SEC FILE NO. 333-134756
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
ON FORM S-3
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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HOUSTON AMERICAN ENERGY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0675953
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(STATE OR JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
801 TRAVIS STREET, SUITE 1425
HOUSTON, TEXAS 77002
(713) 222-6966
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(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MR. JOHN TERWILLIGER
801 TRAVIS STREET, SUITE 1425
HOUSTON, TEXAS 77002
(713) 222-6966
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(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
with a copy to:
MICHAEL SANDERS, ESQUIRE
20333 S.H. 249, SUITE 600
HOUSTON, TEXAS 77070
(832) 446-2599
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this registration statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a registration statement pursuant to General Instruction
I.D. or a post-effective amendment thereto that shall become effective upon
filing with the Commission pursuant to Rule 462(e) under the Securities Act,
please check the following box. [ ]
If this Form is a post-effective amendment to a registration statement
filed pursuant to General Instruction I.D. filed to register additional
securities or additional classes of securities pursuant to Rule 413(b) under the
Securities Act, please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
Explanatory Note
This Post-Effective Amendment No. 1 on Form S-3 is being filed to convert
the Registration Statement on Form SB-2 (File No. 333-134756), declared
effective by the Securities and Exchange Commission on June 16, 2006, into a
Registration Statement on Form S-3 and to update the prospectus contained in the
original Registration Statement. All filing fees payable in connection with the
registration of the securities described herein were previously paid in
connection with the filing of the original Registration Statement.
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The information in this prospectus is not complete and may be changed. The
selling securityholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION APRIL 30, 2007
HOUSTON AMERICAN ENERGY CORP.
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8,264,583 Shares of Common Stock
This prospectus covers resales of shares of our common stock by certain
selling securityholders named herein. This prospectus also covers resales by
selling securityholders of shares of our common stock underlying warrants issued
to placement agents in connection with the placement of common stock and
convertible notes.
The selling securityholders may sell all or a portion of their securities
through public or private transactions at prevailing market prices or at
privately negotiated prices. We will not receive any part of the proceeds from
the sale of these shares by the selling securityholders.
Our common stock is traded on the American Stock Exchange under the symbol
"HGO". The closing price of our common stock on the American Stock Exchange on
April 30, 2007 was $5.25 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROSPECTUS DATED , 2006
TABLE OF CONTENTS
PAGE
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About this Prospectus . . . . . . . . . . . . . . . . 2
Prospectus Summary. . . . . . . . . . . . . . . . . . 3
Risk Factors. . . . . . . . . . . . . . . . . . . . . 4
Caution about Forward-Looking Statements. . . . . . . 11
Use of Proceeds . . . . . . . . . . . . . . . . . . . 11
Selling Shareholders. . . . . . . . . . . . . . . . . 12
Plan of Distribution. . . . . . . . . . . . . . . . . 16
Incorporation of Certain Documents by Reference . . . 18
Where You Can Find More Information . . . . . . . . . 18
Legal Matters . . . . . . . . . . . . . . . . . . . . 18
Experts . . . . . . . . . . . . . . . . . . . . . . . 18
You should rely only on the information contained in this prospectus, any
prospectus supplement and the documents we have incorporated by reference.
Neither we nor the selling shareholders have authorized any other person to give
you different information. These securities are not being offered in any state
where the offering is not permitted. You should not assume that the information
incorporated by reference or provided in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents. We will disclose any material changes in our affairs in an amendment
to this prospectus, any prospectus supplement or a future filing with the
Securities and Exchange Commission, or SEC, incorporated by reference in this
prospectus.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 that we have
filed with the SEC using a "shelf" registration process. Under this shelf
registration process, the selling shareholders may, from time to time, sell the
shares of our common stock described in this prospectus in one or more
offerings.
This prospectus provides you with a general description of us and the common
shares that may be offered by the selling shareholders. In connection with any
offer or sale of common shares by the selling shareholders under this
prospectus, the selling shareholders are required to provide this prospectus
and, in certain cases, a prospectus supplement that will contain specific
information about the selling shareholders, the terms of the applicable offering
and the securities being offered. The prospectus supplement also may add to,
update or change information in this prospectus. If there is any inconsistency
between the information in this prospectus and any prospectus supplement, you
should rely on the information in the prospectus supplement. You should
carefully read this prospectus, any prospectus supplement and the additional
information described below under the heading "Where You Can Find More
Information".
All references in this prospectus to the "Company", "Houston American Energy",
"we", "us" or "our" are to Houston American Energy Corp.
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PROSPECTUS SUMMARY
OUR COMPANY
Houston American Energy Corp. is an oil and gas exploration and production
company. Our oil and gas exploration and production activities are focused on
properties in the U.S. onshore Gulf Coast Region, principally Texas and
Louisiana, and development of concessions in the South American country of
Colombia. We seek to utilize the contacts and experience of our chief executive
officer, John F. Terwilliger, to identify favorable drilling opportunities, to
use advanced seismic techniques to define prospects and to form partnerships and
joint ventures to spread the cost and risks to us of drilling.
Our principal executive offices are located at 801 Travis Street, Suite 1425,
Houston, Texas 77002 and our telephone number is (713) 222-6966.
THE OFFERING
Securities offered:
Common stock 8,264,583 shares(1)
Common stock outstanding
before this offering 27,820,172 shares(2)
Common stock outstanding
after this offering 28,235,172 shares(3)
Use of proceeds We will not receive any proceeds from the sale of common stock
by the selling shareholders
American Stock Exchange symbol HGO
Risk Factors Purchase of the common stock offered hereby involves certain
risk, including risks associated with need for additional capital,
operating losses, uncertain value or decline in value of reserves,
dependence upon management and third parties, and operating
risks in the oil and gas industry, among others. See "Risk Factors."
(1) Consists of (a) 7,849,583 shares presently outstanding, including 2,125,000
shares issued upon conversion of 8% Subordinated Convertible Notes and
191,250 shares issued upon conversion of $1.00 placement agent warrants,
and (b) 415,000 shares issuable upon exercise of $3.00 placement agent
warrants to purchase shares of common stock.
(2) Shares outstanding as of June 1, 2006.
(3) Assumes exercise of 415,000 warrants.
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RISK FACTORS
Investing in our securities involves risks. Before making an investment
decision, you should carefully consider the following risk factors, as well as
other information we include in this prospectus. Additional risks and
uncertainties not presently known to us or that we deem currently immaterial may
also impair our business operations. The risks and uncertainties described below
are not the only ones facing us. Additional risks and uncertainties that we are
unaware of, or that we currently deem immaterial, also may become important
factors that affect us. If any of the following risks occur, our business,
financial condition or results of operations could be materially and adversely
affected.
