----

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| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934: For the quarterly period ended October 31, 2011 |
|---|------------------------------------------------------------------------------------------------------------------------------------------|

| o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934: For the transition period from _______ to _________ |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------|

| NEVADA                                                         |   | 98-0454144                        |
|----------------------------------------------------------------|--------|-----------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (IRS Employer Identification No.) |

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

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of Contents

| Part I. Financial Information                                                                       |
|-----------------------------------------------------------------------------------------------------|
|                                                                                                |   |
| Item 1. Financial Statements                                                                        | 3 |
|                                                                                                |   |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results Of Operations | 16 |
|                                                                                                |   |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk                                  | 21 |
|                                                                                                |   |
| Item 4. Controls and Procedures                                                                     | 21 |
|                                                                                                |   |
| Part II. Other Information                                                                          |
|                                                                                                |   |
| Item 1. Legal Proceedings                                                                           | 21 |
|                                                                                                |   |
| Item 1A. Risk Factors                                                                               | 21 |
|                                                                                                |   |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                 | 22 |
|                                                                                                |   |
| Item 3. Defaults Upon Senior Securities                                                             | 22 |
|                                                                                                |   |
| Item 4. (Removed and Reserved)                                                                      | 22 |
|                                                                                                |   |
| Item 5. Other Information                                                                           | 22 |
|                                                                                                |   |
| Item 6. Exhibits                                                                                    | 22 |
|                                                                                                |   |

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Table Of Contents 

| Item 1. Financial Statements                                                             |
|------------------------------------------------------------------------------------------|
|                                                                                     |
| 1.  Consolidated Balance Sheets (unaudited)                                    |
|                                                                                     |
| 2.  Consolidated Statements of Operations and Comprehensive Income (unaudited) |
|                                                                                     |
| 3.  Consolidated Statements of Cash Flows (unaudited)                          |
|                                                                                     |
| 4.  Notes to Consolidated Financial Statements (unaudited)                     |

