UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
Date of
Report (Date of Earliest Event Reported): March 31, 2020
PEDEVCO CORP.
(Exact name of registrant as specified in its charter)
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Texas
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001-35922
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22-3755993
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(State or other jurisdiction of incorporation or
organization)
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(Commission file number)
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(IRS Employer Identification No.)
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575 N. Dairy Ashford
Energy Center II, Suite 210
Houston, Texas 77079
(Address of principal executive offices)
(713) 221-1768
(Registrant’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):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.001 par value per share
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PED
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NYSE American
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Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Item 1.01 Entry Into a Material Definitive
Agreement.
On March 31, 2020, as part of PEDEVCO
Corp.’s (the “Company”,
“PEDEVCO”,
“we”
and “us”) efforts to reduce operating and corporate costs,
the independent Compensation Committee of the Company’s Board
of Directors approved a 20% reduction in salary for all of the
Company’s salaried employees, effective April 1,
2020.
In connection with the 20% salary reduction, on
March 31, 2020, the Company and each of Mr. Douglas J. Schick, the
Company’s President, and Mr. Clark R. Moore, the
Company’s Executive Vice President, General Counsel, and
Secretary, entered into amendments to their respective employment
agreements (the “Amendments”)
to effect the salary reductions on a temporary basis, until such
time as the Company determines, in its reasonable discretion, that
oil markets have recovered to acceptable levels (the
“Salary
Reduction Period”). The
Amendments to Messrs. Schick’s and Moore’s employment
agreements do not, however, reduce the amount of severance
compensation that such executive would receive under their
respective employment agreements in the event of an applicable
termination of their respective employment, subject to the terms of
such employment agreements.
In addition, the amendment entered into with Mr.
Schick includes a provision whereby, in the event Mr.
Schick’s employment with the Company is voluntarily
terminated by him due to the Company failing to pay his base salary
(as currently reduced as disclosed above) without his written
consent, the Company will (a) continue to pay Mr. Schick an
amount equal to his base salary as in effect immediately before his
termination of employment on the same bi-monthly schedule and
amounts (less required withholdings) as he received such salary
payments prior to his date of termination (the “Cash Payments”), which
Cash Payments shall be reported by the Company on IRS Form 1099 as
income to Mr. Schick and will continue until the earlier to occur
of (x) the date that is twelve (12) months after the termination of
his employment or (y) the date that he commences employment with
another employer that pays him a base salary equal to, or greater
than, his base salary as in effect immediately before his
termination of employment, provided that, if his new employer pays
him less than his Company base salary, he shall only be entitled to
Cash Payment amounts going forward through the remainder of the
twelve (12) month term equal to (i) his Company base salary at the
time of his termination minus the salary he receives from his new
employer; and (b) continue to vest his outstanding Company
restricted stock and options exercisable for Company capital stock
issued to him by the Company which are then held by him on his date
of termination on their then-current vesting schedules during the
period of up to twelve (12) months that he continues to receive the
Cash Payments, in exchange for a full and complete release of
claims against the Company, its affiliates, officers and directors
in a form reasonably acceptable to the Company. Upon the date that
his Cash Payments discontinue, he shall no longer continue to vest
into any outstanding Company restricted stock or options. The Cash
Payments payable to Mr. Schick and the other amounts, based on his
salary, which may be due to him upon termination of his offer
letter upon certain events, and subject to the terms thereof,
during the Salary Reduction Period will continue to be based on Mr.
Schick’s non-reduced salary.
As
previously disclosed, Dr. Simon Kukes, our Chief Executive Officer
and director, has agreed to receive an annual salary of $1 as his
compensation for serving as Chief Executive Officer of the Company
and as a member of the Board of Directors and to not charge the
Company for any personal business expenses he incurs in connection
with such positions. We do not currently have a formal written
agreement in place with Dr. Kukes. To date, Dr. Kukes has not
accepted any salary from the Company (including his $1 annual
compensation).
The foregoing descriptions of the Amendments do
not purport to be complete and are qualified in their entirety by
reference to the Amendments, copies of which are attached
as Exhibit
10.3 and Exhibit
10.5, respectively, to this
Current Report on Form 8-K and incorporated herein by
reference.
