PEDEVCO CORP (Form: 8-K/A, Received: 08/08/2012 12:46:06)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT: August 8, 2012

DATE OF EARLIEST EVENT REPORTED: July 27, 2012

000-53725

(Commission file number)

PEDEVCO CORP.

(Exact name of registrant as specified in its charter)

Blast Energy Services, Inc.

(Former name of registrant as specified in its charter)

Texas	22-3755993
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

4125 Blackhawk Plaza Circle, Suite 201

Danville, California 94506

(Former address of principal executive offices)

P.O . Box 710152

Houston , Texas 77271

(Former address of principal executive offices)

(855) 733-2685

(Issuer’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note:

The Registrant is filing this Amended Report on Form 8-K (Amendment No. 1) to include the financial statements of Pacific Energy Development Corp., which was acquired by the Registrant as a result of the closing of the Merger (defined below), which closed on July 27, 2012, and pro forma financial information in connection therewith as required by Form 8-K. Additionally, the Registrant is filing this Amended Report on Form 8-K to include Item 5.05 information below regarding the adoption of a new Code of Ethics. Other than the disclosure under Item 5.05 below, and the exhibits filed herewith, this Amendment No. 1 to Form 8-K is identical to the Form 8-K filed by the Registrant on August 2, 2012.

-2-

Item 2.01

Completion of Acquisition or Disposition of Assets.

Effective July 27, 2012, PEDEVCO Corp. (formerly Blast Energy Services, Inc.)(the “ Company ”, “ we ” and “ us ”) completed the transactions contemplated by the January 13, 2012, Agreement and Plan of Reorganization (as amended from time to time, the “ Merger Agreement ”), by and between the Company, Blast Acquisition Corp., a wholly-owned Nevada subsidiary of the Company (“ MergerCo ”), and Pacific Energy Development Corp., a privately-held Nevada corporation (“ PEDCO ”).

Pursuant to the Merger Agreement and effective July 27, 2012, MergerCo was merged with and into PEDCO, with PEDCO continuing as the surviving entity and becoming a wholly-owned subsidiary of the Company, in a transaction structured to qualify as a tax-free reorganization (the “ Merger ”). In connection with the Merger and as described in greater detail below under Item 3.02, we issued former security holders of PEDCO 17,917,261 shares of common stock, 19,716,676 shares of new Series A Preferred Stock (as defined below), warrants to purchase an aggregate of 1,120,000 shares of our common stock, warrants to purchase 692,584 shares of our new Series A Preferred Stock, and options to purchase 4,235,000 shares of our common stock.

Additionally, immediately prior to the Merger becoming effective, the shareholders of the Company, at the Meeting (described below under Item 5.07), approved an Amended and Restated Certificate of Formation and an Amended and Restated Series A Convertible Preferred Stock Designation which: (i) converted all outstanding shares of the Company’s Series A Convertible Preferred Stock and Series B Preferred Stock into common stock of the Company on a one to one basis, and immediately thereafter, (ii) effectuated a one for one hundred and twelve (1:112) reverse stock split of the Company’s then outstanding common stock (the “ Reverse Split ” and the “ Amended and Restated Certificate of Formation ”).

Furthermore, in connection with the Reverse Split and the Amended and Restated Certificate of Formation, the Company changed its name to “ PEDEVCO Corp. ”, and amended its Certificate of Formation, to affect various changes to its Certificate of Formation as described in greater detail in the proposals described in Item 5.07, below, including, but not limited to increasing the Company’s authorized capitalization to 300,000,000 shares of capital stock post-Reverse Split, which includes 200,000,000 shares of common stock, $0.001 par value per share (“ Common Stock ”); and 100,000,000 authorized shares of Preferred Stock, including 25,000,000 authorized shares of Series A Convertible Preferred Stock, $0.001 par value per share (" new Series A Preferred Stock "), which shares were designated in connection with approval of and filing of the Amended and Restated Certificate of Designations of the Company’s Series A Convertible Preferred Stock, which amended and replaced the prior designation of the Company’s Series A Convertible Preferred Stock (which shares were automatically converted into shares of common stock in connection with the Amended and Restated Certificate of Formation).

Additional information regarding the Merger, the amendments to the Company’s Certificate of Formation which were effected pursuant to the Amended and Restated Certificate of Formation, and the business, assets, financial statements, operations, related transactions, and risk factors of PEDCO, which became the operations of the Company post-Merger, as well as information on the Company, post-Merger, can be found in the Company’s Definitive Schedule 14A Proxy Statement filed with the Securities and Exchange Commission on July 3, 2012 (the “ Proxy Statement ”), and mailed to shareholders of record as of the June 27, 2012 record date for the Company’s July 27, 2012 special meeting of shareholders, which meeting is described in greater detail in Item 5.07, below.

As a result of the name change and Reverse Split described above, the Company’s trading symbol on the Over-The-Counter Bulletin Board will be changing to “ BESVD ”, effective August 3, 2012, for twenty (20) business days and will change to a new symbol (which has not yet been assigned) thereafter. The name change to PEDEVCO Corp. will also become effective with the Over-The-Counter Bulletin Board on August 3, 2012. The Company plans to file another Form 8-K and release a press release at such time as the Company’s new trading symbol is known.

-3-

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

As described in greater detail below under Item 5.03, the Company’s new Series A Preferred Stock shareholders are entitled to receive non-cumulative dividends at an annual rate of 6% of the “ Original Issue Price ” per share for the new Series A Preferred Stock, which is $0.75 per share (as appropriately adjusted for any recapitalizations). These dividends will only accrue and become payable if declared by our Board of Directors in its discretion.

Additionally, as described in greater detail in the Proxy Statement and the financial statements attached hereto, the Company assumed the liabilities, obligations and debts of PEDCO upon the closing of the Merger.

Item 3.02

Unregistered Sales of Equity Securities.

As described in greater detail under Item 2.01 above, all of the Company’s outstanding shares of Series A Convertible Preferred Stock and Series B Preferred Stock were automatically converted into shares of common stock on a one for one hundred and twelve (1:112) basis in connection with the Amended and Restated Certificate of Formation.

We claim an exemption from registration afforded by Section 3(a)(9) of the Securities Act of 1933, as amended (the “ Act ”) for the above conversions, as the securities were exchanged by the Company with its existing security holder exclusively in transactions where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.

In connection with the closing of the Merger (described above in Item 2.01), the Company has agreed to issue an aggregate of 17,917,261 shares of common stock and 19,716,676 shares of new Series A Preferred Stock to former shareholders of PEDCO. Additionally, the Company agreed to grant warrants to purchase an aggregate of 100,000 shares of common stock with an exercise price of $0.08 per share; 500,000 shares of common stock with an exercise price of $1.25 per share; 500,000 shares of common stock with an exercise price of $1.50 per share; 20,000 shares of common stock with an exercise price of $0.75 per share, to former common stock warrant holders of PEDCO; and warrants to purchase an aggregate of 692,584 shares of new Series A Convertible Preferred Stock with an exercise price of $0.75 per share to former Series A Convertible Preferred Stock warrant holders of PEDCO; and options to purchase an aggregate of 470,000 shares of common stock with an exercise price of $0.08 per share; 365,000 shares of common stock with an exercise price of $0.10 per share; and 3,400,000 shares of the Company’s common stock with an exercise price of $0.17 per share, to former option holders of PEDCO.

Additionally, promptly after the filing of this report, the Company intends to provide the debt holders who entered into Debt Conversion Agreements with the Company in January 2012, notice of the Company’s intent to convert such individuals’ and entities’ debt into shares of the Company’s common stock at a rate of $2.24 per post-Reverse Split share. We anticipate that approximately 214,787 shares of common stock will be issued to the various debt holders in connection with and pursuant to the Debt Conversion Agreements.

The issuances and grants described above will be exempt from registration pursuant to Section 4(2), Rule 506 of Regulation D and/or Regulation S of the Act since the foregoing issuances and grants will not involve a public offering, the recipients will take the securities for investment and not resale, the Company will take appropriate measures to restrict transfer, and the recipients will (a) be “ accredited investors ”; (b) have access to similar documentation and information as would be required in a Registration Statement under the Act; and/or (c) be non-U.S. persons.

-4-

Item 3.03

Material Modification to Rights of Security Holders.

Additionally, in connection with the designation of the new Series A Preferred Stock, described in greater detail below under Item 5.03, the Company designated an amended and restated series of Series A Convertible Preferred Stock.

Item 5.01

Changes in Control of Registrant

Effective in connection with the closing of the Merger, a change in control of the Company occurred, and the former shareholders of PEDCO obtained voting control over the Company. The table below sets forth certain information with respect to beneficial ownership of our securities after the effectiveness of the Merger, the Amended and Restated Certificate of Formation, the Reverse Stock Split and the issuance of shares of common stock, preferred stock, options and warrants to the former security holders of PEDCO by:

persons known by us to be the beneficial owners of more than five percent (5%) of our issued and outstanding common stock;

each of our executive officers and directors; and

all of our executive officers and directors as a group.

Ownership voting percentages are based on 39,324,070 total voting shares which will be outstanding following the consummation of the transactions contemplated by the Merger and after affecting the Reverse Stock Split and other transactions set forth in the Amended and Restated Certificate of Formation, including the conversion of certain Company debt into common stock of the Company in connection with the Debt Conversion Agreements (which will become effective shortly after the date of this Current Report on Form 8-K), and the issuance of approximately 10,268 shares of common stock of the Company in connection with a prior class action settlement which will be issued after the date of this Current Report on Form 8-K. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and/or investing power with respect to securities. We believe that, except as otherwise noted and subject to applicable community property laws, each person named in the following table has sole investment and voting power with respect to the securities shown as beneficially owned by such person. Additionally, shares of common stock subject to options, warrants or other convertible securities that are currently exercisable or convertible, or exercisable or convertible within 60 days of the applicable date below, are deemed to be outstanding and to be beneficially owned by the person or group holding such options, warrants or other convertible securities for the purpose of computing the percentage ownership of such person or group, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group. Unless otherwise stated, the address of each shareholder is c/o PEDEVCO Corp., 4125 Blackhawk Plaza Circle, Suite 201, Danville, CA 94506.

-5-

Name and Address of Beneficial Owner	Number of Voting Shares Beneficially Owned			Percentage of Voting Shares Beneficially Owned (3)
Current Officers and Directors
Frank C. Ingriselli		6,386,668	(1)		16.2	%
Jamie Tseng		3,050,000	(2)		7.8	%
Clark R. Moore		1,955,000	(3)		5.0	%
Michael L. Peterson		1,503,686	(4)		3.8	%
All executive officers and Directors as a group (four persons)		12,895,354			32.8	%

Greater than 5% Shareholders

MIE Holdings Corporation(5)		5,000,000	(6)		12.7	%

Gregory G. Galdi(7)		2,200,000	(8)		5.6	%

(1)

Includes: (i) 3,500,000 fully-vested shares of common stock held by Mr. Ingriselli; (ii) 500,000 shares of common stock held by Mr. Ingriselli vesting with respect to 50% of the shares on August 9, 2012, 20% of the shares of February 9, 2013, 20% of the shares on August 9, 2013, and 10% of the shares on February 9, 2014; (iii) 2,380,000 fully-vested shares of common stock held by Global Venture Investments LLC, a limited liability company owned and controlled by Mr. Ingriselli (“ GVEST ”); (iv) 5,668 shares of new Series A Preferred Stock held by GVEST; and (v) warrants exercisable for 1,000 shares of new Series A Preferred Stock held by GVEST at $0.75 per share.

(2)

Includes: (i) 2,000,000 fully-vested shares of common stock held by Mr. Tseng; (ii) 1,000,000 fully-vested shares of common stock held by Uni-bright Technology Limited, an entity owned and controlled by Mr. Tseng; and (iii) options to purchase 50,000 shares of common stock exercisable by Mr. Tseng on August 9, 2012 at an exercise price of $0.10 per share.

(3)

Includes: (i) 1,605,000 fully-vested shares of common stock; (ii) 50,000 fully-vested shares of common stock held by each of Mr. Moore’s minor children, which he is deemed to beneficially own; and (iii) 250,000 shares of common stock held by Mr. Moore vesting with respect to 50% of the shares on August 9, 2012, 20% of the shares of February 9, 2013, 20% of the shares on August 9, 2013, and 10% of the shares on February 9, 2014.

(4)

Consisting of the following: (i) 80,000 fully-vested shares of common stock held by Mr. Peterson's minor children; (ii) 88,417 fully-vested shares of common stock (including shares held by a family trust which Mr. Peterson is deemed to beneficially own and 22,345 shares issuable upon the conversion of certain debt held by Mr. Peterson into shares of the Company’s common stock which will occur shortly after the filing of this report); (iii) 350,000 shares of common stock held by Mr. Peterson vesting with respect to 175,000 of the shares on December 1, 2012, and 175,000 of the shares on June 1, 2013; (iv) 750,000 shares of common stock held by Mr. Peterson vesting with respect to 50% of the shares on August 9, 2012, 20% of the shares of February 9, 2013, 20% of the shares on August 9, 2013, and 10% of the shares on February 9, 2014; (v) options to purchase 150,000 shares of common stock exercisable by Mr. Peterson on March 1, 2012 at an exercise price of $0.08 per share; (vi) options to purchase 75,000 shares of common stock at an exercise price of $0.08 per share; (vii) 10,269 shares of common stock underlying currently exercisable options, of which options to purchase 8,929 shares are exercisable at $10.08 per share and options to purchase 1,340 shares are exercisable at $22.40 per share.

-6-

(5)

Address: c/o MIE Holdings Corporation, Suite 1501, Block C, Grand Palace, 5 Huizhong Road, Chaoyong District, Beijing, China 100101. To the best of the Company’s knowledge, the beneficial owners of MIE Holdings Corporation are Zhang Ruilin, its Executive Director, Chairman and Chief Executive Officer, and Zhao Jiangwei, its Executive Director, Vice Chairman and Senior Vice President.

(6)	Representing 4,000,000 new Series A Preferred Stock shares and warrants to purchase 500,000 shares of common stock with an exercise price of $1.25 per share, and warrants to purchase 500,000 shares of common stock with an exercise price of $1.50 per share.

(7)	Address: c/o PEDEVCO Corp., 4125 Blackhawk Plaza Circle, Suite 201, Danville, CA 94506.

(8)	Includes: (i) 1,333,333 shares of new Series A Preferred Stock held by Mr. Galdi; (ii) 666,667 shares of new Series A Preferred Stock held in joint tenancy by Mr. Galdi and his spouse; and (iii) warrants exercisable for 200,000 shares of new Series A Preferred Stock at $0.75 per share.

As described in the Proxy Statement, prior to the consummation of the Merger and the transactions contemplated therein, Eric A. McAfee and Clyde Berg, and entities which they beneficially owned, had voting control over an aggregate of approximately 63% of of our voting securities.

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Effective on July 27, 2012, as a required term of the Merger, Roger P. (Pat) Herbert resigned as as a Director of, as Chairman of the Board of Directors of, and as Interim President and Chief Executive Officer of the Company; Donald E. Boyd resigned as a member of the Board of Directors of the Company; and John A. MacDonald resigned as the Executive Vice President, Chief Financial Officer and Secretary of the Company.

Additionally effective July 27, 2012, Frank C. Ingriselli was appointed as Chairman of the Board of Directors of the Company and Michael L. Peterson and Jamie Tseng were appointed as Directors of the Company, and Mr. Ingriselli was further appointed as the President and Chief Executive Officer of the Company; Mr. Peterson was further appointed as the Chief Financial Officer and Executive Vice President of the Company; Mr. Tseng was further appointed as the Senior Vice President of the Company; and Clark R. Moore was appointed as the Executive Vice President, General Counsel and Secretary of the Company.

