Houston American Energy (HUSA) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited condensed consolidated financial statements detail financial position, performance, and cash flows, with accompanying notes Condensed Consolidated Balance Sheets Total assets and shareholders' equity nearly doubled due to cash and new stock issuances, despite increased liabilities | Metric | Dec 31, 2024 | Jun 30, 2025 | Change | | :----- | :----------- | :----------- | :----- | | Total Assets | $4,401,795 | $8,715,938 | +98.0% | | Cash | $2,960,151 | $6,951,006 | +134.8% | | Refundable acquisition deposit | $- | $160,000 | N/A | | Total Liabilities | $195,488 | $304,603 | +55.8% | | Total Shareholders' Equity | $4,206,307 | $8,411,335 | +99.9% | Condensed Consolidated Statements of Operations Net loss significantly increased in 2025 due to higher general and administrative expenses and reduced other income | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Oil and Gas Revenue | $110,557 | $115,805 | $212,902 | $263,490 | | Total Operating Expenses | $1,933,036 | $526,057 | $3,097,364 | $1,081,872 | | Loss from Operations | $(1,822,479) | $(410,252) | $(2,884,462) | $(818,382) | | Total Other Income | $27,639 | $321,167 | $57,139 | $713,597 | | Net Loss | $(1,794,840) | $(89,085) | $(2,827,323) | $(104,785) | | Basic and Diluted Loss per Common Share | $(1.11) | $(0.08) | $(1.81) | $(0.10) | - General and administrative expenses increased significantly due to professional fees related to the acquisition of AGIG[12][86] - Other income decreased substantially as the company received no income in 2025 from Hupecol Meta LLC, an interest relinquished at the end of 2024[12][88] Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity nearly doubled from common stock issuances for cash, offsetting the accumulated deficit | Metric | Dec 31, 2024 | Jun 30, 2025 | Change | | :----- | :----------- | :----------- | :----- | | Total Shareholders' Equity | $4,206,307 | $8,411,335 | +99.9% | | Additional Paid-in Capital | $89,420,107 | $96,451,859 | +7.9% | | Accumulated Deficit | $(85,215,109) | $(88,042,432) | -3.3% | | Shares Issued and Outstanding | 1,308,653 | 1,908,385 | +45.8% | - Issuance of common stock for cash, net, contributed $3,819,495 in Q1 2025 and $3,148,770 in Q2 2025, significantly boosting additional paid-in capital[13] Condensed Consolidated Statements of Cash Flows Operating cash flow became an outflow in 2025 due to professional fees, but significant financing activities led to a net cash increase | Cash Flow Activity | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----------------- | :---------------------------- | :---------------------------- | | Net Cash (Used in) Provided by Operating Activities | $(2,817,410) | $87,803 | | Net Cash Used in Investing Activities | $(160,000) | $(766,216) | | Net Cash Provided by Financing Activities | $6,968,265 | $- | | Increase (Decrease) in Cash | $3,990,855 | $(678,413) | | Cash, End of Period | $6,951,006 | $3,380,769 | - Operating cash flow decreased significantly due to professional fees related to the AGIG acquisition[15][90] - Financing activities provided substantial cash ($6.97 million) from the issuance of common stock for cash[15][92] Notes to Condensed Consolidated Financial Statements Detailed notes provide explanations and disclosures for the unaudited condensed consolidated financial statements and corporate actions NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Unaudited GAAP financial statements assume going concern despite an $88 million accumulated deficit and funding doubts, operating as a single segment - The company has an accumulated deficit of $88 million as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern[22][25] - The company's ability to continue as a going concern is dependent on drawing down funds from the ELOC Purchase Agreement and developing additional capital sources[26] - The company manages its business as a single operating and reportable segment[21] - A 1-for-10 reverse stock split was effected on June 6, 2025, retroactively adjusted in financial statements[19] NOTE 2 - REVENUE FROM CONTRACTS WITH CUSTOMERS Total oil and gas revenue decreased in both periods of 2025 compared to 2024, primarily due to lower oil sales | Revenue Type | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Oil sales | $84,659 | $102,923 | $151,216 | $205,971 | | Natural gas sales | $2,614 | $(8,248) | $21,041 | $8,068 | | Natural gas liquids sales | $23,284 | $21,130 | $40,646 | $49,452 | | Total revenue | $110,557 | $115,805 | $212,902 | $263,490 | NOTE 3 - OIL AND GAS PROPERTIES Depletion expense increased in 2025 compared to the prior year, with all oil and gas properties located in the United States | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Depletion Expense | $44,804 | $28,107 | $66,689 | $63,085 | - All company properties are located in the United States[38] NOTE 4 - STOCK-BASED COMPENSATION EXPENSE Stock-based compensation expense significantly increased in 2025 due to new option grants and stock issuances for services | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Stock-based compensation expense | $50,029 | $12,746 | $64,086 | $63,413 | - The company granted options to its former CEO and a board member in early 2025, with varying exercise prices and vesting schedules[43] - As of June 30, 2025, there was $82,012 of unrecognized stock-based compensation expense[44] NOTE 5 - CAPITAL STOCK Common stock outstanding significantly increased through multiple direct offerings in 2025, raising substantial net proceeds, and a 1-for-10 reverse stock split was effected - The company sold 260,000 shares in January 2025, generating approximately $3.8 million in net proceeds[47] - In June 2025, the company sold 174,100 shares and 49,662 pre-funded warrants, yielding about $2.1 million in net proceeds[48] - An additional 81,629 shares were sold in June 2025, bringing in approximately $1.1 million in net proceeds[49] - A 1-for-10 reverse stock split was effected on June 6, 2025, reducing outstanding shares from approximately 15.7 million to 1.6 million[53] NOTE 6 - EARNINGS PER COMMON SHARE Basic and diluted net losses per common share significantly increased in 2025, driven by higher net losses and more shares outstanding | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Net Loss | $(1,794,840) | $(89,085) | $(2,827,323) | $(104,785) | | Weighted Average Common Shares - Basic | 1,623,011 | 1,090,635 | 1,564,380 | 1,090,635 | | Loss per Common Share - Basic and Diluted | $(1.11) | $(0.08) | $(1.81) | $(0.10) | - Options and warrants were excluded from diluted EPS calculation due to their anti-dilutive effect in periods of net loss[55] NOTE 7 - COMMITMENTS AND CONTINGENCIES The company has an operating lease for office facilities expiring in October 2025, with remaining future payments of $30,020 | Year | Amount | | :--- | :----- | | 2025 | $30,020 | | Total future lease payments | $30,020 | | Present value of future operating lease payments | $29,285 | - The weighted-average remaining lease term is 0.58 years with a weighted average discount rate of 12%[57] NOTE 8 - SUBSEQUENT EVENTS Post-quarter, the company completed a share exchange with AGIG, changing control and management, and secured a $100 million equity line and $5 million convertible note for an industrial site - On July 1, 2025, the company acquired all outstanding units of AGIG, issuing 31,778,032 shares of common stock, resulting in AGIG Unitholders owning 94% of the company and a change of control[58][72] - New management was appointed, including Edward Gillespie as CEO and Lucie Harwood as CFO[59][73] - On July 10, 2025, the company entered into a 24-month committed equity financing facility (ELOC Purchase Agreement) for up to $100 million with an institutional investor[60][74] - On July 10, 2025, the company also secured a senior secured convertible note for $5,434,783, with $5 million gross proceeds used to purchase a 25-acre industrial site in Baytown, Houston, for approximately $8.5 million[61][63][75][77] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The company is transitioning from oil and gas to diversified energy by acquiring AGIG, resulting in higher expenses and net loss, but a strengthened cash position Forward-Looking Information Cautions that the report contains forward-looking statements with inherent risks and uncertainties, where actual results may differ from expectations - Statements in this report that are not historical facts are forward-looking and involve risks and uncertainties[65] - Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the report date[67] Overview The company is transitioning from oil and gas to diversified energy by acquiring AGIG, a waste-to-renewable fuels and chemicals platform - The company previously operated as an independent oil and gas company with properties in the U.S. Permian Basin and Louisiana Gulf Coast[69] - In November 2024, a new management team was recruited to diversify and explore opportunities in oil and gas, renewable energy, and energy transition technologies[70] - On July 1, 2025, the company acquired Abundia Global Impact Group (AGIG), a technology-driven platform for converting waste into renewable fuels and chemicals[70] Recent Developments Completed the AGIG Share Exchange, changing control and management, and secured a $100 million equity line and $5 million convertible note for an industrial site - The Share Exchange