SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

[   ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended December 31, 2009

OR

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

For the transition period from ____________ to __________

OR

[   ]   SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report: ______

Commission file number: 333-104670

STRATA OIL & GAS INC.

(formerly Stratabase Inc.)

(Exact name of Registrant as specified in its charter)

Alberta, Canada

(Jurisdiction of incorporation or organization)

918 16th Avenue NW, Suite 408, Calgary, Alberta, Canada, T2M 0K3

 (Address of principal executive offices)

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

None

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

Common Stock, Fully Paid and Non-Assessable Common Shares, Without Par Value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: The registrant has one class of Common Stock with 65,131,088 shares outstanding at December 31, 2009 and 66,864,423 shares outstanding as of June 25, 2010.  No preferred shares issued and outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities ActYes [  ] No [X]

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes [  ] No [X]

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days.Yes [X] No [  ]

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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ] No [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]                                           Accelerated filer [  ]                                           Non-accelerated filer [X]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP [ X ]     International Financial Reporting Standards as issued          Other [  ]     by the International Accounting Standards Board [  ]

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 [  ] Item 18 [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)Yes [  ]  No [X]

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes [  ] No [  ]

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STRATA OIL & GAS INC.

FORM 20-F ANNUAL REPORT 2009

TABLE OF CONTENTS

Oil and Gas Glossary
Introduction
Part I
Item 1.	Identity of Directors, Senior Management and Advisors	6
Item 2.	Offer Statistics and Expected Timetable	6
Item 3.	Key Information	6
Item 4.	Information on the Company	16
Item 4A.	Unresolved Staff Comments	32
Item 5.	Operating and Financial Review and Prospects	32
Item 6.	Directors, Senior Management and Employees	42
Item 7.	Major Shareholders and Related Party Transactions	48
Item 8.	Financial Information	49
Item 9.	The Offer and Listing	50
Item 10.	Additional Information	51
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 12.	Description of Other Securities Other Than Equity Securities	56
Part II
Item 13.	Defaults, Dividend Arrearages and Delinquencies	57
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	57
Item 15.	Controls and Procedures	57
Item 16. A B C D E F G	Reserved Audit Committee Financial Expert Code of Ethics Principle Accountant Fees and Services Exemptions from the Listing Standards for Audit Committees Purchases of Equity Securities by the Issuer and Affiliated Purchasers Change in Registrants Certifying Accountant Corporate Governance	57 57 58 58 58 58 58
Part III
Item 17.	Financial Statements	59
Item 18.	Financial Statements	59
Item 19.	Exhibits	87
Financial Statements		60
Signature Page		88
Certifications

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OIL AND GAS GLOSSARY

Term	Definition
Basin	A depressed area where sediments have accumulated during geologic time and considered to be prospective for oil and gas deposits.
Bitumen	Heavy, viscous crude oil
Bluesky Formation	The Bluesky is fine to medium grained, usually glauconitic, partly calcareous or sideritic, salt and pepper sandstone with fair porosity. Chert granules and pebbles occur near the top, with thin shale interbedded throughout. The thickness is 0-46 meters in the Peace River plains subsurface. It thins to the south and southeast
CHOPS	Cold Heavy Oil Production with Sand
Carboniferous	The period of geological time between 360 and 286 million years ago.  A series of stratified rocks and associated volcanic rocks which occur above the Devonian or Old Sandstone and below the Permian or Triassic systems belonging to the Carboniferous period.
Cretaceous Period	A period 144 to 65 million years ago
Debolt Formation	Lies above the Elkton Formation and ranges from mid- to upper Visean in age (345.3 to 326.4 million years ago)
Development	The phase in which a proven oil or gas field is brought into production by drilling production (development) wells.

Drilling	The using of a rig and crew for the drilling, suspension, production testing, capping, plugging and abandoning, deepening, plugging back, sidetracking, re-drilling or reconditioning of a well.
Drilling logs	Recorded observations made of rock chips cut from the formation by the drill bit, and brought to the surface with the mud, as well as rate of penetration of the drill bit through rock formations. Used by geologists to obtain formation data.
Exploration	The phase of operations which covers the search for oil or gas by carrying out detailed geological and geophysical surveys followed up where appropriate by exploratory drilling. Compare to "Development" phase.
Jurassic Period	Between 206 and 144 million years ago
Mineral Lease	A legal instrument executed by a mineral owner granting exclusive right to another to explore, drill, and produce oil and gas from a piece of land
Oil Sands	Sand, clay and rock material containing bitumen
Porosity	The ratio of the volume of void spaces in a rock or sediment to the total volume of the rock or sediment.
Reserves	Generally the amount of oil or gas in a particular reservoir that is available for production.
Reservoir	The underground rock formation where oil and gas has accumulated. It consists of a porous rock to hold the oil or gas, and a cap rock that prevents its escape

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INTRODUCTION

Strata Oil & Gas Inc. (formerly Stratabase Inc.) was incorporated under the laws of the State of Nevada on November 18, 1998 and commenced operations in January 1999. We completed our initial public offering in February 2000.   In January 2003, the Company filed a proposal to effect a continuation of the corporate jurisdiction from the State of Nevada to Canada on Form S-4 with the United States Securities and Exchange Commission (SEC).  The Form S-4 was declared effective on or about July 7, 2004 and submitted to the shareholders of the Company.  The special meeting of stockholders to vote on the adoption of the plan of conversion was held on August 17, 2004 and a majority of the shareholders approved the plan of conversion.  Accordingly, the Company changed its name to "Stratabase Inc.," and continued to operate under the Canada Business Corporations Act.

On June 29, 2005 at an annual general and special meeting of shareholders, a majority of the shareholders of the Company approved the sale of all of the rights to the Company’s software assets.  At the same meeting, a majority of the Company’s shareholders also approved the change in business of the Company from software development to oil and gas exploration.  Our headquarters are located at 918 16th Avenue NW, Suite 408, Calgary, Alberta, Canada, T2M 0K3.  The telephone number is (403) 237-5443.  The Company’s web address is strataoil.com.

On May 9, 2006, at a Special Meeting of the Company’s stockholders, a majority of the Company’s stockholders approved a 2:1 forward stock split.  The record and payment dates of the forward split were May 10 and May 11, 2006 respectively.   In addition, on July 13, 2007, at a Special Meeting of the Company’s stockholders, a majority of the Company’s stockholders approved a 2:1 forward stock split.  The record and payment dates of the forward split were October 8 and October 9, 2007 respectively.  All references to share and per share amounts have been restated in this 20-F to reflect these splits.

In this Annual Report, the “Company”, “Strata Oil & Gas Inc.”, “Strata”, "we", "our", and "us", refer to Strata Oil & Gas Inc. (unless the context otherwise requires).  Summary discussions of documents referred to in this Annual Report may not be complete, and we refer you to the actual documents for more complete information.

BUSINESS OF STRATA OIL & GAS INC.

The Company operates in the oil and gas industry with a focus on Canada’s carbonate-hosted bitumen deposits.  The Company currently has interests in a total of 43 oil sands leases located in Northern Alberta, Canada.

FINANCIAL AND OTHER INFORMATION

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in United States Dollars (“USD$” or “$”).

FORWARD-LOOKING STATEMENTS

This Annual Report includes forward-looking statements, principally in ITEM #4, “Information on the Company” and ITEM #5, “Operating and Financial Review and Prospects".  We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business.  These forward-looking statements are subject to risks, uncertainties and assumptions including, among other things, the factors discussed in this Annual Report under ITEM #3, “Key Information, Risk Factors" and factors described in documents that we may furnish from time to time to the Securities and Exchange Commission.

The words "believe", "may", "estimate", "continue", "anticipate", "intend", "expect", and similar words are intended to identify forward-looking statements.  In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this Annual Report might not occur.  Our actual results and performance could differ substantially from those anticipated in our forward-looking statements.  We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise.

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PART I

Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. Selected Financial Data

The following sets forth selected financial information of Strata prepared in accordance with accounting principles generally accepted in the United States for the fiscal years ended December 31, 2009, 2008, 2007, 2006, and 2005.  On June 29, 2005 at an annual general and special meeting of shareholders, a majority of the shareholders of the Company approved the sale of all of the rights to the Company’s software assets.  At the same meeting, a majority of the Company’s shareholders also approved the change in business of the Company from software development to oil and gas exploration.  Subsequent to entering the oil and gas exploration business, we have entered into 43 oil sands leases in Alberta, Canada.  These leases have not previously generated revenue nor did we earn any revenue during the year ended December, 31 2009.  As a result, the selected financial information may not be indicative of Strata’s future performance and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the notes thereto included elsewhere in this annual report.

SELECTED OPERATIONS DATA

(in U.S. dollars)

	Strata Oil & Gas Inc.
	Years Ended December 31,
	2009			2008			2007			2006			2005
Revenue	$	-		$	-		$	-		$	-		$	-
Expenses		331,369			654,240			468,031			7,059,245			2,003,105
Other income (expense), net		(421,569	)		12,497			13,306			181,840			(16,589	)
Loss from continuing operations		(752,938	)		(641,743	)		(454,725	)		(6,877,405	)		(2,019,694	)
Income (loss) from discontinued operations	$	-		$	-		$	-		$	130,000		$	(64,916	)
Net income (loss)	$	(752,938	)	$	(641,743	)	$	(454,725	)	$	(6,747,405	)	$	(2,084,610	)
Basic and diluted income (loss) per share:
From continuing operations	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.13	)	$	(0.05	)
From discontinued operations	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
After discontinued operations	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.13	)	$	(0.05	)
Basic weighted average number of common shares outstanding (in millions)		62.9			61.7			57.4			51.8			43.2
Diluted weighted average number of common shares outstanding (in millions)		N/A			N/A			N/A			N/A			N/A

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Item 3. Key Information  - continued

A. Selected Financial Data  - continued

BALANCE SHEET DATA

(in U.S. Dollars)	Strata Oil & Gas Inc.
	December 31,
	2009			2008			2007			2006			2005
Cash and cash equivalents	$	79,447		$	121,776		$	27,963		$	3,779,527		$	74,436
Other current assets		43,822			47,504			23,449			81,893			6,638
Deposits		94,533			94,533			16,596			-			-
Property and equipment, net		4,467			6,692			8,712			-			-
Oil and gas property interests		8,398,439			7,039,208			7,717,683			2,786,842			128,733
Total assets		8,620,708			7,309,713			7,794,403			6,648,262			209,807
Current liabilities		746,616			120,350			364,528			164,213			57,229
Asset retirement obligations		104,653			88,606			68,563			-			-
Common stock		9,886,028			9,472,278			7,712,278			7,210,518			549,668
Other capital accounts		11,095,530			10,087,660			11,466,472			10,636,244			4,218,218
(Accumulated deficit) retained earnings		(13,212,119	)		(12,459,181	)		(11,817,438	)		(11,362,713	)		(4,615,308	)
Total liabilities and stockholders’ equity		8,620,708			7,309,713			7,794,403			6,648,262		$	209,807

Dividends

We have never paid or declared dividends on our shares of common stock.

Exchange Rates

Our Financial Statements, as provided under Items 8 and 18 and all dollar amounts presented in this Registration Statement, are presented in US dollars, unless otherwise expressly stated. For comparison purposes, exchange rates into U.S. dollars are provided. The following tables set forth the exchange rate as of the latest practicable date, high and low exchange rates for the months indicated and the average exchange rates for the reporting periods indicated, based on the noon U.S. dollar buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York (Canadian Dollar = U.S. $1.00).

Exchange Rates for Canadian Versus U.S. Dollars

The exchange rate as of December 31, 2009 was CDN $1.0510 per U.S. $1.00.

          The exchange rate as of June 25, 2010 was CDN $1.0359 per U.S. $1.00.

Exchange Rates for Canadian Versus U.S. Dollars
(High/low rates for latest six months)	High		Low
May, 2010		1.00		1.07
April, 2010		0.99		1.01
March, 2010		1.01		1.05
February, 2010		1.04		1.08
January, 2010		1.02		1.07
December, 2009		1.04		1.07

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Exchange Rates for Canadian Versus U.S. Dollars	Average ($)
For the twelve months ended December 31, 2009	1.14
For the twelve months ended December 31, 2008	1.07
For the twelve months ended December 31, 2007	1.07
For the twelve months ended December 31, 2006	1.13
For the twelve months ended December 31, 2005	1.21

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the offer and use of proceeds

Not applicable.

D. Risk Factors

This investment has a high degree of risk.  Before you invest you should carefully consider the risks and uncertainties described below and the other information in this prospectus.  If any of the following risks actually occur, our business, operating results and financial condition could be harmed and the value of our stock could go down.  This means you could lose all or a part of your investment.

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RISKS RELATING TO OUR COMPANY

1. We are an exploration stage company, with limited operating history, which raises substantial doubt as to our ability to successfully develop profitable business operations and makes an investment in our common shares very risky.

On June 29, 2005 at an annual general and special meeting of shareholders, a majority of the shareholders of the Company approved the sale of all of the rights to the Company’s software assets to a private company controlled by Trevor Newton, our former president.  At the same meeting, a majority of the Company’s shareholders also approved the change in business of the Company from software development to oil and gas exploration.  As a result we have only recently commenced oil and gas exploration operations. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a business in the oil and natural gas industries. We have yet to generate any revenues from operations.  There is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably. Our future operating results will depend on many factors, including:

• our ability to raise adequate working capital;

• success of our development and exploration;

• demand for natural gas and oil;

• the level of our competition;

• our ability to attract and maintain key management and employees; and

• our ability to efficiently explore, develop and produce sufficient quantities of marketable natural gas or oil in a highly competitive and speculative environment while maintaining quality and controlling costs.

To achieve profitable operations, we must, alone or with others, successfully execute on the factors stated above.  If we are not successful in executing any of the above stated factors, our business will not be profitable and may never even generate any revenue, which make our common shares a less attractive investment and may harm the trading of our common shares trading on the OTC Bulletin Board.

2. At this stage of our business, even with our good faith efforts, potential investors have a high probability of losing their investment.

Because the nature of our business is expected to change as a result of shifts in the market price of oil and natural gas, competition, and the development of new and improved technology, management forecasts are not necessarily indicative of future operations and should not be relied upon as an indication of future performance.

Our Management may incorrectly estimate projected occurrences and events within the timetable of its business plan, which would have an adverse effect on our results of operations and, consequently, make our common shares a less attractive investment and harm the trading of our common shares trading on the OTC Bulletin Board.  Investors may find it difficult to sell their shares on the OTC Bulletin Board.

3. If capital is not available to us to fund future operations, we will not be able to pursue our business plan and operations would come to a halt and our common shares would be nearly worthless.

Cash on hand is not sufficient to fund our anticipated operating needs of approximately $500,000 for the next twelve months.  We will require substantial additional capital to participate in the development of our properties which have not had any production of oil or natural gas as well as for acquisition and/or development of other producing properties.  Because we currently do not have any cash flow from operations we need to raise additional capital, which may be in the form of loans from current shareholders and/or from public and private equity offerings.  Our ability to access capital will depend on our success in participating in properties that are successful in exploring for and producing oil and gas at profitable prices.  It will also be dependent upon the status of the capital markets at the time such capital is sought.  Should sufficient capital not be available, the development of our business plan could be delayed and, accordingly, the implementation of our business strategy would be adversely affected. In such event it would not be likely that investors would obtain a profitable return on their investments or a return of their investments at all.

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4. We are heavily dependent on Manny Dhinsa, our CEO, President and Chairman.  The loss of Mr. Dhinsa, whose knowledge, leadership and technical expertise upon which we rely, would harm our ability to execute our business plan.

Our success depends heavily upon the continued contributions of Manny Dhinsa, whose knowledge, leadership and technical expertise would be difficult to replace.  Our success is also dependent on our ability to retain and attract experienced engineers, geoscientists and other technical and professional staff.   Effective May 15, 2006 we entered into a consulting agreement with Mr. Dhinsa under which Mr. Dhinsa will dedicate all of his time to the operations of the Company.  We do not maintain any key person insurance on Mr. Dhinsa.   If we were to lose his services, our ability to execute our business plan would be harmed and we may be forced to cease operations until such time as we could hire a suitable replacement for Mr. Dhinsa.

5. Volatility of oil and gas prices and markets could make it difficult for us to achieve profitability and less likely investors in our common shares will receive a return on their investment.

Our ability to achieve profitability is substantially dependent on prevailing prices for natural gas and oil.  The amounts of and price obtainable for any oil and gas production that we achieve will be affected by market factors beyond our control.  If these factors are not favorable over time to our financial interests, it is likely that owners of our common shares will lose their investments. Such factors include:

• worldwide or regional demand for energy, which is affected by economic conditions;

• the domestic and foreign supply of natural gas and oil;

• weather conditions;

• domestic and foreign governmental regulations;

• political conditions in natural gas and oil producing regions;

• the ability of members of the Organization of Petroleum Exporting Countries to agree upon and maintain oil prices and production levels; and

• the price and availability of other fuels.

6. Drilling wells is speculative, often involving significant costs that may be more than our estimates.  Any material inaccuracies in drilling costs, estimates or underlying assumptions will reduce the profitability of our business and will negatively affect our results of operations.

Developing and exploring for natural gas and oil involves a high degree of operational and financial risk, which precludes definitive statements as to the time required and costs involved in reaching certain objectives.  The budgeted costs of drilling, completing and operating wells are often exceeded and can increase significantly when drilling costs rise due to a tightening in the supply of various types of oilfield equipment and related services.  Drilling may be unsuccessful for many reasons, including title problems, weather, cost overruns, equipment shortages and mechanical difficulties.  Moreover, the successful drilling of a natural gas or oil well does not ensure a profit on investment.  Exploratory wells bear a much greater risk of loss than development wells.  A variety of factors, both geological and market-related, can cause a well to become uneconomical or only marginally economic such as:

• fires;

• explosions;

• blow-outs and surface cratering;

• uncontrollable flows of oil, natural gas, and formation water;

• natural disasters, such as hurricanes and other adverse weather conditions;

• pipe, cement, or pipeline failures;

• casing collapses;

• embedded oil field drilling and service tools;

• abnormally pressured formations; and

• environmental hazards, such as natural gas leaks, oil spills, pipeline ruptures and discharges of toxic gases.

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If we experience any of these problems, it could affect well bores, gathering systems and processing facilities, which could adversely affect our ability to conduct operations. We could also incur substantial losses as a result of:

• injury or loss of life;

• severe damage to and destruction of property, natural resources and equipment;

• pollution and other environmental damage;

• clean-up responsibilities;

• regulatory investigation and penalties;

• suspension of our operations; and

• repairs to resume operations.

7. The unavailability or high cost of drilling rigs, equipment, supplies, personnel and other services could adversely affect our ability to execute on a timely basis our development, exploitation and exploration plans within our budget.

Shortages or an increase in cost of drilling rigs, equipment, supplies or personnel could delay or interrupt our operations, which could impact our financial condition and results of operations.  Drilling activity in the geographic areas in which we conduct drilling activities may increase, which would lead to increases in associated costs, including those related to drilling rigs, equipment, supplies and personnel and the services and products of other vendors to the industry.  Increased drilling activity in these areas may also decrease the availability of rigs.  We do not have any contracts with providers of drilling rigs and, consequently we may not be able to obtain drilling rigs when we need them.  Therefore, our drilling and other costs may increase further and necessary equipment and services may not be available to us at economical prices.

8. We are subject to complex laws and regulations, including environmental regulations, which can adversely affect the cost, manner or feasibility of doing business.

Development, production and sale of natural gas and oil in Canada are subject to extensive laws and regulations, including environmental laws and regulations.  We may be required to make large expenditures to comply with environmental and other governmental regulations.  Matters subject to regulation include:

• location and density of wells;

• the handling of drilling fluids and obtaining discharge permits for drilling operations;

• accounting for and payment of royalties on production from state, federal and Indian lands;

• bonds for ownership, development and production of natural gas and oil properties;

• transportation of natural gas and oil by pipelines;

• operation of wells and reports concerning operations; and

• taxation.

Under these laws and regulations, we could be liable for personal injuries, property damage, oil spills, discharge of hazardous materials, remediation and clean-up costs and other environmental damages.  Failure to comply with these laws and regulations also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties.  Moreover, these laws and regulations could change in ways that substantially increase our costs.  Accordingly, any of these liabilities, penalties, suspensions, terminations or regulatory changes could materially adversely affect our financial condition and results of operations enough to possibly force us to cease our business operations.

9. Our oil and gas operations may expose us to environmentalliabilities.

If we experience any leakage of crude oil and/or gas from the subsurface portions of a well, our gathering system could cause degradation of fresh groundwater resources, as well as surface damage, potentially resulting in suspension of operation of a well, fines and penalties from governmental agencies, expenditures for remediation of the affected resource, and liabilities to third parties for property damages and personal injuries.  In addition, any sale of residual crude oil collected as part of the drilling and recovery process could impose liability on us if the entity to which the oil was transferred fails to manage the material in accordance with applicable environmental health and safety laws.

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10. Exploratory drilling involves many risks and we may become liable for pollution or other liabilities which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labour, and other risks are involved. We may become subject to liability for pollution or hazards against which it cannot adequately insure or which it may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

11. The potential profitability of oil and gas ventures depends upon factors beyond the control of our company.

The potential profitability of oil and gas properties is dependent upon many factors beyond our control.  For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project.  These changes and events may materially affect our financial performance.

12. Our auditors’ opinion on our December 31, 2009 financial statements includes an explanatory paragraph in respect of there being substantial doubt about our ability to continue as a going concern.

We have incurred net losses of $10,463,329 from July 1, 2005 (the date we commenced our oil and gas operations) to December 31, 2009.  Our financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.  We anticipate generating losses for at least the next 12 months.  Therefore, there is substantial doubt about our ability to continue operations in the future as a going concern.  We will need to obtain additional funds in the future.  Our plans to deal with this cash requirement include loans from existing shareholders, raising additional capital from the public or private sale of equity or entering into a strategic arrangement with a third party.  If we cannot continue as a viable entity, our shareholders may lose some or all of their investment in our company.

13. If we do not maintain the property lease payments on our properties, we will lose our interest in the properties as well as losing all monies incurred in connection with the properties.

We have two land packages in Alberta, Canada that were acquired through auction directly from the government of Alberta.  The land packages are made up of a number of underlying individual leases.  All of our leases require annual lease payments to the Alberta provincial government.  See Item 4.D of the 20-F for a more detailed description of the property obligations.  If we do not continue to make the annual lease payments, we will lose our ability to explore and develop the properties and we will not retain any kind of interest in the properties.

14. We may not be able to compete with current and potential exploration companies, some of whom have greater resources and experience than we do in locating and commercializing oil and natural gas reserves.

The natural gas and oil market is intensely competitive, highly fragmented and subject to rapid change.  We may be unable to compete successfully with our existing competitors or with any new competitors.  We compete with many exploration companies which have significantly greater personnel, financial, managerial, and technical resources than we do.  This competition from other companies with greater resources and reputations may result in our failure to maintain or expand our business.

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15. We expect losses to continue in the future because we have no oil or gas reserves and, consequently, no revenue to offset losses.

Based upon the fact that we currently do not have any oil or gas reserves, we expect to incur operating losses in next 12 months.  The operating losses will occur because there are expenses associated with the acquisition and exploration of natural gas and oil properties which do not have any income-producing reserves.  Failure to generate revenues may cause us to go out of business.  We will require additional funds to achieve our current business strategy and our inability to obtain additional financing will interfere with our ability to expand our current business operations.

16. Because we are in the exploration stage of operations of our business our securities are considered highly speculative.

We are in the exploration stage of our business.  As a result, our securities must be considered highly speculative.   We are engaged in the business of exploring and, if warranted and feasible, developing natural gas and oil properties.  Our current properties are without known reserves of natural gas or oil.  Accordingly, we have not generated any revenues nor have we realized a profit from our operations to date and there is little likelihood that we will generate any revenues or realize any profits in the short term.  Any profitability in the future from our business will be dependent upon locating and developing economic reserves of natural gas and oil, which itself is subject to numerous risk factors as set forth herein.  Since we have not generated any revenues, we will have to raise additional monies through loans from existing shareholders, the sale of our equity securities or strategic arrangement with a third party in order to continue our business operations.

17. Since our directors work for other natural resource exploration companies, their other activities for those other companies could slow down our operations or negatively affect our profitability.

Not all of our officers and directors are required to work exclusively for us and they do not devote all of their time to our operations.  In fact, our directors work for other natural resource exploration companies.  Therefore, it is possible that a conflict of interest with regard to their time may arise based on their employment by such other companies.  Their other activities may prevent them from devoting full-time to our operations which could slow our operations and may reduce our financial results because of the slow down in operations.  It is expected that each of our directors will devote approximately 1 hour per week to our operations on an ongoing basis, and when required will devote whole days and even multiple days at a stretch when property visits are required or when extensive analysis of information is needed.

