PEDEVCO CORP - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE A22CT OF 1934

For the quarterly period ended: September 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 November 8, 2023, there were 87,250,267 shares of the Registrant’s common stock outstanding.

PEDEVCO CORP.

TABLE OF CONTENTS

		Page
Cautionary Note Regarding Forward-Looking Statements		3

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and December 31, 2022	4

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)	5

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (Unaudited)	6

	Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)	7

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults Upon Senior Securities	28

Item 4.	Mine Safety Disclosures	28

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 (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 business strategy;
●	our reserves;
●	our 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;
●	political conditions in or affecting oil, NGLs and natural gas producing regions and/or pipelines, including in Eastern Europe, the Middle East and South America, for example, as experienced with the Russian invasion of the Ukraine in February 2022 and the current war in Israel, which conflicts are ongoing;
●	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)

	September 30, 2023 (Unaudited)			December 31, 2022
Assets
Current assets:
Cash	$	13,200		$	29,430
Accounts receivable – oil and gas		5,615			2,430
Prepaid expenses and other current assets		342			249
Total current assets		19,157			32,109

Oil and gas properties – successful efforts method:
Oil and gas properties, subject to amortization, net		81,606			79,372
Oil and gas properties, not subject to amortization, net		5,980			775
Total oil and gas properties, net		87,586			80,147

Operating lease – right-of-use asset		337			71
Other assets		3,803			3,783
Total assets	$	110,883		$	116,110

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,054		$	1,556
Accrued expenses		2,354			13,835
Revenue payable		956			1,018
Operating lease liabilities – current		87			81
Asset retirement obligations – current		896			472
Total current liabilities		5,347			16,962

Long-term liabilities:
Operating lease liabilities, net of current portion		250			-
Asset retirement obligations, net of current portion		2,996			2,689
Total liabilities		8,593			19,651

Commitments and contingencies

Shareholders’ equity:
Common stock, $0.001 par value, 200,000,000 shares authorized; 87,250,267 and 85,790,267 shares issued and outstanding, respectively		87			86
Additional paid-in capital		224,659			223,114
Accumulated deficit		(122,456	)		(126,741	)
Total shareholders’ equity		102,290			96,459
Total liabilities and shareholders’ equity	$	110,883		$	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				Nine Months Ended
	September 30,				September 30,
Revenue:	2023		2022		2023		2022
Oil and gas sales	$	7,330	$	7,472	$	24,042	$	24,109

Operating expenses:
Lease operating costs		2,245		2,918		7,540		8,076
Selling, general and administrative expense		1,297		1,220		4,118		4,108
Depreciation, depletion, amortization and accretion		2,932		2,313		8,411		6,427
Total operating expenses		6,474		6,451		20,069		18,611

Operating income		856		1,021		3,973		5,498

Other income:
Interest income		88		33		272		40
Other income		5		25		40		90
Total other income		93		58		312		130

Net income	$	949	$	1,079	$	4,285	$	5,628

Income per common share:
Basic	$	0.01	$	0.01	$	0.05	$	0.07
Diluted	$	0.01	$	0.01	$	0.05	$	0.07

Weighted average number of common shares outstanding:
Basic		87,108,745		85,644,180		86,958,033		85,419,689
Diluted		87,108,745		85,644,180		86,958,033		85,419,689

See accompanying notes to unaudited consolidated financial statements.

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PEDEVCO CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(amounts in thousands)

	Nine Months Ended September 30,
	2023			2022
Cash Flows From Operating Activities:
Net income	$	4,285		$	5,628
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion		8,411			6,427
Amortization of right-of-use asset		86			75
Share-based compensation expense		1,546			1,572
Changes in operating assets and liabilities:
Accounts receivable – oil and gas		(3,185	)		(899	)
Prepaid expenses and other current assets		(93	)		10
Accounts payable		(232	)		(243	)
Accrued expenses		669			366
Revenue payable		(62	)		58
Net cash provided by operating activities		11,425			12,994

Cash Flows From Investing Activities:
Cash paid for drilling and completion costs		(27,985	)		(11,413	)
Cash received from the sale of oil and gas property		366			-
Cash received from security deposit reimbursement		9			-
Cash paid for vehicle		(45	)		-
Net cash used in investing activities		(27,655	)		(11,413	)

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

Net (decrease) increase in cash and restricted cash		(16,230	)		1,631
Cash and restricted cash at beginning of period		32,977			29,227
Cash and restricted cash at end of period	$	16,747		$	30,858

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	$	12,558		$	1,791
Changes in estimates of asset retirement costs, net	$	131		$	158
Issuance of restricted common stock	$	1		$	2

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 NINE MONTHS ENDED SEPTEMBER 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		-		-		-			1,574			1,574
Balances at June 30, 2023		87,040,267		87		224,148			(123,405	)		100,830
Issuance of restricted common stock		210,000		-		-			-			-
Share-based compensation		-		-		511			-			511
Net income		-		-		-			949
Balances at September 30, 2023		87,250,267	$	87	$	224,659		$	(122,456	)	$	102,290

	Common Stock				Additional Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Totals
Balances at December 31, 2021		84,263,146	$	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		85,463,146		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
Issuance of restricted common stock		240,000		1		(1	)		-			-
Share-based compensation		-		-		472			-			472
Net income		-		-		-			1,079			1,079
Balances at September 30, 2022		85,790,267	$	86	$	222,604		$	(123,957	)	$	98,733

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

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.

