DEF: Houston American Energy Corp. to Acquire Abundia Global Impact Group in Share Exchange

Houston American Energy Corp. (HUSA) will acquire Abundia Global Impact Group (AGIG) in a share exchange, issuing shares equal to 94% of HUSA's outstanding common stock to AGIG's unitholders.

Summary

• Houston American Energy Corp. (HUSA) is set to acquire Abundia Global Impact Group (AGIG) through a share exchange agreement.
• HUSA will issue new shares of common stock equal to 94% of its outstanding shares to AGIG's unitholders.
• Based on the number of shares outstanding as of April 3, 2025, this would require issuing 245,755,684 shares of HUSA common stock.
• The transaction is subject to customary closing conditions, including stockholder approval.
• Following the share exchange, Abundia Financial will own approximately 84.6% of HUSA's common stock, making HUSA a controlled company under NYSE American rules.
• HUSA is also seeking stockholder approval to amend its charter to conduct a reverse stock split and increase the authorized common stock to 300,000,000 shares.
• A special meeting of stockholders is scheduled for April 24, 2025, to vote on these proposals.
• The board of directors unanimously recommends that stockholders vote in favor of the proposals.

Sentiment

Score: 6

Explanation: The document presents a mix of positive and negative aspects. The acquisition of AGIG offers growth potential, but there are risks associated with dilution, financing, and market conditions. The fairness opinion from Evans & Evans is a positive, but the overall sentiment is cautiously optimistic.

Positives

• The AGIG business has proprietary technology and operates in a growing market for alternative products such as Sustainable Aviation Fuel (SAF).
• The Board and HUSA management believe the AGIG Transaction provides a strong opportunity for growth, which will benefit the existing HUSA stockholders.
• Evans & Evans delivered its opinion to the Board that, as of February 20, 2025, and based upon and subject to the factors and assumptions set forth in its written opinion, the Share Exchange was fair to HUSA stockholders from a financial perspective.

Negatives

• HUSA stockholders will experience dilution because of the issuance of the common stock in connection with the AGIG Transaction.
• The Company may require additional capital to finance AGIGs operations, which may not be available on acceptable terms, or at all.
• The combined company may not fully realize the anticipated benefits of the AGIG Transaction within the timing anticipated or at all.

Risks

• The legacy Oil and Gas businesses of HUSA are declining, and future investment requires significant levels of financial resources.
• The markets in which HUSA operates are extremely competitive, and we have experienced recurring operating losses and may not attain future profitability.
• The combined company may not fully realize the anticipated benefits of the AGIG Transaction within the timing anticipated or at all.
• AGIG has incurred losses and anticipate continuing to incur losses while it commercializes and scales its business.
• AGIG will require substantial additional financing to fund its operations and complete the development and commercialization of its technologies and AGIG may not be able to do so on favorable terms.
• AGIG has identified material weaknesses in its internal control over financial reporting.
• AGIGs technology may not be successful in developing commercial products.
• AGIG expects to rely on a limited number of industry partners for a significant portion of its near-term revenue.
• AGIG is vulnerable to fluctuations in the supply and price of raw materials.
• AGIG may face manufacturing capacity issues that may adversely affect its deployment targets.
• AGIG and its industry partners are subject to extensive international, national and subnational laws and regulations, and any changes in relevant laws or regulations, or failure to comply with these laws and regulations could have a material adverse effect on its business.
• AGIG may be subject to product liability claims, which could result in material expense, diversion of management time and attention and damage to its business, reputation and brand.
• AGIGs failure to protect its intellectual property and proprietary technology may significantly impair its competitive advantage.
• AGIG may be involved in lawsuits to protect or enforce its patents or the patents of its licensors, or lawsuits asserted by a third party, which could be expensive, time consuming and unsuccessful.
• Governmental programs designed to incentivize the production and consumption of low carbon fuels and carbon capture and utilization, may be implemented in a way that does not include AGIGs products or could be repealed, curtailed or otherwise changed, which would have a material adverse effect on AGIGs business and financial condition.
• If AGIG loses key personnel or are unable to attract, integrate and retain additional key personnel, it could harm AGIGs ability to meet its business objectives.
• Natural or man-made disasters, social, economic and political instability, and other similar eventsincluding pandemicsmay significantly disrupt AGIGs and its industry partners businesses, and negatively impact AGIGs results of operations and financial condition.
• HUSA may not complete the Share Exchange, yet we have incurred costs related to the Share Exchange.
• The pendency of the proposed Share Exchange may cause disruption in HUSAs and AGIGs businesses.
• After the Share Exchange, current HUSA stockholders will have reduced ownership and voting interest in the Company as compared to their current ownership and voting interest in the Company and therefore will be able to exercise less influence over management.
• HUSAs failure to complete the Share Exchange in a timely manner could negatively impact the market price of Common Stock and, if the Share Exchange is eventually completed, the business of the combined company.
• The combined company may not fully realize the anticipated benefits of the AGIG Transaction within the timing anticipated or at all.
• Failure to complete the Share Exchange could negatively impact the price of shares of Common Stock, as well as our future businesses and financial results.
• The combined company will be affected by factors beyond its control, which could have a material adverse effect on the combined companys business, results of operations, and financial condition.

