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
|
|||
F-1
|
|||||
F-2
|
|||||
F-3
|
|||||
F-5
|
|||||
Item 2.
|
1
|
||||
Item 3.
|
14 | ||||
Item 4.
|
14 | ||||
PART II – OTHER INFORMATION
|
|||||
Item 1.
|
15 | ||||
Item 1A.
|
15 | ||||
Item 2.
|
16 | ||||
Item 3.
|
17 | ||||
Item 4.
|
17 | ||||
Item 5.
|
17 | ||||
Item 6.
|
17 | ||||
18 |
September 30,
2015
|
December 31,
2014
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash
|
$ | 1,373 | $ | 6,675 | ||||
Accounts receivable
|
169 | - | ||||||
Accounts receivable - oil and gas
|
585 | 581 | ||||||
Accounts receivable - oil and gas - related party
|
- | 21 | ||||||
Accounts receivable - related party
|
3 | 58 | ||||||
Deferred financing costs
|
2,813 | 2,208 | ||||||
Prepaid expenses and other current assets
|
207 | 81 | ||||||
Total Current Assets
|
5,150 | 9,624 | ||||||
Oil and gas properties:
|
||||||||
Oil and gas properties, subject to amortization, net
|
62,377 | 19,850 | ||||||
Oil and gas properties, not subject to amortization, net
|
- | 2,205 | ||||||
Total oil and gas properties, net
|
62,377 | 22,055 | ||||||
Deferred financing costs
|
1,598 | 3,609 | ||||||
Note receivable
|
- | 5,000 | ||||||
Notes receivable – related party
|
- | 1,363 | ||||||
Other assets
|
85 | 85 | ||||||
Investments - cost method
|
4 | 4 | ||||||
Total Assets
|
$ | 69,214 | $ | 41,740 | ||||
Liabilities and Shareholders' Equity (Deficit)
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 3,277 | $ | 6,766 | ||||
Accounts payable - related party
|
- | 1,884 | ||||||
Accrued expenses
|
3,810 | 1,551 | ||||||
Accrued expenses - related party
|
- | 1,353 | ||||||
Revenue payable
|
582 | 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, 931 ,000 and $4,652,000, respectively
|
544 | 526 | ||||||
Notes payable - related parties
|
- | 6,170 | ||||||
Total current liabilities
|
8,801 | 20,341 | ||||||
Long-term liabilities:
|
||||||||
Notes payable - Secured Promissory Notes, net of discounts of $3,254,000 and $7,674,000, respectively
|
25,952 | 22,733 | ||||||
Notes payable - Subordinated
|
8,523 | - | ||||||
Notes payable - other
|
4,925 | - | ||||||
Asset retirement obligations
|
192 | 89 | ||||||
Total liabilities
|
48,393 | 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 September 30, 2015 and December 31, 2014, respectively
|
- | - | ||||||
Common stock, $0.001 par value, 200,000,000 shares authorized; 44,593,639 and 33,117,516 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
|
45 | 33 | ||||||
Additional paid-in-capital
|
96,711 | 59,395 | ||||||
Accumulated deficit
|
(75,877 | ) | (60,796 | ) | ||||
(58 | ) | (55 | ) | |||||
20,821 | (1,423 | ) | ||||||
$ | 69,214 | $ | 41,740 |
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Revenue:
|
||||||||||||||||
Oil and gas sales
|
$ | 1,318 | $ | 1,090 | $ | 4,593 | $ | 4,192 | ||||||||
Operating expenses:
|
||||||||||||||||
Lease operating costs
|
495 | 105 | 1,434 | 1,367 | ||||||||||||
Exploration expense
|
165 | 88 | 693 | 1,213 | ||||||||||||
Selling, general and administrative expense
|
1,389 | 2,198 | 5,672 | 6,207 | ||||||||||||
Impairment of oil and gas properties
|
- | 322 | 1,337 | 354 | ||||||||||||
Depreciation, depletion, amortization and accretion
|
1,072 | 273 | 3,379 | 753 | ||||||||||||
Loss on settlement of payables
|
- | - | - | 39 | ||||||||||||
Total operating expenses
|
3,121 | 2,986 | 12,515 | 9,933 | ||||||||||||
Gain (loss) on sale of oil and gas properties