RISKS RELATING TO OUR COMMON SHARES

18. We may, in the future, issue additional common shares, which would reduce investors’ percent of ownership and may dilute our share value.

Our Articles of Incorporation authorize the issuance of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.  The future issuance of our unlimited authorized common shares may result in substantial dilution in the percentage of our common shares held by our then existing shareholders. We may value any common shares issued in the future on an arbitrary basis.  The issuance of common shares for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common shares.

19. Our common shares are subject to the "Penny Stock" Rules of the SEC and we have no established market for our securities, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than USD $5.00 per share or with an exercise price of less than USD $5.00 per share, subject to certain exceptions.  For any transaction involving a penny stock, unless exempt, the rules require:

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·   that a broker or dealer approve a person's account for transactions in penny stocks; and

·   the broker or dealer  receive from the investor a written  agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

·   obtain financial information and investment experience objectives of the person; and

·   make a reasonable determination that the  transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating  the  risks of  transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

·   sets  forth  the  basis on  which  the  broker  or  dealer  made the suitability  determination;  and

·   that the broker or dealer received a signed,  written agreement from the  investor  prior  to  the  transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules.  This may make it more difficult for investors to dispose of our common shares and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.  Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

20. We are a “foreign private issuer”, and you may not have access to the information you could obtain about us if we were not a “foreign private issuer”.

We are considered a "foreign private issuer" under the Securities Act of 1933, as amended.  As a foreign private issuer we will not have to file quarterly reports with the SEC nor will our directors, officers and 10% stockholders be subject to Section 16(b) of the Exchange Act.  As a foreign private issuer we will not be subject to the proxy rules of Section 14 of the Exchange Act. Furthermore, Regulation FD does not apply to non-U.S. companies and will not apply to us. Accordingly, you may not be able to obtain information about us as you could obtain if we were not a “foreign private issuer”.

21. Because we do not intend to pay any cash dividends on our Common shares, our stockholders will not be able to receive a return on their shares unless they sell them.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common shares in the foreseeable future.  Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.

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22. We may become a passive foreign investment company, or PFIC, which could result in adverse U.S. tax consequences to U.S. investors.

If we are a “passive foreign investment company” or “PFIC” as defined in Section 1297 of the Code, U.S. Holders will be subject to U.S. federal income taxation under one of two alternative tax regimes at the election of each such U.S. Holder. Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and either (i) 75% or more of its gross income for the taxable year is “passive income”, which generally includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if we elect, adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more.  Whether we are a PFIC in any year and the tax consequences relating to PFIC status will depend on the composition of our income and assets, including cash. U.S. Holders should be aware, however, that if we become a PFIC, we may not be able or willing to satisfy record-keeping requirements that would enable U.S. Holders to make an election to treat us as a “qualified electing fund” for purposes of one of the two alternative tax regimes applicable to a PFIC, which would result in adverse tax consequences to our shareholders who are U.S. citizens.

23. Because we are organized under the Canada Business Corporations Act and all of our assets and all of our officers and directors are located outside the United States, it may be difficult for an investor to enforce within the United States any judgments obtained against us or any of our officers and directors.

All of our assets are located outside of the United States and we do not currently maintain a permanent place of business within the United States. In addition, our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for an investor to effect service of process or enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. In addition, there is uncertainty as to whether the courts of Canada would recognize or enforce judgments of United States courts obtained against us or our directors and officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.  There is even uncertainty as to whether the Canadian courts would have jurisdiction to hear original actions brought in Canada against us or our directors and officers predicated upon the securities laws of the United States or any state thereof.

RISKS RELATING TO THE CONTINUANCE

24. Due to the Company changing its domicile on August 17, 2004 from the United States to Canada we may owe additional U.S. taxes as a result of the conversion if our conclusions relating to the value of our assets are incorrect.

For U.S. tax purposes, when we continued the company in Canada in the third quarter of 2004, it was treated as though we sold all of our property and received the fair market value for those properties. We were taxed on any income or gains realized on that "sale."  The fair market value of our assets was greater than our tax basis of our assets and as a result we had a taxable gain on the deemed "sale".

In connection with the continuation, we reviewed our assets, liabilities and paid-up capital and the extent of our losses carried forward and believe that we do not owe any U.S. federal income taxes as a result of the conversion/continuance. It is possible that the facts on which we based our assumptions and conclusions may be challenged by the Internal Revenue Service.  In particular, our determination of fair market value was based upon a valuation of our assets and liabilities as of September 30, 2002. The value was determined based upon the cash flows projected to be generated by our intangible assets, discounted at a rate representative of an appropriate rate of return for an alternative investment of equivalent risk. This discount rate was estimated to be 25%. Underlying the valuation were key estimates of management's projections of revenue and expenses for a six-year period which were based upon on further estimates and assumptions surrounding our cost structure, development of technology and continued market acceptance of our database products and pricing.

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There are other valuation methodologies which, if employed, may have yielded a higher fair market value for our assets which would have resulted in a larger taxable gain. One such method is the "market capitalization method" where the implied value of our net assets is equal to the number of our common shares outstanding multiplied by the quoted market price of our common stock on the OTC Bulletin Board on the transaction date. Had the market capitalization method been applied, the valuation of our assets would have been substantially higher (as much as $9.6 million higher as of the September 30, 2002 valuation date) than the value determined using the discounted cash flow method and would have yielded significant taxable capital gains and taxes owing as a result of the continuance. Management assessed the two methods, but did not consider the "market capitalization method" an appropriate reflection of the value of our company as a whole.  Our Company's common stock as quoted on the OTC Bulletin Board, had a small public float and was relatively thinly traded. Because of these factors, we considered the quoted market price of our stock to be an unreliable measure of the fair value of our net assets and accordingly sought a more appropriate measure of value.

The valuation may be challenged by the Internal Revenue Service ("IRS"). Should the IRS disagree with the valuation methodology we used or any of our assumptions, they could reassess the deemed proceeds on the continuance to a higher amount. We may not have tax losses carried forward from prior years sufficient to cover any adjustments to the taxable gain required upon assessment by federal tax authorities. Should our losses be insufficient, the tax liability to our company could be significant and we may not have the available cash at that time to settle the liability owing. Should we be unable to settle any such liability, we may have to cease operations in which case our stockholders would likely lose their investment in our company.

Management believes the methodology, estimates and assumptions are not only reasonable but the most appropriate in these circumstances.  Hence, we did not apply to the federal tax authorities (the Internal Revenue Service in the United States and the Canada Revenue Agency in Canada) for a ruling on this matter and do not intend to do so. We have also made certain other assumptions regarding the tax treatment of this transaction in order to reach our conclusions and it may be possible for some of these assumptions to be interpreted in a different manner which would be less favorable to us. You should understand that it is possible that the federal tax authorities will not accept our valuations or positions and claim that we owe taxes as a result of this transaction.

Item 4. Information on Strata Oil & Gas Inc.

A. History and Development of Strata Oil & Gas Inc.

Strata Oil & Gas Inc. (formerly Stratabase) was incorporated under the laws of the State of Nevada on November 18, 1998 and commenced operations in January 1999. We completed our initial public offering in February 2000.  Our headquarters are located at 918 16th Avenue, NW, Suite 408, Calgary, Alberta, Canada, T2M 0K3.  The telephone number is (403) 237-5443.  The Company’s web address is strataoil.com.   The Company operates in the oil and gas industry with a focus on Canada’s carbonate-hosted bitumen deposits.  The Company has interests in a total of 43 oil sands leases located in Northern Alberta, Canada.

Continuance to Canada

We are presently incorporated under the Canada Business Corporations Act.  In January 2003, the Company filed a proposal to effect a continuation of the corporate jurisdiction from the State of Nevada to Canada on Form S-4 with the United States Securities and Exchange Commission (SEC). The Form S-4 was declared effective on or about July 7, 2004 and submitted to the shareholders of the Company.  The special meeting of stockholders to vote on the adoption of the plan of conversion was held on August 17, 2004 and a majority of the shareholders approved the plan of conversion.  Accordingly, the Company changed its name to "Stratabase Inc.," and continued to operate under the Canada Business Corporations Act.  "Continuance" is a process by which a corporation which is not incorporated under the laws of Canada may change its jurisdiction of incorporation to Canada. Under the Canada Business Corporations Act, if the laws of its home jurisdiction allow for it and a resolution authorizing the continuance is approved by 66 2/3% of the company's shareholders, the company may be "continued" as a Canadian corporation by filing of Articles of Continuance with the Director under the Canada Business Corporations Act.

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Under the corporate law of Nevada, this process is treated as a conversion of the outstanding shares of a Nevada company to shares of a Canadian company. The business and operations of Strata following the conversion were identical in most respects to our current business, except that we will no longer be subject to the corporate laws of the State of Nevada but are subject to the Canada Business Corporations Act. The Canadian company is liable for all the debts and obligations of the Nevada company, and the officers and directors of the company are the officers and directors of Strata. On August 17, 2004, Strata filed a Form 8-A with the SEC registering its securities under Section 12(g) of the Securities Act of 1933.

Discontinued Operations

Until the end of June, 2005 we had developed software which was designed to allow users to interface with and manage databases and customer relationships.   On June 29, 2005 at an annual general and special meeting of shareholders, a majority of the shareholders of the Company approved the sale of all of the rights to the Company’s software assets to a private company controlled by our former president.  At the same meeting, a majority of the Company’s shareholders also approved the change in business of the Company from software development to oil and gas exploration.

On June 29, 2005 pursuant to approval by a majority of the shareholders of the Company, the Company entered into a letter of intent to dispose of all of its interest in its proprietary software to a company (the “Purchaser”) controlled by its former president for $130,000.    On July 11, 2005 a definitive agreement was completed and in exchange for the rights to all of its software, the Company received a non-interest bearing promissory note (the “Note”) which was due July 11, 2006.  The entire amount of the promissory note was received on June 30, 2006 and has been recorded as income from discontinued operations in the Statement of Operations and Comprehensive Loss at December 31, 2006.  The Company had a lien and security interest in all of the assets that were acquired by the Purchaser.

The assets acquired by the Purchaser include all rights and use to the “Strata”, “Relata”, and “Resync” names, all rights and use of the trademarks, web pages, and domain names for “Strata”, “Relata”, and “Resync”, and all rights to the source code and related documentation for the “Relata” and “Resync” software.  The value of the assets disposed of was based on the results of an evaluation prepared for the Company by an independent evaluator.

The entire outstanding principal amount of the Note could have been converted, at the sole discretion of the Purchaser into the Purchaser’s no par value common shares (“Common Shares”), at any time prior to the maturity.  The Purchaser could not have converted less than the entire principal amount of the Note.  The Purchaser would not have been permitted to convert this Note into Common Shares if there had been an event of default which had not been cured and or was continuing.

The Purchaser had at his sole discretion, the right to convert the promissory note to equity in his private company.  If the Purchaser had chosen to convert the promissory note to equity, it would have been converted into shares of his company at market value.  The promissory note was secured by all of the assets acquired by the Purchaser. The Purchaser could have assigned his rights under the purchase agreement, provided that the terms of sale of the software assets to such alternate buyer or assignee would have been substantially the same as described above.

The results of operations of the software operations have been segregated in the financial statements as discontinued operations for the current and prior periods.

Settlement of Loan Receivable

In May 2002, the Company loaned $150,000 to Advanced Cell Technology ("ACT"), a private biotechnology company, in exchange for a convertible promissory note receivable. The note was unsecured, bore interest at 20% per annum, matured on April 30, 2003, and was to be converted into stock of ACT should ACT have proceeded with a preferred stock financing prior to the note's maturity date. The Company accrued a receivable for interest income, due under the terms of the promissory note, in the amount of $21,206 at December 31, 2002. At April 30, 2003, the note receivable was in default.

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The Company received notice from ACT of their intention to settle the note receivable in full out of future financing.  With the uncertainty regarding the recoverability of the note receivable, in 2003 the Company reserved the principal amount of the note receivable and accrued interest outstanding at December 31, 2002 and fully reserved all additional accruals of interest.

On May 8, 2006 the Company completed an agreement with the current parent company of ACT, Advanced Cell Technology, Inc. (“ACTC”) for settlement of the loan.  The Company received 109,557 common shares of ACTC, a public company, for settlement of the principal and interest of the loan.  As part of the settlement, the Company had agreed to pay its legal counsel a contingent fee based on the loan settlement amount.  As a result, of the total 109,557 common shares of ACTC received by the Company, 14,232 were assigned to the Company’s counsel for payment of legal fees.  At December 31, 2006 the Company owned 95,325 shares of ACTC at a cost of $115,343 and a market value of $55,288.  The gross unrealized holding loss for the twelve month period ended December 31, 2006 was $60,055.  The cost and market values of the ACTC shares were determined by reference to their closing prices on May 8 and December 31, 2006 respectively as quoted on the OTC:BB.  As a result of the settlement of the loan with ACTC, the Company recognized a gain of $115,343 at December 31, 2006.

During 2007, the Company disposed of all of its ACTC shares for gross proceeds of $77,607 resulting in a loss of $37,736 at December 31, 2007.

B. Business Overview

HISTORICAL CORPORATE DEVELOPMENT

The Company was originally a United States incorporated software development company.  In August 2004 the Company formally completed the process of becoming a Canadian-based company and on June 29, 2005 the Company sold all of its interests in its software assets and became a business engaged in oil and gas exploration.

The Company currently has interests in oil sands properties located in the Wabasca and Peace River areas of Northern Alberta, Canada.  A description of the Company’s properties is set out below.

The Company is an exploration stage company and there is no assurance that a commercially viable oil or gas deposit exists on any of its properties. Further evaluation will be required on each property before a final evaluation as to the economics and legal feasibility of the property is determined.

The Company currently has an interest in 43 oil sands leases in northern Alberta, Canada.  Forty-two of the leases are in the Peace River oil sands area and one is located in the Wabasca (a.k.a. Wabiskaw) oil sands region.

MATERIAL EFFECTS OF GOVERNMENT REGULATION

Development, production and sale of natural gas and oil in Canada are subject to extensive laws and regulations, including environmental laws and regulations.  The oil and gas leases currently leased by the Company are owned by the Province of Alberta and are managed by the Department of Energy.  We may be required to make large expenditures to comply with environmental and other governmental regulations.  Matters subject to regulation include:

• location and density of wells;

• the handling of drilling fluids and obtaining discharge permits for drilling operations;

• accounting for and payment of royalties on production from state, federal and Indian lands;

• bonds for ownership, development and production of natural gas and oil properties;

• transportation of natural gas and oil by pipelines;

• operation of wells and reports concerning operations; and

• taxation.

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Under these laws and regulations, we could be liable for personal injuries, property damage, oil spills, discharge of hazardous materials, remediation and clean-up costs and other environmental damages.  Failure to comply with these laws and regulations also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties.  Moreover, these laws and regulations could change in ways that substantially increase our costs.  Accordingly, any of these liabilities, penalties, suspensions, terminations or regulatory changes could materially adversely affect our financial condition and results of operations enough to possibly force us to cease our business operations.

ANTICIPATED CHANGES TO FACILITIES AND EMPLOYEES

Management of the Company anticipates no changes to either facilities or employees in the near future.

SEASONALITY, DEPENDENCY UPON PATENTS, LICENSES, CONTRACTS, PROCESSES, SOURCES AND AVAILIBILTY OF RAW MATERIALS

Certain of the Company’s properties are in remote locations and subject to significant temperature variations and changes in working conditions.  It may not be possible to actively explore the Company’s properties in Alberta throughout the year because seasonal changes in the weather.  If exploration is pursued at the wrong time of year, the Company may incur additional costs to address issues relating to the weather.

Shortages or an increase in cost of drilling rigs, equipment, supplies or personnel could delay or interrupt our operations, which could impact our financial condition and results of operations.  Drilling activity in the geographic areas in which we conduct drilling activities may increase, which would lead to increases in associated costs, including those related to drilling rigs, equipment, supplies and personnel and the services and products of other vendors to the industry. Increased drilling activity in these areas may also decrease the availability of rigs.  We do not have any contracts with providers of drilling rigs and, consequently we may not be able to obtain drilling rigs when we need them.  Therefore, our drilling and other costs may increase further and necessary equipment and services may not be available to us at economical prices.

COMPETITION

The natural gas and oil exploration industry is intensely competitive, highly fragmented and subject to rapid change.  We may be unable to compete successfully with our existing competitors or with any new competitors.  We compete with many exploration companies which have significantly greater personnel, financial, managerial, and technical resources than we do.  This competition from other companies with greater resources and reputations may result in our failure to maintain or expand our business.

C. Organizational Structure

The Company is not part of a group and has no subsidiaries.

D. Property Plant and Equipment

CORPORATE OFFICES

We do not own any real property. Our offices are currently located at 918 16th Avenue NW, Suite 408, Calgary, Alberta, Canada, T2M 0K3.   Prior to this the Company’s offices were located at 717 7th Avenue SW, Suite 1750, Calgary, Alberta T2P 0Z3 where the offices were leased on a 24.5 month lease and that expired October 30, 2009. The Company had the option to renew the lease for an additional one year term but did not renew.  We believe that the facilities will be adequate for the foreseeable future.  All costs described in this section are stated in U.S. dollars as converted from Canadian dollars.  Accordingly, the costs may vary to some degree with the currency exchange rate.

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OIL SANDS LEASES

The Company has an interest in 43 oil sands leases in northern Alberta, Canada.  Forty-two of the leases are in the Peace River oil sands area and one is located in the Wabasca (a.k.a. Wabiskaw) oil sands region.

Oil Sands Background

‘Oil Sands’ refer to unconsolidated, bitumen-saturated sands containing varying amounts of clay and rock material. The bitumen content refers to a heavy, viscous crude oil that generally does not flow under natural reservoir conditions.  As a result, it cannot be recovered from a conventional well the way lighter oil is most often produced.  The oil sands are contained in three major areas beneath an approximate 140,800 square kilometres (54,363 square miles) of north-eastern Alberta - an area larger than the state of Florida.  As of December 2002, according to the Alberta Department of Energy, these three areas, Athabasca/Wabasca, Peace River, and Cold Lake, contained 1.6 trillion barrels of bitumen in-place, of which 174 billion barrels are proven reserves that can be recovered using current technology.

These deposits contain a significant amount of oil but until recently the cost of extraction has created a barrier to economic development.  Extraction of oil from oil sands requires technologically intensive activity and the input of significant amounts of energy to exploit the oil sands deposits.  There are two main types of oil sands production methods:  mining and in-situ.  Oil sands mining is accomplished using an open pit operation whereby the oil sands are dug up and trucked to a processing facility.  For oil sands reservoirs too deep to support economic surface mining, some form of in-situ recovery is required to produce bitumen.  In-situ production is similar to that of conventional oil production where oil is recovered through a well.  The Alberta Energy and Utilities Board estimates that 80 percent of the total bitumen ultimately recovered will be with in-situ techniques.  Numerous in-situ technologies have been developed that apply thermal energy to heat the bitumen and allow it to flow to the well bore.

There are some oil sands reservoirs where primary or “cold” production is possible.  The lighter bitumen in these areas can flow towards a well and bitumen production can be enhanced by the co-production of sand, thereby creating a downhole cavity around the well bore which facilitates the flow of oil towards the well.  This type of production technology is commonly called Cold Heavy Oil Production with Sand (“CHOPS”).  While this type of bitumen is marginally lighter and less viscous than the conventional bitumen found in mineable and other in-situ reserves, it is also slightly heavier than the conventional “Heavy Oil” reservoirs produced in the “heavy oil belt” region, located around the central Alberta - Saskatchewan border.  Another production technology, which may be suitable for some of the lighter oil sands reservoirs is the use of horizontal well bores.  Horizontal production wells, which have been drilled up to more than 2 kilometers away from their surface locations, have been successfully applied to cold in-situ bitumen production, where it is suitable.  In general, open pit oil sands mines are found in central Athabasca deposits, while in-situ bitumen production technology is used in the Cold Lake, south Athabasca, and Peace River deposits, where the overburden thickness exceeds 50 meters.

Oil in oil sands is found mainly in high porosity quartz arenites to arkosic sands that cover large areas and lie up-dip from the purported source rocks to the southwest.  There are also vast amounts of heavy oil as well in fractured carbonate rocks of 10-14% porosity underlying a large triangular region of north central Alberta.  In addition, there is a large amount of heavy oil in a series of thinner blanket sands and channel sands extending all the way from Suffield Alberta to zones overlying the Cold Lake Oil Sands near Bonnyville, and extending well into Saskatchewan.  The latter deposits called the ‘heavy oil belt” are the sites of the most development attention because the oil is less viscous and it can be produced using either CHOPS or horizontal well technology.

The source rocks for the oil sands are from the Cretaceous and Jurassic shales in the Alberta Syncline.  Rapid sedimentation of organic rich argillaceous material caused large flow volumes to be generated as the result of compaction.  Deep burial of the kerogeneous source rocks allowed organic diagenesis to occur resulting in the generation of oil and gas from the kerogen.  The oil sands are 98% un-cemented (unconsolidated sandstones).  The ingress of bitumen has essentially stopped diagenetic processes and the sands do show strong evidence of the early effects of pressure solution and re-crystallization but true cementation is quite rare as are significant calcite cemented zones.

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Carboniferous Oil Sands

Strata has focused its efforts on carbonate-hosted bitumen sands.  The carbonates are the next challenge in the Alberta oil sands industry.  Like oil sands two decades ago, carbonates represent an enormous and relatively untapped petroleum resource. The means for producing bitumen from carbonates is still being understood. The nature of the carbonate triangle in Alberta tends to vary and there is unlikely to be a single one-size-fits-all strategy for production.  Cold production may be possible in some areas although in most cases production requires an in-situ treatment.  Various technologies have been tested and others considered, including similar technologies to those employed in oil sands (cyclic steam, SAGD, etc). Bitumen carbonates are still being understood, and as yet there are several techniques which may prove to be effective.  We are in the process of determining the most efficient means of producing the bitumen from our Peace River project.

Carbonate oil sands are an unconventional resource that remains almost untapped. While much of the world now knows about Alberta’s vast oil sands resource, many people are unaware that a bitumen resource of similar magnitude is locked in carbonate rock. According to a report by Petroleum Technology Alliance Canada (PTAC), 26% of Alberta’s bitumen resources are contained in carbonate rather than sand formations. One northern Alberta carbonate formation alone — the Devonian-age Grosmont complex — has bitumen volumes in place comparable to the huge Athabasca oil sands deposit. This comparison is made in the 176-page official history of the Alberta Oil Sands Technology and Research Authority (AOSTRA), the long-since disbanded provincial agency set up in 1974 to promote bitumen recovery technologies. The history devotes four well-illustrated pages to bitumen carbonates. The resource received serious attention during the AOSTRA years with a series of pilot tests running in the Grosmont formation between 1975 and 1987.   However, oil prices fell and funding was cut. The remotely located and little known bitumen carbonates were largely forgotten until Royal Dutch Shell plc paid nearly $500 million dollars for leases in 2006.

Contained in a roughly triangular 70,000- square-kilometre area of northern Alberta called the Carbonate Triangle, the deposits may be the most technically challenging of the province’s bitumen resources. The basic difference between oil sands and bitumen carbonates is the former is bitumen mixed with unconsolidated sand, which can be either mined or produced from wells. The latter, as the name implies, is bitumen in carbonate rock — both dense limestone and heavily karsted rock. Grosmont bitumen is even heavier than the Athabasca bitumen and the reservoir is extremely variable, meaning that a single recovery method is unlikely to work throughout the formation.  The lack of understanding of the heterogeneous nature of the reservoir is the main hurdle for developing successful bitumen recovery schemes. The bitumen is contained in a dual porosity system — both in the vugs (cavities or fractures) and in the rock matrix itself. The vugs could potentially be good news in that they could conceivably improve permeability once the viscosity of the bitumen is raised by heat or other means, but bad news if they serve as channels for steam to escape from the area of interest. In the karsted areas, these irregular cavities and tunnels are often the diameter of a man’s arm, and sometimes much larger. According to the PTAC review of the pilot results, challenges of drilling through this karsted rock include the potential for loss of drilling fluids into the formation, and problems with the placement of cement to maintain a strong well-to-formation bond.

