UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ______________.
Commission File Number 0-33027.
HOUSTON AMERICAN ENERGY CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 76-0675953
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
801 Travis Street, Suite 2020, Houston, Texas 77002
(Address of principal executive offices)(Zip Code)
(713) 222-6966
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
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 90 days. Yes [X] No [ ]
As of November 1, 2004, we had 19,663,089 shares of $.0001 par value Common
Stock outstanding.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
HOUSTON AMERICAN ENERGY CORP.
-----------------------------
FORM 10-QSB
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet as of September 30, 2004 . . . . . . . . . . . . . . 3
Statements of Operations for the three months and nine months
ended September 30, 2004 and September 30, 2003. . . . . . . . . . 4
Statements of Cash Flows for the nine months
ended September 30, 2004 and September 30, 2003. . . . . . . . . . 5
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . 7
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . . 12
PART II OTHER INFORMATION
Item 6. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
HOUSTON AMERICAN ENERGY CORP.
BALANCE SHEET
September 30, 2004
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 320,585
Accounts receivable 214,940
Prepaid expenses 31,925
----------------------
Total current assets 567,450
----------------------
PROPERTY, PLANT AND EQUIPMENT:
Oil and gas properties - full cost method
Costs subject to amortization 2,117,484
Costs not being amortized 239,733
Furniture and equipment 10,878
----------------------
Total property, plant and equipment 2,368,095
Accumulated depreciation and depletion (888,763)
----------------------
Total property, plant and equipment, net 1,479,332
----------------------
OTHER ASSETS 3,167
----------------------
Total Assets $ 2,049,949
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 205,462
----------------------
Total current liabilities 205,462
----------------------
LONG-TERM LIABILITIES:
Notes payable to principal shareholder 1,000,000
Reserve for plugging costs 17,875
----------------------
Total long-term liabilities 1,017,875
----------------------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 100,000,000 shares
Authorized; 19,663,089 shares outstanding 19,663
Additional paid-in capital 2,541,082
Treasury stock, 100,000 shares, at cost (85,834)
Accumulated deficit (1,648,299)
----------------------
Total stockholders' equity 826,612
----------------------
Total liabilities and stockholders' equity $ 2,049,949
======================
The accompanying notes are an integral part of these financial statements
3
HOUSTON AMERICAN ENERGY CORP.
STATEMENT OF OPERATIONS
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------- -------------------------
2004 2003 2004 2003
----------- ------------ ----------- ------------
Revenue:
Oil and gas $ 672,822 $ 144,138 $ 369,274 $ 39,743
Interest 4,995 - 692 -
----------- ------------ ----------- ------------
Total revenue 677,817 144,138 369,966 39,743
----------- ------------ ----------- ------------
Expenses of operations:
Lease operating expense 283,322 100,108 163,824 34,636
Joint venture expenses 25,637 40,998 19,589 9,417
General and administrative
Expense:
Accounting and legal 94,391 50,597 38,213 12,457
Rent 29,767 29,451 10,005 9,908
Shareholder relations 28,136 34,959 6,157 23,323
Travel and meals 14,791 2,188 5,222 -
Registration fees 8,258 362 5,020 -
Telephone and fax 3,939 6,005 1,445 2,277
Dues and subscription 9,289 2,799 3,587 674
Miscellaneous 14,335 8,324 5,978 3,152
Depreciation and depletion 88,918 41,721 31,425 23,629
Interest expense 54,000 104,772 22,400 34,241
----------- ------------ ----------- ------------
Total expenses 654,783 422,284 312,865 153,714
----------- ------------ ----------- ------------
Net income (loss) $ 23,034 $ (278,146) $ 57,101 $ (113,971)
=========== ============ =========== ============
Basic and diluted loss per share $ 0.00 $ (0.02) $ 0.00 $ (0.01)
=========== ============ =========== ============
Basic and diluted weighted
average shares 19,578,703 14,839,086 19,663,081 16,029,639
=========== ============ =========== ============
The accompanying notes are an integral part of these financial statements