Mr. Ingriselli’s, Mr. Peterson’s, Mr. Tseng’s and Mr. Moore’s biographical information is provided below:

Name	Age	Position
Frank C. Ingriselli	57	Chairman, President and Chief Executive Officer

Michael L. Peterson	50	Director, Chief Financial Officer and Executive Vice President

Jamie Tseng	57	Director, Senior Vice President

Clark R. Moore	39	Executive Vice President, General Counsel and Secretary

-7-

Frank C. Ingriselli, Chairman, President and Chief Executive Officer

Mr. Ingriselli, 57, has served as the President, Chief Executive Officer and Director of the Company since the closing of its Merger with PEDCO on July 27, 2012. Prior to this, Mr. Ingriselli served as President, Chief Executive Officer and Director of PEDCO since its inception in February 2011. Mr. Ingriselli has over 30 years’ experience in the energy industry. Mr. Ingriselli began his career at Texaco, Inc. (“ Texaco ”) in 1979 and held management positions in Texaco’s Producing-Eastern Hemisphere Department, Middle East/Far East Division, and Texaco’s International Exploration Company. While at Texaco, Mr. Ingriselli negotiated a successful foreign oil development investment contract in China in 1983. In 1992, Mr. Ingriselli was named President of Texaco International Operations Inc. and over the next several years directed Texaco’s global initiatives in exploration and development. In 1996, he was appointed President and CEO of the Timan Pechora Company, a Houston, Texas headquartered company owned by affiliates of Texaco, Exxon, Amoco and Norsk Hydro, which was developing an investment in Russia. In 1998, Mr. Ingriselli returned to Texaco’s Executive Department with responsibilities for Texaco’s power and gas operations, merger and acquisition activities, pipeline operations and corporate development. In August 2000, Mr. Ingriselli was appointed President of Texaco Technology Ventures, which was responsible for all of Texaco’s global technology initiatives and investments. In 2001, Mr. Ingriselli retired from Texaco after its merger with Chevron, and founded Global Venture Investments LLC (“ GVEST ”), an energy consulting firm, for which Mr. Ingriselli continues to serve as the President and Chief Executive Officer. In 2005, Mr. Ingriselli co-founded CAMAC Energy Inc. (NYSE: CAK) (formerly Pacific Asia Petroleum, Inc.) an independent energy company headquartered in Houston, Texas, and served as its President, Chief Executive Officer and a member of its Board of Directors from 2005 to July 2010.

From 2000 to 2006, Mr. Ingriselli sat on the Board of the Electric Drive Transportation Association (where he was also Treasurer) and the Angelino Group, and was an officer of several subsidiaries of Energy Conversion Devices Inc., a U.S. public corporation engaged in the development and commercialization of environmental energy technologies. From 2001 to 2006, he was a Director and Officer of General Energy Technologies Inc., a “ technology facilitator ” to Chinese industry serving the need for advanced energy technology and the demand for low-cost high quality components, and Eletra Ltd, a Brazilian hybrid electric bus developer. Mr. Ingriselli currently sits on the Advisory Board of the Eurasia Foundation, a Washington D.C.-based non-profit that funds programs that build democratic and free market institutions in the new independent states of the former Soviet Union. Since 2006, Mr. Ingriselli has also served on the Board of Directors and as an executive officer of Brightening Lives Foundation Inc., a New York charitable foundation headquartered in Danville, California.

Mr. Ingriselli graduated from Boston University in 1975 with a Bachelor of Science degree in Business Administration. He also earned a Master of Business Administration degree from New York University in both Finance and International Finance in 1977 and a Juris Doctor degree from Fordham University School of Law in 1979.

Michael L. Peterson, Chief Financial Officer, Executive Vice President and Director

Mr. Peterson, 50, has served as the Executive Vice President, Chief Financial Officer, and Director of the Company since the closing of its Merger with PEDCO on July 27, 2012. Prior to this, Mr. Peterson served as Executive Vice President of PEDCO since September 2011, and Chief Financial Officer of PEDCO since June 2012. Mr. Peterson brings to the Company extensive experience in the energy, corporate finance and securities sectors. In addition, Mr. Peterson previously served as a director (May 2006 thru August 2012) of Aemetis, Inc. (formerly AE Biofuels Inc.), a Cupertino, California-based global advanced biofuels and renewable commodity chemicals company (AMTX.PK), and served from December 2008 thru July 2012 as Chairman and Chief Executive Officer of Nevo Energy, Inc. (NEVE.PK) (formerly Solargen Energy, Inc.), a Cupertino, California-based developer of utility-scale solar farms which he helped form. In February 2006, Mr. Peterson founded and served as managing partner of California-based Pascal Management, a manager of hedge and private equity investments. Mr. Peterson formerly served as Interim President and CEO (from June 2009 to December 2011) and as director (from May 2008 to December 2011) of the Company. From 2000 to 2004, he served as a First Vice President at Merrill Lynch, where he helped establish a new private client services division to work exclusively with high net worth investors. From September 1989 to January 2000, Mr. Peterson was employed by Goldman Sachs & Co. in a variety of positions and roles, including as a Vice President with the responsibility for a team of professionals that advised and managed over $7 billion in assets.

-8-

Mr. Peterson received his MBA at the Marriott School of Management and a BS in statistics/computer science from Brigham Young University.

Jamie Tseng, Senior Vice President and Director

Mr. Tseng, 57, has served as Senior Vice President and Director of the Company since the closing of its Merger with PEDCO on July 27, 2012. Prior to this, Mr. Tseng served as Senior Vice President and Director of PEDCO since its inception in February 2011, and Chief Financial Officer of PEDCO from PEDCO’s inception until June 2012. Mr. Tseng brings to the Company more than 25 years of financial management and operations experience in the People’s Republic of China, the Republic of China and the United States. In 2005, Mr. Tseng co-founded CAMAC Energy Inc. (NYSE: CAK) (formerly Pacific Asia Petroleum, Inc.), an independent energy company headquartered in Houston, Texas, and served as its Executive Vice President from 2005 through his retirement from the company in January 2010. From February 2000 to August 2005, Mr. Tseng served as Chief Financial Officer of General Energy Technologies Inc., a “ technology facilitator ” to Chinese industry serving the need for advanced energy technology and the demand for low cost high quality components. From 1998 to February 2000, Mr. Tseng served as Chief Financial Officer of Multa Communications Corporation, a California-based Internet service provider focusing on China. From 1980 until 1998, he held management positions with Collins Company, Hilton International, China Airlines and Tatung Company of America. Mr. Tseng is fluent in Chinese Mandarin. He has a BD degree in Accounting from Soochow University in Taiwan.

Clark R. Moore, Executive Vice President, General Counsel and Secretary

Mr. Moore, 39, has served as Executive Vice President, General Counsel, and Secretary of the Company since the closing of its Merger with PEDCO on July 27, 2012. Prior to this, Mr. Moore served as Executive Vice President, General Counsel and Secretary of PEDCO since its inception in February 2011. Mr. Moore began his career in 2000 as a corporate attorney at the law firm of Venture Law Group located in Menlo Park, California, which later merged into Heller Ehrman LLP in 2003. In 2004 Mr. Moore left Heller Ehrman LLP and launched a legal consulting practice focused on representation of private and public company clients in the energy and high-tech industries. In September 2006, Mr. Moore joined CAMAC Energy Inc. (NYSE: CAK) (formerly Pacific Asia Petroleum, Inc.), an independent energy company headquartered in Houston, Texas, as its acting General Counsel and continued to serve in that role through June 2011.

Mr. Moore received his J.D. with Distinction from Stanford Law School and his B.A. with Honors from the University of Washington.

----------------------------------------

Additional information regarding related party transactions (including agreements entered into with such individuals by PEDCO) involving Mr. Ingriselli, Mr. Peterson, Mr. Tseng and Mr. Moore can be found in the Proxy Statement.

Item 5.03

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

In connection with the Merger, the Company filed the Amended and Restated Certificate of Formation with the Secretary of State of Texas to effect various changes to its Certificate of Formation as described in greater detail in the proposals described in Item 5.07, below, which was effective on July 30, 2012, and an Amended and Restated Certificate of Designations of the Company’s Series A Preferred Stock (the “ Amended and Restated Designation ”), with the Secretary of State of Texas, which was effective on July 27, 2012.

-9-

A description of the rights of the Company’s Amended and Restated Series A Convertible Preferred Stock, as set forth in the Amended and Restated Designation is provided below:

Dividends

The holders of the shares of our new Series A Preferred Stock will be entitled to receive non-cumulative dividends at an annual rate of 6% of the “ Original Issue Price ” per share for the new Series A Preferred Stock, which is $0.75 per share (as appropriately adjusted for any recapitalizations). These dividends will only accrue and become payable if declared by our Board of Directors in its discretion. The right to receive dividends on shares of Series A Preferred Stock will not be cumulative, and no right to such dividends will accrue to holders of Series A Preferred Stock by reason of the fact that dividends on said shares are not declared or paid in any calendar year. All declared but unpaid dividends of the shares of new Series A Preferred Stock will be payable in cash upon conversion of such shares. Any dividends declared on our new Series A Preferred Stock will be prior and in preference to any declaration or payment of any dividends or other distributions on our common stock.

Liquidation Rights

In the event of any liquidation, dissolution or winding up of our Company, either voluntary or involuntary, the holders of our new Series A Preferred Stock will be entitled to receive distributions of any of our assets prior and in preference to the holders of our common stock in an amount per share of new Series A preferred stock equal to the sum of (i) the Original Issue Price of $0.75, and (ii) all declared but unpaid dividends on such shares of new Series A Preferred Stock.

If upon the liquidation, dissolution or winding up of our Company, the assets of our Company legally available for distribution to the holders of our new Series A Preferred Stock are insufficient to permit the payment to such holders of the full amounts of their liquidation preferences, then the entire assets of our Company legally available for distribution will be distributed pro rata among the holders of our new Series A Preferred Stock, in proportion to the full amounts they would otherwise be entitled to receive.

After the payment to the holders of our new Series A Preferred Stock of the full preferential amounts specified above, the remaining assets of our Company legally available for distribution will be distributed with equal priority and pro rata among the holders of our common stock in proportion to the number of shares of common stock held by them.

Conversion Rights

Each share of new Series A Preferred Stock will be convertible at the option of the holder into that number of fully-paid, nonassessable shares of common stock determined by dividing the “ Original Issue Price ” for the new Series A preferred stock by the conversion price of $0.75 per share (subject to adjustment). Therefore, each share of new Series A Preferred Stock will initially be convertible into one share of our common stock. Upon any decrease or increase in the conversion price of the new Series A Preferred Stock, the number of shares which each share of new Series A Preferred Stock will convert into will be appropriately increased or decreased.

Our shares of new Series A Preferred Stock will automatically convert into shares of common stock according to the conversion rate described above upon the first to occur of (i) the consent of a majority of the outstanding shares of Series A Preferred Stock or (ii) the date on which the new Series A Preferred Stock issued on the original issuance date to holders who are not affiliates of the Company may be re-sold by such holders without registration in reliance on Rule 144 promulgated under the Securities Act of 1933, as amended, or another similar exemption.

Redemption

We have no obligation to or rights to redeem the new Series A Preferred Stock.

-10-

Voting

The holders of our new Series A Preferred Stock will vote together with the holders of our common stock as a single class (on an as converted basis) on all matters to which our shareholders have the right to vote, except as may otherwise be required by law. In addition, approval of the holders of a majority of the new Series A Preferred Stock will be required to: (a) increase or decrease (other than by redemption or conversion) the total number of authorized shares of new Series A Preferred Stock; (b) effect an exchange, reclassification, or cancellation of all or a part of the new Series A Preferred Stock, including a reverse stock split, but excluding a stock forward split; (c) effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series A Preferred Stock; (d) alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock so as to affect adversely the shares of such series; (e) authorize or issue, or obligate our Company to issue, any other equity security, including any other security convertible into or exercisable for any equity security having a preference over (or on parity with) the new Series A Preferred Stock with respect to voting, dividends or upon liquidation; or (f) amend or waive any provision of our amended and restated certificate of formation or designations or bylaws relative to the new Series A Preferred Stock so as to affect adversely the shares of new Series A Preferred Stock.

The descriptions of the Amended and Restated Certificate of Formation and the Amended and Restated Designation herein are qualified in all respects by the actual Amended and Restated Certificate of Formation and Amended and Restated Designation, copies of which are filed as exhibits to this Report on Form 8-K.

Item 5.05

Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

On July 27, 2012, the Board of Directors of the Company adopted a new Code of Business Conduct and Ethics policy (the “ Code ”) that applies to the Company's officers, directors, and employees. The new Code supersedes the Company’s prior Code of Ethics For Senior Officers and covers topics such as compliance with laws, confidentiality, use of Company property, accuracy of financial reporting, fair and ethical business dealings, health and safety in the workplace, and conflicts of interest, among others. However, the adoption of the Code did not result in any waivers, explicit or implicit, of any provision of the Company's previous Code of Ethics For Senior Officers.

A copy of the Code is attached to this Current Report on Form 8-K as Exhibit 14.1, and is incorporated herein by reference into this Item 5.05.

Item 5.07

Submission of Matters to a Vote of Security Holders.

As previously disclosed in the Company’s Definitive Schedule 14A Proxy Statement, filed with the Securities and Exchange Commission on July 3, 2012, and mailed to shareholders of record as of the June 27, 2012 record date of the meeting shortly thereafter, the Company held a Special Meeting of Shareholders on July 27, 2012 (the “ Meeting ”). A total of 120,633,770 shares were present in person or by proxy and represented at the Meeting, which shares constituted a quorum based on 167,088,556 shares entitled to vote at the Meeting.

At the Meeting, the Company’s shareholders voted on the following proposals described in greater detail in the Company’s Proxy Statement and summarized below. Final voting results for each of the matters voted on at the meeting are set forth below. All outstanding shares of the Company’s then outstanding Series A Convertible Preferred Stock (6,000,000 shares, which had the right to vote 15,000,000 voting shares) and Series B Preferred Stock (one share, which had the right to vote one voting share) voted in favor (i.e., “ for ”) each of the proposals below, and such voting shares are included in the total voting shares described below. There were no broker non-votes applicable to the proposals to come before the Meeting.

-11-

Proposal 1	Votes For	Votes Against	Votes Abstained
To Approve The Agreement And Plan Of Reorganization, Dated January 13, 2012, Whereby Blast Acquisition Corp., Our Wholly-Owned Subsidiary Will Be Merged With Pacific Energy Development Corp.	120,334,853	98,917	200,000
Proposal 2	Votes For	Votes Against	Votes Abstained
Approval Of The Conversion Of Our Series A And Series B Preferred Stock Into Shares Of Our Common Stock	120,334,353	98,917	200,000
Proposal 3	Votes For	Votes Against	Votes Abstained
Approval Of A Reverse Stock Split Of Our Common Stock Of 1:112	120,332,253	101,017	200,000
Proposal 4	Votes For	Votes Against	Votes Abstained
Approval Of A Name Change To "PEDEVCO CORP."	120,322,253	111,017	200,000
Proposal 5	Votes For	Votes Against	Votes Abstained
Approval Of An Increase In Our Authorized Shares Of Common Stock From 180 Million Shares To 200 Million Shares And Preferred Stock From 20 Million Shares To 100 Million Shares	120,316,769	116,501	200,000
Proposal 6	Votes For	Votes Against	Votes Abstained
Approve An Amendment To Our Certificate Of Formation To Limit The Liability Of Our Directors For Monetary Damages In Connection With The Breach Of Their Fiduciary Duty	120,271,319	161,951	200,000
Proposal 7	Votes For	Votes Against	Votes Abstained
Approval Of An Amendment To Our Certificate Of Formation To Clarify That Any Amendment Or Modification Of The Provision Of Our Certificate Of Amendment Which Provides For Us To Indemnify Our Agents, Will Not Adversely Affect Any Right Or Protection Of Agents Occurring Prior To The Date Of Such Amendment Or Modification	120,302,769	118,901	211,600
Proposal 8	Votes For	Votes Against	Votes Abstained
Approval Of An Amendment To Our Certificate Of Formation To Reduce The Shareholder Vote Required To Amend Our Certificate Of Formation And Undertake Certain Other Fundamental Actions From Two-Thirds Of Such Voting Shares To A Majority Of Our Voting Shares	119,956,143	150,951	200,000
Proposal 9	Votes For	Votes Against	Votes Abstained
Approval To Update Certain Outdated Provisions And Remove Certain Redundant Provisions Of Our Certificate Of Formation And To Further Reword, Clarify And Affect Certain Other Non-Material Changes To Our Certificate Of Formation	120,001,027	106,067	200,000
Proposal 10	Votes For	Votes Against	Votes Abstained
Approval Of The Amended And Restated Certificate Of Designations Of Our Series A Preferred Stock	119,993,427	101,567	212,100
Proposal 11	Votes For	Votes Against	Votes Abstained
To Approve The 2012 Equity Incentive Plan	118,130,693	115,567	2,060,834

-12-

As such, each of the Proposals 1 through 10 above received the required approval of at least 2/3rds of our voting shares (along with the unanimous approval of our then outstanding Series A Convertible Preferred Stock and Series B Preferred Stock) and Proposal 11 received the required approval of at least a majority of the shares voted at the Meeting. The Company’s 2012 Equity Incentive Plan is described in greater detail in the Proxy Statement.

