þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Texas
|
22-3755993
|
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
þ
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PART I – FINANCIAL INFORMATION
|
Page
|
||||
Item 1.
|
Financial Statements
|
F-1
|
|||
Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014 (unaudited)
|
F-1
|
||||
Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014 (unaudited)
|
F-2
|
||||
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014 (unaudited)
|
F-3
|
||||
Notes to Unaudited Consolidated Financial Statements
|
F-5
|
||||
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
1
|
|||
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
11
|
|||
Item 4.
|
Controls and Procedures
|
11
|
|||
PART II – OTHER INFORMATION
|
|||||
Item 1.
|
Legal Proceedings
|
12
|
|||
Item 1A.
|
Risk Factors
|
12
|
|||
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
12
|
|||
Item 3.
|
Defaults Upon Senior Securities
|
13
|
|||
Item 4.
|
Mine Safety Disclosures
|
13
|
|||
Item 5.
|
Other Information
|
13
|
|||
Item 6.
|
Exhibits
|
13
|
|||
Signatures
|
14
|
March 31,
2015
|
December 31,
2014
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash
|
$ | 2,318 | $ | 6,675 | ||||
Accounts receivable - oil and gas
|
1,111 | 581 | ||||||
Accounts receivable - oil and gas - related party
|
- | 21 | ||||||
Accounts receivable - related party
|
2 | 58 | ||||||
Deferred financing costs
|
2,383 | 2,208 | ||||||
Prepaid expenses and other current assets
|
205 | 81 | ||||||
Total Current Assets
|
6,019 | 9,624 | ||||||
Oil and gas properties:
|
||||||||
Oil and gas properties, subject to amortization, net
|
62,819 | 19,850 | ||||||
Oil and gas properties, not subject to amortization, net
|
- | 2,205 | ||||||
Total oil and gas properties, net
|
62,819 | 22,055 | ||||||
Deferred financing costs
|
2,948 | 3,609 | ||||||
Note receivable
|
- | 5,000 | ||||||
Notes receivable – related party
|
- | 1,363 | ||||||
Other assets
|
85 | 85 | ||||||
Investments - cost method
|
4 | 4 | ||||||
Total Assets
|
$ | 71,875 | $ | 41,740 | ||||
Liabilities and Shareholders' Equity (Deficit)
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 5,193 | $ | 6,766 | ||||
Accounts payable - related party
|
- | 1,884 | ||||||
Accrued expenses
|
1,149 | 1,551 | ||||||
Accrued expenses - related parties
|
120 | 1,353 | ||||||
Revenue payable
|
743 | 747 | ||||||
Advances from joint interest owners
|
- | 657 | ||||||
Convertible notes payable - Bridge Notes, net of premiums of $113,000 and $132,000, respectively
|
588 | 687 | ||||||
Notes payable - Secured Promissory Notes, net of discounts of $5,034,000 and $4,652,000, respectively
|
451 | 526 | ||||||
Notes payable - related party
|
4,925 | 6,170 | ||||||
Total current liabilities
|
13,169 | 20,341 | ||||||
Long-term liabilities:
|
||||||||
Notes payable - Secured Promissory Notes, net of discounts of $6,274,000 and $7,674,000, respectively
|
23,152 | 22,733 | ||||||
Notes payable - Subordinated
|
8,353 | - | ||||||
Asset retirement obligations
|
178 | 89 | ||||||
Total liabilities
|
44,852 | 43,163 | ||||||
Commitments and Contingencies
|
||||||||
Shareholders' equity (deficit):
|
||||||||
Series A convertible preferred stock, $0.001 par value, 100,000,000 shares authorized, 66,625 and -0- shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively
|
- | - | ||||||
Common stock, $0.001 par value, 200,000,000 shares authorized; 37,817,997 and 33,117,516 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively
|
38 | 33 | ||||||
Additional paid-in-capital
|
92,018 | 59,395 | ||||||
Accumulated deficit
|
(64,978 | ) | (60,796 | ) | ||||
Noncontrolling interests
|
(55 | ) | (55 | ) | ||||
Total shareholders' equity (deficit)
|
27,023 | (1,423 | ) | |||||
Total liabilities and shareholders' equity (deficit)
|
$ | 71,875 | $ | 41,740 |
For the Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
Revenue:
|
||||||||
Oil and gas sales
|
$ | 1,488 | $ | 1,007 | ||||
Operating expenses:
|
||||||||
Lease operating costs
|
361 | 606 | ||||||
Exploration expense
|
315 | 361 | ||||||
Selling, general and administrative expense
|
2,451 | 2,356 | ||||||
Impairment of oil and gas properties
|
1,337 | 3 | ||||||
Depreciation, depletion, amortization and accretion
