Strategic American Oil Corp. Closes $2.5MM Financing

Strategic American Oil Corporation announced that, effective on October 15, 2009, the Company completed a private placement financing involving the sale of an aggregate of 12,500,000 units of the Company (each a "Unit") to 30 purchasers (each a "Purchaser") at a subscription price of $0.20 per Unit and for gross proceeds of $2,500,000.

10,890,000 Units were sold for cash consideration, yielding $2,178,000, and 1,610,000 Units were sold in settlement of debt in the aggregate amount of $322,000. Taking into account the settlement of such debt, and after deducting the payment of $50,000 in legal fees pursuant to the terms of the Securities Purchase Agreement (as defined below) and certain finder's fees in the amount of $87,750, the net cash proceeds to the Company were $2,040,250 which will be used for working capital purposes and otherwise in the discretion of the Company's management.

A total of 1,600,000 Units out of the 12,500,000 Units are being held in escrow pending receipt by the Company of subscription funds totaling $320,000, which is expected to occur on or about Friday, October 16, 2009.

Pursuant to the terms of the securities purchase agreement (the "Securities Purchase Agreement"), as entered into between each Purchaser and the Company, each Unit is comprised of one common share (each a "Share") and one transferable common stock purchase warrant (each a "Warrant") of the Company, with each such Warrant being exercisable for one additional common share of the Company (each a "Warrant Share") at an exercise price of $0.35 per Warrant Share for a period of five years from the closing of the Private Placement, that is, until October 15, 2014.

Pursuant the terms of the Securities Purchase Agreement and subject to the terms thereof, the Purchasers have a right to participate in subsequent financings by the Company for up to five years from the date of the closing of the Private Placement on the same terms, conditions and price provided for in such subsequent financings. In addition, the Securities Purchase Agreement contains a price protection provision pursuant to which the Company will be required to issue additional shares to the Purchasers in the event the Company participates in a subsequent financing during the next three years in which securities are issued at less than the per Unit subscription price paid by such Purchasers, provided that the number of additional shares issuable to any Purchaser shall not exceed the number of Shares originally purchased by the Purchaser upon the closing of the Private Placement.

The Warrants, like the Securities Purchase Agreement, also contain a price protection provision, such that in the event that the Company issues shares or rights to acquire shares at a price less than the exercise price of the Warrants, the exercise price per Warrant Share will be reduced to equal such lower price and the number of Warrant Shares issuable pursuant to the Warrants shall be increased such that the aggregate exercise price, after taking into account the decrease in the exercise price per Warrant Share, equals the aggregate exercise price prior to such adjustment, provided that the number of additional Warrant Shares issuable pursuant to any Warrant shall not, in the aggregate, exceed the number of Warrant Shares originally issuable under such Warrant.

In addition to the Securities Purchase Agreement, the Company entered into a registration rights agreement with each of the Purchasers, pursuant to which the Company has agreed to file a registration statement to register the Shares and Warrant Shares.

The Company relied on exemptions from registration under the United States Securities Act of 1933, as amended (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), based on representations and warranties provided by the Purchasers in their respective Securities Purchase Agreement and, with respect to the one Purchaser for whom the Company relied upon Regulation S, pursuant to representations and warranties provided by such Purchaser in a side letter entered into by and between such Purchaser and the Company.


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