Item 5.02 Departure of
Directors or Certain Officers;
Election of Directors;
Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
See the discussions under Item
1.01 above with respect to
the Amendments entered into with each of Mr. Douglas J. Schick, the
Company’s President, and Mr. Clark R. Moore, the
Company’s Executive Vice President, General Counsel, and
Secretary, which are incorporated into
this Item
5.02 by reference in their
entirety.
Item 7.01 Regulation FD Disclosure.
On
March 31, 2020, the Company issued a press release announcing
certain year-ended December 31, 2019 results, and certain efforts
initiated to reduce operating and corporate costs.
A copy
of the press release is furnished as Exhibit 99.1 hereto. The
information responsive to Item 7.01 of this Form 8-K and
Exhibit 99.1
attached hereto, shall not be deemed “filed” for
purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) or
otherwise subject to the liabilities of that section, nor shall it
be deemed incorporated by reference in any filing under the
Securities Act of 1933, as amended, or the Exchange Act, except as
expressly set forth by specific reference in such a filing. The
furnishing of this Report is not intended to constitute a
determination by the Company that the information is material or
that the dissemination of the information is required by Regulation
FD.
Item 9.01 Financial Statements and
Exhibits.
(d) Exhibits.
* Filed
herewith.
**
Furnished herewith.
SIGNATURES
Pursuant to the
requirements 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.
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PEDEVCO CORP.
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By:
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/s/ Dr. Simon Kukes
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Dr. Simon Kukes
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Chief
Executive Officer
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Date: March
31, 2020
EXHIBIT INDEX
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This
Amendment No. 2 to Employment Agreement (“Amendment”), effective as
of April 1, 2020, is entered into by and between PEDEVCO Corp., as
successor-in-interest to Pacific Energy Development Corp. (herein
referred to as the “Company”), and Clark R.
Moore (“Executive”).
WHEREAS, the Company and Executive have
entered into an employment agreement, dated June 10, 2011, as
amended to date (the “Agreement”), concerning
the employment of Executive as Executive Vice President, General
Counsel and Secretary of the Company; and
WHEREAS, the parties wish to amend the
Agreement to revise certain terms of the Agreement as set forth
herein in order to reduce Company costs on a temporary
basis;
NOW, THEREFORE, in consideration of the
mutual covenants and agreements hereinafter set forth, the parties
hereto agree as follows:
1.
Temporary Reduction in Base
Salary: Commencing on April 1, 2020, and terminating upon
such time as the Company determines, in its reasonable discretion,
that oil markets have recovered to acceptable levels,
Executive’s annual base salary shall be reduced from
$250,000.00 to $200,000.00. Notwithstanding the forgoing,
Executive’s annual base salary for purposes of calculating
any “Separation Payments” under the termination
provisions set forth in Section 5 of the Agreement shall remain at
$250,000.00 during the duration of the temporary base salary
reduction.
2.
Except to the
extent modified hereby, the Agreement shall remain in full force
and effect.
3.
This Amendment
shall be binding upon and inure to the benefit of the parties and
their successors and assigns.
IN WITNESS WHEREOF, the parties have
caused the Amendment to be executed as of the date and year first
referenced above.
“The
Company”
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PEDEVCO
Corp.
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Date: March 31,
2020
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By:
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/s/ Simon Kukes
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Dr. Simon
Kukes
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Chief Executive
Officer
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Date: March 31,
2020
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By:
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/s/ Clark R. Moore
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Clark R.
Moore
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Amendment to Moore Employment Agreement
AMENDMENT NO. 1 TO OFFER LETTER
This
Amendment No.1 to Offer Letter (“Amendment”), effective as
of April 1, 2020, is entered into by and between PEDEVCO Corp.
(herein referred to as the “Company”), and John
Douglas Schick (“Executive”).
WHEREAS, the Company and the Executive
have entered into an offer letter, dated July 30, 2018, (the
“Offer
Letter”), concerning the employment of the Executive
as President of the Company; and
WHEREAS, the parties wish to amend the
Offer Letter to revise certain terms of the Offer Letter as set
forth herein in order to reduce Company costs on a temporary basis,
and to make certain other changes;
NOW, THEREFORE, in consideration of the
mutual covenants and agreements hereinafter set forth, the parties
hereto agree as follows:
1.
