Chapter 78, so requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise.  In no event shall anything herein contained be so construed as to permit the Board to authorize payment of, or the corporation to pay, any amounts for any purpose where the director or officer was engaged in any action or activity known to him or her while so engaged to be unlawful, nor any action or activity constituting willful misfeasance, bad faith, gross negligence, or reckless disregard of his or her duties and obligations to the corporation and the stockholders.  The rights set forth herein shall not be exclusive of other right to which any director or officer may be entitled as a matter of law.  The corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers.
II-2
Section 2.  Right of Claimant to Bring Suit.
If a claim under Section 1 of this Article is not paid in full by the corporation within thirty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim.  It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has failed to meet a standard of conduct which makes it permissible under Nevada law for the corporation to indemnify the claimant for the amount claimed.  Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is permissible in the circumstances because he or she has met such standard of conduct, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such standard of conduct, shall be a defense to the action or create a presumption that the claimant has failed to meet such standard of conduct.
Section 3.  Non-Exclusivity of Rights.
The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Section 4.  Insurance.
The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under Nevada law.
Section 5.  Expenses as a Witness.
To the extent that any director, officer, employee or agent of the corporation is by reason of such position, or a position with another entity at the request of the corporation, a witness in any action, suit or proceeding, he or she shall be indemnified against all costs and expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith.
Section 6.  Indemnity Agreements.
The corporation may enter into indemnity agreements with the persons who are members of its Board of Directors from time to time, and with such officers, employees and agents as the Board may designate, such indemnity agreements to provide in substance that the corporation will indemnify such persons to the full extent contemplated by this Article.
Section 7.  Effect of Amendment.
Any amendment, repeal or modification of any provision of this Article VII by the stockholders and the directors of the corporation shall not adversely affect any right or protection of a director or other of the corporation existing at the time of the amendment, repeal or modification.
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ITEM 25.	OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a list of the expenses to be incurred by us in connection with the preparation and filing of this registration statement.  All amounts shown are estimates except for the SEC registration fee:
SEC registration fee:
$305.34
Accounting fees and expenses:
$15,000.00
Legal fees and expenses:
$25,000.00
Transfer agent and registrar fees:
$2,000.00
Fees and expenses for qualification under state securities laws:
$1,500.00
Miscellaneous (including Edgar filing fees):
$1,000.00
Total:
$44,805.34
We are paying all expenses of the offering listed above.  No portion of these expenses will be borne by the Selling Stockholders.  The Selling Stockholders, however, will pay any other expenses incurred in selling their common stock, including any brokerage or underwriting discounts or commissions paid by the Selling Stockholders to broker-dealers in connection with the sale of their shares.
ITEM 26.	RECENT SALES OF UNREGISTERED SECURITIES
On October 18, 2005, we completed a private placement of 16,000,000 shares of our common stock at a subscription price of $0.001 per share for gross proceeds of $16,000, and an additional 200,000 shares of our common stock with a fair value of $0.001 per share for the settlement of debts of $200.
On October 19, 2005, we completed a private placement of 2,441,978 shares of our common stock at a subscription price of $0.10 per share for gross proceeds of $244,198.
On March 3, 2006, we completed a private placement of 1,259,308 shares of our common stock with a fair value of $0.10 per share for gross proceeds of $125,931.
On May 31, 2006, we completed a private placement of 311,750 shares of our common stock at a subscription price of $0.10 per share for gross proceeds of $31,175, and an additional 136,931 shares of our common stock at a subscription price of $0.10 per share for settlement of debts of $13,693.
On July 7, 2006, we completed a private placement of 1,022,145 Units at a subscription price of $0.35 per Unit for gross proceeds of $357,750.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the shareholder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.
On July 17, 2006, we completed a private placement of 1,100,000 Units at a subscription price of $0.50 per Unit for gross proceeds of $550,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the shareholder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.
On October 5, 2006, we completed a private placement of 180,000 Units at a subscription price of $0.50 per Unit for gross proceeds of $90,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $0.60 per share.
II-4
On October 6, 2006, we completed a private placement of 683,333 Units at a subscription price of $0.60 per Unit for gross proceeds of $410,000.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.
On November 15, 2006, we completed a private placement of 169,667 Units at a subscription price of $0.60 per Unit for gross proceeds of $101,800.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.
On December 6, 2006, we completed a private placement of 819,171 Units at a subscription price of $0.60 per Unit for gross proceeds of $491,503.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.
On December 20, 2006, we issued 500,000 shares of our common stock at a price of $0.001 per share pursuant to a professional services agreement.
On April 30, 2007, we completed a private placement of 1,680,569 Units at a subscription price of $0.60 per Unit for gross proceeds of $1,008,341.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.
On May 31, 2007, we completed a private placement of 185,833 Units at a subscription price of $0.60 per Unit for gross proceeds of $111,500.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.
On July 5, 2007, we issued 385,000 share purchase warrants exercisable at $0.35 per share, 4,000 share purchase warrants exercisable at $0.50 per share, and 163,041 share purchase warrants exercisable at $0.60 per share pursuant to finders' fees agreements.  Each warrant entitles the holder to purchase one common share of the Company for a period commencing upon the date of issuance of the related Units and ending 18 months from the date that the Company's common shares are first listed for trading on any stock exchange or Over-The-Counter Bulletin Board market.