|
1,045 | 115 | ||||||
Loss on settlement of payables
|
- | 39 | ||||||
Total operating expenses
|
5,509 | 3,480 | ||||||
Gain (loss) on sale of oil and gas properties
|
275 | (5,659 | ) | |||||
Gain (loss) on sale of equity investment
|
566 | (1,028 | ) | |||||
Loss on sale of deposit for business acquisition
|
- | (1,945 | ) | |||||
Loss from equity method investments
|
(91 | ) | (274 | ) | ||||
Operating loss
|
(3,271 | ) | (11,379 | ) | ||||
Other income (expense):
|
||||||||
Interest expense
|
(3,143 | ) | (1,092 | ) | ||||
Interest income
|
40 | 64 | ||||||
Gain (loss) on debt extinguishment
|
2,192 | (763 | ) | |||||
Total other expense
|
(911 | ) | (1,791 | ) | ||||
Net loss
|
(4,182 | ) | (13,170 | ) | ||||
Less: Net loss attributable to noncontrolling interests
|
- | - | ||||||
Net loss attributable to PEDEVCO common stockholders
|
$ | (4,182 | ) | $ | (13,170 | ) | ||
Net loss per common share:
|
||||||||
Basic and diluted
|
$ | (0.12 | ) | $ | (0.50 | ) | ||
Weighted average number of common shares outstanding:
|
||||||||
Basic and diluted
|
35,586,758 | 26,221,237 |
For the Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net loss
|
$ | (4,182 | ) | $ | (13,170 | ) | ||
Net loss attributable to noncontrolling interests
|
- | - | ||||||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Stock-based compensation expense
|
1,391 | 1,060 | ||||||
Impairment of oil and gas properties
|
1,337 | 4 | ||||||
Depreciation, depletion and amortization
|
1,027 | 112 | ||||||
Accretion | 18 | 3 | ||||||
(Gain) loss on sale of oil and gas properties
|
(275 | ) | 5,659 | |||||
(Gain) loss on sale of equity investment
|
(566 | ) | 1,028 | |||||
Loss on sale of 50% of the deposit for business acquisition
|
- | 1,945 | ||||||
Loss on settlement of payables
|
- | 39 | ||||||
(Gain) loss on debt extinguishment
|
(2,192 | ) | 763 | |||||
Loss from equity method investments
|
91 | 274 | ||||||
Amortization of debt discount
|
1,018 | 397 | ||||||
Amortization of deferred financing costs
|
486 | 177 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable - oil and gas
|
1,048 | (1,044 | ) | |||||
Accounts receivable - oil and gas - related party
|
21 | (16 | ) | |||||
Accounts receivable - related party
|
56 | (261 | ) | |||||
Inventory
|
- | 397 | ||||||
Prepaid expenses and other current assets
|
(24 | ) | 2 | |||||
Accounts payable
|
(2,239 | ) | 103 | |||||
Accounts payable - related party
|
- | (469 | ) | |||||
Accrued expenses
|
(399 | ) | 606 | |||||
Accrued expenses - related parties
|
161 | (64 | ) | |||||
Revenue payable
|
(4 | ) | 289 | |||||
Advances for joint operations
|
(657 | ) | - | |||||
Net cash used in operating activities
|
(3,884 | ) | (2,166 | ) | ||||
Cash Flows From Investing Activities:
|
||||||||
Cash paid for oil and gas properties
|
- | (28,522 | ) | |||||
Cash paid for drilling costs
|
(200 | ) | (1 | ) | ||||
Proceeds from sale of equity investment
|
500 | 1,616 | ||||||
Proceeds from sale of oil and gas properties
|
- | 8,747 | ||||||
Proceeds from sale of deposit
|
- | 3,055 | ||||||
Proceeds from disposition of White Hawk
|
- | 2,718 | ||||||
Cash paid for asset retirement bond
|
- | (85 | ) | |||||
Issuance of notes receivable - related parties
|
- | (1,891 | ) | |||||
Cash paid for unproved leasehold costs
|
- | (81 | ) | |||||
Net cash provided by (used in) investing activities
|
300 | (14,444 | ) | |||||
Cash Flows From Financing Activities:
|
||||||||
Proceeds from notes payable
|
- | 19,357 | ||||||
Repayment of notes payable
|
(673 | ) | (1,625 | ) | ||||
Repayment of notes payable – related party
|
(100 | ) | - | |||||
Proceeds from issuance of common stock, net of offering costs
|
- | 6,525 | ||||||
Cash paid for deferred financing costs
|
- | (5,382 | ) | |||||
Repayment of paid-in-kind obligations
|
- | (400 | ) | |||||
Proceeds from exercise of warrants for common stock
|
5 | |||||||
Net cash provided by (used in) financing activities
|
(773 | ) | 18,480 | |||||
-
|
Condor Energy Technology LLC, a Nevada limited liability company owned 20% by the Company and 80% by an affiliate of MIE Holdings. The Company accounted for its 20% ownership in Condor using the equity method; and
|
Level 1 – Quoted prices in active markets for identical assets or liabilities.
