ped_10qa.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35922

PEDEVCO Corp.

(Exact name of registrant as specified in its charter)

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

575 N. Dairy Ashford, Suite 210, Houston, Texas		77079
(Address of principal executive offices)		(Zip Code)

(713) 221-1768

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	PED	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

At August 11, 2023, there were 87,040,267 shares of the Registrant’s common stock outstanding.

Explanatory Note

On October 13, 2023, management of PEDEVCO Corp. (the “Company”) concluded, and the Audit Committee of the Board of Directors concurred, that the Company’s previously-issued unaudited financial statements as of and for the three- and six- month periods ended June 30, 2023, which were included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, originally filed with the Securities and Exchange Commission (the “SEC”) on August 14, 2023 (the “Original Filing”), should no longer be relied upon and should be restated to correct the errors discussed below. The Company is filing this Amendment No. 1 to the Quarterly Report on Form 10-Q/A (the “Amendment”), which sets forth the information in the Original Filing in its entirety, as adjusted for the effects of the restatement described below.

During the process of reviewing receivables recorded in the oil, natural gas liquids (NGL) and natural gas revenue accrual as of September 30, 2023, the Company identified a misstatement of approximately $2,046,000 attributable to errors in previous revenue accrual estimates and existing accrual amounts from new third-party operators not being adequately reversed or accurately accrued during the three-months ended June 30, 2023, resulting in an overstatement of the Company’s net production in 14 third-party operated wells (overstatement of 31,463 barrels of oil equivalent (BOE) production). Oil and gas sales, accounts receivable – oil and gas, marketing costs, severance taxes and depletion expense were misstated by approximately $2,362,000, $2,383,000, $137,000, $158,000, and $337,000, respectively, for the three and six months ended June 30, 2023. These corresponding misstatements were related to the revenue accrual misstatement noted above for the quarter ended June 30, 2023 and do not affect cash balances for the three- and six-month periods ended June 30, 2023. See also Note 1 – “Basis of Presentation and Restatement of Financial Statements—Restatement of Previously-Issued Unaudited Financial Statements” in the notes to the consolidated financial statements included in Part I, Item 1. Financial Statements, for a more detailed discussion of the restatements.

This Amendment is being filed to (i) restate the unaudited financial statements to correct the misstatements described above (and to reflect corresponding changes to the Risk Factors in Part II, Item 1A, and to Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2), and (ii) amend Part 1, Item 4 (Controls and Procedures) to address the material weakness in internal control that caused the misstatements.

To reflect the restatement of items described above, this Amendment revises the following sections of the Original Filing:

	·	Part I - Item 1. Financial Statements;
	·	Part I - Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations;
	·	Part I - Item 4. Controls and Procedures;
	·	Part II - Item 1A. Risk Factors; and
	·	Part II - Item 6. Exhibits

The misstatements giving rise to this Amendment resulted from a material weakness in internal control over financial reporting. As such, Item 4 of Part I has been amended to include our assessment of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended. This Amendment includes new certifications from the Company’s Chief Executive Officer and Chief Accounting Officer dated as of the date of the filing of this Amendment, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications are filed with this Amendment as Exhibits 31.1, 31.2, 32.1 and 32.2.

Except as described above, no other changes have been made to the Original Filing. This Amendment does not reflect events occurring after, nor does it modify or update any disclosures that may have been affected by events occurring subsequent to, the date of the filing of the Original Filing. Accordingly, this Amendment should be read in conjunction with our filings made with the Securities and Exchange Commission after the date of the Original Filing.

PEDEVCO CORP.

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		Page
Cautionary Note Regarding Forward-Looking Statements		4

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	5

	Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	5

	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	6

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	7

	Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	8

	Notes to Unaudited Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	27

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

Signatures		31

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Quarterly Report on Form 10-Q/A (this “Report”) include forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may,” and similar expressions or future or conditional verbs such as “should”, “would”, and “could” are generally forward-looking in nature and not historical facts. Forward-looking statements which are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact included in this Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs and cash flows, prospects, plans and objectives of management are forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business strategy, projected plans and objectives. These factors include, among others, the factors set forth below under the heading “Risk Factors.” Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Most of these factors are difficult to predict accurately and are generally beyond our control. Readers are cautioned not to place undue reliance on these forward-looking statements.