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Table Of Contents 

|                                                                                                                                                       |   | October 31, 2011 |        |   | July 31, 2011 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|-------------|--------|---------------|--------|
| Assets                                                                                                                                                     |   |             |        |   |          |   |
| Current assets                                                                                                                                             |   |             |        |   |          |   |
| Cash and cash equivalents                                                                                                                                  |   | $                | 4,737,780   |   |          | $      | 1,082,099 |   |
| Oil and gas revenues receivable                                                                                                                            |   |             | 564,575     |   |          |   | 875,918 |   |
| Accounts receivable – related party                                                                                                                  |   |             | 45,655      |   |          |   | 69,880 |   |
| Available for sale securities                                                                                                                              |   |             | 523,950     |   |          |   | - |   |
| Other receivables, net                                                                                                                                     |   |             | 22,511      |   |          |   | 225,057 |   |
| Other current assets                                                                                                                                       |   |             | 334,699     |   |          |   | 292,973 |   |
| Total current assets                                                                                                                                       |   |             | 6,229,170   |   |          |   | 2,545,927 |   |
|                                                                                                                                                       |   |             |        |   |          |   |   |   |
| Oil and Gas Property, accounted for using the full cost method of accounting                                                                               |   |             |        |   |          |   |   |   |
| Evaluated property, net of accumulated depletion of $738,709 and $567,189, respectively; and accumulated impairment of $373,335 and $373,335, respectively |   |             | 11,529,795  |   |          |   | 7,395,198 |   |
| Restricted cash                                                                                                                                            |   |             | 6,650,000   |   |          |   | 6,716,850 |   |
| Other assets                                                                                                                                               |   |             | 347,368     |   |          |   | 255,942 |   |
| Property and equipment, net of accumulated depreciation of $17,648 and $11,158, respectively                                                               |   |             | 40,502      |   |          |   | 22,857 |   |
|                                                                                                                                                       |   |             |        |   |          |   |   |   |
| Total Assets                                                                                                                                               |   | $                | 24,796,835  |   |          | $      | 16,936,774 |   |
|                                                                                                                                                       |   |             |        |   |          |   |   |   |
| Liabilities and Stockholders’ Equity                                                                                                                 |   |             |        |   |          |   |   |   |
| Current liabilities                                                                                                                                        |   |             |        |   |          |   |   |   |
| Accounts payable and accrued expenses                                                                                                                      |   | $                | 2,562,678   |   |          | $      | 1,676,816 |   |
| Line of credit                                                                                                                                             |   |             | 1,360,573   |   |          |   | 1,360,573 |   |
| Notes payable                                                                                                                                              |   |             | 175,000     |   |          |   | 255,596 |   |
| Deferred income tax                                                                                                                                        |   |             | 162,643     |   |          |   | - |   |
| Asset retirement obligations – short term                                                                                                            |   |             | 640,227     |   |          |   | 468,500 |   |
| Derivative warrant liability                                                                                                                               |   |             | 1,684,195   |   |          |   | 2,543,223 |   |
| Due to related parties                                                                                                                                     |   |             | 6,423       |   |          |   | 14,723 |   |
| Total current liabilities                                                                                                                                  |   |             | 6,591,739   |   |          |   | 6,319,431 |   |
|                                                                                                                                                       |   |             |        |   |          |   |   |   |
| Asset retirement obligations – long term                                                                                                             |   |             | 5,447,560   |   |          |   | 3,987,428 |   |
| Total liabilities                                                                                                                                          |   |             | 12,039,299  |   |          |   | 10,306,859 |   |
|                                                                                                                                                       |   |             |        |   |          |   |   |   |
| Stockholders’ equity:                                                                                                                                |   |             |        |   |          |   |   |   |
| Common stock, $.001 par; 500,000,000 shares authorized shares; 269,510,400 and 169,770,770 shares issued and outstanding                                   |   |             | 269,510     |   |          |   | 169,771 |   |
| Additional paid in capital                                                                                                                                 |   |             | 37,974,360  |   |          |   | 27,807,540 |   |
| Accumulated other comprehensive income                                                                                                                     |   |             | 60,251      |   |          |   | - |   |
| Accumulated deficit                                                                                                                                        |   |             | (25,546,585 | )      |          |   | (21,347,396 | ) |
| Total stockholders’ equity                                                                                                                           |   |             | 12,757,536  |   |          |   | 6,629,915 |   |
|                                                                                                                                                       |   |             |        |   |          |   |   |   |
| Total liabilities and stockholders’ equity                                                                                                           |   | $                | 24,796,835  |   |          | $      | 16,936,774 |   |

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Table Of Contents 

|                                                                                                                |   | Three months endedOctober 31, |        |
|---------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|-------------|
|                                                                                                                |   | 2011                          |        |   | 2010 |   |
|                                                                                                                |   |                          |        |   |   |   |
| Revenues                                                                                                            |   | $                             | 1,562,879   |   |   | $ | 112,873 |   |
|                                                                                                                |   |                          |        |   |   |   |   |   |
| Operating expenses                                                                                                  |   |                          |        |   |   |   |   |   |
| Lease operating expense                                                                                             |   |                          | 805,372     |   |   |   | 101,264 |   |
| Depreciation, depletion, and amortization                                                                           |   |                          | 178,010     |   |   |   | 23,000 |   |
| Accretion                                                                                                           |   |                          | 137,882     |   |   |   | 2,394 |   |
| Consulting fees – related party                                                                               |   |                          | 47,757      |   |   |   | - |   |
| Acquisition cost – related party                                                                              |   |                          | 4,367,750   |   |   |   | - |   |
| Other general and administrative expense                                                                            |   |                          | 1,408,053   |   |   |   | 840,713 |   |
| Total operating expenses                                                                                            |   |                          | 6,944,824   |   |   |   | 967,371 |   |
|                                                                                                                |   |                          |        |   |   |   |   |   |
| Loss from operations                                                                                                |   |                          | (5,381,945  | ) |   |   | (854,498 | ) |
|                                                                                                                |   |                          |        |   |   |   |   |   |
| Interest expense, net                                                                                               |   |                          | (67,494     | ) |   |   | (26,585 | ) |
| Gain (loss) on warrant derivative liability                                                                         |   |                          | 859,028     |   |   |   | (84,561 | ) |
| Gain on sale of available for sale securities                                                                       |   |                          | 433,168     |   |   |   | - |   |
|                                                                                                                |   |                          |        |   |   |   |   |   |
| Net loss before income taxes                                                                                        |   |                          | (4,157,243  | ) |   |   | (965,644 | ) |
| Income tax provision                                                                                                |   |                          | (41,948     | ) |   |   | - |   |
| Net loss                                                                                                            |   | $                             | (4,199,191  | ) |   | $ | (965,644 | ) |
|                                                                                                                |   |                          |        |   |   |   |   |   |
| Other comprehensive income, net of tax:                                                                             |   |                          |        |   |   |   |   |   |
| Net unrealized gain from available for sale securities, net of income tax expense of $32,443 in 2011 and $0 in 2010 |   |                          | 60,251      |   |   |   | - |   |
| Comprehensive loss                                                                                                  |   | $                             | (4,138,940  | ) |   | $ | (965,644 | ) |
|                                                                                                                |   |                          |        |   |   |   |   |   |
| Basic and diluted loss per common share                                                                             |   | $                             | (0.02       | ) |   | $ | (0.02 | ) |
|                                                                                                                |   |                          |        |   |   |   |   |   |
| Basic and diluted weighted average shares outstanding                                                               |   |                          | 212,925,247 |   |   |   | 53,215,312 |   |

