Filing summary
Entity mismatch: The request identifies Abundia Global Impact Group, Inc., but the supplied Form 10-Q is for Houston American Energy Corp. (NYSE American: HUSA). It reports the quarter ended March 31, 2020; the financial statements are unaudited.
Business context and results
The company explores and produces oil and gas, with properties in the United States and Colombia. First-quarter revenue came entirely from U.S. production. Revenue fell 41% year over year to $147,136, reflecting lower production volumes and weaker realized commodity prices.
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Oil and gas revenue | $147,136 | $250,720 |
| Operating expenses | $975,234 | $491,707 |
| Operating loss | $828,098 | $240,987 |
| Net loss | $850,990 | $239,620 |
| Net loss attributable to common shareholders | $908,590 | $297,228 |
| Basic and diluted loss per share | $0.01 | $0.00 |
| Cash used in operating activities | $378,402 | $202,071 |
Financial position, cash flow, and capital
- At March 31, cash was $2.92 million, versus $97,915 at year-end 2019; working capital was $2.80 million, compared with a $748,426 deficit.
- Total assets were $9.91 million and total liabilities were $485,772. The $621,052 related-party bridge loan was repaid in full during the quarter; remaining liabilities principally included lease obligations and plugging-and-abandonment reserves.
- Investing activities used $552,681, mainly for the Frost #2H well in Texas; financing activities provided $3.76 million. The quarter-end cash increase was $2.82 million.
- The company raised $4.43 million net through its at-the-market offering, issuing 21,059,499 common shares. The filing says no funds remained available under that offering at March 31. Shares outstanding increased from 65,947,646 at December 31, 2019 to 87,007,145 at March 31, 2020.
- No operating margin is stated in the filing. Impairment of oil and gas properties was $429,116, compared with none in Q1 2019; the write-down followed a full-cost ceiling test affected primarily by lower energy prices.
Changes, outlook, and risks
- General and administrative expense rose to $374,062 from $249,951, including higher listing and professional fees and stock-based compensation. Lease operating expense declined to $81,234 from $149,227.
- Management said it believed cash on hand would fund operating costs and anticipated drilling for at least the next 12 months following issuance of the statements. It also warned that prolonged COVID-19 disruption and depressed oil and gas prices could reduce revenue, increase losses, trigger further impairments, and delay or make drilling uneconomic.
- Management expected planned additional drilling and development to remain on hold pending improved conditions; it said drilling might be deferred until at least the second half of 2020. Frost #2H had reached total depth, but completion was pending and expected to be delayed. The Montuno-1 well in Colombia was a dry hole.
- The company reported continuing losses since 2011 and acknowledged uncertainty around future funding. It had no commitments for additional financing; inability to fund its share of drilling costs could lead to penalties, loss of prospect interests, or foregone opportunities. It does not hedge commodity-price exposure.
- Disclosure controls and procedures were deemed ineffective as of March 31, 2020, due to a material weakness involving lack of segregation of duties. The CEO also served as principal financial officer; the company relied on outside consultants and its accounting firm for reporting assistance.
- Cash deposits included $2.63 million above the FDIC-insured limit and $2,713 in Colombian banks not insured by the FDIC. The company reported no off-balance-sheet arrangements or third-party guarantees.
Investor verification priorities
- Confirm the filing belongs to Houston American Energy, not the company named in the request.
- Review the effects of the 21.1 million-share ATM issuance, remaining authorized financing capacity, and potential future dilution.
- Assess whether cash and working capital remain sufficient if commodity prices stay depressed or drilling plans change.
- Verify the status and economics of Frost #2H, the Colombia acreage and dry hole, and any subsequent impairment or drilling decisions.
- Review remediation of the disclosed material weakness and the company’s dependence on external reporting support.