<PAGE>

                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

    For the fiscal year ended December 31, 2001.

[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                              For the transition period from _______ to ________
                              Commission file number: ____________


                          HOUSTON AMERICAN ENERGY CORP.
                 (Name of small business issuer in its charter)


         Delaware                                         76-0675953
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)


801 Travis Street, Suite 2020, Houston, Texas                77002
  (Address of principal executive offices)                 (Zip Code)

         Issuer's telephone number, including area code: (713) 222-6966

Securities registered under
Section 12(b) of the Exchange Act:      None.

Securities registered under
Section 12(g) of the Exchange Act:      Common Stock, Par Value $0.001 Per Share
                                                      (Title of class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No ____
                                                                       -

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [_]

     Issuer's revenues for the fiscal year ended December 31, 2001 were $14,814.

     As of March 14, 2002, the aggregate market value of the registrant's common
stock (based on the closing sales price for the common stock as reported on the
OTC Bulletin Board on such date) held by non-affiliates of the registrant was
approximately $3,130,848. (Aggregate market value has been estimated solely for
the purpose of this report. For the purpose of this report it has been assumed
that all officers and directors are affiliates of the registrant. The statements
made herein shall not be construed as an admission for the purposes of
determining the affiliate status of any person.) As of March 22, 2002, the
registrant had a total of 11,999,883 shares of common stock issued and
outstanding.

     Transitional Small Business Disclosure Format (check one): Yes __ No X
                                                                          -
     Documents incorporated by reference: None.
<PAGE>

Forward-Looking Information

         This annual report on Form 10-KSB of Houston American Energy Corp., a
Delaware corporation (referred to herein as "Houston American" or the
"Company"), for the year ended December 31, 2001, contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which are intended to be covered by the safe harbors created
thereby. To the extent that such statements are not recitations of historical
fact, such statements constitute forward-looking statements that, by definition,
involve risks and uncertainties. In any forward-looking statement, where Houston
American expresses an expectation or belief as to future results or events, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will be achieved or accomplished.

         The following are factors that could cause actual results or events to
differ materially from those anticipated, and include, but are not limited to:
general economic, financial and business conditions; the Company's ability to
minimize expenses and exposures related to its oil and gas properties in which
other companies have control over the operations conducted on such properties;
changes in and compliance with governmental laws and regulations, including
various state and federal environmental regulations; the Company's current
dependency on John F. Terwilliger, its sole director and executive officer, to
continue funding the Company's operations and, to the extent he should ever
become unwilling to do so, the Company's ability to obtain additional necessary
financing to obtain additional financing from outside investors and/or bank and
mezzanine lenders; and the ability of the Company to generate sufficient
revenues to cover operating losses and position it to achieve positive cash
flow.

         Readers are cautioned not to place undue reliance on the
forward-looking statements contained herein, which speak only as of the date
hereof. The Company's believes the information contained in this Form 10-KSB to
be accurate as of the date hereof. Changes may occur after that date, and the
Company will not update that information except as required by law in the normal
course of its public disclosure practices.

                                       2
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                <C>
PART I..............................................................................4
   Item 1.  Description of Business.................................................4
   Item 2.  Description of Property.................................................9
   Item 3.  Legal Proceedings.......................................................9
   Item 4.  Submission of Matters to a Vote of Security Holders.....................9
PART II.............................................................................9
   Item 5.  Market for Common Equity and Related Stockholder Matters................9
   Item 6.  Management's Discussion and Analysis or Plan of Operation...............9
   Item 7.  Financial Statements...................................................10
   Item 8.  Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure...................................................10
PART III...........................................................................10
   Item  9.  Directors and Executive Officers......................................10
   Item 10.  Executive Compensation................................................11
   Item 11.  Security Ownership of Certain Beneficial Owners and Management........11
   Item 12.  Certain Relationships and Related Transactions........................11
   Item 13.  Exhibits and Reports on Form 8-K......................................12
SIGNATURES.........................................................................14
</TABLE>

                                       3
<PAGE>

                                     PART I

Item 1.  Description of Business.

Current Strategy

         Houston American is an oil and gas exploration and production company.
In addition to seeking out oil and gas property prospects using advanced seismic
techniques, the Company utilizes the contacts of John F. Terwilliger, the
Company's sole director and executive officer, to identify potential acquisition
targets in the Onshore Texas Gulf Coast Region of the State of Texas, where Mr.
Terwilliger has been involved in oil and gas exploration and production
activities since 1983.

         In addition to its own drilling activities and acquisition strategy,
the Company may also encourage others in the oil and gas industry to enter into
partnerships or joint ventures with it for purposes of acquiring properties and
conducting drilling and exploration activities.

Exploration and Development Activities

         The Company's exploration and development activities focus on the
identification and drilling of new productive wells and the acquisition of
existing producing wells from other producers.

Drilling Activities

         As of March 22, 2002, the Company has drilled three wells and completed
two gross wells (0.45 net wells), including connecting the two wells to the
pipeline system, on three of the Company's four leaseholds in Lavaca County,
Texas. One of the two connected wells is producing a profitable amount of
natural gas.

         The Company's goal in drilling its first two wells was to test the Frio
and Miocene Formations at different depths above 3,500 feet. The Company
considers its third well to be a dry hole and will plug and abandon the well in
accordance with the requirements of the State of Texas.

         The Company expects to drill a 13,500 feet test well on its fourth
leasehold within the next 12 months. The Company anticipates that it will own an
approximate 20 percent working interest in that well, which will be drilled to
test the Lower Wilcox Formation from depths of 11,500 feet to 13,500 feet.

         The following table summarizes the Company's development drilling
activity for the period from its inception on April 2, 2001 through March 22,
2002. There is no correlation between the number of productive wells completed
during any period and the aggregate reserves attributable to those wells. All of
the indicated wells are natural gas wells.

               Total                Productive                 Dry
               -----                ----------                 ---

        Drilled      Net       Drilled       Net       Drilled      Net
        -------      ---       -------       ---       -------      ---
           3        0.60          2          0.45         1         0.15

         A "gross well" is a well in which the Company owns a working interest.
A "net well" is deemed to exist when the sum of the fractional working interests
in gross wells equals one.

Marketing

         The Company markets substantially all of the oil and gas it produces to
Kinder Morgan Pipeline, Inc. and Pinnacle Natural Gas Co, pursuant to gas
purchase agreements the Company entered into with those companies with respect
to the Kalmus No. 1 well and the Carl Klimitchek No. 2 well, respectively. Each
of the gas purchase agreements were originally entered into by Moose Operating
Co., Inc. and the Company obtained the rights to such agreements following the
Company's purchase of the underlying oil and gas interests from Moose Oil & Gas
Company. Each agreement requires the Company to sell all of the gas it produces
from the applicable well to the

                                       4
<PAGE>

purchaser at fluctuating prices, which are based on the appropriate index and,
in the case of the agreement with Pinnacle, the average gas liquids content of
the gas delivered.