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Table Of Contents 

|                                                                                        |   | Three months endedOctober 31, |       |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|
|                                                                                        |   | 2011                                    |       |   | 2010 |   |
| Cash Flows From Operating Activities                                                        |   |                                    |       |   |   |   |
| Net loss                                                                                    |   | $                                       | (4,199,191 | ) |   | $ | (965,644 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities:                 |   |                                    |       |   |   |   |   |   |
| Depreciation, depletion and amortization                                                    |   |                                    | 178,010    |   |   |   | 23,000 |   |
| Accretion                                                                                   |   |                                    | 137,882    |   |   |   | 2,394 |   |
| Amortization of  loan origination fees and prepaid interest expense               |   |                                    | 37,843     |   |   |   | 20,578 |   |
| Gain on sale of available for sale securities                                               |   |                                    | (433,168   | ) |   |   | - |   |
| Warrants amortization – related party                                                 |   |                                    | 47,757     |   |   |   | - |   |
| Common stock granted for services and investor relations                                    |   |                                    | 592,453    |   |   |   | 60,758 |   |
| Share based compensation – amortization of the fair value of  stock options |   |                                    | 126,349    |   |   |   | 114,617 |   |
| Acquisition cost – related party                                                      |   |                                    | 4,367,750  |   |   |   | - |   |
| (Gain) loss on warrant derivative liability                                                 |   |                                    | (859,028   | ) |   |   | 84,561 |   |
| Changes in operating assets and liabilities:                                                |   |                                    |       |   |   |   |   |   |
| Accounts receivable                                                                         |   |                                    | 513,888    |   |   |   | (7,016 | ) |
| Accounts receivable – related party                                                   |   |                                    | 24,225     |   |   |   | 18,764 |   |
| Accounts payable and accrued expenses                                                       |   |                                    | (466,152   | ) |   |   | (113,062 | ) |
| Other assets                                                                                |   |                                    | (152,328   | ) |   |   | 251,328 |   |
| Net cash used in operating activities                                                       |   |                                    | (83,710    | ) |   |   | (509,722 | ) |
|                                                                                        |   |                                    |       |   |   |   |   |   |
| Cash Flows From Investing Activities                                                        |   |                                    |       |   |   |   |   |   |
| Purchases of oil and gas properties                                                         |   |                                    | (112,140   | ) |   |   | (106,835 | ) |
| Purchases of property and equipment                                                         |   |                                    | (24,135    | ) |   |   | - |   |
| Proceeds from sale of oil and gas properties                                                |   |                                    | -          |   |   |   | 275,000 |   |
| Change in restricted cash                                                                   |   |                                    | 54,946     |   |   |   | - |   |
| Purchase of available for sale securities                                                   |   |                                    | (41,256    | ) |   |   | - |   |
| Proceeds from sale of available for sale securities                                         |   |                                    | 3,943,168  |   |   |   | - |   |
| Net cash provided by investment activities                                                  |   |                                    | 3,820,583  |   |   |   | 168,165 |   |
|                                                                                        |   |                                    |       |   |   |   |   |   |
| Cash Flows From Financing Activities                                                        |   |                                    |       |   |   |   |   |   |
| Proceeds from sales of common stock                                                         |   |                                    | -          |   |   |   | 200,100 |   |
| Payments on notes payable                                                                   |   |                                    | (72,892    | ) |   |   | (50,000 | ) |
| Payments on notes payable – related party                                             |   |                                    | (8,300     | ) |   |   | - |   |
| Net cash provided by (used in) financing activities                                         |   |                                    | (81,192    | ) |   |   | 150,100 |   |
|                                                                                        |   |                                    |       |   |   |   |   |   |
| Net increase (decrease) in cash                                                             |   |                                    | 3,655,681  |   |   |   | (191,457 | ) |
| Cash at beginning of period                                                                 |   |                                    | 1,082,099  |   |   |   | 247,851 |   |
| Cash at end of period                                                                       |   | $                                       | 4,737,780  |   |   | $ | 56,394 |   |