RISKS RELATED TO THE OIL AND NATURAL GAS INDUSTRY AND OUR BUSINESS
A SUBSTANTIAL OR EXTENDED DECLINE IN OIL AND NATURAL GAS PRICES MAY ADVERSELY
AFFECT OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS AND OUR
ABILITY TO MEET OUR CAPITAL EXPENDITURE OBLIGATIONS AND FINANCIAL COMMITMENTS.
The price we receive for our oil and natural gas production heavily
influences our revenue, profitability, access to capital and future rate of
growth. Oil and natural gas are commodities and, therefore, their prices are
subject to wide fluctuations in response to relatively minor changes in supply
and demand. Historically, the markets for oil and natural gas have been
volatile. These markets will likely continue to be volatile in the future. The
prices we receive for our production, and the levels of our production, depend
on numerous factors beyond our control. These factors include, but are not
limited to, the following:
- changes in global supply and demand for oil and natural gas;
- the actions of the Organization of Petroleum Exporting Countries, or
OPEC;
- the price and quantity of imports of foreign oil and natural gas;
- political conditions, including embargoes, in or affecting other
oil-producing activity;
- the level of global oil and natural gas exploration and production
activity;
- the level of global oil and natural gas inventories;
- weather conditions;
- technological advances affecting energy consumption; and
- the price and availability of alternative fuels.
Lower oil and natural gas prices may not only decrease our revenues on a
per unit basis but also may reduce the amount of oil and natural gas that we can
produce economically. Lower prices will also negatively impact the value of our
proved reserves. A substantial or extended decline in oil or natural gas prices
may materially and adversely affect our future business, financial condition,
results of operations, liquidity or ability to finance planned capital
expenditures.
A SUBSTANTIAL PERCENTAGE OF OUR PROPERTIES ARE UNDEVELOPED; THEREFORE THE RISK
ASSOCIATED WITH OUR SUCCESS IS GREATER THAN WOULD BE THE CASE IF THE MAJORITY OF
OUR PROPERTIES WERE CATEGORIZED AS PROVED DEVELOPED PRODUCING.
Because a substantial percentage of our properties are unproven
(approximately 99.0%), or proved undeveloped, we will require significant
additional capital to prove and develop such properties before they may become
productive. Further, because of the inherent uncertainties associated with
drilling for oil and gas, some of these properties may never be developed to the
extent that they result in positive cash flow. Even if we are successful in our
development efforts, it could take several years for a significant portion of
our undeveloped properties to be converted to positive cash flow.
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While our current business plan is to fund the development costs with funds
on hand and cash flow from our other producing properties, if such funds are not
sufficient we may be forced to seek alternative sources for cash, through the
issuance of additional equity or debt securities, increased borrowings or other
means.
DRILLING FOR AND PRODUCING OIL AND NATURAL GAS ARE HIGH RISK ACTIVITIES WITH
MANY UNCERTAINTIES THAT COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION
OR RESULTS OF OPERATIONS.
Our future success will depend on the success of our exploitation,
exploration, development and production activities. Our oil and natural gas
exploration and production activities are subject to numerous risks beyond our
control, including the risk that drilling will not result in commercially viable
oil or natural gas production. Our decisions to purchase, explore, develop or
otherwise exploit prospects or properties will depend in part on the evaluation
of data obtained through geophysical and geological analyses, production data
and engineering studies, the results of which are often inconclusive or subject
to varying interpretations. Please read "-Reserve estimates depend on many
assumptions that may turn out to be inaccurate" (below) for a discussion of the
uncertainty involved in these processes. Our cost of drilling, completing and
operating wells is often uncertain before drilling commences. Overruns in
budgeted expenditures are common risks that can make a particular project
uneconomical. Further, many factors may curtail, delay or cancel drilling,
including the following:
- delays imposed by or resulting from compliance with regulatory
requirements;
- pressure or irregularities in geological formations;
- shortages of or delays in obtaining equipment and qualified personnel;
- equipment failures or accidents;
- adverse weather conditions;
- reductions in oil and natural gas prices;
- title problems; and
- limitations in the market for oil and natural gas.
IF OIL AND NATURAL GAS PRICES DECREASE, WE MAY BE REQUIRED TO TAKE WRITE-DOWNS
OF THE CARRYING VALUES OF OUR OIL AND NATURAL GAS PROPERTIES, POTENTIALLY
NEGATIVELY IMPACTING THE TRADING VALUE OF OUR SECURITIES.
Accounting rules require that we review periodically the carrying value of
our oil and natural gas properties for possible impairment. Based on specific
market factors and circumstances at the time of prospective impairment reviews,
and the continuing evaluation of development plans, production data, economics
and other factors, we may be required to write down the carrying value of our
oil and natural gas properties. A write-down could constitute a non-cash charge
to earnings. It is likely the cumulative effect of a write-down could also
negatively impact the trading price of our securities.
RESERVE ESTIMATES DEPEND ON MANY ASSUMPTIONS THAT MAY TURN OUT TO BE INACCURATE.
ANY MATERIAL INACCURACIES IN THESE RESERVE ESTIMATES OR UNDERLYING ASSUMPTIONS
WILL MATERIALLY AFFECT THE QUANTITIES AND PRESENT VALUE OF OUR RESERVES.
The process of estimating oil and natural gas reserves is complex. It
requires interpretations of available technical data and many assumptions,
including assumptions relating to economic factors. Any significant inaccuracies
in these interpretations or assumptions could materially affect the estimated
quantities and present value of reserves shown in this report.
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In order to prepare our estimates, we must project production rates and
timing of development expenditures. We must also analyze available geological,
geophysical, production and engineering data. The extent, quality and
reliability of this data can vary. The process also requires economic
assumptions about matters such as oil and natural gas prices, drilling and
operating expenses, capital expenditures, taxes and availability of funds.
Therefore, estimates of oil and natural gas reserves are inherently imprecise.
Actual future production, oil and natural gas prices, revenues, taxes,
development expenditures, operating expenses and quantities of recoverable oil
and natural gas reserves most likely will vary from our estimates. Any
significant variance could materially affect the estimated quantities and
present value of our reserves. In addition, we may adjust estimates of proved
reserves to reflect production history, results of exploration and development,
prevailing oil and natural gas prices and other factors, many of which are
beyond our control.
You should not assume that the present value of future net revenues from
our proved reserves, as reported from time to time, is the current market value
of our estimated oil and natural gas reserves. In accordance with SEC
requirements, we generally base the estimated discounted future net cash flows
from our proved reserves on prices and costs on the date of the estimate. Actual
future prices and costs may differ materially from those used in the present
value estimate. If future values decline or costs increase it could negatively
impact our ability to finance operations, and individual properties could cease
being commercially viable, affecting our decision to continue operations on
producing properties or to attempt to develop properties. All of these factors
would have a negative impact on earnings and net income, and most likely the
trading price of our securities.