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 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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Oil sales	$	6,705	$	6,978	$	21,977	$	22,098
Natural gas sales		330		398		1,099		1,292
Natural gas liquids sales		295		96		966		719
Total revenue from customers	$	7,330	$	7,472	$	24,042	$	24,109

There were no significant contract liabilities or transaction price allocations to any remaining performance obligations as of September 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):

	September 30, 2023		December 31, 2022
Cash	$	13,200	$	29,430
Restricted cash included in other assets		3,547		3,547
Total cash and restricted cash	$	16,747	$	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 nine months ended September 30, 2023 (in thousands):

	Balance at December 31, 2022			Additions			Disposals			Transfers		Balance at September 30, 2023
Oil and gas properties, subject to amortization	$	176,253		$	10,221		$	(366	)	$	-	$	186,108
Oil and gas properties, not subject to amortization		775			5,206			-			-		5,981
Asset retirement costs		1,407			131			-			-		1,538
Accumulated depreciation, depletion and impairment		(98,288	)		(7,753	)		-			-		(106,041	)
Total oil and gas assets	$	80,147		$	7,805		$	(366	)	$	-	$	87,586

For the nine-month period ended September 30, 2023, the Company incurred $9,985,000 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 282 net mineral acres, and 6,305 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 $493,000 for the net mineral acres and $4,946,000 for the net lease acres.

On September 12, 2023, the Company and Evolution Petroleum Corporation (“Evolution”) entered into a Participation Agreement for the joint development of approximately 16,000 gross leasehold acres divided into twelve “Development Blocks” within the Company’s Permian Basin Asset, in which the parties may jointly develop by drilling and completion of up to nine horizontal San Andres wells in each Development Block. The Company received net proceeds of $366,000 and will serve as the operator. Evolution acquired a 50% working interest share in existing leases, covering the initial two Development Blocks (which equals Evolution’s share of the acreage portion for nine drilling locations therein), and upon completion of the wells in each Development Block, Evolution will have the right, but not the obligation, to acquire a 50% working interest share in the next Development Block in exchange for the payment of $450 per net acre of existing leases held by the Company in such block, and participate on a 50% working interest share basis in the drilling and completion of up to nine horizontal San Andres wells in such Development Block.

The depletion recorded for production on proved properties for the three and nine months ended September 30, 2023 and 2022, amounted to $2,616,000, compared to $2,084,000, and $7,753,000, compared to $5,956,000, respectively.

NOTE 7 – ASSET RETIREMENT OBLIGATIONS

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

	Nine Months Ended September 30, 2023
Balance at the beginning of the period ⁽¹⁾	$	3,161
Accretion expense		642
Liabilities settled		(42	)
Changes in estimates, net		131
Balance at end of period ⁽²⁾	$	3,892

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

	(2)	Includes $896,000 of current asset retirement obligations at September 30, 2023.

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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 a borrowing rate obtained from a financial institution at which it maintains banking accounts.

The Company had a lease for its corporate offices in Houston, Texas on approximately 5,200 square feet of office space that expired on August 31, 2023 and had 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 commenced on September 1, 2023, which expires 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):

Nine Months Ended

September

30, 2023

Cash paid for amounts included in the measurement of lease liabilities

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

	September 30, 2023
Operating lease – right-of-use asset	$	337

Operating lease liabilities - current	$	87
Operating lease liabilities - long-term		250
Total lease liability	$	337

The weighted-average remaining lease term for the Company’s operating lease is 3.4 years as of September 30, 2023, with a weighted-average discount rate of 7.90%.

Lease liability with enforceable contract terms that have greater than one-year terms are as follows (in thousands):

Remainder of 2023	$	28
2024		110
2025		112
2026		115
Thereafter		19
Total lease payments		384
Less imputed interest		(47	)
Total lease liability	$	337

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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, 32 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.

NOTE 9 – SHAREHOLDERS’ EQUITY

Common Stock

During the nine months ended September 30, 2023, the Company granted an aggregate of 1,460,000 restricted stock awards to various employees and board members 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.

On August 31, 2023, an aggregate of 210,000 restricted stock awards were granted to two board members under the Company’s 2021 Equity Incentive Plan. The grant of the 210,000 shares of restricted common stock vest as follows: 100% of 125,000 shares and 100% of 85,000 shares vesting on July 12, 2024 and September 27, 2024, respectively, contingent upon each recipient’s continued service with the Company. These shares have a total fair value of $200,000, based on the market price on the grant date.

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Stock-based compensation expense recorded related to the vesting of restricted stock for the nine months ended September 30, 2023, was $1,229,000. The remaining unamortized stock-based compensation expense at September 30, 2023 related to restricted stock was $1,211,000.

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 nine months ended September 30, 2023, the Company recognized stock option expense of $317,000. The remaining amount of unamortized stock options expense at September 30, 2023 was $316,000.

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

Option activity during the nine months ended September 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		(241,666	)	$	2.14
Outstanding at September 30, 2023		1,706,001		$	1.29		3.0
Exercisable at September 30, 2023		739,334		$	1.46		1.9

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.