|
- | (5 | ) | 275 | (5,413 | ) | ||||||||||
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
|
- | (46 | ) | (91 | ) | (463 | ) | |||||||||
Operating loss
|
(1,803 | ) | (1,947 | ) | (7,172 | ) | (14,590 | ) | ||||||||
Other income (expense):
|
||||||||||||||||
Interest expense
|
(3,656 | ) | (3,033 | ) | (10,145 | ) | (7,131 | ) | ||||||||
Interest income
|
- | 75 | 40 | 207 | ||||||||||||
Gain (loss) on debt extinguishment
|
- | (60 | ) | 2,192 | (823 | ) | ||||||||||
Total other expense
|
(3,656 | ) | (3,018 | ) | (7,913 | ) | (7,747 | ) | ||||||||
Net loss
|
(5,459 | ) | (4,965 | ) | (15,085 | ) | (22,337 | ) | ||||||||
Less: Net loss attributable to noncontrolling interests
|
(4 | ) | (161 | ) | (4 | ) | (168 | ) | ||||||||
Net loss attributable to PEDEVCO common stockholders
|
$ | (5,455 | ) | $ | (4,804 | ) | $ | (15,081 | ) | $ | (22,169 | ) | ||||
$ | (0.12 | ) | $ | (0.17 | ) | $ | (0.37 | ) | $ | (0.81 | ) | |||||
Basic and diluted | 44,390,161 | 29,081,197 | 40,302,489 | 27,334,655 |
For the Nine Months Ended
September 30,
|
||||||||
2015
|
2014
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net loss
|
$ | (15,081 | ) | $ | (22,169 | ) | ||
Net loss attributable to noncontrolling interests
|
(4 | ) | (168 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Stock-based compensation expense
|
3,150 | 2,856 | ||||||
Impairment of oil and gas properties
|
1,337 | 354 | ||||||
Depreciation, depletion, amortization and accretion
|
3,379 | 753 | ||||||
(Gain) loss on sale of oil and gas properties
|
(275 | ) | 5,413 | |||||
(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 | ) | 823 | |||||
Loss from equity method investments
|
91 | 463 | ||||||
Deferred interest expense and principal related to debt restructuring
|
1,152 | - | ||||||
Amortization of debt discount
|
3,158 | 2,543 | ||||||
Amortization of deferred financing costs
|
1,565 | 1,041 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(169 | ) | - | |||||
Accounts receivable - oil and gas
|
1,674 | (1,005 | ) | |||||
Accounts receivable - oil and gas - related party
|
21 | 23 | ||||||
Accounts receivable - related party
|
55 | (52 | ) | |||||
Inventory
|
- | 396 | ||||||
Prepaid expenses and other current assets
|
(125 | ) | (85 | ) | ||||
Accounts payable
|
(4,184 | ) | 3, 635 | |||||
Accounts payable - related party
|
- | (486 | ) | |||||
Accrued expenses
|
(48 | ) | 844 | |||||
Accrued expenses - related party
|
408 | 245 | ||||||
Revenue payable
|
(165 | ) | 416 | |||||
Advances from joint interest owners
|
(657 | ) | 2,217 | |||||
Net cash provided by (used in) operating activities
|
(7,476 | ) | 1,069 | |||||
Cash Flows From Investing Activities:
|
||||||||
Cash paid for oil and gas properties
|
- | (28,521 | ) | |||||
Cash paid for drilling costs
|
(143 | ) | (3,639 | ) | ||||
Proceeds from sale of equity investment
|
500 | 1,616 | ||||||
Proceeds from sale of oil and gas properties
|
- | 8,797 | ||||||
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
|
- | (1,834 | ) | |||||
Cash paid for unproved leasehold costs
|
- | (274 | ) | |||||
Net cash provided by (used in) investing activities
|
357 | (18,167 | ) | |||||
Cash Flows From Financing Activities:
|
||||||||
Repayment of notes payable
|
(863 | ) | - | |||||
Proceeds from issuance of common stock, net of offering costs
|
2,780 | 6,525 | ||||||
Proceeds from notes payable, net of discounts and financing costs
|