WE ARE DEPENDENT UPON THIRD PARTY OPERATORS OF OUR OIL AND GAS PROPERTIES.
Under the terms of the operating agreements related to our oil and gas
properties, third parties act as the operator of our oil and gas wells and
control the drilling activities to be conducted on our properties. Therefore, we
have limited control over certain decisions related to activities on our
properties, which could affect our results of operations. Decisions over which
we have limited control include:
- the timing and amount of capital expenditures;
- the timing of initiating the drilling and recompleting of wells;
- the extent of operating costs; and
- the level of ongoing production.
PROSPECTS THAT WE DECIDE TO DRILL MAY NOT YIELD OIL OR NATURAL GAS IN
COMMERCIALLY VIABLE QUANTITIES.
Our prospects are properties on which we have identified what we believe,
based on available seismic and geological information, to be indications of oil
or natural gas. Our prospects are in various stages of evaluation, ranging from
a prospect that is ready to drill to a prospect that will require substantial
additional seismic data processing and interpretation. There is no way to
predict in advance of drilling and testing whether any particular prospect will
yield oil or natural gas in sufficient quantities to recover drilling or
completion costs or to be economically viable. This risk may be enhanced in our
situation, due to the fact that a significant percentage (99.0%) of our reserves
are currently unproved reserves. The use of seismic data and other technologies
and the study of producing fields in the same area will not enable us to know
conclusively prior to drilling whether oil or natural gas will be present or, if
present, whether oil or natural gas will be present in commercial quantities. We
cannot assure you that the analogies we draw from available data from other
wells, more fully explored prospects or producing fields will be applicable to
our drilling prospects.
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WE MAY INCUR SUBSTANTIAL LOSSES AND BE SUBJECT TO SUBSTANTIAL LIABILITY CLAIMS
AS A RESULT OF OUR OIL AND NATURAL GAS OPERATIONS.
We are not insured against all risks. Losses and liabilities arising from
uninsured and underinsured events could materially and adversely affect our
business, financial condition or results of operations. Our oil and natural gas
exploration and production activities are subject to all of the operating risks
associated with drilling for and producing oil and natural gas, including the
possibility of:
- environmental hazards, such as uncontrollable flows of oil, natural
gas, brine, well fluids, toxic gas or other pollution into the
environment, including groundwater and shoreline contamination;
- abnormally pressured formations;
- mechanical difficulties, such as stuck oil field drilling and service
tools and casing collapse;
- fires and explosions;
- personal injuries and death; and
- natural disasters.
Any of these risks could adversely affect our ability to conduct operations
or result in substantial losses to our company. We may elect not to obtain
insurance if we believe that the cost of available insurance is excessive
relative to the risks presented. In addition, pollution and environmental risks
generally are not fully insurable. If a significant accident or other event
occurs and is not fully covered by insurance, then it could adversely affect us.
WE ARE SUBJECT TO COMPLEX LAWS THAT CAN AFFECT THE COST, MANNER OR FEASIBILITY
OF DOING BUSINESS.
Exploration, development, production and sale of oil and natural gas are
subject to extensive federal, state, local and international regulation. We may
be required to make large expenditures to comply with governmental regulations.
Matters subject to regulation include:
- discharge permits for drilling operations;
- drilling bonds;
- reports concerning operations;
- the spacing of wells;
- unitization and pooling of properties; and
- taxation.
Under these laws, we could be liable for personal injuries, property damage
and other damages. Failure to comply with these laws also may result in the
suspension or termination of our operations and subject us to administrative,
civil and criminal penalties. Moreover, these laws could change in ways that
substantially increase our costs. Any such liabilities, penalties, suspensions,
terminations or regulatory changes could materially adversely affect our
financial condition and results of operations.
OUR OPERATIONS MAY INCUR SUBSTANTIAL LIABILITIES TO COMPLY WITH THE
ENVIRONMENTAL LAWS AND REGULATIONS.
Our oil and natural gas operations are subject to stringent federal, state
and local laws and regulations relating to the release or disposal of materials
into the environment or otherwise relating to environmental protection. These
laws and regulations may require the acquisition of a permit before drilling
commences, restrict the types, quantities and concentration of substances that
can be released into the environment in connection with drilling and production
activities, limit or prohibit drilling activities on certain lands lying within
wilderness, wetlands and other protected areas, and impose substantial
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liabilities for pollution resulting from our operations. Failure to comply with
these laws and regulations may result in the assessment of administrative, civil
and criminal penalties, incurrence of investigatory or remedial obligations or
the imposition of injunctive relief. Changes in environmental laws and
regulations occur frequently, and any changes that result in more stringent or
costly waste handling, storage, transport, disposal or cleanup requirements
could require us to make significant expenditures to maintain compliance, and
may otherwise have a material adverse effect on our results of operations,
competitive position or financial condition as well as the industry in general.
Under these environmental laws and regulations, we could be held strictly liable
for the removal or remediation of previously released materials or property
contamination regardless of whether we were responsible for the release or if
our operations were standard in the industry at the time they were performed.
OUR OPERATIONS IN COLOMBIA ARE SUBJECT TO RISKS RELATING TO POLITICAL AND
ECONOMIC INSTABILITY.
We currently have interests in multiple oil and gas concessions in Colombia
and anticipate that operations in Colombia will constitute a substantial element
of our strategy going forward. The political climate in Colombia is unstable
and could be subject to radical change over a very short period of time. In the
event of a significant negative change in the political or economic climate in
Colombia, we may be forced to abandon or suspend our operations in Colombia.
UNLESS WE REPLACE OUR OIL AND NATURAL GAS RESERVES, OUR RESERVES AND PRODUCTION
WILL DECLINE, WHICH WOULD ADVERSELY AFFECT OUR CASH FLOWS AND INCOME.
Unless we conduct successful development, exploitation and exploration
activities or acquire properties containing proved reserves, our proved reserves
will decline as those reserves are produced. Producing oil and natural gas
reservoirs generally are characterized by declining production rates that vary
depending upon reservoir characteristics and other factors. Our future oil and
natural gas reserves and production, and, therefore our cash flow and income,
are highly dependent on our success in efficiently developing and exploiting our
current reserves and economically finding or acquiring additional recoverable
reserves. If we are unable to develop, exploit, find or acquire additional
reserves to replace our current and future production, our cash flow and income
will decline as production declines, until our existing properties would be
incapable of sustaining commercial production.
