NOTE 4 - STOCK-BASED COMPENSATION EXPENSE

In 2008, the Company adopted the Houston American Energy Corp. 2008 Equity Incentive Plan (the “2008 Plan”). The terms of the 2008 Plan, as amended in 2012 and 2013, allow for the issuance of up to 480,000 shares of the Company’s common stock pursuant to the grant of stock options and restricted stock.

In 2017, the Company adopted the Houston American Energy Corp. 2017 Equity Incentive Plan (the “2017 Plan”). The terms of the 2017 Plan, allow for the issuance of up to 400,000 shares of the Company’s common stock pursuant to the grant of stock options and restricted stock.

In 2021, the Company adopted the Houston American Energy 2021 Equity Incentive Plan (the “2021 Plan” and, together with the 2008 Plan and the 2017 Plan, the “Plans”). The terms of the 2021 Plan allow for the issuance of up to 500,000 shares of the Company’s common stock pursuant to the grant of stock options and restricted stock.

Persons eligible to participate in the Plans are key employees, consultants, and directors of the Company.

The Company periodically grants options to employees, directors, and consultants under the Plans and is required to make estimates of the fair value of the related instruments and recognize expense over the period benefited, usually the vesting period.

Stock Option Activity

In November 2024, the Company agreed to issue to its former Chief Executive Officer a number of options equal to $15,000 divided by the closing price of the common stock on the 15^th day of each month. Each of the options have a ten (10) year life and are exercisable at $7.00 per share for the January through June 2025 issuances, vest 20% on the date of grant and 80% ten months from the date of grant. The grant date fair value of such options were $13,604 in January 2025, $13,486 in February 2025, $13,241 in March 2025, $14,347 in April 2025, $14,386 in May 2025, and $14,574 in June 2025 based on the Black-Scholes Option Pricing model based on the following assumptions: market value of common stock on grant dates (retroactively adjusted for Reverse Split) - $16.30, $14.10, $10.70, $5.56, $6.20 and $10.60, respectively; risk free interest rate based on the applicable US Treasury bill rate - 0%; dividend yield - 0%; volatility factor based on the trading history of the Company - 92%; weighted average expected life in years - 10; and expected forfeiture rate - 0%. On January 15, 2025, the Company also issued 1,5000 options to a board member as compensation. The options have a ten (10) year life and are exercisable at $16.30 per share (on a pre-split basis) for the January issuance, vest 20% on the date of grant and 80% ten months from the date of grant. The grant date fair value of such options was $22,174 in January 2025, based on the Black-Scholes Option Pricing model based on the following assumptions: market value of common stock on grant dates - $1.63 (on a pre-split basis); risk free interest rate based on the applicable US Treasury bill rate - 0%; dividend yield - 0%; volatility factor based on the trading history of the Company - 92%; weighted average expected life in years - 10; and expected forfeiture rate - 0%.

A summary of stock option activity and related information for the six months ended June 30, 2025 is presented below:

SCHEDULE OF STOCK OPTION ACTIVITY

During the three and six months ended June 30, 2025, the Company recognized $50,029 and $64,086, respectively, of stock-based compensation expense attributable to the amortization of stock options and stock issued for services (Note 5). As of June 30, 2025, there was $82,012 of unrecognized stock-based compensation expense related to non-vested stock options.

During the three and six months ended June 30, 2025, the Company issued 4,125 shares of its common stock for the cashless exercise of 15,000 options.

As of June 30, 2025, there were 18,480 shares of common stock available for issuance pursuant to future stock or option grants under the Plans.

Stock-Based Compensation Expense

The following table reflects total stock-based compensation recorded by the Company for the three and six months ended June 30, 2025 and 2024:

SCHEDULE OF STOCK-BASED COMPENSATION