On October 1, 2007, we issued 200,000 shares of our common stock at a deemed issue price of $0.60 per share pursuant to a consulting agreement.
On October 31, 2007, we completed a private placement of 724,666 Units at a subscription price of $0.60 per Unit for gross proceeds of $434,800.  Each Unit is comprised of one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share of the Company until the earlier of 12 months from the date of issuance of the Units or six months from the effective date of the Company's proposed registration statement and exercisable at $1.00 per share.
These private placement transactions were completed in reliance of Rule 506 of Regulation D of the Securities Act of 1933, as amended (the "Securities Act"), with respect to investors in the United States, and in reliance of Rule 903 of Regulation S of the Securities Act, with respect to those investors who were not "U.S. Persons", within the meaning of Regulation S, and who were otherwise outside of the United States, based upon representations made to us by the purchasers.  Sales to United States investors pursuant to Rule 506 of Regulation D were limited to investors who qualified as "accredited investors" within the meaning of Rule 501(a) of Regulation D.
II-5
ITEM 27.             EXHIBITS
The following exhibits are filed with this registration statement on Form SB-2:
Exhibit
Number
Description of Exhibit
3.1
Articles of Incorporation and amendments thereto, dated July 19, 2005, October 18, 2005 and September 5, 2006
3.2
Bylaws
5.1
Opinion of Lang Michener LLP, with consent to use, regarding the validity of the securities being registered
10.1
Sale Contract for Oil and Gas Leases between Energy Program Accompany, LLC and Penasco Petroleum, Inc., dated August 24, 2006 (regarding the Holt, McKay and Strahan Leases)
10.2
Letter Agreement between Penasco Petroleum, Inc. and Tradestar Resources Corporation, dated September 1, 2006
10.3
Assignment, Bill of Sale and Conveyance between OPEX Energy LLC and Penasco Petroleum, Inc., dated effective August 1, 2006 (regarding the Welder Lease)
10.4
Participation Agreement between Rockwell Energy, LLC and the Company, dated October 2005 (regarding the Janssen Lease)
10.5
Oil, Gas and Mineral Lease between Henry J. Janssen Jr. and Penasco Petroleum, Inc., dated July 2006 (regarding the Janssen Lease)
10.6
Assignment and Bill of Sale between Penasco Petroleum, Inc. and ETG Energy Resources, dated October 2006, and Assignment between ETG Energy Resources and Penasco Petroleum, Inc., dated December 2006 (regarding the Janssen Lease)
10.7
Ratification Letter between Marmik Oil Company and Penasco Petroleum, Inc., dated October 2007 (regarding Little Mule Creek Project)
10.8
Assignment between Marmik Oil Company and Penasco Petroleum, Inc., dated November 2007 (regarding Little Mule Creek Project)
10.9
2007 Stock Incentive Plan
10.10
Employment Services Agreement between the Company and Management Solutions International, Inc., dated April 2006
10.11
Consulting Services and Options Agreement between the Company and Jim Thomas, dated April 2006, and Amended and Restated Consulting Services and Option Agreement between the Company and Jim Thomas, dated November 2007
10.12
Consulting Services and Options Agreement between the Company and Kyle Combest, dated August 2006
10.13
Professional Services Retainer Contract between the Company and Steven Carter, dated December 2006
21.1
Subsidiaries of the Company
23.1
Consent of Independent Registered Public Accounting Firm
23.2
Consent of Counsel (included in Exhibit 5.1)
24.1
Power of Attorney (included in the signature page of this registration statement)
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ITEM 28.          UNDERTAKINGS
The undersigned registrant hereby undertakes that it will:
1.    File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:
(a)   Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.
(b)   Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information set forth in this registration statement.  Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
(c)   Include any material information with respect to the plan of distribution.
2.   For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.
3.    File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act of 1933, and we will be governed by the final adjudication of such issue.
Each prospectus filed pursuant to Rule 424(b) of the Securities Act of 1933 as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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II-7
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned in the City of Vancouver, Province of British Columbia, Canada, on February 1, 2008.
STRATEGIC AMERICAN OIL CORPORATION
By:
"Randall Reneau"
_______________________________________
Randall Reneau
President, Chief Executive Officer and Principal Executive Officer
POWER OF ATTORNEY
Know all persons by these presents that that each individual whose signature appears below constitutes and appoints Randall Reneau as a true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing under Rule 462 promulgated under the Securities Act of 1933, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any one of them, or his or their substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.
Signature
Title
Date
"Randall Reneau"
Randall Reneau
President, Chief Executive Officer, Principal Executive Officer and a director
February 1, 2008
"Johnathan Lindsay"
Johnathan Lindsay
Secretary, Treasurer, Chief Financial Officer, Principal Accounting Officer, and a director
February 1, 2008
"Alan P. Lindsay"
Alan P. Lindsay
Director
February 1, 2008
"Leonard Garcia"
Leonard Garcia
Director
February 1, 2008
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