Forward-looking statements may include statements about our:

●	our business strategy;
●	our reserves;
●	technology;
●	our cash flows and liquidity;
●	our financial strategy, budget, projections and operating results;
●	oil and natural gas realized prices;
●	timing and amount of future production of oil and natural gas;
●	the availability of oil field labor;
●	the amount, nature and timing of capital expenditures, including future exploration and development costs;
●	drilling of wells;
●	government regulation and taxation of the oil and natural gas industry;
●	changes in, and interpretations and enforcement of, environmental and other laws and other political and regulatory developments, including in particular additional permit scrutiny in Colorado;
●	exploitation projects or property acquisitions;
●	costs of exploiting and developing our properties and conducting other operations;
●	general economic conditions in the United States and around the world, including the effect of regional or global health pandemics (such as, for example, the 2019 coronavirus (“COVID-19”)), recent increases in inflation and interest rates, and risks of recessions, including as a result thereof;
●	competition in the oil and natural gas industry;
●	effectiveness of our risk management activities;
●	environmental liabilities;
●	counterparty credit risk;
●	developments in oil-producing and natural gas-producing countries;
●	our future operating results;
●	future acquisition transactions;
●	our estimated future reserves and the present value of such reserves; and
●	our plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.

All forward-looking statements speak only at the date of the filing of this Quarterly Report. The reader should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we provide no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 29, 2023. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. We do not undertake any obligation to update or revise publicly any forward-looking statements except as required by law, including the securities laws of the United States and the rules and regulations of the SEC.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PEDEVCO CORP.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

	June 30, 2023 (Unaudited)			December 31, 2022
Assets	As Restated
Current assets:
Cash	$	12,464		$	29,430
Accounts receivable – oil and gas		4,058			2,430
Prepaid expenses and other current assets		50			249
Total current assets		16,572			32,109

Oil and gas properties – successful efforts method:
Oil and gas properties, subject to amortization, net		82,349			79,372
Oil and gas properties, not subject to amortization, net		4,970			775
Total oil and gas properties, net		87,319			80,147

Operating lease – right-of-use asset		18			71
Other assets		3,819			3,783
Total assets	$	107,728		$	116,110

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,019		$	1,556
Accrued expenses		1,322			13,835
Revenue payable		1,011			1,018
Operating lease liabilities – current		21			81
Asset retirement obligations – current		699			472
Total current liabilities		4,072			16,962

Long-term liabilities:
Asset retirement obligations, net of current portion		2,826			2,689
Total liabilities		6,898			19,651

Commitments and contingencies

Shareholders’ equity:
Common stock, $0.001 par value, 200,000,000 shares authorized; 87,040,267 and 85,790,267 shares issued and outstanding, respectively		87			86
Additional paid-in capital		224,148			223,114
Accumulated deficit		(123,405	)		(126,741	)
Total shareholders’ equity		100,830			96,459
Total liabilities and shareholders’ equity	$	107,728		$	116,110

See accompanying notes to unaudited consolidated financial statements.

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PEDEVCO CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(amounts in thousands, except share and per share data)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2023		2022			2023		2022
Revenue:	As Restated					As Restated
Oil and gas sales	$	8,548	$	9,547		$	16,712	$	16,637

Operating expenses:
Lease operating costs		2,830		2,802			5,296		5,158
Selling, general and administrative expense		1,332		1,296			2,820		2,888
Depreciation, depletion, amortization and accretion		2,898		2,228			5,479		4,114
Total operating expenses		7,060		6,326			13,595		12,160

Operating income		1,488		3,221			3,117		4,477

Other income (expense):
Interest income		86		4			184		7
Other income (expense)		-		(15	)		35		65
Total other income (expense)		86		(11	)		219		72

Net income	$	1,574	$	3,210		$	3,336	$	4,549

Income per common share:
Basic	$	0.02	$	0.04		$	0.04	$	0.05
Diluted	$	0.02	$	0.04		$	0.04	$	0.05

Weighted average number of common shares outstanding:
Basic		87,040,267		85,479,421			86,881,427		85,305,583
Diluted		87,040,267		85,479,421			86,881,427		85,305,583

See accompanying notes to unaudited consolidated financial statements.