OUR SUCCESS DEPENDS ON OUR MANAGEMENT TEAM AND OTHER KEY PERSONNEL, THE LOSS OF
ANY OF WHOM COULD DISRUPT OUR BUSINESS OPERATIONS.
Our success will depend on our ability to retain John F. Terwilliger, our
principal executive officer, and to attract other experienced management and
non-management employees, including engineers, geoscientists and other technical
and professional staff. We will depend, to a large extent, on the efforts,
technical expertise and continued employment of such personnel and members of
our management team. If members of our management team should resign or we are
unable to attract the necessary personnel, our business operations could be
adversely affected.
THE UNAVAILABILITY OR HIGH COST OF DRILLING RIGS, EQUIPMENT, SUPPLIES, PERSONNEL
AND OIL FIELD SERVICES COULD ADVERSELY AFFECT OUR ABILITY TO EXECUTE ON A TIMELY
BASIS OUR EXPLORATION AND DEVELOPMENT PLANS WITHIN OUR BUDGET.
Shortages or the high cost of drilling rigs, equipment, supplies or
personnel could delay or adversely affect our development and exploration
operations. As the price of oil and natural gas increases, the demand for
production equipment and personnel will likely also increase, potentially
resulting, at least in the near-term, in shortages of equipment and personnel.
In addition, larger producers may be more likely to secure access to such
equipment by virtue of offering drilling companies more lucrative terms. If we
are unable to acquire access to such resources, or can obtain access only at
higher prices, not only
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would this potentially delay our ability to convert our reserves into cash flow,
but could also significantly increase the cost of producing those reserves,
thereby negatively impacting anticipated net income.
IF OUR ACCESS TO MARKETS IS RESTRICTED, IT COULD NEGATIVELY IMPACT OUR
PRODUCTION, OUR INCOME AND ULTIMATELY OUR ABILITY TO RETAIN OUR LEASES.
Market conditions or the unavailability of satisfactory oil and natural gas
transportation arrangements may hinder our access to oil and natural gas markets
or delay our production. The availability of a ready market for our oil and
natural gas production depends on a number of factors, including the demand for
and supply of oil and natural gas and the proximity of reserves to pipelines and
terminal facilities. Our ability to market our production depends in substantial
part on the availability and capacity of gathering systems, pipelines and
processing facilities owned and operated by third parties. Our failure to obtain
such services on acceptable terms could materially harm our business.
We may operate in areas with limited or no access to pipelines, thereby
necessitating delivery by other means, such as trucking, or requiring
compression facilities. Such restrictions on our ability to sell our oil or
natural gas have several adverse affects, including higher transportation costs,
fewer potential purchasers (thereby potentially resulting in a lower selling
price) or, in the event we were unable to market and sustain production from a
particular lease for an extended time, possibly causing us to lose a lease due
to lack of production.
WE MAY NEED ADDITIONAL FINANCING TO SUPPORT OPERATIONS AND FUTURE CAPITAL
COMMITMENTS.
While we presently believe that our operating cash flows and funds on hand
will support our ongoing operations and anticipated future capital requirements,
a number of factors could result in our needing additional financing, including
reductions in oil and natural gas prices, declines in production, unexpected
developments in operations that could decrease our revenues, increase our costs
or require additional capital contributions and commitments to new acquisition
or drilling programs. We have no commitments to provide any additional
financing, if needed, and may be limited in our ability to obtain the capital
necessary to support operations, complete development, exploitation and
exploration programs or carry out new acquisition or drilling programs. We have
not thoroughly investigated whether this capital would be available, who would
provide it, and on what terms. If we are unable, on acceptable terms, to raise
the required capital, our business may be seriously harmed or even terminated.
COMPETITION IN THE OIL AND NATURAL GAS INDUSTRY IS INTENSE, WHICH MAY ADVERSELY
AFFECT OUR ABILITY TO COMPETE.
We operate in a highly competitive environment for acquiring properties,
marketing oil and natural gas and securing trained personnel. Many of our
competitors possess and employ financial, technical and personnel resources
substantially greater than ours, which can be particularly important in the
areas in which we operate. Those companies may be able to pay more for
productive oil and natural gas properties and exploratory prospects and to
evaluate, bid for and purchase a greater number of properties and prospects than
our financial or personnel resources permit. Our ability to acquire additional
prospects and to find and develop reserves in the future will depend on our
ability to evaluate and select suitable properties and to consummate
transactions in a highly competitive environment. Also, there is substantial
competition for capital available for investment in the oil and natural gas
industry. We may not be able to compete successfully in the future in acquiring
prospective reserves, developing reserves, marketing hydrocarbons, attracting
and retaining quality personnel and raising additional capital.
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RISKS RELATED TO OUR COMMON STOCK
THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY, AND THIS MAY MAKE IT
DIFFICULT FOR YOU TO RESELL COMMON STOCK WHEN YOU WANT OR AT PRICES YOU FIND
ATTRACTIVE.
The price of our common stock constantly changes. We expect that the market
price of our common stock will continue to fluctuate.
Our stock price may fluctuate as a result of a variety of factors, many of
which are beyond our control. These factors include:
- quarterly variations in our operating results;
- operating results that vary from the expectations of management,
securities analysts and investors;
- changes in expectations as to our future financial performance;
- announcements by us, our partners or our competitors of leasing and
drilling activities;
- the operating and securities price performance of other companies that
investors believe are comparable to us;
- future sales of our equity or equity-related securities;
- changes in general conditions in our industry and in the economy, the
financial markets and the domestic or international political
situation;
- fluctuations in oil and gas prices;
- departures of key personnel; and
- regulatory considerations.
In addition, in recent years, the stock market in general has experienced
extreme price and volume fluctuations. This volatility has had a significant
effect on the market price of securities issued by many companies for reasons
often unrelated to their operating performance. These broad market fluctuations
may adversely affect our stock price, regardless of our operating results.
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY AFFECT OUR
STOCK PRICE.
Future sales of substantial amounts of our common stock or equity-related
securities in the public market or privately, or the perception that such sales
could occur, could adversely affect prevailing trading prices of our common
stock and could impair our ability to raise capital through future offerings of
equity or equity-related securities. No prediction can be made as to the
effect, if any, that future sales of shares of common stock, or the availability
of shares of common stock for future sale, will have on the trading price of our
common stock.
OUR CHARTER AND BYLAWS, AS WELL AS PROVISIONS OF DELAWARE LAW, COULD MAKE IT
DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY AND ALSO COULD LIMIT THE
PRICE THAT INVESTORS ARE WILLING TO PAY IN THE FUTURE FOR SHARES OF OUR COMMON
STOCK.