with AGIG was completed on July 1, 2025, leading to AGIG Unitholders owning 94% of the company and a change in control[72] - New CEO Edward Gillespie and CFO Lucie Harwood were appointed following the Share Exchange[73] - A 24-month committed equity financing facility of up to $100 million was secured on July 10, 2025[74] - A senior secured convertible note for $5.43 million (gross proceeds $5 million) was issued on July 10, 2025, to fund the acquisition of a 25-acre industrial site for approximately $8.5 million[75][77] Critical Accounting Policies No material changes to critical accounting policies as of June 30, 2025, consistent with the prior year's Form 10-K - No material changes or updates to critical accounting policies for the three and six months ended June 30, 2025[79] Reverse Stock Split A 1-for-10 reverse stock split on June 6, 2025, retroactively adjusted all share and per share data - A 1-for-10 reverse stock split was effected on June 6, 2025, reducing outstanding common stock shares[80] Results of Operations Oil and gas revenues decreased, while operating and G&A expenses significantly increased, resulting in a larger net loss and reduced other income | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | | :----- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Oil and Gas Revenues | $110,557 (-5%) | $115,805 | $212,902 (-19%) | $263,490 | | Net oil production (Bbl) | 1,363 | 1,091 | 2,298 | 2,690 | | Average sales price – oil (per barrel) | $62.11 | $79.71 | $65.80 | $76.56 | | Lease Operating Expenses | $228,226 (+60%) | $142,203 | $304,251 (unchanged) | $305,233 | | General and Administrative Expense (excl. stock-based comp) | $1,609,977 (+369%) | $343,001 | $2,662,338 (+310%) | $650,141 | | Stock-Based Compensation | $50,029 (+293%) | $12,746 | $64,086 (+6%) | $60,413 | | Other Income (Expense), net | $27,639 (-91%) | $321,167 | $57,139 (-92%) | $713,597 | - Revenue decrease was primarily due to one well being shut down and natural production decline[81][82] - Increase in lease operating expenses was due to repair costs for the shut-down well[84] - Significant increase in G&A expenses was attributable to professional fees for the AGIG acquisition[86] - Other income declined due to no income from Hupecol Meta LLC in 2025[88] Financial Condition Cash and working capital significantly improved from common stock sales, with operating activities using cash and financing activities providing funds | Metric | Jun 30, 2025 | Dec 31, 2024 | Change | | :----- | :----------- | :----------- | :----- | | Cash Balance | $6,951,006 | $2,960,151 | +134.8% | | Working Capital | $7,225,589 | $3,072,783 | +135.1% | - Cash increase was primarily due to the sale of 260,000 shares in January 2025 and 255,729 shares plus 49,662 pre-funded warrants in June 2025[89] - Operating activities used $2,817,410 of cash in the six months ended June 30, 2025, compared to $87,803 provided in the prior year, mainly due to professional fees for the AGIG acquisition[90] - Financing activities provided $6,968,265 in the six months ended June 30, 2025, from common stock sales, compared to $0 in the prior year[92] Off-Balance Sheet Arrangements No off-balance sheet arrangements or third-party guarantees existed as of June 30, 2025 - No off-balance sheet arrangements or third-party guarantees as of June 30, 2025[94] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from market risk disclosures as it qualifies as a smaller reporting company - The company is exempt from providing market risk disclosures as a smaller reporting company[95] Item 4. Controls and Procedures Internal control over financial reporting was ineffective due to material weaknesses in accounting knowledge, experience, and segregation of duties - Internal control over financial reporting was not effective as of June 30, 2025[96] - Material weaknesses identified include a lack of appropriate accounting knowledge and experience for public company financial reporting, especially for reserve inputs, asset retirement obligations, DDA calculation, and full cost ceiling tests, and a lack of segregation of duties[96] - The company is relying on third-party consultants to assist in remedying these material weaknesses[96] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[97] PART II—OTHER INFORMATION Item 1. Legal Proceedings No material legal proceedings are currently pending that would adversely affect the company's business or financial condition - No material legal proceedings are currently pending against the company[99] Item 1A. Risk Factors Outlines risks from the Share Exchange, combined company ownership, AGIG's operations, manufacturing, regulatory compliance, intellectual property, and general economic factors Risks