HYDROCARB ENERGY CORP - FORM 10-Q/A

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - HYDROCARB ENERGY CORP	ex32_1.htm
EX-31.2 - EXHIBIT 31.2 - HYDROCARB ENERGY CORP	ex31_2.htm
EX-31.1 - EXHIBIT 31.1 - HYDROCARB ENERGY CORP	ex31_1.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended October 31, 2009

o	Transition Report Pursuant to Section13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____ to _____

Commission File Number:000-53313

STRATEGIC AMERICAN OIL CORPORATION

(Exact name of registrant as specified in its charter)

NEVADA		98-0454144

(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification No.)

Suite 2015, 600 Leopard Street, Corpus Christi, Texas		78473

(Address of principal executive offices)		(Zip Code)

(361) 884-7474

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

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

	o	Large accelerated filer		o	Accelerated filer
	o	Non-accelerated filer (Do not check if smaller reporting company)		x	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 48,624,946 shares of common stock outstanding as of December 11, 2009.

EXPLANATORY NOTE TO FORM 10-Q/A:

This 10-Q/A is being filed to correct our financial statements for the three months ended October 31, 2009 and 2008. Subsequent to issuing the report for the three months ended October 31, 2009 and 2008, we discovered the following errors that impacted the balance sheets, statements of operations and comprehensive loss, and statements of cash flows.

In October 2009, our private placements included warrants which had a “price protection” feature (i.e., an anti-dilution feature; a ratchet down feature). As a result, the warrants are not considered indexed to our own stock, and as such, they are to be classified as liabilities and all future changes in the fair value of these warrants will be recognized currently in earnings in our consolidated statement of operations under the caption “Other Items – Gain (loss) on warrant derivative liability” until such time as the warrants are exercised or expire. The previously filed financial statements reflected the warrants as indexed to our own stock and classified them as a component of equity. See Note 7: Warrant derivative liability for a detailed disclosure relating to these warrants.

In August 2009, we extended the term of warrants originally issued with an equity raise. Because the warrants that were extended were originally issued with common stock, the fair values associated with this modification should have been recorded as a deemed dividend. The previously filed financial statements reflected the extension as interest and finance charges. See Note 10: Stockholders’ equity (deficit) – warrant modifications for more information.

Additionally, we have corrected various typographical errors from the original document.

STRATEGIC AMERICAN OIL CORPORATION

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION			1

	Item 1.	Financial Statements	1

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

	Item 4.	Controls and Procedures	23

PART II - OTHER INFORMATION			24

	Item 1.	Legal Proceedings	24

	Item 1A.	Risk Factors	24

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 3.	Defaults Upon Senior Securities	25

	Item 4.	Submission of Matters to a Vote of Security Holders	25

	Item 5.	Other Information	25

	Item 6.	Exhibits	25

SIGNATURES			26

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PART I- FINANCIAL INFORMATION

Item 1. Financial Statements

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STRATEGIC AMERICAN OIL CORPORATION

(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2009

(Unaudited)

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STRATEGIC AMERICAN OIL CORPORATION

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	October 31, 2009
	(Restated)			July 31, 2009

CURRENT ASSETS
Cash	$	1,292,560		$	18,793
Accounts receivable		19,682			35,073
Prepaid expenses and deposits		76,200			44,478

		1,388,442			98,344

RECLAMATION BONDS (Note 3)		59,317			59,317
EQUIPMENT (Note 4)		27,802			29,830
OIL AND GAS PROPERTIES (Note 5)
Proved properties		972,419			986,926
Unproved properties		295,566			295,454

TOTAL ASSETS	$	2,743,546		$	1,469,871

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	148,420		$	403,804
Convertible notes (Note 6)		65,707			42,718
Notes payable (Note 6)		97,111			-
Warrant derivative liability (Note 7)		4,390,338			-
Due to related parties (Note 8)		74,636			459,257
		4,776,212			905,779

ASSET RETIREMENT OBLIGATIONS (Note 9)		22,853			22,662
Total liabilities		4,799,065			928,441

STOCKHOLDERS' EQUITY (DEFICIT)
Capital stock (Note 10)
Common stock $0.001 par value: 500,000,000 shares authorized 43,014,135 shares issued and outstanding (July 31, 2009 - 29,350,827)		43,014			29,351
Additional paid-in capital		8,141,281			7,688,912
Obligation to issue shares		17,000			37,382
Share subscriptions		18,012			356,062
Deficit accumulated during the exploration stage		(10,274,826	)		(7,570,277	)
Total stockholders’ equity (deficit)		(2,055,519	)		541,430

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	2,743,546		$	1,469,871

COMMITMENTS AND CONTINGENCIES (Notes 1 and 11)

SUBSEQUENT EVENTS (Note 13)

The accompanying notes are an integral part of these consolidated financial statements.

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STRATEGIC AMERICAN OIL CORPORATION

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended October 31, 2009 (Restated)			Three Months Ended October 31, 2008			For the Period from April 12, 2005 (inception) to October 31, 2009 (Restated)

OIL AND GAS REVENUES (Note 8)	$	82,933		$	135,427		$	2,348,044

EXPENSES
Consulting fees		133,985			171,392			2,129,417
Consulting fees - stock based (Note 10)		175,078			5,556			1,746,483
Depreciation and depletion		16,050			9,927			227,517
Direct operating costs (Note 8)		52,469			87,160			1,762,457
General and administrative		42,553			60,568			463,395
Impairment of properties (Note 5)		-			-			233,306
Interest and financing charges (Notes 6, 8 and 10)		70,068			-			135,054
Management fees (Note 8)		102,546			90,520			1,149,871
Management fees – stock based (Notes 8 and 10)		-			-			1,656,000
Professional fees		102,379			57,402			718,028
Travel and promotion		24,907			13,024			363,110

TOTAL EXPENSES		720,035			495,549			10,584,638

LOSS BEFORE OTHER ITEMS		(637,102	)		(360,122	)		(8,236,594	)

OTHER ITEMS
Gain on debt settlement		4,195			-			4,195
Interest and other income		112			-			8,400
Foreign exchange loss		(33,528	)		-			(12,601	)
Loss on warrant derivative liability (Note 7)		(2,038,226	)		-			(2,038,226	)

NET LOSS FOR THE PERIOD		(2,704,549	)		(360,122	)		(10,274,826	)

DEFICIT ACCUMULATED DURING THE EXPLORATION STAGE, BEGINNING OF PERIOD		(7,570,277	)		(4,787,774	)		-

DEFICIT ACCUMULATED DURING THE EXPLORATION STAGE, END OF PERIOD	$	(10,274,826	)	$	(5,147,896	)	$	(10,274,826	)

NET LOSS PER SHARE, BASIC AND DILUTED	$	(0.08	)	$	(0.01	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED		31,984,844			28,235,658

The accompanying notes are an integral part of these consolidated financial statements.

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STRATEGIC AMERICAN OIL CORPORATION

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended October 31, 2009(Restated)			Three Months Ended October 31, 2008			For the Period From April 12, 2005 (inception) to October 31, 2009(Restated)

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period	$	(2,704,549	)	$	(360,122	)	$	(10,274,826	)

Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and depletion		16,050			9,927			227,517
Impairment of oil and gas properties		-			-			233,306
Non-cash interest and financing charges		52,100			-			115,464
Stock based compensation		175,078			5,556			3,402,483
Loss on warrant derivative liability		2,038,226			-			2,038,226
Gain on debt settlement		(4,195	)		-			(4,195	)
Write-off of reclamation bond		-			-			21,875
Changes in operating assets and liabilities:
Accounts receivable		15,391			178,396			(19,682	)
Prepaid expenses and deposits		(75,000	)		(131,830	)		(76,200	)
Accounts payable and accrued liabilities		(79,789	)		(27,425	)		411,303
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(566,688	)		(325,498	)		(3,924,729	)

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares for cash, net of share issuance costs		1,842,112			469,900			6,411,309
Proceeds from convertible notes		-			-			150,000
Proceeds from notes payable		100,000			-			100,000
Advances and repayments to related parties		(102,221	)		(7,000	)		370,929
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		1,839,891			462,900			7,032,238

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of oil and gas properties, net of cost recoveries		1,857			(24,951	)		(1,667,268	)
Purchase of equipment		(1,293	)		-			(66,489	)
Reclamation bonds		-			-			(81,192	)

NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		564			(24,951	)		(1,814,949	)

INCREASE IN CASH		1,273,767			112,451			1,292,560

CASH, BEGINNING		18,793			67,650			-

CASH, ENDING	$	1,292,560		$	180,101		$	1,292,560

SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH INVESTING AND FINANCING ACTIVITIES (Note 12)

The accompanying notes are an integral part of these consolidated financial statements.