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Table Of Contents 

|                                                                                                                         |   | Three months endedOctober 31, |      |
|------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|-----------|
|                                                                                                                         |   | 2011                                    |      |   | 2010 |   |
|                                                                                                                         |   |                                    |      |   |   |   |
| Supplemental Disclosures:                                                                                                    |   |                                    |      |   |   |   |
| Interest paid in cash                                                                                                        |   | $                                       | 22,437    |   |   | $ | - |   |
| Income taxes paid in cash                                                                                                    |   |                                    | -         |   |   |   | - |   |
|                                                                                                                         |   |                                    |      |   |   |   |   |   |
| Non-cash investing and financing                                                                                             |   |                                    |      |   |   |   |   |   |
| Non-cash capitalized interest                                                                                                |   | $                                       | -         |   |   | $ | 24,858 |   |
| Asset retirement obligation sold                                                                                             |   |                                    | -         |   |   |   | 12,132 |   |
| Exercise of warrants classified as a derivative                                                                              |   |                                    | -         |   |   |   | 153,445 |   |
| Acquisition of SPE Navigation I, LLC for Strategic common stock, including asset retirement obligation assumed of $1,493,977 |   |                                    | 5,132,250 |   |   |   | - |   |
| Notes payable for prepaid insurance                                                                                          |   |                                    | 18,667    |   |   |   | - |   |
| Adjustment of purchase price of acquisition: environmental liability acquired                                                |   |                                    | 150,000   |   |   |   | - |   |
| Unrealized gain on available for sale securities, net of tax                                                                 |   |                                    | 60,251    |   |   |   | - |   |

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Table Of Contents 

| Recognized Amount of Identifiable Assets Acquired and Liabilities Assumed  |   |
|---------------------------------------------------------------------------------|--------|
| Available for sale securities (1)                                               |   | $ | 3,900,000 |   |
| Oil and Gas Property, accounted for using the full cost basis of accounting     |   |   |   |   |
| Evaluated property (2)                                                          |   |   | 4,081,477 |   |
| Accounts payable and accrued expenses                                           |   |   | (37,500 | ) |
| Deferred tax liability (1)                                                      |   |   | (1,317,750 | ) |
| Asset retirement obligations (2)                                                |   |   | (1,493,977 | ) |
| Total Identifiable Net Assets                                                   |   | $ | 5,132,250 |   |

|   | (1) | The Hyperdynamics common stock is valued, using the closing market price on the acquisition date, at $3.90 per share.  SPE management believes its tax basis in Hyperdynamics common stock is $0.135 per share.  Deferred taxes, therefore, are computed on the difference between the tax basis and the book basis per share at the corporate tax rate of 35%.  If the carry-over basis is not available to Strategic, there would be no book tax difference and no deferred taxes associated with the acquisition.  If that occurs, the identifiable net assets would be $6,450,000 and there would be no deferred tax liability acquired. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Oil and gas properties include the asset retirement obligation measured on the effective date of the transaction at $1,493,977 and $2,550,000, which was the cash price that SPE paid to obtain its 25% working interest in the oil and gas properties and represents the fair value of the properties. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table Of Contents 