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PEDEVCO CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(amounts in thousands)

	Six Months Ended June 30,
	2023			2022
	As Restated
Cash Flows From Operating Activities:
Net income	$	3,336		$	4,549
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion		5,479			4,114
Amortization of right-of-use asset		53			50
Share-based compensation expense		1,035			1,100
Changes in operating assets and liabilities:
Accounts receivable – oil and gas		(1,628	)		(3,002	)
Prepaid expenses and other current assets		199			289
Accounts payable		(386	)		(138	)
Accrued expenses		293			73
Revenue payable		(7	)		96
Net cash provided by operating activities		8,374			7,131

Cash Flows From Investing Activities:
Cash paid for drilling and completion costs		(25,295	)		(10,047	)
Cash paid for vehicle		(45	)		-
Net cash used in investing activities		(25,340	)		(10,047	)

Cash Flows From Financing Activities:
Proceeds from issuance of shares, net of offering costs		-			50
Net cash provided by financing activities		-			50

Net decrease in cash and restricted cash		(16,966	)		(2,866	)
Cash and restricted cash at beginning of period		32,977			29,227
Cash and restricted cash at end of period	$	16,011		$	26,361

Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest	$	-		$	-
Income taxes	$	-		$	-

Noncash investing and financing activities:
Change in accrued oil and gas development costs	$	13,017		$	1,604
Changes in estimates of asset retirement costs, net	$	31		$	80
Issuance of restricted common stock	$	1		$	1

See accompanying notes to unaudited consolidated financial statements.

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PEDEVCO CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited)

(amounts in thousands, except share amounts)

	Common Stock				Additional Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Totals
Balances at December 31, 2022		85,790,267	$	86	$	223,114		$	(126,741	)	$	96,459
Issuance of restricted common stock		1,250,000		1		(1	)		-			-
Share-based compensation		-		-		518			-			518
Net income		-		-		-			1,762			1,762
Balances at March 31, 2023		87,040,267		87		223,631			(124,979	)		98,739
Share-based compensation		-		-		517			-			517
Net income (As Restated)		-		-		-			1,574			1,574
Balances at June 30, 2023 (As Restated)		87,040,267	$	87	$	224,148		$	(123,405	)	$	100,830

	Common Stock				Additional Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Totals
Balances at December 31, 2021		84,236,146	$	84	$	220,984		$	(129,585	)	$	91,483
Issuance of restricted common stock		1,200,000		1		(1	)		-			-
Share-based compensation		-		-		563			-			563
Net income		-		-		-			1,339			1,339
Balances at March 31, 2022		85,436,146		85		221,546			(128,246	)		93,385
Sale of common stock to non-affiliate		87,121		-		50			-			50
Share-based compensation		-		-		537			-			537
Net income		-		-		-			3,210			3,210
Balances at June 30, 2022		85,550,267	$	85	$	222,133		$	(125,036	)	$	97,182

See accompanying notes to unaudited consolidated financial statements.

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PEDEVCO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND RESTATEMENT OF FINANCIAL STATEMENTS

Basis of Presentation

The accompanying interim unaudited consolidated financial statements of PEDEVCO Corp. (“PEDEVCO” or the “Company”), have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in PEDEVCO’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate disclosures contained in the audited financial statements for the most recent fiscal year, as reported in the Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 29, 2023 (the “2022 Annual Report”), have been omitted.

The Company’s consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and subsidiaries in which the Company has a controlling financial interest. All significant inter-company accounts and transactions have been eliminated in consolidation.

The Company's future financial condition and liquidity will be impacted by, among other factors, the success of our drilling program, the number of commercially viable oil and natural gas discoveries made and the quantities of oil and natural gas discovered, the speed with which we can bring such discoveries to production, the actual cost of exploration, appraisal and development of our prospects, the prevailing prices for, and demand for, oil and natural gas.

Restatement of Previously-Issued Unaudited Financial Statements

The Company has restated its unaudited financial statements, which were included in the Company’s June 30, 2023 Form 10-Q that was previously filed with the SEC on August 14, 2023, to correct an error in its oil and gas revenue accrual, which impacted accounts receivable – oil and gas and oil and gas sales as well as depletion expense to oil and gas properties. This error was identified during the process of collecting production data recorded in the oil, NGL and natural gas sales receivable balance as of September 30, 2023.

The following tables illustrate the effect of the error correction on all affected line items of the Company’s previously-issued Balance Sheet as of June 30, 2023; Statements of Operations for the three and six months ended June 30, 2023; Statement of Cash Flows for the six months ended June 30, 2023; and Statements of Stockholders' Equity for the three months ended June 30, 2023.