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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 September 30,				Nine Months Ended September 30,
Numerator:	2023		2022		2023		2022
Net income	$	949	$	1,079	$	4,285	$	5,628

Denominator:
Weighted average common shares – basic		87,108,745		85,644,180		86,958,033		85,419,689

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

Denominator:
Weighted average common shares – diluted		87,108,745		85,644,180		86,958,033		85,419,689

Earnings per share – basic	$	0.01	$	0.01	$	0.05	$	0.07
Earnings per share – diluted	$	0.01	$	0.01	$	0.05	$	0.07

For the three and nine months ended September 30, 2023 and 2022, share equivalents related to options to purchase 1,706,001, compared to 1,456,000, and 1,706,001 compared to 1,456,000, 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.

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 September 30, 2023 and 2022, respectively.

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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 nine months ended September 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 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 nine-month periods ended September 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 September 30, 2023, we held approximately 31,245 net Permian Basin acres located in Chaves and Roosevelt Counties, New Mexico, through PEDCO and approximately 22,188 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 wholly-owned subsidiary, PRH Holdings LLC, in early August 2023. As of September 30, 2023, we held interests in 379 gross (375 net) wells in our Permian Basin Asset of which 44 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.

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Our strategy is to be the operator and/or a significant working interest owner, directly or through our subsidiaries and joint ventures, in the majority of our Permian Basin acreage so we can dictate the pace of development in order to execute our business plan. Our D-J Basin strategy is to participate in projects we deem highly economic on an operated or non-operated basis as our acreage position does not always allow for us to serve as operator in the D-J Basin. Our net capital expenditures for 2023 are estimated at the time of this Quarterly Report to range between $28.5 million to $30.5 million (of which we have incurred approximately $15.4 million in expenses through September 30, 2023). This estimate includes a range of $13 million to $17 million for drilling and completion costs on our Permian Basin and D-J Basin Assets (of which we have incurred approximately $5.5 million in expenses through September 30, 2023), approximately $5.0 million in estimated capital expenditures for ESP purchases, rod pump conversions, recompletions, well cleanouts, facilities, remediation and other miscellaneous capital expenses (of which we have incurred $4.4 million in expenses through September 30, 2023), and approximately $5.0 million for leasehold acquisitions and mineral acquisitions (of which we have incurred approximately $5.0 million for leasehold acquisitions and $0.5 million for mineral acquisitions through September 30, 2023). We have received AFE’s for two non-operated projects in the D-J Basin consisting of 13 total wells that are scheduled to be drilled in 2023 with a total estimated cost of approximately $10.0 million net to the Company. We are not certain if we will be billed for these projects in 2023, or if they will be completed in 2023. However, both projects are included in our $28.5 million to $30.5 million capital expenditure projections as estimated drilling and completion costs in 2023. We also plan to spend approximately $5.0 million net to the Company on drilling and completion costs on three new horizontal San Andres wells on our Permian Basin Asset that we began drilling in October 2023 in which we have a 50% working interest and serve as the operator. We also paid approximately $12.5 million in accrued capital expenditures for amounts related to our 2022 capital budget in 2023, which are not included in our net capital expenditures projections for 2023. We periodically review our capital expenditures and adjust our capital forecasts and allocations based on liquidity, drilling results, leasehold acquisition opportunities, partner non-consents, proposals from third party operators, and commodity prices, while prioritizing our financial strength and liquidity.

We plan to continue to evaluate D-J Basin well proposals as received from third party operators and participate in those we deem most economic and prospective. If new proposals are received that meet our economic thresholds and require material capital expenditures, we have flexibility to move capital from our Permian Asset to our D-J Basin Asset, or vice versa, as our Permian Asset is 100% operated and held by production (“HBP”), allowing for flexibility of timing on development. Our 2023 development program incorporates service costs that have remained relatively flat, based on costs we have experienced since the second half of 2022. Our 2023 development program is based upon our current outlook for the year and is subject to revision, if and as necessary, to react to market conditions, product pricing, contractor availability, requisite permitting, capital availability, partner non-consents, capital allocation changes between assets, acquisitions, divestitures and other adjustments determined by the Company in the best interest of its shareholders while prioritizing our financial strength and liquidity.

We expect that we will have sufficient cash available to meet our needs over the next 12 months after the filing of this Report and in the foreseeable future, including to fund our 2023 development program, discussed above, which cash we anticipate being available from (i) projected cash flow from our operations, (ii) existing cash on hand, (iii) equity infusions or loans (which may be convertible) made available from Dr. Simon Kukes, our Chief Executive Officer and director, which funding Dr. Kukes is under no obligation to provide, (iv) public or private debt or equity financings, including up to $3.5 million in securities which we may sell in the future in an on-going “at the market offering”, subject to availability under the Company’s shelf-registration, which limits the maximum amount of securities which can be sold in any 12 month period to 1/3 of the Company’s then public float, and (v) funding through credit or loan facilities. In addition, we may seek additional funding through asset sales, farm-out arrangements, and credit facilities to fund potential acquisitions during the remainder of 2023.

How We Conduct Our Business and Evaluate Our Operations

Our use of capital for acquisitions and development allows us to direct our capital resources to what we believe to be the most attractive opportunities as market conditions evolve. We have historically acquired properties that we believe had significant appreciation potential. We intend to continue to acquire both operated and non-operated properties to the extent we believe they meet our return objectives.

We will use a variety of financial and operational metrics to assess the performance of our oil and natural gas operations, including:

	·	production volumes;
	·	realized prices on the sale of oil and natural gas, including the effects of our commodity derivative contracts;
	·	oil and natural gas production and operating expenses;
	·	capital expenditures;
	·	general and administrative expenses;
	·	net cash provided by operating activities; and
	·	net income.