|
|
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
December 31,
|
March 31,
|
|||||||||||||||||||
2014
|
Additions
|
Disposals
|
Transfers
|
2015
|
||||||||||||||||
Oil and gas properties, subject to amortization
|
$ | 24,057 | $ | 43,675 | $ | (3,401 | ) | $ | 289 | $ | 64,620 | |||||||||
Oil and gas properties, not subject to amortization
|
8,159 | - | (7,870 | ) | (289 | ) | - | |||||||||||||
Asset retirement costs
|
76 | 87 | (15 | ) | - | 148 | ||||||||||||||
Accumulated depreciation, depletion and impairment
|
(10,237 | ) | (2,364 | ) | 10,652 | - | (1,949 | ) | ||||||||||||
Total oil and gas assets
|
$ | 22,055 | $ | 41,398 | $ | (634 | ) | $ | - | $ | 62,819 |
Purchase price on February 23, 2015
|
||||
Fair value of common stock issued
|
$
|
2,734
|
||
Fair value of Series A Preferred stock issued
|
28,402
|
|||
Assumption of subordinated notes payable
|
8,353
|
|||
Kazakhstan option issued
|
5,000
|
|||
Total purchase price
|
$
|
44,489
|
Fair value of net assets at February 23, 2015
|
||||
Accounts receivable – oil and gas
|
$
|
1,578
|
||
Oil and gas properties, subject to amortization
|
43,562
|
|||
Prepaid expenses and other assets | 100 | |||
Total assets
|
45,240
|
|||
Accounts payable
|
(664)
|
|||
Asset retirement obligations
|
(87)
|
|||
Total liabilities
|
(751)
|
|||
Net assets acquired
|
$
|
44,489
|
Allocated Proceeds
|
Historical Cost
|
Loss on Sale
|
||||||||||
Note receivable
|
$ | 3,055 | $ | 5,000 | $ | (1,945 | ) | |||||
Oil and gas properties
|
$ | 8,747 | $ | 14,267 | $ | (5,520 | ) | |||||
Mississippian Asset
|
$ | 1,615 | $ | 2,643 | $ | (1,028 | ) |
For the Three Months Ended
|
||||||||||||
March 31, 2015
|
||||||||||||
PEDEVCO
|
Net Acquisitions/Dispositions
|
(1)
|
Combined
|
|||||||||
Revenue
|
$
|
1,488
|
$
|
780
|
$
|
2,268
|
||||||
Lease operating costs
|
$
|
(361
|
)
|
$
|
(275
|
)
|
$
|
(636
|
)
|
|||
Net income (loss)
|
$
|
(4,182
|
)
|
$
|
505
|
$
|
(3,677
|
)
|
||||
Net loss per common share
|
$
|
(0.12
|
)
|
$
|
0.01
|
$
|
(0.10
|
)
|
For the Three Months Ended
|
||||||||||||
March 31, 2014
|
||||||||||||
PEDEVCO
|
Net Acquisitions/Dispositions
|
(1)
|
Combined
|
|||||||||
Revenue
|
$
|
1,007
|
$
|
81
|
$
|
1,088
|
||||||
Lease operating costs
|
$
|
(606
|
)
|
$
|
(15
|
)
|
$
|
(621
|
)
|
|||
Net income (loss)
|
$
|
(13,170
|
)
|
$
|
66
|
$
|
(13,104
|
)
|
||||
Net loss per common share
|
$
|
(0.50
|
)
|
$
|
0.00
|
$
|
(0.50
|
)
|
(1)
|
Amounts are based on Company estimates.