DROWNED AREA OIL SANDS LEASE

Acquisition of Interest

On September 7, 2005 the Company acquired a 100% interest in Alberta Oil Sands Lease #7400100011 (the ‘Drowned Property’).  The rights to the Drowned Property were acquired for a payment of CDN $25,000 (USD $20,635) as well as other closing costs of CDN$9,874 (USD $8,150).  The Drowned Property covers 512 hectares of land in the Drowned Area of the Wabasca oil sands in the West Athabasca area of Northern Alberta.  The lease gives the Company the right to explore the Drowned Property covered by the lease.

Strata's acquisition of the Drowned Property lease includes an overriding 4% royalty agreement with the vendor.  The royalty is to be paid on a well-to-well basis and is payable on all petroleum substances produced by any well on the Property.   In addition, the Company must pay the province of Alberta CDN $1,792 (USD $1,471) per year to maintain its right to the lease.  The lease is subject to a royalty payable to the government of Alberta.  The royalty is calculated using a revenue-less-cost formula.

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In years prior to the recovery of the project’s capital investment, the royalty is 1% of gross revenue.  Once the project costs have been recovered, the royalty is the greater of 1% of gross revenue or 25% of net revenue.

Location

The Drowned Property lies near the southern edge of the Wabasca Heavy Oil/Oil sands field in west Athabasca approximately 45km south of the town of Wabasca or 60km Northeast of Slave Lake.

Lease Number	Hectares	Townships	Range	Section
7400100011	512	75, 76	23	1 and 36

Drowned Project Lease Information

The Drowned Property is comprised of a single lease with the government of the province of Alberta, Canada.  The lease is a fifteen year lease and expires on October 4, 2015.

Lease Number	Hectares	Rent / Hectare	Annual Minimum Lease Payments
7400100011	512	CDN $3.50 (USD $3.33) per year	CDN $1,792 (USD $1,705) per year

Regional Geology

Regionally, the Wabiskaw Reservoir consists of three overlapping en-echelon sand bodies interpreted as shoreface sand which coarsen upwards from shale to fine sand.   The three bodies are informally referred to as Wabiskaw “A” Sand, Wabiskaw “B” Sand, and Wabiskaw “C” Sand.   The three bodies are separated from each other by shales and each has proven to be correlatable and mappable over a wide area.  All three bodies contain bitumen but only the bitumen sand of the Wabiskaw “A” is being cold produced at the present time.  The “B” and “C” are generally thinner and contain smaller bitumen accumulations.

Gas and water are also significant components of the reservoir fluids in the Wabiskaw sands.  Several associated gas fields are currently in production.  There may be a distinct basal water leg below the bitumen.  This is especially true in the southwestern part of the Wabiskaw reservoirs.

The deposit lies above the western part of the Athabasca oil sands and extends westward somewhat beyond the McMurray Formation edge.  In many regions, the Wabasca is oil rich and it overlies the McMurray forming two stacked reservoirs.  Detrital matter arrived mainly from the west but mixed with a small component of sediments from the shield.  The bitumen is highly viscous and is at a depth of 100 to 700 meters.  The Wabasca is classified as the lowest Member of the Clearwater Formation and therefore overlies the McMurray Formation.  The reservoir and the thickness of oil saturated material vary from 0 to 10 meters.

Property Geology

Several pre-existing bore holes indicate that neither the Wabiskaw “A” sand nor the Wabiskaw “B” sand is present on the Company’s Drowned Property, although it appears that 0 to 4 meters of a thin bitumen-bearing Wabiska “C” sand may be present.  In addition, the McMurray Formation is present beneath the Wabiskaw and fills a local north-south oriented valley system incised into the older limestone basement. These McMurray valley filled sediments appear to be complex, consisting mainly of water-bearing silts and clays, and hold only minor, discontinuous, bitumen-bearing sands of an unknown quality.    The Wabiskaw and McMurray sands lie at a depth of 550 to 600 meters and the Grand Rapids reservoir lies at a depth of 425 to 500 meters.

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Previous Work

Historically, the Drowned Project has had four wells drilled on it by companies owning the gas exploration rights. The geophysical well logs demonstrate the presence of bitumen in all four wells, one of which shows the presence of oil sands.     The Company did not undertake any exploration work on the Drowned Property in 2009.

Planned Work by the Company for 2010

The Company has focused its exploration efforts on its Peace River Property and as a result, does not have any current plans to undertake an exploration program on the Drowned Property in 2010 due to our limited funds.

PEACE RIVER OIL SANDS LEASES

The following are two maps showing the location of the Company’s 42 oil sands leases in the Peace River region of northern Alberta, Canada.

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Acquisition of Interest

The Company has entered into a series of leases in multiple transactions with the province of Alberta in the Peace River area of Alberta, Canada (the “Peace River Property”).  All of the leases were acquired through a public auction process that requires the Company to submit sealed bids for land packages being auctioned by the provincial government.  Upon being notified that it has submitted the highest bid for a specific land parcel the Company immediately pays the government the bid price and enters into a formal lease with the government.    The bid price includes the first year’s minimum annual lease payments.  The specific transactions entered into by the Company are as noted below.

Date	Number of Leases	Land Area (Hectares)	Annual Minimum Lease Payments
December 15, 2005	7	10,752	CDN $37,632 / USD $35,806
June 15, 2006	3	4,864	CDN $17,024 / USD $16,198
August 10, 2006	9	7,424	CDN $25,984 / USD $24,723
August 24, 2006	2	2,048	CDN $7,168 / USD $6,820
October 19, 2006	4	3,584	CDN $12,544 / USD $11,935
November 2, 2006	9	14,336	CDN $50,176 / USD $47,741
January 11, 2007	4	4,608	CDN $16,128 / USD $15,345
January 24, 2007	2	2,304	CDN $8,064 / USD $7,673
April 3, 2008	2	512	CDN $1,792 / USD $1,705
	42	50,432	CDN $176,512 / USD $167,947

The Peace River Property consists of a total of 50,432 hectares of land in a region of northern Alberta known as Peace River.  The leases are subject to royalties payable to the government of Alberta.  The royalty is calculated using a revenue-less-cost formula.  In years prior to the recovery of the project’s capital investment, the royalty will start at 1% of gross revenue, and increase for every dollar oil is priced above $55 per barrel, to a maximum of 9% when oil is priced at $120 or higher.  Once the project costs have been recovered the net royalty, applied post-payout, will start at 25% of net revenue and increase for every dollar oil is priced above $55 per barrel to 40% when oil is priced at $120 or higher.

Location

The Peace River Property lies in the Peace River oil sands field in Alberta in an approximate 50 to 60 kilometer arc from the town of Peace River.  Our holdings in the Peace River area are situated in three distinct areas consisting of the Cadotte, Culp, and Bearhead groups of leases.  The Cadotte leases lie northeast of the town of Peace River, the Bearhead lease are to the southeast while the Culp lease are located almost due south.

Peace River Project Lease Information

The Peace River Property is comprised of 42 leases with the government of the province of Alberta, Canada.  All of the leases are for a 15 year term, require minimum annual lease payments, and grant the Company the right to explore for potential oil sands opportunities on the respective lease.

Regional Geology

The Peace River Cretaceous clastic reservoir consists of a complex stratigraphy similar in nature to the Athabasca Deposit to the east.  These are thought to comprise fossil estuarine systems where the best reservoirs are contained in tidal inlet and barrier sands.  Secondary reservoir targets may be tidal delta, bayhead delta, tidal channel, and tidal flat sands.  The Peace River Carboniferous reservoir consists of platform sediments with relatively few reef building organisms. Structurally, the Peace River strata dip to the southwest and the elevation of the bitumen-bearing interval lies between 50 and 100 meters below sea level or at a depth of between 680 to 790 meters below the surface.

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Property Geology (Cadotte Leases)

The Company has not yet undertaken significant exploration of its Bearhead and Culp leases.  The discussion in the following sections of this report relates to the Cadotte leases.

Strata has focused its efforts on the bitumen resources contained in the Bluesky/Gething clastic Cretaceous Formations and the Debolt/Elkton carbonate Carboniferous Formation in the Cadotte area.  In particular, our exploration programs to date have focused on 29 sections in the Cadotte area located in Townships 86 and 87, Ranges 18 and 19W (the “Target Area”).

The nature of the geology of the carbonate sequence in the Target Area has a significant influence on the distribution of the bitumen resource.  The principal reference source for this section is the Alberta Research Council’s publication, “Geological Atlas of the Western Canada Sedimentary Basin”. The sequence that hosts the bitumen deposits is the Rundle Group of Lower Carboniferous age. The Rundle Group in this area includes three stratigraphic units which, in ascending order, are the Pekisko, Shunda and Debolt Formations. From place-to-place the Debolt Formation may also include another distinct unit, the Elkton Member. In the Cadotte Lease area, the Elkton Member is usually present, as long as the overlying unconformity with the Cretaceous sequence has not eroded the entire Debolt Formation sequence. Although there are many intervals that are bitumen enriched in the Rundle sequence in the Cadotte Lease area, the principal enrichment zones occur in the Elkton Member, the upper half of the Debolt but usually not right at the top of the formation and, to a lesser extent, in the Shunda Formation. The high grade zones of enrichment are those that occur in the Elkton Member and the Debolt Formation.

A Cretaceous clastic sequence that includes the Gething and Bluesky Formations at the base, unconformably overlies the Carboniferous rocks in this area. All the beds dip gently to the west with those lying below the unconformity having a somewhat greater dip than those above it. This causes the sequence below the unconformity to be eroded to a greater degree to the east and to be less complete, compared with the west. These westerly dips are the result of post-depositional tectonic events and do not reflect the original orientation of the accumulation of sediment. The Carboniferous sequence of the Rundle assemblage accumulated as a result of a series of prograding events that developed in a southerly to south-westerly direction.

The Carboniferous sequence mainly includes platform sediments that show generally shallower-water characteristics up-section. In a basinward direction the depositional facies proceed from beach and lagoonal environments through shoals of the shelf margin to marine basin muds. The lithologies that result include high energy siliciclastics of the beach environment, through various types of carbonates on the platform and its slope to shale in the deep marine environment. There even appear to be beds present that have the character of unconsolidated coarse sediments. Several transgressive events therefore resulted in the accumulation of clastic sediments interbedded with carbonate units.

The carbonate units included relatively few reef building organisms and thus there was little tendency for irregular geological bodies such as reefs to form in this sequence in this area. From one well to the next the regular nature of the deposition that took place at this time is apparent and it is relatively easy to show the correlation that exists between the same units in adjacent wells in the target area. This feature of regular bed continuity is in strong contrast to the variability of the clastic units of the overlying Cretaceous sequence as seen in the Athabasca region.

It is also most noteworthy that the bitumen enrichment is strongly influenced by the bedded nature and continuity of the sediments. It is readily possible in many cases to show the same details of the enriched sequence in adjacent wells even when they are spaced a kilometre or more apart. This has a very strong impact on the selection of data separation distances for the classification of resources; in this sequence an equivalent assurance of existence is achieved with much wider spacing of wells than that used in the classification of bitumen resources for the Cretaceous surface mineable oil sand deposits presently being explored and developed near Fort McMurray.

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Previous Work

During the winter drill season of 2006 – 2007, Strata drilled four wells on the Cadotte leases.  Three of these wells were within the Cadotte Target Area and one was in the Cadotte East leases.  All of the wells were drilled and cored.  Three wells were drilled with cores in the Cadotte Target Area, two of which were cased allowing for production testing with the ability to re-enter these wells for future testing.  The other well was abandoned due to drilling fluid losses during drilling which did not allow the well to be cased for testing in the future.  The fourth well drilled in the Cadotte East location was cored and cased.  Due to natural gas flowing from the well, to which the Company did not have the rights to, additional borehole tests were not conducted.  The cores of all of these wells were tested and examined in a laboratory in Calgary.  The results of these tests were that cold production was not viable.  However, the results indicated that the bitumen would flow at approximately 85°C.  These results will allow the company to explore different means of extraction in addition to steam.

Former lease holders have drilled wells on and around the Company’s Target Area.  Geophysical well logs are of variable quality but generally consist of a full suite of tools to evaluate the potential reservoirs.  With respect to available drilling data, the leases of the Target Area are drilled at an average spacing of one well per section.  However, not all of these existing wells were drilled to investigate the sequence located on the Company’s Cadotte leases. The effective average spacing with wells that have penetrated the Carboniferous sequence is approximately 0.8 wells per section. This spacing is from twenty-three wells on or immediately adjacent to the leases. There are an additional two hundred nineteen wells in the surrounding area, the data from which has also been referenced and inspected by the Company to assist with its evaluation of the Cadotte leases.

However, the quality of the data from the wells of different vintage is quite variable. Several of the wells were drilled in the 1950’s. The drilling records and logs for these wells are sometimes poor or absent or they may be less complete than those of more recently drilled wells. A database search was done to identify higher quality data which was restricted to wells drilled since 1970 and this, plus the new Strata wells was used as the primary reference data. A total of eighteen wells of this vintage are located on or immediately adjacent to the lease blocks. The well log data from these wells is the primary source of information on the leases available for the present evaluation but this was supplemented by high quality data from a further thirty-nine more distant wells in the area.

Planned Work by the Company for 2010

Strata intends to continue to discuss a variety of funding arrangements with potential partners in 2010, but until funding can be secured the Company's development plans will temporarily be put on hold.  Once financing has been secured, the Company plans to undertake an engineering and production testing/ drilling program in the Cadotte target area.  The Company does not have any plans to undertake land acquisitions in 2010.

Estimated Resources of Bitumen

In the United States, registrants, including foreign private issuers like us, are required to disclose proved reserves using the standards contained in Rule 4-10(a) of the United States Securities and Exchange Commission’s (“SEC”) Regulation S-X.

The Company completed the drilling of its first four wells in the winter drilling season of 2006 – 2007.  Strata had engaged Norwest Corporation (”Norwest”) of Calgary, Alberta, Canada to assist Strata with the planning and undertaking of its exploration of the Cadotte leases.  On August 16, 2007 Norwest completed a technical report titled Evaluation of In-Place Bitumen Resources - Cadotte Leases and on February 29, 2008 Norwest Questa Engineering Corporation  (“Norwest Questa”) of Golden, Colorado completed a report titled Preliminary Feasibility Study of the Cadotte Leases,  Alberta, Canada.  Both of these reports are available to the public on the www.sec.gov web site.  All discussion in this section is qualified by reference to the two reports and readers are advised to read the two technical reports in their entirety.

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Evaluation of In-Place Bitumen Resources - Cadotte Leases – August 16, 2007

The study was designed to comply with the requirements of National Instrument 51-101 and the resource classification scheme and criteria elaborated in Volume 1, of the Canadian Oil and Gas Evaluation Handbook. Recoverable bitumen volumes were not addressed in this report because no estimate of the recovery factor was available at the time.  Mr. Geoff Jordan, P. Geol., former Senior Vice President of Norwest Corporation and a qualified person as defined by National Instrument 51-101 was responsible for the preparation of the technical information in the report.

The amount of exploration drilling and testing on the Cadotte Target Area is sufficient for that part of the Peace River Oil Sand deposit to be classified as a Discovered Resource (the classification system was subsequently changed such that the Discovered Resource would now be called Discovered Petroleum Initially In-Place (PIIP)).  The classification of the Discovered Resource into Low, Best (Most Likely) and High categories was based on the following criteria:

·   The Low Estimate includes all of the material that has a minimum grade of 8 wt% and a minimum thickness of 10 m;

·   The Best (Most Likely) Estimate includes all of the material that has a minimum grade of 8 wt% but no minimum thickness; and

·   The High Estimate includes all of the material without any grade or thickness constraint. Hence the latter is an estimate of the original bitumen in place for the zones under investigation in the Cadotte Target Area.

The results of the different estimates for the Original Bitumen In Place (“OBIP”) are presented on the following table:

Effective OBIP for the Cadotte Area by Target Zone in millions of Stock Tank Barrels (MMSTB), Using 8% wt Cut-off
Formation	Low Estimate		Best (Most Likely) Estimate		High Estimate
Bluesky/Gething		N/A		N/A		103
Debolt		1,443		1,500		1,503
Elkton		N/A		490		644
Total		1,443		1,990		2,251

In the Bluesky/Gething Formations the results indicate that there are some areas where grades above the threshold of 8 wt% occur but these are somewhat scattered and there are no areas where especially high grade results were found. At the same time, the ore thickness is generally relatively low.

It is important to note that the resource estimates presented in this report are made for quantities on an in-place basis. This is not an estimate of quantities that may be recovered. Such an estimate could not be made at the time because there was no reliable value available for the bitumen recovery factor that should be applied. Such a factor is determined as a result of the completion of various engineering tests and analyses.

The accuracy of resource estimates is, in part, a function of the quality and quantity of available data and of engineering and geological interpretation and judgment.  Given the data available at the time this report was prepared, the estimates presented herein are considered reasonable.  However, they should be accepted with the understanding that additional data and analysis available subsequent to the date of the estimates may necessitate revision.  These revisions may be material.  There is no guarantee that all or any part of the estimated resources of bitumen will be recoverable.

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Neither Strata nor Norwest make any express or implied warranties or guarantees of any kind concerning this report; including without limitation any implied warranty of merchantability or fitness for a particular purpose.  Specifically, neither Strata nor Norwest make any warranties or guarantees that any property identified in this report will produce oil and/or gas in any quantity, or that any property identified in this report will produce or receive any economic, commercial, or other benefit.

Readers of this 20-F are advised to read the August 16, 2007 report titled Evaluation of In-Place Bitumen Resources - Cadotte Leases, that is publicly available on the www.sec.gov web site, was filed on September 27, 2007 under cover of 6-K.

Preliminary Feasibility Study of the Cadotte Leases, Alberta, Canada – February 29, 2008

The preliminary feasibility report was prepared in compliance with Canadian National Instrument 51-101 guidelines for disclosure concerning oil and gas resources in Canada.  NI 51-101 requires that the procedures and criteria of the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook) be used for resource classification and these standards and criteria have been used in this report.  In this case it has been found that the estimate of potentially recoverable bitumen in the Cadotte Target Area cannot yet be classified as a Contingent Resource. The major factor is that, at present, there is no pilot project that is applying in-situ recovery methods to bitumen in a hardrock carbonate host that can be used as a demonstration of recoverability.  Not only is this the case for Canada but there are no suitable examples anywhere in the world.  This means that existing pilot projects in clastic hosts, which have different physical characteristics from carbonates, have to be used for performance prediction.  This additional risk prevents the “Contingent Resource” classification being made.  The additional factors that also prevent classification as a Contingent Resource include:

1.   A lack of a cost estimate for the full-field development and operation of a bitumen recovery and upgrading project;

2.   Lack of permeability data for the target zones; and

3.   Limited geologic and reservoir data samples for the target zones

The Norwest August 16, 2007 report resource estimate is classified as “Discovered Resources”, in accordance with the criteria and former classification scheme of the COGE Handbook.  The current version of the COGE Handbook has re-titled “Discovered Resources” as “Discovered Petroleum Initially In Place” (“Discovered PIIP”).  The Pre-Feasibility estimate prepared by Norwest Questa is compliant with the requirements of National Instrument 51-101 with respect to classifying the resource as Discovered PIIP.  Dr. John D. Wright, Ph.D., P.E., who was President and Chief Engineer, of Norwest Questa Engineering Corporation at the time of the preparation of the Preliminary Feasibility, is a qualified person as defined by National Instrument 51-101.  Dr. Wright supervised the preparation of the technical information in this report.

The analogy method was utilized to develop recovery factors that were applied to the OBIP estimates to obtain a low, most likely, and high estimate for potentially recoverable bitumen.  Several projects using technology similar to that expected to be implemented on the Cadotte leases were used as analogies for a bitumen recovery method and a resultant range of recovery factors.  Shell’s Carmon Project (“Carmon Creek”) was one of the primary analogies utilized by Norwest for the recovery factor estimates.  Norwest reviewed the Carmon Creek Project and concluded that some bitumen bearing stratigraphy on Strata’s land correlates with the same stratigraphy at Carmon Creek.  Over the last 25 years, Shell has tested numerous recovery methods at Peace River and has recently concluded that Horizontal Cyclic Steam (“HCS”) is the optimal recovery method for Carmon Creek.  The present Preliminary Feasibility Study for Cadotte is based on the application of that method of extraction, as well as the Shell Carmon Project well layout and designs which were obtained from various public disclosure reports.

For the Cadotte leases a production schedule was developed over the key Target Area of twenty nine sections.  Each section, which has an area of one square mile, is about the same size as the Carmon Project pad and development block design.  Each pad and development block includes 20 wells of 1,400 m length, each of which is about 600 m in the vertical direction and 800 m horizontally.  In the design the pads are “brought on stream” over a four year build-up period.  The development block sequence is implemented such that the highest grade and thickest ore blocks are addressed first as long as the local infrastructure is able to service those areas.  During the main period of development, the daily production rate for the leases is about 56,000 barrels.

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The production life for this schedule exceeds 20 years. Cost estimates for this preliminary feasibility study were obtained from a review of public literature.

Based on the analogy method with an adjustment for difference between gross and effective OBIP calculations, Norwest Questa estimated the following recovery factors for application to the effective OBIP deterministic cases:

·   17 percent for the Low estimate

·   26 percent for the Most Likely estimate, and

·   38 percent for the High estimate.

Norwest Questa then applied the estimated recovery factors shown above to the effective OBIP estimates from the August 16, 2007 report, which is the in-place Best estimate at an 8 wt% grade cut-off, to obtain the Low, Most Likely, and High Resource estimates for the Cadotte Area as follows:

Potentially Recoverable Portion of Discovered PIIP for the Cadotte Area by Target Zone in millions of Stock Tank Barrels (MMSTB)
Formation	Low Estimate		Most Likely Estimate		High Estimate
Bluesky/Gething		N/A		N/A		39
Debolt		245		390		571
Elkton		N/A		127		245
Total		245		517		855

Norwest Questa conducted an initial economic evaluation of the Cadotte area, at a level of study consistent with that of a Preliminary Feasibility Study, based on the Most Likely potentially recoverable Discovered PIIP estimate of 517 MMSTB.  Based on a forecast price of $65 per barrel and constant costs, this Preliminary Feasibility economic analysis indicates that the development of the Cadotte area is economically viable with a net present value (discounted at 10%) of cash flows before income taxes of about $1.2 billion.

Norwest Questa also completed a sensitivity analysis based on three different oil prices as noted below.

Summary of Economic Evaluations at Different Oil Price Assumptions ($US Billions)
Oil Price	Gross Oil Revenue	Net Investment	Total Operating Expenses	Crown Royalties	Cumulative Cash Flow	Cumulative Disc. (10%) Cash Flow	IRR
Constant $65 WTI	19.7	1.6	8.2	2.1	7.8	1.2	27%
Constant $55 WTI	14.8	1.6	8.2	0.8	4.2	0.4	17%
Constant $75 WTI	24.7	1.6	8.2	3.3	11.5	2.0	35%

Based on forecast prices and costs, this preliminary feasibility economic analysis indicates that the development of the Cadotte area is economically viable with a return on capital investment of 27% and Net Present Value (“NPV”) discounted at 10% of $1.2 billion.  At a WTI crude oil pride of $65 per barrel, the impact of the planned royalty change is only about a 1% reduction of return on capital investment.  At a constant $55 per barrel WTI price, the return on capital investment is just over 17%.  Based on the favorable results of the pre-feasibility economic analysis, the Cadotte area warrants further evaluation including a pilot well test program and feasibility level project design and cost estimates.

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This report is limited in scope to document only the potentially recoverable portion of the Discovered Petroleum Initially In Place (Discovered PIIP), formerly referred to as Discovered Resources, within the Target Area of the Cadotte properties.  This report does not attempt to place a Fair Market Value on that resource portion.

Norwest Questa reserves the right to revise its opinions of all estimates of resources if new information is deemed sufficiently credible to do so.

The accuracy of any estimate is a function of available time, data, geological engineering, commercial interpretation, and judgment.  While the resource estimates presented herein are believed to be reasonable, they should be viewed with an understanding that additional analysis of new data may justify their revision and Norwest Questa reserves the right to make such revisions.

Readers of this 20-F are advised to read the February 29, 2008 report titled Preliminary Feasibility Study of the Cadotte Leases,  Alberta, Canada that is publicly available on the www.sec.gov web site, was filed on March 6, 2008 under cover of 6-K.

Item 4A.  Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and Prospects

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying audited financial statements for the fiscal years ended December 31, 2009, 2008, and 2007. These reports are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States, referred to in this annual report as US GAAP.

Certain statements contained in the foregoing MD&A and elsewhere in this 20-F constitute forward-looking statements.  Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the financial statements were made, and readers are advised to consider such forward-looking statements in light of the risks set forth in section 3.D. above.