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Results of Operations and Financial Condition

Market Conditions and Commodity Prices

Our financial results depend on many factors, particularly the price of natural gas and crude oil and our ability to market our production on economically attractive terms. Commodity prices are affected by many factors outside of our control, including changes in market supply and demand, which are impacted by among other factors, weather conditions, inventory storage levels, basis differentials and other factors. As a result, we cannot accurately predict future commodity prices and, therefore, we cannot determine with any degree of certainty what effect increases or decreases in these prices will have on our production volumes or revenues. In addition to production volumes and commodity prices, finding and developing sufficient amounts of natural gas and crude oil reserves at economical costs are critical to our long-term success. We expect prices to remain volatile for the remainder of the year. For information about the impact of realized commodity prices on our natural gas and crude oil and condensate revenues, refer to “Results of Operations” below.

Results of Operations

The following discussion and analysis of the results of operations for the three and nine-month periods ended September 30, 2023 and 2022, should be read in conjunction with our consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q. The majority of the numbers presented below are rounded numbers and should be considered as approximate.

Three Months Ended September 30, 2023 vs. Three Months Ended September 30, 2022

We reported net income for the three-month period ended September 30, 2023 of $0.95 million, or $0.01 per share, compared to net income for the three-month period ended September 30, 2022 of $1.1 million or $0.01 per share. The decrease in net income of $0.13 million, when comparing the current period to the prior year’s period, was primarily due to a $0.1 million decrease in net revenues coupled with minimal changes to total operating expenses and other income (all of which are discussed in more detail below).

Net Revenues

The following table sets forth the operating results and production data for the periods indicated:

	Three Months Ended September 30,				Increase			% Increase
	2023		2022		(Decrease)			(Decrease)
Sale Volumes:
Crude Oil (Bbls)		88,755		76,644		12,111			16%
Natural Gas (Mcf)		144,495		51,564		92,931			180%
NGL (Bbls)		13,724		3,140		10,584			337%
Total (Boe) ⁽¹⁾		126,562		88,378		38,184			43%

Crude Oil (Bbls per day)		965		833		132			16%
Natural Gas (Mcf per day)		1,571		560		1,011			181%
NGL (Bbls per day)		149		34		115			338%
Total (Boe per day) ⁽¹⁾		1,376		960		416			43%

Average Sale Price:
Crude Oil ($/Bbl)	$	75.54	$	91.04	$	(15.50	)		(17%)
Natural Gas ($/Mcf)		2.29		7.72		(5.43	)		(70%)
NGL ($/Bbl)		21.46		30.57		(9.11	)		(30%)

Net Operating Revenues (in thousands):
Crude Oil	$	6,705	$	6,978	$	(273	)		(4%)
Natural Gas		330		398		(68	)		(17%)
NGL		295		96		199			207%
Total Revenues	$	7,330	$	7,472	$	(142	)		(2%)

(1)	Assumes 6 Mcf of natural gas equivalents to 1 barrel of oil.

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Total crude oil, natural gas and NGL revenues for the three-month period ended September 30, 2023, decreased $0.1 million, or 2%, to $7.33 million, compared to $7.47 million for the same period a year ago, due to a favorable volume variance of $1.4 million, offset by an unfavorable price variance of $1.5 million, due to the average sales prices for crude oil, natural gas and NGLs realized by the Company decreasing considerably from the three-month period ended September 30, 2022. The increase in production volume is related to the positive performance from our participation in 14 non-operated wells in the D-J Basin Asset (six of which began producing in late 2022 and eight of which began producing in the first quarter of 2023), combined with maintaining relatively flat production declines from the existing operated Permian Basin and D-J Basin Assets.

Operating Expenses and Other Income

The following table summarizes our production costs and operating expenses for the periods indicated (in thousands):

	Three Months Ended
	September 30,					Increase			% Increase
	2023			2022		(Decrease)			(Decrease)
Direct Lease Operating Expenses	$	1,106		$	1,250	$	(144	)		(12%)
Workovers		373			886		(513	)		(58)
Gain on ARO Settlement		(11	)		-		11			100%
Other*		777			782		(5	)		(1%)
Total Lease Operating Expenses	$	2,245		$	2,918	$	(673	)		(23%)

Depreciation, Depletion,
Amortization and Accretion	$	2,932		$	2,313	$	619			27%

General and Administrative (Cash)	$	786		$	748	$	38			5%
Share-Based Compensation (Non-Cash)		511			472		39			8%
Total General and Administrative Expense	$	1,297		$	1,220	$	77			6%

Interest Income	$	88		$	33	$	55			167%
Other Income	$	5		$	25	$	(20	)		(80%)

*Includes severance, ad valorem taxes and marketing costs.

Lease Operating Expenses. Expense reduction measures to control costs have been implemented on our operated properties in our Permian Basin and D-J Basin Assets, such as operation and lift efficiency improvements, resulting in a reduction in direct operating expenses, offset by a corresponding increase in direct operating expenses from our participation in non-operated wells (noted above) when comparing the current period to the prior period. Other expenses have also increased due to production increases, offset by a corresponding decrease in workovers when comparing the current period to the prior period. Taken together, there was a $0.7 million decrease in overall lease operating expenses when comparing the prior period.