Production

         Each of the Company's first two wells, the Kalmus No. 1 well, in which
the Company owns a 0.20 working interest and a 0.15 net revenue interest, and
the Carl Klimitchek No. 2 well, in which the Company owns a 0.25 working
interest and a 0.1875 net revenue interest, began producing natural gas in the
first week of July 2001. Through January 31, 2002, the two wells have produced a
total of 46,855 Mcf, or thousand cubic feet, of gas. After netting gas used for
lease compression and gas attributed to line loss, 44,623 Mcf of gas produced
from the wells was sold, which represents approximately 7,012 net Mcf to Houston
American based on its ownership interests in the wells. The gas produced from
the wells through January 31, 2002, was sold at an average price of
approximately $2.29 per Mcf, which resulted in total revenues of approximately
$16,057 to Houston American based on its net revenue interests in the wells.

Reserves


         The Company obtained an independent reserve report of its producing
wells as of December 31, 2001, which indicated that there was an impairment of
the oil and gas properties. As a result, the Company wrote the value of its
properties down by $574,331, to the present value of the estimated recoverable
amount of oil and gas. At December 31, 2001, the Company's estimated reserves
included 27,999 Mcf of gas and no oil. The write down of $574,331 is included in
the Company's losses through December 31, 2001 of $932,620.

         The Company's business strategy requires it to develop reserves through
the acquisition of proved natural gas and oil properties, further development of
its existing properties, and exploration activities.

         The Company expects to continue incurring costs to acquire, explore and
develop oil and gas properties, and management predicts that these costs,
together with general and administrative expenses, will exceed the Company's
revenues. It is anticipated that the source of funds to carry out exploration
and development will come from a combination of the Company's production
revenues, sales of its securities, and funds from other funding transactions.

         The Company periodically reviews the carrying value of its natural gas
and oil properties under the full cost accounting rules of the SEC. Under these
rules, capitalized costs of proved natural gas and oil properties may not exceed
the present value of estimated future net revenues from proved reserves,
discounted at an annual rate of 10 percent. Application of this "ceiling" test
requires pricing future revenue at the unescalated prices in effect as of the
end of each fiscal quarter and requires a write-down for accounting purposes if
the ceiling is exceeded, even if prices were depressed for only a short period
of time. In the future, the Company may be required to further write down the
carrying value of its natural gas and oil properties when natural gas and oil
prices are depressed or unusually volatile, which would result in a charge
against the Company's earnings. Once incurred, a write-down of the carrying
value of its natural gas and oil properties is not reversible at a later date.

Risks Related to the Company's Oil and Gas Operations

         Operational Hazards and Insurance. The Company's development,
exploitation and exploration activities may be unsuccessful for many reasons,
including weather, cost overruns, equipment shortages and mechanical
difficulties. Moreover, the successful drilling of a natural gas and oil well
does not ensure a profit on investment. A variety of factors, both geological
and market-related, can cause a well to become uneconomical or only marginally
profitable. The Company's business involves a variety of operating risks which
may adversely affect its profitability, including:

         .    fires;

         .    explosions;

                                       5
<PAGE>

         .    blow-outs and surface cratering;

         .    uncontrollable flows of oil, natural gas, and formation water;

         .    natural disasters, such as hurricanes and other adverse weather
              conditions;

         .    pipe, cement, or pipeline failures;

         .    casing collapses;

         .    embedded oil field drilling and service tools;

         .    abnormally pressured formations; and

         .    environmental hazards, such as natural gas leaks, oil spills,
              pipeline ruptures and discharges of toxic gases.

         In accordance with industry practice, the Company's insurance protects
it against some, but not all, operational risks. Further, the Company does not
carry business interruption insurance at levels that would provide enough funds
for the Company to continue operating without access to additional funds. As
pollution and environmental risks generally are not fully insurable, the
Company's insurance may be inadequate to cover any losses or exposure for such
liability.

         Volatility of Oil and Gas Prices. As an independent oil and gas
producer, the Company's revenue, profitability and future rate of growth are
substantially dependent upon the prevailing prices of, and demand for, natural
gas, oil, and condensate. The Company's realized profits affect the amount of
cash flow available for capital expenditures. The Company's ability to maintain
or increase its borrowing capacity and to obtain additional capital on
attractive terms is also substantially dependent upon oil and gas prices. Prices
for oil and natural gas are subject to wide fluctuation in response to
relatively minor changes in the supply of, and demand for, oil and gas, market
uncertainty and a variety of additional factors that are beyond Houston
American's control. Among the factors that can cause the volatility of oil and
gas prices are:

         .    worldwide or regional demand for energy, which is affected by
              economic conditions;

         .    the domestic and foreign supply of natural gas and oil;

         .    weather conditions;

         .    domestic and foreign governmental regulations;

         .    political conditions in natural gas and oil producing regions;

         .    the ability of members of the Organization of Petroleum Exporting
              Countries to agree upon and maintain oil prices and production
              levels; and

         .    the price and availability of other fuels.

Competition

         Competition in the oil and gas industry is intense and the Company
competes with major and other independent oil and gas companies with respect to
the acquisition of producing properties and proved undeveloped acreage. The
Company's competitors actively bid for desirable oil and gas properties, as well
as for the equipment and labor required to operate and develop the properties.
Many of those competitors, however, have financial resources and exploration and
development budgets that are substantially greater than the Company's and may be
able to absorb the burden of any changes in federal, state and local laws and
regulations more easily than the

                                       6
<PAGE>

Company can do so, which would adversely affect its competitive position. These
competitors may be able to pay more for natural gas and oil properties and may
be able to define, evaluate, bid for and purchase a greater number of properties
than the Company. The Company's ability to acquire additional properties and
develop new and existing properties in the future will depend on its capability
to conduct operations, to evaluate and select suitable properties and to
consummate transactions in this highly competitive environment.

Governmental Regulation

         The Company's business and the oil and gas industry in general are
subject to extensive laws and regulations, including environmental laws and
regulations. As such, the Company may be required to make large expenditures to
comply with environmental and other governmental regulations. State and federal
regulations, including those enforced by the Texas Railroad Commission as the
primary regulator of the oil and gas industry in the State of Texas, are
generally intended to prevent waste of oil and gas, protect rights to produce
oil and gas between owners in a common reservoir and control contamination of
the environment. Matters subject to regulation in the State of Texas include:

         .    location and density of wells;

         .    the handling of drilling fluids and obtaining discharge permits
              for drilling operations;

         .    accounting for and payment of royalties on production from state,
              federal and Indian lands;

         .    bonds for ownership, development and production of natural gas and
              oil properties;

         .    transportation of natural gas and oil by pipelines;

         .    operation of wells and reports concerning operations; and

         .    taxation.