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STRATEGIC AMERICAN OIL CORPORATION

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2009 (Unaudited)

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 11, 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. As at October 31, 2009, the Company had working deficit of $(3,387,770) and 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 Consolidated Financial Statements

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. They may not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statements for the year ended July 31, 2009, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The interim unaudited consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K filed on November 12, 2009 with the U.S. Securities and Exchange Commission. 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, 2009, are not necessarily indicative of the results that may be expected for the year ending July 31, 2010.

Restatement

These consolidated financial statements have been restated as more fully discussed in Note 2 – Restatement.

Fair Value

Accounting standards regarding fair value of financial instruments define fair value, establish a three-level hierarchy which prioritizes and defines the types of inputs used to measure fair value, and establish disclosure requirements for assets and liabilities presented at fair value on the consolidated balance sheets.

Fair value is the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants. A liability is quantified at the price it would take to transfer the liability to a new obligor, not at the amount that would be paid to settle the liability with the creditor.

The three-level hierarchy is as follows:

Level 1 inputs consist of unadjusted quoted prices for identical instruments in active markets.

Level 2 inputs consist of quoted prices for similar instruments.

Level 3 valuations are derived from inputs which are significant and unobservable and have the lowest priority.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. We have determined that certain warrants outstanding as of the date of these financial statements qualify as derivative financial instruments under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock.” These warrant agreements include provisions designed to protect holders from a decline in the stock price (‘down-round’ provision) by reducing the exercise price in the event we issue equity shares at a price lower than the exercise price of the warrants. As a result of this down-round provision, the exercise price of these warrants could be modified based upon a variable that is not an input to the fair value of a ‘fixed-for-fixed’ option as defined under FASB ASC Topic No. 815-40 and consequently, these warrants must be treated as a liability and recorded at fair value at each reporting date.

The fair value of these warrants was determined using the Black-Sholes option pricing method with any change in fair value during the period recorded in earnings as “Other income (expense) – Gain (loss) on warrant derivative liability.”

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Significant inputs used to calculate the fair value of the warrants include expected volatility and the risk-free interest rate.

The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of October 31, 2009.

Carrying

Fair Value Measurement at October 31, 2009

Value at

October 31, 2009

Level 1

Level 2

Level 3

Derivative warrant liability

4,390,338

The following table sets forth the changes in the fair value measurement of our Level 3 derivative warrant liability during the three months ended October 31, 2009:

Beginning balance – July 31, 2009	$	-
Issuance of derivative warrants		2,352,112
Reduced for warrants exercised		-
Change in fair value of derivative liability		2,038,226
At October 31, 2009	$	4,390,338

The $2,038,226 change in fair value was recorded as an increase of the derivative liability and as an unrealized loss due to change in fair value of the liability in our statement of operations.

Subsequent Events

The Company has evaluated events occurring between the end of the fiscal quarter, October 31, 2009, and December 10, 2009 when the financial statements were issued.

Recent accounting pronouncements

The Accounting Standards Codification (ASC) has become the source of authoritative U.S. generally accepted accounting principles ("GAAP"). The ASC only changes the referencing of financial accounting standards and does not change or alter existing GAAP.

Effective August 1, 2009, the Company adopted ASC 855, Subsequent Events (formerly FAS No. 165 "Subsequent Events"). ASC 855 requires companies to recognize in the financial statements the effects of subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. An entity shall disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued. Companies are not permitted to recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements are issued. Some non recognized subsequent events must be disclosed to keep the financial statements from being misleading. For such events a company must disclose the nature of the event, an estimate of its financial effect, or a statement that such an estimate cannot be made. This Statement applies prospectively for interim or annual financial periods ending after June 15, 2009. The adoption of ASC 855 did not have a material impact on the Company's results of operations and financial position.

Certain other recent accounting pronouncements have not been disclosed as they are not applicable to the Company.

NOTE 2: RESTATEMENT

Subsequent to issuing the report for the three months ended October 31, 2009 and 2008, we discovered the following errors that impacted the balance sheets, statements of operations and comprehensive loss, and statements of cash flows.

The restatement changes increase the loss in the statement of operations and the accumulated deficit by $1,677,149, decreases additional paid in capital by $2,713,189 and increases warrant derivative liability by $4,390,338.

The results of the restatements are summarized as follows:

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Consolidated Balance Sheets as of October 31, 2009:

	As reported			Adjustment			As restated

Warrant derivative liability	$	-		$	4,390,338		$	4,390,338
Total current liabilities		385,874			4,390,338			4,776,212
TOTAL LIABILITIES	$	408,727		$	4,390,338		$	4,799,065

Additional paid-in capital	$	10,854,470		$	(2,713,189	)	$	8,141,281
Accumulated deficit		(8,597,677	)		(1,677,149	)		(10,274,826	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	$	2,334,819		$	(4,390,338	)	$	(2,055,519	)

Consolidated Statements of Operations for the three months ended October 31, 2009:

	As reported			Adjustment			As restated
Interest and financing charges	$	431,145		$	(361,077	)	$	70,068
Total expenses		1,081,112			(361,077	)		720,035
Loss before other items		(998,179	)		361,077			(637,102	)
Loss on warrant derivative liability		-			(2,038,226	)		(2,038,226	)
NET LOSS FOR THE PERIOD		(1,027,400	)		(1,677,149	)		(2,704,549	)
DEFICIT ACCUMULATED DURING THE EXPLORATION STAGE, END OF PERIOD	$	(8,597,677	)	$	(1,677,149	)	$	(10,274,826	)
BASIC AND DILUTED LOSS PER SHARE	$	(0.03	)	$	(0.05	)	$	(0.08	)

Consolidated Statements of Operations for the Period from April 12, 2005 (inception) to October 31, 2009:

	As reported			Adjustment			As restated
Interest and financing charges	$	496,131		$	(361,077	)	$	135,054
Total expenses		10,945,715			(361,077	)		10,584,638
Loss before other items		(8,597,671	)		361,077			(8,236,594	)
Loss on warrant derivative liability		-			(2,038,226	)		(2,038,226	)
NET LOSS FOR THE PERIOD	$	(8,597,677	)	$	(1,677,149	)	$	(10,274,826	)

Consolidated Statements of Cash Flows for the three months ended October 31, 2009:

	As reported			Adjustment			As restated

Net loss	$	(1,027,400	)	$	(1,677,149	)	$	(2,704,549	)
Non cash interest & financing charges	$	413,177		$	(361,077	)	$	52,100
Loss on warrant liability	$	-		$	2,038,226		$	2,038,226

Consolidated Statements of Cash Flows for the Period from April 12, 2005 (inception) to October 31, 2009:

	As reported			Adjustment			As restated

Net loss	$	(8,597,677	)	$	(1,677,149	)	$	(10,274,826	)
Non- cash interest and financing charges	$	476,541		$	(361,077	)	$	115,464
Loss on warrant liability	$	-		$	2,038,226		$	2,038,226

NOTE 3: RECLAMATION BONDS

Reclamation bonds includes interest and non-interest bearing deposits issued in the States of Louisiana $19,317 (July 31, 2009 - $19,317) and Texas $40,000 (July 31, 2009 - $40,000) to cover each State's reclamation requirement for producing operations. There were no changes during the three months ended October 31, 2009.

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NOTE 4: EQUIPMENT

Equipment acquisitions consist of the following:

	October 31, 2009			July 31, 2009

EQUIPMENT
Computer equipment	$	5,925		$	4,632
Furniture and fixtures		8,320			8,320
Leasehold improvements		11,294			11,294
Production equipment		40,950			40,950

		66,489			65,196
Accumulated depreciation		(38,687	)		(35,366	)

	$	27,802		$	29,830

NOTE 5: OIL AND GAS PROPERTIES

Proved Properties

Barge Canal, Texas

On November 16, 2006, the Company completed an assignment and purchase agreement with OPEX Energy, LLC with an effective date of August 1, 2006. 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.