Balance Sheet

(in thousands)	June 30, 2023
	As Reported			Adjustments			Revised
Accounts receivable – oil and gas		6,441			(2,383	)		4,508
Total current assets		18,955			(2,383	)		16,572

Oil and gas properties, subject to amortization, net		82,012			337			82,349
Total oil and gas properties, net		86,982			337			87,319
Total assets	$	109,774		$	(2,046	)	$	107,728

Accumulated deficit		(121,359	)		(2,046	)		(123,405	)
Total shareholders’ equity		102,876			(2,046	)		100,830

Total liabilities and shareholders’ equity	$	109,774		$	(2,046	)	$	107,728

Statements of Operations

(in thousands)	Three Months Ended June 30,2023
	As Reported		Adjustments			Revised
Oil and gas sales	$	10,910	$	(2,362	)	$	8,548

Lease operating costs		2,809		21			2,830
Depreciation, depletion, amortization and accretion		3,235		(337	)		2,898
Total operating expenses		7,376		(316	)		7,060

Net income	$	3,620	$	(2,046	)	$	1,574

Earnings per common share:
Basic	$	0.04	$	(0.02	)	$	0.02
Diluted	$	0.04	$	(0.02	)	$	0.02

(in thousands)	Six Months Ended June 30, 2023
	As Reported		Adjustments			Revised
Oil and gas sales	$	19,074	$	(2,362	)	$	16,712

Lease operating costs		5,275		21			5,296
Depreciation, depletion, amortization and accretion		5,816		(337	)		5,479
Total operating expenses		13,911		(316	)		13,595

Net income	$	5,382	$	(2,046	)	$	3,336

Earnings per common share:
Basic	$	0.06	$	(0.02	)	$	0.04
Diluted	$	0.06	$	(0.02	)	$	0.04

Statement of Cash Flows

(in thousands)	Six Months Ended June 30, 2023
	As Reported			Adjustments			As Restated
Cash Flows From Operating Activities:
Net income	$	5,382		$	(2,046	)	$	3,336
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, depletion, amortization and accretion		5,816			(337	)		5,479
Changes in operating assets and liabilities:
Accounts receivable – oil and gas		(4,011	)		2,383			(1,628	)

Statements of Stockholders’ Equity

(in thousands)	Retained Earnings
	As Reported			Adjustments			As Restated
Net income		3,620			(2,046	)		1,574
Balances at June 30, 2023		(121,359	)		(2,046	)		(123,405	)

	Total Stockholder Equity
	As Reported			Adjustments			As Restated
Net income		3,620			(2,046	)		1,574
Balances at June 30, 2023		102,876			(2,046	)		100,830

NOTE 2 – DESCRIPTION OF BUSINESS

PEDEVCO is an oil and gas company focused on the development, acquisition and production of oil and natural gas assets where the latest in modern drilling and completion techniques and technologies have yet to be applied. In particular, the Company focuses on legacy proven properties where there is a long production history, well defined geology and existing infrastructure that can be leveraged when applying modern field management technologies. The Company’s current properties are located in the San Andres formation of the Permian Basin situated in West Texas and eastern New Mexico (the “Permian Basin”) and in the Denver-Julesburg Basin (“D-J Basin”) in Colorado and Wyoming. The Company holds its Permian Basin leasehold acres located in Chaves and Roosevelt Counties, New Mexico, through its wholly-owned subsidiary, Pacific Energy Development Corp. (“PEDCO”), which asset the Company refers to as its “Permian Basin Asset,” and operates its Permian Basin Asset through its wholly-owned operating subsidiaries EOR Operating Company and Ridgeway Arizona Oil Corp. The Company holds its D-J Basin leasehold acres located in Weld and Morgan Counties, Colorado, and Laramie County, Wyoming, through its newly formed wholly-owned subsidiary PRH Holdings LLC, which asset the Company refers to as its “D-J Basin Asset,” and operates its D-J Basin Asset through its wholly-owned operating subsidiary Red Hawk Petroleum, LLC (“Red Hawk”).

The Company believes that horizontal development and exploitation of conventional assets in the Permian Basin and development of the Wattenberg and Wattenberg Extension in the D-J Basin represent among the most economic oil and natural gas plays in the United States (“U.S.”). Moving forward, the Company plans to optimize its existing assets and opportunistically seek additional acreage proximate to its currently held core acreage, as well as other attractive onshore U.S. oil and gas assets that fit the Company’s acquisition criteria, that Company management believes can be developed using its technical and operating expertise and be accretive to shareholder value.