Item 9.01.

Financial Statements And Exhibits.

(a) Financial statements of businesses acquired.

Filed herewith as Exhibits 99.1 and 99.2.

(b) Pro forma financial information

Filed herewith as Exhibit 99.3.

(d) Exhibits.

Exhibit No.	Description

2.1	Agreement and Plan of Reorganization, dated January 13, 2012 Filed January 20, 2012 with the SEC, Form 8-K, and incorporated by reference herein

2.2	First Amendment to the Agreement and Plan of Merger Filed May 31, 2012 with the SEC, Form 8-K, and incorporated by reference herein

3.1	Amended and Restated Certificate of Formation (as filed with the Secretary of State of Texas) Filed August 2, 2012 with the SEC, Form 8-K, and incorporated by reference herein

3.2	Amended and Restated Certificate of Designations of Series A Convertible Preferred Stock (as filed with the Secretary of State of Texas) Filed August 2, 2012 with the SEC, Form 8-K, and incorporated by reference herein

3.3	Articles of Merger (as filed with the Secretary of State of Nevada) by and between Blast Acquisition Corp. and Pacific Energy Development Corp. Filed August 2, 2012 with the SEC, Form 8-K, and incorporated by reference herein

4.1	2012 Equity Incentive Plan Filed August 2, 2012 with the SEC, Form 8-K, and incorporated by reference herein

14.1*	Code of Business Conduct and Ethics

99.1*	Audited Financial Statements of PEDCO for the period from February 5, 2011 (Inception) through December 31, 2011

99.2*	Unaudited Financial Statements of PEDCO for the three months ended March 31, 2012 and 2011

99.3*	Pro Forma Financial Information

* Filed herewith.

-13-

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PEDEVCO CORP.

	By:	/s/ Frank C. Ingriselli
		Frank C. Ingriselli
		President and CEO


		Date: August 8, 2012

-14-

PEDEVCO CORP.

CODE OF BUSINESS CONDUCT AND ETHICS

As of July 2012

Introduction.

PEDEVCO CORP. and its subsidiaries (the “ Company ”) will conduct its business honestly and ethically wherever we operate. We will constantly attempt to improve the quality of our services, products and operations and will maintain a reputation for honesty, fairness, respect, responsibility, integrity, trust and sound business judgment. No illegal or unethical conduct on the part of our directors, officers or employees or their affiliates is in the Company’s best interest. The Company will not compromise its principles for short-term advantage. The honest and ethical performance of the Company is the sum of the ethics of the men and women who work here. Therefore, we are all expected to adhere to high standards of personal integrity.

This Code of Business Conduct and Ethics (this “ Code ”) covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all directors, officers and employees of the Company. All of our directors, officers and employees must conduct themselves accordingly and seek to avoid even the appearance of improper behavior. This Code should also be provided to and followed by the Company’s other agents and representatives, including consultants.

In accordance with applicable law and stock exchange regulations, this Code will be filed with the Securities and Exchange Commission (the “ SEC ”), posted on the Company’s website and/or otherwise made available for examination by our stockholders.

Compliance with Applicable Laws, Rules and Regulations.

Obeying the law, both in letter and in spirit, is the foundation on which the Company’s ethical standards are built. All directors, officers and employees must respect and obey the laws, rules and regulations of the United States and of the cities, states and countries in which we operate. In particular, all directors, officers and employees must comply with federal securities laws, rules and regulations that govern the Company and with the rules and regulations of the OTC Bulletin Board, the stock exchange on which our common stock is traded.

Avoidance of Conflicts of Interest.

The Company’s directors, officers and employees must never permit their personal interests to conflict, or even appear to conflict, with the interests of the Company. A “conflict of interest” exists when a person’s private interests interfere in any way, or even appear to interfere, with the Company’s interests. A conflict situation can arise when a director, officer or employee takes actions, or has interests, that may make it difficult to perform his or her Company work objectively and effectively. Conflicts of interest may also arise when a director, officer or employee, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Company. Loans to, or guarantees of the obligations of, directors, officers and employees and their family members may create conflicts of interest and may also be illegal.

For example, it is a conflict of interest for a director, officer or employee to work simultaneously for a competitor or customer, even as a consultant or board member. Each director, officer and employee must be particularly careful to avoid representing the Company in any transaction with a third party with whom the director, officer or employee has any outside business affiliation or relationship. The best policy is to avoid any direct or indirect business connection with our customers and competitors, except on our behalf.

Conflicts of interest (including both actual and apparent conflicts of interest) are prohibited under this Code except in limited cases under guidelines or exceptions specifically approved in advance by the Company’s Board of Directors.

Conflicts of interest may not always be clear-cut, so if you have a question, you should consult with our Chief Financial Officer (“ CFO ”) or our legal counsel. Our CFO’s and legal counsel’s telephone numbers and addresses are set forth in Appendix A to the Code. Any director, officer or employee who becomes aware of any transaction or relationship that is a conflict of interest or a potential conflict of interest should bring it to the attention of our CFO or legal counsel.

Bribes, Kickbacks and Gifts.

No bribes, kickbacks or other similar remuneration or consideration may be given to any person or organization in order to attract or influence business activity. The United States Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. Therefore, this Code strictly prohibits making illegal payments to government officials of any country.

The Company’s directors, officers and employees are also prohibited from receiving or providing gifts, gratuities, fees or bonuses as an inducement to attract or influence business activity. No entertainment should ever be offered, given or accepted by any director, officer or employee (or any family member of any such person) in connection with our business activities unless it: (a) is consistent with customary business practices; (b) is not excessive in value; (c) cannot be construed as a bribe or payoff; and (d) does not violate any laws or regulations. Please discuss with our CFO or legal counsel any entertainment that you are not certain is appropriate.

Confidential Information.

Our directors, officers and employees will often come into contact with, or have possession of, confidential information about the Company or our suppliers, customers or affiliates, and they must take all appropriate steps to assure that the confidentiality of such information is maintained. Confidential information includes all nonpublic information that might be of use to competitors or harmful to the Company if disclosed. It also includes nonpublic information that our suppliers, customers or affiliates have entrusted to us.

Confidential information, whether it belongs to the Company or any of our suppliers, customers or affiliates, may include, among other things, strategic business plans, actual operating results, projections of future operating results, marketing strategies, customer lists, personnel records, proposed acquisitions and divestitures, new investments, changes in dividend policies, the proposed issuance of additional securities, management changes or manufacturing costs, processes and methods. Confidential information about our Company and other companies, individuals and entities must be treated with sensitivity and discretion and only be disclosed to persons within the Company whose positions require use of that information or if disclosure is required by applicable laws, rules and regulations. You should consult with our CFO or legal counsel concerning any confidential information that you believe may need to be disclosed to third parties under any applicable laws, rules or regulations.

Insider Trading .

Trading in the Company’s securities is covered by the Company’s Insider Trading Policy previously distributed to all employees, which Policy is hereby incorporated in its entirety in this Code. If you would like to receive another copy of the Insider Trading Policy or have any questions regarding such Policy, please contact our legal counsel.

Public Disclosure of Information Required by the Securities Laws.

The Company is a public company that is required to file various reports and other documents with the SEC. An objective of this Code is to ensure full, fair, accurate, timely and understandable disclosure in the reports and other documents that we file with, or otherwise submit to, the SEC and in the press releases and other public communications that we distribute.

The federal securities laws, rules and regulations require the Company to maintain “disclosure controls and procedures,” which are controls and other procedures that are designed to ensure that financial information and non-financial information that is required to be disclosed by us in the reports that we file with or otherwise submit to the SEC (i) is recorded, processed, summarized and reported within the time periods required by applicable federal securities laws, rules and regulations and (ii) is accumulated and communicated to our management, including our President or Chief Executive Officer and CFO, in a manner allowing timely decisions by them regarding required disclosure in the reports.

Some of our directors, officers and employees will be asked to assist management in the preparation and review of the reports that we file with the SEC, including recording, processing, summarizing and reporting to management information for inclusion in these reports. If you are asked to assist in this process, you must comply with all disclosure controls and procedures that are communicated to you by management regarding the preparation of these reports. You must also perform with diligence any responsibilities that are assigned to you by management in connection with the preparation and review of these reports, and you may be asked to sign a certification to the effect that you have performed your assigned responsibilities.

SEC regulations impose upon our President, Chief Executive Officer and CFO various obligations in connection with annual and quarterly reports that we file with the SEC, including responsibility for:

Establishing and maintaining disclosure controls and procedures and internal control over financial reporting that, among other things, ensure that material information relating to the Company is made known to them on a timely basis;

Designing the Company’s internal control over financial reporting to provide reasonable assurances that the Company’s financial statements are fairly presented in conformity with generally accepted accounting principles;

Evaluating the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting;

Disclosing (i) specified deficiencies and weaknesses in the design or operation of the Company’s internal control over financial reporting, (ii) fraud that involves management or other employees who have a significant role in the Company’s internal control over financial reporting, and (iii) specified changes relating to the Company’s internal control over financial reporting; and

Providing certifications in the Company’s annual and quarterly reports regarding the above items and other specified matters.

This Code requires our President or Chief Executive Officer and CFO to carry out their designated responsibilities in connection with our annual and quarterly reports, and this Code requires you, if asked, to assist our executive officers in performing their responsibilities under these SEC regulations.

Record-Keeping.

The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions. For example, only the true and actual number of hours worked should be reported. Also, business expense accounts must be documented and recorded accurately. If you are not sure whether a certain expense is legitimate, ask our CFO.

All of the Company’s books, records, accounts and financial statements must be maintained in reasonable detail, must accurately and appropriately reflect the Company’s transactions and must conform both to applicable legal requirements and to the Company’s internal control over financial reporting and disclosure controls and procedures. All transactions must be recorded in a manner that will present accurately and fairly our financial condition, results of operations and cash flows and that will permit us to prepare financial statements that are accurate, complete and in full compliance with applicable laws, rules and regulations. Unrecorded or “off the books” funds or assets should not be maintained unless expressly permitted by applicable laws, rules and regulations.

Business records and communications often become public, and we should avoid exaggeration, derogatory remarks, guesswork or inappropriate characterizations of people and companies that can be misunderstood. This applies equally to e-mail, internal memoranda and formal reports.

Records should be retained in accordance with the Company’s record retention policies, and records should be destroyed only if expressly permitted by our record retention policies and applicable laws, rules and regulations. If you become the subject of a subpoena, lawsuit or governmental investigation relating to your work at the Company, please contact our CFO or legal counsel immediately.

Corporate Opportunities.

Directors, officers and employees are prohibited from taking for themselves personally opportunities that are discovered through the use of the Company’s property or confidential information or as a result of their position with the Company, except upon the prior written consent of the Board of Directors. No director, officer or employee may use corporate property, information or position for improper personal gain; no director, officer or employee may use Company contacts to advance his or her private business or personal interests at the expense of the Company or its customers, suppliers or affiliates; and no director, officer or employee may directly or indirectly compete with the Company. Directors, officers and employees owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises.

Competition and Fair Dealing.

We seek to outperform our competition fairly and honestly. We seek competitive advantage through superior performance, never through unethical or illegal business practices. Stealing proprietary information, possessing trade secret information that was obtained without the owner’s consent, or inducing such disclosures by past or present employees of other companies is prohibited. Each director, officer and employee should endeavor to respect the rights of and deal fairly with the Company’s customers, suppliers, competitors and affiliates. No director, officer or employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other intentional unfair-dealing practice.

To maintain the Company’s valuable reputation, compliance with our quality processes and safety requirements is essential. In the context of ethics, quality requires that our products and services be designed to meet our obligations to customers. All inspection and testing documents must be handled in accordance with all applicable laws, rules and regulations.

10.

Protection and Proper Use of Company Assets.

Directors, officers and employees should endeavor to protect the Company’s assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company’s profitability. Any suspected incident of fraud or theft should be immediately reported for investigation. Company equipment should not be used for non-Company business, though incidental personal use of items such as telephones and computers may be permitted pursuant to written policies approved by the Board of Directors.

The obligation of directors, officers and employees to protect the Company’s assets includes its proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks and copyrights, as well as business, marketing and service plans, engineering and manufacturing ideas, designs, databases, records, salary information and any unpublished financial data and reports. Unauthorized use or distribution of this information would violate Company policy. It could also be illegal and result in civil or even criminal penalties.

11.

Discrimination and Harassment.

The diversity of the Company’s directors, officers and employees is a tremendous asset. We are firmly committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or harassment or any kind. Examples include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances.

12.

Health and Safety.

The Company strives to provide each director, officer and employee with a safe and healthful work environment. Each director, officer and employee has responsibility for maintaining a safe and healthy workplace for all other persons by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions.

Violence and threatening behavior are not permitted. Directors, officers and employees should report to work in condition to perform their duties, free from the influence of illegal drugs or alcohol. The use of illegal drugs or alcohol in the workplace will not be tolerated.

13.

Waivers and Amendments of the Code of Business Conduct and Ethics.

A waiver of any provision of this Code may be granted to any director, officer or employee only by the Company’s Board of Directors, or a designated committee of the Board of Directors, and any such waiver promptly will be publicly disclosed to the extent required by law or stock exchange regulations.

This Code can be amended only by the Board of Directors, and any such amendment promptly will be publicly disclosed as required by law or stock exchange regulations.

14.

Enforcement of the Code of Business Conduct and Ethics.

A violation of this Code by any director, officer or employee will be subject to disciplinary action, including possible termination of employment. The degree of discipline imposed by the Company may be influenced by whether the person who violated this Code voluntarily disclosed the violation to the Company and cooperated with the Company in any subsequent investigation. In some cases, a violation of this Code may constitute a criminal offense that is subject to prosecution by federal or state authorities.

15.

Compliance Procedures; Reporting Misconduct or Other Ethical Violations.

Directors, officers and employees should promptly report any unethical, dishonest or illegal behavior, or any other violation of this Code or of other Company policies and procedures, to our CFO or our legal counsel. Their telephone numbers and addresses are set forth in Appendix A to this Code. All complaints with respect to questionable accounting or auditing matters should be made to the Chairman of our Board of Directors (whose telephone number and address is set forth in Appendix A) and may be made anonymously and will be confidential.

If you ever have any doubt about whether your conduct or that of another person violates this Code or compromises the Company’s reputation, please discuss the issue with our CFO or our legal counsel.

The Company’s policy is not to allow retaliation for a report of unethical, dishonest or illegal behavior, or of any other violation of this Code or of other Company policies and procedures, if the report about another person’s conduct is made in good faith by a director, officer or employee. Directors, officers and employees are expected to cooperate in internal investigations regarding possible unethical, dishonest or illegal behavior or any other possible violation of this Code or of other Company policies and procedures.

APPENDIX A

Chairman of Board of Directors : Frank C. Ingriselli (925) 263-2426

Chief Financial Officer : Michael L. Peterson (925) 406-4985

Legal Counsel : Clark R. Moore (925) 208-1742

ACKNOWLEDGMENT AND CERTIFICATION

The undersigned hereby acknowledges and certifies that the undersigned:

(a)

has read and understands the PEDEVCO Corp. Code of Business Conduct and Ethics (the “ Code of Ethics ”);

(b)

understands that PEDEVCO Corp.’s Chief Financial Officer and legal counsel are available to answer any questions the undersigned has regarding the Code of Ethics; and

(c)

will continue to comply with the Code of Ethics for as long as the undersigned is subject thereto.

Signature:

Date:

Print Name:

PACIFIC ENERGY DEVELOPMENT CORPORATION

(A DEVELOPMENT STAGE COMPANY)


AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (RESTATED)

Report of Independent Registered Public Accounting Firm	F-2

Financial Statements
Consolidated Balance Sheet—December 31, 2011	F-3

Consolidated Statements of Operations— For the Period From February 5, 2011 (Inception) Through December 31, 2011	F-4

Consolidated Statement of Stockholders’ Deficit—For the Period From February 5, 2011 (Inception) Through December 31, 2011	F-5

Consolidated Statements of Cash Flows— For the Period From February 5, 2011 (Inception) Through December 31, 2011	F-6

Notes to Consolidated Financial Statements	F-7

F-1

INDEPENDENT AUDITORS’ REPORT

To Board of Directors

Pacific Energy Development Corporation

4125 Blackhawk Plaza Circle, Suite 201A

Danville, CA 94506

We have audited the accompanying consolidated balance sheet of Pacific Energy Development Corporation and its subsidiary (the “Company”) as of December 31, 2011, and the related consolidated statements of operations, stockholders’ equity and cash flows for the period from February 9, 2011 (Inception) to December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011, and the results of its operations and its cash flows for the period from February 9, 2011 (Inception) through December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred net losses from operations and has no revenue producing activities at December 31, 2011. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

As discussed in Note 2, these financial statements have been restated to correct for certain errors related to the Company’s accounting for its deferred costs and equity method investment.