- | 21,226 | ||||||
Repayment of notes payable - related party
|
(100 | ) | - | |||||
Proceeds from notes payable
|
- | - | ||||||
Cash paid for deferred financing costs
|
- | (5,658 | ) | |||||
Repayment of Secured Notes Payable
|
- | (2,321 | ) | |||||
Repayment of paid-in-kind obligations
|
- | (400 | ) | |||||
Proceeds from exercise of warrants and options
|
- | 4 | ||||||
Net cash provided by financing activities
|
1,817 | 19,376 | ||||||
Net (decrease) increase in cash
|
(5,302 | ) | 2,278 | |||||
Cash at beginning of period
|
6,675 | 6,613 | ||||||
Cash at end of period
|
$ | 1,373 | $ | 8,891 | ||||
Supplemental Disclosure of Cash Flow Information
|
||||||||
Cash paid for:
|
||||||||
Interest
|
$ | 4,764 | $ | 2,843 | ||||
Income taxes
|
$ | - | $ | - | ||||
Noncash Investing and Financing Activities:
|
||||||||
Issuance of common stock in settlement of liabilities
|
$ | - | $ | 580 | ||||
Issuance of common stock to Bridge Note holders due to conversion
|
$ | 102 | $ | 2,098 | ||||
Rescission of common stock issued in private placement
|
$ | - | $ | 10,000 | ||||
Deferred financing costs related to warrants issued in conjunction with notes payable
|
$ | - | $ | 1,520 | ||||
Reclass of notes payable - Bridge Notes to convertible notes
|
$ | - | $ | 2,375 | ||||
Consolidation of non-controlling interest in PEDCO MSL
|
$ | - | $ | 2,644 | ||||
Reclass of deposit for business acquisitions to notes receivable
|
$ | - | $ | 5,000 | ||||
Beneficial conversion feature of convertible notes payable - Bridge Notes
|
$ | - | $ | 285 | ||||
Reclass of notes payable - related parties to notes payable - Bridge Notes
|
$ | - | $ | 525 | ||||
Debt discount related to the warrants issued to Bridge Notes
|
$ | - | $ | 427 | ||||
Accrual of development costs for oil and gas properties
|
$ | 1,943 | $ | - | ||||
Changes in estimates of asset retirement obligations
|
$ | 13 | $ | 21 | ||||
Accounts receivable acquired in purchase
of oil and gas property
|
$ | 1,678 | $ | - | ||||
$ | 751 | $ | - | |||||
$ | 5,000 | $ | - | |||||
$ | 8,353 | $ | - | |||||
$ | 28,402 | $ | - | |||||
$ | 2,734 | $ | - | |||||
$ | 160 | $ | - |
-
|
Condor Energy Technology LLC, a Nevada limited liability company, owned 20% by the Company and 80% by an affiliate of MIE Holdings through February 2015. The Company accounted for its 20% ownership in Condor using the equity method.
|
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,
|
September 30,
|
|||||||||||||||||||
2014
|
Additions
|
Disposals
|
Transfers
|
2015
|
||||||||||||||||
Oil and gas properties, subject to amortization
|
$ | 24,057 | $ | 45,551 | $ | (3,401 | ) | $ | 289 | $ | 66,496 | |||||||||
Oil and gas properties, not subject to amortization
|
8,159 | - | (7,870 | ) | (289 | ) | - | |||||||||||||
Asset retirement costs
|
76 | 73 | (1 | ) | - | 148 | ||||||||||||||
Accumulated depreciation, depletion and impairment
|
(10,237 | ) | (4,682 | ) | 10,652 | - | (4,267 | ) | ||||||||||||
Total oil and gas assets
|
$ | 22,055 | $ | 40,942 | $ | (620 | ) | $ | - | $ | 62,377 |
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 Nine Months Ended
|
||||||||||||
September 30, 2015
|
||||||||||||
PEDEVCO
|
Net Acquisitions/Dispositions
|
Combined
|
||||||||||
Revenue
|
$
|
4,593
|
$
|
780
|
$
|
5,373
|
||||||
Lease operating costs
|
$
|
(1,434
|
)
|
$
|
(275
|
)
|
$
|
(1,709
|
)
|
|||
Net income (loss)
|
$
|
(15,081
|
)
|
$
|
505
|
$
|
(14,576
|
)
|
||||