Temporary Reduction in Base
Salary: Commencing on April 1, 2020 and terminating upon
such time as the Company determines, in its reasonable discretion,
that oil markets have recovered to acceptable levels, the
Executive’s “Base Salary” shall be reduced from
$20,833.34 per month to $16,666.67 per month.
a.
Effective
immediately, Section 10(b) of the Offer Letter shall be amended to
include the following language immediately following the existing
language of Section 10(b):
“Furthermore,
notwithstanding Section 10.a. above, in the event your employment
with the Company is voluntarily terminated by you for “Good
Reason”, the Company will (a) continue to pay to you an
amount equal to your base salary as in effect immediately before
your termination of employment on the same bi-monthly schedule and
amounts (less required withholdings) as you received such salary
payments prior to your date of termination (the “Cash
Payments”), which Cash Payments shall be reported by the
Company on IRS Form 1099 as income to you and will continue until
the earlier to occur of (x) the date that is twelve (12) months
after the termination of your employment or (y) the date that you
commence employment with another employer that pays you a base
salary equal to, or greater than, your base salary as in effect
immediately before your termination of employment, provided that,
if your new employer pays you less than your Company base salary,
you shall only be entitled to Cash Payment amounts going forward
through the remainder of the twelve (12) month term equal to (i)
your Company base salary at the time of your termination minus the
salary you receive from your new employer (for example only, if
your new employer base salary is $10,000.00 per month, and your
Company base salary at the time of your termination was $20,833.34
per month, then the Company would pay you $10,833.34 per month for
the remainder of the term); and (b) continue to vest your
outstanding Company restricted stock and options exercisable for
Company capital stock issued to you by the Company which are then
held by you on your date of termination on their then-current
vesting schedules during the period of up to twelve (12) months
that you continue to receive the Cash Payments, in exchange for a
full and complete release of claims against the Company, its
affiliates, officer and directors in a form reasonably acceptable
to the Company and as otherwise provided in Section 10.c., below
(the “Release”). Upon the date your Cash Payments
discontinue, you shall no longer continue to vest into any
outstanding Company restricted stock or options. You agree to
notify the Company in writing upon your commencement of any new
employment within twelve (12) months of your termination of
employment with the Company, and to provide a copy of reasonable
documentation as requested by the Company to substantiate your base
salary received from your new employer. For purposes of this
provision, “Good Reason” means any failure by the
Company to pay you your base salary of $20,833.34 in any material
way, without your written consent.”
Amendment to Schick Offer Letter
b.
Notwithstanding the
forgoing, my base salary for purposes of calculating any payments
due under the termination provisions set forth in Section 10 of the
Offer Letter, as amended herein, shall remain at $20,833.34 per
month during the duration of the temporary base salary
reduction.
3.
Except to the
extent modified hereby, the Offer Letter shall remain in full force
and effect.
4.
This Amendment
shall be binding upon and inure to the benefit of the parties and
their successors and assigns.
IN WITNESS WHEREOF, the parties have
caused the Amendment to be executed as of the date and year first
referenced above.
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“The
Company”
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PEDEVCO
Corp.
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Date: March 31,
2020
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By:
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/s/ Simon Kukes
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Dr. Simon
Kukes
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Chief Executive
Officer
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Date: March 31,
2020
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By:
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/s/ John Douglas Schick
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John Douglas
Schick
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Amendment to Schick Offer Letter
PEDEVCO Announces Year-End Results
and New Cost-Reduction Initiatives
HOUSTON,
TX March 31, 2020 – On March 30, 2020, PEDEVCO Corp. (NYSE
American: PED) (“PEDEVCO” or the “Company”)
reported its year-end results for 2019, and today announced new
efforts initiated to reduce operating and corporate
costs.