|
March 31,
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Note receivable-related party prior to applying excess losses
|
$
|
6,979
|
$
|
6,979
|
||||
Equity change in net loss at 20% applied to note receivable-related party as of December 31, 2013
|
(5,193)
|
(5,193)
|
||||||
Equity change in net loss at 20% for year ended December 31, 2014
|
(271
|
)
|
(271
|
) | ||||
Equity change in net loss at 20% for period from January 1 through February 23, 2015
|
(91
|
)
|
-
|
|||||
Previously unrecognized losses for year ended December 31, 2013
|
(273
|
)
|
(273)
|
|||||
Interest accrued
|
160
|
121
|
||||||
Portion of Settlement Agreement with MIEJ
|
(1,311
|
)
|
-
|
|||||
Net note receivable
|
$
|
-
|
$
|
1,363
|
●
|
The Company and MIEJ entered into a new Amended and Restated Secured Subordinated Promissory Note, dated February 19, 2015 (the “New MIEJ Note”), with a principal amount of $4.925 million, extinguishing the original MIEJ Note;
|
●
|
The Company sold to MIEJ (i) its 20% interest in Condor, and (ii) all of the direct interests in approximately 945 net acres and working interests in three wells separately owned by the Company;
|
●
|
The Company’s employees were removed as officers of Condor, and the Company agreed to assist with Condor’s accounting and audits and perform joint interest billing accounting for a monthly fee of $55,000 for January 2015, $0 for February 2015, $10,000 for March 2015 and $30,000 per month thereafter, pro-rated for partial months, for up to six months;
|
●
|
MIEJ paid $500,000 to the Company’s Senior Loan Investors as a principal reduction on the Company’s Senior Loan;
|
●
|
Condor forgave approximately $1.8 million in previous working interest expenses related to the drilling and completion of certain wells operated by Condor that the Company owed to Condor ;
|
●
|
The Company paid MIEJ $100,000 as a principal reduction under the original MIEJ Note; and
|
●
|
The parties fully released each other from every claim, demand or cause of action arising on or before February 19, 2015.
|
Items Issued / Sold
|
||||
New MIEJ note
|
$ | 4,925 | ||
Note receivable with Condor
|
1,272 | |||
Oil and gas property operated by Condor
|
620 | |||
Total items issued or sold
|
6,817 | |||
Items Received
|
||||
Accrued liabilities
|
3,280 | |||
Original debt with MIE net of cash payments
|
6,070 | |||
Proceeds from cash payments made by MIE to RJ Credit and BAM
|
500 | |||
Total items received
|
9,850 | |||
Net gain on settlement
|
$ | 3,033 |
Allocated Proceeds
|
Historical Cost
|
Gain on Settlement
|
||||||||||
Gain on sale of oil and gas properties
|
$ | 895 | $ | 620 | $ | 275 | ||||||
Gain on sale of equity investment
|
$ | 1,838 | $ | 1,272 | $ | 566 | ||||||
Gain on debt extinguishment
|
$ | 7,117 | $ | 4,925 | $ | 2,192 |
Revenue | $ | 108 | ||
Operating expenses | (368 | ) | ||
Operating loss | (260 | ) | ||
Interest expense | (195 | ) | ||
Net loss | $ | (455 | ) |
(A)
|
prior to June 1, 2014, the Conversion Price was $2.15 per share; and
|
(B)
|
following June 1, 2014, the denominator used in the calculation described above is the greater of (i) 80% of the average of the closing price per share of the Company’s publicly-traded common stock for the five (5) trading days immediately preceding the date of the conversion notice provided by the holder; and (ii) $0.50 per share.
|
●
|
The Long-Term Financing must not exceed $95 million;
|
●
|
The Company must make commercially reasonable best efforts to include adequate reserves or other payment provisions whereby MIEJ is paid all interest and fees accrued on the New MIEJ Note commencing as of March 8, 2017 and annually thereafter, and to allow for quarterly interest payments starting March 31, 2017 of not less than 5% per annum on the outstanding balance of the New MIEJ Note, plus a one-time payment of accrued interest (not to exceed $500,000) as of March 31, 2017; and
|
●
|
Commencing on March 8, 2017, MIEJ shall have the right to convert the balance of the New MIEJ Note into the Company’s common stock at a price equal to 80% of the average closing price per share of our stock over the then previous 60 days, subject to a minimum conversion price of $0.30 per share. MIEJ shall not be permitted to convert if the conversion would result in MIEJ holding more than 19.9% of the Company’s outstanding common stock without approval from the Company’s shareholders, which the Company has agreed to seek at its 2016 annual shareholder meeting or, if not approved then, at its 2017 annual shareholder meeting.