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Depreciation, Depletion, Amortization and Accretion. The $0.6 million increase was primarily the result of an increase in production (noted above) in the current period when compared to the prior period.

General and Administrative Expenses (excluding share-based compensation). There was 5% increase in general and administrative expenses (excluding share-based compensation) as the Company continues to strive to contain costs and remain within budget from period to period.

Share-Based Compensation. Share-based compensation, which is included in general and administrative expenses in the Statements of Operations, increased 8% due to the issuance of restricted shares of common stock to board members during the current period. Share-based compensation is utilized for the purpose of conserving cash resources for use in field development activities and operations.

Interest Income and Other Income. Includes interest earned from our interest-bearing cash accounts, for which interest rates have increased significantly in the current period, compared to the prior period. Other income in the prior period is primarily related to a $24,000 non-refundable two-year rent payment made in September 2022 to the Company for office space leased by SK Energy, LLC (“SK Energy”), which is 100% owned and controlled by Simon Kukes, our Chief Executive Officer and director, coupled with a $9,000 sale of old equipment.

Nine Months Ended September 30, 2023 vs. Nine Months Ended September 30, 2022

We reported net income for the nine-month period ended September 30, 2023 of $4.3 million, or $0.05 per share, compared to net income for the nine-month period ended September 30, 2022 of $5.6 million or $0.07 per share. The decrease in net income of $1.3 million was primarily due to a nominal decrease in revenue, coupled with an increase of $1.5 million in total operating expenses in the current period, offset by a $0.2 million increase in interest and other income (all of which are discussed in more detail below).

Net Revenues

The following table sets forth the operating results and production data for the periods indicated:

	Nine Months Ended September 30,				Increase			% Increase
	2023		2022		(Decrease)			(Decrease)
Sale Volumes:
Crude Oil (Bbls)		304,487		233,851		70,636			30%
Natural Gas (Mcf)		353,179		194,280		158,899			82%
NGL (Bbls)		42,737		17,455		25,282			145%
Total (Boe) ⁽¹⁾		406,087		283,686		122,401			43%

Crude Oil (Bbls per day)		1,115		857		258			30%
Natural Gas (Mcf per day)		1,294		712		582			82%
NGL (Bbls per day)		157		64		93			145%
Total (Boe per day) ⁽¹⁾		1,488		1,040		448			43%

Average Sale Price:
Crude Oil ($/Bbl)	$	72.18	$	94.49	$	(22.31	)		(24%)
Natural Gas ($/Mcf)		3.11		6.65		(3.54	)		(53%)
NGL ($/Bbl)		22.60		41.19		(18.59	)		(45%)

Net Operating Revenues (in thousands):
Crude Oil	$	21,977	$	22,098	$	(121	)		(1%)
Natural Gas		1,099		1,292		(193	)		(15%)
NGL		966		719		247			34%
Total Revenues	$	24,042	$	24,109	$	(67	)		-%

(1)	Assumes 6 Mcf of natural gas equivalents to 1 barrel of oil.

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Total crude oil, natural gas and NGL revenues for the nine-month period ended September 30, 2023 decreased nominally compared to the same period a year ago. Although production increased resulting in a favorable volume variance of $6.2 million, the average sales prices for crude oil, natural gas and NGLs realized by the Company decreased considerably from the nine-month period ended September 30, 2022, resulting in an unfavorable price variance of $6.2 million. The increase in production volume is related to the positive performance from our participation in 14 non-operated wells in the D-J Basin Asset (six of which began producing in late 2022 and eight of which began producing in the first quarter of 2023), combined with maintaining relatively flat production declines from the existing operated Permian Basin and D-J Basin Assets.

Operating Expenses and Other Income

The following table summarizes our production costs and operating expenses for the periods indicated (in thousands):

	Nine Months Ended
	September 30,						Increase			% Increase
	2023			2022			(Decrease)			(Decrease)
Direct Lease Operating Expenses	$	3,476		$	3,446		$	30			1%
Workovers		1,313			2,299			(986	)		(43%)
Gain on ARO Settlement		(11	)		(6	)		5			83%
Other*		2,762			2,337			425			18%
Total Lease Operating Expenses	$	7,540		$	8,076		$	(536	)		(7%)

Depreciation, Depletion,
Amortization and Accretion	$	8,411		$	6,427		$	1,984			31%

General and Administrative (Cash)	$	2,572		$	2,536		$	36			1%
Share-Based Compensation (Non-Cash)		1,546			1,572			(26	)		(2%)
Total General and Administrative Expense	$	4,118		$	4,108		$	10			-%

Interest Income	$	272		$	40		$	232			580%
Other Income	$	40		$	90		$	(50	)		(56%)

*Includes severance, ad valorem taxes and marketing costs.

Lease Operating Expenses. Expense reduction measures to control costs have been implemented on our operated properties in our Permian Basin and D-J Basin Assets, such as operation and lift efficiency improvements, resulting in a reduction in direct operating expenses, offset by a corresponding increase in direct operating expenses from our participation in non-operated wells (noted above) when comparing the current period to the prior period. Other expenses have also increased due to production increases, offset by a corresponding decrease in workovers when comparing the current period to the prior period. Taken together, there was a $0.5 million decrease in overall lease operating expenses when comparing periods.