South Delhi / Big Creek Field, Louisiana

On August 24, 2006, the Company 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, the Company paid $250,000 to acquire the Holt Lease, the Strahan Lease and the McKay Lease, as described below. In December 2007, an independent registered engineer completed a reserve and economics report on the combined South Delhi and Big Creek Field properties. The report outlined the proved developed producing reserves as of January 1, 2008, and accordingly, acquisition costs of $290,290 and development costs of $42,900 were reclassified as capitalized proved oil and gas properties.

The Holt Lease

Pursuant to the EPA Purchase Agreement, the Company acquired a 97% working interest and an 81.25% net revenue interest in approximately 136 acres in Franklin Parish, Louisiana (the "Holt Lease").

The Strahan Lease

Pursuant to the EPA Purchase Agreement, the Company acquired a 100% working interest and an 81.25% net revenue interest in approximately 40 acres in Richland Parish, Louisiana (the "Strahan Lease").

The McKay Lease

Pursuant to the EPA Purchase Agreement, the Company acquired a 100% working interest and an 82.08% net revenue interest in approximately 80 acres in Richland Parish, Louisiana (the "McKay Lease"). On November 1, 2008, the Company assigned 100% of its interest in and to the McKay No. 1 well bore and leasehold. Pursuant to the Assignment Agreement, the Company retained ownership to all surface equipment, which was subsequently moved to the Company's Holt Lease in Franklin Parish. Additionally, all plugging liabilities were transferred to the purchaser and the Company retained no ORRI or working interest in the McKay No. 1 well.

Assignment of Interests to Tradestar Resources Corporation

In conjunction with the acquisition of the Holt Lease, the Strahan Lease and the McKay Lease, the Company assigned a 25% working interest with respect to each lease to Tradestar Resources Corporation as a finder's fee. In each case, the 25% working interest consists of two parts - a 12.5% working interest prior to payout and a 12.5% back in after payout agreement working interest. Tradestar Energy Inc., a wholly owned subsidiary of Tradestar Resources Corporation, became the operator of record for the Holt, Strahan and McKay Leases as of December 1, 2007.

Unproven Reserves

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 of Texas LLC for $220,000 plus additional payments of $13,800 to negotiate new oil, gas and mineral leases. 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. At July 31, 2009, management determined the recoverable value of its interest to be $20,000 and accordingly, costs of $55,000 were deemed to be impaired and added to the full cost pool, which is amortized on a unit-of-production basis.

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Koliba Prospect, Texas

Through October 31, 2009, the Company has entered into several lease agreements with certain mineral owners of a 142 acre tract (the "Koliba Lease") in Victoria County, Texas. The Company has leased over 95% of the minerals rights on this tract with additional leases pending. Additionally, the Company paid $70,000 for an assignment of oil and gas leases on 64 adjacent and contiguous acres. This Assignment includes several leases with numerous mineral owners.

Oakdale NE, Donoho, Markum City and DST Prospects, Illinois

Through October 31, 2009, the Company has entered into numerous oil and gas leases in Jefferson County, Illinois. The leases total approximately 3,472 gross acres pursuant to which the Company has a 100% working interest and an 87.5% net revenue interest.

Dixon Prospect, Louisiana

Through October 31, 2009, the Company has leased 93.82% of 81.25% net revenue mineral interests in the Dixon 160 acre tract in Franklin Parish, Louisiana. The Dixon lease has two temporarily abandoned oil wells and one currently permitted salt water disposal well.

Little Mule Creek Project, Oklahoma

In October 2007, the Company 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. Under the terms of the agreement, the Company's interest is subject to a 25% back in after payout, which would reduce the Company's interest to 3.0%. The prospect consists of approximately 11,550 acres. To October 31, 2009, the Company has paid for a pro-rata share of land and geology-geophysical costs, charges to exercise additional lease options (prorata share), and a prorata share of drilling costs. The initial well was drilled and tested and deemed to be uneconomical for commercial oil and gas production, and was plugged in the second quarter of 2009. Accordingly, acquisition and development costs of $163,773 were deemed to be impaired and added to the full cost pool, which is amortized on a unit-of-production basis.

Gobbler's Knob Prospect, Illinois

Through December 15, 2008, the Company had 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 100% working interest and 87.5% net revenue interest. On December 15, 2008, the Company assigned all 214 gross acres of the Gobbler's Knob prospect. Pursuant to the Assignment Agreement, the Company retained a 7.5% ORRI and 10% back in after payout on any reworked drilled wells, and the purchaser must re-work or drill one well each 12 months to hold the acreage. Accordingly, acquisition costs of $3,700 were deemed to be impaired and added to the full cost pool, which is amortized on a unit-of-production basis.

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, 2009			July 31, 2009

PROVED PROPERTIES
Barge Canal	$	593,843		$	593,767
South Delhi / Big Creek Field		346,902			346,787
Impaired properties		220,504			222,473

		1,161,249			1,163,027

Accumulated depletion		(188,830	)		(176,101	)

		972,419			986,926

UNPROVED OR UNEVALUATED PROPERTIES
Janssen Lease		20,000			20,000
Illinois prospects		164,816			164,272
Louisiana prospects		22,944			22,944
Texas prospects		87,806			88,238

		295,566			295,454

	$	1,267,985		$	1,282,380

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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, 2009		July 31, 2009

ACQUISITION COSTS
Barge Canal	$	572,456	$	572,456
Janssen Lease		20,000		20,000
South Delhi / Big Creek Field		290,290		290,290
Illinois prospects		164,816		164,272
Louisiana Prospects		22,944		22,944
Texas Prospects		87,806		88,238
Impaired acquisition costs		99,817		101,786

		1,258,129		1,259,986

DEVELOPMENT COSTS
Barge Canal		12,246		12,246
South Delhi / Big Creek Field		42,900		42,900

		55,146		55,146

EXPLORATION COSTS
Impaired exploration costs		120,687		120,687

RETIREMENT OBLIGATIONS
Barge Canal		9,141		9,065
South Delhi / Big Creek Field		13,712		13,597

		22,853		22,662

	$	1,456,815	$	1,458,481

NOTE 6: NOTES PAYABLE

2009 Convertible Debenture

On March 25, 2009, the Company completed a convertible debenture financing of $150,000 issuing convertible promissory notes that bear interest at 15% per annum. If not converted, the notes would be due on September 25, 2010. The unpaid amount of principal and accrued interest can be converted at any time at the holder's option into shares of the Company's common stock at a price of the greater of $0.25 or the current market price less 10%. Additionally, the Company issued to the Lender, as fully paid and non-assessable, 600,000 non-transferable and registerable share purchase warrants to acquire an equivalent number of common shares of the Company at an exercise price of $0.60 per share, and for an exercise period of up to September 25, 2010. The Company retained the right to redeem the convertible promissory notes at any time upon giving certain notice to the holder(s), and subject to paying a 20% premium.

The Company determined and recognized the fair value of the embedded beneficial conversion feature of $75,999 as additional paid-in capital as the convertible notes were issued with an intrinsic value conversion feature.

The Company has charged the beneficial conversion feature to additional paid-in capital. In addition, the Company allocated the proceeds of issuance between the convertible debt and the detachable warrants based on their relative fair values. Accordingly, the Company recognized the relative fair value of the warrants of $61,935 as a component of stockholders' equity. Additionally, for the three months ended October 31, 2009, interest expense of $22,989 has been accreted increasing the carrying value of the convertible debentures to $65,707 as at October 31, 2009.

2010 Promissory Note

On September 2, 2009, the Company issued a $100,000 promissory note that bears interest at 3% for the term, due 90 days from the date of issuance. Additionally, the Company issued, as fully paid and non-assessable, 100,000 non-transferable and registerable share purchase warrants to acquire an equivalent number of common shares of the Company at an exercise price of $0.25 per share, and for an exercise period of three years. Accordingly, the Company recognized the relative fair value of the warrants of $16,000 as a component of stockholders' equity. For the three months ended October 31, 2009, interest expense of $13,111 has been accreted increasing the carrying value of the promissory note to $97,111 as at October 31, 2009. The fair value of the warrants was estimated using the Black-Scholes option pricing model with an expected life of three years, a risk free interest rate of 0.89%, a dividend yield of 0%, and an expected volatility of 109%.