Related to the Share Exchange Post-Share Exchange business success is not guaranteed, and loss of key personnel or unmet investor expectations could negatively impact the company - The company's ability to successfully operate and grow the business related to the Share Exchange is not guaranteed, and the loss of key personnel could have a material adverse effect[100] - If the benefits of the Share Exchange do not meet investor expectations, the market price of the company's securities may decline and be volatile[101] Risks Related to the Combined Company and our Ownership Structure After the Share Exchange Existing stockholders face significant dilution, and AGIG Unitholders will control the combined company, operating as a "controlled company" exempt from some governance rules - HUSA stockholders will experience dilution due to the issuance of additional shares in the Share Exchange, limiting their influence on management[102] - AGIG Unitholders will beneficially own approximately 94% of the voting power, giving them substantial control over the combined company[103] - The combined company will be a "controlled company" under NYSE American rules, potentially exempting it from certain corporate governance requirements (e.g., independent directors on the board and committees)[104] - Anti-takeover provisions under Delaware corporate law (Section 203 DGCL) may make it difficult to replace the board or deter acquisitions[105] - AGIG may have unknown, unasserted, or contingent liabilities that could adversely affect financial results[106] - AGIG will require additional capital to fund operations and may not be able to secure it on acceptable terms, leading to potential delays or elimination of development programs[107] Risks Related to AGIG's Business and Operations AGIG's history of losses raises going concern doubts, compounded by material internal control weaknesses, variable financial results, and a need for substantial financing - AGIG has incurred net losses since inception ($3.6 million in 2024, $2.1 million in H1 2025) and expects to continue incurring losses, raising substantial doubt about its ability to continue as a going concern[113][114] - Material weaknesses in AGIG's internal controls over financial reporting have been identified, particularly regarding the formal control environment, control activities, risk assessment for segregation of duties, and accounting for significant/unusual transactions[115][116][117] - AGIG's financial results could vary significantly quarter-to-quarter due to factors like cash resource use, timing of R&D releases, product popularity, competitor actions, and market entry success[119][123] - AGIG will require substantial additional financing for operations and commercialization, which may not be available on favorable terms, potentially forcing delays or reductions in programs[121][124] - AGIG's technology may not be successful in developing commercial products due to funding issues, regulatory approvals, competition, or commercialization challenges[125][128] - Failure to effectively manage growth and expand operations could damage AGIG's reputation and business results[126][129] - AGIG operates in a competitive bio-mass to liquid fuel market, facing established and new competitors with greater resources and market share[130][132] - AGIG relies on industry partners for growth, and failure to maintain these relationships or accurately forecast demand could adversely affect its business[133][134][136] Risks Related to AGIG's Manufacturing and Commercialization AGIG's manufacturing and commercialization success is vulnerable to technological obsolescence, feedstock price/supply fluctuations, and scaling/cost reduction challenges - Technological innovation by competitors could render AGIG's technology and products uneconomical[140] - Fluctuations in waste-based feedstock prices and supply, as well as raw material costs, could affect AGIG's cost structure, margins, and ability to compete[141][142][144] - AGIG's success is highly dependent on its technology platform, and problems with engineering or data analysis could harm its business[143] - Inability to successfully add additional process trains or overcome manufacturing capacity issues could prevent AGIG from meeting customer demand and achieving profitability[146][147] - Declines in feedstock availability or increased competition for them could force AGIG to delay production, raise prices, and reduce demand/revenue[148] - Failure to continuously reduce operating and capital costs for facilities may impact product adoption and negatively affect AGIG's business[149] - Construction of AGIG's facilities may face delays or increased costs due to regulatory, environmental, political, and