4
HOUSTON AMERICAN ENERGY CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months ended September 30,
--------------------------------------------
2004 2003
--------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from operations $ 23,034 $ (278,146)
Adjustments to reconcile net income (loss)
to net cash from operations
Depreciation and depletion 88,918 41,447
Non-cash expenses 19,416 6,041
Changes in operating assets and liabilities:
(Increase) in accounts receivable (148,937) (58,809)
(Increase) decrease in prepaid expense (25,987) 5,644
(Increase) decrease in other assets 36,863 1,578
Increase in accounts payable and accrued expenses 140,176 140,297
--------------------- ---------------------
Net cash provided (used) by operations 133,483 (141,948)
--------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of properties and assets (589,163) (659,865)
Funds received in excess of prospect cost 21,650 -
--------------------- ---------------------
Net cash used by investing activities (567,513) (659,865)
--------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 91,193 837,160
Loans from shareholders - 194,200
--------------------- ---------------------
Net cash provided by financing activities 91,193 1,031,360
--------------------- ---------------------
Increase (decrease) in cash and equivalents (342,837) 229,547
Cash, beginning of period 663,422 942
--------------------- ---------------------
Cash, end of period $ 320,585 230,489
===================== =====================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 36,000 $ -
SUPPLEMENTAL NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Stock issued for financial public relations 103,000 -
Stock issued for oil and gas activity 47,500 -
Notes payable for oil and gas activity - 11,111
The accompanying notes are an integral part of these financial statements
5
HOUSTON AMERICAN ENERGY CORP.
Notes to Financial Statements
September 30, 2004
(Unaudited)
NOTE 1. - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Houston American Energy
Corp., a Delaware corporation (the "Company") have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B. They do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for a complete financial presentation. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation, have been included in the
accompanying unaudited financial statements. Operating results for the periods
presented are not necessarily indicative of the results that may be expected for
the full year.
These financial statements should be read in conjunction with the financial
statements and footnotes, which are included as part of the Company's Form
10-KSB for the year ended December 31, 2003.
NOTE 2. - CHANGES IN PRESENTATION
Certain financial presentations for the periods presented for 2003 have been
reclassified to conform to the 2004 presentation.
NOTE 3. - COMMON STOCK
During the nine months ended September 30, 2004, the Company (1) issued 227,983
shares of its common stock for cash consideration of $91,193, (2) in conjunction
with an agreement with an individual to assist the Company in locating viable
oil and gas prospects, issued 50,000 shares of its common stock, valued at
$47,500, and granted an interest equal to 10% of the Company's interest in any
prospects generated by the individual's contacts, and (3) issued 100,000 shares
of its common stock, valued at $103,000, for financial public relations services
over a six month period. The value of the shares issued for financial public
relations services was recorded as prepaid expense and charged to shareholders
relations expense ratably over the life of the contract. During September 2004,
the Company entered into negotiations to terminate the financial public
relations contract as a result of disputes relating to performance under the
contract. Subsequent to September 30, 2004, the financial public relations
contract was terminated, the 100,000 shares originally issued under the contract
were returned to the Company and the Company paid $5,000 in full settlement of
the contract. As a result of the termination and settlement of the public
relations contract, during the quarter ended September 30, 2004, the Company
recorded shareholder relations expense of $5,000, credited $85,834 against
prepaid expenses and recorded treasury stock in the amount of $85,834.