/s/ SingerLewak LLP

San Francisco, California

March 27, 2012, except for Note 2 as

to which the date is May 23, 2012

F-2

PACIFIC ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

December 31, 2011

(As restated)

ASSETS

Current assets
Cash and cash equivalents	$	176,471
Receivables from related entities		302,315
Prepaid expenses		26,533
Deferred costs		111,828

Total current assets		617,147

Oil and gas property and equipment, net		1,728,928
Equity method investment		588,453
Other investment		4,100

Total assets	$	2,938,628

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable	$	145,428
Accrued liabilities		1,904,647

Total current liabilities		2,050,075

Commitments and Contingencies (Note 7)

Stockholders’ equity
Series A convertible preferred stock, $0.001 par value
Authorized shares - 100,000,000
Issued and outstanding shares - 6,666,667		6,667
(liquidation preference of $5,000,000)
Common stock, $0.001 par value, Authorized shares - 200,000,000
Issued and outstanding shares - 15,502,261		15,503
Additional paid in capital		1,630,060
Stock service receivable		(69,667	)
Accumulated deficit		(694,010	)

Total stockholders’ equity		888,553

Total liabilities and stockholders’ equity	$	2,938,628

The accompanying notes are an integral part of these financial statements.

F-3

PACIFIC ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF OPERATIONS

For the Period From February 9, 2011 (Inception)

Through December 31, 2011

(Restated)

Operating expenses:
Occupancy	$	18,538
Travel and entertainment		75,092
Professional services		205,200
Personnel		312,348
Administration		36,947

Total operating expenses		648,125

Loss from operations		(648,125)

Other Expense
Interest expense		(12,912)
Equity in loss of equity method investment		(25,875)
Other expenses		(7,098)

Total other expenses		(45,885)

Net loss	$	(694,010)

The accompanying notes are an integral part of these financial statements.

F-4

PACIFIC ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

For the Period From February 9, 2011 (Inception)

Through December 31, 2011

(Restated)

	Series A Convertible
	Preferred Stock				Common Stock
									Additional			Service
	Shares		Amount		Shares		Amount		Paid-In Capital			Receivable Amount			Accumulated Deficit			Total
Balances at February 9, 2011		-	$	-		-	$	-	$	-		$	-		$	-		$	-
Issuance of common stock for cash		-		-		10,420,000		10,420		-			-			-			10,420
Issuance of common stock for interest in Rare Earth JV		-		-		4,100,000		4,100		-			-			-			4,100
Issuance of Series A preferred stock for cash		4,266,667		4,267		-		-		3,195,733			-			-			3,200,000
Contribution of corporate investor capital
to equity method investee		-		-		-		-		(2,457,312	)		-			-			(2,457,312	)
Issuance of Series A preferred stock
upon conversion of notes payable		2,400,000		2,400		-		-		897,600			-			-			900,000
Issuance costs for Series A preferred stock		-		-		-		-		(106,865	)		-			-			(106,865	)
Issuance of common stock for services		-		-		285,595		286		28,274			-			-			28,560
Issuance of common stock in exchange for services receivable		-		-		696,666		697		68,970			(69,667	)		-			-
Stock compensation		-		-		-		-		3,660			-			-			3,660
Net loss		-		-		-		-					-			(694,010	)		(694,010	)
Balances at December 31, 2011		6,666,667	$	6,667		15,502,261	$	15,503	$	1,630,060		$	(69,667	)	$	(694,010	)	$	888,553

The accompanying notes are an integral part of these financial statements.

F-5

PACIFIC ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Period From February 9, 2011 (Inception)

Through December 31, 2011

(Restated)

Cash flows from operating activities
Net loss	$	(694,010	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		662
Stock based compensation expense		3,660
Equity in loss of equity method investment		25,875
Changes in operating assets and liabilities:
Receivables from related entities		(302,315	)
Prepaid expenses		(22,433	)
Accounts payable		145,428
Accrued liabilities		32,775

Net cash used in operating activities		(810,358	)

Cash flows from investing activities
Deferred costs		(111,828	)
Acquisition of oil and gas interest		(2,899,542	)
Acquisition of property and equipment		(5,356	)

Net cash used in investing activities		(3,016,726	)

Cash flows from financing activities
Proceeds from issuance of notes payable to related party		1,100,000
Repayment of notes payable to related party		(200,000	)
Proceeds from issuance of common stock		10,420
Proceeds from issuance of Series A preferred stock (net of issuance costs of $106,865)		3,093,135

Net cash provided by financing activities		4,003,555

Net increase in cash and cash equivalents		176,471
Cash and cash equivalents, February 9, 2011		-
Cash and cash equivalents, December 31, 2011	$	176,471

Supplemental Disclosures of Cash Flow Information
Interest paid	$	12,912

Supplemental disclosure of noncash investing and financing activities:
Issuance of 4,100,000 shares of common stock in exchange
for investment in Rare Earth JV	$	4,100
Accrual of oil and gas interest purchase obligations	$	1,871,872
Conversion of notes payable into 2,400,000 shares of Series A preferred stock	$	1,800,000
Contribution of 62.5% of oil and gas interest to equity method investee	$	3,071,640
Issuance of common stock as part of oil and gas interest purchase	$	28,560

The accompanying notes are an integral part of these financial statements.

F-6

PACIFIC ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2011

NOTE 1 – DESCRIPTION OF BUSINESS

Pacific Energy Development Corporation and subsidiary (the “Company”) is a development stage company formed for the purpose of (i) engaging in the business of oil and gas exploration, development and production of primarily shale oil and gas and secondarily conventional oil and gas opportunities in the United States, and (ii) subsequently utilizing the Company’s strategic relationships for exploration, development and production in Pacific Rim countries, with a particular focus in China. In October 2011, the Company formed a new subsidiary called Condor Energy Technology LLC (“Condor”), a limited liability company organized under the laws of the State of Nevada. The Company owns 20% of Condor and a corporate investor owns 80%. The Company also holds a 6% joint venture interest in Rare Earth Ovonic Metal Hydride JV Co. Ltd. Joint Venture, a Chinese rare earth metal manufacturing and production company (the “Rare Earth JV”) through its 100% owned subsidiary Pacific Energy & Rare Earth Inc. The Company was originally formed in February 2011 as a limited liability company, and converted to a C corporation in June 2011.

The Company plans to focus initially on developing shale oil and gas assets held by the Company in the United States, including its first oil and gas working interest known as “the Niobrara Asset” and, if and when acquired, “the Eagle Ford Asset”, each as described below. Subsequently, the Company plans to seek additional shale oil and gas and traditional oil and gas asset acquisition opportunities in the United States and Pacific Rim countries utilizing its strategic relationships and technologies that may provide the Company a competitive advantage in accessing and exploring such assets. Some or all of these assets may be acquired by subsidiaries, including Condor, or others that may be formed at a future date.

NOTE 2 – RESTATEMENT

These financial statements have been restated as a result of two errors discovered subsequent to their original issuance. These errors are as follows:

	·	$87,668 of improperly deferred costs associated with the Eagle Ford Asset acquisition (as described in Note 13).
	·	$19,200 of improper intercompany profit eliminations related to intercompany transactions between Condor and the Company.

The impact on the previously reported balance sheet as of December 31, 2011 is as follows:

	As Reported		As Restated

Deferred costs	$	199,496	$	111,828
Total current assets	$	704,815	$	617,147
Equity method investment	$	607,653	$	588,453
Total assets	$	3,045,496	$	2,938,628
Accumulated deficit	$	587,142	$	694,010
Total stockholders’ equity	$	995,121	$	888,553

F-7

NOTE 2 – RESTATEMENT (Continued)

The impact on the previously reported loss from operations and net loss for the period from February 9, 2011 (Inception) through December 31, 2011 is as follows:

	As Reported			As Restated

Equity in loss of equity method investment	$	(6,675	)	$	(25,875	)
Loss from operations	$	(560,457	)	$	(648,125	)
Net loss	$	(587,142	)	$	(694,010	)

NOTE 3 – GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred net losses from operations of $694,010 from the date of inception (February 9, 2011) through December 31, 2011 and as of December 31, 2011, has no revenue producing activities. Additionally the Company is dependent on obtaining additional debt and or equity financing to roll-out and scale its planned principal business operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters consist principally of seeking additional debt and/or equity financing combined with expected cash flows from planned oil and gas asset acquisitions. There can be no assurance that the Company’s efforts will be successful. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The consolidated financial statements include the Company and its wholly-owned subsidiary, Pacific Energy and Rare Earth, Inc. All inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

The Company’s most significant estimates relate to the valuation of its investment in the Rare Earth JV and its valuation of its common stock, options and warrants. With respect to the Rare Earth JV, given that there is no established market for this interest combined with the highly speculative nature of this investment, management used their best good faith judgment and estimated a nominal value of $4,100 for this asset at the time of its exchange for shares of the Company’s common stock. Management considered the following in arriving at their judgment of value: the joint venture’s historical operating results, the lack of marketability, restrictions on transfer, and its minority interest position. The Company intends to sell this asset and the actual results of a subsequent sale could be materially different from management’s estimated value.

F-8

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents

The Company classifies all highly liquid investments purchased with an original maturity of three months or less at the date of purchase as cash equivalents. As of December 31, 2011, cash equivalents consisted of money market funds.

Deferred Property Acquisition Costs

The Company defers the costs, such as title and legal fees, related to oil and gas property acquisitions. At the time the acquisition is completed, these costs are reclassified and included as part of the purchase price of the property acquired. To the extent a property acquisition is not consummated these costs are expensed.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk include cash deposits placed with financial institutions. The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2011, none of the Company’s cash balances were uninsured. The Company has not experienced any losses in such accounts.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires, among other things, that deferred income taxes be provided for temporary differences between the tax basis of the Company’s assets and liabilities and their financial statement reported amounts. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating losses and tax credit carry-forwards. A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized.

Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In the event that the Company changes its determination as to the amount of deferred tax assets that is more likely than not to be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.

The Company adopted authoritative guidance regarding uncertain tax positions. This guidance requires that realization of an uncertain income tax position must be more likely than not (i.e. greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. The guidance further prescribes the benefit to be realized assuming a review by taxing authorities having all relevant information and applying current conventions. The interpretation also clarifies the financial statement classification of tax related penalties and interest and sets forth new disclosures regarding unrecognized tax benefits. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits as income tax expense.

Stock Based Compensation

ASC 718, Compensation-Stock Compensation (“ASC 718”), establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair-value of these awards over the requisite employee service period. Under ASC 718, share-based compensation cost related to stock options is determined at the grant date using an option-pricing model. The value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the employee’s requisite service period.

F-9

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

The Company follows Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurement (“ASC 820”), which clarifies fair value as an exit price, establishes a hierarchal disclosure framework for measuring fair value, and requires extended disclosures about fair value measurements. The provisions of ASC 820 apply to all financial assets and liabilities measured at fair value.

As defined in ASC 820, fair value, clarified as an exit price, represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

As a basis for considering these assumptions, ASC 820 defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

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.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

At December 31, 2011 the Company had no financial instruments for which disclosure of fair value was required.

Recent Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and IFRSs (“ASU 2011-04”), to converge the guidance in generally accepted accounting principles in the United States of America (“US GAAP”) and International Financial Reporting Standards (“IFRS”). The amended guidance changes several aspects of the fair value measurement guidance in ASC 820. In addition, the amended guidance includes several new fair value disclosure requirements, including, among other things, information about valuation techniques and unobservable inputs used in Level 3 fair value measurements and a narrative description of Level 3 measurements’ sensitivity to changes in unobservable inputs. For nonpublic entities, the amended guidance must be applied prospectively for annual periods beginning after December 15, 2011.

F-10

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income” (ASU 2011-05) which amends ASC Topic 220, Comprehensive Income. The updated guidance in ASC Topic 220 gives an entity the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The updated guidance in ASC Topic 220 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.

Implementation of these recent accounting pronouncements is not expected to have a significant impact on the Company’s financial statements.

NOTE 5 – OIL AND GAS PROPERTY AND EQUIPMENT, NET

The Company had not commenced drilling operations as of December 31, 2011. Property and equipment as of December 31, 2011 consisted of the following:

Oil and gas interests	$	1,724,234
Computers and software		5,356
Accumulated depreciation		(662	)

Property and equipment, net	$	1,728,928

Depreciation expense for the period from February 9, 2011 (Inception) through December 31, 2011 was $662, and is included in operating expenses in the accompanying statement of operations.

Oil and gas interests -- The Company acquired oil and gas interests in Colorado in a geologic formation known as the Niobrara formation (“the Niobrara Asset”) on October 31, 2011 for a total cost of $4,914,624. 62.50% of the value of the Niobrara interest acquired by the Company was assigned into Condor (see Note 6), of which the Company owns 20%. The following details the purchase price components:

	·	$2,827,387 cash paid at closing.
	·	1,333,334 shares of Series A Preferred, with a guaranteed minimum value of $1 million to be issued on November 10, 2012.*

	·	$699,372 cash carry of the Sellers share of future drilling costs.*
	·	285,595 shares of common stock of the Company valued at $28,560 issued to a due diligence provider, South Texas Reservoir Alliance, LLC (“STXRA”).

	·	230,000 shares of Series A Preferred Stock to be issued in February of 2012 at a share price of $0.75, or $172,500 to STXRA.*
	·	Other acquisition transaction costs in the amount of $186,806.

*These obligations totaling $1,871,872 have been recorded as part of accrued liabilities in the balance sheet.

F-11

NOTE 6 – EQUITY METHOD INVESTMENT

In October 2011, the Company formed a new subsidiary called Condor Energy Technology LLC (“Condor”), a limited liability company organized under the laws of the State of Nevada. The Company owns 20% of Condor and a subsidiary of MIE Holdings Corporation (“MIE Holdings”) owns 80%. The Company acquired oil and gas interests in the Niobrara formation (the “Niobrara Asset”) on October 31, 2011. 62.50% of the value of the Niobrara interest acquired by the Company has been assigned into Condor at a value of $3,071,640. In connection with this transaction, the Company recorded $614,328 as its investment in Condor and the difference of $2,457,312 was recorded as an offset to additional paid-in capital as a reduction of the Series A preferred stock proceeds received from MIE Holdings. Because the Series A preferred stock funding, formation of Condor and purchase of the Niobrara Asset transactions were completed in contemplation of each other, the Company concluded that this accounting best represented the economic substance.

The Company accounts for its 20% ownership in Condor using the equity method. The Company evaluated its relationship with Condor to determine if Condor was a variable interest entity, (“VIE”) as defined in ASC 810-10, and whether the Company was the primary beneficiary of Condor, in which case consolidation with the Company would be required. The Company determined that Condor qualified as a VIE, however the Company concluded that the MIE Holdings was the primary beneficiary as a result of its voting and Board control combined with its funding commitments to Condor. The Company’s entire investment in Condor is at risk of loss. The Company’s total investment in Condor at December 31, 2011 was $588,453, after recording its share of Condor’s 2011 losses of $25,875.

Condor’s financial information, derived from its unaudited financial statements, is as follows:

As of December 31, 2011
Current assets	$	154,826
Noncurrent assets	$	3,275,390
Total Assets	$	3,430,216
Current liabilities	$	487,979
Total Liabilities	$	487,949

For the Period from October 31, 2011 (inception) through December 31, 2011
Gross Revenue	$	-
Net Loss	$	(129,374	)

During the period from inception through December, 31, 2011, the Company advanced Condor $299,750 for organizational, administrative, managerial and other costs. Subsequent to December 31, 2011 all of the advances were repaid in full. These advances are included in the balance sheet at December 31, 2011 as part of receivables from related entities.