Over
the year-ended December 31, 2019, the Company generated nearly $13
million in gross oil and gas revenue from the production and sale
of 266,070 barrels of oil equivalent (“BOE”) from its
Permian Basin and D-J Basin assets, representing a 186% increase in
both year-over-year production and revenues, with a corresponding
direct lease operating expense (“LOE”) increase of only
122%, demonstrating efficiencies of cost and scale as the Company
significantly increased its production. These production increases
were largely attributable to new wells completed and brought
on-line in the Company’s Permian Basin asset in late spring
2019, with the Company anticipating LOE to drop significantly in
2020 through operational efficiencies. In addition, the Company
reported $0.644 million in net cash flow provided by operating
activities before changes in working capital, which is the first
time the Company has had positive cash flow in over 10 years. In
addition, the Company’s total estimated proved reserves as
estimated by the independent petroleum engineering firm of Cawley,
Gillespie & Associates grew from 12.4 million BOE at the
year-ended December 31, 2018, to over 14.0 million BOE at the
year-ended December 31, 2019, of which 12.4 million barrels are
crude oil.
The
Company also has initiated significant G&A cost-reduction
measures, including a reduction to all employee salaries by 20%
until market conditions significantly improve, cutting all
discretionary spending, and undertaking additional actions
resulting in a nearly 30% aggregate G&A reduction in 2020.
Additionally, the Company is taking cost-reduction measures
anticipated to reduce LOE by over 30% in 2020. Unless market
conditions significantly improve through the year, the Company
plans to pause its planned 2020 development plan, with the only
anticipated significant capital expenditures in 2020 being those
related to 2019 carryover capital commitments.
Dr.
Simon Kukes, the Chief Executive Officer of the Company, commented,
"We believe our year-end results demonstrate the strength of our
assets and their growth potential as we continue to unlock the
value of our Permian Basin and D-J Basin asset positions through
further development. We are uniquely positioned with zero debt,
nearly $10 million of free cash on hand, and the ability to slow or
halt most of our current development projects to weather the
current down market. We believe our strong asset base and balance
sheet, together with the cost-cutting measures being implemented
now, will put us in an excellent position when the market recovers
to resume our full development plan and potentially acquire
additional assets from companies which are under extremely heavy
distress in the current environment.”
About PEDEVCO Corp.
PEDEVCO
Corp. (NYSE American: PED), is a publicly-traded energy company
engaged in the acquisition and development of strategic, high
growth energy projects in the United States. The Company’s
principal assets are its San Andres Asset located in the Northwest
Shelf of the Permian Basin in eastern New Mexico, and its D-J Basin
Asset located in the D-J Basin in Weld and Morgan Counties,
Colorado. PEDEVCO is headquartered in Houston, Texas.
Cautionary Statement Regarding Forward Looking
Statements
All
statements in this press release that are not based on historical
fact are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and the provisions
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the
"Acts"). In particular, when used in the preceding discussion, the
words "estimates," "believes," "hopes," "expects," "intends,"
"plans," "anticipates," or "may," and similar conditional
expressions are intended to identify forward-looking statements
within the meaning of the Act, and are subject to the safe harbor
created by the Act. Any statements made in this news release other
than those of historical fact, about an action, event or
development, are forward-looking statements. While management has
based any forward-looking statements contained herein on its
current expectations, the information on which such expectations
were based may change. These forward-looking statements rely on a
number of assumptions concerning future events and are subject to a
number of risks, uncertainties, and other factors, many of which
are outside of the Company's control, that could cause actual
results to materially differ from such statements. Such risks,
uncertainties, and other factors include, but are not necessarily
limited to, those set forth under Item 1A "Risk Factors" in the
Company's Annual Report on Form 10-K for the year ended December
31, 2019 and subsequently filed Quarterly Reports on Form 10-Q
under the heading "Risk Factors". The Company operates in a highly
competitive and rapidly changing environment, thus new or
unforeseen risks may arise. Accordingly, investors should not place
any reliance on forward-looking statements as a prediction of
actual results. The Company disclaims any intention to, and
undertakes no obligation to, update or revise any forward-looking
statements, except as otherwise required by law, and also takes no
obligation to update or correct information prepared by third
parties that are not paid for by the Company. Readers are also
urged to carefully review and consider the other various
disclosures in the Company's public filings with the Securities
Exchange Commission (SEC).
Contacts
PEDEVCO
Corp.
1-855-733-3826
PR@pedevco.com