|
As of
|
As of
|
|||||||
March 31,
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Deferred Tax Assets (Liabilities)
|
||||||||
Difference in depreciation, depletion, and capitalization methods – oil and natural gas properties
|
$
|
2,278
|
$
|
1,385
|
||||
Net operating losses
|
4,131
|
4,131
|
||||||
Impairment – oil and natural gas properties
|
(1,122
|
)
|
(1,122
|
)
|
||||
Other
|
535
|
623
|
||||||
Total deferred tax asset
|
5,822
|
5,017
|
||||||
Less: valuation allowance
|
(5,822
|
)
|
(5,017
|
)
|
||||
Total deferred tax assets
|
$
|
-
|
$
|
-
|
●
|
a liquidation preference senior to all of the Company’s common stock equal to $400 per share;
|
●
|
a dividend, payable annually, of 10% of the liquidation preference;
|
●
|
voting rights on all matters, with each share having 1 vote; and
|
●
|
a conversion feature at GGE’s option, which must be approved by a majority of the shareholders’ of the Company which will allow the Series A Preferred stock to be converted into shares of the Company’s common stock on a 1,000:1 basis.
|
●
|
the Series A Preferred shall automatically cease accruing dividends and all accrued and unpaid dividends will be automatically forfeited and forgiven;
|
●
|
the liquidation preference of the Series A Preferred will be reduced to $0.001 per share from $400 per share.
|
●
|
until November 23, 2015, the Company may redeem any or all of the Tranche One shares at a repurchase price of $500 per share;
|
●
|
from November 24, 2015 until February 23, 2017, the Company may redeem any or all of the Tranche One shares and Tranche Two shares at a repurchase price of $650 per share; and
|
●
|
from February 24, 2017 until February 23, 2018, the Company may redeem any or all remaining outstanding shares of Series A Preferred at a repurchase price of $800 per share
|
●
|
the Tranche Four shares are automatically redeemed for $0 per share, and
|
●
|
GGE may request (but not require) that the Company redeem
|
°
|
the Tranche Two shares at a redemption price of $650 per share for a period of 30 days following February 23, 2017, and
|
°
|
the Tranche Two Shares and 11,625 shares of the Tranche Three shares at a redemption price of $800 per share for a period of 30 days following February 23, 2018.
|
Weighted
|
||||||||||||
Weighted
|
Average
|
|||||||||||
Average
|
Remaining
|
|||||||||||
Number of
|
Exercise
|
Contract Term
|
||||||||||
Shares
|
Price
|
(# years)
|
||||||||||
Outstanding at January 1, 2015
|
1,827,224
|
$
|
1.08
|
6.5
|
||||||||
Granted
|
1,265,000
|
0.37
|
||||||||||
Exercised
|
-
|
-
|
||||||||||
Forfeited and cancelled
|
-
|
-
|
||||||||||
Outstanding at March 31, 2015
|
3,092,224
|
$
|
0.79
|
5.6
|
||||||||
Exercisable at March 31, 2015
|
1,403,898
|
$
|
0.75
|
6.7
|
Weighted
|
||||||||||||
Weighted
|
Average
|
|||||||||||
Average
|
Remaining
|
|||||||||||
Number of
|
Exercise
|
Contract Term
|
||||||||||
Shares
|
Price
|
(# years)
|
||||||||||
Outstanding at January 1, 2015
|
6,594,129
|
$
|
2.13
|
3.9
|
||||||||
Granted
|
-
|
-
|
||||||||||
Exercised
|
-
|
-
|
||||||||||
Forfeited and cancelled
|
-
|
-
|
||||||||||
Outstanding at March 31, 2015
|
6,594,129
|
$
|
2.13
|
3.6
|
||||||||
Exercisable at March 31, 2015
|
6,594,129
|
$
|
2.13
|
3.6
|
Fair Value Measurements At March 31, 2015
|
||||||||||||||||
Quoted Prices in Active Markets for Identical Assets
|
Significant Other Observable Inputs
|
Significant Unobservable Inputs
|
Total Carrying Value
|
|||||||||||||
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||||
Series A Convertible Preferred Stock
|
$ | - | $ | - | $ | 28,402 | $ | 28,402 |
Three Months Ended
March 31,
2015
|
Three Months Ended
March 31,
2014
|
|||||||
Oil volume (BBL)
|
37,617
|
11,263
|
||||||
Gas volume (MCF)
|
68,158
|
10,449
|
||||||
Volume equivalent (BOE) (1)
|
48,976
|
13,005
|
||||||
Revenue (000’s)
|
$
|
1,518
|
$
|
999
|
●
|
a liquidation preference senior to all of the Company’s common stock equal to $400 per share;
|
●
|
a dividend, payable annually, of 10% of the liquidation preference;
|
●
|
voting rights on all matters, with each share having 1 vote; and
|
●
|
a conversion feature at GGE’s option, which must be approved by a majority of the shareholders’ of the Company which will allow the Series A Preferred stock to be converted into shares of the Company’s common stock on a 1,000:1 basis.