F-12

NOTE 7 – NOTES PAYABLE TO RELATED PARTY

In February 2011, the Company received a $200,000 loan from its president and chief executive officer. Interest accrued at an annual rate of 3%, and principal and interest were due on October 31, 2011. The loan plus accrued interest of $4,258 was repaid in full on October 31, 2011. Upon receipt of these proceeds, the president and chief executive officer used the proceeds to purchase through Global Venture Investments, LLC, an entity owned and controlled by him, 266,667 shares of the Company’s Series A Preferred Stock at a price of $0.75 per share.

In July 2011, the Company received a $900,000 loan from Global Venture Investments, LLC. Interest accrued at an annual rate of 3%, and principal and interest were due on November 30, 2011. The note was convertible into equity securities of the Company in the event of the closing of a qualified financing (defined as receipt of at least $2,000,000 in gross proceeds), and the note converted into the securities being sold in the qualified financing at a 50% discount. The qualified financing occurred in October 2011 and the principal amount of this note was converted into 2,400,000 shares of Series A Preferred Stock pursuant to the loan’s original conversion terms. The accrued interest of $8,655 was paid in cash.

The note agreement also provided for the issuance of a warrant to the holder in the event that the note was automatically converted into a qualified financing. The warrant would have a three year term and an exercise price equal to the price paid by the investors in the qualified financing. In connection with the closing of the Company’s Series A Preferred Stock financing in October 2011, which was a qualified financing, the Company issued this warrant for 480,000 shares of Series A Preferred Stock at an exercise price of $0.75 per share.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

The Company has entered into a non-cancelable lease agreement ending in June 2012 for certain office space. As of December 31, 2011, the remaining obligation under this lease was $12,227.

NOTE 9 – STOCKHOLDERS’ EQUITY

Common Stock

At December 31, 2011, the Company was authorized to issue 200,000,000 shares of its common stock with a par value of $0.001, of which 10,420,000 shares had been issued to its founders in exchange for cash in the amount of $10,420 in February 2011. The shares issued are fully vested. An additional 4,100,000 shares were issued in February 2011 to a company that is wholly owned by the Company’s president and chief executive officer in exchange for that company’s 6% interest in the Rare Earth JV. These shares were valued at $4,100. As of December 31, 2011, the Company had issued a total of 14,520,000 shares of common stock to its founders for total value received of $14,520.

F-13

NOTE 9 – STOCKHOLDERS’ EQUITY (Continued)

Common Stock (continued)

In October 2011, the Company’s board of directors granted 700,000 shares of its restricted common stock to a non-employee executive vice president. The shares were originally subject to forfeiture by the Company in the event the officer was no longer an employee, officer, director or consultant to the Company, which risk of forfeiture would lapse with respect to 75% of the shares if the Company (i) received $6 million in financing (excluding funds raised from certain investors) and (ii) “goes public” through the effectiveness of the registration of a class of the Company’s securities under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or through the Company’s merger with a public company. The remaining 25% of the shares would have been released from the risk of forfeiture on that date six months from the latter date of these two events. In addition, if the Company did not raise $6 million (excluding funds raised from certain investors), then 50% of the shares would have been released from the risk of forfeiture if the Company (i) received $3 million in financing (excluding funds raised from certain investors) and (ii) “goes public” through the effectiveness of the registration of a class of the Company’s securities under the Exchange Act or through the Company’s merger with a public company. Furthermore, 25% of the shares would have been released from the risk of forfeiture six months from the latter date of these two events, and the remaining 25% would have been released from the risk of forfeiture six months later. Contemporaneous with this grant, the executive vice president received an option exercisable for 300,000 shares of the Company’s common stock that may be exercised at $0.08 per share, with vesting occurring at various intervals based upon achievement of certain objectives, and expiring in October 2021 if not exercised earlier. As of December 31, 2011, none of the vesting milestones had been reached so none of the shares were vested and as a result they are not being shown as outstanding shares in the financial statements. In February 2012 the Company’s board of directors and the executive vice president agreed to a revised time-based vesting schedule with respect to these shares and options in connection with this executive vice president becoming a full-time employee of the Company (see Note 13 – Subsequent Events).

In conjunction with the Niobrara Asset acquisition, a grant of 285,595 fully vested shares of the Company’s common stock was paid to the company that arranged the purchase and provided various technical and due diligence assistance services to the Company. These shares were valued at $0.10 per share.

In October 2011, the Company signed a non-binding letter of intent to merge with a publicly traded oil and gas exploration and production company. Related to this merger, the Company issued fully vested stock awards for a total of 696,666 common shares to certain investor relations consultants, but performance is not required until after the merger is complete. These shares were valued at $0.10 per share and have been shown as outstanding in the balance sheet with an offsetting contra-equity account called service receivable.

F-14

NOTE 9 – STOCKHOLDERS’ EQUITY (Continued)

Preferred Stock

At December 31, 2011, the Company was authorized to issue 100,000,000 shares of its preferred stock with a par value of $0.001. 6,666,667 shares of its Series A Preferred Stock were issued and outstanding at December 31, 2011.

In October 2011, the Company sold 4,000,000 shares of its Series A Preferred Stock to a corporate investor for $3,000,000.

When the Company acquired the Niobrara Asset on October 31, 2011, additional consideration due to the sellers on November 10, 2012 is 1,333,334 shares of the Company’s Series A Preferred Stock. The Company has guaranteed to the sellers that the market value of these shares will be no less than $1 million on such date, calculated as the 30 day average closing sales price quoted for the Company’s publicly-traded securities (if, and as applicable). Under certain conditions, the sellers may elect to receive their proportionate share of the $1 million in cash rather than shares, including in the event the Company’s shares are not publicly-traded. As collateral for this obligation, from October 31, 2011 until the Company satisfies this obligation to the sellers, the sellers hold a lien on all of the Company’s interests in the Niobrara Asset, together with tangible and intangible assets attributable thereto.

In October 2011, the Company repaid the $200,000 note payable to its president and chief executive plus accrued interest of $4,258. Upon receipt of these proceeds, the president and chief executive officer used the proceeds to purchase through an entity owned and controlled by him, 266,667 shares of the Company’s Series A Preferred Stock at a price of $0.75 per share.

In October 2011, the Company converted the $900,000 note payable to Global Venture Investments, LLC into 2,400,000 shares of the Company’s Series A Preferred Stock. Pursuant to the terms of the note, the note’s principal converted into Series A Preferred Stock at a price per share of $0.375, which was equal to 50% of the $0.75 price per share of the Series A Preferred Stock, as required pursuant to the note. As required pursuant to the terms of the note, the Company also issued a warrant to purchase 480,000 shares of Series A Preferred Stock to the noteholder as described in Note 7.

The rights, preferences, and conversion privileges of the Series A Preferred Stock are as follows:

Liquidation Preferences

In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, holders of the Series A Preferred Stock are entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of the common stock, an amount per share equal to the amount paid for their shares and all declared but unpaid dividends on such shares of Series A Preferred Stock. If upon the liquidation, dissolution or winding up of the Company, the assets of the Company legally available for distribution to the holders of the Series A Preferred Stock are insufficient to permit the payment to such holders of the full amounts due to them, then the entire assets of the Company legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series A Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive.

F-15

NOTE 9 – STOCKHOLDERS’ EQUITY (Continued)

Preferred Stock (continued)

Dividend Rights

Dividends, if and when declared by the board of directors, accrue at an annualized rate of 6% and are not cumulative.

Conversion Rights

Holders of Series A Preferred Stock may voluntarily convert their shares into the identical number of shares of the Company’s common stock. Automatic conversion will be effective at the time one of the following events occurs:

The date on which the shares of Series A Preferred Stock issued on the original issuance date to holders who are not affiliates of the Company may be re-sold by such holders without registration in reliance on Rule 144 promulgated under the Securities Act or another similar exemption under the Securities Act is available for such resale.

The holders of a majority of the then outstanding shares of Series A Preferred Stock elect to convert all of their shares of Series A Preferred Stock into shares of common stock.

The conversion price is subject to adjustment in the event of stock splits, stock dividends, reclassifications, reorganization and other equity restructuring type transactions.

Warrants

In October 2011, the Company signed a non-binding letter of intent to merge with a publicly traded oil and gas exploration and production company. The Company issued a warrant to purchase 100,000 shares of its common stock at an exercise price of $0.08 per share to an adviser in this possible transaction. The warrant expires in October 2021, but is revocable by the Company if the transaction does not close by June 1, 2012.

In October 2011, the Company issued a warrant to purchase 480,000 shares of Series A Preferred Stock to an entity owned and controlled by the Company’s president and chief executive officer in connection with the conversion of outstanding principal under a promissory note into Series A Preferred Stock of the Company as described in Note 7. The warrant has a three year term and has an exercise price of $0.75 per share.

NOTE 10 – STOCK-BASED COMPENSATION

Stock-based compensation expense for all share-based payment awards granted in 2011 is based on the grant-date calculated fair value. The Company recognizes these compensation costs, net of an estimated forfeiture rate, and recognizes the compensation costs for only those shares expected to vest on a straight-line basis over the requisite service period of the award. As of December 31, 2011, the Company had not adopted a stock option plan.

For the year ended December 31, 2011, the Company recorded stock-based compensation expense of $3,660. At December 31, 2011 there was approximately $12,210 of unamortized stock based compensation cost related to unvested stock options which is expected to be recognized over a weighted average period of 1.75 years.

F-16

NOTE 10 – STOCK-BASED COMPENSATION (Continued)

In October 2011, the Company granted to three of its consultants and employees, non-qualified and incentive stock options exercisable for a total of 110,000 shares of its common stock at an exercise price of $0.08 per share. 50% of the shares subject to the options vest six months from the date of grant, 20% vest one year from the date of grant, 20% vest eighteen months from the date of grant, and the final 10% vest two years from the date of grant, all contingent upon the recipient’s continued service with the Company. The options have a ten year term.

In October 2011, the Company also granted options, exercisable for 120,000 shares of the Company’s common stock at an exercise price of $0.08 per share with a ten year term, as partial consideration for STXRA’s agreement to provide consulting services to the Company and serve as the operator of the Niobrara Asset. 50% of the shares subject to the option vest six months from the date of grant, 25% vest one year from the date of grant, and the balance of 25% vests eighteen months from the date of grant, all contingent upon the operator’s continued service with the Company.

Stock option activity for the year ended December 31, 2011 is as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Options granted		530,000		0.08
Options exercised		-		-
Options cancelled/forfeited/expired		-		-
Outstanding at December 31, 2011		530,000		0.08		9.75
Vested and exercisable at December 31, 2011		-

The weighted average grant date calculated fair value of options granted during the year ended December 31, 2011 was $0.069.

No cash was received for option exercises and purchases of shares of Company common stock as stock-based compensation for the year ended December 31, 2011.

F-17

NOTE 10 – STOCK-BASED COMPENSATION (Continued)

The calculated fair value of option grants was estimated using the Black-Scholes option pricing model with the following weighted average assumptions for the year ended December 31, 2011.

Expected dividend yield (1) 0%

Risk-free interest rate (2) 0.41%

Expected volatility (3) 173%

Expected life (in years) (4) 3.0

(1) The Company has no current plans to pay dividends.

(2) The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant.

(3) The Company estimated the volatility based on comparable public companies.

(4) The expected life represents the period of time that options granted are expected to be outstanding.

NOTE 11 – INCOME TAXES

Due to the Company’s net loss, there was no provision for income taxes for the period from February 9, 2011 (Inception) through December 31, 2011.

The difference between the income tax expense of zero shown in the statement of operations and pre-tax book net loss times the federal statutory rate of 34% is principally due to the change in the valuation allowance.

Deferred income taxes assets for the period from February 9, 2011 (Inception) through December 31, 2011 are as follows:

Deferred tax assets
Net operating loss carryovers	$	272,936
Less valuation allowance		(272,936	)

Total deferred tax assets	$	-

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of deferred assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, management has applied a full valuation allowance against its net deferred tax assets at December 31, 2011. The net change in the total valuation allowance for the period from February 9, 2011 (Inception) through December 31, 2011 was an increase of $272,936.

F-18

NOTE 11 – INCOME TAXES (Continued)

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of December 31, 2011, the Company did not have any significant uncertain tax positions or unrecognized tax benefits. The Company did not have associated accrued interest or penalties, nor was any interest expense or penalties recognized during the period from February 9, 2011 (Inception) through December 31, 2011.

As of December 31, 2011 the Company has net operating loss carryforwards of approximately $659,302 for federal and state tax purposes, respectively. If not utilized, these losses will begin to expire beginning in 2031 for both federal and state purposes.

Utilization of NOL and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code (the “Code”), as amended, as well as similar state provisions. In general, an "ownership change" as defined by the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock of a company by certain stockholders or public groups.

NOTE 12 – RELATED PARTY TRANSACTIONS

As discussed in Note 7, the Company repaid a loan from the president and chief executive officer and a company wholly owned by its president and chief executive officer.

Effective upon the closing of the Company’s acquisition of the Niobrara Asset in October 2011, the Company transferred and assigned to Condor, a Nevada limited liability company owned 20% by the Company and 80% by an affiliate of MIE Holdings, 62.5% of the Niobrara Asset interest acquired by the Company, the net result of which is that each of the Company and MIE Holdings have a 50% net working interest in the Niobrara Asset originally acquired by the Company. Furthermore, Condor was designated as “Operator” of the Niobrara Asset. Condor’s Board of Managers is comprised of the Company’s President and Chief Executive Officer, Mr. Frank Ingriselli, and two designees of MIE Holdings. In addition, MIE Holdings has agreed to carry the Company at both the Condor and the Company levels for all of the Company’s proportional fees and expenses due in connection with the drilling and completion of the initial well on the Niobrara Asset, which carry shall be in the form of loans made by MIE Holdings to Condor and repayable by Condor from production from the Niobrara Asset.

In October 2011, the Company also sold 4,000,000 shares of its Series A Preferred Stock to MIE Holdings for $3,000,000.

NOTE 13 – SUBSEQUENT EVENTS

The Company evaluates events occurring subsequent to the date of the financial statements in determining the accounting for and disclosure of transactions and events that affect the financial statements. Subsequent events have been evaluated through March 27, 2012, which is the date the financial statements were available to be issued.

On January 9, 2012, the Company sold 835,002 shares of its Series A Preferred Stock for a total of $626,251 in cash proceeds.

F-19

NOTE 13 – SUBSEQUENT EVENTS (Continued)

On January 25, 2012, the Company sold 863,868 shares of its Series A Preferred Stock for a total of $647,901 in cash proceeds.

On February 9, 2012, the Company issued 230,000 shares of Series A Preferred Stock at a value of $172,500 to STXRA. See Note 4 above.

On February 23, 2012, the Company sold 206,667 shares of its Series A Preferred Stock for a total of $155,001 in cash proceeds.

In February 2012, the Company adopted an equity incentive plan that provides for the issuance of incentive and nonqualified stock options, restricted stock, restricted units and performance grants to employees, directors and consultants of the Company or any parent or subsidiary of the Company. The Company reserved 3,000,000 shares of common stock for issuance under the plan.

In February 2012, the Company granted to five of its consultants and employees a total of 1,655,000 shares of its restricted common stock. The shares are subject to forfeiture in the event the recipient is no longer an employee, officer, director or consultant to the Company, which risk of forfeiture lapses with respect to 50% of the shares on the date that is six months from the date of grant, 20% on the date that is twelve months from the date of grant, 20% on the date that is eighteen months from the date of grant, and the final 10% on the date that is twenty-four months from the date of grant, all contingent upon the recipient’s continued service with the Company. These awards were authorized and issued under the Company’s equity incentive plan adopted in February 2012.

In February 2012, the Company granted to five of its consultants and employees options exercisable for a total of 265,000 shares of its common stock at an exercise price of $0.10 per share and a ten-year term. 50% of the shares subject to the options vest six months from the date of grant, 20% vest one year from the date of grant, 20% vest eighteen months from the date of grant, and the final 10% vest two years from the date of grant, all contingent upon the recipient’s continued service with the Company. These awards were authorized and issued under the Company’s equity incentive plan adopted in February 2012.

