ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On October 9, 2009, PetroAlgae Inc. ("PetroAlgae" or the "Company") entered into an agreement with Green Alternative Energy USA, LLC ("Alternative Energy") pursuant to which the Company agreed to sell in a private placement to Alternative Energy 375,000 shares of the Company's common stock ("Common Stock") at a price of $8.00 per share and a warrant to purchase 375,000 shares of Common Stock at an exercise price of $15.00 per share, for an aggregate purchase price of $3,000,000.00. Alternative Energy was also given the option, exercisable by December 31, 2009, to purchase up to an additional 875,000 shares of Common Stock at a price of $8.00 per share (the "Option Shares") and a warrant to purchase 875,000 shares of Common Stock at an exercise price of $15.00 per share (the "Option Warrant"). The securities sold in the private placement are unregistered.

The proceeds from this private placement will be used to fund the working capital needs of the Company and PA LLC, an entity in which the Company holds an approximate 81.3% membership interest on a fully-diluted basis. As of October 9, 2009, the number of shares of Common Stock outstanding (including the 375,000 shares issuable in the private placement) was 105,237,746.

6-Month Price Protection Rights on the Common Stock Issued

If the Company issues, within 182 days of October 9, 2009, shares of Common Stock, options to purchase or rights to subscribe for shares of Common Stock, securities by their terms convertible into, exercisable or exchangeable for shares of Common Stock, or options to purchase or rights to subscribe for such convertible, exercisable or exchangeable securities without consideration or for consideration per share less than $8.00 (as may be subsequently adjusted) (each such issuance, a "Triggering Issuance"), then the Company shall issue to Alternative Energy for no additional consideration such additional number of shares of Common Stock which when aggregated to the shares issued pursuant to the purchase agreement would result in an effective price per share equal to that of the new issuance. Securities issued under the Company's 2009 Equity Compensation Plan or any shares of Common Stock issued to a strategic partner or licensee in connection with a joint venture, strategic alliance, licensing agreement, or other similar form of agreement are excluded from this price protection provision.

Price Protection on the Option Shares and Option Warrant

In the event Alternative Energy exercises the option after a Triggering Issuance, then it will be issued (in addition to the Option Shares) such additional number of shares of Common Stock, without any increase in the purchase price for the Option Shares, which when aggregated with the Option Shares (together, such additional shares and the Option Shares, the "Adjusted Share Total") would result in an effective purchase price per share of Common Stock to Alternative Energy equal to the effective price per share of Common Stock of the Triggering Issuance. In any such event, the amount of shares of Common Stock available for purchase under the Option Warrant would be adjusted to equal the Adjusted Share Total.

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