ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

Houston American Energy Corp. is an oil and gas exploration and production company. In addition to seeking out oil and gas prospects using advanced seismic techniques, we utilize the contacts of John F. Terwilliger, our 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. Further, we have, through an interest in a limited liability company, interests in two concessions in the South American country of Colombia. As a result, we expect to be active in Colombia for the foreseeable future. Moreover, as well as our own drilling activities and acquisition strategy, we may also encourage others in the oil and gas industry to enter into partnerships or joint ventures with us for the purpose of acquiring properties and conducting drilling and exploration activities.

EXPLORATION PROJECTS

Our exploration projects are focused on existing property interests, and future acquisition of additional property interests, in the onshore Texas Gulf Coast region, Colombia and Louisiana.

Each of our exploration projects differs in scope and character and consists of one or more types of assets, such as 3-D seismic data, leasehold positions, lease options, working interests in leases, partnership or limited liability company interests or other mineral rights. Our percentage interest in each exploration project ("Project Interest") represents the portion of the interest in the exploration project we share with other project partners. Because each exploration project consists of a bundle of assets that may or may not include a working interest in the project, our Project Interest simply represents our proportional ownership in the bundle of assets that constitute the exploration project. Therefore, our Project Interest in an exploration project should not be confused with the working interest that we will own when a given well is drilled. Each exploration project represents a negotiated transaction between the project partners. Our working interest may be higher or lower than our Project Interest.

Our principal exploration projects as of December 31, 2003 consisted on the following:

LAVACA COUNTY, TEXAS. In Lavaca County, Texas, we hold two separate interests consisting of a 5% non-participating royalty interest in a 150 acre tract known as the Mavis Wharton Lease and a 38% working interest in a 65.645 acre tract known as the West Hardys Creek Prospect.

The Mavis Wharton #3 well was drilled on the Mavis Wharton Lease and, following completion, experienced production problems. The well was reworked and determined to be non-commercial and abandoned. We have been advised that a deep gas test is planned to include the Mavis Wharton Lease. Our royalty interest in the Mavis Wharton Lease does not bear any costs of well operations.

The Goyen #1 well was drilled on the West Hardys Creek Prospect in the third quarter of 2003. The Goyen #1 well tested the Frio and Miocene Sands to a depth of 3,000 feet. The Goyen #1 well was successfully completed in September 2003 and commenced production as a gas well with an initial production rate of 350MCF per day. We presently have no plans with respect to drilling additional wells on the West Hardys Creek Prospect.

MATAGORDA COUNTY, TEXAS. In Matagorda County, Texas, we hold two separate interests consisting of a 3.5% working interest with a 2.415% net revenue interest in a 779 acre tract known as the S.W. Pheasant Prospect and an option to participate, based on a 3.5% working interest with a 2.415% net revenue interest, in a 672 acre tract known as the Turtle Creek Prospect.

A well was successfully completed on the S.W. Pheasant Prospect in July 2003 with initial production rates from the Frio K Sand of 1400 MCF and 35 barrels of oil per day. Pursuant to our option covering the adjacent Turtle Creek Prospect, we anticipate participating in the drilling of a well on the Turtle Creek Prospect within the next year. Other than the anticipated well on the Turtle Creek Prospect, we presently have no plans with respect to drilling additional wells in Matagorda County.

JACKSON COUNTY, TEXAS. In Jackson County, Texas, we hold a 100% leasehold, subject to a 27% royalty, on an 80 acre tract known as the W. Harmon Prospect. At December 31, 2003, we had developed a plan with respect to drilling of the Miller #1 well on the W. Harmon Prospect and had engaged an operator to drill a 7,300 foot test well. Drilling of the Miller #1 is expected to begin in the third quarter of 2004 if we are successful in resolving certain location and gas line issues with the surface owner.

ST. JOHN THE BAPTIST PARISH, LOUISIANA. In St. John the Baptist Parish, Louisiana, we hold a 2% working interest with a 1.44% net revenue interest in a 726 acre leasehold known as the Bougere Estate and the Bougere Estate #1 well. The Bougere Estate #1 well was completed in June 2003 with initial production of 200 barrels of oil and 170 MCF of gas per day. Commercial production of the well commenced in December 2003 following installation of a gas sales pipeline. We presently have no additional plans with respect to drilling additional wells on the Bougere Estate.