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NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company has provided a discussion of significant accounting policies, estimates and judgments in its 2022 Annual Report. There have been no changes to the Company’s significant accounting policies since December 31, 2022.

Recently Issued Accounting Pronouncements

On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments, as issued by the Financial Accounting Standards Board (FASB). This standard established the current expected credit loss model, a new impairment model for certain financial instruments, based on expected rather than incurred losses. Adoption of this standard is on a modified retrospective basis and had no material impact on the Company’s financial position, results of operations, cash flows or net income per share.

Subsequent Events

The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration.

NOTE 4 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue from Contracts with Customers. The following table disaggregates revenue by significant product type in the periods indicated (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	As Restated				As Restated
Oil sales	$	7,812	$	8,725	$	15,271	$	15,120
Natural gas sales		265		473		769		894
Natural gas liquids sales		471		349		672		623
Total revenue from customers	$	8,548	$	9,547	$	16,712	$	16,637

There were no significant contract liabilities or transaction price allocations to any remaining performance obligations as of June 30, 2023.

NOTE 5 – CASH

The following table provides a reconciliation of cash and restricted cash reported within the balance sheets, which sum to the total of such amounts in the periods indicated (in thousands):

	June 30, 2023		December 31, 2022
Cash	$	12,464	$	29,430
Restricted cash included in other assets		3,547		3,547
Total cash and restricted cash	$	16,011	$	32,977

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NOTE 6 – OIL AND GAS PROPERTIES

The following table summarizes the Company’s oil and gas activities by classification for the six months ended June 30, 2023 (in thousands):

	Balance at December 31, 2022			Additions			Disposals		Transfers		Balance at June 30, 2023
Oil and gas properties, subject to amortization	$	176,253		$	8,083		$	-	$	-	$	184,336
Oil and gas properties, not subject to amortization		775			4,195			-		-		4,970
Asset retirement costs		1,407			31			-		-		1,438
Accumulated depreciation, depletion and impairment (As Restated)		(98,288	)		(5,137	)		-		-		(103,425	)
Total oil and gas assets (As Restated)	$	80,147		$	7,172		$	-	$	-	$	87,319

For the six-month period ended June 30, 2023, the Company incurred $7,846,000 of capital costs primarily related to non-operated drilling and completion costs related to the Company’s participation in eight new non-operated wells in the D-J Basin Asset in which the Company participated, together with costs related to certain workovers for lift conversions and cleanouts in the Company’s Permian Basin Asset.

The Company also acquired approximately 267 net mineral acres, and 5,592 net lease acres, in and around its existing footprint in the D-J Basin through multiple transactions with total acquisition and due diligence costs of $483,000 for the net mineral acres and $3,949,000 for the net lease acres.

The depletion recorded for production on proved properties for the three and six months ended June 30, 2023 and 2022, amounted to $2,690,000, compared to $2,127,000, and $5,137,000, compared to $3,872,000, respectively.

NOTE 7 – ASSET RETIREMENT OBLIGATIONS

Activity related to the Company’s asset retirement obligations is as follows (in thousands):

	Six Months Ended June 30, 2023
Balance at the beginning of the period ⁽¹⁾	$	3,161
Accretion expense		333
Changes in estimates, net		31
Balance at end of period ⁽²⁾	$	3,525

	(1)	Includes $472,000 of current asset retirement obligations at December 31, 2022.

	(2)	Includes $699,000 of current asset retirement obligations at June 30, 2023.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Lease Agreements

Currently, the Company has one operating sublease for office space that requires ASC Topic 842 treatment, discussed below.

The Company’s leases typically do not provide an implicit rate. Accordingly, the Company is required to use its incremental borrowing rate in determining the present value of lease payments based on the information available at the commencement date. The Company’s incremental borrowing rate would reflect the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. However, the Company currently maintains no debt, and in order to apply an appropriate discount rate, the Company used an average discount rate of eight publicly-traded peer group companies similar to it based on size, geographic location, asset types, and/or operating characteristics.

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The Company has a sublease for its corporate offices in Houston, Texas on approximately 5,200 square feet of office space that expires on August 31, 2023 and has a base monthly rent of approximately $10,000. In December 2022, the Company entered into a new lease agreement for its existing office space that will commence on September 1, 2023, and expire on February 28, 2027. The base monthly rent will be approximately $9,200 for the first 18 months and increase to approximately $9,500 thereafter. The Company paid both a security deposit and prepaid rent for $14,700, respectively.