         Under these laws and regulations, the Company could be liable for
personal injuries, property damage, oil spills, discharge of hazardous
materials, remediation and clean-up costs and other environmental damages.
Failure to comply with these laws and regulations also may result in the
suspension or termination of the Company's operations and subject it to
administrative, civil and criminal penalties. Moreover, these laws and
regulations could change in ways that substantially increase the Company's
operating costs.

         Natural gas operations are subject to various types of regulation at
the federal, state and local levels. Prior to commencing drilling activities for
a well, the Company is required to procure permits and/or approvals for the
various stages of the drilling process from the applicable state and local
agencies. Permits and approvals include those for the drilling of wells, and
regulations include maintaining bonding requirements in order to drill or
operate wells and the location of wells, the method of drilling and casing
wells, the surface use and restoration of properties on which wells are drilled,
the plugging and abandoning of wells, and the disposal of fluids used in
connection with operations.

         The Company's operations are also subject to various conservation laws
and regulations. These include the regulation of the size of drilling and
spacing units and the density of wells, which may be drilled and the unitization
or pooling of natural gas properties. In this regard, some states allow the
forced pooling or integration of tracts to facilitate exploration while other
states rely primarily or exclusively on voluntary pooling of lands and leases.
In areas where pooling is voluntary, it may be more difficult to form units, and
therefore, more difficult to develop a project if the operator owns less than
100 percent of the leasehold.

         Regulation of Sales and Transportation of Natural Gas. Historically,
the transportation and resale of natural gas in interstate commerce have been
regulated by the Natural Gas Act of 1938, the Natural Gas Policy Act of 1978,
and the regulations promulgated by the Federal Energy Regulatory Commission.
Maximum selling prices of some categories of natural gas sold in "first sales,"
whether sold in interstate or intrastate commerce, were regulated under the
NGPA. The Natural Gas Well Head Decontrol Act removed, as of January 1, 1993,
all

                                       7
<PAGE>

remaining federal price controls from natural gas sold in "first sales" on
or after that date. FERC's jurisdiction over natural gas transportation was
unaffected by the Decontrol Act. While sales by producers of natural gas and all
sales of crude oil, condensate and natural gas liquids can currently be made at
market prices, Congress could reenact price controls in the future.

         Sales of natural gas are affected by the availability, terms and cost
of transportation. The price and terms for access to pipeline transportation are
subject to extensive regulation. In recent years, FERC has undertaken various
initiatives to increase competition within the natural gas industry. As a result
of initiatives like FERC Order No. 636, issued in April 1992, the interstate
natural gas transportation and marketing system has been substantially
restructured to remove various barriers and practices that historically limited
non-pipeline natural gas sellers, including producers, from effectively
competing with interstate pipelines for sales to local distribution companies
and large industrial and commercial customers. The most significant provisions
of Order No. 636 require that interstate pipelines provide transportation
separate or "unbundled" from their sales service, and require that pipelines
make available firm and interruptible transportation service on an open access
basis that is equal for all natural gas suppliers.

         In many instances, the result of Order No. 636 and related initiatives
has been to substantially reduce or eliminate the interstate pipelines'
traditional role as wholesalers of natural gas in favor of providing only
storage and transportation services. Another effect of regulatory restructuring
is the greater transportation access available on interstate pipelines. In some
cases, producers and marketers have benefited from this availability. However,
competition among suppliers has greatly increased and traditional long-term
producer pipeline contracts are rare. Furthermore, gathering facilities of
interstate pipelines are no longer regulated by FERC, thus allowing gatherers to
change higher gathering rates.

         Environmental Regulations. The Company's operations are subject to
additional laws and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection. Public interest
in the protection of the environment has increased dramatically in recent years.
It appears that the trend of more expansive and stricter environmental
legislation and regulations will continue.

         The Company generates wastes that may be subject to the Federal
Resource Conservation and Recovery Act ("RCRA") and comparable state statutes,
which have limited the approved methods of disposal for some hazardous wastes.
Additional wastes may be designated as "hazardous wastes" in the future, and
therefore become subject to more rigorous and costly operating and disposal
requirements. Although management believes that the Company utilizes good
operating and waste disposal practices, prior owners and operators of the
Company's properties may not have done so, and hydrocarbons or other wastes may
have been disposed of or released on or under the properties owned or leased by
the Company or on or under locations where wastes have been taken for disposal.
These properties and the wastes disposed on the properties may be subject to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
RCRA and analogous state laws, which require the removal and remediation of
previously disposed wastes, including waste disposed of or released by prior
owners or operators.

         CERCLA and similar state laws impose liability, without regard to fault
or the legality of the original conduct, on some classes of persons that are
considered to have contributed to the release of a "hazardous substance" into
the environment. These persons include the owner or operator of the disposal
site or sites where the release occurred and companies that disposed of or
arranged for the disposal of the hazardous substances found at the site. Persons
who are or were responsible for release of hazardous substances under CERCLA may
be subject to joint and several liability for the costs of cleaning up the
hazardous substances that have been released into the environment and for
damages to natural resources, and it is not uncommon for neighboring landowners
and other third parties to file claims for personal injury and property damage
allegedly caused by the hazardous substances released into the environment.

Employees

         As of March 22, 2002, the Company had one full-time employee and no
part time employees. The employee is not covered by a collective bargaining
agreement, and the Company does not anticipate that any of its future employees
will be covered by such agreement. If the Company's operations continue to grow
as expected, it anticipates hiring as many as three additional employees over
the next six to eight months.

                                       8
<PAGE>

Item 2.  Description of Property.

         As of March 22, 2002, the Company has leasehold interests in four oil
and gas properties in Lavaca County, Texas, which represent a total of 943.8
gross and 157.55 net developed acres and 1,195 gross and 240.36 net undeveloped
acres. A "gross acre" is an acre in which a working interest is owned. The
number of gross acres represents the sum of acres in which a working interest is
owned. A "net acre" is deemed to exist when the sum of the fractional working
interests in gross acres equals one. The number of net acres is the sum of the
fractional working interests in gross acres expressed in whole numbers or
fractions.

         The Company currently leases approximately 2,000 square feet of office
space in Houston, Texas as its executive offices. Management anticipates that
the Company's space will be sufficient for its for the foreseeable future. The
monthly rental under the lease, which expires on November 30, 2006, is
$3,166.66.

Item 3.  Legal Proceedings.

         As of March 22, 2002, the Company is not involved in any legal
proceedings.

Item 4.  Submission of Matters to a Vote of Security Holders.

         None.

                                    PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

         Since January 22, 2002, the Company's common stock has been listed on
the OTC Bulletin Board under the symbol "HUSA." From inception on April 2, 2001
to January 21, 2002, the Company's common stock was not publicly traded.
However, with the exception of the shares owned by John F. Terwilliger, all of
the issued and outstanding shares of the Company's common stock were registered
under the Securities Act of 1933 pursuant to the Company's Form S-4 Registration
Statement, which became effective on December 17, 2001.