Delaware corporate law and our charter and bylaws contain provisions that
could delay, deter or prevent a change in control of our company or our
management. These provisions could also discourage proxy contests and make it
more difficult for our stockholders to elect directors and take other corporate
actions without the concurrence of our management or board of directors. These
provisions:
- authorize our board of directors to issue "blank check" preferred
stock, which is preferred stock that can be created and issued by our
board of directors, without stockholder approval, with rights senior
to those of our common stock;
10
- provide for a staggered board of directors and three-year terms for
directors, so that no more than one-third of our directors could be
replaced at any annual meeting;
- provide that directors may be removed only for cause; and
- establish advance notice requirements for submitting nominations for
election to the board of directors and for proposing matters that can
be acted upon by stockholders at a meeting.
We are also subject to anti-takeover provisions under Delaware law, which
could also delay or prevent a change of control. Taken together, these
provisions of our charter and bylaws, Delaware law may discourage transactions
that otherwise could provide for the payment of a premium over prevailing market
prices of our common stock and also could limit the price that investors are
willing to pay in the future for shares of our common stock.
OUR MANAGEMENT OWNS A SIGNIFICANT AMOUNT OF OUR COMMON STOCK, GIVING THEM
INFLUENCE OR CONTROL IN CORPORATE TRANSACTIONS AND OTHER MATTERS, AND THEIR
INTERESTS COULD DIFFER FROM THOSE OF OTHER SHAREHOLDERS.
At March 1, 2007, our directors and executive officers owned approximately
46.6 percent of our outstanding common stock. As a result, our current directors
and executive officer are in a position to significantly influence or control
the outcome of matters requiring a shareholder vote, including the election of
directors, the adoption of any amendment to our certificate of incorporation or
bylaws, and the approval of mergers and other significant corporate
transactions. Such level of control of the company may delay or prevent a change
of control on terms favorable to the other shareholders and may adversely affect
the voting and other rights of other shareholders.
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
Some of the statements under the captions "Prospectus Summary," "Risk Factors,"
"Use of Proceeds," and elsewhere in this prospectus are "forward-looking
statements." These forward-looking statements include, but are not limited to,
statements about our plans, objectives, expectations and intentions and other
statements contained in this prospectus that are not historical facts. When used
in this prospectus, the words "anticipates," "believes," "continue," "could,"
"estimates," "expects," "intends," "may," "plans," "seeks," "should" or "will"
or the negative of these terms or similar expressions are generally intended to
identify forward-looking statements. Because these forward-looking statements
involve risks and uncertainties, there are important factors that could cause
actual results to differ materially from those expressed or implied by these
forward-looking statements, including our plans, objectives, expectations and
intentions and other factors discussed under "Risk Factors."
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the sale of
the common shares sold under this prospectus. We will not receive any proceeds
from the sale of these securities.
11
SELLING SHAREHOLDERS
The selling securityholders are holders of 7,849,583 shares of common stock and
the holders of warrants to purchase 415,000 shares of common stock. The shares
consist of (1) 5,533,333 shares issued in April 2006 in a private placement to
accredited investors, (2) 2,125,000 shares issued in May 2006 pursuant to the
conversion of $2,125,000 in principal amount of 8% Subordinated Convertible
Notes that were issued in May 2005 in a private placement to accredited
investors, and (3) 191,250 shares issued in May 2006 pursuant to the exercise of
$1.00 placement agent warrants that were issued in connection with the May 2005
private placement. The warrants consist of 415,000 warrants, exercisable at
$3.00 per share, issued to the placement agent in the April 2006 private
placement. Pursuant to the terms of the sale of the convertible notes, we
entered into a Registration Rights Agreement with each of the selling
securityholders wherein we agreed to register for resale the notes and the
shares of common stock issuable upon conversion of the notes and exercise of the
warrants issued in conjunction with the issuance of the notes. Pursuant to the
terms of the sale of the shares of common stock in the April 2006 private
placement, we entered into a Registration Rights Agreement with each of the
selling securityholders wherein we agreed to register for resale the shares of
common stock issued in the private placement and the shares of common stock
issuable upon exercise of the warrants issued in the conjunction with the
private placement.
The following table sets forth information with respect to the selling
securityholders and the respective common stock beneficially owned by each
selling securityholder that may be offered under this prospectus. The
information is based on information that has been provided to us by or on behalf
of the selling securityholders. With the exception of Edwin Broun III who has
served as one of our directors since August 2005, unless otherwise indicated
herein, none of the selling securityholders listed in the following table has,
or within the past three years has had, any position, office or other material
relationship with us or any of our predecessors or affiliates. Because the
selling securityholders may from time to time use this prospectus to offer all
or some portion of the common stock offered hereby, we cannot provide an
estimate as to the amount or percentage of any such type of security that will
be held by any selling securityholder upon termination of any particular
offering or sale under this prospectus. In addition, the selling securityholder
identified below may have sold, transferred or otherwise disposed of all or a
portion of any such securities since the date on which they provided us
information regarding their holdings, in transactions exempt from the
registration requirements of the Securities Act.
For the purposes of the following table, the number of our common shares
beneficially owned has been determined in accordance with Rule 13d-3 of the
Exchange Act, and such information is not necessarily indicative of beneficial
ownership for any other purpose. Under Rule 13d-3, beneficial ownership includes
any shares as to which a selling securityholder had sole or shared voting power
or investment power and also any shares which that selling securityholder had
the right to acquire within 60 days of June 16, 2006 through the exercise of any
stock option, warrants or other rights.