LLANOS BASIN, COLOMBIA. In the Llanos Basin, Colombia, we hold an interest, through our ownership in Hupecol, LLC, in a 357,000 acre tract known as the Cara Cara concession. In conjunction with our acquisition of our interest in Hupecol, we also acquired, and hold, a 12.6% working interest, with an 11.31% net revenue interest, in the Tambaqui Association Contract covering 88,000 acres in the State of Casanare, Colombia.

The first well drilled in the Cara Cara concession, the Jaguar #1 well, was completed in April 2003 with initial production of 892 barrels of oil per day. In December 2003, Hupecol commenced drilling an additional three wells on the Cara Cara concession as offsets to, and to delineate, the Jaguar #1 well.

Included in our interest in the Tambaqui Association Contract is an interest in a producing well, the Tambaqui #1, and in two exploration wells. The first exploration well drilled as an offset to the Tambaqui #1, the Tambaqui #1Am, was dry. We expect to commence drilling another offset to the Tambaqui #1 well by April 2004.

In conjunction with the efforts to develop the Cara Cara concession, Hupecol has acquired 50 square miles of 3D seismic grid surrounding the Jaguar #1 well and two other prospect areas. That data is expected to be utilized to identify additional drill site opportunities to develop a field around the Jaguar #1 well and in other prospect areas within the grid.

Our working interest in our exploration projects in Colombia are subject to an escalating royalty of 8% on the first 5,000 barrels of oil per day to 20% at 125,000 barrels of oil per day. Our interest in the Tambaqui Association Contract is subject to reversionary interests of Ecopetrol, the state owned Colombian oil company, that could cause 50% of the working interest to revert to Ecopetrol after we have recouped four times our initial investment.

In December 2003, we exercised our right to participate in the acquisition, through Hupecol, of over 3,000 kilometers of seismic data in Colombia covering in excess of 20 million acres. The seismic data is expected to be utilized to map prospects in key areas with a view to delineating multiple drilling opportunities beginning in 2004. We will hold a 12.5% interest in all prospects developed by Hupecol arising from the acquired seismic data.

The following table sets forth certain information about each of our exploration projects:

                                          Acres Leased or Under Option at
                                               December 31, 2003 (1)
                                 -------------------------------------------------
                                    Project      Project    Company Net   Project
Project Area                         Gross         Net                   Interest
-------------------------------  -------------  ----------  -----------  ---------
TEXAS:

Lavaca County, Texas

   Mavis Wharton. . . . . . . .         300.00      150.00         7.50      5.00%

   West Hardys Creek. . . . . .          65.65       65.65        24.95     38.00%

Jackson County, Texas

   W. Harmon Prospect . . . . .          80.00       80.00        80.00    100.00%

San Patricio County, Texas

   St. Paul Prospect. . . . . .         380.00      380.00        19.00      5.00%

Matagorda County, Texas

   S.W. Pheasant Prospect . . .         779.00      779.00        27.27      3.50%

   Turtle Creek Prospect. . . .         672.00      672.00        23.52      3.50%
                                 -------------  ----------  -----------
Texas Sub-Total . . . . . . . .       2,276.65    2,126.65       182.24

LOUISIANA:

St. John the Baptist Parish,

  Louisiana . . . . . . . . . .         726.00      726.00        14.52      2.00%
                                 -------------  ----------  -----------
Louisiana Sub-Total . . . . . .         726.00      726.00        14.52      2.00%

OKLAHOMA

Jenny #1-14 . . . . . . . . . .         160.00      160.00         3.78      2.36%
                                 -------------  ----------  -----------
Oklahoma Sub-Total. . . . . . .         160.00      160.00         3.78

COLOMBIA

   Cara Cara Concession . . . .     357,000.00  357,000.00     5,676.30      1.59%

   Tambaqui Assoc. Contract (2)      88,000.00   88,000.00    11,088.00      12.6%
                                 -------------  ----------  -----------
Colombia Sub-Total. . . . . . .     445,000.00  445,000.00    16,764.30
                                 -------------  ----------  -----------
Total . . . . . . . . . . . . .     448,162.65  448,012.65    16,964.84
                                 =============  ==========  ===========

(1)  Project Gross Acres refers to the number of acres within a project.
     Project Net Acres refers to leaseable acreage by tract. Company Net Acres
     are either leased or under option in which we own an undivided interest.
     Company Net Acres were determined by multiplying the Project Net Acres
     leased or under option times our working interest therein.