A. Overall Performance

The following table sets forth the audited statement of operations data for Strata for the fiscal years indicated:

	2009			2008			2007
Expenses	$	(331,369	)	$	(654,240	)	$	(468,031	)
Other income (expenses)	$	(421,569	)	$	12,497		$	13,306
Loss from continuing operations	$	(752,938	)	$	(641,743	)	$	(454,725	)
Income from discontinued operations	$	-		$	-		$	-
Net loss	$	(752,938	)	$	(641,743	)	$	(454,725	)
From continuing operations	$	(0.01	)	$	(0.01	)	$	(0.01	)
From discontinued operations	$	(0.00	)	$	(0.00	)	$	(0.00	)
After discontinued operations	$	(0.01	)	$	(0.01	)	$	(0.01	)
Weighted average number of common shares outstanding (in millions)		62.9			61.7			57.4

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Year ended December 31, 2009 compared to the year ended December 31, 2008

RESULTS OF OPERATIONS

During the year ended December 31, 2009, we incurred a net loss of $752,938 compared to a net loss of $641,743 for the year ended December 31, 2008, an increase net loss of $111,195. Not including the non-cash change in fair value derivative liability of $421,980, the net loss for the period decreased $310,785 largely due to less activity during the year in professional fees, rent and office and sundry.

REVENUES

The Company did not earn any revenue for the year ended December 31, 2009, 2008 or 2007.  We do not anticipate earning revenues until such time as we have entered into commercial production of our oil and gas properties. We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of oil or gas resources on our properties, or if such resources are discovered, that we will enter into commercial production of our oil and gas properties.

CONTINUING OPERATIONS

The Company incurred a loss from continuing operations of $752,938 for the year ended December 31, 2009 compared to a loss from continuing operations in 2008 of $641,743, an increase of $111,195.  A large portion of the increase in the loss from continuing operations relates to the recognition of $234,127 in consulting fees in 2009 compared to $386,143 in 2008.  As well, office and sundry expense in 2009 was $2,325 compared to $125,805 in 2008.  Also, professional fees in 2009 were $17,430 compared to $37,741 in 2008 and interest and miscellaneous was $411 in 2009 compared to $12,497 in 2008.

A large portion of the balance of the 2009 net loss from continuing operations before other income and expenses is comprised of costs related to general and administrative activities.  Consulting expense decreased to $234,127 in 2009 from $386,143 in 2008 due to several factors including a decrease in salaries paid to our President, and the resignation of our Chief Financial Officer in September 2008, as well as the requirement for consulting work was reduced in light of  the world-wide economic downturn.  Excluding the effect of consulting expense, stock-based compensation was $94,164 in 2009 compared to $94,730 in 2008.  Office and sundry decreased in 2009 to $2,325 from $125,805 in 2008 due to several factors including a credit of $47,483 from a transaction during 2007 that was successfully challenged by Company and reversed, lower Annual General Meeting costs as the Company completed much of the material handling in-house, lower travel costs, and lower costs related to printing and other promotional material.  Rent decreased in 2009 to $67,993 from $96,153 in 2008 as a result of recording ten months of rent on office space in Calgary whose lease began on October 15, 2007 and ended October 31, 2009.  Professional fees have decreased to $17,430 in 2009 from $37,741 in 2008.  The reduction is due to an overall lower level of Company activity in 2009 compared to 2008 resulting in a decreased need in legal and accounting services.

DISCONTINUED OPERATIONS

There was no discontinued operations activity in 2009 or 2008.

INTEREST AND OTHER INCOME (EXPENSE)

Interest and miscellaneous income decreased to $411 in 2009 from $12,497 in 2008 due to a guaranteed investment certificate that earned interest in 2008 and matured in February 2009 as well lower average cash balances and lower interest rates in 2009 compared to 2008.

Included in other income (expense) is an expense of $421,980 relating to the change in fair value of derivative liability explained in Note 4 of the Financial Statements. The Company recorded a derivative liability in the amount of $259,000 upon adoption of FASB ASC 815 during the year. The Company determined the fair value of the derivative liability to be $680,980 as of December 31, 2009. As a result of the changes in fair value, the Company recorded a charge to the change in the fair value of derivative liability of $421,980 to the statement of operations for the year ended December 31, 2009. There is no impact on loss per share on adoption.

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Year ended December 31, 2008 compared to the year ended December 31, 2007

RESULTS OF OPERATIONS

During the year ended December 31, 2008, we incurred a net loss of $641,743 compared to a net loss of $454,725 for the year ended December 31, 2007, an increase net loss of $187,018.

REVENUES

The Company did not earn any revenue for the year ended December 31, 2008 or 2007.  We do not anticipate earning revenues until such time as we have entered into commercial production of our oil and gas properties. We are presently in the exploration stage of our business and we can provide no assurance that we will discover commercially exploitable levels of oil or gas resources on our properties, or if such resources are discovered, that we will enter into commercial production of our oil and gas properties.

CONTINUING OPERATIONS

The Company incurred a loss from continuing operations of $641,743 for the year ended December 31, 2008 compared to a loss from continuing operations in 2007 of $454,725, an increase of $187,018.  A substantial portion of the increase in the loss from continuing operations relates to the recognition of $94,730 in stock-based compensation in 2008 compared to a reversal of the expense of ($120,151) in 2007.  The reversal of stock-based compensation expense that occurred in 2007 was due to the Company granting stock options in 2006 when the Company’s share price was significantly higher than it was when the unvested stock options were revalued during 2007.    For 2008, the share price of the Company’s stock has not decreased as much since 2007 as it did between 2007 and 2006.  All stock options granted in 2008, 2007 and 2006 were to non-employees. Stock options granted in 2008, 2007 and 2006 will continue to be re-valued and amortized until all of the options vest.

A large portion of the balance of the 2008 net loss from continuing operations is comprised of costs related to general and administrative activities.  Consulting expense increased to $386,143 in 2008 from $168,372 in 2007.  A significant portion of the increase from 2007 relates to stock-based compensation of $94,730 in 2008 compared to a reversal of expense of ($120,151) in 2007.  Excluding the effect of stock-based compensation, consulting expense was $291,413 in 2008 compared to $288,523 in 2007.  Office and sundry decreased in 2008 to $125,805 from $188,371 in 2007 due to several factors including lower Annual General Meeting costs as the Company completed much of the material handling in-house, lower on-going costs related to the accounting software as implementation was completed in 2007, and lower costs related to printing and other promotional material.  Rent increased in 2008 to $96,153 from $31,128 in 2007 as a result of recording a full year of rent on office space in Calgary whose lease began on October 15, 2007.  Professional fees have decreased to $37,741 in 2008 from $75,286 in 2007.  The reduction is due to an overall lower level of Company activity in 2008 compared to 2007 resulting in a decreased need in legal and accounting services.

DISCONTINUED OPERATIONS

There was no discontinued operations activity in 2008 or 2007.

INTEREST AND OTHER INCOME (EXPENSE)

During 2006 the Company received shares in settlement of a loan and during 2007 the Company disposed of all the shares for gross proceeds of $77,607 resulting in a realized loss of $37,736 at December 31, 2007.  No such transaction took place in 2008.  Interest and miscellaneous income decreased to $12,497 in 2008 from $51,042 in 2007 due to lower average cash balances and lower interest rates in 2008 compared to 2007.

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B. Liquidity and Capital Resources

(in U.S. dollars)	As at December 31,
	2009			2008			2007
Cash and cash equivalents	$	79,447		$	121,776		$	27,963
Working capital (deficit)		(623,347	)		48,930			(313,116	)
Net cash provided by (used in)
Operating activities		(285,977	)		(602,263	)		(554,258	)
Investing activities		(180,251	)		(1,015,262	)		(3,657,462	)
Financing activities		413,750			1,760,000			501,760

As of December 31, 2009, we had $79,447 in cash, a decrease of $42,329 from December 31, 2008. The cash balance is due to the receipt of $413,750 from the exercise of warrants in 2009.  Substantially offsetting the cash receipts is cash used in operations of $285,977.  Management estimates that the Company will require approximately $500,000 to fund the Company’s planned operations for the next twelve months.  Therefore, current cash on hand is not sufficient to fund planned operations for 2010.  Our policy is to pay all operational expenses when due, provided that the vendor, in the normal course of business, has satisfied all necessary conditions for payment.

Net cash used in operating activities during the twelve months ended December 31, 2009 was $285,977 compared to $602,263 in 2008.  A significant reason for the decrease in cash used for operations was due to less activity during the year. Although net loss in 2009 ($752,938) compared to 2008 ($641,743) was higher, in 2009, the Company recorded a non-cash amount of $421,980 relating to a change in the fair value derivative on adoption of a new accounting standard. See Notes 3 and 4 of the financial statements.  Not including the $421, 980, the comparative loss decrease in part was due to a consulting expense decrease to $234,127 in 2009 from $386,143 in 2008 which arose from a decrease in salaries paid to our President, and the resignation of our Chief Financial Officer in September 2008, as well as the requirement for consulting work was reduced in light of the world-wide economic downturn.  Excluding the effect of consulting expense, stock-based compensation was $94,164 in 2009 compared to $94,730 in 2008.  Office and sundry decreased in 2009 to $2,325 from $125,805 in 2008 due to several factors including a credit of $47,483 from a transaction during 2007 that was successfully challenged by Company and reversed, lower Annual General Meeting costs as the Company completed much of the material handling in-house, and lower costs related to printing and other promotional material.  Rent decreased in 2009 to $67,993 from $96,153 in 2008 as a result of recording ten months of rent on office space in Calgary whose lease began on October 15, 2007 and ended October 31, 2009.  Professional fees have decreased to $17,430 in 2009 from $37,741 in 2008.  The reduction is due to an overall lower level of Company activity in 2009 compared to 2008 resulting in a decreased need in legal and accounting services.  The primary factor relating to the change was the reduction of accounts payable due to the adjustment made from a prior year invoice that was successfully challenged and reversed in 2009.  The secondary factor was the overstatement of audit fee accruals for the year.

Investing activities in 2009 and 2008 of $180,251 and $1,015,262 respectively related primarily to the Company’s exploration of its oil and gas property interests in northern Alberta.  Cash from financing in 2009 totaled $413,750 relating to proceeds from the exercise of share purchase warrants.  Cash from financing in 2008 totaled $1,760,000 relating to proceeds from a private placement of $1,700,000 and $60,000 from the exercise of share purchase warrants.

Net cash used in operating activities during the twelve months ended December 31, 2008 was $602,263 compared to $554,258 in 2007.  A significant reason for the increase in cash used for operations was due to a higher loss in 2008 ($641,743) compared to 2007 ($454,725).  The loss increased in part due to a non-cash item related to an increase in stock-based compensation of $94,730 in 2008 compared to a reversal of expense of ($120,151) in 2007.  An additional non-cash item in 2007 related to the settlement of the ACTC loan.  In 2007 all of the ACTC shares were sold resulting in a realized loss of $37,736 being recognized while in 2008 no such item occurred.  The primary factor relating to the change was the paying down of accounts payable in 2008.

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Investing activities in 2008 and 2007 of $1,015,262 and $3,657,462 respectively related primarily to the Company’s exploration of its oil and gas property interests in northern Alberta.  Partially offsetting the outflow from the exploration activities in 2007 was the receipt of $77,607 from the sale of the ACTC shares.  Cash from financing in 2008 totaled $1,760,000 relating to proceeds from a private placement of $1,700,000 and $60,000 from the exercise of share purchase warrants.  Cash from financing in 2007 related to $164,260 from the exercise of stock options and $337,500 from the exercise of share purchase warrants.

Our previous business was primarily financed with proceeds of equity.  We expect our oil and gas operations to similarly be financed by equity.

We had cash of $79,447 as of December 31, 2009. We anticipate that we will incur through the end of our next fiscal year:

·   $190,000 in connection with property lease payments and follow up analysis on the Company’s oil sands properties;

·   $310,000 for operating expenses, including working capital, consulting fees, general and administrative, professional, legal and accounting expenses.

We have no long-term debt.  In 2010 our most significant expense is expected to be for the exploration of our oil and gas properties.  During 2009 we received $413,750 in proceeds from the exercise of share purchase warrants. Even with this additional cash, we believe that our available cash will not be sufficient to fund our working capital requirements for the next twelve months.    If we are to continue to explore and develop our oil sands properties, we will require additional funding.  We cannot be certain that any required additional financing will be available on terms favorable to us. If additional funds are raised by the issuance of our equity securities, such as through the issuance and exercise of warrants, then existing stockholders will experience dilution of their ownership interest. We believe that debt financing will not be an alternative for funding.  The risky nature of this enterprise and lack of tangible assets places debt financing beyond the credit-worthiness required by most banks or typical investors of corporate debt until such time as the economic viability of our oil sands properties can be demonstrated. If adequate funds are not available or not available on acceptable terms, we may be unable to fund expansion, develop or enhance services or respond to competitive pressures.

Critical Accounting Estimates:

The preparation of the Company's financial statements requires management to make estimates and assumptions regarding future events. These estimates and assumptions affect the reported amounts of certain assets and liabilities, and disclosure of contingent liabilities.

The Company follows the full cost method of accounting for natural gas and oil operations.  Under the full cost method all costs incurred in the acquisition, exploration and development of natural gas and oil reserves are initially capitalized into cost centers on a country-by-country basis. The Company’s current cost centers are located in Canada. Such costs include land acquisition costs, geological and geophysical expenditures, carrying charges on non-producing properties, costs of drilling and overhead charges directly related to acquisition, exploration and development activities.

Costs capitalized, together with the costs of production equipment, are depleted and amortized on the unit-of-production method based on the estimated net proved reserves, as determined by independent petroleum engineers.  The percentage of total reserve volumes produced during the year is multiplied by the net capitalized investment plus future estimated development costs in those reserves.   Costs of acquiring and evaluating unproved properties are initially excluded from depletion calculations. These unevaluated properties are assessed periodically to ascertain whether an impairment has occurred. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion calculations.

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Under full cost accounting rules, capitalized costs, less accumulated amortization and related deferred income taxes, shall not exceed an amount (the ceiling) equal to the sum of:  (i) the after tax present value of estimated future net revenues computed by applying current prices of oil and gas reserves to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on currents costs) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; (ii) the cost of properties not being amortized; and (iii) the lower of cost or estimated fair value of unproven properties included in the costs being amortized.  If unamortized costs capitalized within a cost center, less related deferred income taxes, exceed the ceiling, the excess shall be charged to expense and separately disclosed during the period in which the excess occurs.  Amounts thus required to be written off shall not be reinstated for any subsequent increase in the cost center ceiling.

Estimates of undiscounted future cash flows that we use for conducting impairment tests are subject to significant judgment decisions based on assumptions of highly uncertain future factors such as, crude oil and natural gas prices, production quantities, estimates of recoverable reserves, and production and transportation costs. Given the significant assumptions required and the strong possibility that actual future factors will differ, we consider the impairment test to be a critical accounting procedure.

The Company has not recognized any revenue from its oil and gas exploration activities which commenced in the last quarter of 2005.  During the years ended December 31, 2009, 2008 and 2007 no property impairment adjustments were recorded.

In accordance with ASC 410, Asset Retirement and Environmental Obligations  the fair value of an asset retirement cost, and corresponding liability, should be recorded as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. The Company has recorded an asset retirement obligation at December 31, 2009 and 2008 (Note 8) to reflect its legal obligations related to future abandonment of its oil and gas interests using estimated expected cash flow associated with the obligation and discounting the amount using a credit-adjusted, risk-free interest rate. At least annually, the Company will reassess the obligation to determine whether a change in any estimated obligation is necessary. The Company will evaluate whether there are indicators that suggest the estimated cash flows underlying the obligation have materially changed. Should those indicators suggest the estimated obligation has materially changed the Company will accordingly update its assessment. The asset retirement obligation is measured at fair value on a non-recurring basis using level 3 inputs based on discounted cash flows involving estimates, assumptions, and judgments regarding the cost, timing of settlement, credit-adjusted risk-free rate and inflation rates.

Management has made significant assumptions and estimates determining the fair market value of stock-based compensation granted to employees and non-employees.  These estimates have an effect on the stock-based compensation expense recognized and the contributed surplus and share capital balances on the Company’s Balance Sheet.  The value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model.  For non-employees, such amount is revalued on a quarterly basis.  To date, all of our stock option grants have been to non-employees.  Increases in our share price will likely result in increased stock option compensation expense. The Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the option award and stock price volatility. The expected term of options granted for the purposes of the Black-Scholes calculation is the term of the award since all grants are to non-employees. Because our Company has only recently become an oil and gas exploration company, the expected volatility is based on comparable junior oil and gas companies who granted similar term options.  These estimates involve inherent uncertainties and the application of management judgment. An expected forfeiture rate of nil was used in the recognition of compensation expense for those options not yet vested at December 31, 2009.

These accounting policies are applied consistently for all years presented. Our operating results would be affected if other alternatives were used. Information about the impact on our operating results is included in the notes to our financial statements.

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Valuation of Derivative Instruments

US GAAP requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants and non-employee stock-options to determine whether they should be considered a derivative liability and subject to re-measurement at their fair value. Warrants with such provisions will no longer be recorded to equity. In estimating the appropriate fair value, the Company uses a Black-Scholes option pricing model.

Inflation

We operate in Canada only, where inflation for our operational costs is at low levels, i.e. in the 2%-5% range.

Impact of Foreign Currency Fluctuations

We hold our cash reserves in Canadian dollars. We incur the majority of our expenses and capital expenditures also in Canadian dollars. Therefore, an increase or decrease in the value of the Canadian dollar versus the U.S. dollar would have a minimal effect on us.

Government Policies

We are subject to regulations of the Government of Canada and the Government of Alberta. Such regulations may relate directly and indirectly to our operations including production, marketing and sale of hydrocarbons, royalties, taxation, environmental matters and other factors. There is no assurance that the laws relating to our operations will not change in a manner that may materially and adversely affect us, however, there has been no material impact on us from changes to such laws in the past three fiscal periods.

C. Research and development, patents, and licenses, etc.

See Item 4.B Business Overview and 5.A Operating Results.

D. Trends

No disclosure necessary.

E. Off-balance sheet arrangements

We do not have any off balance sheet arrangements as of December 31, 2009 and December 31, 2008 or of the date of this report.

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F.  Contractual obligations

The following table list contractual obligations at December 31, 2009.

Contractual Obligations	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than five years
Annual Oil Sands Lease Payments:
Drowned property lease	$	8,291	$	1,471	$	3,410	$	3,410	$	0
Peace River property leases		1,838,036		167,947		335,893		335,893		998,303
Capital (Finance) Lease Obligations		0		0		0		0		0
Operating Lease Obligations		0		0		0		0		0
Purchase Obligations		0		0		0		0		0
Other Long-Term Liabilities Reflected on the Company’s Balance Sheet Under the GAAP of the primary financial statements		0		0		0		0		0
Total	$	1,846,327	$	169,418	$	339,303	$	339,303	$	998,303

The Drowned Property is comprised of a single lease with the government of the province of Alberta, Canada requiring annual lease payments of $1,471.  The lease is a fifteen year lease and expires on October 4, 2015.

The Peace River Project is currently comprised of 42 leases with the government of the province of Alberta, Canada requiring annual lease payments of $167,947.  The leases are fifteen year leases that begin expiring on December 15, 2020.

At December 31, 2009, the Company had trade payables and accrued liabilities of $65,636.  All of these obligations are due in less than one year.

At December 31, 2009, the Company had a derivative liability of $680,980 that relates to option instruments with an exercise price in a different currency than the Company’s functional currency (see Note 4 in the financial statements).  It is unknown when this liability will be settled.

Recent Accounting Pronouncements:

ASC No. 815

On January 1, 2009, the Company adopted FASB ASC 815 (EITF 07-5, Determining Whether an Instrument (or embedded Feature) is indexed to an Entity’s Own Stock). As part of the adoption of FASB ASC 815, the Company determined that its option instruments have an exercise price that is not in the Company’s functional currency and are therefore the option instruments are not considered indexed to the Company’s stock.  Thus, the Company is now required to separately account for the option as a derivative instrument liability, carried at fair value and marked-to-market each period, with the changes in the fair value each period charged or credited to the statement of operations.

The transition provisions of ASC 815-40-15 require cumulative effect adjustments as of January 1, 2009 to reflect the amounts that would have been recognized if derivative fair value accounting had been applied from the original issuance date of an equity- equity-linked financial instrument through the implementation date of the revised guidance.

The Company recorded a derivative liability in the amount of $259,000 upon adoption of FASB ASC 815. The Company determined the fair value of the derivative liability to be $680,980 as of December 31, 2009. As a result of the changes in fair value, the Company recorded a charge to the change in the fair value of derivative liability of $421,980 to the statement of operations for the year ended December 31, 2009. There is no impact on loss per share on adoption.

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ASC No. 805-10-65

In December 2007, Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) ASC 805-10-65 (formerly SFAS No. 141(R), “Business Combinations – Revised”).  FASB establishes principles and requirements for how an acquirer in a business combination:  (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in an acquiree, (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase price, and (3) determines what information to disclose to enable users of the consolidated financial statements to evaluate the nature and financial effects of the business combination.  Among other changes, FASB ASC 805-10-65 will require us to immediately expense transaction costs that have historically been included in the purchase price allocation under existing guidance.  FASB ASC 805-10-65 will apply prospectively to any acquisitions completed on or after the beginning of an entity’s fiscal year that begins on or after December 15, 2008.  The Company adopted ASC 805-10-65 on January 1, 2009 and it did not have an  impact on the Company’s financial statements.

ASC No. 855

In May 2009, the FASB issued new guidance for subsequent events.  The new guidance, which is a part of ASC 855, Subsequent Events is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  Specifically, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet.  The new guidance is effective for fiscal years and interim periods ended after June 15, 2009 and is to be applied prospectively.  The Company’s adoption of the new guidance did not have a material effect on the Company’s financial statements.

ASU No. 2009-05

In August 2009, FASB issued ASU No. 2009-5 “Fair Value of Measurements and Disclosure (Topic 820) – Measuring Liabilities at Fair Value”.  The new guidance, which is now part of ASC 820, provides clarification that in certain circumstances in which a quoted price in an active market for the identical liability is not available, a company is required to measure fair value using one or more of the following valuation techniques:  the quoted price of the identical liability when traded as an asset, the quoted prices for similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of fair value measurements.  The new guidance clarifies that a company is not required to include an adjustment for restrictions that prevent the transfer of the liability and if an adjustment is applied to the quoted price used in a valuation technique, the result is a Level 2 or 3 fair value measurement.  The new guidance is effective for interim and annual periods beginning after August 27, 2009.  The adoption of this standard has been reflected in the Company’s financial statements.

ASU No. 2009-06

In September 2009, FASB issued ASU No. 2009-06, “Income Taxes (Topic 740) – Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities.  This update is to address the need for additional implementation guidance on accounting for uncertainty in income taxes.  The implementation guidance will apply to financial statements on nongovernmental entities that are presented in conformity with U.S. GAAP.  The effective date is for entities that are currently applying the standards for accounting for uncertain income tax positions, the guidance and disclosure amendments are effective for financial statements issued for interim and annual periods ending after September 15, 2009.  For those entities that have deferred the application of accounting for uncertainty in income taxes in accordance with paragraph 740-10-65-1(e), the guidance and disclosure amendments are effective upon adoption of those standards.  The adoption of this standard did not have a material effect on the Company’s financial statements.

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ASU No. 2009-9

In September 2009, FASB issued ASU No. 2009-09, “Accounting for Investments – Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees.  This update is an amendment to ASC 323-10-S99 and 505-50-S99.  The amendment to ASC 323-10-S99 provides guidance on the accounting by an investor for stock-based compensation based on the investor’s stock granted to employees of an equity method investee.  Investors that are SEC registrants should classify any income or expense resulting from application of this guidance in the same income statement caption as the equity in earnings (or losses) of the investee.  The amendment to ASC 505-50-S99 clarifies the accounting by the grantee or grantor in transactions involving equity instruments granted to other than employees if the accounting does not reflect the same commitment date or similar values.  The adoption of this standard did not have a material effect on the Company’s financial statements.

ASU No. 2010-01

In January 2010, the FASB issued ASU No. 2010-01 “Accounting for Distributions to Shareholders with Components of Stock and Cash” with Equity (Topic 505).  The objective of this update is to address diversity in practice related to the accounting for a distribution to shareholders that offers them the ability to elect to receive their entire distribution in cash or shares of equivalent value with a potential limitation on the total amount of cash that shareholders can elect to receive in aggregate.  Historically, some entities have accounted for the stock portion

of the distribution as a new share issuance that is reflected in earning per share (“EPS”) prospectively.  Other entities have accounted for the stock portion of the distribution as a stock dividend by retroactively restating shares outstanding and EPS for all periods presented.  The amendments in this update clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or shares with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance, rather than a stock dividend, thus eliminating the diversity in practice.  The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis.  The adoption of ASU 2010-01 did not have a material impact on the Company’s financial statements.