NOTE 4. - CONTINGENCY
During the nine months ended September 30, 2004, the Company was named as
defendant in a suit filed in the United States Bankruptcy Court for the Southern
District of Texas. The plaintiff alleges that expenses relating to the
formation and operation of the Company were paid by Moose Oil and Gas or Moose
Operating Company, that interests in certain oil and gas properties were
transferred to the Company from Moose Oil and Gas or Moose Operating Company and
that the alleged payments and transfers constituted fraudulent transfers and
voidable preferences. The plaintiff seeks to recover all properties alleged to
have been wrongfully transferred as well as costs of suit and other relief. The
Company believes that the action is without merit and intends to vigorously
contest the same.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD-LOOKING INFORMATION
This Form 10-QSB quarterly report of Houston American Energy Corp. (the
"Company") for the nine months ended September 30, 2004, contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which are intended to be covered by the safe harbors created
thereby. To the extent that there are statements that are not recitations of
historical fact, such statements constitute forward-looking statements that, by
definition, involve risks and uncertainties. In any forward-looking statement,
where the Company expresses an expectation or belief as to future results or
events, such expectation or belief is expressed in good faith and believed to
have a reasonable basis, but there can be no assurance that the statement of
expectation or belief will be achieved or accomplished.
The following are factors that could cause actual results or events to differ
materially from those anticipated, and include, but are not limited to: general
economic, financial and business conditions; the Company's ability to minimize
expenses and exposures related to its oil and gas properties in which other
companies have control over the operations conducted on such properties; results
of drilling activities; changes in and compliance with governmental laws and
regulations, including various state and federal environmental regulations; the
Company's ability to obtain additional necessary financing from outside
investors and/or bank and mezzanine lenders, if needed, to support operations
and leasing and drilling activities; and Company's dependence upon John
Terwilliger who serves as the Company's sole officer.
Readers are cautioned not to place undue reliance on the forward-looking
statements contained herein, which speak only as of the date hereof. The Company
believes the information contained in this Form 10-QSB to be accurate as of the
date hereof. Changes may occur after that date, and the Company will not update
that information except as required by law in the normal course of its public
disclosure practices. The oil and gas industry is subject to volatile price
movements based on various factors including supply and demand and other factors
beyond the control of the Company. While the industry has generally benefited
from higher prices during the past two years, sudden and/or sustained decreases
in energy prices can occur, which could limit our ability to fund planned levels
of capital expenditures.
Additionally, the following discussion regarding the Company's financial
condition and results of operations should be read in conjunction with the
financial statements and related notes contained in Item 1 of Part 1 of this
Form 10-QSB, as well as the financial statements in Item 7 of Part II of the
Company's Form 10-KSB for the fiscal year ended December 31, 2003.
CRITICAL ACCOUNTING POLICIES
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The Company believes certain critical accounting
policies affect its more significant judgments and estimates used in the
preparation of its financial statements. A description of the Company's
critical accounting policies is set forth in the Company's Form 10-KSB for the
year ended December 31, 2003. As of, and for the nine months ended, September
30, 2004, there have been no material changes or updates to the Company's
critical accounting policies other than the following updated information
relating to Unevaluated Oil and Gas Properties:
7
UNEVALUATED OIL AND GAS PROPERTIES. Unevaluated oil and gas properties not
subject to amortization include the following at September 30, 2004:
Acquistion costs $147,330
Evalution costs 92,403
--------
Total $239,733
========
CURRENT YEAR DEVELOPMENTS
Drilling Activities
Through September 30, 2004, the Company has drilled three on-shore domestic
wells as follows:
- A test well in San Patricio County, Texas, the Saint Paul Prospect Garza
#1, was drilled in January 2004 and completed as a natural gas well.
Natural gas sales from the well began March 1, 2004. The Company holds a 5%
working interest in the well.
- A test well in Vermillion Parish, Louisiana, the LaFurs #F-16, was drilled
in May 2004 and completed as a natural gas well. Natural gas sales from the
well began in September 2004. The Company holds a 3% working interest in
the well.
- A test well in Acadia Parish, Louisiana, the Baronet #1, on the 620-acre
Crowley Prospect, was drilled in September 2004. After reaching a depth of
12,042 feet, the well encountered a stuck drill pipe. The well was plugged
back and a side track attempt was made. After encountering a second stuck
drill pipe and following negotiations with the operator, the well was taken
off of turnkey, intermediate casing was set and a completion rig is being
contracted with the objective of completing a well in the Camerina sands
that produced gas shows. The well has since been completed in a Camerina
sand and production is awaiting a hook-up to a sales line. A second rig is
being contracted to drill a new well to test the Hayes sands on the
prospect. The completion rig and a new rig to drill the second well on the
property are expected to be on location by the end of 2004. The Company
holds a 3% working interest in the well.