Supplemental cash flow information related to the Company’s operating lease is included in the table below (in thousands):

	Six Months Ended
	June 30, 2023
Cash paid for amounts included in the measurement of lease liabilities	$	62

Supplemental balance sheet information related to operating leases is included in the table below (in thousands):

	June 30, 2023
Operating lease – right-of-use asset	$	18

Operating lease liabilities - current	$	21
Operating lease liabilities - long-term		-
Total lease liability	$	21

The weighted-average remaining lease term for the Company’s operating lease is 0.2 years as of June 30, 2023, with a weighted-average discount rate of 5.35%.

Leasehold Drilling Commitments

The Company’s oil and gas leasehold acreage is subject to expiration of leases if the Company does not drill and hold such acreage by production or otherwise exercises options to extend such leases, if available, in exchange for payment of additional cash consideration. In the D-J Basin Asset, no net acres expire during the remainder of 2023, and no significant net acres expire within the next two-year period (net to our direct ownership interest only). In the Permian Basin Asset, 61 acres are due to expire during the remainder of 2023 and 40 net acres expire thereafter (net to our direct ownership interest only). The Company plans to hold significantly all of this acreage through a program of drilling and completing producing wells. If the Company is not able to drill and complete a well before lease expiration, the Company may seek to extend leases where able.

Other Commitments

Although the Company may, from time to time, be involved in litigation and claims arising out of its operations in the normal course of business, the Company is not currently a party to any material legal proceeding. In addition, the Company is not aware of any material legal or governmental proceedings against it or contemplated to be brought against it.

As part of its regular operations, the Company may become party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning its commercial operations, products, employees and other matters.

Although the Company provides no assurance about the outcome of any future legal and administrative proceedings and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on the Company’s financial condition or results of operations.

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NOTE 9 – SHAREHOLDERS’ EQUITY

Common Stock

During the six months ended June 30, 2023, the Company granted an aggregate of 1,250,000 restricted stock awards to various employees of the Company (see Note 10 below).

NOTE 10 – SHARE-BASED COMPENSATION

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award over the vesting period.

Common Stock

On January 23, 2023, an aggregate of 1,250,000 shares of restricted common stock were granted to officers of the Company under the Company’s 2021 Equity Incentive Plan. The grant of the 1,250,000 shares of restricted common stock vest as follows: 33.3% vest each subsequent year from the date of grant, contingent upon the recipient’s continued service with the Company. These shares had a total fair value of $1,363,000 based on the market price on the issuance date.

Stock-based compensation expense recorded related to the vesting of restricted stock for the six months ended June 30, 2023, was $824,000. The remaining unamortized stock-based compensation expense at June 30, 2023 related to restricted stock was $1,417,000.

Options

On January 23, 2023, the Company granted options to purchase an aggregate of 540,000 shares of common stock to various Company employees at an exercise price of $1.09 per share under the Company’s 2021 Equity Incentive Plan. The options have a term of five years and fully vest in January 2026. 33.3% vest each subsequent year from the date of grant, contingent upon the recipient’s continued service with the Company. The aggregate fair value of the options on the date of grant, using the Black-Scholes model, was $429,000. Variables used in the Black-Scholes option-pricing model for the options issued include: (1) a discount rate of 3.61% based on the applicable US Treasury bill rate, (2) expected term of 3.5 years, (3) expected volatility of 113% based on the trading history of the Company, and (4) zero expected dividends.

During the six months ended June 30, 2023, the Company recognized stock option expense of $211,000. The remaining amount of unamortized stock options expense at June 30, 2023 was $421,000.

The intrinsic value of outstanding and exercisable options at June 30, 2023 was $-0-.

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Option activity during the six months ended June 30, 2023 was:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contract Term (Years)
Outstanding at December 31, 2022		1,407,667		$	1.51		2.7
Granted		540,000		$	1.09
Expired/Canceled		(21,666	)	$	1.68
Outstanding at June 30, 2023		1,926,001		$	1.39		2.9
Exercisable at June 30, 2023		959,334		$	1.63		1.8

NOTE 11 – EARNINGS PER COMMON SHARE

Earnings per common share-basic is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Net income per common share-diluted assumes the conversion of all potentially dilutive securities and is calculated by dividing net income by the sum of the weighted average number of shares of common stock, as defined above, outstanding plus potentially dilutive securities. Net income per common share-diluted considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares, as defined above, would have an anti-dilutive effect.