         During the period from January 22, 2002 through March 14, 2002, the
high and low bid prices for the Company's common stock were $0.75 and $0.32,
respectively. The foregoing quotations of the high and low bid price of the
Company's common stock reflect inter-dealer prices, without retail markup,
markdown or commission and may not represent actual transactions.

         As of the close of business on March 22, 2002, the Company's
outstanding common stock was held by approximately 1,028 beneficial holders of
record. The Company has never paid dividends on its common stock. As the Company
anticipates that all of its future earnings will be retained for the development
of its, business, the Company does not expect to pay any cash dividends in the
foreseeable future. Any actual payment of future dividends will be at the
discretion of the Company's board of directors and will be based on the
Company's future earnings, financial condition, capital requirements and other
relevant factors.

Item 6.  Management's Discussion and Analysis or Plan of Operations.

         The following discussion regarding the Company's financial condition
and results of operations should be read in conjunction with the financial
statements and related notes contained in Item 7 of this Form 10-KSB.

Results of Operations

         Since inception on April 2, 2001 to December 31, 2001, the Company has
incurred an operating loss of $932,620, which included a write down in the value
of its oil and gas properties of $574,331 as a result of the findings of an
independent reserve report conducted as of December 31, 2001. The Company's
revenues during that period were approximately $14,814 and its total expenses
were $373,103, excluding the amount of the write down. The total expenses of
$373,103 included $203,400 of non-recurring expenses related to the Company's
formation and the process of taking the Company public.

                                       9
<PAGE>

Liquidity and Capital Resources

         Management anticipates that the Company's current financing in place
will meet its anticipated objectives and business operations for approximately
the next 12 months. For that period, management anticipates that the Company's
committed share of the costs associated with drilling, completing, testing and
connecting its fourth well will be approximately $800,000. Additionally, the
Company's management is currently evaluating several producing property
acquisitions as well as several drilling prospects. Over the next few months,
management expects the Company to enter into definitive agreements on one or
more of these projects, subject to its ability to obtain adequate financing at
that time.

         As discussed by the Company's accountants in the audited financial
statements included in Item 7 of this Form 10-KSB, the Company's revenue is
currently insufficient to cover its costs and expenses. In addition to the
income received from the Company's wells, John F. Terwilliger, the Company's
sole director and executive officer, continues to loan the Company the funds
needed to continue its operations. To the extent the Company's revenue shortfall
exceeds Mr. Terwilliger's willingness and ability to continue loaning the
Company the funds needed for its operations, management anticipates raising any
necessary capital from outside investors coupled with bank or mezzanine lenders.
As of March 22, 2002, the Company has not entered into any negotiations with any
third parties to provide such capital.

Item 7.  Financial Statements.

         The Company's financial statements are set forth immediately following
the signature page of this Form 10-KSB.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

         None.

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.

Directors and Executive Officers

         John F. Terwilliger, age 54, is the Company's sole director and
executive officer. Mr. Terwilliger has been the Company's President, Secretary
and Treasurer since its inception in April 2001. Since 1988, Mr. Terwilliger has
served as the Chairman of the Board and President of Moose Oil & Gas Company, a
Houston, Texas based company. Prior to 1988, Mr. Terwilliger was the Chairman of
the Board and President of Cambridge Oil Company, a Houston, Texas based oil
exploration and production company. Mr. Terwilliger served in the United States
Army, receiving his honorable discharge in 1969.

         The Company's board of directors is divided into three classes, each
elected for staggered three-year terms. Mr. Terwilliger is a Class C director
and his term is scheduled to expire at the third annual meeting following the
end of its 2001 fiscal year. The Company's executive officers are elected by its
board of directors and serve terms of one year or until their death, resignation
or removal by the board of directors.

Section 16(A) Beneficial Ownership Reporting Requirements

         Based upon a review of filings with the Securities and Exchange
Commission and written representations that no other reports were required, the
Company believes that Mr. Terwilliger, the Company's sole director and executive
officer, complied with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended, during 2001.

                                       10
<PAGE>

Item 10. Executive Compensation.

         During the period from the Company's inception on April 1, 2001 through
March 22, 2002, Mr. Terwilliger has not received a salary or any other
compensation for the services he has provided to the Company.

         The Company does not compensate its directors for serving in such
capacity. As of March 22, 2002, the Company has not issued any options or
warrants to purchase shares of its common stock.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

         The following table sets forth certain information regarding the
beneficial ownership of the Company's issued and outstanding common stock as of
March 22, 2002, by (i) each person or entity known to beneficially own more than
five percent of the Company's common stock , and (ii) John F. Terwilliger, the
Company's sole director and executive officer.


                                                           Shares Beneficially
                                                                Owned (2)
                                                           -------------------
Name and Address of Beneficial Owner                      Number     Percent (3)
------------------------------------                      ------     -----------

John F. Terwilliger(1)................................   7,395,695        61.6
Orrie Lee Tawes.......................................     726,968         6.4
   c/o O. Lee Tawes III
   C.E. Unterberg Towbin
   350 Madison Avenue, 10/th/ Floor
   New York, New York 10017
 All directors and officers as a group (one person)...   7,395,695        61.6

__________
(1)  Mr. Terwilliger's address is c/o Houston American Energy Corp., 801 Travis,
     Suite 2020, Houston, Texas 77002.
(2)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission.
(3)  Based on 11,999,883 shares of the Company's common stock outstanding as of
     March 22, 2002.

Item 12. Certain Relationships and Related Transactions.

         The Company's oil and gas properties were purchased, at cost, from
Moose Oil & Gas Company, a Texas corporation and an affiliate of John F.
Terwilliger, the Company's sole director and executive officer. As payment for
the properties, the Company issued Moose Oil & Gas a promissory note in the
amount of $216,981, which, as discussed below, was paid in July 2001.

         On April 6, 2001, the Company entered into an Operating Agreement with
Moose Operating Co., Inc., a Texas corporation and a subsidiary of Moose Oil &
Gas. Under the terms of the Operating Agreement, Moose Operating has full
control over the drilling activities to be conducted on the Company's current
leaseholds in Lavaca County, Texas. Although Moose Operating is initially
responsible for the payment of all costs associated with development and
operation, the Company, along with Moose Oil & Gas, is ultimately responsible
for its proportionate share of the costs based on its respective working
interests.

         In order to secure repayment of the operating costs, the Operating
Agreement grants Moose Operating a security interest in the Company's
proportionate share of the oil or gas produced from any wells. In addition to
being entitled to utilize and receive payment for the use of its own equipment
and labor in conducting the operations, the Operating Agreement entitles Moose
Operating to receive monthly fixed overhead payments of $4,500 per well being
drilled and $500 per producing well. The monthly fixed overhead payments to
Moose Operating were determined based on competitive rates.

         In July, 2001, the Company borrowed approximately $664,000 from John F.
Terwilliger, its sole director and executive officer. The notes bear interest at
a rate of 10 percent per annum and are due on demand. The Company's payment of
the notes is secured by its interests in its oil and gas properties. Should the
Company fail to make any required payment or otherwise default on the note, Mr.
Terwilliger would have the right to foreclose on the Company's interests in its
oil and gas properties.