(2)  The project interest is the working interest in the concession and not
     necessarily the working interest in the well.

DRILLING ACTIVITIES

From April 2001 (inception of the Company) through December 31, 2003, we drilled 9 exploratory and developmental wells, of which 7 were completed and 2 were dry holes. In 2001, 3 exploratory and 0 developmental wells were drilled of which 2 were completed and 1 was a dry hole. In 2002, 2 exploratory and 0 developmental wells were drilled of which 2 were completed and 0 were dry holes. In 2003, 3 exploratory and 1 developmental wells were drilled of which 3 were completed and 1 was a dry hole

The following table sets forth certain information regarding the actual drilling results for each of the years 2002 and 2003 as to wells drilled in each such individual year:

                             Exploratory Wells (1)  Developmental Wells (1)
                            ----------------------  ----------------------
                              Gross         Net       Gross        Net
                            ----------  ----------  ----------  ----------
2002
----

  Productive . . . . . . . .         2        0.04           0           0

  Dry. . . . . . . . . . . .         0        0.00           0           0

2003
----

  Productive . . . . . . . .         3       0.435           0           0

  Dry. . . . . . . . . .. . .        0           0           1       0.125

(1)  Gross wells represent the total number of wells in which we owned an
     interest; net wells represent the total of our net working interests owned
     in the wells.

One well was in progress at December 31, 2003, on the Cara Cara concession in Colombia.

                                 Gas                     Oil
                        ----------------------  ----------------------
                          Gross         Net       Gross        Net
                        ----------  ----------  ----------  ----------

Texas. . . . . . . . .           2       0.415           0           0

Louisiana. . . . . . .           1       0.020           0           0

Oklahoma . . . . . . .           1       0.024           0           0

Colombia . . . . . . .           0       0.000           2       0.141
                        ----------  ----------  ----------  ----------

     Total . . . . . .           4       0.459           2       0.141
                        ==========  ==========  ==========  ==========

                                 Year Ended December 31,
                                 ----------------------
                                    2002        2003
                                 ----------  ----------
Net Production:

       Gas (Mcf):

            United States . . .       8,957       15,993
            Columbia. . . . . .          na            0

       Oil (Bbls):

            United States . . .           0          246
            Columbia. . . . . .           0        5,880

Average sales price:

       Gas ($per Mcf) . . . . .        2.88         5.11

       Oil (Bbls) . . . . . . .          na        30.17

Average production expense and
  Taxes ($per Bble):

          United States . . . .        2.17         2.35
          Columbia. . . . . . .          na        24.88

                                                          At December 31,
                                                     ------------------------
                                                         2002         2003
                                                     ------------  ----------
Net proved reserves (1):
       Natural gas (Mcf) . . . . . . . . . . .             18,872     176,600

       Oil (Bbls). . . . . . . . . . . . . . .                  0     274,107

Standardized measure of discounted future net
  cash flows (2) . . . . . . . . . . . . . . .       $     41,289  $3,172,639

(1)  At December 31, 2003, net proved reserves, by region, consisted of
     269,707 barrels of oil in Columbia and 4,400 barrels of oil in the U.S.;
     all natural gas reserves were in the U.S.

(2)  The standardized measure of discounted future net cash flows represents
     the present value of future net revenues after income tax discounted at 10%
     per annum and has been calculated in accordance with SFAS No. 69,
     "Disclosures About Oil and Gas Producing Activities" (see Note 7 -
     Supplemental Information on Oil and Gas Exploration, Development and
     Production Activities (Unaudited)) and, in accordance with current SEC
     guidelines, and does not include estimated future cash inflows from
     hedging. The standardized measure of discounted future net cash flows
     attributable to our reserves was prepared using prices in effect at the end
     of the respective periods presented, discounted at 10% per annum on a
     pre-tax basis.