NOTE 7: WARRANT DERIVATIVE LIABILITY (RESTATED)

Effective July 31, 2009, we adopted FASB ASC Topic No. 815-40 (formerly EITF 07-05) which defines determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. This literature specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to our own stock and (b) classified in stockholders’ equity in the statement of financial position, would not be considered a derivative financial instrument and provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the scope exception.

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Certain warrants we issued during the three months ended October 31, 2009 are not afforded equity treatment because these warrants have a down-round ratchet provision on the exercise price. As a result, the warrants are not considered indexed to our own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings in our consolidated statement of operations under the caption “Other income (expense) – Gain (loss) on warrant derivative liability” until such time as the warrants are exercised or expire.

The exercise price of all the 12,977,500 warrants issued to investors, vendors, and for finders’ fees in October 2009, as more fully discussed in Note 10 – Stockholders’ equity (deficit), is subject to “reset” provisions in the event we subsequently issue common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than $0.35. If these provisions are triggered, the exercise price of all their warrants will be reduced.

The total fair value of the warrants issued during October 2009, amounting to $4,410,367 has been recognized as a derivative liability on the date of issuance. The fair value on the date of issuance includes the net cash proceeds from the sale of stock of $2,042,112, the value of accounts payable and debt settled of $310,000 and an unrealized loss as of the date of issuance of $2,058,225.

The following table sets forth the changes in the fair value measurement of our Level 3 derivative warrant liability during the three months ended October 31, 2009:

Beginning balance – July 31, 2009	$	-
Issuance of derivative warrants		2,352,112
Reduced for warrants exercised		-
Change in fair value of derivative liability		2,038,226
At October 31, 2009	$	4,390,338

The $2,038,226 change in fair value was recorded as an increase of the derivative liability and as an unrealized loss due to change in fair value of the liability in our statement of operations.

NOTE 8: RELATED PARTY TRANSACTIONS

During the three months ended October 31, 2009 the Company had transactions with certain officers and directors of the Company as follows:

(a) recorded production revenues of $47,184 (2008 - $98,790) and incurred production costs of $29,819 (2008 - $31,193) for the Barge Canal property which is operated by a company controlled by an officer of the Company;

(b) incurred $102,546 in management fees (2008 - $90,520) paid to directors and officers during the period. At October 31, 2009, $74,636 (July 31, 2008 - $244,257) was payable to these directors and officers;

(c) repaid a $44,000 promissory note issued to an officer of the Company, and incurred $1,434 (2008 - $2,450) in interest and finance charges;

(d) repaid a $25,000 promissory note issued to a director of the Company, and incurred $752 (2008 - $1,134) in interest and finance charges;

(e) repaid a $100,000 promissory note issued to a direct family member of an officer and a director of the Company, and incurred $3,008 (2008 - $Nil) in interest and finance charges;

(f) repaid a $27,500 promissory note issued to an officer of the Company, and incurred $1,098 (2008 - $Nil) in interest and finance charges;

(g) repaid a $18,500 promissory note issued to a director of the Company, and incurred $760 (2008 - $Nil) in interest and finance charges; and

(h) incurred $1,817 (2008 - $Nil) in interest and finance charges on a $100,000 promissory note to a direct family member of an officer and a director that was issued and repaid during the three months ended October 31, 2009. Additionally, the Company issued, as fully paid and non-assessable, 100,000 non-transferable and registerable share purchase warrants to acquire an equivalent number of common shares of the Company at an exercise price of $0.25 per share, and for an exercise period of three years. Accordingly, the Company recognized the relative fair value of the warrants of $16,000 as a component of stockholders' equity. For the three months ended October 31, 2009, interest expense of $16,000 has been accreted increasing the carrying value of the promissory note to $100,000 prior to repayment. The fair value of the warrants was estimated using the Black-Scholes option pricing model with an expected life of three years, a risk free interest rate of 0.89%, a dividend yield of 0%, and an expected volatility of 109%.

All related party transactions involving provision of services or tangible assets were recorded at the exchange amount, which is the value established and agreed to by the related parties reflecting arms length consideration payable for similar services or transfers.

NOTE 9: ASSET RETIREMENT OBLIGATIONS

The Company's asset retirement obligations ("ARO's") in regards to Barge Canal and South Delhi / Big Creek Field projects (refer to Note 5) relates to site restoration. A reconciliation between the opening and closing ARO's balances is provided below:

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	October 31, 2009		July 31, 2009

BARGE CANAL
Opening balance	$	9,065	$	10,722
Revisions		-		(1,956	)
Accretion expense		76		299

		9,141		9,065

SOUTH DELHI / BIG CREEK FIELD
Opening balance		13,597		4,643
Revisions		-		8,505
Accretion expense		115		449

		13,712		13,597

	$	22,853	$	22,662

The Company measured the ARO's at a fair value of $37,500 and capitalized this to proved oil and gas properties. The ARO's will accrete to $53,977 until the time at which it is expected to be settled. A discount rate of 6.00% was used to calculate the present value of the ARO. Actual retirement costs will be recorded against the ARO's when incurred. Any difference between the recorded ARO's and the actual retirement costs incurred will be recorded as a gain or loss in the period of settlement.

NOTE 10: STOCKHOLDERS' EQUITY (DEFICIT)

Share Capital

The Company's capitalization at October 31, 2009 was 500,000,000 authorized common shares with a par value of $0.001 per share.

2010 Share Transactions

On September 1, 2009, the Company issued 57,144 shares of its restricted common stock pursuant under a Business Development Services Agreement. As of July 31, 2009, the Company had recorded the $23,715 fair value as a share issuance obligation which was expensed as stock-based consulting fees in the prior year (refer to Note 10).

On September 15, 2009, the Company completed a private placement for 460,166 Units at a subscription price of $0.30 per Unit for gross proceeds of $138,050, which were received during the fiscal year ended July 31, 2009. Additionally, on September 15, 2009 the Company completed a private placement for 479,332 Units at a subscription price of $0.30 per Unit for the conversion of debt in the amount of $143,800. 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 at an exercise price of $0.40 per warrant share, for a period of three years from the date of issuance.

On October 7, 2009, the Company issued 66,666 shares of its restricted common stock pursuant to a Corporate Development Consulting Agreement. The Company recorded the $24,666 fair value of the shares issued as stock-based consulting.

On October 15, 2009, the Company issued 100,000 shares of its restricted common stock pursuant to an Amended Business Development Services Agreement. The Company recorded the $27,000 fair value of the shares issued as stock-based consulting.

On October 15, 2009, the Company completed a private placement for 12,500,000 Units at a subscription price of $0.20 per Unit for gross proceeds of $2,500,000, of which $310,000 were received in the form of debt conversion. 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 at an exercise price of $0.35 per warrant share, for a period of five years from the date of issuance. The proceeds, net of finder’s fees, were allocated to the warrants because the warrants are derivatives (see Note 6) and the fair value of the warrants was classified as a liability.

Other than derivative warrants, the Company has not separately disclosed the fair market value of the warrants attached to the unit private placements during the current and prior fiscal years.

Share Purchase Warrants

On October 15, 2009, in conjunction with the private placement issuance on the same day, the Company issued as finders' fees 477,500 non-transferable share purchase warrant with an exercise price of $0.35, for a period of five years. The $162,276 fair value of the warrants at the date of issuance was estimated using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 2.41%, a dividend yield of 0%, and an expected volatility of 140%. The warrants are derivatives (see Note 6) and the fair value of the warrants was classified as a liability at issuance.