Depreciation, Depletion, Amortization and Accretion. The $2.0 million increase was primarily the result of an increase in production (noted above) in the current period when compared to the prior period.

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General and Administrative Expenses (excluding share-based compensation).There was a nominal decrease in general and administrative expenses (excluding share-based compensation) as the Company continues to strive to contain costs and remain within budget from period to period.

Share-Based Compensation.Share-based compensation, which is included in general and administrative expenses in the Statements of Operations, decreased nominally due to the forfeiture of certain employee stock-based options due to certain voluntary employee terminations in the prior period, offset by the issuance of restricted shares of common stock to board members in the current period. Share-based compensation is utilized for the purpose of conserving cash resources for use in field development activities and operations.

Interest Income and Other Income. Includes interest earned from our interest-bearing cash accounts, for which interest rates have increased significantly in the current period, compared to the prior period. Other income in the current period is primarily related to the sale of used pipe while other income in the prior period is primarily related to an $80,000 vendor dispute settlement, coupled with a $24,000 non-refundable two-year rent payment made in September 2022, to the Company for office space leased by SK Energy, which is 100% owned and controlled by Simon Kukes, our Chief Executive Officer and director, offset by a $15,000 royalty adjustment.

Liquidity and Capital Resources

The primary sources of cash for the Company during the nine-month period ended September 30, 2023 were from $24.0 million in sales of crude oil and natural gas. The primary uses of cash were funds used for drilling, completion and operating costs, as well as leasehold acquisitions.

Working Capital

At September 30, 2023, the Company’s total current assets of $19.2 million exceeded its total current liabilities of $5.3 million, resulting in a working capital surplus of $13.9 million, while at December 31, 2022, the Company’s total current assets of $32.1 million exceeded its total current liabilities of $17.0 million, resulting in a working capital surplus of $15.1 million. The $1.2 million decrease in our working capital surplus is primarily related to cash used to fund our current capital drilling budget and leasehold acquisitions (described above).

Financing

The Company has an ongoing $3.6 million offering of securities in an “at the market offering”, pursuant to which the Company may sell securities from time to time (the “ATM Offering”). On June 10, 2022, the Company sold 87,121 shares of common stock at a sales price of $1.66 per share in the ATM Offering for net proceeds of $141,000, which includes $4,000 in commission fees. The Company also incurred $106,000 in initial and subsequent legal and audit fees for registration and placement of the ATM Offering.

We expect that we will have sufficient cash available to meet our needs over the next 12 months after the filing of this report and in the foreseeable future, including to fund our 2023 development program, discussed above, which cash we anticipate being available from (i) projected cash flow from our operations, (ii) existing cash on hand, (iii) equity infusions or loans (which may be convertible) made available from Dr. Simon Kukes, our Chief Executive Officer and director, which funding Dr. Kukes is under no obligation to provide, (iv) public or private debt or equity financings, including up to $3.5 million in securities which we may sell in the future in an on-going “at the market offering”, subject to availability under the Company’s shelf-registration, which limits the maximum amount of securities which can be sold in any 12 month period to 1/3 of the Company’s then public float, and (v) funding through credit or loan facilities. In addition, we may seek additional funding through asset sales, farm-out arrangements, and credit facilities to fund potential acquisitions during the remainder of 2023.

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Cash Flows (in thousands)

	Nine Months Ended September 30,
	2023			2022
Net cash provided by operating activities	$	11,425		$	12,994
Net cash used in investing activities		(27,655	)		(11,413	)
Net cash provided by financing activities		-			50
Net (decrease) increase in cash and restricted cash	$	(16,230	)	$	1,631

Net cash provided by operating activities.Net cash provided by operating activities decreased by $1.6 million for the current year’s period, when compared to the prior year’s period, primarily due to a decrease in net income of $1.3 million, offset by a $2.0 million increase in depreciation, depletion and amortization (due to increased sales production), and a $0.9 million net increase to our other components of working capital (predominantly from our additional oil and gas sales receivable) in the current period, related to our increased operational activity.

Net cash used in investing activities. Net cash used in investing activities increased by $16.2 million for the current year’s period, when compared to the prior year’s period, primarily due to increased capital spending relating to our drilling and completion activities.

Net cash provided by financing activities.In the prior period, we sold our common stock via our ATM Offering discussed directly above.

Non-GAAP Financial Measures

We have included EBITDA and Adjusted EBITDA in this Report as supplements to generally accepted accounting principles in the United States of America (“GAAP”) measures of performance to provide investors with an additional financial analytical framework which management uses, in addition to historical operating results, as the basis for financial, operational and planning decisions and present measurements that third parties have indicated are useful in assessing the Company and its results of operations. “EBITDA” represents net income before interest, taxes, depreciation and amortization. “Adjusted EBITDA” represents EBITDA, less share-based compensation. Adjusted EBITDA excludes certain items that we believe affect the comparability of operating results and can exclude items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. EBITDA and Adjusted EBITDA are presented because we believe they provide additional useful information to investors due to the various noncash items during the period. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are: EBITDA and Adjusted EBITDA do not reflect cash expenditures, future requirements for capital expenditures, or contractual commitments; EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs; and EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments. For example, although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. Additionally, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than PEDEVCO Corp. does, limiting its usefulness as a comparative measure. You should not consider EBITDA and Adjusted EBITDA in isolation, or as substitutes for analysis of the Company’s results as reported under GAAP. The Company’s presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. We compensate for these limitations by providing a reconciliation of each of these non-GAAP measures to the most comparable GAAP measure. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measure. The following table presents a reconciliation of the GAAP financial measure of net income to the non-GAAP financial measure of Adjusted EBITDA (in thousands):

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	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net income	$	949	$	1,079	$	4,285	$	5,628
Add (deduct)
Depreciation, depletion, amortization and accretion		2,932		2,313		8,411		6,427
EBITDA		3,881		3,392		12,696		12,055
Add (deduct)
Share-based compensation		511		472		1,546		1,572
Adjusted EBITDA	$	4,392	$	3,864	$	14,242	$	13,627

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our most significant judgments and estimates used in preparation of our financial statements.