In February of 2012, the vesting terms were revised for two restricted stock and option grants issued in October 2011 to an executive vice president of the Company as described in Note 8. In October 2011, the Company’s board of directors originally granted the officer 700,000 shares of its restricted common stock, subject to a Company right of forfeiture in the event certain milestones were not achieved. The revised terms provide that the Company’s right of forfeiture shall lapse with respect to 50% of the shares on June 1, 2012, 25% on December 1, 2012, and the final 25% on June 1, 2013, all contingent upon the recipient’s continued service with the Company, with 100% of the shares being released from the Company’s right of forfeiture in the event the Company terminates his relationship with the Company without cause (as defined in the grant agreement). The vesting terms of the option exercisable for 300,000 shares of the Company’s common stock at an exercise price of $0.08 per share were also revised in February 2012, with 50% of the shares subject to the option vesting on March 1, 2012, 25% on June 1, 2012, and the balance of 25% on January 1, 2013, all contingent upon the recipient’s continued service with the Company.

F-20

NOTE 13 – SUBSEQUENT EVENTS (Continued)

On January 13, 2012, the Company signed a reverse merger agreement with Blast Energy Services, Inc. (“BLAST”), an oil and gas development and production company that is publicly traded on the over-the-counter exchange in the U.S. under the symbol BESV. At closing, BLAST is expected to acquire the Company as a wholly-owned subsidiary and to issue shares of BLAST common stock and BLAST preferred stock, as applicable, to the stockholders of the Company upon the terms and conditions set forth in the merger agreement. BLAST Acquisition Corp. is a wholly-owned subsidiary corporation of BLAST that is expected to be merged with and into the Company, whereupon the Company will be the surviving corporation of the merger and will become a wholly-owned subsidiary of BLAST. In connection with the merger, Blast will be required to convert all of its existing preferred stock into common stock and consummate a reverse stock split resulting in no more than 2,400,000 shares of its common stock remaining issued and outstanding on a fully-diluted basis prior to the merger’s effective date, subject to downward adjustment in the event Blast does not reimburse the Company for certain of Blast’s transaction-related fees and expenses currently being funded by the Company (see below for advances made to date). As a result of the merger, the Company stockholders will receive one (1) share of Blast’s common stock or Series A preferred stock for each share of the Company’s common stock or Series A Preferred Stock, respectively, and the stockholders of the Company are anticipated to receive up to approximately 95% of the issued and outstanding capital stock of BLAST. The merger is expected to close as soon as possible, but no later than June 1, 2012, subject to the satisfaction of a number of conditions precedent and milestones, including the conversion of various outstanding debts of BLAST into equity of BLAST, and the approval of the merger by the BLAST and the Company boards of directors and stockholders, respectively. As of March 13, 2012, advances made to BLAST by the Company amount to $228,016 and as of December 31, 2011 the Company had advanced Blast $112,138, which is shown in the balance sheet as part of deferred costs.

The Company signed amendatory letters on each of February 9, 2012 and February 29, 2012 that amended a Stock Purchase Agreement entered into by and among the Company, Excellong, Inc., and various other sellers, dated December 16, 2011 (the Stock Purchase Agreement, as amended, the “SPA”). Pursuant to the SPA, the Company plans to acquire Excellong E&P-2, Inc., a Texas corporation whose sole asset is an approximately 8 percent working interest in certain oil and gas leases covering approximately 1,650 net acres in the Leighton Field located in McMullen County, Texas, which is currently producing oil and natural gas from the Eagle Ford shale formation (the “Eagle Ford Asset”). This area is currently producing oil and natural gas from two wells, but the remainder of the land is under development. The total purchase price was negotiated to be approximately $3.75 million, consisting of $1.5 million in cash to be paid at closing, an additional $1.0 million due 60 days following closing, and $1.25 million worth of the Company’s Series A preferred stock, issued at the same terms as the Company’s initial Series A financing closing, and with a guaranteed value of $1.25 million on the date that is twelve months from the date of closing. The amendment signed on February 29, 2012 provides that the acquisition of the Eagle Ford Assets is to be closed by March 29, 2012.

On March 15, 2012, the Company sold 301,334 shares of its Series A Preferred Stock for a total of $226,000 in cash proceeds.

F-21

PACIFIC ENERGY DEVELOPMENT CORPORATION

(A DEVELOPMENT STAGE COMPANY)


UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

Financial Statements
Unaudited Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011	F-2

Unaudited Consolidated Statement of Operations For the Three Months Ended March 31, 2012, the Period From February 5, 2011 (Inception) Through March 31, 2011 and the Period From February 5, 2011 (Inception) Through March 31, 2012	F-4

Unaudited Condensed Consolidated Statement of Stockholders’ Equity Consolidated Statement of Stockholders’ Deficit, for the Period From February 5, 2011 (Inception) Through March 31, 2012	F-5

Unaudited Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2012 and 2011	F-6


Notes to Unaudited Consolidated Financial Statements

F-1

PACIFIC ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31, 2012		December 31, 2011

ASSETS

Current assets
Cash and cash equivalents	$	250,884	$	176,471
Receivables from related entities		58,292		302,315
Prepaid expenses		20,170		26,533
Deferred costs		309,635		111,828

Total current assets		638,981		617,147

Oil and gas property and equipment, net		5,479,989		1,728,928
Equity method investment		560,882		588,453
Other investment		4,100		4,100

Total assets	$	6,683,952	$	2,938,628

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable	$	74,513	$	145,428
Accrued liabilities		2,756,009		1,904,647

Total current liabilities		2,830,522		2,050,075

Commitments and Contingencies (Note 7)

Stockholders’ equity
Series A convertible preferred stock, $0.001 par value
Authorized shares - 100,000,000
11,222,874 and 6,666,667 shares issued and outstanding		11,224		6,667
at March 31, 2012 and December 31, 2011, respectively
(liquidation preference of $5,000,000)
Common stock, $0.001 par value, Authorized shares - 200,000,000
15,502,261 shares issued and outstanding at March 31, 2012 and		15,503		15,503

December 31, 2011, respectively
Additional paid in capital		5,056,697			1,630,060
Stock service receivable		(69,667	)		(69,667	)
Accumulated deficit		(1,160,327	)		(694,010	)

Total stockholders’ equity		3,853,430			888,553

Total liabilities and stockholders’ equity	$	6,683,952		$	2,938,628

The accompanying notes are an integral part of these financial statements.

F-2

PACIFIC ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS



				Period from			Period from
	Three Months			February 9, 2011			February 9, 2011
	Ended March 31,			(Inception) to			(Inception) to
	2012			March 31, 2011			March 31, 2012

Operating expenses:
Occupancy	$	8,315		$	-		$	26,853
Travel and entertainment		12,978			-			88,070
Professional services		94,865			-			300,065
Personnel		304,327			-			616,675
Administration		18,261			740			55,208

Total operating expenses		438,746			740			1,086,871

Loss from operations		(438,746	)		(740	)		(1,086,871	)

Other Expense
Interest expense		-			(25	)		(12,912	)
Equity in loss of equity method investment		(27,571	)		-			(53,446	)
Other expenses		-			-			(7,098	)

Total other expenses		(27,571	)		(25	)		(73,456	)

Net loss	$	(466,317	)	$	(765	)	$	(1,160,327	)

The accompanying notes are an integral part of these financial statements.

F-3

PACIFIC ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

	Series A Convertible											Service
	Preferred Stock				Common Stock							Receivable
									Additional
	Shares		Amount		Shares		Amount		Paid-In Capital			Amount			Accumulated Deficit			Total
Balances at February 9, 2011		-	$	-		-	$	-	$	-		$	-		$	-		$	-
Issuance of common stock for cash		-		-		10,420,000		10,420		-			-			-			10,420
Issuance of common stock for interest in Rare Earth JV		-		-		4,100,000		4,100		-			-			-			4,100
Issuance of Series A preferred stock for cash		4,266,667		4,267		-		-		3,195,733			-			-			3,200,000
Contribution of corporate investor capital
to equity method investee		-		-		-		-		(2,457,312	)		-			-			(2,457,312	)
Issuance of Series A preferred stock
upon conversion of notes payable		2,400,000		2,400		-		-		897,600			-			-			900,000
Issuance costs for Series A preferred stock		-		-		-		-		(106,865	)		-			-			(106,865	)
Issuance of common stock for services		-		-		285,595		286		28,274			-			-			28,560
Issuance of common stock in exchange for services receivable		-		-		696,666		697		68,970			(69,667	)		-			-
Stock compensation		-		-		-		-		3,660			-			-			3,660
Net loss		-		-		-		-					-			(694,010	)		(694,010	)
Balances at December 31, 2011		6,666,667	$	6,667		15,502,261	$	15,503	$	1,630,060		$	(69,667	)	$	(694,010	)	$	888,553

Issuance of Series A preferred stock for cash		2,659,540		2,660		-		-		1,947,955			-			-			1,950,615
Issuance of common stock for Excellong E&P-2, Inc.		1,666,667		1,667		-		-		1,248,333			-			-			1,250,000
Issuance of Series A preferred stock to STXRA		230,000		230		-		-		172,270			-			-			172,500
Stock compensation		-		-		-		-		58,079			-			-			58,079
Net loss		-		-		-		-					-			(466,317	)		(466,317	)
Balances at March 31, 2012		11,222,874	$	11,224		15,502,261	$	15,503	$	5,056,697		$	(69,667	)	$	(1,160,327	)	$	3,853,430

The accompanying notes are an integral part of these financial statements.

F-4

PACIFIC ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


				Period from			Period from
	Three Months			February 9, 2011			February 9, 2011
	Ended March 31,			(Inception) to			(Inception) to
	2012			March 31, 2011			March 31, 2012

Cash flows from operating activities
Net loss	$	(466,317	)	$	(765	)	$	(1,160,327	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		489			-			1,151
Stock based compensation expense		58,079			-			61,739
Equity in loss of equity method investment		27,571			-			53,446
Changes in operating assets and liabilities:
Receivables from related entities		244,023			-			(58,292	)
Prepaid expenses		6,363			-			(16,070	)
Accounts payable		(70,915	)		-			74,513
Accrued liabilities		23,862			740			56,637

Net cash used in operating activities		(176,845	)		(25	)		(987,203	)

Cash flows from investing activities
Deferred costs		(197,807	)		-			(309,635	)
Acquisition of oil and gas interest		(1,500,000	)		-			(4,399,542	)
Acquisition of property and equipment		(1,550	)		-			(6,906	)

Net cash used in investing activities		(1,699,357	)		-			(4,716,083	)

Cash flows from financing activities
Proceeds from issuance of notes payable to related party		-			200,000			1,100,000
Repayment of notes payable to related party		-			-			(200,000	)
Proceeds from issuance of common stock		-			9,730			10,420
Proceeds from issuance of Series A preferred stock (net of issuance costs
of $41,035, $0 and $147,900)		1,950,615			-			5,043,750

Net cash provided by financing activities		1,950,615		209,730		5,954,170

Net increase in cash and cash equivalents		74,413		209,705		250,884
Cash and cash equivalents at beginning of the period		176,471		-		-
Cash and cash equivalents at end of the period	$	250,884	$	209,705	$	250,884

Supplemental Disclosures of Cash Flow Information
Interest paid	$	-	$	-	$	12,912

Supplemental disclosure of noncash investing and financing activities:
Issuance of 1,666,667 shares of Series A preferred stock in exchange
for investment in Excellong E&P-2, Inc.	$	1,250,000	$	-	$	1,250,000
Issuance of 230,000 shares of Series A preferred stock in connection
with the Niobrara purchase	$	172,500	$	-	$	172,500
Issuance of 4,100,000 shares of common stock in exchange
for investment in Rare Earth JV	$	-	$	-	$	4,100
Accrual of oil and gas interest purchase obligations	$	1,000,000	$	-	$	2,871,872
Conversion of notes payable into 2,400,000 shares of Series A preferred stock	$	-	$	-	$	1,800,000
Contribution of 62.5% of oil and gas interest to equity method investee	$	-	$	-	$	3,071,640
Issuance of common stock as part of oil and gas interest purchase	$	-	$	-	$	28,560

The accompanying notes are an integral part of these financial statements.

F-5

PACIFIC ENERGY DEVELOPMENT CORPORATION AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – DESCRIPTION OF BUSINESS

Pacific Energy Development Corporation and subsidiary (the “Company”) is a development stage company formed for the purpose of (i) engaging in the business of oil and gas exploration, development and production of primarily shale oil and gas and secondarily conventional oil and gas opportunities in the United States, and (ii) subsequently utilizing the Company’s strategic relationships for exploration, development and production in Pacific Rim countries, with a particular focus in China. The Company was originally formed in February 2011 as a limited liability company, and converted to a C corporation in June 2011. In October 2011, the Company formed a new subsidiary called Condor Energy Technology LLC (“Condor”), a limited liability company organized under the laws of the State of Nevada. The Company owns 20% of Condor and a corporate investor owns 80%. The Company also holds a 6% joint venture interest in Rare Earth Ovonic Metal Hydride JV Co. Ltd. Joint Venture, a Chinese rare earth metal manufacturing and production company (the “Rare Earth JV”) through its 100% owned subsidiary Pacific Energy & Rare Earth Inc. In March of 2012, the Company acquired 100% of Excellong E&P-2, Inc., a Texas corporation whose sole asset is an approximately 8 percent working interest in certain oil and gas leases covering approximately 1,650 net acres in the Leighton Field located in McMullen County, Texas, which is currently producing oil and natural gas from the Eagle Ford shale formation (the “Eagle Ford Asset”).

The Company plans to focus initially on developing shale oil and gas assets held by the Company in the United States, including its first oil and gas working interest known as “the Niobrara Asset” and its second oil and gas working interest known as the “the Eagle Ford Asset”, each as described below. Subsequently, the Company plans to seek additional shale oil and gas and traditional oil and gas asset acquisition opportunities in the United States and Pacific Rim countries utilizing its strategic relationships and technologies that may provide the Company a competitive advantage in accessing and exploring such assets. Some or all of these assets may be acquired by subsidiaries, including Condor, or others that may be formed at a future date.

NOTE 2 – GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred losses from operations of $1,160,327 from the date of inception (February 9, 2011) through March 31, 2012. Additionally the Company is dependent on obtaining additional debt and or equity financing to roll-out and scale its planned principal business operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters consist principally of seeking additional debt and/or equity financing combined with expected cash flows from planned oil & gas asset acquisitions. There can be no assurance that the Company’s efforts will be successful. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

F-6

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and, accordingly, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These condensed consolidated financial statements are prepared on the same basis and should be read in conjunction with the audited financial statements and related notes included in the Company's financial statements for the year ended December 31, 2011. Interim results are not necessarily indicative of the results to be expected for the full year, and no representation is made thereto.

In the opinion of management, these financial statements include all adjustments necessary to state fairly the financial position and results of operations for each interim period shown. All such adjustments occur in the ordinary course of business and are of a normal, recurring nature.

The condensed consolidated financial statements include the Company and its wholly-owned subsidiary, Pacific Energy and Rare Earth, Inc. All inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

The Company’s most significant estimates relate to the valuation of its investment in the Rare Earth JV, its valuation of its common stock, options and warrants, and the valuation and allocation of its purchase of the Eagle Ford asset.

Cash and Cash Equivalents

The Company classifies all highly liquid investments purchased with an original maturity of three months or less at the date of purchase as cash equivalents. As of March 31, 2012 and December 31, 2011, cash equivalents consisted of money market funds.

Deferred Property Acquisition Costs

Exploration and Evaluation Assets and Oil and Gas Properties

The successful efforts method of accounting is used for oil and gas exploration and production activities. Under this method, all costs for development wells, support equipment and facilities, and proved mineral interests in oil and gas properties are capitalized. Geological and geophysical costs are expensed when incurred. Costs of exploratory wells are capitalized as exploration and evaluation assets pending determination of whether the wells find proved oil and gas reserves. Proved oil and gas reserves are the estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, (i.e., prices and costs as of the date the estimate is made). Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions.

F-7

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Exploratory wells in areas not requiring major capital expenditures are evaluated for economic viability within one year of completion of drilling. The related well costs are expensed as dry holes if it is determined that such economic viability is not attained. Otherwise, the related well costs are reclassified to oil and gas properties and subject to impairment review. For exploratory wells that are found to have economically viable reserves in areas where major capital expenditure will be required before production can commence, the related well costs remain capitalized only if additional drilling is under way or firmly planned. Otherwise the related well costs are expensed as dry holes.

Exploration and evaluation expenditure incurred subsequent to the acquisition of an exploration asset in a business combination is accounted for in accordance with the policy outlined above.