                                       11
<PAGE>

         The Company utilized a portion of the funds borrowed from Mr.
Terwilliger to pay the principal and accrued interest on the $216,981 promissory
note that was payable to Moose Oil & Gas Company upon the purchase of the
Company's oil and gas properties, and to repay Moose Operating for the operating
expenses and drilling and completing costs it had advanced on the Company's
behalf pursuant to the Operating Agreement.

Item 13.  Exhibits and Reports on Form 8-K.

(a)      Exhibits.

    Exhibit No.                   Identification of Exhibit
    -----------                   -------------------------

     2.1**     Amended and Restated Plan and Agreement of Merger dated as of
               September 26, 2001, between Texas Nevada Oil & Gas Co. and
               Houston American Energy Corp. (incorporated by reference to
               Exhibit 2.1 to Amendment No. 5 to the Company's Registration
               Statement on Form SB-2, registration number 333-66638 (the
               "Company's Registration Statement"), filed with the SEC on
               November 30, 2001).
     3.1**     Certificate of Incorporation of Houston American Energy Corp.
               filed April 2, 2001 (incorporated by reference to Exhibit 3.1 to
               the Company's Registration Statement filed with the SEC on August
               3, 2001).
     3.2**     Certificate of Merger Merging Opportunity Acquisition Company
               with and into Houston American Energy Corp. filed April 12, 2001
               (incorporated by reference to Exhibit 3.2 to the Company's
               Registration Statement filed with the SEC on August 3, 2001).
     3.3**     Bylaws of Houston American Energy Corp. adopted April 2, 2001
               (incorporated by reference to Exhibit 3.3 to the Company's
               Registration Statement filed with the SEC on August 3, 2001).
     3.4**     Certificate of Amendment to the Certificate of Incorporation of
               Houston American Energy Corp. filed September 25, 2001
               (incorporated by reference to Exhibit 3.4 to Amendment No. 1 to
               the Company's Registration Statement filed with the SEC on
               October 1, 2001).
     3.5*      Certificate of Merger Merging Texas Nevada Oil & Gas Co. with and
               into Houston American Energy Corp. filed January 17, 2002.
     4.1**     Text of Common Stock Certificate of Houston American Energy Corp.
               (incorporated by reference to Exhibit 4.1 to the Company's
               Registration Statement filed with the SEC on August 3, 2001).
               4.2** Text of Preferred Stock Certificate of Houston American
               Energy Corp. (incorporated by reference to Exhibit 4.2 to the
               Company's Registration Statement filed with the SEC on August 3,
               2001).
     10.1**    Model Form Operating Agreement dated April 6, 2001, between Moose
               Operating Co., Inc. and Houston American Energy Corp.
               (incorporated by reference to Exhibit 10.1 to the Company's
               Registration Statement filed with the SEC on August 3, 2001).
     10.2**    Agreement to Assign Interests in Oil and Gas Leases dated as of
               April 6, 2001, between Moose Oil & Gas Company and Houston
               American Energy Corp. (incorporated by reference to Exhibit 10.2
               to the Company's Registration Statement filed with the SEC on
               August 3, 2001).
     10.3**    Assignment of Interests in Oil and Gas Leases and Bill of Sale
               effective as of April 6, 2001, between Moose Oil & Gas Company
               and Houston American Energy Corp. (incorporated by reference to
               Exhibit 10.3 to the Company's Registration Statement filed with
               the SEC on August 3, 2001).
     10.4**    Promissory Note of Houston American Energy Corp. in the amount of
               $216,981.06 dated April 15, 2001, payable to Moose Oil & Gas
               Company. (incorporated by reference to Exhibit 10.4 to the
               Company's Registration Statement filed with the SEC on August 3,
               2001).
     10.5**    Plan and Agreement of Merger dated as of April 12, 2001, between
               Opportunity Acquisition Company and Houston American Energy Corp.
               (incorporated by reference to Exhibit 10.5 to the Company's
               Registration Statement filed with the SEC on August 3, 2001).
     10.6**    Agreement dated as of March 23, 2001, between Unicorp, Inc.,
               Equitable Assets, Incorporated, Texas Nevada Oil & Gas Co. and
               Opportunity Acquisition Company (incorporated by reference to
               Exhibit 10.6 to the Company's Registration Statement filed with
               the SEC on August 3, 2001).

                                       12
<PAGE>

    Exhibit No.                      Identification of Exhibit
    -----------                      -------------------------

     10.7**    First Amendment of Agreement dated as of July 31, 2001, between
               Unicorp, Inc., Equitable Assets, Incorporated, Texas Nevada Oil &
               Gas Co. and Houston American Energy Corp. (incorporated by
               reference to Exhibit 10.7 to the Company's Registration Statement
               filed with the SEC on August 3, 2001).
     10.8**    Gas Purchase Contract #36-1599 dated as of May 1, 2001, between
               Kinder Morgan Texas Pipeline, L.P. and Moose Operating Co., Inc.
               (incorporated by reference to Exhibit 10.8 to Amendment No. 1 to
               the Company's Registration Statement filed with the SEC on
               October 1, 2001).
     10.9**    Gas Purchase Agreement dated July 31, 1997, between Dominion
               Pipeline Company (as predecessor-in-interest to Pinnacle Natural
               Gas Co.) and Moose Operating Co., Inc. (incorporated by reference
               to Exhibit 10.9 to Amendment No. 1 to the Company's Registration
               Statement filed with the SEC on October 1, 2001).
     10.10**   Model Form Operating Agreement dated December 11, 1997, between
               Louis Dreyfus Natural Gas Corp., Seisgen Exploration, Inc. and
               Moose Operating Co., Inc. (incorporated by reference to Exhibit
               10.10 to Amendment No. 1 to the Company's Registration Statement
               filed with the SEC on October 1, 2001).
     10.11**   Promissory Note of Houston American Energy Corp. in the amount of
               $390,000 dated July 2, 2001, payable to John F. Terwilliger
               (incorporated by reference to Exhibit 10.11 to Amendment No. 4 to
               the Company's Registration Statement filed with the SEC on
               November 21, 2001).
     10.12**   Promissory Note of Houston American Energy Corp. in the amount of
               $285,000 dated July 30, 2001, payable to John F. Terwilliger
               (incorporated by reference to Exhibit 10.12 to Amendment No. 4 to
               the Company's Registration Statement filed with the SEC on
               November 21, 2001).

----------
*    Filed herewith.
**   Incorporated herein as indicated.

(b)      Reports on Form 8-K.

         Texas Nevada Oil & Gas Co., a Texas corporation, which merged with and
into Houston American Energy Corp. on January 17, 2002, filed a report on Form
8-K on November 16, 2001, related to the Amended and Restated Plan and Agreement
of Merger the companies entered into as of September 26, 2001, a copy of which
was attached as an exhibit to the Form 8-K. Financial statements were not
required to be filed in connection with the Form 8-K.