Warrant modification (Restated)

During August 2009, we extended the term of 5,158,238 warrants which were originally issued in conjunction with equity issues during 2006, 2007, and 2008. The modification resulted in a deemed dividend of $679,200 which was calculated as the difference in the fair value of the warrants immediately before and after the modification using the Black-Scholes option pricing model. The following table details the significant assumptions used to compute the fair market value of the warrant modification:

	Before			After
Risk-free interest rate		0.47	%		0.47	%
Dividend yield		0	%		0	%
Volatility factor		154.60	%		154.60	%
Remaining term (years)		0			1

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A summary of the Company's common share purchase warrants as at October 31, 2009, and changes during the period is presented below:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Life (years)

BALANCE, JULY 31, 2008		7,117,425		$	0.83		0.79

Issued		1,544,999			1.00		1.33
Cancelled or expired		(2,302,145	)		0.60		-

BALANCE, JULY 31, 2009		6,360,279			0.91		0.20
Issued		14,116,998			0.35		4.83
Cancelled or expired		-			-		-

BALANCE, OCTOBER 31, 2009		20,477,277		$	0.53		3.54

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 May 21, 2009, the Board of Directors authorized and approved the adoption of the 2009 Re-Stated Stock Incentive Plan (the "2009 Plan"), which absorbs and replaces the 2007 Stock Incentive Plan, under which an aggregate of 10,000,000 of the Company's shares may be issued. The Stock Incentive Plan is administered by the Board of Directors which determines, among other things, (i) the persons to be granted awards under the Plan; (ii) the number of shares or amount of other awards to be granted; and (iii) the terms and conditions of the awards granted.

On March 18, 2009, the Company granted a total of 500,000 stock options at an exercise price of $0.35 per share to a consultant. The term of the options is three years. The $130,000 fair value of the options at the date of grant was estimated using the Black-Scholes option pricing model with an expected life of 3 years, a risk free interest rate of 1.7%, a dividend yield of 0%, and an expected volatility of 129%. An amount of $130,000 was recorded as stock based consulting fees during the fiscal year ended July 31, 2009.

On May 21, 2009, the Company granted a total of 2,230,000 stock options with an exercise price of $0.35 per share to consultants, officers and directors. The term of the options is ten years. The $1,070,400 fair value of the options at the date of grant was estimated using the Black-Scholes option pricing model with an expected life of 5 years, a risk free interest rate of 1.7%, a dividend yield of 0%, and an expected volatility of 105%. An amount of $456,000 was recorded as stock based management fees during the fiscal year ended July 31, 2009. Of the $614,400 fair value of the options issued to consultants, $204,800 was recorded as stock based consulting fees during the fiscal year ended July 31, 2009, $76,800 was recorded as stock based consulting fees during the three months ended October 31, 2009, with the balance to be expensed over the vesting period.

A summary of the Company's stock options as at October 31, 2009, and changes during the period is presented below:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Life (years)

BALANCE, JULY 31, 2008		3,800,000	$	0.33		8.83
Issued		2,730,000		0.35		10.00

BALANCE, JULY 31, 2009		6,530,000		0.34		8.16
Issued		-		-		-

BALANCE, OCTOBER 31, 2009		6,530,000	$	0.34		7.91

A summary of the status of the Company's unvested options as of October 31, 2009, and changes during the three months ended October 31, 2009, is presented below:

	Number of Shares			Weighted-Average Grant Date Fair Value

UNVESTED, JULY 31, 2008		33,333		$	0.50
Issued		1,280,000			0.48
Vested		(353,333	)		0.48

UNVESTED, JULY 31, 2009		960,000			0.48
Vested		-			-

UNVESTED, OCTOBER 31, 2009		960,000		$	0.48

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NOTE 11: COMMITMENTS

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 only agreement outstanding at October 31, 2009 with fixed compensation calls for a monthly management fee of $10,000, which automatically renews every three months as of November 30, 2008.

On June 1, 2009, the Company entered into a business development services agreement which was amended on August 1, 2009. Under the terms of the amended agreement, the Company will (i) pay a monthly fee of $10,000, or (ii) issue 50,000 common shares per month through July 31, 2010. The agreement will automatically renew on a monthly basis subject to written termination, and can be terminated subsequent to February 1, 2010. As of October 31, 2009, the Company was obligated to issue 50,000 common shares pursuant to the amended agreement. The $17,000 fair value of the 50,000 shares was recorded as a share issuance obligation and expensed as stock-based consulting fees.

NOTE 12 SUPPLEMENTAL CASH FLOW INFORMATION AND NONCASH INVESTING AND FINANCING ACTIVITIES

	Three Months Ended October 31,
	2009		2008

Interest paid	$	-	$	-
Income taxes paid	$	-	$	-

Refer to Note 10.

NOTE 13: SUBSEQUENT EVENTS

On November 13, 2009, the Company completed a private placement for 5,250,000 Units at a subscription price of $0.20 per Unit for gross proceeds of $1,050,000. 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 at an exercise price of $0.35 per warrant share, for a period of five years from the date of issuance. The proceeds, net of finder’s fees, were allocated to the warrants because the warrants are derivatives (see Note 6) and the relative fair value of the warrants was classified as a liability.

In association with the private placement, during November 2009, we granted warrants to purchase 730,000 shares of common stock at $.35 per share which expire five years from the date of issuance as finder’s fees. In addition, a consultant received warrants to purchase 50,000 shares of common stock at $.35 per share which expire five years from the date of issuance for business services. The warrants are derivatives (see Note 7) and the fair value of the warrants was classified as a liability at issuance.

Effective November 30, 2009, the Company entered into a one year corporate development services agreement. Under the terms of the agreement, the Company will: (i) pay a monthly fee of $5,000; and (ii) issue 500,000 shares, as fully paid and non-assessable, of its restricted common stock. The 500,000 shares will be issued as follows: (a) 300,000 shares within five business days from the effective date of the agreement; and (b) 50,000 shares on each of the days which are three, six, nine and 12 months, respectively, from the effective date of the agreement.

Effective December 1, 2009, the Company entered into a one year executive services agreement following the appointment of a new Chief Executive Officer and President. Under the terms of the agreement, the Company will: (i) pay a monthly fee of $8,333, (ii) pay a one-time signing bonus of $20,000, and (iii) issue options to purchase an aggregate of not less than 2,500,000 common shares of the Company, at an exercise price of $0.20, for a term of three years.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Form 10-Q/A for the quarterly period ended October 31, 2009 contains forward-looking statements that involve risks and uncertainties. Forward-looking statements in this document include, among others, statements regarding our capital needs, business plans and expectations. Such forward-looking statements involve assumptions, risks and uncertainties regarding, among others, the success of our business plan, availability of funds, government regulations, operating costs, our ability to achieve significant revenues, our business model and products and other factors. Any statements contained herein that are not statements of historical fact 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. In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties set forth in reports and other documents we have filed with or furnished to the SEC, including, without limitation, our Form 10-K for the period ended July 31, 2009. These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this document. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. The forward-looking statements in this document are made as of the date of this document and we do not intend or undertake 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.

OVERVIEW

As used in this Quarterly Report: (i) the terms "we", "us", "our", "Strategic", "Penasco" and the "Company" mean Strategic American Oil Corporation and its wholly owned subsidiary, Penasco Petroleum Inc., unless the context otherwise requires; (ii) "SEC" refers to the Securities and Exchange Commission; (iii) "Securities Act" refers to the Securities Act of 1933, as amended; (iv) "Exchange Act" refers to the Securities Exchange Act of 1934, as amended; and (v) all dollar amounts refer to United States dollars unless otherwise indicated.

The following discussion of our plan of operations, results of operations and financial condition as at and for the three months ended October 31, 2009 should be read in conjunction with our unaudited consolidated interim financial statements and related notes for the three months ended October 31, 2009 included in this Quarterly Report, as well as our Annual Report on Form 10-K for the year ended July 31, 2009.

General

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.

Our principal offices are located at Suite 2015, 600 Leopard Street, Corpus Christi, Texas, 78473. Our telephone number is (361) 884-7474 and our fax number is (512) 233-2531.

Our Business Operations

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 395 gross (209 net) developed acres and approximately 14,775 gross (3,998 net) undeveloped acres pursuant to leases or acquisitions as described below. Of that acreage, we maintain approximately 176 gross (132 net) developed acres in Louisiana, 219 gross (77 net) developed acres in Texas, 3,472 gross (3,268 net) undeveloped acres in Illinois, 160 gross (150 net) undeveloped acres in Louisiana, 11,000 gross (440 net) undeveloped acres in Oklahoma, and 143 gross (140 net) undeveloped acres in Texas. Total developed and undeveloped acreage is approximately 15,169 gross acres (4,207 net).