Net income (loss) per common share
|
$
|
(0.37
|
)
|
$
|
0.01
|
$
|
(0.36
|
)
|
For the Nine Months Ended
|
||||||||||||
September 30, 2014
|
||||||||||||
PEDEVCO
|
Net Acquisitions/Dispositions
|
Combined
|
||||||||||
Revenue
|
$
|
4,192
|
$
|
1,401
|
$
|
5,593
|
||||||
Lease operating costs
|
$
|
(1,367
|
)
|
$
|
(1,288
|
)
|
$
|
(2,655
|
)
|
|||
Net income (loss)
|
$
|
(22,169
|
)
|
$
|
113
|
$
|
(22,056
|
)
|
||||
Net loss per common share
|
$
|
(0.81
|
)
|
$
|
0.00
|
$
|
(0.81
|
)
|
September 30,
|
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 which had a principal amount of $6,070,000 after cash payments of $100,000;
|
●
|
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 Received by PEDEVCO
|
||||
Extinguishment of accrued liabilities
|
3,280
|
|||
Extinguishment of original debt with MIE net of cash payments of $100,000
|
6,070
|
|||
Proceeds from cash payments made by MIE to RJ Credit and BAM
|
500
|
|||
Total
|
9,850
|
Items Received by MIEJ
|
||||
Issuance of new MIEJ note
|
$
|
4,925
|
||
Extinguishment of note receivable with Condor
|
1,272
|
|||
Historical cost of oil and gas property sold to Condor
|
620
|
|||
Total
|
6,817
|
|||
Net gain on settlement
|
$ |
3,033
|
Allocated Value
|
Historical Cost
|
Gain on Settlement
|
||||||||||
Oil and gas properties
|
$
|
895
|
$
|
620
|
$
|
275
|
||||||
Investment in Condor
|
1,838
|
1,272
|
566
|
|||||||||
Note Payable - MIEJ
|
7,117
|
4,925
|
2,192
|
|||||||||
Total
|
$
|
9,850
|
$
|
6,817
|
$
|
3,033
|
Revenue
|
$
|
108
|
||
Operating expenses
|
(368
|
)
|
||
Operating loss
|
(260
|
)
|
||
Interest expense
|
(195
|
)
|
||
Net loss
|
$
|
(455
|
)
|
●
|
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
|
|||||||
September 30,
|
December 31,
|
|||||||
2015
|
2014
|
|||||||
Deferred Tax Assets (Liabilities)
|
||||||||
Difference in depreciation, depletion, and capitalization methods – oil and natural gas properties
|
$
|
1,695
|
$
|
1,385
|
||||
Net operating losses
|
4,131
|
4,131
|
||||||
Impairment – oil and natural gas properties
|
(1,122
|
)
|
(1,122
|
)
|
||||
Other
|
753
|
623
|
||||||
Total deferred tax asset
|
5,457
|
5,017
|
||||||
Less: valuation allowance
|
(5,457
|
)
|
(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 would allow the Series A preferred stock to be converted into shares of the Company’s common stock on a 1,000:1 basis, subject to stockholder approval of the issuance of the shares of common stock issuable upon such conversion.
|
●
|
the Series A preferred has ceased accruing dividends and all accrued and unpaid dividends have been automatically forfeited and forgiven; and
|
●
|
the liquidation preference of the Series A preferred has been 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
|
(19,445
|
)
|
0.30
|
|||||||||
Forfeited and cancelled
|
(13,888
|
)
|
0.30
|
|||||||||
Outstanding at September 30, 2015
|
3,058,891
|
$
|
0.80
|
5.0
|
||||||||
Exercisable at September 30, 2015
|
2,162,540
|
$
|
0.76
|
5.4
|
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
|
1,650,115
|
0.89
|
||||||||||
Exercised
|
-
|
-
|
||||||||||
Forfeited and cancelled
|
(440,962
|
)
|
3.67
|
|||||||||
Outstanding at September 30, 2015
|
7,803,282
|
$
|
1.78
|
3.2
|
||||||||
Exercisable at September 30, 2015
|
7,753,282
|
$
|
1.79
|
3.2
|
Fair Value Measurements At September 30, 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
|
●
|
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.