legal uncertainties[150] - Supply chain issues for critical components could impact technology deployment cost estimates and schedule timelines[152][153] Risks Related to AGIG's Legal, Regulatory, and Environmental, Health and Safety Matters AGIG faces significant risks from hazardous materials, extensive regulations, and complex permitting for deployment sites, with non-compliance leading to fines and operational harm - AGIG and its partners use hazardous materials and must comply with extensive environmental, health, and safety laws; non-compliance could lead to liability, fines, and operational disruption[154] - AGIG is subject to extensive international, national, and subnational laws and regulations, and changes or non-compliance could materially adversely affect its business, especially with international expansion[155][157] - Technology deployment sites require permitting and planning, often in line with petrochemical standards, and delays or inability to secure these could adversely affect deployment schedules[158][159] - Product liability claims, defects, or errors in offerings could result in significant expense, diversion of management time, and damage to business and reputation[162][163][164] Risks Related to AGIG's Intellectual Property AGIG's competitive advantage is vulnerable due to non-exclusive licenses, IP disputes, trade secret protection issues, costly infringement claims, and patent enforcement challenges - AGIG has non-exclusive service agreements or licenses to some intellectual property, and disputes over ownership with partners could harm commercialization plans[165] - Failure to protect proprietary technology through patents, trademarks, and trade secrets may significantly impair AGIG's competitive advantage, especially in foreign countries[166] - Patent rights may not provide commercially meaningful protection against competition, and existing or pending patents could be challenged or invalidated[167] - AGIG may face costly intellectual property infringement claims, leading to litigation, damages, and diversion of resources[169][170][171] - Reliance on trade secrets is risky as they are difficult to protect and enforce, and independent discovery by competitors could harm AGIG's business[173][174][175][176][177] - AGIG depends on licensed technologies and does not control their intellectual property rights, making it vulnerable to issues with licensors or adverse legal actions against them[178][179] General Risks Related to AGIG AGIG faces risks from changing governmental incentives, market price volatility, currency fluctuations, adverse macroeconomic conditions, and depends on retaining key personnel and robust IT systems - Governmental programs incentivizing low carbon fuels could be repealed or changed, decreasing demand and revenue for AGIG's products[180][181] - Market prices for alternatively produced products are volatile, and AGIG's reliance on its own market research for forecasts carries risks[182] - Significant fluctuations in U.S. dollar to Euro exchange rates could impact AGIG's results of operations, cash position, and funding requirements, despite hedging efforts[183][184][185] - Conditions in financial markets and the broader economy, including inflation and bank failures, may adversely affect AGIG's ability to raise capital, execute its business plan, or remain in business[186][187][188] - The loss of key personnel or inability to attract and retain additional qualified management and technical staff could harm AGIG's ability to meet business objectives[189] - Significant disruptions in information technology systems, including security breaches or failure to implement new systems, could adversely affect business operations and financial condition[190][191][192] - Natural or man-made disasters, social/economic/political instability, and pandemics may significantly disrupt AGIG's and its partners' businesses[193] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds[194] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - No defaults upon senior securities[194] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[194] Item 5. Other Information No other information was reported for the period - No other information[195] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including corporate amendments, purchase agreements, agency agreements, and certifications - Includes Certificate of Amendment of the Certificate of Incorporation, Securities Purchase Agreements, Placement Agency Agreements, and certifications (31.1, 31.2, 32.1, 32.2)[196] SIGNATURES SIGNATURES The report is signed by Edward Gillespie (CEO) and Lucie Harwood (CFO) on August 14, 2025 - Signed by Edward Gillespie (CEO) and Lucie Harwood (CFO) on August 14, 2025[201]