|
●
|
the Series A Preferred shall automatically cease accruing dividends and all accrued and unpaid dividends will be automatically forfeited and forgiven;
|
●
|
the liquidation preference of the Series A Preferred will be reduced to $0.001 per share from $400 per share.
|
●
|
until November 23, 2015, the Company may redeem any or all of the Tranche One shares at a repurchase price of $500 per share;
|
●
|
from November 24, 2015 until February 23, 2017, the Company may redeem any or all of the Tranche One shares and Tranche Two shares at a repurchase price of $650 per share; and
|
●
|
from February 24, 2017 until February 23, 2018, the Company may redeem any or all remaining outstanding shares of Series A Preferred at a repurchase price of $800 per share
|
●
|
the Tranche Four shares are automatically redeemed for $0 per share, and
|
●
|
GGE may request (but not require) that we redeem
|
°
|
the Tranche Two shares at a redemption price of $650 per share for a period of 30 days following February 23, 2017, and
|
°
|
the Tranche Two Shares and 11,625 shares of the Tranche Three shares at a redemption price of $800 per share for a period of 30 days following February 23, 2018.
|
●
|
approval by each party’s Board of Directors and shareholders in accordance with applicable law and their respective governing documents;
|
●
|
approval of a mutually agreeable definitive acquisition agreement;
|
●
|
approval from the NYSE MKT of the DOME Acquisition and the issuance and additional listing of our shares issuable in the transaction;
|
●
|
the registration with the SEC of our shares issuable in the transaction;
|
●
|
the provision for the repayment or satisfaction of all amounts due and outstanding under the PEDEVCO Senior Loan on or immediately following the closing of the DOME Acquisition;
|
●
|
agreement by RJC to subordinate its $8.35 million junior subordinated debt to DOME US’s senior credit facility;
|
●
|
our consummation of the acquisition of the GGE assets (as described above and was completed on February 23, 2015);
|
●
|
receipt of all material necessary third party consents and approvals, including approval from each party’s senior lenders, as necessary and required;
|
●
|
our continued listing on the NYSE MKT; and
|
●
|
completion by each party of confirmatory due diligence, to each such party’s satisfaction, including, but not limited to, with respect to the other party’s oil and gas production, leaseholds, and financial condition.
|
●
|
The Company and MIEJ entered into a new Amended and Restated Secured Subordinated Promissory Note, dated February 19, 2015 (the “New MIEJ Note”), with a principal amount of $4.925 million, extinguishing the original MIEJ Note;
|
●
|
The Company sold to MIEJ (i) its 20% interest in Condor, and (ii) all of the direct interests in approximately 945 net acres and working interests in three wells separately owned by the Company;
|
●
|
The Company’s employees were removed as officers of Condor, and the Company agreed to assist with Condor’s accounting and audits and perform joint interest billing accounting for a monthly fee of $55,000 for January 2015, $0 for February 2015, $10,000 for March 2015 and $30,000 per month thereafter, pro-rated for partial months, for up to six months;
|
●
|
MIEJ paid $500,000 to the Company’s Senior Loan Investors as a principal reduction on the Company’s Senior Loan;
|
●
|
Condor forgave approximately $1.8 million in previous working interest expenses related to the drilling and completion of certain wells operated by Condor that the Company owed to Condor ;
|
●
|
The Company paid MIEJ $100,000 as a principal reduction under the original MIEJ Note; and
|
●
|
The parties fully released each other from every claim, demand or cause of action arising on or before February 19, 2015.