Oil and Gas Properties, Successful Efforts Method.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.

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 expenditures incurred subsequent to the acquisition of an exploration asset in a business combination are accounted for in accordance with the policy outlined above.

Depreciation, depletion and amortization of capitalized oil and gas properties is calculated on a field-by-field basis using the unit of production method. Lease acquisition costs are amortized over the total estimated proved developed and undeveloped reserves and all other capitalized costs are amortized over proved developed reserves. Costs specific to developmental wells for which drilling is in progress or uncompleted are capitalized as wells in progress and not subject to amortization until completion and production commences, at which time amortization on the basis of production will begin.

Revenue Recognition.The Company’s revenue is comprised entirely of revenue from exploration and production activities. The Company’s oil is sold primarily to marketers, gatherers, and refiners. Natural gas is sold primarily to interstate and intrastate natural-gas pipelines, direct end-users, industrial users, local distribution companies, and natural-gas marketers. NGLs are sold primarily to direct end-users, refiners, and marketers. Payment is generally received from the customer in the month following delivery.

Contracts with customers have varying terms, including month-to-month contracts, and contracts with a finite term. The Company recognizes sales revenues for oil, natural gas, and NGLs based on the amount of each product sold to a customer when control transfers to the customer. Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed. Revenue is measured based on the contract price, which may be index-based or fixed, and may include adjustments for market differentials and downstream costs incurred by the customer, including gathering, transportation, and fuel costs.

Revenues are recognized for the sale of the Company’s net share of production volumes. Sales on behalf of other working interest owners and royalty interest owners are not recognized as revenues.

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Stock-Based Compensation. Pursuant to the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, which establishes accounting for equity instruments exchanged for employee service, we utilize the Black-Scholes option pricing model to estimate the fair value of employee stock option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances. We estimate volatility by considering historical stock volatility. We have opted to use the simplified method for estimating expected term, which is equal to the midpoint between the vesting period and the contractual term.

Recently Adopted and Recently Issued Accounting Pronouncements.

On January 1, 2023, we adopted ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, as issued by the 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 impact on the Company’s financial position, results of operations, cash flows or net income per share.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management, as appropriate, in order to allow timely decisions in connection with required disclosure.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”)(the Principal Executive Officer) and Chief Accounting Officer (“CAO”)(the Principal Financial/Accounting Officer), we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report. Based on this evaluation, our CEO and CAO concluded as of September 30, 2023, that our disclosure controls and procedures were designed at a reasonable assurance level and were not effective to provide reasonable assurance that the information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure, for the reasons discussed below.

Changes in Internal Control over Financial Reporting

Certain changes were made to the Company’s internal controls subsequent to the fiscal quarter relating to the Company’s oil, NGL and natural gas revenue accrual process for third-party operated properties to begin to remediate the material weakness identified in the second quarter. Specifically, management began to implement additional controls consisting of validating production detail of source documentation for the new well revenue accruals. Except as discussed above, there were no changes in our internal control over financial reporting during the three months ended September 30, 2023, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting, including any corrective actions regarding significant deficiencies and material weaknesses.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Commission on March 29, 2023 (the “Form 10-K”), under the heading “Item 1A. Risk Factors”, except as disclosed below, and investors are encouraged to review such risk factors in the Annual Report and below, prior to making an investment in the Company. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended December 31, 2022, under “Risk Factors” and below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.

Failure to maintain effective internal controls in future periods could impact the Company’s ability to report accurately and on a timely basis our financial condition and results of operations.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002 (“SOX”) and the NYSE rules and regulations. SOX requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting in our Annual Report on Form 10-K filing for each year, as required by Section 404 of SOX. We previously had identified a material weakness in our internal control over financial reporting relating to the completeness and accuracy of the Company’s oil, NGL and natural gas sales revenue accrual, which weaknesses existed during, and was reported in our Quarterly Report on Form 10-Q for the period ended June 30, 2023. To begin remediating this material weakness, changes were subsequently made to the Company’s internal control for validating the Company’s oil, NGL and natural gas revenue accrual process for third-party operated properties. Specifically, management began to implement additional controls consisting of validating production detail of source documentation for the new well revenue accruals.

While we believe we are in the process of remediating the material weaknesses as of September 30, 2023, we cannot assure you that this or any other material weakness will not continue to exist or occur or otherwise be discovered in the future. Any failure to maintain internal controls over financial reporting could result in material weaknesses or material misstatements in our financial statements in the future. Any such failure could harm our financial condition and operating results and could cause stockholders to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading price of our securities, including shares of our common stock.

The conflicts in Ukraine and Israel and related price volatility and geopolitical instability could negatively impact our business.