The cost of oil and gas properties is amortized at the field level based on the unit of production method. Unit of production rates are based on oil and gas proved and probable developed producing reserves estimated to be recoverable from existing facilities based on the current terms of the respective production agreements. The Company’s reserves estimates represent crude oil and gas which management believes can be reasonably produced within the current terms of their production agreements.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk include cash deposits placed with financial institutions. The Company maintains its cash in bank accounts which, at times, may exceed federally insured limits as guaranteed by the Federal Deposit Insurance Corporation (FDIC). At March 31, 2012, none of the Company’s cash balances were uninsured. The Company has not experienced any losses in such accounts.

Income Taxes

F-8

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock Based Compensation

Fair Value of Financial Instruments

Fair Value of Financial Instruments (continued)

As a basis for considering these assumptions, ASC 820 defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

Level 1 – Quoted prices in active markets for identical 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.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Recent Accounting Pronouncements

F-9

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (continued)

Implementation of these recent accounting pronouncements did not have a significant impact on the Company’s financial statements.

NOTE 4 – OIL AND GAS PROPERTY AND EQUIPMENT, NET

Property and equipment as of March 31, 2012 and December 31, 2011 consisted of the following:

	March 31, 2012			December 31, 2011

Oil and gas interests	$	5,474,233		$	1,724,234
Computers and software		6,906			5,356
Accumulated depreciation		(1,151	)		(662	)

Property and equipment, net	$	5,479,988		$	1,728,928

Depreciation expense for the period from February 9, 2011 (Inception) through March 31, 2012 was $1,151, and is included in operating expenses in the accompanying statement of operations. Depreciation expense for the quarter ended March 31, 2012 was $489, and is included in operating expenses in the accompanying statement of operations.

Oil and gas interests -- The Company acquired oil and gas interests in Colorado in a geologic formation known as the Niobrara formation (“the Niobrara Asset”) on October 31, 2011 for a total cost of $4,914,624. 62.50% of the value of the Niobrara interest acquired by the Company was assigned into Condor (see Note 5), of which the Company owns 20%. The following details the purchase price components:

	·	$2,827,387 cash paid at closing.
	·	1,333,334 shares of Series A Preferred, with a guaranteed minimum value of $1 million to be issued on November 10, 2012.*

	·	$699,372 cash carry of the Sellers share of future drilling costs.*
	·	285,595 shares of Common Stock of the Company valued at $28,560 issued to a due diligence provider, South Texas Reservoir Alliance, LLC (“STXRA”)

	·	230,000 shares of Series A Preferred Stock to be issued in February of 2012 at a share price of $0.75, or $172,500 to STXRA.*
	·	Other acquisition transaction costs in the amount of $186,806.

F-10

NOTE 4 – OIL AND GAS PROPERTY AND EQUIPMENT, NET (Continued)

*These obligations totaling $1,871,872 have been recorded as part of accrued liabilities in the balance sheet as of December 31, 2011. Due to the satisfaction of the $172,500 obligation to STXRA through the issuance of 230,000 shares of Series A Preferred stock in the quarter ended March 31, 2012, these obligations total $1,699,372 as of March 31, 2012.

NOTE 5 – BUSINESS ACQUISITION

During the quarter ended March 31, 2012, the Company acquired Excellong E&P-2, Inc., a Texas corporation whose sole asset is an approximately 8 percent working interest in certain oil and gas leases covering approximately 1,650 net acres in the Leighton Field located in McMullen County, Texas, which is currently producing oil and natural gas from the Eagle Ford shale formation (the “Eagle Ford Asset”). This area is currently producing oil and natural gas from two wells, but the remainder of the land is under development. The acquisition closed on March 29 and the total purchase price was $3.75 million, consisting of

	·	$1,500,000 cash paid at closing.
	·	$1,000,000 million due 60 days following closing on May 28, 2012 *

1,666,667 shares of Series A Preferred Stock with a total value of $1,250,000 and with a guaranteed value of $1.25 million on the date that is twelve months from the date of closing. In the event that, on this twelve month anniversary (i) the Series A Stock has no Public Market Value, or (ii) the Series A Stock has a Public Market Value but the total Public Market Value of the Closing Stock issued to Sellers is less than $1,250,000, then each Seller shall have the right to require Buyer to repurchase some or all of such Seller’s shares of Closing Stock still then-held by such Seller for cash in an amount equal to $0.75 per share of Series A Stock repurchased (subject to adjustment for stock splits, conversions and the like) (the “Put”). For example, if all Sellers exercise the Put as to all shares of Closing Stock, the total repurchase price payable in connection with the Put would be $1,250,000.

*This obligation totaling $1,000,000 has been recorded as part of accrued liabilities in the balance sheet as of March 31, 2012.

The following table summarizes the allocation of the aggregate purchase price as follows:

Asset	Valuation

Tangible equipment	$	147,000
Proved oil and gas reserves		3,603,000

Total	$	3,750,000

F-11

NOTE 5 – BUSINESS ACQUISITION (Continued)

Management determined that there were no intangible assets. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and represents intangible assets that do not qualify for separate recognition. There was no Goodwill recognized associated with this acquisition. The fair value of the acquired tangible assets and proved oil and gas reserves is preliminary pending the final valuation of those assets.

The estimated future net recoverable oil and gas reserves from proved resources, both developed and undeveloped which were acquired in this transaction are as follows:

	Crude Oil (M Bbls)			Natural Gas (M Mcf)

Net recoverable oil and gas from proved resources		7,390.0			16,448.7
Current working interest		7.9	%		7.9	%

		586.7			1,305.9

NOTE 6 – EQUITY METHOD INVESTMENT

In October 2011, the Company formed a new subsidiary called Condor Energy Technology LLC (“Condor”), a limited liability company organized under the laws of the State of Nevada. The Company owns 20% of Condor and a subsidiary of MIE Holdings Corporation (“MIE Holdings”) owns 80%. The Company acquired oil and gas interests in the Niobrara formation (the “Niobrara Asset”) on October 31, 2011. 62.50% of the value of the Niobrara interest acquired by the Company has been assigned into Condor at a value of $3,071,640. In connection with this transaction, the Company recorded $614,328 as its investment in Condor and the difference of $2,457,312 was recorded as an offset to additional paid-in capital as a reduction of the Series A preferred stock proceeds received from MIE Holdings. Because the Series A preferred stock funding, formation of Condor and purchase of the Niobrara asset transactions were completed in contemplation of each other, the Company concluded that this accounting best represented the economic substance.

The Company accounts for its 20% ownership in Condor using the equity method. The Company evaluated its relationship with Condor to determine if Condor was a variable interest entity, (“VIE”) as defined in ASC 810-10, and whether the Company was the primary beneficiary of Condor, in which case consolidation with the Company would be required. The Company determined that Condor qualified as a VIE, however the Company concluded that the MIE Holdings was the primary beneficiary as a result of its voting and Board control combined with its funding commitments to Condor. The Company’s entire investment in Condor is at risk of loss. The Company’s total investment in Condor at March 31, 2012 was $560,882, after recording its share of Condor’s 2012 losses of $27,571.

F-12

NOTE 6 – EQUITY METHOD INVESTMENT (Continued)

Condor’s financial information, derived from its unaudited financial statements, is as follows:

	As of March 31, 2012
Current assets	$	375,823
Noncurrent assets	$	3,942,739
Total Assets	$	4,318,562
Current liabilities	$	1,514,149
Total Liabilities	$	1,514,149

	For the Quarter ended March 31, 2012
Gross Revenue	$	-
Net Loss	$	(137,854	)

During the quarter ended March 31, 2012, and from inception through March 31, 2012, the Company advanced Condor $56,518 and $356,268 respectively for organizational, administrative, managerial and other costs. Subsequent to March 31, 2012 all of the advances were repaid in full. These advances are included in the balance sheet at March 31, 2012 and December 31, 2011 as part of receivables from related entities.

NOTE 7 – NOTES PAYABLE TO RELATED PARTY

The note agreement also provided for the issuance of a warrant to the holder in the event that the note was automatically converted into a qualified financing. The warrant would have a three year term and an exercise price equal to the price paid by the investors in the qualified financing. In connection with the initial closing of the Company’s Series A Preferred Stock financing in October 2011, which was a qualified financing, the Company issued this warrant for 480,000 shares of Series A Preferred Stock at an exercise price of $0.75 per share.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

The Company has entered into a non-cancelable lease agreement ending in June 2012 for certain office space. As of March 31, 2012, the remaining obligation under this lease was $6,114.

F-13

NOTE 9 – STOCKHOLDERS’ EQUITY

Common Stock

At March 31, 2012, the Company was authorized to issue 200,000,000 shares of its common stock with a par value of $0.001, of which 10,420,000 shares had been issued to its founders in exchange for cash in the amount of $10,420 in February 2011. The shares issued are fully vested. An additional 4,100,000 shares were issued in February 2011 to a company that is wholly owned by the Company’s president and chief executive officer in exchange for that company’s 6% interest in the Rare Earth JV. These shares were valued at $4,100. As of December 31, 2011, the Company had issued a total of 14,520,000 shares of common stock to its founders for total value received of $14,520.

Common Stock (continued)

Contemporaneous with this grant, the executive vice president received an option exercisable for 300,000 shares of the Company’s common stock that may be exercised at $0.08 per share, with vesting occurring at various intervals based upon achievement of certain objectives, and expiring in October 2021 if not exercised earlier. As of December 31, 2011, none of the vesting milestones had been reached so none of the shares were vested and as a result they are not being shown as outstanding shares in the financial statements. In February 2012 the Company’s board of directors and the executive vice president agreed to a revised time-based vesting schedule with respect to these shares and options in connection with this executive vice president becoming a full-time employee of the Company. The revised terms provide that the Company’s right of forfeiture shall lapse with respect to 50% of the shares on June 1, 2012, 25% on December 1, 2012, and the final 25% on June 1, 2013, all contingent upon the recipient’s continued service with the Company, with 100% of the shares being released from the Company’s right of forfeiture in the event the Company terminates his relationship with the Company without cause (as defined in the grant agreement). At March 31, 2012 all 700,000 shares are subject to forfeiture.

F-14

NOTE 9 – STOCKHOLDERS’ EQUITY (Continued)

In February 2012, the Company granted to five of its consultants and employees a total of 1,655,000 shares of its restricted common stock valued at $0.10 per share. The shares are subject to forfeiture in the event the recipient is no longer an employee, officer, director or consultant to the Company, which risk of forfeiture lapses with respect to 50% of the shares on the date that is six months from the date of grant, 20% on the date that is twelve months from the date of grant, 20% on the date that is eighteen months from the date of grant, and the final 10% on the date that is twenty-four months from the date of grant, all contingent upon the recipient’s continued service with the Company. These awards were authorized and issued under the Company’s equity incentive plan adopted in February 2012. At March 31, 2012, all 1,655,000 shares were subject to forfeiture.

Preferred Stock

At March 31, 2012, the Company was authorized to issue 100,000,000 shares of its preferred stock with a par value of $0.001. 11,222,874 shares of its Series A Preferred Stock were issued and outstanding at March 31, 2012 and 6,666,667 shares of its Series A Preferred Stock were issued and outstanding at December 31, 2011.

In October 2011, the Company sold 4,000,000 shares of its Series A Preferred Stock to a corporate investor for $3,000,000.

F-15

NOTE 9 – STOCKHOLDERS’ EQUITY (Continued)

Preferred Stock (continued)

On February 9, 2012, the Company issued 230,000 shares of Series A Preferred Stock at a value of $172,500 to South Texas Reservoir Alliance LLC. A liability was accrued as of December 31, 2011 for this issuance, which is satisfaction of certain obligations to STXRA associated with the Niobrara Asset purchase.

On March 29, 2012, the Company issued 1,666,667 shares of its Series A Preferred Stock for a total value of $1,250,000 as part of the consideration issuable by the Company in the Eagle Ford acquisition.

On March 28, 2012, 4000 shares of Series A Preferred Stock were issued to Oracle as a Series A placement fee valued at $3000.

The rights, preferences, and conversion privileges of the Series A Preferred Stock are as follows:

Issuances in the quarter ended March 31, 2012, totaled 4,556,207 shares of Series A Preferred Stock. Issuances were for cash 2,665,540 shares, as part of the Eagle Ford acquisition 1,666,667 shares, to SXTRA 230,000 shares and to Oracle Capital Securities, LLC (“Oracle”) as a placement fee 4,000 shares. Total cash received in the quarter ended March 31, 2012 from issuances 2,655,540 shares was $1,991,650.

Liquidation Preferences

Dividend Rights

Dividends, if and when declared by the board of directors, accrue at an annualized rate of 6% and are not cumulative.

Conversion Rights

The holders of a majority of the then outstanding shares of Series A Preferred Stock elect to convert all of their shares of Series A Preferred Stock into shares of common stock.

F-16

NOTE 9 – STOCKHOLDERS’ EQUITY (Continued)

Preferred Stock (continued)

Conversion Rights (continued)

The conversion price is subject to adjustment in the event of stock splits, stock dividends, reclassifications, reorganization and other equity restructuring type transactions.

Warrants

In October 2011, the Company issued a warrant to purchase 480,000 shares of Series A Preferred Stock to an entity owned and controlled by the Company’s president and chief executive officer in connection with the conversion of outstanding principal under a promissory note into Series A Preferred Stock of the Company as described in Note 5. The warrant has a three year term and has an exercise price of $0.75 per share.

In March 2012, in connection with the Series A closings in Q1 2012, the Company issued warrants to a placement firm for 20,000 shares of Series A Preferred Stock at an exercise price of $0.75 per share.

NOTE 10 – STOCK-BASED COMPENSATION

Stock-based compensation expense for all share-based payment awards granted in 2011 and 2012 are based on the grant-date calculated fair value. The Company recognizes these compensation costs, net of an estimated forfeiture rate, and recognizes the compensation costs for only those shares expected to vest on a straight-line basis over the requisite service period of the award. For the quarter ended March 31, 2012, awards were authorized and issued under the Company’s equity incentive plan adopted in February 2012.

For the quarter ended March 31, 2012, the Company recorded stock-based compensation expense of $58,079 related to stock options and grants of restricted common stock. At March 31, 2012 there was approximately $30,410 of unamortized stock based compensation cost related to unvested stock options which is expected to be recognized over a weighted average period of 1.30 years. At March 31, 2012 there was approximately $195,721 of unamortized stock based compensation cost related to unvested restricted stock grants which is expected to be recognized over a weighted average period of 1.64 years.

F-17

NOTE 10 – STOCK-BASED COMPENSATION (Continued)

In October 2011, the Company granted a non-qualified performance-based option to its consulting executive vice president for 300,000 shares at $0.08 per share with a term of 10 years. At December 31, 2011 none of the performance milestones had been met and, as a result, no expense was recorded in 2011 for this award. This award was modified in February 2012 to a time-based vesting schedule in connection with this consultant becoming a full-time employee of the Company. The vesting terms of the option exercisable for these 300,000 shares are now 50% of the shares subject to the option vesting on March 1, 2012, 25% on June 1, 2012, and the balance of 25% on January 1, 2013, all contingent upon the recipient’s continued service with the Company.

Stock option activity through the quarter ended March 31, 2012 is as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Options granted		530,000		0.08
Options exercised		-		-
Options cancelled/forfeited/expired		-		-
Outstanding at December 31, 2011		530,000		0.08		9.77
Vested and exercisable at December 31, 2011		-

Options granted	265,000	0.10	9.87
Options exercised	-	-
Options cancelled/forfeited/expired	-	-
Outstanding at March 31, 2012	795,000	0.09	9.64
Vested and exercisable at March 31, 2012	150,000	0.08	9.52

The weighted average grant date calculated fair value of options granted during the year ended December 31, 2011 was $0.069. The weighted average grant date calculated fair value of options granted during the quarter ended March 31, 2012 was $0.072.

No cash was received for option exercises and purchases of shares of Company common stock as stock-based compensation for the year ended December 31, 2011 and the quarter ended March 31, 2012.

F-18

NOTE 10 – STOCK-BASED COMPENSATION (Continued)

The calculated fair value of option grants was estimated using the Black-Scholes option pricing model with the following weighted average assumptions for the year ended December 31, 2011 and the quarter ended March 31, 2012.

	December 31, 2011	March 31, 2012
Expected dividend yield (1)	0%	0%
Risk-free interest rate (2)	0.41%	0.41%
Expected volatility (3)	173%	173%
Expected life (in years) (4)	3.0	1.5

(1)	The Company has no current plans to pay dividends.

(2)	The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant.

(3)	The Company estimated the volatility based on comparable public companies.