|
For the Three Months Ended
|
||||||||||||
Ended March 31,
|
Increase/
|
|||||||||||
(in thousands)
|
2015
|
2014
|
(Decrease)
|
|||||||||
Payroll and related costs
|
$ | 582 | $ | 448 | $ | 134 | ||||||
Stock compensation expense
|
1,391 | 1,060 | 331 | |||||||||
Legal fees
|
83 | 417 | (334 | ) | ||||||||
Accounting and other professional fees
|
205 | 322 | (117 | ) | ||||||||
Insurance
|
25 | 22 | 3 | |||||||||
Travel and entertainment
|
25 | 34 | (9 | ) | ||||||||
Office rent, communications and other
|
140 | 53 | 87 | |||||||||
$ | 2,451 | $ | 2,356 | $ | 95 |
●
|
the Long-Term Financing must not exceed $95 million;
|
●
|
we must make commercially reasonable best efforts to include adequate reserves or other payment provisions whereby MIEJ is paid all interest and fees accrued on the New MIEJ Note commencing as of March 8, 2017 and annually thereafter, and to allow for quarterly interest payments starting March 31, 2017 of not less than 5% per annum on the outstanding balance of the New MIEJ Note, plus a one-time payment of accrued interest (not to exceed $500,000) as of March 31, 2017; and
|
●
|
commencing on March 8, 2017, MIEJ shall have the right to convert the balance of the New MIEJ Note into our common stock at a price equal to 80% of the average closing price per share of our stock over the then previous 60 days, subject to a minimum conversion price of $0.30 per share. MIEJ shall not be permitted to convert to the extent such conversion would result in MIEJ holding more than 19.9% of our outstanding common stock without approval of our shareholders, which we have agreed to seek at our 2016 annual shareholder meeting or, if not approved then, at our 2017 annual shareholder meeting.
|
(A)
|
prior to June 1, 2014, the Conversion Price was $2.15 per share; and
|
(B)
|
following June 1, 2014, the denominator used in the calculation described above is the greater of (i) 80% of the average of the closing price per share of our publicly-traded common stock for the five (5) trading days immediately preceding the date of the conversion notice provided by the holder; and (ii) $0.50 per share
|
●
|
business strategy;
|
●
|
reserves;
|
●
|
technology;
|
●
|
cash flows and liquidity;
|
●
|
financial strategy, budget, projections and operating results;
|
●
|
oil and natural gas realized prices;
|
●
|
timing and amount of future production of oil and natural gas;
|
●
|
availability of oil field labor;
|
●
|
the amount, nature and timing of capital expenditures, including future exploration and development costs;
|
●
|
availability and terms of capital;
|
●
|
drilling of wells;
|
●
|
government regulation and taxation of the oil and natural gas industry;
|
●
|
marketing of oil and natural gas;
|
●
|
exploitation projects or property acquisitions;
|
●
|
costs of exploiting and developing our properties and conducting other operations;
|
●
|
general economic conditions;
|
●
|
competition in the oil and natural gas industry;
|
●
|
effectiveness of our risk management and hedging activities;
|
●
|
environmental liabilities;
|
●
|
counterparty credit risk;
|
●
|
developments in oil-producing and natural gas-producing countries;
|
●
|
future operating results;
|
● |
planned combination with Dome Energy;
|
●
|
estimated future reserves and the present value of such reserves; and
|
●
|
plans, objectives, expectations and intentions contained in this Report that are not historical.
|
PEDEVCO Corp.
|
|||
May 14, 2015
|
By:
|
/s/ Frank C. Ingriselli
|
|
Frank C. Ingriselli
|
|||
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
PEDEVCO Corp.
|
|||
May 14, 2015
|
By:
|
/s/ Michael L. Peterson
|
|
Michael L. Peterson
|
|||
President and Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
Incorporated By Reference
|
||||||||||||
Exhibit No.
|
Description
|
Filed With
This Quarterly Report on Form 10-Q
|
Form
|
Exhibit
|
Filing Date/Period End Date
|
File Number
|
||||||
1.1
|
Underwriting Agreement, dated May 13, 2015, by and between PEDEVCO Corp. and National Securities Corporation
|
8-K
|
1.1
|
5/13/2015
|
001-35922
|
|||||||
2.1
|
Purchase and Sale Agreement, dated February 23, 2015, by and between Golden Globe Energy (US), LLC and Red Hawk Petroleum, LLC
|
8-K
|
2.1
|
2/24/2015
|
001-35922
|
|||||||
3.1
|
Amended and Restated Certificate of Designations of PEDEVCO Corp. Establishing the Designations, Preferences, Limitations and Relative Rights of its Series A Convertible Preferred Stock
|
8-K
|
3.1
|
2/24/2015
|
001-35922
|
|||||||
4.2
|
Form of PEDEVCO Corp. Series A Preferred Stock Certificate
|
10-K
|
4.2
|
3/31/2015
|
001-35922
|
|||||||
10.1
|
Note and Security Agreement, dated April 10, 2014, by and between Golden Globe Energy (US), LLC (formerly RJ Resources Corp.), and RJ Credit LLC
|
8-K
|
10.1
|
2/24/2015
|
001-35922
|
|||||||
10.2
|
Amendment to Note and Security Agreement, dated February 23, 2015, by and between PEDEVCO Corp. and RJ Credit LLC
|
8-K
|
10.2
|
2/24/2015
|
001-35922
|
|||||||
10.3
|
Assumption and Consent Agreement, dated February 23, 2015, by and among RJ Credit LLC, Golden Globe Energy (US), LLC (formerly RJ Resources Corp.), and PEDEVCO Corp.