|
Three Months Ended
September 30,
2015
|
Three Months Ended
September 30,
2014
|
|||||||
Oil volume (BBL)
|
25,256
|
12,347
|
||||||
Gas volume (MCF)
|
112,239
|
30,940
|
||||||
Volume equivalent (BOE) (1)
|
43,963
|
17,504
|
||||||
Revenue (000’s)
|
$
|
1,318
|
$
|
1,186
|
||||
Nine Months Ended
September 30,
2015
|
Nine Months Ended
September 30,
2014
|
|||||||
Oil volume (BBL)
|
99,093
|
46,715
|
||||||
Gas volume (MCF)
|
248,348
|
74,625
|
||||||
Volume equivalent (BOE) (1)
|
140,484
|
59,153
|
||||||
Revenue (000’s)
|
$
|
4,623
|
$
|
4,494
|
●
|
Acquired oil and gas assets from Golden Globe Energy, LLC, which increased the value of our assets by approximately $45,000,000, and our debt obligations by approximately $9,000,000, essentially doubling our proved reserves and net acreage held. In connection with the acquisition, we issued 3,375,000 shares of restricted common stock and 66,625 shares of Series A Convertible Preferred Stock
|
●
|
Sold our ownership in Condor Energy Technology, LLC and working interests in the related oil and gas assets to MIE Jurassic Energy Corporation, recognizing a gain of approximately $275,000 and a net reduction in debt of approximately $2,000,000.
|
●
|
Entered into an agreement to acquire Dome Energy, Inc. which is expected to result in additional proved reserves of 6 MBOE, an additional 1,250 net barrels of oil equivalent per day of oil and gas production, and provide greater resources to raise capital.
|
●
|
Restructured various debt obligations to defer until note maturity approximately $ 3.3 million of principal and interest payments until February 2016, reducing total cash pay requirements under the notes by $ 490,000 to approximately $100,000 per month. In connection with the deferment, we issued warrants to purchase 1.55 million shares of common stock.
|
●
|
Implemented G&A cost savings strategies (excluding non-cash items) which resulted in reduced costs of approximately $1,000,000 compared to the nine months ended September 30, 2015.
|
●
|
approval of the Agreement by the shareholders of the Company and Dome AB,
|
●
|
receipt of required regulatory approvals,
|
●
|
the absence of any law or order prohibiting the consummation of the Exchange,
|
●
|
approval of the NYSE MKT, and
|
●
|
the effectiveness of a Registration Statement relating to our common stock to be issued in the Exchange and including proxy information for both the Company and Dome AB.
|
For the Three Months Ended
|
||||||||||||
Ended September 30,
|
Increase/
|
|||||||||||
(in thousands)
|
2015
|
2014
|
(Decrease)
|
|||||||||
Payroll and related costs
|
$ | 461 | $ | 452 | $ | 9 | ||||||
Stock compensation expense
|
701 | 965 | (264 | ) | ||||||||
Legal fees
|
22 | 60 | (38 | ) | ||||||||
Accounting and other professional fees
|
78 | 456 | (378 | ) | ||||||||
Insurance
|
20 | 24 | (4 | ) | ||||||||
Travel and entertainment
|
17 | 51 | (34 | ) | ||||||||
Office rent, communications and other
|
90 | 190 | (100 | ) | ||||||||
$ | 1,389 | $ | 2,198 | $ | (809 | ) |
For the Nine Months Ended
|
||||||||||||
Ended September 30,
|
Increase/
|
|||||||||||
(in thousands)
|
2015
|
2014
|
(Decrease)
|
|||||||||
Payroll and related costs
|
$ | 1,421 | $ | 1,305 | $ | 116 | ||||||
Stock compensation expense
|
3,150 | 2,710 | 440 | |||||||||
Legal fees
|
192 | 564 | (372 | ) | ||||||||
Accounting and other professional fees
|
398 | 1,116 | (718 | ) | ||||||||
Insurance
|
70 | 69 | 1 | |||||||||
Travel and entertainment
|
66 | 131 | (65 | ) | ||||||||
Office rent, communications and other
|
375 | 312 | 63 | |||||||||
$ | 5,672 | $ | 6,207 | $ | (535 | ) |
●
|
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.