Future Outlook

Following the completion of the AGIG Transaction, the combined company will be operating in a growing market with the potential to significantly increase revenue and cash flow over the next three to five years and beyond, and investors are eager to provide capital for required investments.

Management Comments

• The Board believes that a reverse stock split is desirable for a number of reasons.
• We expect that a reverse stock split of Common Stock will increase the per share market price, enabling the Common Stock to comply with NYSE Americans minimum share price listing requirements, although we cannot assure that it will be able to do so.
• The Board intends to implement the reverse stock split at a ratio of between and including 1-for-5 and 1-for-60.

Industry Context

The AGIG business has proprietary technology and operates in a growing market for alternative products such as Sustainable Aviation Fuel (SAF) and the renewable diesel markets are also growing significantly. SAF is one of the fastest growing niches in energy as airlines are looking for more industry capacity.

Comparison to Industry Standards

• Evans & Evans utilized the Selected GPC Analysis to select a weighting of fiscal 2029 and 2030 EBITDA multiples to estimate a range of enterprise values for AGIG.
• Evans & Evans initially identified 17 companies whose shares trade on recognized stock exchanges and thereafter upon further review of financial and operating results selected nine publicly traded companies that it deemed relevant in its analysis (the Selected Publicly Traded Companies).
• Evans & Evans selected the Selected Publicly Traded Companies based on their relative similarity, primarily in terms of business focus, revenue growth history and outlook, capital requirements, profit margins and other characteristics, to that of AGIG.
• Companies were removed from the analysis for the following reasons: (1) in the process of building their own plants and as such had no operating metrics; (2) feedstock was not comparable to that of the AGIG plants; (3) if the focus was primarily on engineering / construction design services for companies like AGIG; and (4) a focus on different outputs such as green hydrogen or syngas.

Management Changes

Stakeholder Impact

• Existing HUSA stockholders will experience dilution due to the issuance of new shares.
• The combined company will operate in a growing market, potentially increasing revenue and cash flow.
• The AGIG Transaction provides a strong opportunity for growth, which will benefit the existing HUSA stockholders.

Next Steps

• HUSA stockholders will vote on the Issuance Proposal, Reverse Stock Split Proposal, and Share Increase Proposal at a special meeting on April 24, 2025.
• HUSA will work to submit the NYSE American Application and to cause the Exchange Shares to be approved for listing on NYSE American.
• The combined company plans to effectuate the Reverse Stock Split Amendment to comply with the rules of the NYSE American.

Key Dates

Keywords

share exchange, Abundia Global Impact Group, Houston American Energy Corp, AGIG, HUSA, reverse stock split, stock issuance, renewable energy, acquisition, proxy statement