|                                  |   | Three months endedOctober 31, |       |
|---------------------------------------|--------|-----------------------------------------|------------|
|                                  |   | 2011                                    |       |   | 2010 |   |
| Revenues                              |   | $                                       | 1,710,878  |   |   | $ | 1,545,367 |   |
| Loss from operations                  |   |                                    | (5,572,866 | ) |   |   | (1,479,114 | ) |
| Net loss                              |   |                                    | (4,390,127 | ) |   |   | (1,590,260 | ) |
| Earnings per share, basic and diluted |   | $                                       | (0.02      | ) |   | $ | (0.01 | ) |

| Cost                |   | $      | 431,256 |   |
|---------------------|--------|--------|---------|--------|
| Unrealized gains    |   |   | 100,000 |   |
| Unrealized (losses) |   |   | (7,306  | )      |
| Fair Value          |   | $      | 523,950 |   |

|                         |   |                       |       |
|------------------------------|--------|----------------------------|------------|
|                         |   | October 31, 2011 |       |   | July 31, 2011 |   |
| Oil and gas properties       |   |                       |       |   |   |   |
| Evaluated Properties         |   |                       |       |   |   |   |
|                         |   |                       |       |   |   |   |
| Costs subject to depletion   |   | $                          | 12,268,504 |   |   | $ | 7,962,387 |   |
|                         |   |                       |       |   |   |   |   |   |
| Depletion                    |   |                       | (738,709   | ) |   |   | (567,189 | ) |
|                         |   |                       |       |   |   |   |   |   |
| Total oil and gas properties |   | $                          | 11,529,795 |   |   | $ | 7,395,198 |   |

|   | · | The acquisition of an aggregate of approximately 25% working interest in our properties in Galveston Bay as part of our acquisition of SPE, as discussed in Note 2 – Acquisitions, for $4,081,477, which includes asset retirement obligations assumed of $1,493,977; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Land acquisition costs of $8,689; |
|--------|--------|-----------------------------------|

|   | · | Exploration costs, consisting primarily of geological and geophysical costs, of $40,107; |
|--------|--------|------------------------------------------------------------------------------------------|

|   | · | Development costs associated with a new planned well in Galveston Bay of $3,861; |
|--------|--------|----------------------------------------------------------------------------------|

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Table Of Contents 

|   | · | Recompletion costs associated with a well on our Welder lease of $59,482.  We paid a cash call prior to the commencement of the recompletion of $127,541; thus, we had a remaining balance in prepaid expenses of $68,059. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Adjustment of $112,500 to the purchase price of GBE to reflect recognition of an estimate of the cost of soil remediation required to be completed at one of GBE’s facilities.  The remediation liability existed as of the date of acquisition. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                           |   | October 31, 2011 |      |   | July 31, 2011 |   |
|----------------------------------------------------------------|--------|----------------------------|-----------|--------|-------------------------|--------|
| Liability for asset retirement obligation, beginning of period |   | $                          | 4,455,928 |   |                    | $      | 57,623 |   |
| Asset retirement obligations assumed                           |   |                       | 1,493,977 |   |                    |   | 5,843,330 |   |
| Asset retirement obligations sold                              |   |                       | -         |   |                    |   | (1,523,573 | ) |
| Accretion                                                      |   |                       | 137,882   |   |                    |   | 213,866 |   |
| Costs incurred                                                 |   |                       | -         |   |                    |   | (135,318 | ) |
| Liability for asset retirement obligation, end of period       |   | $                          | 6,087,787 |   |                    | $      | 4,455,928 |   |

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|   | · | 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. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|

|                          |   | CarryingValue atOctober  |      |   | Fair Value Measurement at October 31, 2011 |   |
|-------------------------------|--------|-------------------------------|-----------|--------|--------------------------------------------|--------|
|                          |   | 31, 2011                      |      |   | Level 1                                    |   |   | Level 2 |   |   | Level 3 |   |
| Assets:                       |   |                          |      |   |                                       |   |   |   |   |   |   |   |
| Available for sale securities |   | $                             | 523,950   |   |                                       | $      | 523,950 |   |   |   | - |   |   |   | - |   |
|                          |   |                          |      |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                  |   |                          |      |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
| Derivative warrant liability  |   | $                             | 1,684,195 |   |                                       |   | - |   |   |   | - |   |   | $ | 1,684,195 |   |

|   | ● | The stock price on the valuation date would fluctuate with our projected volatility; |
|--------|---------|--------------------------------------------------------------------------------------|