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 Quarterly Report:

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	Gross Acres		Net Acres (*)

DEVELOPED ACREAGE
Louisiana		175.89		131.92
Texas		219.00		77.04

UNDEVELOPED ACREAGE
Illinois		3,471.59		3,268.29
Louisiana		160.00		150.08
Oklahoma		11,000.00		440.00
Texas		143.00		139.84

		15,169.48		4,207.17

(*) Certain of our interests in oil and natural gas properties are less than 100%. Accordingly, we have presented the acreage of our mineral properties on a net acre basis.

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.

	Oil				Natural Gas
	Gross		Net		Gross		Net

LOUISIANA		4		3.00		-		-
TEXAS		2		2.00		1		0.03

		6		5.00		1		0.03

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 November 2006, we completed the acquisition of the Welder lease in Calhoun County, Texas, which produces both oil and gas. The effective date of the Welder acquisition was August 1, 2006 and accordingly, production results from the effective date through the closing date have been included in operating results. 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, 2009. 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 nine Mcf of natural gas to one Bbl of oil; and (vi) "MMcf" means one million cubic feet.

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	Three Months Ended October 31, 2009		Three Months Ended October 31, 2008		Period from Inception to October 31, 2009

PRODUCTION DATA
Oil (MBbls)		1.1		1.1		27.1
Natural gas (MMcf)		3.0		2.1		50.4

Total (MMcfe)		9.7		8.5		212.8

AVERAGE PRICES
Oil (per Bbl)	$	67.04	$	109.63	$	75.76
Natural gas (per Mcf)	$	2.73	$	8.52	$	5.79

Total (per Mcfe)	$	8.53	$	15.87	$	11.01

AVERAGE COSTSs (per Mcfe)
Lease operating expenses(*)	$	5.01	$	9.05	$	5.92
Production tax expense	$	0.39	$	1.17	$	0.33

(*) 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.

Drilling Activity

As of the date of this quarterly report, 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 Tradestar Energy based in Hot Springs, Arizona. 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 operated by PROEX Energy Management Company ("Proex") based in Houston, Texas. We pay a monthly management fee to the operating companies for their services.

Our Properties

Barge Canal, Texas

On November 16, 2006 we completed an assignment and purchase agreement with OPEX Energy, LLC with an effective date of August 1, 2006. Under the terms of the agreement, 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. At the time of the acquisition, the two wells on the Welder lease were producing assets.

As of the date of this quarterly report, 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.

South Delhi/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"). At the time of the acquisition, one of four wells on the Holt lease, the one well on the Strahan lease, and no wells on the McKay lease were producing assets. Under the terms of the EPA Purchase Agreement, we paid $250,000 to acquire the Holt Lease, the Strahan 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"). In the months following 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 quarterly report, we are producing oil from the Holt No.'s 10 and 22 wells. The Holt No. 4 and 24 wells are 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").

As of the date of this quarterly report, 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"). On the McKay lease, we re-worked the well but did not improve production. On November 1, 2008 we assigned 100% of our interest in and to the McKay No. 1 well bore and leasehold. Pursuant to the Assignment Agreement, we retained ownership to all surface equipment, which was subsequently moved to our Holt Lease in Franklin Parish. Additionally, all plugging liabilities were transferred to the purchaser and we retained no ORRI or working interest in the McKay No. 1 well.

Assignment of Interests to Tradestar Resources Corporation

In conjunction with our acquisition of the Holt Lease, the Strahan Lease and the McKay Lease, we assigned a 25% working interest with respect to each lease to Tradestar Resources Corporation ("Tradestar Resources") as a finder's fee. The 25% working interest consisted of two parts, (i) a 12.5% working interest assigned upon acquisition of the leases, and (ii) a 12.5% back in assigned with an effective date of January 1, 2007. Tradestar Energy Inc. ("Tradestar Energy"), a wholly owned subsidiary of Tradestar Resources Corporation, became the operator of record for the Holt, Strahan and McKay Leases as of December 1, 2007.

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 97% of the working interest to ETG Energy Resources. We retained a 3% working interest 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 quarterly report, we have entered into to several lease agreements with certain mineral owners of a 79 acre tract (the "Koliba Lease") in Victoria County, Texas. We have leased over 95% of the mineral rights with additional leases pending. Additionally, we acquired an Assignment of oil and gas leases on 64 adjacent and contiguous acres from Ensley Properties, Inc. This Assignment includes several leases with numerous mineral owners. We paid $70,000 to Ensley Properties, Inc. for this Assignment. The property underlying these lease agreements is located near our Welder lease and has one shut-in oil/gas well. The well has proven oil and gas zones 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. We will drill one well as an offset to the former Koliba No. 1 well, and will retain a carried 25% interest to casing point.

Oakdale NE, Donoho, Markum City and DST Prospects, Illinois

Through the date of this quarterly report, we have entered into numerous oil and gas leases in Jefferson County, Illinois. Currently these leases total approximately 2,994 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 2010 offsetting past producing wells (Oakdale North Field) to a depth of approximately 4,000 feet.

Dixon Prospect, Louisiana

Through the date of this quarterly report, we have entered into numerous oil and gas leases with certain mineral owners of a 160 acre tract (the "Dixon Lease") in Franklin Parish, Louisiana. We have leased over 93% of the mineral rights. The Dixon lease has two temporarily abandoned oil wells and one currently permitted salt water disposal well.

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 11,550 acres. An initial horizontal well (RRC#1-19) was spudded in around January 9, 2008 and was drilled vertically to 4,950 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 160 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. The initial well was drilled and tested and deemed to be uneconomic for commercial oil and gas production. We signed a consent to plug and abandon the well on February 18, 2009. Accordingly, acquisition and development costs of $163,773 were impaired during the year and added to the full cost pool, which is amortized on a unit-of-production basis.

Recent 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). We have leased 93.82% of 81.25% net revenue mineral interests in the Dixon 160 acre tract in Franklin Parish, Louisiana. The Dixon lease has two temporarily abandoned oil wells that will be re-worked, re-equipped and put back into production. The lease also has one (1) currently permitted salt water disposal well. Tradestar Resources can earn a 50% interest in the Dixon lease by paying 100% of the cost of re-establishing production. Tradestar Energy will operate the lease for us.

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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 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.

RESULTS OF OPERATIONS

Three Months Ended October 31, 2009 Compared to Three Months Ended October 31, 2008

	Three Months Ended October 31, 2009 (As Reported)			Three Months Ended October 31, 2009 (Restated)			Three Months Ended October 31, 2008

OIL AND GAS REVENUES	$	82,933		$	82,933		$	135,427

EXPENSES
Consulting fees		133,985			133,985			171,392
Consulting fees - stock based		175,078			175,078			5,556
Depreciation and depletion		16,050			16,050			9,927
Direct operating costs		52,469			52,469			87,160

General and administrative		42,553			42,553			60,568

Interest and financing charges		431,145			70,068			-

Management fees		102,546			102,546			90,520

Professional fees		102,379			102,379			57,402

Travel and promotion		24,907			24,907			13,024

TOTAL EXPENSES		1,081,112			720,035			495,549

LOSS BEFORE OTHER ITEMS		(998,179	)		(637,102	)		(360,122	)

OTHER ITEMS
Gain on debt settlement		4,195			4,195			-
Interest and other income		112			112			-
Foreign exchange		(33,528	)		(33,528	)		-
Loss on warrant derivative liability		-			(2,038,226	)		-

NET LOSS FOR THE PERIOD	$	(1,027,400	)	$	(2,704,549	)	$	(360,122	)

Revenue

Revenue from oil and gas properties was $82,933 for the three months ended October 31, 2009, compared to $135,427 in the prior period. Significant developments or changes between these periods are outlined below:

Barge Canal: Revenue from the Barge Canal project was $47,184 for the three months ended October 31, 2009, as compared to $98,790 for the three months ended October 31, 2008. Average sale prices for oil and natural gas (per Mcf) were 39% and 68% lower respectively in the current period, while average production decreased by 23% for oil and increased by 40% for gas from the prior period. The decrease in oil production resulted from unscheduled maintenance in the current period, while the increase in gas production resulted from flooding in the prior period. The market price of oil and gas increased during the current period, and decreased during the prior period.