The calculation of earnings per share for the periods indicated below were as follows (amounts in thousands, except share and per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Numerator:	As Restated				As Restated
Net income	$	1,574	$	3,210	$	3,336	$	4,549

Denominator:
Weighted average common shares – basic		87,040,267		85,479,421		86,881,427		85,305,583

Dilutive effect of common stock equivalents:
Options		-		-		-		-

Denominator:
Weighted average common shares – diluted		87,040,267		85,479,421		86,881,427		85,305,583

Earnings per share – basic	$	0.02	$	0.04	$	0.04	$	0.05
Earnings per share – diluted	$	0.02	$	0.04	$	0.04	$	0.05

For the three and six months ended June 30, 2023 and 2022, share equivalents related to options to purchase 1,926,001, compared to 1,597,667, and 1,926,001 compared to 1,597,667, shares of common stock, respectively, were excluded from the computation of diluted net income per share as the inclusion of such shares would be anti-dilutive.

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NOTE 12 – INCOME TAXES

The Company has estimated that its effective tax rate for U.S. purposes will be zero for the 2023 and 2022 fiscal years as a result of prior net losses and a full valuation allowance against the net deferred tax assets. Consequently, the Company has recorded no provision or benefit for income taxes for the three months ended June 30, 2023 and 2022, respectively.

NOTE 13 – SUBSEQUENT EVENTS

In August 2023, the Company acquired approximately 494 net lease acres in and around its existing footprint in the D-J Basin through multiple transactions at total acquisition costs of $508,000.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following is management’s discussion and analysis of the significant factors that affected the Company’s financial position and results of operations during the periods included in the accompanying unaudited consolidated financial statements. You should read this in conjunction with the discussion under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, and the unaudited consolidated financial statements included in this quarterly Report.

Certain abbreviations and oil and gas industry terms used throughout this Quarterly Report are described and defined in greater detail under “Glossary of Oil And Natural Gas Terms” on page 2 of our Annual Report on Form 10‑K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission on March 29, 2023.

Our fiscal year ends on December 31st. Interim results are presented on a quarterly basis for the quarters ended March 31st, June 30th, and September 30th, the first quarter, second quarter and third quarter, respectively, with the quarter ending December 31st being referenced herein as our fourth quarter. Fiscal 2022 means the year ended December 31, 2022, whereas fiscal 2023 means the year ended December 31, 2023.

Certain capitalized terms used below but not otherwise defined, are defined in, and shall be read along with the meanings given to such terms in, the notes to the unaudited financial statements of the Company for the three and six months ended June 30, 2023, above.

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “PEDEVCO” and “PEDEVCO Corp.” refer specifically to PEDEVCO Corp. and its wholly and majority-owned subsidiaries.

In addition, unless the context otherwise requires and for the purposes of this Report only:

●

“Boe” refers to barrels of oil equivalent, determined using the ratio of one Bbl of crude oil, condensate or natural gas liquids, to six Mcf of natural gas;

●

“Bopd” refers to barrels of oil day;

●

“Mcf” refers to a thousand cubic feet of natural gas;

●

“NGL” refers to natural gas liquids;

●

“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

	●	“SEC” or the “Commission” refers to the United States Securities and Exchange Commission;

	●	“SWD” means a saltwater disposal well; and

●

“Securities Act” refers to the Securities Act of 1933, as amended.

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Available Information

The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, are filed with the SEC. The Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements and other information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge at our website (www.pedevco.com) under “Investors” – “SEC Filings”, when such reports are available on the SEC’s website. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The Company periodically provides other information for investors on its corporate website, www.pedevco.com. This includes press releases and other information about financial performance, information on corporate governance and details related to the Company’s annual meeting of shareholders. The information contained on the websites referenced in this Form 10-Q/A is not incorporated by reference into this filing. Further, the Company’s references to website URLs are intended to be inactive textual references only.

Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. Our MD&A is organized as follows:

	●	General Overview. Discussion of our business and overall analysis of financial and other highlights affecting us, to provide context for the remainder of our MD&A.

	●	Strategy. Discussion of our strategy moving forward and how we plan to seek to increase stockholder value.