                            INTENTIONALLY LEFT BLANK

                                       13
<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                             HOUSTON AMERICAN ENERGY CORP.

Dated March 27, 2002.


                                             By  /s/ John F. Terwilliger
                                               ---------------------------------
                                                John F. Terwilliger, President

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated:

<TABLE>
<CAPTION>
           Name                  Signature                  Title                  Date
           ----                  ---------                  -----                  ----
    <S>                   <C>                       <C>                       <C>
    John F. Terwilliger   /s/ John F. Terwilliger   Director, President,      March 27, 2002
                                                    Treasurer and Secretary
</TABLE>

                                       14
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

HOUSTON AMERICAN ENERGY CORP.:

<TABLE>
<S>                                                                                <C>
Independent Auditors Report.....................................................     F-2
Balance Sheet as of December 31, 2001...........................................     F-3
Statement of Loss From April 2, 2001 (Date of Inception) to December 31, 2001...     F-4
Statement of Shareholders' Deficit Accumulated in Development Stage From
     April 2, 2001 (Date of Inception) to December 31, 2001.....................     F-5
Statement of Cash Flows From April 2, 2001 (Date of Inception) to
     December 31, 2001..........................................................     F-6
Notes to the Financial Statements From April 2, 2001 (Date of Inception) to
     December 31, 2001..........................................................     F-7
</TABLE>

                                      F-1
<PAGE>

                           INDEPENDENT AUDITORS REPORT

Houston American Energy Corp.
Houston, Texas

We have audited the accompanying balance sheet of Houston American Energy Corp.
(a development stage company) as of December 31, 2001 and the related statements
of loss, stockholders' deficit, and cash flows for the period from April 2, 2001
(date of inception), to December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the over-all
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Houston American Energy Corp.
as of December 31, 2001, and the results of its operations and its cash flows
from April 2, 2001 (date of inception), to December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.

The Company is in the development stage as of December 31, 2001. As discussed in
Note 2 to the financial statements, successful completion of the Company's fund
raising activities and, ultimately, the attainment of profitable operations is
dependent upon future events, including obtaining adequate financing to fulfill
its development activities and achieving a level of revenue adequate to support
the Company's cost structure.



                                             /s/  Thomas Leger & Co., L.L.P.

                                             Thomas Leger & Co., L.L.P.

February 28, 2002
Houston, Texas

                                      F-2
<PAGE>

                          HOUSTON AMERICAN ENERGY CORP.
                           A DEVELOPMENT STAGE COMPANY
                                  BALANCE SHEET
                                DECEMBER 31, 2001
                          -----------------------------

                                     ASSETS
                                     ------

CURRENT ASSETS
    Cash                                                          $     9,389
    Accounts receivable - gas sales                                     5,218
    Prepaid expenses                                                    8,142
                                                                  -----------

       Total current assets                                            22,749
                                                                  -----------

PROPERTY PLANT AND EQUIPMENT
    Oil and Gas Properties, full cost method
       Cost subject to amortization                                   635,039
       Cost not being amortized                                       128,219
    Furniture and Equipment                                             5,596
                                                                  -----------
    Total properties                                                  768,854
    Accumulated depreciation and depletion oil and gas properties    (611,923)
                                                                  -----------

  Total property, plant and equipment                                 156,931
                                                                  -----------

OTHER ASSETS                                                            5,541
                                                                  -----------

    TOTAL ASSETS                                                  $   185,221
                                                                  ===========


              LIABILITIES AND SHAREHOLDERS' DEFICIT
              -------------------------------------

CURRENT LIABILITIES
    Accrued liabilities                                           $    90,341
    Notes payable, shareholder                                      1,016,097
                                                                  -----------

    Total current liabilities                                       1,106,438
                                                                  -----------

SHAREHOLDERS' DEFICIT
Common stock, par value $.001;
    100,000,000 shares authorized, 11,403,414 shares outstanding       11,403
    Deficit accumulated in development stage                         (932,620)
                                                                  -----------

    Total shareholders' deficit                                      (921,217)
                                                                  -----------

    TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                   $   185,221
                                                                  ===========


                   The accompanying notes are an integral part
                         of these financial statements.

                                      F-3
<PAGE>

                          HOUSTON AMERICAN ENERGY CORP.
                           A DEVELOPMENT STAGE COMPANY
                                STATEMENT OF LOSS
           FROM APRIL 2, 2001 (DATE OF INCEPTION) TO DECEMBER 31, 2001
           -----------------------------------------------------------


Revenue                                                          $     14,814
                                                                 ------------

Lease operating expense                                                11,019

General and administrative expense                                    280,890

Depreciation and depletion                                             37,592

Interest expense                                                       43,602

Write-down of oil and gas properties due to ceiling limitation        574,331
                                                                 ------------

Total expenses                                                        947,434
                                                                 ------------

Net loss                                                         $   (932,620)
                                                                 ------------

Basic loss per share                                             $      (0.08)
                                                                 ============

Basic weighted average share                                       11,403,414
                                                                 ============


                   The accompanying notes are an integral part
                         of these financial statements.

                                      F-4
<PAGE>

                         HOUSTON AMERICAN ENERGY CORP.
                           A DEVELOPMENT STAGE COMPANY
                       STATEMENT OF SHAREHOLDERS' DEFICIT
                        ACCUMULATED IN DEVELOPMENT STAGE
           FROM APRIL 2, 2001 (DATE OF INCEPTION) TO DECEMBER 31, 2001
           -----------------------------------------------------------

<TABLE>
<CAPTION>
                                                                     Deficit
                                                                   Accumulated
                                                                      in the
                                              Common Stock         Development
                                           Shares      Amount         Stage        Total
                                         ----------   --------     -----------  -----------
<S>                                     <C>           <C>          <C>          <C>
Balance at inception, April 2, 2001               -    $     -     $        -   $        -


Stock issued for cash                     1,000,000      1,000              -        1,000

Retroactive adjustment for stock
   split on September 25, 2001           10,403,414          -              -            -

Additional contributed capital
   from majority shareholder                      -     10,403              -       10,403

Net loss                                          -          -       (932,620)    (932,620)
                                         ----------    -------     ----------   ----------


Balance at December 31, 2001             11,403,414    $11,403     $ (932,620)  $ (921,217)
                                         ==========    =======     ==========   ==========
</TABLE>

                   The accompanying notes are an integral part
                         of these financial statements.