In late February 2022, Russia launched significant military action against Ukraine. The sanctions announced by the United States and other countries against Russia and Belarus following Russia’s invasion of Ukraine to date include restrictions on selling or importing goods, services, or technology in or from affected regions and travel bans and asset freezes impacting connected individuals and political, military, business, and financial organizations in Russia and Belarus. The United States and other countries could impose wider sanctions and take other actions should the conflict further escalate. Separately, in October 2023, Israel and certain Iranian-backed Palestinian forces began an armed conflict in Israel, the Gaza Strip, and surrounding areas, which threaten to extent into other Middle Eastern countries. These conflicts have caused, and could intensify, volatility in natural gas, oil and NGL prices, and the extent and duration of the military actions, sanctions and resulting market disruptions could be significant and could potentially have a substantial negative impact on the global economy and/or our business for an unknown period of time. We believe that the increase in crude oil prices during the first half of 2022 was partially due to the impact of the conflict between Russia and Ukraine on the global commodity and financial markets, and in response to economic and trade sanctions that certain countries have imposed on Russia. Any such volatility and disruptions may also magnify the impact of other risks described herein, and in our Annual Report on Form 10-K for the year ended December 31, 2022.

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We have been and may continue to be negatively impacted by inflation.

Increases in inflation have had an adverse effect on us. Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies, and geopolitical instability, including the ongoing conflicts between the Ukraine and Russia and Israel and Hamas. Continuing increases in inflation, have in the past, and could in the future, impact our costs of labor, equipment and services and the margins we are able to realize on our wells, all of which could have an adverse impact on our business, financial position, results of operations and cash flows. Inflation has also resulted in higher interest rates, which in turn raises our cost of debt borrowing.

Declining general economic, business or industry conditions have, and will continue to have, a material adverse effect on our results of operations, liquidity and financial condition, and are expected to continue having a material adverse effect for the foreseeable future.

Concerns over global economic conditions, the duration and effects of future pandemics, and the results thereof, energy costs, geopolitical issues (including, but not limited to the current Ukraine/Russia conflict and Israel/Hamas conflict), inflation, increasing interest rates and the availability and cost of credit have contributed to increased economic uncertainty and diminished expectations for the global economy. These factors, combined with volatile prices of oil and natural gas, and declining business and consumer confidence, have precipitated an economic slowdown, which could expand to a recession or global depression. If the economic climate in the United States or abroad deteriorates, demand for petroleum products could diminish, which could further impact the price at which we can sell our oil, natural gas and natural gas liquids, affect the ability of our vendors, suppliers and customers to continue operations, and ultimately adversely impact our results of operations, liquidity and financial condition to a greater extent that it has already.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company did not issue or sell any unregistered equity securities during the quarter ended September 30, 2023, and through the date of the filing of this Report.

Use of Proceeds From Sale of Registered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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ITEM 5. OTHER INFORMATION

(a)

Clawback Policy.

On November 8, 2023, the Board of Directors (the “Board”) of the Company adopted a Policy for the Recovery of Erroneously Awarded Incentive-Based Compensation (the “Clawback Policy”), to comply with the final clawback rules adopted by the U.S. Securities and Exchange Commission under Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended (“Rule 10D-1”), and the listing standards, as set forth in the New York Stock Exchange Listed Company Manual (the “NYSE Rules” and, together with Rule 10D-1, the “Final Clawback Rules”). The Clawback Policy provides for the mandatory recovery of erroneously awarded incentive compensation from current and former officers of the Company as defined in Rule 10D-1 (“Covered Officers”) in the event the Company is required to prepare an accounting restatement as specified in the Clawback Policy. Under the Clawback Policy, the Board may recoup from the Covered Officers erroneously awarded incentive compensation received within a lookback period of the three completed fiscal years preceding the date on which the Company is required to prepare an accounting restatement. The Clawback Policy is effective as of October 2, 2023.

The foregoing summary of the Clawback Policy does not purport to be complete and is qualified in its entirety by reference to the full text of the Clawback Policy, a copy of which is attached hereto as Exhibit 10.2, to this Report and incorporated herein by reference.

(b) None.

(c)

Insider Adoption, Modification or Termination of Trading Arrangements.

During the fiscal quarter ended September 30, 2023, none of our directors or officers informed us of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.

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ITEM 6. EXHIBITS

Incorporated By Reference

Exhibit No.

Description

Form

Exhibit

Filing Date

File Number

10.1+

Participation Agreement, dated September 12, 2023, entered into by and between PEDEVCO Corp. and Evolution Petroleum Corporation

8-K

10.1

9/12/2023

001-35922

10.2#*

PEDEVCO Corp., Policy for the Recovery of Erroneously Awarded Incentive-Based Compensation

31.1*

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH*

Inline XBRL Taxonomy Extension Schema Document

101.CAL*

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*

Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set

* Filed herewith.

** Furnished herewith.

+ Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.

# Indicates management contract or compensatory plan or arrangement.

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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.

	PEDEVCO Corp.

November 9, 2023	By:	/s/ Dr. Simon G. Kukes
		Dr. Simon G. Kukes
		Chief Executive Officer
		(Principal Executive Officer)

	PEDEVCO Corp.

November 9, 2023	By:	/s/ Paul A. Pinkston
		Paul A. Pinkston
		Chief Accounting Officer
		(Principal Financial and Accounting Officer)