(4)	The expected life represents the period of time that options granted are expected to be outstanding.

NOTE 11 – RELATED PARTY TRANSACTIONS

As discussed in Note 6, the Company repaid a loan from the president and chief executive officer and a company wholly owned by its president and chief executive officer.

In October 2011, the Company also sold 4,000,000 shares of its Series A Preferred Stock to MIE Holdings for $3,000,000.

NOTE 12 – SUBSEQUENT EVENTS

The Company evaluates events occurring subsequent to the date of the financial statements in determining the accounting for and disclosure of transactions and events that affect the financial statements. Subsequent events have been evaluated through May 25, 2012, which is the date the financial statements were available to be issued.

On April 3, 2012, the Company sold 266,667 shares of its Series A Preferred Stock for a total of $200,000 in cash proceeds.

On April 5, 2012, the Company sold 266,667 shares of its Series A Preferred Stock for a total of $200,000 in cash proceeds.

F-19

NOTE 12 – SUBSEQUENT EVENTS (Continued)

On April 11, 2012, the Company sold 133,333 shares of its Series A Preferred Stock for a total of $100,000 in cash proceeds.

On April 18, 2012, the Company sold 86,667 shares of its Series A Preferred Stock for a total of $65,000 in cash proceeds.

In April of 2012, the Company issued warrants to purchase a total of 60,000 shares of its Series A Preferred Stock at an exercise price of $0.75 per share to two Series A Preferred stock placement agents. These warrants expire in April 2015.

In April 2012, the Company granted to an advisor fully vested options exercisable for a total of 100,000 shares of its common stock at an exercise price of $0.10 per share with a ten-year term. This award was authorized and issued under the Company’s equity incentive plan adopted in February 2012.

On April 23, 2012, the Company received an AFE Cost Estimate from Texoz E&P II, Inc., the operator of the Company’s Eagle Ford Asset held in White Hawk (defined below), in connection with the proposed drilling of a third well in the Eagle Ford Asset (the “EFS #1H Well”). The Company has consented to participate in the drilling of the EFS #1H Well, and this well is currently being drilled by the operator. The total AFE Cost Estimate for the EFS #1H Well is $9,846,300, of which the Company has elected to participate to its full proportionate share of 7.939%. On May 8, 2012, the operator of the EFS #1H Well notified the Company that one of the working interest owners had elected to non-consent to participating in the drilling of the EFS #1H Well, and, effective May 9, 2012, the Company elected to increase its working interest by an additional 0.6846% in this well, which will proportionately increase the Company’s share of the drilling and completion expenses under the AFE Cost Estimate to 8.6236%.

On May 11, 2012, the Company merged its wholly-owned subsidiary, Excellong E&P-2, Inc. (“E&P-2”), into White Hawk Petroleum, LLC (“White Hawk”), a newly-formed Nevada limited liability company also wholly-owned by the Company (the “E&P-2 Merger”). White Hawk was the surviving entity in the E&P-2 Merger, with all the properties, rights, privileges, immunities, powers and franchises of E&P-2 vesting in White Hawk as the surviving entity, and all debts, liabilities, obligations and duties of E&P-2 becoming the debts, liabilities, obligations and duties of White Hawk. The separate corporate existence of E&P-2 ceased as a result of the E&P-2 Merger. White Hawk now holds all of the Eagle Ford Assets of the Company.

In May of 2012, the Company issued warrants to purchase a total of 9,167 shares of its Series A Preferred Stock at an exercise price of $0.75 per share to an advisor who also acted as a placement agent. These warrants expire in May 2015. In May of 2012, the Company also issued 533 shares of its Series A Preferred Stock to this same advisor valued at a price of $0.75 per share.

F-20

NOTE 12 – SUBSEQUENT EVENTS (Continued)

On May 23, 2012, the Company completed the sale of 50% of the ownership interests in White Hawk to an affiliate of MIE Holdings, which is also the Company’s 80% partner in Condor as described above and a significant investor in the Company (the “White Hawk Sale”). As a result of the White Hawk Sale, an affiliate of MIE Holdings and the Company each have an equal 50% ownership interest in the Eagle Ford Asset originally acquired by the Company in March 2012 as described above, and each have agreed to proportionately share all expenses and revenues with respect to the Eagle Ford Asset going forward. In consideration for the White Hawk Sale, MIE Holdings paid to the Company an aggregate of $2.0 million in cash as follows: (i) $500,000 in cash paid to the Company on May 23, 2012; (ii) $1.0 million in cash paid to the original sellers of the Eagle Ford Asset on behalf of Company on March 23, 2012, which amount was due to such sellers 60 days following the acquisition by the Company of the Eagle Ford Asset as described above; and (iii) $500,000 in cash payable to the Company on or before June 29, 2012. As further inducement for MIE Holdings to participate in the White Hawk Sale, the Company (a) agreed to share with MIE Holdings all production revenue from the Eagle Ford Asset commencing March 1, 2012, (b) issued a two year warrant to MIE Holdings exercisable for 500,000 shares of Company common stock at $1.25 per share, exercisable solely on a cash basis, and (c) granted a two year warrant to MIE Holdings exercisable for 500,000 shares of Company common stock at $1.50 per share, exercisable solely on a cash basis. These warrants were granted effective May 23, 2012.

F-21

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma combined consolidated financial statements are based on the historical financial statements of PEDEVCO Corp. (formerly Blast Energy Services, Inc.)(“Blast” or the “Company”) and Pacific Energy Development Corp., a privately-held Nevada corporation (“PEDCO”) after giving effect to the agreement for our merger with PEDCO, and the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma combined financial statements.

The unaudited pro forma combined balance sheet as of March 31, 2012, is presented as if the merger with PEDCO had occurred on March 31, 2012. The unaudited pro forma combined statements of operations for the three months ended March 31, 2012, are presented as if the merger had occurred on January 1, 2012, and on the audited pro forma combined statements of operations for the year ended December 31, 2011, are presented as if the date of the merger had occurred on January 1, 2011, with recurring merger-related adjustments reflected in each of the periods.

Determination of the purchase price and allocations of the purchase price used in the unaudited pro forma combined financial statements are based upon preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as we finalize the valuations of the net tangible assets and intangible assets. Any change could result in material variances between our future financial results and the amounts presented in these unaudited combined financial statements, including variances in fair values recorded, as well as expenses associated with these items.

The unaudited pro forma combined financial statements are prepared for illustrative purposes only and are not necessarily indicative of or intended to represent the results that would have been achieved had the transaction been consummated as of the dates indicated or that may be achieved in the future. The unaudited pro forma combined financial statements do not reflect any operating efficiencies and associated cost savings that we may achieve with respect to the combined companies.

The unaudited pro forma combined financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes and other information pertaining to Blast and PEDCO contained in this report and/or in Blast’s filings with the SEC.

PEDEVCO CORP.
(formerly Blast Energy Services, Inc.)
Pro forma Consolidated Balance Sheets
(Unaudited)

			Pacific Energy
	Blast Energy		Development							Pro forma
	Services, Inc.		Corporation				Pro forma			Consolidated
	03/31/12		03/31/12				Adjustments			03/31/12
Assets

Current assets:
Cash	$	3,097	$	250,884						$	253,981
Accounts receivable, net		20,742		58,292							79,034
Deferred costs		-		309,635							309,635
Prepaid expenses and other current assets		68,655		20,170							88,825
Total current assets		92,494		638,981							731,475

Oil and gas properties
Proved oil and gas properties		699,851		3,750,000							4,449,851
Unproven oil and gas properties		696,178		1,729,989							2,426,167
Equity method investment		-		560,882							560,882
Total oil and gas properties		1,396,029		6,040,871							7,436,900

Other investment		-		4,100							4,100

Equipment, net		381,421		-							381,421

Goodwill		-		-	(1	)		2,091,000			2,091,000

Total assets	$	1,869,944	$	6,683,952				2,091,000		$	10,644,896

Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable	$	82,437	$	74,513						$	156,950
Accrued expenses		672,197		2,756,009							3,428,206
Accrued expenses – related parties		396,413		-	(6	)		(344,997	)		51,416
Note payable – related parties		106,150		-							106,150
Notes payable – other		1,561,589		-							1,561,589
Total current liabilities		2,818,786		2,830,522							5,304,311

Long-term liabilities:
Notes payable – related party		1,120,000		-	(6	)		(1,120,000	)		-
Asset retirement obligations		41,712		-							41,712
Total liabilities		3,980,498		2,830,522							5,346,023


Stockholders’ equity:
Series A Preferred Stock, $.001 par value, 20,000,000 shares
authorized, 6,000,000 shares issued and outstanding		6,000			-		(2	)		(6,000	)		14,714
							(5	)		14,714
Series A Preferred Stock, $.001 par value, 100,000,000 shares
authorized, 11,222,874 shares issued and outstanding		-			11,224		(5	)		(11,224	)		-
Series B Preferred Stock, $.001 par value, 1 share authorized
1 and 0 share issued and outstanding, respectively		-			-		(2	)		-			-
Common Stock, $.001 par value, 180,000,000 shares authorized;
71,425,905 shares and 19,202,580 shares issued and outstanding, respectively		71,426			-		(2	)		6,000			19,263
							(3	)		(76,734	)
							(4	)		17,917
							(6	)		654
Common stock, $0.001 par value, 200,000,000 shares authorized;
15,502,261 shares issued and outstanding		-			15,503		(4	)		(15,503	)		-
Subscription receivable		-			(69,667	)	(4	)		69,667			-
Additional paid-in capital		76,389,124			5,056,697		(1	)		2,091,000			6,790,858
							(3	)		76,734
							(4	)		(78,283,550	)
							(5	)		(3,490	)
							(6	)		1,464,343
Accumulated deficit		(78,577,104	)		(1,160,327	)	(4	)		78,211,469			(1,525,962	)
Total stockholders’ equity		(2,110,554	)		3,853,430								5,298,873

Total liabilities and stockholders’ equity	$	1,869,944		$	6,683,952				$	2,091,000		$	10,644,896

Pro Forma Footnotes:

(1) To record goodwill for the difference between the fair value of consideration transferred and the fair value of assets acquired and liabilities assumed (which valuation and allocation is not final, is not based on any valuation and is subject to change).

(2) To convert all outstanding Series A and Series B preferred stock into shares of the Company's common stock on a one-for-one basis.

(3) To adjust common stock par value and the additional paid-in capital to reflect one-for-one hundred and twelve (1:112) reverse stock split.

(4) To record the issuance of 17,917,261 shares of the Company's common stock to existing holders of common stock of PEDCO.

(5) To record the issuance of 14,713,645 shares of the Company's Series A preferred stock to existing holders of Series A preferred stock of PEDCO.

(6) To record the conversion of $1.465 million of Blast related party secured debt into common stock of PEDCO.

PEDEVCO CORP.
(formerly Blast Energy Services, Inc.)
Pro forma Consolidated Statements of Operations
(Unaudited)

				Pacific Energy
	Blast Energy			Development					Pro forma
	Services, Inc.			Corporation					Consolidated
	for Quarter			for Quarter					for Quarter
	Ended			Ended				Pro forma	Ended
	3/31/2012			3/31/2012				Adjustments	3/31/2012

Revenues:	$	118,214		$	-				$	118,214
										-
Cost of revenues
Services		-			-					-
Lease operating costs		67,353			-					67,353
Total cost of revenues		67,353			-					67,353

Operating expenses
Selling, general and administrative expense		190,981			438,746					629,727
Depreciation, depletion and amortization		36,124			-					36,124
Total operating expenses		227,105			438,746					665,851

Operating loss		(176,244	)		(438,746	)				(614,990	)

Other income (expense):
Interest expense		(189,391	)		-					(189,391	)
Equity in loss of equity method investment		-			(27,571	)				(27,571	)
Other income (expense)		-			-
Total other expense		(189,391	)		(27,571	)				(216,962	)
										-
Loss from continuing operations		(365,635	)		(466,317	)				(831,952	)
Net Loss		(365,635	)		(466,317	)				(831,952	)

Preferred dividends		(59,836	)		-					(59,836	)
Net loss attributable to common shareholders	$	(425,471	)	$	(466,317	)			$	(891,788	)

Net loss per common share - Basic :
Continuing operations	$	(0.01	)						$	(0.05	)

Net loss per common share - Diluted :
Continuing operations	$	(0.01	)						$	(0.05	)

Weighted average common shares outstanding - basic and diluted		71,425,905					(1)(2)	(52,163,325)		19,262,580

Pro forma footnotes:

(1) The weighted average common shares outstanding - basic and diluted is adjusted to reflect the following:

- The conversion of all outstanding Series A and Series B preferred stock into shares of the Company's common stock on a one-for-one basis;

- The one-for-one hundred and twelve (1:112) reverse stock split;

- The issuance of 17,917,261 shares of the Company's common stock to existing holders of common stock of PEDCO; and

- The conversion of $1.465 million of Blast related party secured debt converted into common stock of PEDCO.

(2) The weighted average common shares outstanding do not include the following potentially dilutive securities:

- The grant of warrants to purchase 1,120,000 of the Company's common stock to existing warrant holders of PEDCO;

- The grant of options to purchase 4,235,000 of the Company's common stock to existing option holders of PEDCO; and

- The issuance of 14,713,645 shares of the Company's Series A preferred stock to existing holders of Series A preferred stock of PEDCO.

PEDEVCO CORP.
(formerly Blast Energy Services, Inc.)
Pro forma Consolidated Statements of Operations
(Unaudited)

				Pacific Energy
	Blast Energy			Development				Pro forma
	Services, Inc.			Corporation				Consolidated
	for Year			for Year				for Year
	Ended			Ended			Pro forma	Ended
	12/31/2011			12/31/2011			Adjustments	12/31/2011

Revenues:	$	446,526		$	-			$	446,526
									-
Cost of revenues
Services		8,069			-				8,069
Lease operating costs		270,746			-				270,746
Total cost of revenues		278,815			-				278,815

Operating expenses									-
Selling, general and administrative expense		1,469,061			648,125				2,117,186
Depreciation, depletion and amortization		147,591			-				147,591
Impairment loss		1,640,489			-				1,640,489
Total operating expenses		3,257,141			648,125				3,905,266

Operating loss		(3,089,430	)		(648,125	)			(3,737,555	)

Other income (expense):
Interest expense		(1,057,331	)		(12,912	)			(1,070,243	)
Equity in loss of equity method investment		-			(25,875	)			(25,875	)
Other income (expense)		1,407			(7,098	)			(5,691	)
Total other expense		(1,055,924	)		(45,885	)			(1,101,809	)
									-
Loss from continuing operations		(4,145,354	)		(694,010	)			(4,839,364	)
Loss from discontinued operations		(3,686	)		-				(3,686	)
Net Loss		(4,149,040	)		(694,010	)			(4,843,050	)

Preferred dividends		(240,000	)		-				(240,000	)
Net loss attributable to common shareholders	$	(4,389,040	)	$	(694,010	)		$	(5,083,050	)

Net loss per common share - Basic :
Continuing operations	$	(0.06	)					$	(0.26	)
Discontinued operations		(0.00	)						-
Total	$	(0.06	)					$	(0.26	)

Net loss per common share - Diluted :
Continuing operations	$	(0.06	)					$	(0.26	)
Discontinued operations		(0.00	)						-
Total	$	(0.06	)					$	(0.26	)


Weighted average common shares outstanding - basic and diluted		71,059,786				(1)	(51,777,195)		19,282,591

Pro forma footnotes:

(1) The weighted average common shares outstanding - basic and diluted is adjusted to reflect the following:

- The conversion of all outstanding Series A and Series B preferred stock into shares of the Company's common stock on a one-for-one basis;

- The one-for-one hundred and twelve (1:112) reverse stock split;

- The issuance of 17,917,261 shares of the Company's common stock to existing holders of common stock of PEDCO;

- The issuance of 14,713,645 shares of the Company's Series A preferred stock to existing holders of Series A preferred stock of PEDCO; and

- The conversion of $1.465 million of Blast related party secured debt into common stock of PEDCO.

(2) The weighted average common shares outstanding do not include the following potentially dilutive securities:

- The grant of warrants to purchase 1,120,000 of the Company's common stock to existing warrant holders of PEDCO;

- The grant of options to purchase 4,235,000 of the Company's common stock to existing option holders of PEDCO; and

- The issuance of 14,713,645 shares of the Company's Series A preferred stock to existing holders of Series A preferred stock of PEDCO.