                                      F-5
<PAGE>

                          HOUSTON AMERICAN ENERGY CORP.
                           A DEVELOPMENT STAGE COMPANY
                             STATEMENT OF CASH FLOWS
           FROM APRIL 2, 2001 (DATE OF INCEPTION) TO DECEMBER 31, 2001
           -----------------------------------------------------------


OPERATING ACTIVITIES
    Loss from operations                                            $ (932,620)


    Adjustment to reconcile net loss to
     net cash from operations
      Depreciation and depletion                                        37,592
      Write-down oil and gas properties                                574,331
      Non-cash expenses                                                257,646
      Increase in accounts receivable                                   (5,218)
      Increase in prepaid expense                                       (8,142)
      Increase in other assets                                          (5,541)
      Increase in accrued expenses                                      90,341
                                                                    ----------

    Total adjustment                                                   941,009
                                                                    ----------

    Net cash provided by operations                                      8,389
                                                                    ----------

CASH FLOW FROM FINANCING, sale of common stock                           1,000
                                                                    ----------

    Net increase in cash, and cash at end of year                   $    9,389
                                                                    ==========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
    AND FINANCING ACTIVITIES
       Oil and gas properties acquired                              $  768,854
       Non-cash expense                                                257,646
       Note payable for oil and gas properties and expenses          1,026,500


                   The accompanying notes are an integral part
                         of these financial statements.

                                      F-6
<PAGE>

                          HOUSTON AMERICAN ENERGY CORP.
                           A DEVELOPMENT STAGE COMPANY
                        NOTES TO THE FINANCIAL STATEMENTS
           FROM APRIL 2, 2001 (DATE OF INCEPTION) TO DECEMBER 31, 2001
           -----------------------------------------------------------

NOTE 1. - NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Houston American Energy Corp. (a Delaware Corporation) ("the Company") was
incorporated on April 2, 2001. The Company was organized to engage in the
exploration, development and acquisition of domestic oil and gas properties
principally in the State of Texas.

The Company completed a stock split as of September 25, 2001, which resulted in
total outstanding shares of 11,403,414. The Company has retroactively applied
this stock split to all share amounts and per share amounts in these financial
statements and footnotes.

Oil and Gas Revenues Receivables - The Company recognizes oil and gas revenue
--------------------------------
from its interest in producing wells as oil and gas is produced and sold from
those wells. The Company does not anticipate that the oil and gas sold will be
significantly different from the Company's production entitlement.

Oil and Gas Properties and Equipment - The Company follows the full cost method
------------------------------------
of accounting for oil and gas property acquisition, exploration and development
activities. Under this method, all productive and nonproductive costs incurred
in connection with the exploration for and development of oil and gas reserves
are capitalized. Capitalized costs include lease acquisition, geological and
geophysical work, delay rentals, costs of drilling, completing and equipping
successful and unsuccessful oil and gas wells and related internal costs that
can be directly identified with acquisition, exploration and development
activities, but does not include any cost related to production, general
corporate overhead or similar activities. Gains or loss on the sale or other
disposition of oil and gas properties is not recognized unless significant
amounts of oil and gas reserves are involved. No corporate overhead has been
capitalized as of December 31, 2001.

The capitalized costs of oil and gas properties, plus estimated future
development costs relating to proved reserves are amortized on a
unit-of-production method over the estimated productive life of the proved oil
and gas reserves. Unevaluated oil and gas properties are excluded from this
calculation.

Capitalized oil and gas property costs, less accumulated amortization, are
limited to an amount (the ceiling limitation) equal to the sum of: (a) the
present value of estimated future net revenues from the projected production of
proved oil and gas reserves, calculated at prices in effect as of the balance
sheet date (with consideration of price changes only to the extent provided by
contractual arrangements) and a discount factor of 10%; (b) the cost of unproved
and unevaluated properties excluded from the costs being amortized; (c) the
lower of cost or estimated fair value of unproved properties included in the
costs being amortized; and (d) related income tax effects. Excess costs are
charged to proved properties impairment expense.

Unevaluated Oil and Gas Properties - Unevaluated oil and gas properties consist
----------------------------------
principally of the Company's acquisition costs in undeveloped leases net of an
allowance for impairment and transfers to depletable oil and gas properties.

When leases are developed, expire or are abandoned, the related costs are
transferred from unevaluated oil and gas properties to depletable oil and gas
properties. Additionally, the Company reviews the carrying costs of unevaluated
oil and gas properties for the purpose of determining probable future lease
expirations and abandonments, and prospective discounted future economic benefit
attributable to the leases. The Company records an allowance for impairment
based on the review with the corresponding charge being made to depletable oil
and gas properties. There is no such allowance for impairment presented in the
accompanying financial statements.

                                      F-7
<PAGE>

                          HOUSTON AMERICAN ENERGY CORP.
                           A DEVELOPMENT STAGE COMPANY
                        NOTES TO THE FINANCIAL STATEMENTS
           FROM APRIL 2, 2001 (DATE OF INCEPTION) TO DECEMBER 31, 2001
           -----------------------------------------------------------

NOTE 1. - NATURE OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
continued ...

Unevaluated oil and gas properties not subject to amortization include the
following:

                  Acquisition costs                    $128,219
                                                       ========

The $128,219 is for an oil and gas property in Lavaca County, Texas. The Company
is maintaining this property and anticipates a well will be drilled within the
next twelve months.

Accrued Liabilities - Accrued liabilities consisted of operating expenses.
-------------------

Income Taxes - Deferred income taxes are provided on a liability method whereby
------------
deferred tax assets and liabilities are established for the difference between
the financial reporting and income tax basis of assets and liabilities as well
as operating loss and tax credit carryforwards. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.

Preferred Stock - The Company has authorized 10,000,000 shares of preferred
---------------
stock with a par value of $0.001. The Board of Directors shall determine the
designations, rights, preferences, privileges and voting rights of the preferred
stock as well as any restrictions and qualifications thereon. No shares of
preferred stock have been issued.

Statement of Cash Flows - Cash equivalents consists of demand deposits and cash
-----------------------
investments with initial maturity dates of less than three months. The Company
paid no interest or taxes during the period of the accompanying financial
statements.

Net Loss Per Share - Basic loss per share is computed by dividing the net loss
------------------
available to common shareholders by the weighted average of common shares
outstanding during the period, as retroactively adjusted by the stock split
described in the second paragraph of Note 1.

Use of Estimates - The preparation of financial statements in conformity with
----------------
generally accepted accounting principles requires the Company to make estimates
and assumptions that could affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.

General and Administrative Expense - Includes approximately $203,400 of expenses
----------------------------------
incurred by the Company to register it's securities and become a public
reporting company.

NOTE 2. - DEVELOPMENT STAGE

The Company is in the development stage and has minimal revenue to support its
operations. It is dependent on the majority shareholder to fund its operations
and costs associated with the acquisition, exploration and development of oil
and gas properties. Management intends to obtain funds through private and/or
public securities offerings.

NOTE 3. - NOTES PAYABLE

Notes payable at December 31, 2001, in the amount of $1,016,097, is due to the
majority shareholder. The note bears interest at 10%, is due on demand for
principal and interest and is secured by all the oil and gas properties owned by
the Company.