|
●
|
we may experience negative reactions from the financial markets and our partners and employees;
|
●
|
under the Reorganization Agreement, we may be required to pay to Dome US a termination fee of approximately $1.0 million if the Reorganization Agreement is terminated under certain circumstances. If such termination fee is payable, the payment of this fee could have material and adverse consequences to our financial condition and operations;
|
●
|
the Reorganization Agreement places certain restrictions on the conduct of our business prior to the completion of the Exchange or the termination of the Reorganization Agreement. Such restrictions, the waiver of which is subject to the consent of Dome US, may prevent us from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the Exchange; and
|
●
|
matters relating to the Exchange (including integration planning) may require substantial commitments of time and resources by our management, which would otherwise have been devoted to other opportunities that may have been beneficial to us as an independent company.
|
PEDEVCO Corp.
|
|||
November 13, 2015
|
By:
|
/s/ Frank C. Ingriselli
|
|
Frank C. Ingriselli
|
|||
Chief Executive Officer
|
|||
(Principal Executive 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+
|
Agreement and Plan of Reorganization dated as of May 21, 2015, by and among PEDEVCO Corp., PEDEVCO Acquisition Subsidiary, Inc., Dome Energy, Inc. and Dome Energy AB
|
8-K
|
2.1
|
5/26/2015
|
001-35922
|
|||||||
2.2+
|
Amendment No. 1 to Agreement and Plan of Reorganization dated as of July 15, 2015, by and among PEDEVCO Corp., PEDEVCO Acquisition Subsidiary, Inc., Dome Energy, Inc. and Dome Energy AB
|
8-K
|
2.1
|
7/20/2015
|
001-35922
|
|||||||
2.3+
|
Amendment No. 2 to Agreement and Plan of Reorganization dated as of August 28, 2015, by and among PEDEVCO Corp., PEDEVCO Acquisition Subsidiary, Inc., Dome Energy, Inc. and Dome Energy AB
|
8-K
|
2.1
|
9/1/2015
|
001-35922
|
|||||||
10.1
|
Voting Agreement dated as of May 21, 2015, by and among Dome Energy AB, Dome Energy, Inc., and Frank C. Ingriselli; Michael L. Peterson; Clark R. Moore and Golden Globe Energy (US), LLC
|
8-K
|
10.1
|
5/26/2015
|
001-35922
|
|||||||
10.2
|
Voting Agreement dated as of May 21, 2015 by and among Dome Energy AB, Dome Energy, Inc., andBrightening Lives Foundation, Inc.
|
8-K
|
10.2
|
5/26/2015
|
001-35922
|
|||||||
10.3
|
Voting Agreement dated as of May 13, 2015 by and among PEDEVCO Corp., Bustein AS and Range Ventures LLC
|
8-K
|
10.3
|
5/26/2015
|
001-35922
|
|||||||
10.4
|
Form of Executive Vesting Agreement dated May 21, 2015
|
8-K
|
10.4
|
5/26/2015
|
001-35922
|
|||||||
10.5
|
Amended and Restated 2012 Equity Incentive Plan
|
8-K
|
10.1
|
10/13/15
|
001-35922
|
|||||||
10.6
|
Letter Agreement, dated August 28, 2015, by and among PEDEVCO Corp., BAM Administrative Services LLC, Senior Health Insurance Company of Pennsylvania, BRE BCLIC Sub, BRE WNIC 2013 LTC Primary, BRE WNIC 2013 LTC Sub, HEARTLAND Bank, and RJ Credit LLC
|
8-K
|
10.1
|
9/1/2015
|
001-35922
|
|||||||
10.7
|
Letter Agreement, dated August 28, 2015, by and among PEDEVCO Corp. and HEARTLAND Bank
|
8-K
|
10.2
|
9/1/2015
|
001-35922
|
|||||||
10.8
|
Form of Common Stock Warrant (April 24, 2015 Lender Amendment)
|
X
|
10.9
|
Form of Common Stock Warrant (August 28, 2015 Lender Amendment)
|
8-K
|
10.3
|
9/1/2015
|
001-35922
|
|||||||
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
|||||||||||
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X
|
|||||||||||
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
|
*
|
|||||||||||
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
|
**
|
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.
|
November 13, 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.
|
November 13, 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
|
|||
November 13, 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.
|
November 13, 2015
|
By:
|
/s/ Michael L. Peterson
|
|
Michael L. Peterson
|
|||
President and Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|