|
8-K
|
10.3
|
2/24/2015
|
001-35922
|
|||||||
10.4
|
Call Option Agreement, dated February 23, 2015, by and between PEDEVCO Corp., Pacific Energy Development Corp. and Golden Globe Energy (US), LLC
|
8-K
|
10.4
|
2/24/2015
|
001-35922
|
|||||||
10.5
|
Heads of Agreement, dated February 23, 2015, by and among PEDEVCO Corp., Dome Energy AB, and Dome Energy, Inc.
|
8-K
|
10.5
|
2/24/2015
|
001-35922
|
|||||||
10.6
|
Settlement Agreement, dated February 19, 2015, by and among MIE Jurassic Energy Corporation, PEDEVCO Corp., and Pacific Energy Development Corp.
|
8-K
|
10.6
|
2/24/2015
|
001-35922
|
|||||||
10.7
|
Amended and Restated Secured Subordinated Promissory Note, dated February 19, 2015, and effective January 1, 2015, issued by PEDEVCO Corp. to MIE Jurassic Energy Corporation
|
8-K
|
10.7
|
2/24/2015
|
001-35922
|
|||||||
10.8
|
Membership Interest Purchase Agreement, dated February 19, 2015, by and between Pacific Energy Development Corp. and MIE Jurassic Energy Corporation
|
8-K
|
10.8
|
2/24/2015
|
001-35922
|
|||||||
10.9
|
Assignment, Conveyance and Bill of Sale, dated February 19, 2015, by and between Pacific Energy Development Corp. and Condor Energy Technology LLC
|
8-K
|
10.9
|
2/24/2015
|
001-35922
|
|||||||
10.10
|
Letter Agreement, dated April 24, 2015, by and among PEDEVCO Corp., BAM Administrative Services LLC, BRE BCLIC Primary, BRE BCLIC Sub, BRE WNIC 2013 LTC Primary, BRE WNIC 2013 LTC Sub, HEARTLAND Bank, and RJ Credit LLC
|
X
|
||||||||||
10.11
|
Form of Common Stock Warrant
|
X
|
||||||||||
31.1
|
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
||||||||||
31.2
|
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
32.1
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
*
|
||||||||||
32.2
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
*
|
||||||||||
101.INS
|
XBRL Instance Document
|
**
|
||||||||||
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
**
|
||||||||||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
**
|
||||||||||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
**
|
||||||||||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
**
|
||||||||||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
**
|
|
Re:
|
Consent and Agreement
|
Regards
,
|
|||
|
/s/ Clark R. Moore | ||
Clark R. Moore | |||
Executive Vice President and General Counsel
|
|||
PEDEVCO Corp.
|
PEDEVCO CORP.
By:
Name: Frank C. Ingriselli
Title:Chairman and CEO
HOLDER:
____________________________
By:
|
|
Name:
Title:
|
|
Dated:___________________
|
By:______________________
|
1.
|
I have reviewed this quarterly report on Form 10-Q of PEDEVCO Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
|
|
Company Name
|
|||
May 14, 2015
|
By:
|
/s/ Frank C. Ingriselli
|
|
Frank C. Ingriselli
|
|||
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of PEDEVCO Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
|
May 14, 2015
|
By:
|
/s/ Michael L. Peterson
|
|
Michael L. Peterson
|
|||
President and Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Company Name
|
|||
May 14, 2015
|
By:
|
/s/ Frank C. Ingriselli
|
|
Frank C. Ingriselli
|
|||
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
May 14, 2015
|
By:
|
/s/ Michael L. Peterson
|
|
Michael L. Peterson
|
|||
President and Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|