12
Common Stock Percentage of Beneficially Owned
Beneficially Owned Common Shares Common Shares After Completion of
Selling Securityholders Prior to Offering (1) Outstanding (29) Offered Hereby(1) Offering
---------------------------------------- --------------------- ---------------- ----------------- -------------------
E.C. Broun III 1,005,000 3.6% 200,000 805,000
Lorraine DiPaolo (28) 261,625 * 230,625 31,000
Camilla Bellick 150,000 * 125,000 25,000
Jacob Harris (28) 125,000 * 125,000 0
Alan M. Berman 100,000 * 100,000 0
Peter S. Rawlings (28) 100,000 * 100,000 0
Barry Garfinkel 100,000 * 100,000 0
William Lippe 100,000 * 100,000 0
David Schwartz & Florence
Schwartz JTROW 100,000 * 100,000 0
Richard Zorn (28) 180,625 (2) * 130,625 50,000
Ronald Sunderland 64,500 (3) * 50,000 14,500
Myron Zisser 50,000 * 50,000 0
Gorel Realty Company (4) 50,000 * 50,000 0
Mitchell Kessler 50,000 * 50,000 0
Eric Lippe 50,000 * 50,000 0
William P. Behrens (28) 62,000 * 62,000 0
William T. Behrens 3,000 * 3,000 0
The Churchill Fund QP, LP (5) 41,000 * 41,000 0
The Churchill Fund, LP (5) 34,000 * 34,000 0
Felix Z. Edwards III 25,000 * 25,000 0
Mary Willis 25,000 * 25,000 0
Judith Parnes 25,000 * 25,000 0
Marie Carlino 25,000 * 25,000 0
Michael Salmanson & Tobi
E. Zemsky, JTROW 25,000 * 25,000 0
Gem Holdings (6) 25,000 * 25,000 0
Bear Stearns Securities Corp as
Custodian for the benefit of
Bernard Korman IRA 25,000 * 25,000 0
Stanley Weirthorn Rev Trust
DTD 9/7/90 25,000 * 25,000 0
Edmund Dollinger 25,000 * 25,000 0
Southridge Drive Associates (7) 25,000 * 25,000 0
Mary A. Susnjara 35,000 25,000 10,000
Johannah F. Stefanakis 25,000 * 25,000 0
Richard R. Davis (28) 25,000 * 25,000 0
Anne O'Malley 28,000 * 25,000 3,000
Malcolm O'Malley 27,000 * 25,000 2,000
Miriam Salmanson 25,000 * 25,000 0
Joseph Martello 25,000 * 25,000 0
Roy Nelson & Anne Nelson,
JTROW 25,000 * 25,000 0
Edmund Karam & Barbara
Karam, JTROW 26,000 * 25,000 1,000
Kathleen Mullinix 25,000 * 25,000 0
Northeast Securities, Inc. (8)(27) 30,000 * 30,000 0
David T.R. Tsiang (28) 25,000 * 25,000 0
Jon Salmanson (28) 34,000 * 25,000 9,000
Merrill Lynch, Pierce, Fenner & Smith
FPO Robert A. Bonelli IRA (28) 15,000 * 15,000 0
Stephen Perrone (28) 15,000 * 15,000 0
Danny Nicholas (28) 5,000 * 5,000 0
2003 Houston Energy Partners (9)(28) 252,500 * 195,000 57,500
2004 Houston Energy Partners (9)(28) 63,000 * 55,000 8,000
Amaranth LLC (10)(28) 200,000 * 200,000 0
Atlantis Software Company
Employee Profit Sharing Plan (11)(28) 15,000 * 15,000 0
Basso Fund Ltd (12) 80,000 * 80,000 0
Basso Multi-Strategy Holding
Fund Ltd (12) 213,333 * 213,333 0
Basso Private Opportunity
Holding Fund Ltd. (12) 40,000 * 40,000 0
Ben T. Morris (28) 16,000 * 16,000 0
Bruce R. McMaken 10,000 * 10,000 0
Capital Ventures International (13)(28) 250,000 * 250,000 0
Cranshire Capital L.P. (14) 75,000 * 75,000 0
Don A. Sanders Restricted (28) 120,000 * 120,000 0
13
Don Weir and Julie Ellen Weir (28) 40,000 * 40,000 0
Erik S. Klefos (28) 20,000 (15) * 20,000 0
George L. Ball (28) 16,000 * 16,000 0
GLG Global Utilities Fund (16) 1,000,000 * 1,000,000 0
Harry Edelson 666,666 * 666,666 0
HHMI Investments L.P. (17) 41,000 * 41,100 0
Houston Energy International Ltd (9)(28) 269,000 * 250,000 19,000
Hudson Bay Fund, L.P. (18)(28) 100,000 * 100,000 0
IRA FBO Brede C. Klefos (28) 20,000 * 20,000 0
IRA FBO Robert Clifford (28) 25,000 * 25,000 0
Iroquois Master Fund Ltd. (19) 100,000 * 100,000 0
John H. and Jodi F. Malanga (28) 15,000 * 15,000 0
Katherine U. Sanders Children
Trust (20)(28) 120,000 * 120,000 0
Meadowbrook Opportunity
Fund LLC (21) 50,000 * 50,000 0
Michael S. Chadwick (28) 18,000 * 3,000 15,000
MotherRock Energy Master
Fund Ltd. (22) 1,137,300 * 1,000,000 137,300
Nite Capital, LP (23) 26,666 * 26,666 0
Rune Medhus & Elisa Medhus (28) 35,000 * 35,000 0
Sanders Opportunity Fund
(Institutional), L.P. (24)(28) 186,152 * 186,152 0
Sanders Opportunity Fund, L.P. (24)(28) 57,183 * 57,183 0
Tom Juda and Nancy Juda Living
Trust (28) 200,000 * 200,000 0
Walker Smith Capital (QP), L.P. (17) 70,200 * 70,200 0
Walker Smith Capital, L.P. (17) 12,453 * 12,453 0
Walker Smith International
Fund, Ltd. (17) 101,900 * 101,900 0
WS Opportunity Fund (QP), L.P. (25) 26,400 * 26,400 0
WS Opportunity Fund
International, Ltd. (25) 50,880 * 50,880 0
WS Opportunity Fund, L.P. (25) 30,400 * 30,400 0
Sanders Morris Harris Inc (26)(27) 415,000 * 415,000 0
* Less than 1%.
(1) Shares of common stock shown as beneficially owned include, and the shares
of common stock registered for sale hereby consist of, all shares issuable
upon exercise of the warrants.
(2) Includes 25,000 shares held by Richard Zorn, 25,000 shares held by the
Richard Zorn IRA, 30,625 shares underlying warrants held by Richard Zorn,
50,000 shares held by Frances H. Zorn, the spouse of Richard Zorn, and
50,000 shares held by LRZ Family Partnership. Richard Zorn has investment
and voting power with respect to the shares held by LRZ Family Partnership.
(3) Includes 5,000 shares held by the Ronald Sunderland IRA and 59,500 shares
held by the Sunderland Family Trust Dated 7/15/96 (#2). Ronald Sunderland
has investment and voting power with respect to the shares held by
Sunderland Family Trust Dated 7/15/96 (#2).
(4) Myron Gorel has investment and voting power with respect to the shares held
by Gorel Realty Company.
(5) Cecelia Brancato has investment and voting power with respect to the shares
held by The Churchill Fund QP, LP and The Churchill Fund, LP.
(6) Marc Stern has investment and voting power with respect to the shares held
by Gem Holdings.
(7) Richard Swartz has investment and voting power with respect to the shares
held by Southridge Drive Associates.
(8) Robert Bonelli has investment and voting power with respect to the shares
held by Northeast Securities, Inc.
(9) Stephen H. Pouns has investment and voting power with respect to the shares
held by 2003, Houston Energy Partners, 2005 Houston Energy Partners and
Houston Energy International Ltd.
14
(10) Nicholas M. Maounis has investment and voting power with respect to the
shares held by Amaranth LLC.