ASU No. 2010-06

In January 2010, the FASB issued ASU, on codification, Fair value Measurements and Disclosures (Topic 820-10) improving disclosures about fair value measurements.  This update provides amendments to Topic 820 that will provide more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Level 1, 2, and 3.  The standard adds new disclosure and clarifies existing disclosure requirements.  The new standard requires disclosures of the fair value of financial instruments for interim reporting periods of publicly traded companies in addition to the annual disclosure required at year-end.  The provisions of the new standard are effective for the interim periods ending after June 15, 2009.  The adoption of ASU 2010-06 has been reflected in Company’s financial statements.

APB 14-1 (ASC 470)

In May 2008, FASB issued FASB Staff Position ("FSP") APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1").  FSP APB 14-1 clarifies that convertible debt instruments that may be settled in cash upon either mandatory or optional conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, "Accounting for Convertible Debt and Debt issued with Stock Purchase Warrants."  Additionally, FSP APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods.  FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.  The adoption of APB 14-1 did not have a material impact on the Company’s financial statements.

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ASC No. 2010-03

In January 2010, FASB issued an Accounting Standard Update, ASC No. 2010-03, on Oil and Gas.  The objective of the amendments included in this update is to align the oil and gas reserve estimation and disclosure requirements of Extractive Activities—Oil and Gas (Topic 932) with the requirements in the Securities and Exchange Commission's final rule, Modernization of the Oil and Gas Reporting Requirements (the Final Rule). The Final Rule was issued on December 31, 2008.  The amendments to Topic 932 affect entities that engage in oil- and gas producing activities, including entities that extract saleable hydrocarbons, in the solid, liquid, or gaseous state, from oil sands, shale, coal-beds, or other nonrenewable natural resources that are intended to be upgraded into synthetic oil or gas, and activities undertaken with a view to such extraction. The amendments to Topic 932 are effective for annual reporting periods ending on or after December 31, 2009. An entity should apply the adoption of the amendments as a change in accounting principle inseparable from a change in estimate. The amendments to Topic 932 specify the required disclosures for the effect of adoption.  Early application is not permitted. An entity that became subject to the disclosure requirements of Topic 932 due to the change to the definition of significant oil- and gas-producing activities is permitted to apply the disclosure provisions of Topic 932 in annual periods beginning after December 31, 2009. The new SEC and FASB authoritative guidance became effective for the Company’s 2009 Form 20 F and has been prospectively adopted as of December 31, 2009. The new authoritative guidance did not have a material impact on the Company’s financial statements.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

The directors, officers and designers upon whose work the Company is dependent of Strata are as follows:

Name	Position	Position Held Since
Manny Dhinsa	President, Secretary, Treasurer, Chief Executive Officer, Director	August 19, 2005
Shezad Ahmad	Vice President – Engineering, Director	December 1, 2009
Pratt Barndollar	Director	October 12, 2005
Charlie Perity	Director	January 1, 2006
Pol Brisset	Director	August 23, 2005

The following summarizes certain biographical data concerning the directors and senior management of Strata:

MANNY DHINSA, age 38, is an accomplished petroleum specialist who has been working in the Alberta oil patch for more than a decade. His clients have included world-class oil and gas companies such as Encana, Nexen, Devon and CNRL. He has been involved in advanced exploration programs throughout Alberta, Saskatchewan and northeast British Columbia, including heavy oil exploration in the Lloydminster area (CNRL) and Encana's natural gas resource in the Greater Sierra play.  Mr. Dhinsa graduated from the University of Alberta with a Bachelor of Science degree in geology.

SHEZAD AHMAD, age 40, is an experienced professional in the petroleum industry, with extensive technical expertise and a broad business background. He has worked overseas in the natural gas and petrochemical industries, throughout the Middle East. Mr. Ahmad has also served as a senior engineer for Schlumberger in Alberta, Canada. Mr. Ahmad brings to the company an advanced understanding of the issues surrounding the maximization of economic recoveries from subsurface hydrocarbon reservoirs. He received his B.Sc. in Petroleum Engineering from the University of Alberta.

PRATT BARNDOLLAR, age 51, is an experienced geophysicist who has served as senior geoscience manager and interpreter for large and small oil companies during the span of his career.  He has broad US and international experience in prospect evaluation, operations and planning and currently holds the position of Manager, Exploration Planning at Talisman Energy Inc. Between 2006 and 2008 he was Vice President, Exploration of Napa Energy Ltd.

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Mr. Barndollar served as Chief Geophysicist and Exploration Portfolio Manager for Devon Energy between 2002 and 2005, Senior Geophysicist for Samson Canada between 2000 and 2002, Chief Geophysicist for Apache Canada between 1997 and 2000, and Senior Explorer and Project Leader for Phillips Petroleum between 1982 and 1997.  Mr. Barndollar earned two Bachelor of Science degrees from Kansas State University, in Geophysics and Civil Engineering.  His professional affiliations include the Association of Professional Engineers, Geologists, and Geophysicists of Alberta; Texas Board of Professional Geoscientists; American Association of Petroleum Geologists; Canadian Society of Petroleum Geologists; and the Canadian Society of Exploration Geophysicists.

CHARLIE PERITY, age 55, is an experienced oil sands geologist who has worked for large and small oil companies during the span of his career.  He is currently semi-retired and pursing other interests in resources investments.  From 2005 to 2006 he was employed as a Senior Geologist for Terracon Geotechnique Ltd, an oil sands consulting business based in Calgary.  Prior to that Mr. Perity served as Hydrogeologist for Lifewater Resources and AGC Woodward-Clyde, both of Australia, after running a technology company from 1995 through 2002.  Mr. Perity served as Oil Sands Project Geologist for BP Canada between 1984 and 1990.  Mr. Perity earned a Bachelor of Science degree in Earth Sciences (Geology) from the University of Waterloo, and a Master of Science degree in Hydrogeology from the University of Technology in Sydney, Australia.

POL BRISSET, age 34, is a Montreal-based finance and marketing professional. During his career he has worked for such multi-billion dollar corporations as Coors and Molson. His knowledge and experience in business operations and team development is of specific importance to Strata.  Mr. Brisset is fluent in English and French, and received his Business degree from the University of Quebec at Montreal.

Our directors have been elected to serve until the next annual meeting of stockholders and until their successor(s) have been elected and qualified, or until death, resignation or removal.

There are no family relationships between any directors or executive officers. There are no arrangements or understandings pursuant to which any director or member of senior management was selected as a director or member of senior management.

B. Compensation

The following table shows compensation paid to the Company’s executives for the last three years.

Name	Title	Year	Salary	Bonus	Stock Options Granted	Other Annual Compensation	Restricted Stock Awarded	LTIP Payouts ($)	All Other Compensation
Many Dhinsa(1)	Director, President, Secretary, and Treasurer	2009	$12,285	0	0	0	0	0	0
		2008	69,096	0	0	0	0	0	0
		2007	126,191	0	200,000	0	0	0	0
Scott Praill(2)	Chief Financial Officer	2008	69,096	0	0	0	0	0	0
		2007	52,579	0	0	0	0	0	0
Geoff Jordan(3)	Director	2009	0	0	0	0	0	0	0
		2008	33,973	0	600,000	0	0	0	0

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(1)   Manny Dhinsa was appointed to his position on August 19, 2005 and did not receive any salary or fees in 2005.  Commencing May 15, 2006, Mr. Dhinsa has received CDN$10,000 (USD $9,515) per month in consulting fees.  Commencing August 1, 2008, Mr. Dhinsa agreed to amend his compensation arrangement whereby he is compensated based on an hourly rate.  Mr. Dhinsa has been granted 800,000 stock options exercisable into common shares at $0.11 per option until expiry on August 24, 2015.  On March 19, 2007 Mr. Dhinsa was granted an additional 200,000 options exercisable into common shares at a price of $0.61 per option until March 19, 2017.

(2)   Scott Praill was appointed to his position on June 1, 2007 and received CDN$10,000 (USD $9,515) per month in consulting fees.  Mr. Praill has been granted 400,000 stock options exercisable into common shares at $0.11 per option until expiry on August 24, 2015.  On September 10, 2008 Mr. Praill resigned as the Company’s Chief Financial Officer, and his options were subsequently cancelled.

(3)   Geoff Jordan was appointed to the Board of Directors on June 16, 2008.  Mr. Jordan performs consulting services for the Company at the discretion of the Company’s CEO.  Mr. Jordan was granted 600,000 options exercisable into common shares at $0.82 per option until expiry on June 16, 2018.  Mr. Jordan resigned from the Board of Directors on April 3, 2009 and his options were subsequently cancelled.

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Stock Options Outstanding at December 31, 2009

Name	Number of Options Outstanding	Grant Date	Expiration Date	Exercise Price per Option	Market Value of Securities Underlying Options on Date of Grant(6)	Number of Securities Underlying Unexercised Options, Exercisable	Number of Securities Underlying Unexercised Options, Unexercisable	Grant Date Fair Value of Stock Options(7)
Manny Dhinsa(1)	680,000	8/24/05	8/24/15	$0.11	$0.11	680,000	-	75,400
	200,000	3/19/07	3/19/17	$0.61	$0.61	200,000	-	114,400
Shezad Ahmad(2)	-	-	-	-	-	-	-	-
Pol Brisset(3)	134,000	8/24/05	8/24/15	$0.11	$0.11	134,000	-	37,700
Pratt Barndollar(4)	100,000	7/24/08	7/24/18	$0.74	$0.74	30,000	70,000	67,700
Charlie Perity(5)	-	-	-	-	-	-	-	-

(1) Manny Dhinsa was granted 800,000 options on August 24, 2005 vesting in equal installments of 133,334 every six months commencing February 24, 2007 and ending August 24, 2008.  He exercised 120,000 stock options during 2006.     On March 19, 2007 Mr. Dhinsa was granted an additional 200,000 options that all vest on March 19, 2010.

(2) Shezad Ahmad has not been granted stock options.

(3) Pol Brisset was granted 400,000 options on August 24, 2005, vesting in equal installments of 66,666 every six months commencing February 24, 2007 and ending August 24, 2008.  He exercised 266,000 stock options during 2007.

(4) Pratt Barndollar was granted 100,000 options on July 24, 2008 that vest as to 30,000 on July 24, 2009, 30,000 on July 24, 2010, and 40,000 on July 24, 2011.

(5) Charlie Perity has not been granted stock options.

(6) The exercise price of the Company’s stock option grants is determined based on the closing share price of the Company’s common stock as quoted on the OTC:BB on the date of grant.

(7) The figures in this column represent the grant date fair value of stock option grants as determined using the Black-Scholes model.  For more information regarding the assumptions used to value stock option grants, please refer to Note 3 of the Company’s audited financial statements for the fiscal year ended December 31, 2009 filed with this Form 20-F.

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Change of Control Remuneration.

The Company had no plans or arrangements in respect of remuneration received or that may be received by Executive Officers of the Company in Fiscal 2009 to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control. However, effective August 1, 2008, the Company amended the compensation arrangement with its President of the Company and has agreed to pay for his services based on a needed basis and on an hourly rate.

C. Board Practices

6.C.1.  Terms of Office.

Refer to ITEM 6.A.1.

6.C.2.  Directors’ Service Contracts.

Mr. Dhinsa, Chairman of the Board, President, Secretary, Treasurer and CEO supervises the company's operations.  As of May 15, 2006 Mr. Dhinsa began dedicating 100% of his time working for the Company.  On August 1, 2008, recognizing that his time required had declined significantly due to declines in activity, Mr. Dhinsa agreed to amend his compensation to be paid on an hourly basis.  Mr. Brisset, Mr. Barndollar and Mr. Perity each have a service contract providing for payment of CDN $500 per month for their services as Directors of our Company.  The agreements are to remain in effect as long as the respective individual continues to serve as a Director.  The agreements do not provide for any termination benefits of any kind.  No director fees were recorded during the year due to the reduced activity of the Company and the limited involvement of the Directors throughout the year.

6.C.3.  Board of Director Committees.

The Audit Committee oversees the accounting and financial reporting processes of the Company and all audits and external reviews of the financial statements of the Company on behalf of the Board, and has general responsibility for oversight of internal controls, accounting and auditing activities of the Company. The Committee reviews, on a continuous basis, any reports prepared by the Company's external auditors relating to the Company's accounting policies and procedures, as well as internal control procedures and systems. The Committee is also responsible for examining all financial information, including annual financial statements, prepared for securities commissions and similar regulatory bodies prior to filing or delivery of the same. The Audit Committee also oversees the annual audit process, the Company's internal accounting controls, any complaints and concerns regarding accounting, internal controls or auditing matters and the resolution of issues identified by the Company's external auditors. The Audit Committee recommends to the Board the firm of independent auditors to be nominated for appointment by the shareholders and the compensation of the auditors. The Audit Committee meets on an as needed basis.

The Board has established an Option Committee and Compensation Committee, each consisting of the independent Directors of the Company which includes Messrs. Barndollar, Perity, and Brisset. The Option Committee recommends and grants options to individuals under the option plans adopted by the company. The Compensation Committee recommends and grants compensation to individuals who work for the company.

The audit committee consists of Pol Brisset, Charlie Perity and Pratt Barndollar.

6.D.  Employees

The Company had no full-time employees for the year ended December 31, 2009, 2008 and 2007.  It is anticipated that we will need to add managerial, technical and administrative staff in the future in order to realize our business objectives.  We currently outsource to outside engineers, geologists and consultants on an as-needed basis.

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E. Share Ownership

As of  June 25, 2010 Management is not aware of any persons or entity that is the beneficial owner of more than 5% of our outstanding common stock.  The table below indicates as of June 25, 2010  the share ownership of each of our officers and directors and all of our officers and directors as a group. Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using "beneficial ownership" concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest.

The percentages below are calculated based on 66,864,423 shares of common stock issued and outstanding as of June 25, 2010, plus in the case of a person who has the right to acquire additional shares within 60 days, any new shares which would be issued to effect such acquisition.

Officers, Directors,
And 5% Shareholders	Number of Shares		Beneficial Ownership (%)
Manny Dhinsa	891,000	(1)	1.33%
Shezad Ahmad	-		-
Pol Brisset	134,000	(2)	*
Charlie Perity	10,000		*
Pratt Barndollar	60,000	(3)	*
All Directors and Executive Officers as a Group (5 persons)	1,110,000		1.66%

* Represents less than 1%.

(1) Includes stock options to purchase up to 880,000 shares of our common stock, exercisable within sixty days.

(2) Includes stock options to acquire up to 134,000 shares of our common stock, exercisable within sixty days.

(3) Includes stock options to acquire up to 60,000 shares of our common stock, exercisable within sixty days.

The persons or entities named in this table, based upon the information they have provided to us, have sole voting and investment power with respect to all shares of common stock beneficially owned by them.

Stock Option Plans:

The Company has three option plans pursuant to which employees, directors and consultants and other agents of the Company could receive shares. The Company has a 2006 Stock Option Plan (“the 2006 Plan”), a 2002 Stock Option Plan (“the 2002 Plan”) and a 2000 Stock Option Plan (“the 2000 Plan”).

The principal purposes of the Company’s stock option programs are to (a) promote a proprietary interest in the Company among the officers, directors, employees and consultants of the Company, (b) retain and attract the qualified officers, directors, employees and consultants the Company requires, (c) provide a long-term incentive element in overall compensation, and (d) promote the long-term profitability of the Company.

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The Company grants stock options to non-employees for services that include researching Crown land availability and Crown lease acquisitions, geological consulting and geophysicist services including interpretation of seismic data.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

7.A.1.a.  Holdings By Major Shareholders.

See Item 6.E.  As of June 25, 2010 management is not aware of any persons or entity that is the beneficial owner of more than 5% of our outstanding common stock.

7.A.1.b.  Significant Changes in Major Shareholders’ Holdings.

There were no major shareholders during 2009 or 2008.

7.A.1.c.  Different Voting Rights.

The Company’s major shareholders do not have different voting rights.

7.A.2.  Canadian Share Ownership.

On June 25, 2010, the Company had one hundred thirty-four (134) registered shareholders representing 24,201,399 shares.  Of these, twenty-two (23) registered shareholders representing 19,905,491 have addresses in Canada.

7.A.4.  Change of Control of Company Arrangements.

There are no arrangements, known to the Company, the operation of which may at a subsequent date result in a change in control of the Company.

B. Related Party Transactions

The Company amended the compensation arrangement with its President and has agreed to pay for his services based on a needed basis and on a hourly rate.  The Chief Financial Officer resigned in September 2008, and no longer receives compensation from the Company.  Total compensation expense of $12,775 (2008 - $172,165, 2007 - $178,770) has been recognized as consulting fees for the year ended December 31, 2009.

The Company pays its independent Directors $500 per month for serving on the Company’s Board of Directors.  All of the Directors currently receive their payments in $CDN.  As of January 2009, the Directors’ fees were temporarily suspended in order to conserve working capital.  Directors’ fees of $Nil (2008 - $20,719, 2007 - $22,395) have been recorded as consulting fees at December 31, 2009.

Mr. Geoff Jordan joined the Board of Directors on June 16, 2008.  Mr. Jordan is an experienced geologist who performs consulting services for the Company.  During 2008 Mr. Jordan was paid $33,973 for services rendered to the Company.  Mr. Jordan resigned from the Board of Directors on April 3, 2009.

Shareholder Loans

There are no loans to shareholders outstanding at December 31, 2009 or 2008.

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Amounts Owing to Senior Management/Directors

At December 31, 2009 , $2,807 (2008 -$nil)  were owing to senior management, directors and company’s controlled by directors.  Other than as noted above, there have been no transactions since inception, or proposed transactions, which have materially affected or will materially affect the Company in which any director, executive officer, or beneficial holder of more than 5% of the outstanding common shares, or any of their respective relatives, spouses, associates or affiliates has had or will have any direct or material indirect interest.  Management believes the transactions referenced above were on terms at least as favorable to the Company as the Company could have obtained from unaffiliated parties.

C. Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

A. Financial Statements and Other Financial Information

The Company's financial statements are stated in United States Dollars and are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

The financial statements as required under ITEM #18 are attached hereto and found immediately following the text of this Annual Report.  The audit report of BDO Canada LLP are included herein immediately preceding the financial statements.

Audited Financial Statements:

Fiscal years ended December 31, 2009, 2008 and 2007.

8.A.7.  Legal/Arbitration Proceedings

The Directors and the management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.

The Directors and the management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.

8.A.8.  Policy on dividend distributions

We have never declared or paid any cash dividends on our common stock nor do we anticipate paying any in the foreseeable future. Furthermore, we expect to retain any future earnings to finance our operations and expansion. The payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our earnings levels, capital requirements, any restrictive loan covenants and other factors the Board considers relevant.

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B.  Significant Changes

At the Annual and Special Meeting of the Company’s shareholders held on July 13, 2007 a majority of the Company’s shareholders voted in favor of splitting the Company’s stock.   The Company’s Board of Directors determined that it was in the best interests of our shareholders to split the issued and outstanding share capital of the Company on a two (2) to one (1) basis (the “Share Split”).  The definitive Share Split ratio was determined by the management based on a review of market liquidity and trading volumes at the time the split is effected.  The record date of the stock split was October 8, 2007 and the payment date was October 9, 2007.

All of the 29,320,544 shares issued on the record date of October 9, 2007 were split on a two for one basis.  The Share Split was completed via a stock dividend that did not require any further action to be taken by the shareholders on the record date of October 8, 2007.

Item 9. The Offer and Listing

A. Offer and Listing Details

The following tables set forth the price history of the Company’s stock.  All share prices have beenadjusted to reflect the 2:1 forward split of the Company’s stock completed in October 2007.

1.   Annual high and low market prices for the last five full financial years:

Year	Market Price
	High Price		Low Price
2009	$	0.76	$	0.12
2008	$	1.54	$	0.10
2007	$	1.74	$	0.25
2006	$	3.98	$	0.44
2005	$	0.74	$	0.07

2.           High and low market prices for each full financial quarter during the two most recent full financial years:

Financial Quarter		Market Price
Year	Quarter	High Price		Low Price
2009	Fourth Quarter of 2009	$	0.53	$	0.36
	Third Quarter of 2009	$	0.76	$	0.43
	Second Quarter of 2009	$	0.55	$	0.14
	First Quarter of 2009	$	0.21	$	0.12
2008	Fourth Quarter of 2008	$	0.38	$	0.10
	Third Quarter of 2008	$	0.84	$	0.36
	Second Quarter of 2008	$	0.95	$	0.74
	First Quarter of 2008	$	1.54	$	0.85

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2.   High and low market prices for each of the six most recent months:

Month	Market Price
	High Price.		Low Price
May 2010	$	0.38	$	0.26
April 2010	$	0.42	$	0.36
March 2010	$	0.44	$	0.39
February 2010	$	0.50	$	0.40
January 2010	$	0.51	$	0.42
December 2009	$	0.52	$	0.37

B. Plan of distribution.

Not applicable.

C. Markets.

In July 2000 our common stock began trading on the Over the Counter Bulletin Board sponsored by the National Association of Securities Dealers, Inc. under the symbol "SBSF.OB". Subsequent to our continuance to Canada, our symbol was changed to “SBASF.OB”.  On June 29, 2005 the shareholders approved the sale of the Company’s software assets as well as approved the Company’s change of business to oil and gas exploration.  Subsequent to the meeting, the Company’s symbol was changed to “SOIGF.OB”.  The Over the Counter Bulletin Board is maintained by the NASDAQ Stock Market, but does not have any of the quantitative or qualitative standards such as those required for companies listed on the NASDAQ Small Cap Market or National Market System.

D. Selling shareholders.

Not applicable.

E. Dilution.

Not applicable.

F. Expenses of the issue.

Not applicable.

Item 10. Additional Information

A. Share Capital.

Not applicable.

B. Memorandum and Articles of Incorporation

This section summarizes certain material provisions of the Company’s charter and bylaws.

The Company is authorized to issue an unlimited number of shares of common stock (the “Common Shares”) as well as an unlimited number of shares of preferred stock (the “Preferred Shares”).

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Subject to the rights of holders of Preferred Shares in the future, if any, holders of the Common Shares are entitled to share equally on a per share basis in such dividends as may be declared by the Board of Directors out of funds legally available therefore. There are presently no plans to pay dividends with respect to the Common Shares. Upon the Company’s liquidation, dissolution or winding up, after payment of creditors and the holders of any of the Preferred Shares, if any, the Company’s assets will be divided pro rata on a per share basis among the holders of the Common Shares. The Common Shares are not subject to any liability for further assessments. There are no conversions or redemption privileges nor any sinking fund provisions with respect to the Common Shares and the Common Shares are not subject to call. The holders of Common Shares do not have any pre-emptive or other subscription rights.  Holders of the Common Shares are entitled to cast one vote for each share held at all shareholders’ meetings for all purposes, including the election of directors. The Common Shares do not have cumulative voting rights.

None of the Preferred Shares are currently outstanding.  The Board of Directors has the authority, without further action by the holders of the outstanding Common Shares, to issue preferred shares from time to time in one or more series, to fix the number of shares constituting any series, and to fix the terms of any such series, including dividend rights, dividend rates, conversion or exchange rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price and the liquidation preference or such series.

The Company’s Bylaws provide that Board of Directors may, from time to time, with or without the  authority or the  authorization  of the shareholders, in such amounts and on such terms as it deems expedient, cause the Company to borrow money.  The board may from time to time delegate to a committee,  to a director,  or to an officer of the Company all or any of the powers  conferred on the board by law or the by-laws to such extent and in such manner as the board from time to time determines.

Annual and special meetings of the shareholders may be called by the Board of Directors.   Notice of a shareholder meeting shall be given not less than 21 days and not more than 60 days prior to the date of such meeting to each director, the auditor of the Company, and each shareholder of record entitled to vote at the meeting.  A quorum for any shareholder meeting shall be persons present not being less than two in number and holding or representing by proxy not less than 5% of the total number of issued shares entitled to vote at the meeting.

C.  Material Contracts

We have not entered into any material contracts, other than contracts entered into in the ordinary course of business, for the two years immediately preceding publication of this document.  Significant property contracts are as described in Section 4.D.