The Company and its partners plan to drill, or to have commenced drilling, up to
five additional on-shore domestic wells through the end of 2004, including the
well proposed to be drilled on the Crowley Prospect discussed above, the
Hutchins Peareson #1 and the Hutchins Peareson #2 on a 280 leasehold in Wharton
County, Texas in which the Company will have a 9.5% carried working interest to
the casing point, the Donner Field well on a 194 acre leasehold in Terrebonne
Parish, Louisiana in which the Company will have a 1.25% carried working
interest to the casing point, and a well on the 300 acre Baker Bay Prospect in
Plaquemines Parish, Louisiana in which the Company will have a 2.4% working
interest. Both the Hutchins Peareson #1 and the Hutchins Peareson #2 were
drilled subsequent to September 2004 and were dry holes.
Through September 30, 2004, the Company has drilled seven international wells in
Colombia as follows:
- Drilling of five offset wells on the Cara Cara concession in Colombia was
completed with production commencing on the Jaguar #2 in March 2004, the
Bengala #2 in April 2004, the Jaguar #6 in July 2004 and the Jaguar #12 in
September 2004. The fifth well, the Cara Cara #1 is shut in pending
evaluation. A sixth offset well on the Cara Cara concession, the Jaguar
#3A, began drilling in September 2004 and was successfully completed with
production commencing in October 2004. The Company holds a 1.59% working
interest in each of the wells.
8
- An oil well, the Tambaqui #2, was drilled and successfully completed under
the Company's Tambaqui Association Contract in Columbia and began
production in June 2004. The Company holds a 12.6% working interest and an
11.59% net revenue interest in the well.
The Company and its partners plan to drill up to 3 additional wells on the Cara
Cara concession through the end of 2004.
Leasehold Activities
During the nine months ended September 30, 2004, we invested approximately
$167,451 for the acquisition of oil and gas properties, consisting of (1)
acquisition of a 3% interest in the North Freshwater Bayou Field in Louisiana,
(2) acquisition of a 100% interest in the South Sibley Prospect, and (3)
acquisition of a 50% interest in the Southern Star Wharton Prospect.
In September 2004, the Company sold its 50% interest in a 280 acre leasehold in
Wharton County, Texas to an independent exploration and production company. The
Company received funds in excess of its acquisition cost on the Wharton County
lease. The excess proceeds from the sale, totaling approximately $21,650, were
applied to reduce the cost of oil and gas properties. Pursuant to the terms of
the sale, the buyer agreed to drill two wells on the prospect with the Company
retaining a carried working interest of 9.5% to the casing point and a net
revenue interest of 7.125%.
Other Developments
In August 2004, the Company joined a Libya Study Group consisting of twelve oil
companies for the purpose of developing drilling prospects and applying for
concessions to exploit drilling opportunities in Libya. The study group plans
to have completed the process of defining prospects followed by a formal request
for drilling concessions in early 2005.
In September 2004, the Company approved the payment of a salary of $15,000 per
month, commencing in October 2004, to John Terwilliger, the Company's President
and Chief Executive Officer. Mr. Terwilliger had previously served without
compensation.
RESULTS OF OPERATIONS
Oil and Gas Revenues. Total oil and gas revenues increased $528,684 to $672,822
in the nine months ended September 30, 2004 when compared to the nine months
ended September 30, 2003. The increase in revenue is due to (1) increased
production resulting from the development of the Columbian fields and the new
domestic wells that have come on line during 2003 and the first nine months of
2004 and (2) increases in oil prices. The Company had interests in 7 producing
wells in Columbia and 6 producing wells in the U.S. during the 2004 period as
compared to 2 producing wells in Columbia and 2 producing wells in the U.S.
during the 2003 period. Average prices from sales were $32.22 per barrel of oil
and $5.35 per mcf of gas during the nine months ended September 30, 2004 as
compared to $23.03 per barrel of oil and $5.00 per mcf of gas during the same
period in 2003. Following is a summary comparison, by region, of oil and gas
sales for the periods.