(11) Rune Medhus has investment and voting power with respect to the shares held
by Atlantis Software Company Employee Profit Sharing Plan.
(12) Howard I. Fisher has investment and voting power with respect to the shares
held by Basso Fund Ltd., Basso Multi-Strategy Holding Fund Ltd. and Basso
Private Opportunities Holding Fund Ltd.
(13) Martin Kobinger has investment and voting power with respect to the shares
held by Capital Ventures International. Mr. Kobinger disclaims any
beneficial ownership of shares held by Capital Ventures International.
(14) Mitchell P. Kopin has investment and voting power with respect to the
shares held by Cranshire Capital, L.P.
(15) Includes 10,000 shares held by Erik S. Klefos and 10,000 shares held by IRA
FBO Erik Klefos Pershing LLC as Custodian Rollover Account.
(16) Noam Gottesman, Pierre Lagrange and Emmanuel Roman have investment and
voting power with respect to the shares held by GLG Global Utilities Fund.
(17) Reid Walker and G. Stacy Smith have investment and voting power with
respect to the shares held by HHMI Investments, L.P., Walker Smith Capital,
L.P., Walker Smith Capital (QP), L.P., and Walker Smith International Fund
Ltd.
(18) Yoav Roth and John Doscas have investment and voting power with respect to
the shares held by Hudson Bay Fund, L.P. Mr. Roth and Mr. Doscas each
disclaim any beneficial ownership of shares held by Hudson Bay Fund, L.P.
(19) Joshua Silverman has investment and voting power with respect to the shares
held by Iroquois Master Fund Ltd. Mr. Silverman disclaims any beneficial
ownership of shares held by Iroquois Master Fund Ltd.
(20) Don Weir has investment and voting power with respect to the shares held by
Katherine U. Sanders Children Trust.
(21) Michael Ragins has investment and voting power with respect to the shares
held by Meadowbrook Opportunity Fund LLC.
(22) J. Robert Collins has investment and voting power with respect to the
shares held by MotherRock Energy Master Fund Ltd.
(23) Keith A. Goodman has investment and voting power with respect to the shares
held by Nite Capital LP.
(24) Brad Sanders has investment and voting power with respect to the shares
held by Sanders Opportunity Fund (International), L.P. and Sanders
Opportunity Fund, L.P.
(25) Patrick Walker, Reid Walker and G. Stacy Smith have investment and voting
power with respect to the shares held by WS Opportunity Fund, L.P., WS
Opportunity Fund (QP), L.P., and WS Opportunity Fund International, Ltd.
(26) Ben T. Morris has investment and voting power with respect to the shares
held by Sanders Morris Harris, Inc.
(27) This selling security holder has identified itself as a registered
broker-dealer. The shares indicated as held and offered by this selling
security holder represent shares underlying warrants received as
compensation for providing investment banking related services in
connection with the placement of the Notes and/or common stock.
15
(28) This selling security holder has identified itself as an affiliate of a
registered broker-dealer and has represented to us that such selling
security holder acquired its common stock, or warrants, in the ordinary
course of business and, at the time of the purchase of the common stock,
notes and/or warrants or the underlying common stock, such selling security
holder had no agreements or understandings, directly or indirectly, with
any person to distribute the common stock, the notes, the warrants or
underlying common stock.
(29) Percentages based on number of shares of common stock outstanding as of
June 1, 2006.
PLAN OF DISTRIBUTION
The selling securityholders and their successors, including their transferees,
pledgees or donees or their respective successors, may sell the common stock
offered hereby directly to purchasers or through underwriters, broker-dealers or
agents, who may receive compensation in the form of discounts, concessions or
commissions from the selling securityholders or the purchasers. These discounts,
concessions or commissions as to any particular underwriter, broker-dealer or
agent may be in excess of those customary in the types of transactions involved.
We will not receive any of the proceeds from the sale of these securities. If
the shares of common stock are to be sold by transferees, pledgees or donees or
their respective successors then we must amend the list of selling
securityholders to include the transferee, pledgee or donee or their respective
successors as selling securityholders by amending the registration statement, of
which this prospectus is a part, or supplementing this prospectus, as required
by law.
The common stock may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market prices, at varying prices determined at the time of sale or at
negotiated prices. These sales may be affected in transactions, which may
involve crosses or block transactions:
- on any national securities exchange or quotation service on which our
common stock may be listed or quoted at the time of sale;
- in the over-the-counter market;
- otherwise than on these exchanges or services or in the
over-the-counter market; or
- through the writing of options, whether the options are listed on an
options exchange or otherwise.
In connection with the sale of the common stock, the selling securityholders may
enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the common stock in the course of hedging the positions they
assume. The selling securityholders may also sell the common stock and deliver
these securities to close out their short positions, or loan or pledge them to
broker-dealers that in turn may sell these securities.
The selling securityholders or their successors in interest may from time to
time pledge or grant a security interest in some or all of the common stock and,
if the selling securityholders default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell these securities
from time to time under this prospectus.
The aggregate proceeds to the selling securityholders from the sale of the
common stock offered by them will be the purchase price of the common stock less
discounts, concessions or commissions, if any. Each selling securityholder
reserves the right to accept and, together with its agents from time to time, to
reject, in whole or in part, any proposed purchase of these securities to be
made directly or through agents.
16
Our outstanding common stock is listed on the American Stock Exchange under the
symbol "HGO."
In order to comply with the securities laws of some states, if applicable, the
common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock may
not be sold unless they have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.
Selling securityholders that are also registered broker-dealers who act in
connection with the sale of shares of common stock under this prospectus, other
than those who have received shares as compensation for providing investment
banking related services, are "underwriters" within the meaning of the
Securities Act and any commissions they receive and proceeds of any sale of
shares of common stock may be deemed to be underwriting discounts and
commissions under the Securities Act. Neither we nor any selling securityholder
can presently estimate the amount of this compensation. Selling securityholders
who are "underwriters" within the meaning of the Securities Act will be subject
to the prospectus delivery requirements of the Securities Act.
The selling securityholders have acknowledged that they understand their
obligations to comply with the provisions of the Exchange Act and the rules
thereunder relating to stock manipulation, particularly Regulation M thereunder,
or any successor rules or regulations, and have agreed that neither they nor any
person acting on their behalf will engage in any transaction in violation of
these provisions.
In addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule
144 or Rule 144A rather than pursuant to this prospectus.
To the extent required, the specific common stock to be sold, the names of the
selling securityholders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
discounts, concessions or commissions with respect to a particular offer will be
set forth in an amendment to the registration statement, of which this
prospectus is a part, or in a supplement to this prospectus, as required by law.