D. Exchange Controls

There are no government laws, decrees or regulations in Canada which restrict the export or import of capital or, subject to the following sentence, which affect the remittance of dividends or other payments to nonresident holders of Strata’s common shares. However, any such remittance to a resident of the United States is generally subject to non-resident tax pursuant to Article X of the 1980 Canada-United States Income Tax Convention. See “Item 10.E Taxation” for additional discussion on tax matters.

There are currently no limitations of general application imposed by Canadian federal or provincial laws on the rights of non-residents of Canada to hold or vote Strata’s common shares. There are also no such limitations imposed by the articles of incorporation with respect to Strata’s common shares. There are, however, certain requirements on the acquisition of control of Strata’s securities by non-residents of Canada. The Investment Canada Act requires notification to and, in certain cases, advance review and approval by, the Government of Canada, of the acquisition by a “non-Canadian” of “control” of a “Canadian business”, all as defined in the Investment Canada Act. Generally speaking, in order for an acquisition to be subject to advance review and approval, the asset value of the Canadian business being acquired must meet or exceed certain monetary thresholds.

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E. Taxation

The following discussion is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of Strata and no opinion or representation with respect to the Canadian or United States federal, state, provincial, local or other income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares of Strata should consult their own tax advisors about the federal, state, provincial, local and foreign tax consequences of purchasing, owning and disposing of common shares of Strata.

CANADIAN FEDERAL INCOME TAX CONSEQUENCES

This summary is based upon the current provisions of the Income Tax Act (Canada), the regulations there under, the current publicly announced administrative and assessing policies of the Canada Revenue Agency, and all specific proposals (the “Tax Proposals”) to amend the Income Tax Act and regulations announced by the Minister of Finance (Canada) prior to the date hereof. This discussion is not exhaustive of all possible Canadian federal income tax consequences and, except for the Tax Proposals, does not take into account or anticipate any changes in law, whether by legislative, governmental or judicial action, nor does it take into account provincial or foreign tax considerations which may differ significantly from those discussed herein.

The summary applies to beneficial owners of common shares who, for the purposes of the Income Tax Act, are residents of the United States and are not resident in Canada, and who hold common shares of Strata as capital property.

Dividends

The Income Tax Act provides that dividends and other distributions deemed to be dividends paid or deemed to be paid by a Canadian resident corporation (such as Strata) to a non-resident of Canada shall be subject to a non-resident withholding tax equal to 25% of the gross amount of the dividend or deemed dividend.

Provisions in the Income Tax Act relating to dividend and deemed dividend payments to and capital gains realized by non-residents of Canada who are residents of the United States are subject to the 1980 Canada-United States Income Tax Convention.

Article X of the 1980 Canada-United States Income Tax Convention provides that the rate of Canadian non-resident withholding tax on dividends or deemed dividends paid to a United States corporation that beneficially owns at least 10% of the voting shares of the corporation paying the dividend shall not exceed 5% of the dividend or deemed dividend, and in any other case, the rate of non-resident withholding tax shall not exceed 15% of the dividend or deemed dividend.

Disposition of Shares

The Income Tax Act provides that a non-resident person is subject to tax in Canada on the disposition of “taxable Canadian property.” Common shares of Strata are considered to be “taxable Canadian property” as defined in the Income Tax Act. Therefore, under the Income Tax Act, a non-resident would be subject to tax in Canada on the disposition of common shares of Strata. Article XIII of the 1980 Canada-United States Income Tax Convention provides that gains realized by a United States resident on the disposition of shares of a Canadian corporation may not generally be taxed in Canada unless the value of the Canadian corporation is derived principally from real property situated in Canada.

Generally, certain filing and reporting obligations exist where a non-resident of Canada disposes of taxable Canadian property. In particular, the non-resident must make an application to the Canada Revenue Agency in advance of the disposition for the purpose of obtaining a certificate issued by the Canada Revenue Agency pursuant to section 116 of the Income Tax Act. If the non-resident fails to secure such certificate from the Canada Revenue Agency in advance of the disposition, the purchaser is required to withhold and remit to the Canada Revenue Agency 25% of the amount otherwise payable to the non-resident.

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed Treasury Regulations, published Internal Revenue Service rulings, published administrative positions of the Internal Revenue Service and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation that, if enacted, could be applied, possibly on a retroactive basis, at any time. In addition, this discussion does not cover any state, local or foreign tax consequences. The following is a discussion of United States federal income tax consequences, under current law, generally applicable to a U.S. Holder (as defined below) of common shares of Strata who holds such shares as capital assets. This discussion does not address all potentially relevant federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of federal income tax law, such as those described below that are excluded from the definition of a U.S. Holder.

U.S. Holder

As used herein, a “U.S. Holder” includes a holder of common shares of Strata who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, any United States entity which is taxable as a corporation for United States tax purposes and any other person or entity whose ownership of common shares of Strata is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, nonresident alien individuals or foreign corporations whose ownership of common shares is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their shares through the exercise of employee stock options or otherwise as compensation.

Dividends

Except as otherwise discussed below under “Passive Foreign Investment Company Considerations,” U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of Strata are required to include in gross income for United States federal income tax purposes the gross amount of such distributions to the extent that Strata has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s United States federal tax liability or, alternatively, may be deducted in computing the U.S. Holder’s federal taxable income (but in the case of individuals, only if they itemize deductions). See “Foreign Tax Credit.” To the extent that distributions exceed current or accumulated earnings and profits of Strata, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares (which adjusted basis must therefore be reduced) and thereafter as a gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder that is an individual, estate or trust. Moreover, “qualified dividends” received by U.S. Holders who are individuals, during tax years beginning before January 1, 2009, from any “qualified foreign corporation” are subject to a preferential tax rate, provided such individual U.S. Holder meets a certain holding period requirement. A “qualified foreign corporation” is generally any corporation formed in a foreign jurisdiction which has a comprehensive income tax treaty with the United States or, if not, the dividend is paid with respect to stock that is readily tradable on an established United States market. However, a “qualified foreign corporation” excludes a foreign corporation that is a foreign personal holding company, a foreign investment company, or a passive foreign investment company for the year the dividend is paid or the previous year. Strata believes that it qualifies as a “qualified foreign corporation”. There are currently no preferential tax rates for a U.S. Holder that is a corporation.

53

In general, dividends paid on common shares of Strata will not be eligible for the same dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from Strata (unless Strata is a “foreign personal holding company” as defined in Section 552 of the Code, or a “passive foreign investment company” as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of Strata. The availability of this deduction is subject to several complex limitations that are beyond the scope of this discussion.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions) Canadian or other foreign income tax with respect to the ownership of common shares of Strata may be entitled, at the election of the U.S. Holder, to either a tax credit or a deduction for such foreign tax paid or withheld. This election is made on a year-by-year basis and generally applies to all foreign income taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations that apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income” and certain other classifications of income. In addition, U.S. Holders that are corporations and that own 10% or more of the voting stock of Strata may be entitled to an “indirect” foreign tax credit under Section 902 of the Code with respect to the payment of dividends by Strata under certain circumstances and subject to complex rules and limitations. The availability of the foreign tax credit and the application of the limitations on the foreign tax credit are fact specific and holders and prospective holders of common shares should consult their own tax advisors regarding their individual circumstances.

Disposition of Shares

Except as otherwise discussed below under “Passive Foreign Investment Company Considerations,” a gain or loss realized on a sale of common shares will generally be a capital gain or loss, and will be long-term if the shareholder has a holding period of more than one year. The amount of gain or loss recognized by a selling U.S. Holder will be measured by the difference between (i) the amount realized on the sale and (ii) his or its tax basis in the common shares. Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital losses are subject to significant limitations. Individual U.S. Holders may carryover unused capital losses to offset capital gains realized in subsequent years. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), any unused capital losses may only be carried back three and forward five years from the loss year to offset capital gains until such net capital losses are exhausted.

Foreign Personal Holding Company Considerations

Special rules apply to a U.S. Holder of a “foreign personal holding company” or “FPHC” as defined in Section 552 of the Code. Strata will not be classified as a FPHC for U.S. federal income tax purposes unless (i) five or fewer individuals who are U.S. citizens or residents own or are deemed to own more than 50% of the total voting power of all classes of stock entitled to vote or the total value of Strata stock; and (ii) at least 60% (or 50% in certain cases) of Strata’s gross income consists of “foreign personal holding company income,” which generally includes passive income such as dividends, interest, gains from the sale or exchange of stock or securities, certain rents, and royalties. Strata believes that it is not a FPHC; however, no assurance can be provided that Strata will not be classified as a FPHC in the future.

54

Passive Foreign Investment Company Considerations

If Strata is a “passive foreign investment company” or “PFIC” as defined in Section 1297 of the Code, U.S. Holders will be subject to U.S. federal income taxation under one of two alternative tax regimes at the election of each such U.S. Holder. Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and either (i) 75% or more of its gross income for the taxable year is “passive income”, which generally includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if Strata elects, adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more. The rules applicable to a FPHC take priority over the rules applicable to a PFIC, so that amounts includable in gross income under the FPHC rules will not be taxable again under the PFIC rules. Strata does not believe that it will be a PFIC for the current fiscal year or for future years.  Whether Strata is a PFIC in any year and the tax consequences relating to PFIC status will depend on the composition of Strata’s income and assets, including cash. U.S. Holders should be aware, however, that if Strata becomes a PFIC, it may not be able or willing to satisfy record-keeping requirements that would enable U.S. Holders to make an election to treat Strata as a “qualified electing fund” for purposes of one of the two alternative tax regimes applicable to a PFIC.  U.S. Holders or potential shareholders should consult their own tax advisor concerning the impact of these rules on their investment in Strata.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

Strata is subject to the informational requirements of the United States Securities Exchange Act of 1934, as amended, such as to file reports and other information with the SEC. Shareholders may read and copy any of Strata’s reports and other information at, and obtain copies upon payment of prescribed fees from, the Public Reference Room maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Strata is not required to file reports and other information with any securities commissions in Canada.

As a foreign private issuer, Strata is exempt from the rules under the United States Securities Exchange Act of 1934, as amended, prescribing the furnishing and content of proxy statements to shareholders.

Strata will provide without charge to each person, including any beneficial owner, on the written or oral request of such person, a copy of any or all documents referred to above which have been or may be incorporated by reference in this annual report (not including exhibits to such incorporated information that are not specifically incorporated by reference into such information). Requests for such copies should be directed to Strata at the following address: Strata Oil and Gas Inc. Suite 408 – 918 16th Ave. SW, Calgary, Alberta, Canada, T2M 0K3 Attention: President, telephone number: 403-237-5443.

I. Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the potential risk of loss in the future earnings of Strata due to adverse changes in financial markets. Strata is exposed to market risk from changes in its common share price, foreign exchange rates and interest rates. Inflation has not had a significant impact on Strata’s results of operations.

55

Foreign Currency Sensitivity

While our financial statements are reported in US dollars and are intended to comply with U.S. GAAP requirements, a significant portion of our business operations may be conducted in Canadian dollars.  Since June 1, 1970, the government of Canada has permitted a floating exchange rate to determine the value of the Canadian dollar as compared to the United States dollar.  On June 25, 2010, the exchange rate in effect for Canadian dollars exchanged for United States dollars, expressed in terms of Canadian dollars was $1.0359.  This exchange rate is based on the noon buying rates in New York City for cable transfers in Canadian dollars, as certified for customs purposes by the Federal Reserve Bank of New York.

Interest Rate Sensitivity

The Company currently has no significant long-term or short-term debt requiring interest payments. Thus, the Company has not entered into any agreement or purchased any instrument to hedge against possible interest rate risks at this time.

The Company's interest earning investments are primarily short-term, or can be held to maturity, and thus, any reductions in carrying values due to future interest rate declines are believed to be immaterial. However, as the Company has a significant cash or near-cash position, which is invested in such instruments, reductions in interest rates will reduce the interest income from these investments.

Item 12. Description of Securities Other than Equity Securities

Not applicable.

56

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s management carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of December 31, 2009, being the date of the Company’s most recently completed fiscal year end. This evaluation was carried out under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, Mr. Manny Dhinsa.  Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are not effective due to the material weakness noted in the Internal Controls over Financial Reporting below.

Internal Controls over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision of the Company’s Principal Executive Officer, the Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”). The Company’s controls include policies and procedures that:

¨   pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

¨   provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP; and

¨   provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the annual financial statements or interim financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the design and operation of the Company’s internal control over financial reporting as of December 31, 2009, based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2009 due to the following material weakness:

·   Our company’s administration is composed of a small number of administrative individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties.  Management will reassess this matter in the following year to determine whether improvement in segregation of duty is feasible.

Limitations of Controls and Procedures

The Company’s management, including the Principal Executive Officer and Principal Financial Officer, believe that any disclosure controls and procedures or internal controls over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

Attestation Report of Registered Public Accounting Firm

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

Changes in Internal Controls over Financial Reporting

During the most recently completed fiscal year ended December 31, 2009, the Company reduced its staff and as a result, a limitation in the segregation of duties occurred.  This weakness has been reported by the Company.

Item 16A. Audit Committee Financial Expert

The Company’s Audit Committee consists of three directors, all of whom are financially literate and knowledgeable about the Company’s affairs.  Mr. Pol Brisset is the audit committee’s financial expert member as an experienced business manager.

Item 16B. Code of Ethics

The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. For purposes of this Item, the term code of ethics means written standards that are reasonably designed to deter wrongdoing and to promote:

-   honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

-   full, fair, accurate, timely, and understandable disclosure in reports and documents that the issuer files with, or submits to, the Commission and in other public communications made by the issuer;

-   compliance with applicable governmental laws, rules and regulations;

-   the prompt internal reporting of violations of the code to the board of directors or another appropriate person or persons; and

-   accountability for adherence to the code.

57

The Company hereby undertakes to provide to any person without charge, upon request, a copy of such code of ethics. Such request may be made in writing to the board of directors at the address of the issuer.

Item 16C. Principal Accountant and Fees

BDO Canada LLP has served as the Company’s Principal Accountant since April 30, 2003. Their pre-approved fees to the Company (including an estimate of year end audit fees) are set forth below:

	Fiscal year ending December 31, 2009 (1)		Fiscal year ending December 31, 2008 (1)
Audit Fees	$	39,970	$	42,710
Audit Related Fees		-		14,620
Tax Fees		-		-
All Other Fees		-		-
	$	39,970	$	57,330

(1)   As of December 31, 2009, the Company’s Audit Committee did not have a formal documented pre-approval policy for the fees of the principal accountant.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Neither the Company nor any “affiliated purchasers” as defined in Section 240.10b-18(a)(3) of the Exchange Act purchased any shares of the Company.

Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

We are subject to a variety of corporate governance guidelines and requirements enacted by the SEC under its rules and those mandated by the U.S. Sarbanes Oxley Act of 2002. Today, we are in compliance with the corporate governance legal requirements in the United States. We are listed on the NASDAQ and, although we are not required to comply with all of the Exchange’s corporate governance requirements to which we would be subject if we were a U.S. corporation, we feel our governance practices comply with the NASDAQ’s requirements as if we were a U.S. domestic issuer.

58

PART III

Item 17. Financial Statements

The Company has elected to provide financial statements pursuant to ITEM 18.

Item 18. Financial Statements

The Company's financial statements are stated in United States Dollars and are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).

The financial statements as required under ITEM 18 are attached hereto and found immediately following the text of this Annual Report.  The audit report of BDO Canada LLP, is included herein immediately preceding the audited financial statements.

59

Strata Oil & Gas Inc.

(An Exploration Stage Company)

FINANCIAL STATEMENTS

December 31, 2009 and 2008

(Stated in US Dollars)

60

Strata Oil & Gas Inc.

(An Exploration Stage Company)

Financial Statements

December 31, 2009

Contents

Report of Independent Registered Public Accounting Firm

Comments by Auditors for US Readers on Canada – US Reporting Differences

Financial Statements

Balance Sheets

Statements of Operations and Comprehensive Income (Loss)

Statements of Changes in Stockholders’ Equity

Statements of Cash Flows

Notes to the Financial Statements

61

                                                          BDO Canada LLP                                                       600 Cathedral Place

925 West Georgia Street

Vancouver, BC, Canada V6C 3L2

Telephone:  (604) 688-5421

Telefax:  (604) 688-5132

E-mail:  vancouver@bdo.ca

www.bdo.ca

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Directors and Stockholders,

Strata Oil & Gas Inc.

(An Exploration Stage Company)

We have audited the accompanying balance sheets of Strata Oil & Gas Inc. (the “Company”) (An Exploration Stage Company) as at December 31, 2009 and 2008 and the related statements of operations and comprehensive income (loss), cash flows and changes in stockholder’s equity for the years ended December 31, 2009, 2008 and 2007 and for the period from July 1, 2005 (the date of entering into exploration stage) to December 31, 2009.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2009 and 2008 and the results of its operations and its cash flows for each of the years ended December 31, 2009, 2008 and 2007 and for the period from July 1, 2005 (the date of entering into exploration stage) to December 31, 2009 in accordance with accounting principles generally accepted in the United States.

/s/ BDO Canada LLP

Chartered Accountants

Vancouver, Canada

June 23, 2010

62

Comments by Auditors for U.S. Readers

On Canada-U.S. Reporting Differences

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 2 to the financial statements. Our report to the directors and stockholders dated June 23, 2010 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors’ report when these are adequately disclosed in the financial statements.  PCAOB reporting standards requires the addition of an explanatory paragraph when changes in an accounting policy, such as those described in Notes 3 and 4, have a material effect on the consolidated financial statements.  Although we conducted our audits in accordance with both Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), our report to the directors and stockholders on the Financial Statements dated June 23, 2010 is expressed in accordance with Canadian reporting standards which do not permit a reference to such conditions and events in the auditors’ report when these are adequately disclosed in the financial statements.

/s/ BDO Canada LLP

Chartered Accountants

Vancouver, Canada

June 23, 2010

63

STRATA OIL & GAS INC.

 (An Exploration Stage Company)

BALANCE SHEETS

(Expressed in US Dollars)

	DECEMBER 31
	2009			2008
Assets
Current
Cash	$	79,447		$	121,776
Receivables		43,106			46,788
Prepaid expenses		716			716
Total current assets		123,269			169,280
Deposits		94,533			94,533
Office equipment, net (Note 3)		4,467			6,692
Oil and gas property interests (Note 6)		8,398,439			7,039,208
Total Assets	$	8,620,708		$	7,309,713
Liabilities and Stockholders’ Equity
Liabilities
Current
Accounts payable (Note 8)	$	32,194		$	71,354
Accrued liabilities		33,442			48,996
Derivative liability (Note 4)		680,980			-
Total current liabilities		746,616			120,350
Asset retirement obligations (Note 9)		104,653			88,606
Total Liabilities		851,269			208,956
Stockholders’ equity
Preferred stock, no par value, unlimited shares    authorized and unissued		-			-
Common stock, no par value, unlimited shares authorized; 65,131,088 shares issued and outstanding at December 31, 2009 (2008 - 61,881,088)		9,886,028			9,472,278
Additional paid-in capital		10,804,285			10,969,121
Accumulated deficit		(2,748,790	)		(2,748,790	)
Deficit accumulated during the exploration stage		(10,463,329	)		(9,710,391	)
Accumulated other comprehensive income (loss)
Foreign currency translation adjustments		291,245			(881,461	)
Total stockholders’ equity		7,769,439			7,100,757
Total Liabilities and Stockholders’ Equity	$	8,620,708		$	7,309,713

The accompanying notes are an integral part of these financial statements

64

STRATA OIL & GAS INC.

 (An Exploration Stage Company)

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Expressed in US Dollars)

	FOR THE YEARS ENDED DECEMBER 31
										From July 1, 2005 (the date of entering into exploration stage) to
	2009			2008			2007			DECEMBER 31, 2009
Expenses
Salaries and benefits	$	-		$	-		$	-		$	67,335
Professional fees		17,430			37,741			75,286			228,802
Office and sundry (Note 3)		2,325			125,805			188,371			430,497
Rent		67,993			96,153			31,128			206,769
Consulting fees (including $94,164, $94,730, and $(120,151) of stock-based compensation expense for 2009, 2008 and 2007 respectively (Note 3))		234,127			386,143			168,372			9,383,238
Transfer agent fees		240			640			3,483			12,603
Accretion expense (Note 9)		7,029			5,738			-			12,767
Depreciation		2,225			2,020			1,391			11,243
		(331,369	)		(654,240	)		(468,031	)		(10,353,254	)
Other income (expenses)
Interest and miscellaneous income		411			12,497			51,042			137,987
Interest expense		-			-			-			(26,444	)
Loss on disposal of shares (Note 5)		-			-			(37,736	)		(37,736	)
Gain on settlement of loan (Note 5)		-			-			-			115,343
Change in fair value of derivative liability (Note 4)		(421,980	)		-			-			(421,980	)
		(421,569	)		12,497			13,306			(232,830	)
Loss from continuing operations		(752,938	)		(641,743	)		(454,725	)		(10,586,084	)
Income (loss) from discontinued operations (Note 7)		-			-			-			122,755
Net loss for the period		(752,938	)		(641,743	)		(454,725	)		(10,463,329	)
Other comprehensive income (loss)
Unrealized holding gain (loss) on investments available for sale (Note 5)		-			-			60,055			-
Foreign currency translation adjustments		1,172,706			(1,473,542	)		890,324			321,061
Comprehensive income (loss)	$	419,768		$	(2,115,285	)	$	495,654		$	(10,142,268	)
Basis and diluted loss per share
From continuing operations	$	(0.01	)	$	(0.01	)	$	(0.01	)
From discontinued operations		(0.00	)		(0.00	)		(0.00	)
	$	(0.01	)	$	(0.01	)	$	(0.01	)
Weighted average shares outstanding		62,881,499			61,742,787			57,368,984

The accompanying notes are an integral part of these financial statements

65

STRATA OIL & GAS INC.

 (An Exploration Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Expressed in US Dollars)

												Accumulated
						Additional						Other			Total
	Common Stock					Paid-in			Accumulated			Comprehensive			Stockholders’
	Shares (1)			Amount		Capital			Deficit			Loss			Equity
Balance, July 1, 2005		43,667,888		$	339,668	$	2,556,753		$	(2,748,790	)	$	(29,816	)	$	117,815
Private placement common stock issuances for cash, November 2005 (Note 11)		560,000			210,000		-			-			-			210,000
Issuance of common shares as collateral for a loan (Note 8)		240,000,000			-		-			-			-			-
Cancellation of common shares upon repayment of the loan (Note 8)		(240,000,000	)		-		-			-			-			-
Stock-based compensation		-			-		1,691,671			-			-			1,691,671
Net loss and comprehensive loss		-			-		-			(1,866,518	)		(390	)		(1,866,908	)
Balance, December 31, 2005		44,227,888			549,668		4,248,424			(4,615,308	)		(30,206	)		152,578
Private placement common stock issuances for cash, June 2006 (Note 11)		500,000			1,000,000		-			-			-			1,000,000
Stock option exercises Feb to Aug 2006		7,324,000			5,151,990		-			-			-			5,151,990
Warrant exercises May to July 2006		4,523,200			508,860		-			-			-			508,860
Stock-based compensation		-			-		6,746,118			-			-			6,746,118
Net loss and comprehensive loss		-			-		-			(6,747,405	)		(328,092	)		(7,075,497	)
Balance, December 31, 2006		56,575,088			7,210,518		10,994,542			(11,362,713	)		(358,298	)		6,484,049
Warrant exercises June to December 2007		2,120,000			337,500		-			-			-			337,500
Stock option exercises Sept to Nov 2007		1,166,000			164,260		-			-			-			164,260
Stock-based compensation		-			-		(120,151	)		-			-			(120,151	)
Net loss and comprehensive income		-			-		-			(454,725	)		950,379			495,654
Balance, December 31, 2007		59,861,088			7,712,278		10,874,391			(11,817,438	)		592,081			7,361,312
Warrant exercise January 2008 (Note 11)		320,000			60,000		-			-			-			60,000
Private placement common stock issuances for cash, January 2008 (Note 11)		1,700,000			1,700,000		-			-			-			1,700,000
Stock-based compensation (Note 3)		-			-		94,730			-			-			94,730
Net loss and comprehensive loss		-			-		-			(641,743	)		(1,473,542	)		(2,115,285	)
Balance, December 31, 2008		61,881,088		$	9,472,278	$	10,969,121		$	(12,459,181	)	$	(881,461	)	$	7,100,757
Warrant exercises Jun- Nov 2009 (Note 11)		3,250,000			413,750		-			-			-			413,750
Stock-based compensation (Note 3)		-			-		94,164			-			-			94,164
Derivative liability (Note 4)		-			-		(259,000	)		-			-			(259,000	)
Net loss and comprehensive income (loss)		-			-		-			(752,938	)		1,172,706			419,768
Balance, December 31, 2009		65,131,088		$	9,886,028	$	10,804,285		$	(13,212,119	)	$	291,245		$	7,769,439

(1) Reflects the 2:1 forward stock splits completed on May 11, 2006 and on October 8, 2007.  See Note 11.