|   | ● | Warrant holders would exercise at target price multiples of the market price trigger prices.  The target price multiple reduces as the warrants approach maturity; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Warrant holders would exercise the warrant at maturity if the stock price was above two times the reset exercise price; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------|

|   | ● | An annual reset event would occur at 65% discount to market price; |
|--------|---------|--------------------------------------------------------------------|

|   | ● | The projected volatility was based on historical volatility.  Because we do not have sufficient trading history to determine our own historical volatility, we used the volatility of a group of comparable companies combined with our own historical volatility from May 2009, when we began trading. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Beginning balance – August 1, 2011     |   | $      | 2,543,223 |   |
|----------------------------------------------|--------|--------|-----------|--------|
|                                         |   |   |      |   |
| Change in fair value of derivative liability |   |   | (859,028) |   |
|                                         |   |   |      |   |
| At October 31, 2011                          |   | $      | 1,684,195 |   |

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Table Of Contents 

|                                                      |   | 2011   |   |   | 2010   |   |
|-----------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Number of options granted                                 |   |   | -      |   |   |   | 1,400,000 |   |
| Compensation expense recognized                           |   | $      | 55,835 |   |   | $      | 114,617 |   |
| Compensation cost capitalized                             |   |   | -      |   |   |   | - |   |
| Weighted average fair value of options  granted |   |   | -      |   |   | $      | 0.20 |   |

|                    |   | 2011                   |   | 2010                |   |
|-------------------------|--------|------------------------|--------|---------------------|--------|
| Risk-free interest rate |   | 0.12 – 1.66%     |   | 1.27%               |   |
| Dividend yield          |   | 0%                     |   | 0%                  |   |
| Volatility factor       |   | 139 - 148%             |   | 153%                |   |
| Expected life (years)   |   | 0.80 – 6.5 years |   | 1.5 – 2 years |   |

----

Table Of Contents 

|                                                  |   | Options |       |   | Weighted Average Share Price |   |   | Aggregate intrinsic value |   |   | Weighted average remaining contractual life (years) |   |
|-------------------------------------------------------|--------|---------|------------|--------|-----------------------------------|--------|--------|--------------------------------|--------|--------|----------------------------------------------------------|--------|
| Outstanding at year ended July 31, 2011               |   |    | 27,530,000 |   |                              | $      | 0.10   |                           |   | $      | 1,101,200                                                |   |   |   | 8.14 |   |
| Granted                                               |   |    | -          |   |                              |   | -      |                           |   |   |                                                     |   |   |   |   |   |
| Exercised                                             |   |    | -          |   |                              |   | -      |                           |   |   |                                                     |   |   |   |   |   |
| Expired                                               |   |    | -          |   |                              |   | -      |                           |   |   |                                                     |   |   |   |   |   |
| Outstanding at year ended  October 31, 2011 |   |    | 27,530,000 |   |                              | $      | 0.10   |                           |   | $      | 275,300                                                  |   |   |   | 7.89 |   |

|                                                 |   | Warrants |       |   | Weighted Average Share Price |   |   | Aggregate intrinsic value |   |   | Weighted average remaining contractual life (years) |   |
|------------------------------------------------------|--------|----------|------------|--------|-----------------------------------|--------|--------|-------------------------------------|--------|--------|---------------------------------------------------------------|--------|
|                                                 |   |     |       |   |                              |   |   |                                |   |   |                                                          |   |   |   |   |   |
| Outstanding at year ended July 31, 2011              |   |     | 93,961,497 |   |                              | $      | 0.10   |                                |   | $      | 3,710,880                                                     |   |   |   | 3.83 |   |
|                                                 |   |     |       |   |                              |   |   |                                |   |   |                                                          |   |   |   |   |   |
| Granted                                              |   |     | -          |   |                              |   | -      |                                |   |   |                                                          |   |   |   |   |   |
|                                                 |   |     |       |   |                              |   |   |                                |   |   |                                                          |   |   |   |   |   |
| Exercised                                            |   |     | -          |   |                              |   | -      |                                |   |   |                                                          |   |   |   |   |   |
|                                                 |   |     |       |   |                              |   |   |                                |   |   |                                                          |   |   |   |   |   |
| Expired                                              |   |     | (50,000)   |   |                              |   | 1.00   |                                |   |   |                                                          |   |   |   |   |   |
|                                                 |   |     |       |   |                              |   |   |                                |   |   |                                                          |   |   |   |   |   |
| Outstanding at year ended  October 31,2011 |   |     | 93,911,497 |   |                              | $      | 0.10   |                                |   | $      | 927,720                                                       |   |   |   | 3.58 |   |