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South Delhi/Big Creek Field: Revenue from the South Delhi / Big Creek Field project was $34,743 for the three months ended October 31, 2009, as compared to $31,255 for the three months ended October 31, 2008. As with Barge Canal, average sale prices for oil was 39% lower in the current period. Average production for the three months ended October 31, 2009 increased by 76% from the prior period. The increase in production resulted from significant maintenance downtime in the prior period. The market price of oil and gas increased during the current period, and decreased during the prior period.

Janssen Lease: Revenue from the Janssen Lease project was $1,006 for the three months ended October 31, 2009, as compared to $5,164 for the three months ended October 31, 2008. As with Barge Canal and South Delhi/Big Creek Field, average sale prices for oil and natural gas (per Mcf) were 39% and 68% lower respectively in the current period.

Operating Expenses

Operating expenses incurred during the three months ended October 31, 2009, were $720,035 compared to $495,549 in the prior period. Significant changes and expenditures are outlined as follows:

Consulting fees decreased to $133,985 during the three months ended October 31, 2009, from $171,392 during the same period ended October 31, 2008, due primarily to corporate development in the prior period relating to the listing process which completed in August, 2008.

Consulting fees - stock based increased to $175,078 during the three months ended October 31, 2009, from $5,556 during the same period ended October 31, 2008. The current and prior period expense consists of the fair value of shares and option grants issued to consultants that were earned during the period.

Depreciation and depletion increased to $16,050 during the three months ended October 31, 2009, from $9,927 during the same period ended October 31, 2008. Depletion of capitalized oil and natural gas properties is based on production during the current and comparative periods.

Direct operating costs were $52,469 during the three months ended October 31, 2009, compared to $87,160 during the same period ended October 31, 2008. Significant developments or changes in direct operating costs per project are outlined as follows:

Barge Canal: Direct operating costs of $29,819 during the three months ended October 31, 2009, represented approximately 63% of gross production sales during the current period. Direct operating costs of $31,193 during the three months ended October 31, 2008, represented approximately 32% of gross production sales during the prior period. The current period operating costs were a higher percentage of gross production sales than in the prior period due to unscheduled maintenance costs.

ii.

South Delhi/Big Creek Field: Direct operating costs of $21,904 for the three months ended October 31, 2009, represented approximately 63% of gross production sales during the current period. Direct operating costs of $54,744 for the three months ended October 31, 2008, represented approximately 175% of gross production sales during the prior period. Operating costs in the prior period included planned and weather related maintenance charges.

iii.

Janssen Lease: Direct operating costs of $746 for the three months ended October 31, 2009, represented approximately 74% of gross production sales during the current period. Direct operating costs of $1,223 for the three months ended October 31, 2008, represented approximately 24% of gross production sales during the prior period.

General and administrative costs decreased to $42,553 during the three months ended October 31, 2009, from $60,568 during the same period ended October 31, 2008, due to significant prior year costs relating to the listing process which completed in August 2008.

Interest and financing charges increased to $70,068, as restated, during the three months ended October 31, 2009, from $Nil during the same period ended October 31, 2008. Interest and financing charges includes the accrued interest and the fair value of warrants issued in conjunction with promissory notes and the accretion of the fair value of warrants issued with convertible debentures.

Management fees increased to $102,546 during the three months ended October 31, 2009, from $90,520 during the same period ended October 31, 2008. Some executive services vary from month to month based on activities and requirements of our company.

Professional fees increased to $102,379 during the three months ended October 31, 2009, from $57,402 during the same period ended October 31, 2008, due primarily to increases in legal services relating to corporate and business development during the current period.

Travel and promotion increased to $24,907 during the three months ended October 31, 2009, from $13,024 during the same period ended October 31, 2008. As market conditions during the current period improved, additional travel was incurred which related to financing activities.

A $4,195 gain on the settlement of debt was realized during the three months ended October 31, 2009. Additionally, interest and other income increased to $112 during the three months ended October 31, 2009, from $Nil during the same period ended October 31, 2008. We also realized a foreign exchange loss of $33,528 during the three months ended October 31, 2009.

Loss on warrant derivative liability was $2,038,226 during the three months ended October 31, 2009, compared to $Nil during the prior period. This represents an increase of 100%. This is due to the warrants issued during the current period which qualify as derivative financial instruments under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock.” The fair value of these warrants was determined using the Black-Scholes option pricing method with any change in fair value during the period recorded in earnings as “Other income (expense) – Gain (loss) on warrant derivative liability.

Our net loss during the three months ended October 31, 2009, as restated, was $2,704,549 or ($0.08) per share compared to a net loss of $360,122 or ($0.01) per share during the same period ended October 31, 2008. The weighted average number of shares outstanding was 31,984,844 for the three months ended October 31, 2009, compared to 28,235,658 in the prior period.

Transactions with Officers and Directors

Of the $720,035 incurred as operating expenses during the three months ended October 31, 2009, an aggregate of $102,546 was incurred payable to certain officers and directors and recorded as management fees, and $8,869 was incurred and interest and financing charges on promissory notes issued to related parties. As at October 31, 2009, management fees and expense reimbursements of $74,636 are outstanding with no specified terms of repayment.

During the three months ended October 31, 2009, we issued a $100,000 promissory note to a direct family member of an officer and a director, and which was fully repaid in the period. Additionally, we issued, as fully paid and non-assessable, 100,000 non-transferable and registerable share purchase warrants to acquire an equivalent number of common shares of the Company at an exercise price of $0.25 per share, and for an exercise period of three years.

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Of the $82,933 reported revenues and $52,469 direct operating costs for the three months ended October 31, 2009, we recorded production revenues of $47,184 and incurred production costs of $29,819 for the Barge Canal property which is operated by company controlled by one of our officers.

LIQUIDITY AND CAPITAL RESOURCES

	October 31, 2009		October 31, 2009			October 31, 2009			October 31, 2008
	(As Reported)		(Adjustments)			(Restated)

Cash and cash equivalents	$	1,292,560		-		$	1,292,560		$	180,101
Working capital (deficit)		1,002,568		(4,390,338	)		(3,387,770	)		(3,977	)
Total assets		2,743,546		-			2,743,546			1,725,871
Total liabilities		408,727		4,390,338			4,799,065			384,032
Shareholders' equity (deficit)		2,334,819		(4,390,338	)		(2,055,519	)		1,341,839

At October 31, 2009, we had $1,292,560 in cash and working deficit, as restated, of $(3,387,770). We have financed our operations through proceeds from the private placement of equity securities and debt instruments. We increased net cash by $1,273,767 during the three months ended October 31, 2009, compared to an increase of $112,451 during the same period ended October 31, 2008. See "Plan of Operation and Funding" below.

Operating Activities

Net cash used in operating activities during the three months ended October 31, 2009, was $566,688 compared to $325,498 during the same period ending October 31, 2008. Significant operating expenditures during the current period included consulting fees, direct operating costs, in addition to management and professional fees.

Financing Activities

Net cash provided by financing activities during the three months ended October 31, 2009, was $1,839,891 compared to $462,900 during the same period ending October 31, 2008. During the current period, we received net proceeds of $1,842,112 from private placement subscriptions, $100,000 from promissory notes and repaid $102,221 in advances from related parties.

Investing Activities

Net cash provided by investing activities during the three months ended October 31, 2009, was $564 compared net cash used in investing activities of $24,951 in the same period ending October 31, 2008. There were no significant investing expenditures during the current or prior periods.

Stock Options and Warrants

As at October 31, 2009, we had 6,530,000 stock options and 20,477,277 share purchase warrants outstanding. The outstanding stock options have a weighted average exercise price of $0.34 per share and the outstanding warrants have a weighted average exercise price of $0.53 per share. Accordingly, as at October 31, 2009, the outstanding options and warrants represented a total of 27,007,277 shares issuable for proceeds of approximately $13,073,000 if these options and warrants were exercised in full. The exercise of these options and warrants is at the discretion of the holders and, accordingly, there is no assurance that any of these options or warrants will be exercised.