Columbia U.S. Total
--------- -------- --------
2004 Period
Oil sales $ 423,614 $ 16,489 $440,103
Gas sales - 232,719 232,719
2003 Period
Oil sales 105,755 1,478 107,233
Gas sales - 36,905 36,905
9
Lease Operating Expenses. Lease operating expenses, excluding joint venture
expenses relating to our Columbian operations discussed below, increased 183% to
$283,322 in the 2004 nine month period from $100,108 in the 2003 period. The
increase in lease operating expenses was attributable to the increase in the
number of wells operated during the 2004 period. Following is a summary
comparison of lease operating expenses for the periods.
Columbia U.S. Total
--------- ------- --------
2004 Period $ 255,676 $27,646 $283,322
2003 Period 90,252 9,856 100,108
Joint Venture Expenses. Joint venture expenses, representing our allocable
share of administrative expenses from our Colombian joint venture, totaled
$25,637 for the nine months ended September 30, 2004. During the same period in
2003 joint venture expense was $40,998.
Depreciation and Depletion Expense. Depreciation and depletion expense was
$88,918 and $41,721 for the nine months ended September 30, 2004 and 2003
respectively. The increase is due to the increase in domestic and Columbian
production and increased investment in oil and gas properties.
Interest Expense. Interest expense totaled $54,000 for the nine months ended
September 30, 2004 as compared to $104,772 for the 2003 period. The reduction in
interest expense was attributable to reduced debt relating to the conversion of
certain debt to equity in 2003 and a reduction in the interest rate.
General and Administrative Expenses. General and administrative expense
increased by 50.6% to $202,906 during the first nine months of 2004 from
$134,685 in the 2003 period. The increase in general and administrative expense
was primarily attributable to increased professional fees ($43,794) arising
principally from litigation commenced during the 2004 period.
FINANCIAL CONDITION
Liquidity and Capital Resources. At September 30, 2004, we had a cash balance
of $320,585 and working capital of $361,988 compared to a cash balance of
$663,422 and working capital of $654,451 at December 31, 2003. Part of that
working capital for September 30, 2004 consisted of prepaid drilling cost,
prepaid legal fees and prepaid financial public relations fees. Prepaid
drilling cost, totaling $12,600 at September 30, 2004, related to the Jaguar #3A
well which was completed subsequent to September 30, 2004. Prepaid legal
expenses, totaling $18,000 at September 30, 2004, relate to litigation against
the Company under the Moose Oil Company bankruptcy. The Company believes there
is no merit to the claims made against the Company.
The Company previously issued 100,000 shares of its common stock, valued at
$103,000, for financial public relations services over a six month period. The
value of the shares issued for financial public relations services was recorded
as prepaid expense and charged to shareholders relations expense ratably over
the life of the contract. During September 2004, the Company entered into
negotiations to terminate the financial public relations contract as a result of
disputes relating to performance under the contract. Subsequent to September
30, 2004, the financial public relations contract was terminated, the 100,000
shares originally issued under the contract were returned to the Company and the
Company paid $5,000 in full settlement of the contract. As a result of the
termination and settlement of the public relations contract, during the quarter
ended September 30, 2004, the Company recorded shareholder relations expense of
$5,000, credited $85,834 against prepaid expenses and recorded treasury stock in
the amount of $85,834.
10
As discussed in our prior financial statements, our revenue was previously
insufficient to cover our costs and expenses. In addition to the income
received from our wells, certain significant shareholders, including John F.
Terwilliger, our sole director and executive officer, previously provided us the
funds needed to continue our development and operations. During the quarter and
nine months ended September 30, 2004, the Company, for the first time, operated
profitably and with positive cash flow. At current production levels and
prices, our operations are self-supporting from a cash flow standpoint.