The accompanying notes are an integral part of these financial statements

66

STRATA OIL & GAS INC.

 (An Exploration Stage Company)

STATEMENTS OF CASH FLOWS

(Expressed in US Dollars)

										FROM
	FOR THE YEARS ENDED DECEMBER 31									July 1, 2005 (the date of entering into exploration stage) to
	2009			2008			2007			DECEMBER 31, 2009
Cash flows from operating activities
Net loss	$	(752,938	)	$	(641,743	)	$	(454,725	)	$	(10,463,329	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,225			2,020			1,391			11,243
Stock option compensation expense (recovery)		94,164			94,730			(120,151	)		8,506,532
Accretion expense		7,029			5,738			-			12,767
Loss on disposal of shares		-			-			37,736			37,736
Gain on settlement of loan		-			-			-			(115,343	)
Gain on sale of software		-			-			-			(130,000	)
De-recognition of liability (Note 3)		(47,483	)		-			-			(47,483	)
Change in fair value of derivative liability (Note 4)		421,980			-			-			421,980
Change in assets and liabilities:
Receivables		3,682			(24,055	)		3,156			(39,445	)
Prepaid expenses		-			-			-			1,630
Accounts payable		918			(28,663	)		(36,169	)		36,020
Accrued liabilities		(15,554	)		(10,290	)		14,504			29,143
Net cash used in operating activities		(285,977	)		(602,263	)		(554,258	)		(1,738,549	)
Cash flows from investing activities
Deposits		-			(77,937	)		(16,596	)		(94,533	)
Acquisition of oil and gas interests		(180,251	)		(937,235	)		(3,708,370	)		(7,707,255	)
Acquisition of office equipment		-			-			(10,103	)		(10,103	)
Proceeds on the sale of investments		-			-			77,607			77,607
Proceeds on the sale of software		-			-			-			130,000
Net cash used in investing activities		(180,251	)		(1,015,262	)		(3,657,462	)		(7,604,284	)
Cash flows from financing activities
Proceeds from the issuance of common stock		-			1,700,000			-			2,910,000
Proceeds from the exercise of stock options		-			-			164,260			5,316,250
Proceeds from the exercise of warrants		413,750			60,000			337,500			1,320,110
Proceeds from loan financing		-			-			-			1,020,000
Repayment of loan financing		-			-			-			(1,020,000	)
Net cash provided by financing activities		413,750			1,760,000			501,760			9,546,360
Foreign exchange effect on cash		10,149			(48,662	)		(41,604	)		(254,077	)
Net (decrease) increase in cash		(42,329	)		93,813			(3,751,564	)		(50,550	)
Cash, beginning of period		121,776			27,963			3,779,527			129,997
Cash, end of period	$	79,447		$	121,776		$	27,963			79,447
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	-		$	-		$	-		$	26,444
Income taxes		-			-			-			-
Non-cash investing and financing activities
Receipt of marketable securities for settlement of loan, net	$	-		$	-		$	-		$	115,343
Accounts payable related to oil and gas properties interests	$	7,405		$	205,225		$	221,980		$	24,160
Asset retirement obligation	$	-		$	14,305		$	68,563		$	82,868

The accompanying notes are an integral part of these financial statements

67

STRATA OIL & GAS INC.

 (An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

1.      NATURE OF BUSINESS AND OPERATIONS

Strata Oil & Gas Inc. (the ‘Company’) is engaged in the exploration for oil and natural gas in oil sands in the Canadian province of Alberta.  The Company was formerly engaged in the development of Knowledge Worker Automation (KWA) software.

On June 29, 2005 at an annual general and special meeting of shareholders, a majority of the stockholders of the Company approved the sale of all of the rights to the Company’s software assets to a company controlled by the Company’s former chief executive officer.  At the same meeting, a majority of the Company’s stockholders also approved the change in business of the Company from software development to oil and gas exploration (Note 6).  Upon disposal of the Company’s software assets and change in focus to oil and gas exploration, the Company has entered the exploration stage of its new business activity and follows Accounting Standards Codification (“ASC”) 915, Development Stage Enterprises.  Since re-entering the exploration stage in July 2005, the Company has incurred a loss of $10,463,329.

2.      ABILITY TO CONTINUE AS A GOING CONCERN

The accompanying financial statements have been prepared in US dollars and in accordance with accounting principles generally accepted in the United States on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.  The Company only commenced its oil and gas exploration activities in the last quarter of 2005.  Previously, the Company had been actively developing its proprietary software product line. On June 29, 2005, the Company disposed of all of its rights to its proprietary software to a company controlled by the Company’s former chief executive officer.  The Company has not realized any revenue from its present operations.  During the year ended December 31, 2009, the Company incurred a net loss of $752,938.  Since the Company had re-entered the exploration stage, it has an accumulated deficit of $10,463,329 at December 31, 2009.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.

The Company's ability to continue as a going concern is dependent on its ability to develop its oil and gas properties and ultimately achieve profitable operations and to generate sufficient cash flow from financing and operations to meet its obligations as they become payable. The Company expects that it will need approximately $500,000 to fund its operations during the next twelve months which will include minimum annual property lease payments as well as the costs associated with maintaining an office.  Management has plans to seek additional capital through a private placement and public offering of its common stock.  Although there are no assurances that management’s plans will be realized, management believes that the Company will be able to continue operations in the future.  Accordingly, no adjustment relating to the recoverability and classification of recorded asset amounts and the classification of liabilities has been made to the accompanying financial statements in anticipation of the Company not being able to continue as a going concern.

68

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

3.      SIGNIFICANT ACCOUNTING POLICIES

Management’s Estimates and Assumptions

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date, and revenues and expenses for the period then ended.  Actual results could differ significantly from those estimates

Oil and Gas Property Payments and Exploration Costs

The Company follows the full cost method of accounting for natural gas and oil operations.  Under the full cost method all costs incurred in the acquisition, exploration and development of natural gas and oil reserves are initially capitalized into cost centers on a country-by-country basis. The Company’s current cost center is located in Canada. Such costs include land acquisition costs, geological and geophysical expenditures, carrying charges on non-producing properties, costs of drilling and overhead charges directly related to acquisition, exploration and development activities.

Costs capitalized, together with the costs of production equipment, are depleted and amortized on the unit-of-production method based on the estimated net proved reserves, as determined by independent petroleum engineers.  In December 2009, the Company adopted revised oil and gas reserve estimation and disclosure requirements. The primary impact of the new disclosures is to conform the definition of proved reserves with the SEC Modernization of Oil and Gas Reporting rules, which were issued by the SEC at the end of 2008. The accounting standards update revised the definition of proved oil and gas reserves to require that the average, first-day-of-the-month price during the 12-month period before the end of the year rather than the year-end price, must be used when estimating whether reserve quantities are economical to produce. This same 12-month average price is also used in calculating the aggregate amount of (and changes in) future cash inflows related to the standardized measure of discounted future net cash flows. The percentage of total reserve volumes produced during the year is multiplied by the net capitalized investment plus future estimated development costs in those reserves.  Costs of acquiring and evaluating unproved properties are initially excluded from depletion calculations. These unevaluated properties are assessed periodically to ascertain whether impairment has occurred. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion calculations.

Under full cost accounting rules, capitalized costs, less accumulated amortization and related deferred income taxes, shall not exceed an amount (the ceiling) equal to the sum of:  (i) the after tax present value of estimated future net revenues computed by applying current prices of oil and gas reserves to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on currents costs) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; (ii) the cost of properties not being amortized; and (iii) the lower of cost or estimated fair value of unproven properties included in the costs being amortized.  If unamortized costs capitalized within a cost center, less related deferred income taxes, exceed the ceiling, the excess shall be charged to expense and separately disclosed during the period in which the excess occurs.  Amounts thus required to be written off shall not be reinstated for any subsequent increase in the cost center ceiling.

The Company has not recognized any revenue from its oil and gas exploration activities which commenced in the last quarter of 2005.

69

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

3.      SIGNIFICANT ACCOUNTING POLICIES - continued

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of 90 days or less to be cash equivalents. There was no cash equivalent balances for the year ended December 31, 2009 (2008 – $102,625).

Investments

Available for Sale

Investments designated as available-for-sale include marketable equity securities. Investments designated as available-for-sale are reported at fair value, with unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income. The cost of securities sold is based on the specific identification method. Realized

Gains or losses on the sale or exchange of equity securities and declines in value judged to be other-than-temporary are recorded in gains (losses) on equity securities.

The Company applies ASC 320, Investments -  Debt and Equity Securities when determining when an investment is other-than-temporarily impaired. Investments are reviewed quarterly for indicators of other-than-temporary impairment. For debt securities, management must assess whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery. These steps are done before assessing whether the entity will recover the cost basis of the investment. This change does not affect the need to forecast recovery of the value of the security through either cash flows or market price. In instances when a determination is made that other-than-temporary impairment exists but the investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, ASC 320 changes the presentation and amount of the other-than-temporary impairment recognized in the income statement. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income. This determination requires significant judgment. In making this judgment, we employ a systematic methodology quarterly that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and our intent and ability to hold the investment. The Company also considers specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, changes in technology, operational and financing cash flow factors, and rating agency actions.. If market, industry, and/or investee conditions deteriorate, we may incur future impairments.

Receivables

Accounts receivable are presented net of an allowance for doubtful accounts.  The allowance was $Nil at December 31, 2009, 2008, and 2007 respectively.

Management evaluates the collectability of accounts receivable balances based on a combination of factors on a periodic basis. In cases where we are aware of circumstances that may impair a specific customer's ability to meet its financial obligations, we record a specific allowance against amounts due, and thereby reduce the net recognized receivable to the amount management reasonably believes will be collected.  For all other customers, the Company recognizes allowances for doubtful accounts based on the length of time the receivables are outstanding, industry and geographic concentrations, the current business environment and historical experience.

70

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

3.      SIGNIFICANT ACCOUNTING POLICIES - continued

Office Equipment

Office equipment is recorded at cost less accumulated depreciation using the straight-line method over the estimated useful lives of the assets which is estimated to be five years.

	December 31, 2009		December 31, 2008
Cost	$	10,103	$	10,103
Accumulated depreciation		5,636		3,411
Net book value	$	4,467	$	6,692

Impairment of Long-lived Assets

In accordance with ASC 360, Property, Plant and Equipment, long lived assets such as equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.  Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount of fair value less costs to sell, and are no longer depreciated.  The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

Asset Retirement Obligations

In accordance with ASC 410, Asset Retirement and Environmental Obligations  the fair value of an asset retirement cost, and corresponding liability, should be recorded as part of the cost of the related long-lived asset and subsequently allocated to expense using a systematic and rational method. The Company has recorded an asset retirement obligation at December 31, 2009 and 2008 (Note 9) to reflect its legal obligations related to future abandonment of its oil and gas interests using estimated expected cash flow associated with the obligation and discounting the amount using a credit-adjusted, risk-free interest rate. At least annually, the Company will reassess the obligation to determine whether a change in any estimated obligation is necessary. The Company will evaluate whether there are indicators that suggest the estimated cash flows underlying the obligation have materially changed. Should those indicators suggest the estimated obligation has materially changed the Company will accordingly update its assessment. The asset retirement obligation is measured at fair value on a non-recurring basis using level 3 inputs based on discounted cash flows involving estimates, assumptions, and judgments regarding the cost, timing of settlement, credit-adjusted risk-free rate and inflation rates.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes whereby deferred tax assets and liabilities are recognized for the future tax consequences of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  If it is determined that the realization of the future tax benefit is not more likely than not, the enterprise establishes a valuation allowance.

71

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

3.      SIGNIFICANT ACCOUNTING POLICIES - continued

Foreign Exchange Translation

The Company's functional currency is the Canadian dollar, but reports its financial statements in US dollars. The Company translates its Canadian dollar balances to US dollars in the following manner:  Assets and liabilities have been translated using the rate of exchange at the balance sheet date.  The Company’s results of operations have been translated using average rates.  Translation gains or losses resulting from the changes in the exchange rates are accumulated as other comprehensive income or loss in a separate component of stockholders' equity.

All amounts included in the accompanying financial statements and footnotes are stated in U.S. dollars.

Stock Option Plans

Under ASC 718, Compensation-Stock Compensation, the Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding as at the date of adoption.

The Company grants stock options to non-employees for services that include researching Crown land availability and Crown lease acquisitions, geological consulting and geophysicist services including interpretation of seismic data.  These options are accounted for under ASC 505 (EITF 96-18) and were measured at the fair value of the options as determined by an option pricing model on the measurement date and recognized as the related services are provided and the options earned.

Compensation expense for unvested options to non-employees is revalued at each period end and is being amortized over the vesting period of the options.

Compensation expense is recognized immediately for past services and pro-rata for future services over the option vesting period.  During 2009 the Company recognized a stock option expense of $94,164 (2008 - $94,730 expense; 2007 - $(120,151) recovery) in stock-based compensation in the Statement of Operations and Comprehensive Loss in respect of options granted to non-employees.  All stock options granted in 2009, 2008 and 2007 were to non-employees of the Company.

The fair value of each option in 2009, 2008 and 2007 was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2009	2008	2007
Dividend yield	0%	0%	0%
Expected volatility	108.82%	108.82%	110.7%
Risk-free rate	2.82%	2.69%	4.06%
Expected life	10 years	10 years	10 years

The weighted average fair value per option in 2009 was $0.67 (2008 - $0.09; 2007 – $0.57)

Expected volatilities are based on industry comparables using available data and other factors due to the fact the Company’s business changed substantially from the previous technology business to oil and gas in 2005. When applicable, the Company will use historical data to estimate option exercise, forfeiture and employees termination within the valuation model. For non-employees, the expected term of the options approximates the full term of the options.

72

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

3.      SIGNIFICANT ACCOUNTING POLICIES - continued

Earnings (Loss) Per Share of Common Stock

Basic earnings (loss) per share of common stock is computed by dividing  net income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period.  Diluted earnings per share of common stock reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

At December 31, 2009, 2008 and 2007, potential common shares of 17,113,600, 21,299,600 and 20,919,600 respectively, related to stock options and warrants were excluded from the computation of diluted earnings per share since their effect was anti-dilutive.

Fair Value of Financial Instruments

The book values of cash, receivables and accounts payable approximate their respective fair values due to the short-term nature of these instruments. The fair value hierarchy under GAAP distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels: 

•  Level one — Quoted market prices in active markets for identical assets or liabilities;

•  Level two — Inputs other than level one inputs that are either directly or indirectly observable; and

•  Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter. Liabilities measured at fair value are summarized as follows as of December 31, 2009:

	Level 1		Level 2			Level 3			Total
Derivative liability	$	—	$	—	$		680,980	$		680,980
Asset retirement obligation	$	—	$	—	$		104,653	$		104,653

We currently measure and report the fair value liability for non-employee stock options with a strike price currency different than the functional currency of the Company on a recurring basis. The fair value liabilities for non-employee stock options have been recorded as determined utilizing the Black-Scholes option pricing model. See Note 4for further discussion of the inputs used in determining the fair value.

The asset retirement obligation is measured at fair value on a non-recurring basis using level 3 inputs based on discounted cash flows involving estimates, assumptions, and judgments regarding the cost, timing of settlement, credit-adjusted risk-free rate and inflation rates. See Note 9 for further discussion of the inputs used in determining the fair value.

73

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

3.      SIGNIFICANT ACCOUNTING POLICIES - continued

De-recognition of Financial Liability

A financial liability is de-recognized when the obligation under the liability is discharged, cancelled or expires. During the year ended December 31, 2009, a financial liability of $47,483 (2008 - $Nil) was de-recognized and recorded in office and sundry in the Statement of Operations.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Company's items of other comprehensive income (loss) are foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities.

New Accounting Pronouncements

ASC No. 815

On January 1, 2009, the Company adopted FASB ASC 815- Derivatives and Hedging (EITF 07-5, Determining Whether an Instrument (or embedded Feature) is Indexed to an Entity’s Own Stock. As part of the adoption of FASB ASC 815, the Company determined that its option instruments have an exercise price that is not in the Company’s functional currency and are therefore the option instruments are not considered indexed to the Company’s stock.  Thus, the Company is now required to separately account for the option as a derivative instrument liability, carried at fair value and marked-to-market each period, with the changes in the fair value each period charged or credited to the statement of operations.

The transition provisions of ASC 815-40-15 require cumulative effect adjustments as of January 1, 2009 to reflect the amounts that would have been recognized if derivative fair value accounting had been applied from the original issuance date of an equity- equity-linked financial instrument through the implementation date of the revised guidance.

The Company recorded a derivative liability in the amount of $259,000 upon adoption of FASB ASC 815. The Company determined the fair value of the derivative liability to be $680,980 as of December 31, 2009. As a result of the changes in fair value, the Company recorded a charge to the change in the fair value of derivative liability of $421,980 to the statement of operations for the year ended December 31, 2009. There is no impact on loss per share on adoption.

ASC No. 805-10-65

In December 2007, Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) ASC 805-10-65 (formerly SFAS No. 141(R), “Business Combinations – Revised”).  FASB establishes principles and requirements for how an acquirer in a business combination:  (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in an acquiree, (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase price, and (3) determines what information to disclose to enable users of the consolidated financial statements to evaluate the nature and financial effects of the business combination.  Among other changes, FASB ASC 805-10-65 will require us to immediately expense transaction costs that have historically been included in the purchase price allocation under existing guidance.  FASB ASC 805-10-65 will apply prospectively to any acquisitions completed on or after the beginning of an entity’s fiscal year that begins on or after December 15, 2008.  The Company adopted ASC 805-10-65 on January 1, 2009 and it did not have  an  impact on the Company’s financial statements.

74

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

3.      SIGNIFICANT ACCOUNTING POLICIES - continued

New Accounting Pronouncements - continued

ASC No. 855

In May 2009, the FASB issued new guidance for subsequent events.  The new guidance, which is a part of ASC 855, Subsequent Events is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  Specifically, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet.  The new guidance is effective for fiscal years and interim periods ended after June 15, 2009 and is to be applied prospectively.  The Company’s adoption of the new guidance did not have a material effect on the Company’s financial statements.

ASU No. 2009-05

In August 2009, FASB issued ASU No. 2009-5 “Fair Value of Measurements and Disclosure (Topic 820) – Measuring Liabilities at Fair Value”.  The new guidance, which is now part of ASC 820, provides clarification that in certain circumstances in which a quoted price in an active market for the identical liability is not available, a company is required to measure fair value using one or more of the following valuation techniques:  the quoted price of the identical liability when traded as an asset, the quoted prices for similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of fair value measurements.  The new guidance clarifies that a company is not required to include an adjustment for restrictions that prevent the transfer of the liability and if an adjustment is applied to the quoted price used in a valuation technique, the result is a Level 2 or 3 fair value measurement.  The new guidance is effective for interim and annual periods beginning after August 27, 2009.  The adoption of this standard has been reflected in the Company’s financial statements.

ASU No. 2009-06

In September 2009, FASB issued ASU No. 2009-06, “Income Taxes (Topic 740) – Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities.  This update is to address the need for additional implementation guidance on accounting for uncertainty in income taxes.  The implementation guidance will apply to financial statements on nongovernmental entities that are presented in conformity with U.S. GAAP.  The effective date is for entities that are currently applying the standards for accounting for uncertain income tax positions, the guidance and disclosure amendments are effective for financial statements issued for interim and annual periods ending after September 15, 2009.  For those entities that have deferred the application of accounting for uncertainty in income taxes in accordance with paragraph 740-10-65-1(e), the guidance and disclosure amendments are effective upon adoption of those standards.  The adoption of this standard did not have a material effect on the Company’s financial statements.

ASU No. 2009-9

In September 2009, FASB issued ASU No. 2009-09, “Accounting for Investments – Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees.  This update is an amendment to ASC 323-10-S99 and 505-50-S99.  The amendment to ASC 323-10-S99 provides guidance on the accounting by an investor for stock-based compensation based on the investor’s stock granted to employees of an equity method investee.  Investors that are SEC registrants should classify any income or expense resulting from application of this guidance in the same income statement caption as the equity in earnings (or losses) of the investee.

75

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

3.      SIGNIFICANT ACCOUNTING POLICIES - continued

New Accounting Pronouncements - continued

ASU No. 2009-9- continued

The amendment to ASC 505-50-S99 clarifies the accounting by the grantee or grantor in transactions involving equity instruments granted to other than employees if the accounting does not reflect the same commitment date or similar values.  The adoption of this standard did not have a material effect on the Company’s financial statements.

ASU No. 2010-01

In January 2010, the FASB issued ASU No. 2010-01 “Accounting for Distributions to Shareholders with Components of Stock and Cash” with Equity (Topic 505).  The objective of this update is to address diversity in practice related to the accounting for a distribution to shareholders that offers them the ability to elect to receive their entire distribution in cash or shares of equivalent value with a potential limitation on the total amount of cash that shareholders can elect to receive in aggregate.  Historically, some entities have accounted for the stock portion

of the distribution as a new share issuance that is reflected in earning per share (“EPS”) prospectively.  Other entities have accounted for the stock portion of the distribution as a stock dividend by retroactively restating shares outstanding and EPS for all periods presented.  The amendments in this update clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or shares with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance, rather than a stock dividend, thus eliminating the diversity in practice.  The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis.  The adoption of ASU 2010-01 did not  have a material impact on the Company’s financial statements.

ASU No. 2010-06

In January 2010, the FASB issued ASU, on codification, Fair value Measurements and Disclosures (Topic 820-10),  improving disclosures about fair value measurements.  This update provides amendments to Topic 820 that will provide more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Level 1, 2, and 3.  The standard adds new disclosure and clarifies existing disclosure requirements.  The new standard requires disclosures of the fair value of financial instruments for interim reporting periods of publicly traded companies in addition to the annual disclosure required at year-end.  The provisions of the new standard are effective for the interim periods ending after June 15, 2009.  The adoption of ASU 2010-06 has been reflected in Company’s financial statements.

APB 14-1 (ASC 470)

In May 2008, FASB issued FASB Staff Position ("FSP") APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1").  FSP APB 14-1 clarifies that convertible debt instruments that may be settled in cash upon either mandatory or optional conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, "Accounting for Convertible Debt and Debt issued with Stock Purchase Warrants."  Additionally, FSP APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods.  FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.  The adoption of APB 14-1 did not have a material impact on the Company’s financial statements.

76

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

3.      SIGNIFICANT ACCOUNTING POLICIES - continued

New Accounting Pronouncements - continued

ASC No. 2010-03

In January 2010, FASB issued an Accounting Standard Update, ASC No. 2010-03, on Oil and Gas.  The objective of the amendments included in this update is to align the oil and gas reserve estimation and disclosure requirements of Extractive Activities—Oil and Gas (Topic 932) with the requirements in the Securities and Exchange Commission's final rule, Modernization of the Oil and Gas Reporting Requirements (the Final Rule). The Final Rule was issued on December 31, 2008.  The amendments to Topic 932 affect entities that engage in oil- and gas producing activities, including entities that extract saleable hydrocarbons, in the solid, liquid, or gaseous state, from oil sands, shale, coal-beds, or other nonrenewable natural resources that are intended to be upgraded into synthetic oil or gas, and activities undertaken with a view to such extraction. The amendments to Topic 932 are effective for annual reporting periods ending on or after December 31, 2009. An entity should apply the adoption of the amendments as a change in accounting principle inseparable from a change in estimate. The amendments to Topic 932 specify the required disclosures for the effect of adoption.  Early application is not permitted. An entity that became subject to the disclosure requirements of Topic 932 due to the change to the definition of significant oil- and gas-producing activities is permitted to apply the disclosure provisions of Topic 932 in annual periods beginning after December 31, 2009. The new SEC and FASB authoritative guidance became effective for the Company’s 2009 Form 20 F and has been prospectively adopted as of December 31, 2009. The new authoritative guidance did not have a material impact on the Company’s financial statements.