	●	Results of Operations and Financial Condition. An analysis of our financial results comparing the three and six-month periods ended June 30, 2023, and 2022, and a discussion of changes in our consolidated balance sheets, cash flows and a discussion of our financial condition.

	●	Critical Accounting Policies. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.

General Overview

We are an oil and gas company focused on the development, acquisition and production of oil and natural gas assets where the latest in modern drilling and completion techniques and technologies have yet to be applied. In particular, we focus on legacy proven properties where there is a long production history, well defined geology and existing infrastructure that can be leveraged when applying modern field management technologies. Our current properties are located in the San Andres formation of the Permian Basin situated in West Texas and eastern New Mexico and in the Denver-Julesburg Basin in Colorado and Wyoming. As of June 30, 2023, we held approximately 31,274 net Permian Basin acres located in Chaves and Roosevelt Counties, New Mexico, through PEDCO and approximately 17,191 net D-J Basin acres located in Weld and Morgan Counties, Colorado, and Laramie County, Wyoming, through our wholly-owned operating subsidiary, Red Hawk, which D-J Basin leases were assigned to our newly formed wholly-owned subsidiary, PRH Holdings LLC, in early August 2023. As of June 30, 2023, we held interests in 380 gross (376 net) wells in our Permian Basin Asset of which 45 are active producers, 16 are active injectors and two are active Saltwater Disposal Wells (“SWDs”), all of which are held by PEDCO and operated by its wholly-owned operating subsidiaries, and interests in 97 gross (24.6 net) wells in our D-J Basin Asset, of which 18 gross (16.2 net) wells are operated by Red Hawk and currently producing, 62 gross (8.4 net) wells are non-operated, and 17 wells have an after-payout interest.

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Strategy

We believe that horizontal development and exploitation of conventional assets in the Permian Basin and development of the Wattenberg and Wattenberg Extension in the D-J Basin, represent among the most economic oil and natural gas plays in the U.S. We plan to optimize our existing assets and opportunistically seek additional acreage proximate to our currently held core acreage, as well as other attractive onshore U.S. oil and gas assets that fit our acquisition criteria, that Company management believes can be developed using our technical and operating expertise and be accretive to stockholder value.

Specifically, we seek to increase stockholder value through the following strategies:

●

Grow production, cash flow and reserves by developing our operated drilling inventory and participating opportunistically in non-operated projects. We believe our extensive inventory of drilling locations in the Permian Basin and the D-J Basin, combined with our operating expertise, will enable us to continue to deliver accretive production, cash flow and reserves growth. We believe the location, concentration and scale of our core leasehold positions, coupled with our technical understanding of the reservoirs will allow us to efficiently develop our core areas and to allocate capital to maximize the value of our resource base.

●

Apply modern drilling and completion techniques and technologies. We own and intend to acquire additional properties that have been historically underdeveloped and underexploited. We believe our attention to detail and application of the latest industry advances in horizontal drilling, completions design, frac intensity and locally optimal frac fluids will allow us to successfully develop our properties.

●

Optimization of well density and configuration. We own properties that are legacy oil fields characterized by widespread vertical and horizontal development and geological well control. We utilize the extensive geological, petrophysical and production data of such legacy properties to confirm optimal well spacing and configuration using modern reservoir evaluation methodologies.

●

Maintain a high degree of operational control. We believe that by retaining high operational control, we can efficiently manage the timing and amount of our capital expenditures and operating costs, and thus key in on the optimal drilling and completions strategies, which we believe will generate higher recoveries and greater rates of return per well.

●

Leverage extensive deal flow, technical and operational experience to evaluate and execute accretive acquisition opportunities. Our management and technical teams have an extensive track record of forming and building oil and gas businesses. We also have significant expertise in successfully sourcing, evaluating and executing acquisition opportunities. We believe our understanding of the geology, geophysics and reservoir properties of potential acquisition targets will allow us to identify and acquire highly prospective acreage in order to grow our reserve base and maximize stockholder value.

●	Preserve financial flexibility to pursue organic and external growth opportunities. We intend to maintain a disciplined financial profile in order to provide flexibility across various commodity and market cycles.

We also are committed to developing and monitoring environmental, social and governance (“ESG”) initiatives and the Board of Directors plans to evaluate the potential adoption of ESG initiatives from time to time, provided that no definitive ESG plans have been adopted to date.

SEC Form 10-Q/A filed by Pedevco Corp. (Amendment)