Management anticipates raising any necessary funds for major capital
expenditures from outside investors or commercial bank or mezzanine lenders.
During the nine months ended September 30, 2004, the Company (1) issued 227,983
shares of its common stock for cash consideration of $91,193, (2) in conjunction
with an agreement with an individual to assist the Company in locating viable
oil and gas prospects, issued 50,000 shares of its common stock, valued at
$47,500, and granted an interest equal to 10% of the Company's interest in any
prospects generated by the individual's contacts, and (3) issued 100,000 shares
of its common stock, valued at $103,000, for financial public relations services
over a six month period. As noted above, the Company terminated the financial
public relations service contract and the 100,000 shares previously issued in
connection with the contract were returned to the Company and are reflected as
treasury stock.
Loans from shareholders totaled $1,000,000 at September 30, 2004.
Capital and Exploration Expenditures and Commitments. Our principal capital and
exploration expenditures relate to our ongoing efforts to acquire, drill and
complete prospects. Historically, we funded our capital and exploration
expenditures from funds borrowed from John F. Terwilliger, our principal
shareholder and officer, and from sales of common stock. We expect that future
capital and exploration expenditures will be funded principally through
additional stock offerings, mezzanine loans, funds on hand and funds generated
from operations.
During the nine months ended September 30, 2004, we invested approximately
$589,163 for the acquisition and development of oil and gas properties,
consisting of (1) acquisition of a 3% interest in the North Freshwater Bayou
Field in Louisiana, (2) acquisition of a 100% interest in the South Sibley
Prospect, (3) acquisition of a 50% interest in the Southern Star Wharton
Prospect, (4) consulting fee in forming the joint venture with a private company
and (5) drilling and/or completing expenses for the Jaguar #2, Bengala #1, Cara
Cara #1, Tambaqui #2, Jaguar #6, Jaguar #12 and Jaguar #3A wells in Colombia and
the Garza #1, LaFurs #F-16 and Baronet #1 in the U.S.
Our only material contractual obligations requiring determinable future payments
on our part are a note payable to our principal shareholder and our lease
relating to our executive offices which were unchanged when compared to the 2003
Form 10-K.
In addition to the contractual obligations requiring that we make fixed
payments, in conjunction with our efforts to secure oil and gas prospects,
financing and services, we have, from time to time, granted overriding royalty
interests (ORRI) in various properties, and may grant ORRIs in the future,
pursuant to which we will be obligated to pay a portion of our interest in
revenues from various prospects to third parties. As of September 30, 2004, we
had granted ORRIs to affiliates, including our President, ranging from 1.0% to
4.02166% of our interest in selected properties.
At September 30, 2004, we had 7 revenue producing wells in Columbia, three
revenue producing wells in south Texas, two revenue producing well in south
Louisiana and one producing well in Oklahoma.
11
Management anticipates that our current financing strategy of private debt and
equity offerings, combined with an expected increase in revenues, will meet our
anticipated objectives and business operations for the next 12 months.
Management continues to evaluate producing property acquisitions as well as a
number of drilling prospects. Subject to our ability to obtain adequate
financing at the applicable time, we may enter into definitive agreements on one
or more of those projects.
OFF-BALANCE SHEET ARRANGEMENTS
We had no off-balance sheet arrangements or guarantees of third party
obligations at September 30, 2004.
INFLATION
We believe that inflation has not had a significant impact on our operations
since inception.
ITEM 3. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures under the supervision and with the participation of our chief
executive officer ("CEO") who also serves as chief financial officer. Based on
this evaluation, our management, including the CEO, concluded that our
disclosure controls and procedures were effective. There have been no
significant changes in our internal controls or in other factors that could
significantly affect internal control subsequent to the evaluation.
PART II
ITEM 6. EXHIBITS
Exhibit
Number Description
-------- ------------------------------------------------------------------------
31.1 Certification of CEO and CFO pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
HOUSTON AMERICAN ENERGY CORP.
By: /s/ John Terwilliger
John Terwilliger
CEO and President
Date: November 9, 2004
13