Plan of Operation and Funding

At October 31, 2009, we had $1,292,560 of cash on hand and working deficit of $(3,387,770). As such, our working capital at October 31, 2009 will not be sufficient to enable us to pursue our lease operating costs, to pay our general and administrative expenses, and to pursue our plan of operations over the next twelve months. Our management is currently making efforts to obtain the required financing, but we have not yet secured any commitments with respect to such financing. If we are not able to obtain financing in the amounts required or on terms that are acceptable to us, we may be forced to scale back, or abandon, our plan of operations.

Various conditions outside of our control may detract from our ability to raise the capital needed to execute our plan of operations, including the price of oil as well as the overall market conditions in the international and local economies. We recognize that the United States economy has suffered through a period of uncertainty during which the capital markets have been depressed from levels established twelve months ago, and that there is no certainty that these levels will stabilize or reverse. We also recognize that the price of oil increased from approximately $30 per barrel in 2003 to over $140 per barrel in the summer of 2008 but has decreased to lows of below $40 in December 2008 and February 2009, and then increased to approximately $80 per barrel as of late November 2009. If the price of oil continues to fluctuate significantly, we recognize that it will adversely affect our ability to raise additional capital. Any of these factors could have a material impact upon our ability to raise financing and, as a result, upon our short-term or long-term liquidity.

Going Concern

Our current sources of revenue are inadequate to provide incoming cash flows to sustain our future operations. As outlined above, our ability to pursue our planned business activities is dependent upon our successful efforts to raise additional equity financing. These factors raise substantial doubt regarding our ability to continue as a going concern. Our 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, 2009, we had accumulated losses of $10,274,826 since inception. Our 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.

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Current Economic Conditions

During 2008 and the beginning of 2009, particularly in the fourth quarter of 2008, the ongoing global credit crisis and economic weakness have made for extremely volatile capital markets characterized by plunging equity and commodity prices and an environment in which few opportunities exist to raise additional capital. We have taken precautions where we can, and implemented initiatives to preserve our cash resources. We will be reviewing our operating activities, exploration plans and capital position on an ongoing basis during fiscal 2010 and may revise our operations or abandon properties if management deems it necessary in order to maintain the long-term viability of the Company.

Off-Balance Sheet Arrangements

As of the date of this quarterly report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

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.

See Note 2 of the interim consolidated financial statements for our three months ended October 31, 2009, for a summary of significant accounting policies.

Item 3. Quantitive and Qualitative Disclosures About Market Risk

We are currently not subject to any material market risks.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective, due to certain deficiencies in our internal control over financial reporting as of July 31, 2009, as described in our management's report on internal control over financial reporting included in our annual report on Form 10-K for our fiscal year ended July 31, 2009, which deficiencies have not been remedied as of October 31, 2009.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the first quarter of our fiscal year ending July 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II- OTHER INFORMATION

Item 1. Legal Proceedings

As of the date of this quarterly report, no director, officer, affiliate or beneficial owner of more than 5% of our common stock is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceeding. Management is not aware of any other material legal proceedings pending or that have been threatened against us or our properties.

Item 1A. Risk Factors

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended July 31, 2009 which was filed with the SEC on November 12, 2009.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 1, 2009, we issued 57,144 shares of restricted common stock to one shareholder pursuant to the terms of a business development services agreement at a deemed price of $0.415 per share. We relied on exemptions from registration under the Securities Act provided by Section 4(2) thereof and Regulation S.

On September 2, 2009, we issued two promissory notes in the aggregate amount of $200,000, bearing interest at 3% per annum, due 90 days from the date of issuance. Additionally, the Company issued to the two lenders, as fully paid and non-assessable, an aggregate of 200,000 non-transferable share purchase warrants to acquire an equivalent number of common shares at an exercise price of $0.25 per share and for an exercise period of up to three years from the date of issuance. We relied on exemptions from registration under the Securities Act provided by Section 4(2) thereof and Regulation S.

Effective September 15, 2009 we completed (i) a private placement for 460,166 Units to seven subscribers at a subscription price of $0.30 per Unit for gross proceeds of $138,050 and (ii) a private placement for 479,332 Units to four subscribers at a subscription price of $0.30 per Unit for the conversion of debt in the amount of $143,800. 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 at an exercise price of $0.40 per warrant share, for a period of three years from the date of issuance. We relied on exemptions from registration under the Securities Act provided by Regulation S (with respect to eight of the subscribers) and Rule 506 of Regulation D (with respect to the remaining three subscribers).

Effective October 6, 2009, we issued 66,666 shares of restricted common stock to one shareholder pursuant to the terms of a consulting agreement at a deemed price of $0.35 per share. We relied on an exemption from registration under the Securities Act provided by Regulation S.

Effective October 12, 2009, we issued 100,000 shares of restricted common stock to one shareholder pursuant to the terms of a services agreement at a deemed price of $0.20 per share. We relied on an exemption from registration under the Securities Act provided by Regulation S.

Effective on October 15, 2009, we issued 12,500,000 units to 30 accredited investors at a subscription price of $0.20 per Unit and for gross proceeds of $2,500,000. Each unit consists of on share of our common stock and one share purchase warrant to purchase an additional share of common stock at an exercise price of $0.35 until October 15, 2014. We relied on exemptions from registration under the Securities Act, provided by Rule 506 of Regulation D (with respect to 29 of the 30 purchasers) and Regulation S (with respect to the remaining purchaser). In addition, on such date we issued share purchase warrants to purchase an additional 477,500 shares of our common stock (on the same warrant terms as described above in this paragraph) to five holders pursuant to finders' fee agreements; we relied on exemptions from registration under the Securities Act provided by Section 4(2) thereof and Rule 506 of Regulation D. These issued shares and shares issuable upon exercise of these warrants were subsequently registered pursuant to our S-1 registration statement filed with the SEC on November 24, 2009, which was declared effective on December 7, 2009.

Effective on November 13, 2009, we issued 5,250,000 units to 12 accredited investors at a subscription price of $0.20 per Unit and for gross proceeds of $1,050,000. Each unit consists of on share of our common stock and one share purchase warrant to purchase an additional share of common stock at an exercise price of $0.35 until November 13, 2014. We relied on exemptions from registration under the Securities Act, provided by Rule 506 of Regulation D. In addition, on such date we issued share purchase warrants to purchase an additional 730,000 shares of our common stock (on the same warrant terms as described above in this paragraph) to seven holders pursuant to finders' fee agreements; we relied on exemptions from registration under the Securities Act provided by Section 4(2) thereof and Rule 506 of Regulation D. These issued shares and shares issuable upon exercise of these warrants were subsequently registered pursuant to our S-1 registration statement filed with the SEC on November 24, 2009, which was declared effective on December 7, 2009.

Effective on November 13, 2009, we issued share purchase warrants to purchase 50,000 shares of our common stock at an exercise price of $0.35 until November 13, 2014 as payment for prior business development services provided to us. We relied on exemptions from registration under the Securities Act, provided by Section 4(2) thereof and Rule 506 of Regulation D. The shares issuable upon exercise of these warrants were subsequently registered pursuant to our S-1 registration statement filed with the SEC on November 24, 2009, which was declared effective on December 7, 2009.

Effective November 27, 2009, we entered into a restated corporate development consulting agreement. In accordance with the terms of the agreement on December 9, 2009, we issued 10,811 shares of our restricted common stock to one shareholder pursuant to Regulation S and/or Section 4(2) of the Securities Act.

Effective November 30, 2009, we entered into a corporate development services agreement. In accordance with the terms of the agreement on December 9, 2009, we issued 300,000 shares of our restricted common stock to one shareholder pursuant to Rule 506 of Regulation D and/or Section 4(2) of the Securities Act.

Effective December 1, 2009, we entered into a consulting services agreement. In accordance with the terms of the agreement on December 9, 2009, we issued 50,000 shares of our restricted common stock to one shareholder pursuant to Rule 506 of Regulation D and/or Section 4(2) of the Securities Act.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are included with this Quarterly Report on Form 10-Q/A:

Exhibit	Description of Exhibit

31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).

32.1	Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

STRATEGIC AMERICAN OIL CORPORATION

/s/ "Jeremy Glenn Driver"

Jeremy Glenn Driver

President, Chief Executive Officer, Principal Executive Officer and a director

Date: January 7, 2011

/s/ "Johnathan Lindsay"

Johnathan Lindsay

Secretary, Treasurer, Chief Financial Officer, Principal Accounting Officer and a director

Date: January 7, 2011

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