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|                  |   | Three months ended October 31, |   |
|-----------------------|--------|--------------------------------|--------|
|                  |   | 2011                           |   |   | 2010 |   |
| Revenues              |   | $                              | 90,306 |   |   | $ | 67,501 |   |
| Lease operating costs |   | $                              | 46,869 |   |   | $ | 49,580 |   |

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 Management’s 

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|                            |   | Three months ended October 31, |   |
|---------------------------------|--------|--------------------------------|--------|
|                            |   | 2011                           |   |   | 2010 |   |
|                            |   | Oil (Bbls)                     |   |   | Gas (Mcf) |   |   | Total (Mcfe) |   |   | Oil (Bbls) |   |   | Gas (Mcf) |   |   | Total (Mcfe) |   |
| Production                      |   |                           | 13,179 |   |   |   | 47,013 |   |   |   | 126,085 |   |   |   | 1,381 |   |   |   | 2,871 |   |   |   | 1,159 |   |
| Average sales price             |   | $                              | 103.05 |   |   | $ | 4.36 |   |   | $ | 12.40 |   |   | $ | 73.80 |   |   | $ | 3.81 |   |   | $ | 10.11 |   |
| Average lease operating expense |   |                           |   |   |   |   |   |   |   | $ | 6.39 |   |   |   |   |   |   |   |   |   |   | $ | 9.00 |   |

|                                          |   | Three months ended October 31, |       |   |   |   |     |                |   |
|-----------------------------------------------|--------|--------------------------------|------------|--------|--------|--------|----------|---------------------|--------|
|                                          |   | 2011                           |       |   | 2010   |   |     | Increase/(Decrease) |   |   | %Change |   |
|                                          |   |                           |       |   |   |   |     |                |   |   |   |   |
| Revenues                                      |   | $                              | 1,562,879  |   |   | $      | 112,873  |                |   | $ | 1,450,006 |   |   |   | 1,285 | % |
|                                          |   |                           |       |   |   |   |     |                |   |   |   |   |   |   |   |   |
| Operating expenses                            |   |                           |       |   |   |   |     |                |   |   |   |   |   |   |   |   |
| Lease operating expense                       |   |                           | 805,372    |   |   |   | 101,264  |                |   |   | 704,108 |   |   |   | 695 | % |
| Depreciation, depletion, and amortization     |   |                           | 178,010    |   |   |   | 23,000   |                |   |   | 155,010 |   |   |   | 674 | % |
| Accretion                                     |   |                           | 137,882    |   |   |   | 2,394    |                |   |   | 135,488 |   |   |   | 5,659 | % |
| Consulting fees – related party         |   |                           | 47,757     |   |   |   | -        |                |   |   | 47,757 |   |   |   | 100 | % |
| Acquisition cost – related party        |   |                           | 4,367,750  |   |   |   | -        |                |   |   | 4,367,750 |   |   |   | 100 | % |
| Other general and administrative expense      |   |                           | 1,408,053  |   |   |   | 840,713  |                |   |   | 567,340 |   |   |   | 67 | % |
| Total operating expenses                      |   |                           | 6,944,824  |   |   |   | 967,371  |                |   |   | 5,977,453 |   |   |   | 618 | % |
|                                          |   |                           |       |   |   |   |     |                |   |   |   |   |   |   |   |   |
| Loss from operations                          |   |                           | (5,381,945 | )      |   |   | (854,498 | )                   |   |   | (4,527,447 | ) |   |   | 530 | % |
|                                          |   |                           |       |   |   |   |     |                |   |   |   |   |   |   |   |   |
| Interest expense, net                         |   |                           | (67,494    | )      |   |   | (26,585  | )                   |   |   | (40,909 | ) |   |   | 154 | % |
| Gain (loss) on derivative warrant liability   |   |                           | 859,028    |   |   |   | (84,561  | )                   |   |   | 943,589 |   |   |   | 1,116 | % |
| Gain on sale of available for sale securities |   |                           | 433,168    |   |   |   | -        |                |   |   | 433,168 |   |   |   | 100 | % |
| Income tax provision                          |   |                           | (41,948    | )      |   |   | -        |                |   |   | (41,948 | ) |   |   | 100 | % |
|                                          |   |                           |       |   |   |   |     |                |   |   |   |   |   |   |   |   |
| Net Loss                                      |   | $                              | (4,199,191 | )      |   | $      | (965,644 | )                   |   | $ | (3,233,547 | ) |   |   | 335 | % |