In accordance with applicable requirements of the Securities and Exchange Commission, we estimate our proved reserves and future net cash flows using sales prices and costs estimated to be in effect as of the date we make the reserve estimates. We hold the estimates constant throughout the life of the properties, except to the extent a contract specifically provides for escalation. Gas prices, which have fluctuated widely in recent years, affect estimated quantities of proved reserves and future net cash flows. Any estimates of natural gas and oil reserves and their values are inherently uncertain, including many factors beyond our control. The reserve data contained in this prospectus represent only estimates. Reservoir engineering is a subjective process of estimating underground accumulations of natural gas and oil that cannot be measured in an exact manner. The accuracy of reserve estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, estimates of different engineers, including those we use, may vary. In addition, estimates of reserves may be revised based upon actual production, results of future development and exploration activities, prevailing natural gas and oil prices, operating costs and other factors, which revision may be material. Accordingly, reserve estimates may be different from the quantities of natural gas and oil that we are ultimately able to recover and are highly dependent upon the accuracy of the underlying assumptions. Our estimated proved reserves have not been filed with or included in reports to any federal agency.

                   Proved Developed  Proved Undeveloped        Unproven
                   ----------------  ------------------  ---------------------
                    Gross     Net     Gross      Net       Gross        Net
                   --------  ------  --------  --------  ----------  ---------

Texas. . . . . . .   225.65   30.55    480.00     16.80    1,571.00     134.90

Louisiana. . . . .   300.00    6.00      0.00      0.00      426.00       8.52

Oklahoma . . . . .   160.00    3.78      0.00      0.00        0.00       0.00

Colombia . . . . .   640.00   27.65  3,320.00     88.16  441,040.00  16,648.49
                   --------  ------  --------  --------  ----------  ---------

     Total . . . . 1,325.65   67.98  3,800.00    104.96  443,037.00  16,791.91
                   ========  ======  ========  ========  ==========  =========

TITLE TO PROPERTIES

Title to properties is subject to royalty, overriding royalty, carried working, net profits, working and other similar interests and contractual arrangements customary in the gas and oil industry, liens for current taxes not yet due and other encumbrances. As is customary in the industry in the case of undeveloped properties, little investigation of record title is made at the time of acquisition (other than preliminary review of local records).

Investigation, including a title opinion of local counsel, generally are made before commencement of drilling operations.

MARKETING

At March 1, 2004, we had no contractual agreements to sell our gas and oil production and all production was sold on spot markets.

RISKS RELATED TO OUR OIL AND GAS OPERATIONS

Operational Hazards and Insurance. Our 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. Our business involves a variety of operating risks which may adversely affect our profitability, including:

- fires;

- explosions;

- 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, our insurance protects us against some, but not all, operational risks. Further, we do not carry business interruption insurance at levels that would provide enough cash for us to continue operating without access to additional funds. As pollution and environmental risks generally are not fully insurable, our 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, our revenue, profitability and future rate of growth are substantially dependent upon the prevailing prices of, and demand for, natural gas, oil, and condensate. Our realized profits affect the amount of cash flow available for capital expenditures. Our ability to maintain or increase our 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 our 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.

OPERATIONS IN COLOMBIA

As described above, we currently have interests in two concessions in the South American country of Colombia and expect to be active in Colombia for the foreseeable future. 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 political and economic stability in the vicinity of our Colombian operations, we may be forced to abandon or suspend our efforts. Either of such events could be harmful to our expected business prospects.

COMPETITION

Competition in the oil and gas industry is intense and we compete with major and other independent oil and gas companies with respect to the acquisition of producing properties and proved undeveloped acreage. Our 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 ours and may be able to absorb the burden of any changes in federal, state and local laws and regulations more easily than we can do so, which would adversely affect our 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 we can. Our ability to acquire additional properties and develop new and existing properties in the future will depend on our capability to conduct operations, to evaluate and select suitable properties and to consummate transactions in this highly competitive environment.

GOVERNMENTAL REGULATION

Our business and the oil and gas industry in general are subject to extensive laws and regulations, including environmental laws and regulations. As such, we 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, we 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 our operations and subject us to administrative, civil and criminal penalties. Moreover, these laws and regulations could change in ways that substantially increase our 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, we are 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 including 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.

Our 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 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 charge higher gathering rates.

Environmental Regulations. Our 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.

We generate 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 we utilize good operating and waste disposal practices, prior owners and operators of our 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 us 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 1, 2004, we had one full-time employee and no part time employees. The employee is not covered by a collective bargaining agreement, and we do not anticipate that any of our future employees will be covered by such agreement. If our operations continue to grow as expected, we anticipate hiring as many as three additional employees over the next six to eight months.