We will use our commercially reasonable best efforts to keep the registration
statement, of which this prospectus is a part, effective until the earlier of
(1) the sale of all shares offered hereunder, (2) the date on which all of the
shares offered hereunder may be resold without any restriction pursuant to Rule
144, or (3) one year after the termination of the warrants held by Sanders
Morris Harris, Inc. No sales may be made pursuant to this prospectus after that
period unless we amend the registration statement, of which this prospectus is a
part, or supplement this prospectus, as required by law, to indicate that we
have agreed to extend the period of effectiveness.
We have agreed, among other things, to bear all fees and expenses, other than
selling expenses, discounts, concessions and commissions and expenses of counsel
to the selling securityholders, in connection with the registration and sale of
the shares of common stock under this prospectus.
17
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission under the
Exchange Act are hereby incorporated by reference into this prospectus:
(1) Our Annual Report on Form 10-KSB for the year ended December 31,
2006;
(2) The description of our securities included in the Form S-4
Registration Statement (SEC File No. 333-66638) filed on December 14, 2001; and
(3) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the financial
statements included in our Form 10-KSB for the year ended December 31, 2006
referred to in (1) above.
All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus and prior to the termination of
the offering shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing such documents. Any statements contained in
this prospectus or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained herein or in any
subsequently filed documents which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus.
We will provide without charge to each person, including any beneficial owner,
to whom this prospectus has been delivered, upon written or oral request of such
person, a copy of any or all of the documents that have been incorporated by
reference herein (not including exhibits to such documents unless such exhibits
are specifically incorporated by reference herein or into such documents). Such
requests may be directed to Mr. John Terwilliger, Chief Executive Officer,
Houston American Energy Corp., 801 Travis Street, Suite 1425, Houston, Texas
77002, Telephone Number (713) 222-6966.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 that we filed
with the SEC. We are a public company and file proxy statements and annual,
quarterly and special reports and other information with the SEC. You can
inspect and copy the registration statement as well as the reports, proxy
statements and other information we have filed with the SEC at the public
reference room maintained by the SEC at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. You can call the SEC at 1-800-732-0330 for further
information about the public reference rooms. We are also required to file
electronic versions of these documents with the SEC, which may be accessed from
the SEC's website at http://www.sec.gov.
LEGAL MATTERS
The validity of the securities being offered hereby was passed upon for us by
Michael W. Sanders, Attorney at Law.
EXPERTS
The financial statements incorporated in this prospectus and elsewhere in this
registration statement by reference to the Annual Report on Form 10-KSB for the
year ended December 31, 2006 have been so incorporated in reliance on the report
of Thomas Leger & Co., L.L.P., independent registered public accounting firm,
given on the authority of said firm as experts in auditing and accounting.
18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a list of the estimated expenses to be incurred in connection
with the issuance and distribution of the securities being registered hereby,
all of which are payable by the Company, other than underwriting discounts and
commissions.
Registration Fee . . . . . . . $ 0.00
Accountants' Fees and Expenses 5,000.00
Legal Fees and Expenses. . . . 10,000.00
Miscellaneous. . . . . . . . . 0.00
----------
Total. . . . . . . . . . . . $15,000.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may, in advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expenses
(including attorneys' fees) incurred by any officer, director, employee or agent
in defending such action, provided that the director or officer undertakes to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation. A corporation may indemnify such person
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
A Delaware corporation may indemnify officers and directors in an action by or
in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses (including attorneys fees) that he actually and reasonably
incurred in connection therewith. The indemnification provided is not deemed to
be exclusive of any other rights to which an officer or director may be entitled
under any corporation's by-law, agreement, vote or otherwise.
In accordance with Section 145 of the DGCL, the company's Certificate of
Incorporation (the "Certificate") provides that the company shall indemnify each
person who is or was a director, officer, employee or agent of the company
(including the heirs, executors, administrators or estate of such person) or is
or was serving at the request of the company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, to the fullest extent permitted. The indemnification provided by the
Certificate shall not be deemed exclusive of any other rights to which any of
those seeking indemnification or advancement of expenses may be entitled under
any by-law, agreement, vote of stockholder or disinterested directors or
otherwise, both as to action in his official
II-1
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person. Expenses (including attorneys' fees) incurred
in defending a civil, criminal, administrative or investigative action, suit or
proceeding shall be paid by the company in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the indemnified person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the company. The
Certificate provides that a director of the company shall not be personally
liable to the company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit.
ITEM 16. EXHIBITS
4.1 Form of 8% Subordinated Convertible Note due 2010, dated May 4,
2005(1)
4.2 Form of Placement Agent Warrant, dated May 4, 2005(1)
4.3 Form of Registration Rights Agreement, dated May 4, 2005(1)
4.4 Form of Placement Agent Warrant, dated April 28, 2006(2)
4.5 Form of Registration Rights Agreement, dated April 28, 2006(2)
5.1+ Opinion and consent of Michael W. Sanders, Attorney at Law re: the
legality of the shares being registered
10.1 Form of Purchase Agreement, dated May 4, 2005 relating to the sale
of 8% Subordinated Convertible Notes due 2010(1)
10.2 Form of Subscription Agreement, dated April 28, 2006, relating to
the sale of shares of common stock(2)
10.3 Form of Lock-Up Agreement(2)
23.1 Consent of Michael W. Sanders, Attorney at Law (including in
Exhibit 5.1)
23.2* Consent of Thomas Leger & Co., L.L.P.
------------
* Filed herewith
+ Previously filed
(1) Incorporated by reference to the respective exhibits filed with the
Company's Current Report on Form 8-K dated May 4, 2005.
(2) Incorporated by reference to the respective exhibits filed with the
Company's Current Report on Form 8-K dated April 28, 2006.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
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(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement of any material change to such information in the
registration statement.
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this
section do not apply if the registration statement is on Form S-3 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement, or is contained in a form of prospectus filed pursuant
to Rule 424(b) that is part of the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas on the 1 day of May 2007.
HOUSTON AMERICAN ENERGY CORP.
BY: /s/ John F. Terwilliger
---------------------------------
JOHN F. TERWILLIGER
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ John F. Terwilliger
----------------------- President, Chief Executive Officer May 1, 2007
John F. Terwilliger and Director (Principal Executive
Officer)
/s/ O. Lee Tawes III
----------------------- Director May 1, 2007
O. Lee Tawes III
/s/ Stephen Hartzell
----------------------- Director May 1, 2007
Stephen Hartzell
/s/ Edwin C. Broun III
----------------------- Director May 1, 2007
Edwin C. Broun III
/? John Boylan
----------------------- Director May 1, 2007
John Boylan
/s/ James J. Jacobs
----------------------- Chief Financial Officer May 1, 2007
James J. Jacobs (Principal Financial and
Accounting Officer)
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