                                      F-8
<PAGE>

                          HOUSTON AMERICAN ENERGY CORP.
                           A DEVELOPMENT STAGE COMPANY
                        NOTES TO THE FINANCIAL STATEMENTS
           FROM APRIL 2, 2001 (DATE OF INCEPTION) TO DECEMBER 31, 2001
           -----------------------------------------------------------

NOTE 4. - RELATED PARTIES

The Company's oil and gas properties were purchased from an affiliate entity at
their cost.

NOTE 5 - INCOME TAXES

The following table sets forth a reconciliation of the statutory federal income
tax for the year ended December 31, 2001.

              Loss before income taxes                             $  (932,620)
                                                                   ===========

              Income tax computed at statutory rates               $  (317,091)
              Permanent differences, nondeductible expenses             69,165
              Increase in valuation allowance                          247,926
                                                                   -----------

              Tax provision                                        $         -
                                                                   ===========

No federal income taxes have been paid since the inception of the Company. The
Company has a net operating loss carry forward of approximately $740,000 which
will expire in 2021.

Deferred Income Taxes
---------------------

The tax effects of the temporary differences between financial statement income
and taxable income are recognized as a deferred tax asset and liability.
Significant components of the deferred tax asset and liability as of December
31, 2001 are set out below.

              Deferred tax asset:
                Net operating loss carry forwards                   $  251,561
                Valuation allowance                                   (247,926)
                                                                    ----------
                Net deferred tax asset                                   3,635
                                                                    ----------

              Deferred tax liability:
                Book over tax depreciation, depletion
                  and capitalization methods on oil and
                  gas properties.                                        3,635
                                                                    ----------

              Net deferred tax liability                            $        -
                                                                    ==========

NOTE 6. - COMMITMENT

As of December 31, 2001, the Company had lease obligation for office space that
expires on November 30, 2006.

                                    Year            Amount
                                    ----            ------

                                    2002        $    38,000
                                    2003             38,000
                                    2004             38,000
                                    2005             38,000
                                    2006             34,833
                                                -----------

                                    Total       $   186,833
                                                ===========

                                      F-9
<PAGE>

                          HOUSTON AMERICAN ENERGY CORP.
                           A DEVELOPMENT STAGE COMPANY
                        NOTES TO THE FINANCIAL STATEMENTS
           FROM APRIL 2, 2001 (DATE OF INCEPTION) TO DECEMBER 31, 2001
           -----------------------------------------------------------

NOTE 7. - SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION, DEVELOPMENT AND
PRODUCTION ACTIVITIES (UNAUDITED)

This footnote provides unaudited information required by Statement of Financial
Accounting Standards No. 69, "Disclosures about Oil and gas Producing
Activities."

Capital Costs
-------------

Capitalized costs and accumulated depletion relating to the Company's oil and
gas producing activities as of December 31, 2001, all of which are conducted
within the continental United States, are summarized below:

              Properties subject to amortization                $  635,039
              Unevaluated properties                               128,219
              Less accumulated amortization and impairment        (611,363)
                                                                ----------
              Capitalized costs                                 $  151,895
                                                                ==========
Costs Incurred
--------------

Costs incurred in oil and gas property acquisition, exploration and development
activities are summarized below:

              Property acquisition costs:
                Proved                                          $    5,535
                Unproved                                           128,219
              Exploration costs                                     75,539
              Development costs                                    553,967
                                                                ----------
              Total costs incurred                              $  763,260
                                                                ==========

Reserve Information and Related Standardized Measure of Discounted Future Net
-----------------------------------------------------------------------------
Cash Flows
----------

The following supplemental unaudited presentation of proved reserve quantities
and related standardized measure of discounted future net cash flows provides
estimates only and does not purport to reflect realizable values or fair market
values of the Company's reserves. Volumes reported for proved reserves are based
on reasonable estimates. These estimates are consistent with current knowledge
of the characteristics and production history of the reserves. The Company
emphasizes that reserve estimates are inherently imprecise and that estimates of
new discoveries are more imprecise than those of producing oil and gas
properties. Accordingly, significant changes to these estimates can be expected
as future information becomes available.

Proved reserves are those estimated reserves of crude oil (including condensate
and natural gas liquids) and natural gas that geological and engineering data
demonstrate with reasonable certainly to be recoverable in future years from
known reservoirs under existing economic and operating conditions. Proved
developed reserves are those expected to be recovered through existing wells,
equipment, and operating methods.

The standardized measure of discounted future net cash flows relating to proved
oil and gas reserves is computed by applying year-end prices of oil and gas
(with consideration of price changes only to the extent provided by contractual
arrangements) to the estimated future production of proved oil and gas reserves,
less estimated future expenditures (based on year-end costs) to be incurred in
developing and producing the proved reserves, less estimated related future
income tax expenses (based on year-end statutory tax rates, with consideration
of future tax rates already legislated), and assuming continuation of existing
economic conditions. Future income tax expenses give effect to permanent
differences and tax credits but do not reflect the impact of continuing
operations including

                                      F-10
<PAGE>

                          HOUSTON AMERICAN ENERGY CORP.
                           A DEVELOPMENT STAGE COMPANY
                        NOTES TO THE FINANCIAL STATEMENTS
           FROM APRIL 2, 2001 (DATE OF INCEPTION) TO DECEMBER 31, 2001
           -----------------------------------------------------------

NOTE 7. - SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION, DEVELOPMENT AND
PRODUCTION ACTIVITIES (UNAUDITED) continued . . .

property acquisitions and exploration. The estimated future cash flows are then
discounted using a rate of ten percent a year to reflect the estimated timing of
the future cash flows.

              Proved developed reserves
                                                                          Gas
                                                                         (mcf)
                                                                      --------
                   As of inception April 2, 2001                             -
                   Extensions and discoveries                           34,169
                   Production                                            6,170
                                                                      --------
                   End of year                                          27,999
                                                                      ========

              Standard measure of discounted future net cash flows

                   Future cash inflows                                $ 55,399
                   Future production cost                              (27,827)
                                                                      --------
                   Future net cash flow                                 27,572
                   10% annual discount for estimated
                     timing of cash flows                               (3,905)
                                                                      --------

              Standardized measure of discounted future net
                   cash flow relating to proved gas reserves          $ 23,667
                                                                      ========

              Changes in standardized measure

                   Change due to current year operations:
                      Sales of gas, net of production costs           $ (3,795)
                      Extension and discoveries                         27,462
                                                                      --------

                   End of year                                        $ 23,667
                                                                      ========

NOTE 8. - SUBSEQUENT EVENTS

The Company has entered into an agreement with a public entity whereby the
public entity will spin off a wholly-owned subsidiary. A registration statement
under the Securities Exchange Act of 1934, as amended, was filed for the
subsidiary in July, 2001, and became effective in January, 2002, at which time
the subsidiary became a fully reporting company. The Company merged with the
reporting entity on January 17, 2002.

                                      F-11