|   | ● | Revenues, lease operating expense, depreciation, depletion, and amortization expense, and accretion expense increased substantially because of the inclusion of the results of our new subsidiaries, GBE and SPE.  We purchased GBE on February 15, 2011.  We purchased SPE on September 23, 2011.  Our consolidated financial statements include the results associated with the working interest in oil and gas properties in Galveston Bay, Texas.  Through these working interests, we produced from approximately 26 active oil and gas wells in four fields. This represents a substantial increase in our operations. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Consulting fees – related party increased due to the amortization of expense associated with warrants granted as compensation to a company for investor relations and public relations services.  This company is a related party, as it is controlled by the father-in-law of our CEO, Jeremy Driver. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | We incurred an expense charge of $4,367,750 due to the excess of the fair value of the purchase price of SPE over SPE’s carrying value in the net assets acquired. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | We opened a new location in Houston, Texas, hired additional accounting staff, and hired an operations manager and regulatory manager for GBE, which increased our general and administrative expense by approximately $130,000.  Additionally, we incurred investor relations expense of approximately $600,000 associated with a stock grant during the quarter ended October 31, 2011.  These were offset by reductions in consulting expense and professional fees. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | ● | GBE maintains a letter of credit to satisfy a Texas Railroad Commission requirement and has a line of credit with a commercial bank.  Because of these arrangements, interest expense increased. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | We re-measure our derivative warrants at fair value at every reporting date.  The fair value of the derivative warrants, as determined using a lattice model, reduced substantially as of October 31, 2011 as compared with July 31, 2011, resulting in a gain on derivative warrant liability; whereas the change in fair value of the warrants as of October 31, 2010 as compared with July 31, 2010 resulted in a small loss. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | We acquired equity securities with our acquisition of SPE.  We sold securities with a cost basis of $3,510,000 for proceeds of $3,943,168, resulting in a gain on the sale of the securities. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | We experienced a tax profit due primarily to the sale of our available for sale securities and, consequently, we have recorded a provision for income tax payable and expense. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                      |   | October 31, 2011 |      |   | July 31, 2011 |   |
|---------------------------|--------|------------------|-----------|--------|---------------|--------|
|                      |
| Cash and cash equivalents |   | $                | 4,737,780 |   |          | $      | 1,082,099 |   |
| Working capital (deficit) |   | $                | (362,569  | )      |          | $      | (3,773,504 | ) |

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|   | ● | 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. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------|

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nti

Controls 

cee

 Factors

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Table Of Contents 

 Proceeds

ul

ve

mation

Item 6. Exhibits

| Exhibit 31.1 - Certification of Chief Executive Officer of Strategic American Oil Corporation required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                     |
| Exhibit 31.2 - Certification of Chief Financial Officer of Strategic American Oil Corporation required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|                                                                                                                                                                                                                                                     |
| Exhibit 32.1 - Certification of Chief Executive Officer and Chief Financial Officer of Strategic American Oil Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.                                    |

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| “Jeremy Glenn Driver”                               |   |   |
|-----------------------------------------------------------------|--------|--------|
| Jeremy Glenn Driver                                             |   |   |
| President, Chief Executive Officer, Principal Executive Officer |   |
| and a director                                                  |   |   |
| Date: December 20, 2011                                         |   |   |

| “Sarah Berel-Harrop”                            |   |   |
|-------------------------------------------------------------|--------|--------|
| Sarah Berel-Harrop                                          |   |   |
| Secretary, Treasurer, Chief Financial Officer and Principal |   |
| Accounting Officer                                          |   |   |
| Date: December 20, 2011                                     |   |   |

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