4.      DERIVATIVE LIABILITIES

Derivative liabilities, consisting of the option instruments with an exercise price in a different currency than the Company’s functional currency, are accounted for as separate liabilities measured at their respective fair values as follows:

Balance, January 01, 2009 an adoption	$	259,000
Change in fair value of derivative liabilities		421,980
Balance, December 31, 2009	$	680,980

The fair value of the derivative liabilities has been determined using the Black-Scholes option pricing model using the following weighted average assumptions:

	December 31,			January 01,
	2009			2009
Risk-free interest rate		3.08			2.42
Expected life of derivative liability	7 yrs			7 yrs
Annualized volatility		108.82	%		108.82	%
Dividend rate		0.00	%		0.00	%

77

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

5.       INVESTMENTS

In May 2002, the Company loaned $150,000 to Advanced Cell Technology ("ACT"), a private biotechnology company, in exchange for a convertible promissory note receivable. The note was unsecured, bore interest at 20% per annum, matured on April 30, 2003, and was to be converted into stock of ACT should ACT have proceeded with a preferred stock financing prior to the note's maturity date. The Company accrued a receivable for interest income, due under the terms of the promissory note, in the amount of $21,206 at December 31, 2002. At April 30, 2003, the note receivable was in default. The Company received notice from ACT of their intention to settle the note receivable in full out of future financing.  With the uncertainty regarding the recoverability of the note receivable, in 2003 the Company reserved the principal amount of the note receivable and accrued interest outstanding at December 31, 2002 and fully reserved all additional accruals of interest.

On May 8, 2006 the Company completed an agreement with the current parent company of ACT, Advanced Cell Technology, Inc. (“ACTC”) for settlement of the loan.  The Company received 109,557 common shares of ACTC, a public company, for settlement of the principal and interest of the loan.  As part of the settlement, the Company had agreed to pay its legal counsel a contingent fee based on the loan settlement amount.  As a result, of the total 109,557 common shares of ACTC received by the Company, 14,232 were assigned to the Company’s counsel for payment of legal fees.  Therefore, upon settlement the Company owned 95,325 shares of ACTC at a cost of $115,343 and a market value of $55,288 at December 31, 2006.  The gross unrealized holding loss for the twelve month period ended December 31, 2006 was $60,055.  The cost and market values of the ACTC shares were determined by reference to their closing prices on May 8 and December 31, 2006 respectively as quoted on the OTC:BB.  During 2007, the Company disposed of all of its ACTC shares for gross proceeds of $77,607 resulting in a realized loss of $37,736 during the year ended December 31, 2007.

6.       OIL AND GAS PROPERTY INTERESTS

	2009 (Cumulative)
	Peace River		Drowned		Total
Property acquisition and lease payments	$	3,304,156	$	39,467	$	3,343,623
Geological and geophysical		291,330		13,939		305,269
Project management		889,583		-		889,583
Drilling		3,529,150		-		3,529,150
Assaying and analysis		65,466		-		65,466
Asset retirement obligations		97,573		-		97,573
Camp and field supplies		41,875		-		41,875
Travel and accommodation		125,900		-		125,900
Total expenditures	$	8,345,033	$	53,406	$	8,398,439

	2008 (Cumulative)
	Peace River		Drowned		Total
Property acquisition and lease payments	$	2,677,006	$	32,361	$	2,709,367
Geological and geophysical		247,526		11,969		259,495
Project management		773,615		-		773,615
Drilling		3,013,522		-		3,013,522
Assaying and analysis		56,273		-		56,273
Asset retirement obligations		82,868		-		82,868
Camp and field supplies		35,958		-		35,958
Travel and accommodation		108,110		-		108,110
Total expenditures	$	6,994,878	$	44,330	$	7,039,208

78

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

6.       OIL AND GAS PROPERTY INTERESTS - continued

Peace River Property

The Company has entered into a series of leases in multiple transactions with the province of Alberta in the Peace River area of Alberta, Canada (the “Peace River Property”).  All of the leases were acquired through a public auction process that requires the Company to submit sealed bids for land packages being auctioned by the provincial government.  Upon being notified that it has submitted the highest bid for a specific land parcel the Company immediately pays the government the bid price and enters into a formal lease with the government.  All of the leases are for a 15 year term, require minimum annual lease payments, and grant the Company the right to explore for potential oil sands opportunities on the respective lease.  The specific transactions entered into by the Company are as noted below.

Date	Number of Leases	Land Area (Hectares)	Annual Lease Payments
December 15, 2005	7	10,752	CDN $37,632 / USD $35,806
June 15, 2006	3	4,864	CDN $17,024 / USD $16,198
August 10, 2006	9	7,424	CDN $25,984 / USD $24,724
August 24, 2006	2	2,048	CDN $7,168 / USD $6,820
October 19, 2006	4	3,584	CDN $12,544 / USD $11,936
November 2, 2006	9	14,336	CDN $50,176 / USD $47,742
January 11, 2007	4	4,608	CDN $16,128 / USD $15,346
January 24, 2007	2	2,304	CDN $8,064 / USD $7,673
April 3, 2008	2	512	CDN $1,792 / USD $1,705
	42	50,432	CDN $176,512 / USD $167,947

Drowned Property

On September 7, 2005 the Company acquired a 100% interest in an Alberta oil sands lease (the “Drowned Property”).  The rights to the Drowned Property were acquired for $20,635 plus fees and closing costs of $8,150 which were paid.  The Property covers 512 hectares of land in the Drowned Area of the Wabasca oil sands in the West Athabasca area of Northern Alberta.  The lease, which expires in October 2015, gives the Company the right

to explore the Property covered by the lease.  The Company’s acquisition of the lease includes an overriding 4% royalty agreement with the vendor.  The royalty is to be paid on a well-to-well basis and is payable on all petroleum substances produced by any well on the Property.  The Property is subject to an annual lease payment payable to the government of Alberta in the amount of CDN $1,792 (USD $1,471) until expiry on October 4, 2015.

All of the Company’s leases for the Peace River and Drowned Properties are subject to royalties payable to the government of Alberta.  The royalty is calculated using a revenue-less-cost formula.  In years prior to the recovery of the project’s capital investment, the royalty is 1% of gross revenue.  Once the project costs have been recovered, the royalty is the greater of 1% of gross revenue or 25% of net revenue.

79

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

7.       DISCONTINUED OPERATIONS

On June 29, 2005 pursuant to approval by a majority of the shareholders of the Company, the Company entered into a letter of intent to dispose of all of its interest in its proprietary software to a private company controlled by its former president (the “Purchaser”) for $130,000.  The value of the assets disposed of was based on an independent valuation.  The net book value of these assets at 2005 was $Nil.

The results of operations and cash flows of the software operations have been segregated in the financial statements as discontinued operations for the current and prior periods.  On July 11, 2005 a definitive agreement was completed

and in exchange for the rights to all of its software, the Company received a non-interest bearing promissory note which was due on July 11, 2006. The Purchaser had at his sole discretion, the right to convert the promissory note into its common shares at a conversion price to be determined.  Had the Purchaser chosen to convert the promissory note to equity, it would have converted it into shares at market value.  The promissory note was collateralized by all of the assets acquired by the Purchaser. The Purchaser could have located an alternate buyer for the assets or assigned its rights under the purchase agreement, provided that the terms of sale of the software assets to such alternate buyer or assignee would have remained substantially the same as described above.

No revenue was recognized during 2009, 2008 or 2007 from discontinued operations.

8.       LOANS PAYABLE

On October 12, 2005 the Company entered into a $20,000 bridge loan agreement with a shareholder. The loan bore interest at the Bank of Canada Prime Rate plus 1% per annum.  The loan was due on October 12, 2006 and was unsecured.  The Company repaid the loan and accrued interest of $143 on December 9, 2005.

On August 24, 2005 the Company borrowed $1,000,000 from a single lender (the “Lender”).  In consideration for such loan, the Company issued to the Lender a Secured Promissory Note, in the original principal amount of $1,000,000, with interest accruing at the rate of 8% per annum.  The principal and all accrued but unpaid interest under such Secured Promissory Note was due and payable in full one year from the date of the loan, but could be prepaid at anytime without penalty.  As collateral security for the payment of the amounts owed under such Secured Promissory Note, the Company issued 240,000,000 shares of its common stock pursuant to a Stock Pledge Agreement, dated August 24, 2005.  The Company repaid the loan and accrued interest of $26,301 on December 22, 2005.  Upon repayment, the 240,000,000 common shares granted to the Lender as security were returned to the Company and the shares were extinguished.

9.       ASSET RETIRMENT OBLIGATIONS

During 2007, the Company drilled four wells on its Peace River Property.  Total future asset retirement obligations were estimated by management based on the Company’s working interest in its wells and facilities, estimated costs to remediate, reclaim and abandon the wells and facilities and the estimated timing of the costs to be incurred in future periods. The Company has estimated the net present value of its total asset retirement obligations to be approximately $104,653 at December 31, 2009 (2008 - $88,606), based on an undiscounted total future liability of $278,782 (CDN$293,000). These payments are expected to be incurred between 2015 and 2030. The Company used a credit adjusted risk-free rate of 10% per annum and an inflation rate of 2% to calculate the present value of the asset retirement obligation.  Accretion expense of $7,029 (2008 – $5,738, 2007 - $Nil) has been recorded in the Statements of Operations and Comprehensive Loss at December 31, 2009.

80

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

10.       RELATED PARTY TRANSACTIONS

Related party transactions not disclosed elsewhere in these financial statements include:

Management Fees

The Company amended the compensation arrangement with its President and has agreed to pay for his services based on a needed basis and on a hourly rate.  The Chief Financial Officer resigned in September 2008, and no longer receives compensation from the Company.  Total compensation expense of $12,775 (2008 - $172,165, 2007 - $178,770) has been recognized as consulting fees for the year ended December 31, 2009.

Directors’ fees

The Company pays its independent Directors $500 per month for serving on the Company’s Board of Directors.  All of the Directors currently receive their payments in $CDN.  As of January 2009, the Directors’ fees were temporarily suspended in order to conserve working capital.  Directors’ fees of $Nil (2008 - $20,719, 2007 - $22,395) have been recorded as consulting fees at December 31, 2009.

The above-noted transactions were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

As at December 31, 2009, accounts payable includes $2,807 (2008 - $Nil) due to a company controlled by a director and officer of the Company with respect to expenses incurred for service.

11.      SHARE CAPITAL

On November 15, 2005 the Company closed a private placement of 560,000 units at $0.375 per unit for a total offering price of $210,000. Each unit consisted of one share of the common stock of the Company, one Class A Warrant exercisable for one share of Common Stock at an exercise price of $0.44 for a period of four years commencing on November 15, 2006, and one Class B Warrant exercisable for one share of Common Stock at an exercise price of $0.50 for a period of three years commencing on November 15, 2007. The Company has the right to accelerate the exercise date or reduce the exercise price of the Class A and Class B Warrants.

On May 9, 2006, at a Special Meeting of the Company’s stockholders, a majority of the Company’s stockholders approved a 2:1 forward stock split.  The record and payment dates of the forward split were May 10 and May 11, 2006 respectively.   All of the common shares issued and outstanding on May 10, 2006 were split.   All references to share and per share amounts have been restated in these financial statements to reflect the split.

On June 13, 2006 the Company closed a private placement of 500,000 units at $2.00 per unit for a total offering price of $1,000,000.  Each unit consisted of one share of the common stock of the Company, one Class A Warrant exercisable for one share of Common Stock at an exercise price of $2.125 for a period of four years commencing on June 13, 2007 and one Class B Warrant exercisable for one share of Common Stock at an exercise price of $2.25 for a period of three and one half years commencing on December 13, 2007.  The Company has the right to accelerate the exercise date or reduce the exercise price of the Class A and Class B Warrants.

On July 13, 2007, at a Special Meeting of the Company’s stockholders, a majority of the Company’s stockholders approved a 2:1 forward stock split.  The record and payment dates of the forward split were October 8 and October 9, 2007 respectively.   All of the common shares issued and outstanding on October 8, 2007 were split.   All references to share and per share amounts have been restated in these financial statements to reflect the split.

81

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

11.      SHARE CAPITAL- continued

On January 28, 2008, the Company closed a private placement of 1,700,000 common shares at $1.00 per share for total proceeds of $1,700,000.

During the year ended December 31, 2008, 320,000 common share warrants were exercised at an exercise price of $0.19 for proceeds of $60,000.

During the year ended December 31, 2009, 3,250,000 common share warrants were exercised at exercise prices ranging from $0.125 to $0.20 for proceeds of $413,750.

12.       STOCK OPTION PLANS

In February 2000, the Company adopted its 2000 Stock Option Plan (“the 2000 Plan”).  The 2000 Plan provides for the granting of up to 7,000,000 stock options to key employees, directors and consultants, of common shares of the Company.  Under the 2000 Plan, the granting of incentive and non-qualified stock options, exercise prices and terms are determined by the Company's Option Committee, a committee designated to administer the 2000 Plan by the Board of Directors.  For incentive options, the exercise price shall not be less than the fair market value of the Company's common stock on the grant date. (In the case of options granted to an employee who owns stock possessing more than 10% of the voting power of all classes of the Company's stock on the date of grant, the option price must not be less than 110% of the fair market value of common stock on the grant date.).  Options granted are not to exceed terms beyond ten years (five years in the case of an incentive stock option granted to a holder of 10 percent of the Company's common stock).  As of December 31, 2009, there were no options available for grant or options outstanding under the 2000 Plan.

During 2001, the Company adopted its 2002 Stock Option Plan (“the 2002 Plan”).  The 2002 Plan provides for the granting of up to an additional 7,000,000 stock options to key employees, directors and consultants, of common shares of the Company.  Under the 2002 Plan, the granting of incentive and non-qualified stock options, exercise prices and terms are determined by the Company's Option Committee, a committee designated to administer the 2002 Plan by the Board of Directors.  For incentive options, the exercise price shall not be less than the fair market value of the Company's common stock on the grant date. (In the case of options granted to an employee who owns stock possessing more than 10% of the voting power of all classes of the Company's stock on the date of grant, the option price must not be less than 110% of the fair market value of common stock on the grant date.)  Options granted are not to exceed terms beyond ten years (five years in the case of an incentive stock option granted to a holder of 10 percent of the Company's common stock)

Activity under the 2002 Plan is summarized as follows:

		Available for Grant		Options Outstanding	Weighted Average Exercise Price
Balance outstanding,
	December 31, 2007		200,000	1,150,000	$	0.11
Balance outstanding,
	December 31, 2008		200,000	1,150,000		0.11
	Options cancelled		336,000	(336,000)		0.11
	Balance outstanding, December 31, 2009		536,000	814,000	$	0.11
Balance exercisable,
	December 31, 2009			814,000	$	0.11
	December 31, 2008			1,150,000	$	0.11
	December 31, 2007			616,667	$	0.11

82

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

12.       STOCK OPTION PLANS- continued

At the Annual General and Special Meeting of Shareholders held in June 2006 the stockholders approved and the Company adopted its 2006 Stock Option Plan (“the 2006 Plan”).  The 2006 Plan provides for the granting of up to an additional 8,000,000 stock options to key employees, directors and consultants, of common shares of the Company.  Under the 2006 Plan, the granting of incentive and non-qualified stock options, exercise prices and terms are determined by the Company's Option Committee, a committee designated to administer the 2006 Plan by the Board of Directors.  For incentive options, the exercise price shall not be less than the fair market value of the Company's common stock on the grant date. (In the case of options granted to an employee who owns stock possessing more than 10% of the voting power of all classes of the Company's stock on the date of grant, the option price must not be less than 110% of the fair market value of common stock on the grant date.)  Options granted are not to exceed terms beyond ten years (five years in the case of an incentive stock option granted to a holder of 10 percent of the Company's common stock).

Activity under the 2006 Plan is summarized as follows:

	Available for Grant			Options Outstanding			Weighted Average Exercise Price
Balance outstanding,
December 31, 2007		6,100,000			600,000		$	1.17
Options granted		(700,000	)		700,000			0.81
Balance outstanding,
December 31, 2008		5,400,000			1,300,000			0.98
Options cancelled		600,000			(600,000	)		0.82
Balance outstanding,
December 31, 2009		6,000,000			700,000		$	1.11

Balance exercisable,
December 31, 2009	430,000	$	1.40
December 31, 2008	200,000	$	2.29
December 31, 2007	200,000	$	2.29

The following table summarizes information concerning outstanding and exercisable common stock options under the 2006, 2002 and 2000 Plans at December 31, 2009:

Range of Exercise Prices	Number of Options Outstanding	Remaining Contractual Life (in Years)	Weighted Average Exercise Price		Number of Options Currently Exercisable	Weighted Average Exercise Price
$0.11	814,000	5.67	$	0.11	814,000	$	0.11
$0.61	400,000	7.25	$	0.61	200,000	$	0.61
$0.74	100,000	8.58	$	0.74	30,000	$	0.74
$2.29	200,000	6.58	$	2.29	200,000	$	2.29
	1,514,000				1,244,000

83

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

12.       STOCK OPTION PLANS - continued

The aggregate intrinsic value of stock options outstanding at December 31, 2009 was $317,460 (2008 - $11,500, 2007 - $652,500) while the aggregate intrinsic value of stock options exercisable at December 31, 2009 was also $317,460 (2008 - $11,500, 2007 - $339,167).  No stock options were exercised in 2009 and 2008 while the aggregate intrinsic value of stock options exercised in 2007 was $1,070,510.

As of December 31, 2009, there was $20,319 (2008 - $57,493, 2007- $201,103) of total unrecognized compensation cost related to all options granted and outstanding. This unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 1.5 years. (2008 – 3 years, 2007 – 4 years) A summary of status of the Company’s unvested stock options as of December 31, 2009 under all plans is presented below:

	Number of Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Unvested at December 31, 2007		933,333		$	0.32	$	0.28
Granted		700,000			0.81		0.74
Vested		(533,333	)		0.11		0.10
Unvested at December 31, 2008		1,100,000		$	0.74	$	0.68
Vested		(230,000	)		0.63		0.55
Cancelled		(600,000	)		0.82		0.22
Unvested at December 31, 2009		270,000		$	0.64	$	0.67

13.      WARRANTS

(a) Issued	Warrants			Weighted Average Exercise Price
Balance, December 31, 2007		19,169,600		$	0.29
Warrants exercised		(320,000	)		0.19
Balance, December 31, 2008		18,849,600			0.29
Warrants exercised		(3,250,000	)		0.13
Balance, December 31, 2009		15,599,600		$	0.32

The following table lists the common share warrants outstanding at December 31, 2009.  Each warrant is exchangeable for one common share.

Number Outstanding	Number Vested	Exercise Price	Expiry
2,523,200	2,523,200	$0.11	December 23, 2010*
6,206,400	6,206,400	$0.19	December 23, 2010
850,000	850,000	$0.125	February 14, 2012
3,900,000	3,900,000	$0.20	February 14, 2012
560,000	560,000	$0.44	November 15, 2010
560,000	560,000	$0.50	November 15, 2010
500,000	500,000	$2.125	June 13, 2011
500,000	500,000	$2.25	June 13, 2011
15,599,600	15,599,600

*Subsequent to the year ended December 31, 2009, 1,733,335 common share warrants were exercised for proceeds of $200,000.

84

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

14.      INCOME TAXES

The tax effects of temporary differences that give rise to the Company’s deferred tax assets are as follows:

	2009			2008
Deferred tax assets (liabilities)
Net operating loss carry-forwards	$	840,000		$	692,000
Capital losses		5,000			4,000
Office equipment		10,000			8,000
Share issue costs		-			1,000
Asset retirement obligation		26,000			22,000
		881,000			727,000
Valuation allowance		(881,000	)		(727,000	)
Net deferred tax asset	$	-		$	-

Upon continuation to Canada in 2004, all losses carried forward at that time expired.  As of December 31, 2009, the Company had available to offset future taxable income, net Canadian operating loss carry-forwards of approximately $3.3 million.  The carry-forwards will begin expiring in 2014 unless utilized in earlier years.  The Company also has approximately $8 million in Canadian oil and gas dedication pools that can be used to offset income of future periods.

The Company’s deferred tax assets include the tax effect relating to approximately $Nil (2008 – $1,000) of future tax deductions for share issue costs.  If and when the valuation allowance related to the tax effect of these amounts is reversed the Company will recognize this benefit as an adjustment to share capital as opposed to income tax expense in the Statement of Operations and Comprehensive Loss.

The Company evaluates its valuation allowance requirements based on projected future operations.  When circumstances change and this causes a change in management's judgment about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current income.

The (benefit) provision for income taxes differs from the amount of income tax determined by applying the applicable Canadian statutory federal income tax rate to pre-tax loss as a result of the following differences:

	2009			2008			2007
Statutory federal income tax rate		(30	%)		(31	%)		(32	%)
Change in valuation allowance		20	%		0	%		25	%
Non-deductible stock-based compensation		4	%		5	%		(8	)%
Non-deductible change in fair value of derivative liability		17	%		0	%		0	%
Effect of foreign exchange		(16	)%		18	%		(24	)%
Effect of reduction in income tax rate		5	%		6	%		35	%
Other		0	%		2	%		4	%
		-	%		-	%		-	%

85

STRATA OIL & GAS INC.

(An Exploration Stage Company)

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in US Dollars)

14.           INCOME TAXES – continued

In June 2006, the FASB issued FASB ASC 740 Income Taxes (Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (“FIN 48”)). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements , and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.. The Company has evaluated its tax positions for the years ended December 31, 2009, 2008 and 2007 and determined that it has no uncertain tax positions requiring financial statement recognition.

Under FIN 48, the impact of an uncertain income tax position on income tax expense must be recognized at the largest amount that is more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has 50% or less  likelihood of being sustained.

We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes. There was no amount of interest and penalties accrued during 2009 or 2008.

We file one income tax return in Canada. Our income tax returns are generally considered closed to examination for years prior to 2004.

15.      COMMITMENTS

Environmental Matters

The Company is engaged in oil and gas exploration and may become subject to certain liabilities as they relate to environmental cleanup of sites or other environmental restoration procedures as they relate to the exploration of oil and gas. Should it be determined that a liability exists with respect to any environmental clean up or restoration, the liability to cure such a violation could fall upon the Company. No claim has been made, nor is the Company aware of any liability, which it may have, as it relates to any environmental clean-up, restoration or the violation of any rules or regulations relating thereto. Liabilities for expenditures are recorded when environmental assessment and/or remediation is probable and the costs can be reasonably estimated.

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Item 19. Exhibits

Exhibit No.	Description
1.1	Articles of Continuance(1)
1.2	Bylaws(1)
2.1	Description of Capital Stock (contained in the Articles of Continuance filed as Exhibit 1.1)
2.2	Form of Class A warrant issued in February 2005 (2)
2.3	Form of Class B warrant issued in February 2005 (2)
2.4	Form of Class A warrant issued in November 2005 (2)
2.5	Form of Class B warrant issued in November 2005 (2)
2.6	Form of Class A warrant issued in June 2006 (6)
2.7	Form of Class B warrant issued in June 2006 (6)
2.8	Form of Subscription Agreement for shares issued in January 2008 (7)
4.1	Agreement, dated October 12, 2005 between the Company and Pratt Barndollar (2)
4.2	Agreement, dated January 1, 2006 between the Company and Charlie Perity (2)
4.3	Asset Sale Agreement, dated June 29, 2005, between the Company and Trevor Newton (2)
4.4	Consulting agreement dated May 15, 2006 between Manny Dhinsa and the Company (2)
12.1*	Rule 13a-14(a)/15d-14(a) Certifications
13.1*	Section 1350 Certifications
14.1*	Consent of Independent Registered Public Accounting Firm
15.3	2000 Stock Option Plan (3)
15.4	2002 Stock Option Plan (4)
15.4	2006 Stock Option Plan (5)

* Filed herewith.

(1) Previously filed with the Company’s Registration Statement on Form S-4 on April 22, 2003

(2) Previously filed with the Company’s 2005 Form 20-F filed on June 1, 2006.

(3) Filed on Form S-8 on January 29, 2001

(4) Filed on Form S-8 on February 12, 2002

(5) Filed on Form S-8 on June 1, 2006.

(6) Previously filed with the Company’s Form 6-K filed on June 23, 2006.

(7) Previously filed with the Company’s Form 6-K filed on February 1, 2008.

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SIGNATURES

Pursuant to the requirements of Section 12g of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

STRATA OIL & GAS INC.
	By                /s/ Manny Dhinsa
	Manny Dhinsa
Dated: June 25, 2010	President, Chief Executive Officer, Secretary and Treasurer

/s/ Pol Brisset	Director	Dated: June 25, 2010
Pol Brisset
/s/ Pratt Barndollar	Director	Dated: June 25, 2010
Pratt Barndollar
/s/ Charlie Perity	Director	Dated: June 25, 2010
Charlie Perity
/s/ Shezad Ahmad	Director	Dated: June 25, 2010
Shezad Ahmad

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