UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

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

For the quarterly period ended: June 30, 2023

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

For the transition period from            to           

Commission file number: 001-35922

PEDEVCO Corp.

(Exact name of registrant as specified in its charter)

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

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

(713) 221-1768

(Registrant’s telephone number, including area code)

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

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

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐ 

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

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

Explanatory Note

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

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

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

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

· Part I - Item 1. Financial Statements;

· Part I - Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations;

· Part I - Item 4. Controls and Procedures;

· Part II - Item 1A. Risk Factors; and

· Part II - Item 6. Exhibits

 

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

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

2

PEDEVCO CORP.

TABLE OF CONTENTS

		Page
Cautionary Note Regarding Forward-Looking Statements		4
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	5
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	7
	Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
Signatures		31

3

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

Forward-looking statements may include statements about our:

● our business strategy;

● our reserves;

● technology;

● our cash flows and liquidity;

● our financial strategy, budget, projections and operating results;

● oil and natural gas realized prices;

● timing and amount of future production of oil and natural gas;

● the availability of oil field labor;

● the amount, nature and timing of capital expenditures, including future exploration and development costs;

● drilling of wells;

● government regulation and taxation of the oil and natural gas industry;

● changes in, and interpretations and enforcement of, environmental and other laws and other political and regulatory developments, including in particular additional permit scrutiny in Colorado;

● exploitation projects or property acquisitions;

● costs of exploiting and developing our properties and conducting other operations;

● general economic conditions in the United States and around the world, including the effect of regional or global health pandemics (such as, for example, the 2019 coronavirus (“COVID-19”)), recent increases in inflation and interest rates, and risks of recessions, including as a result thereof;

● competition in the oil and natural gas industry;

● effectiveness of our risk management activities;

● environmental liabilities;

● counterparty credit risk;

● developments in oil-producing and natural gas-producing countries;

● our future operating results;

● future acquisition transactions;

● our estimated future reserves and the present value of such reserves; and

● our plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.

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

4

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PEDEVCO CORP.

CONSOLIDATED BALANCE SHEETS

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

	June 30, 2023 (Unaudited)			December 31, 2022
Assets	As Restated
Current assets:
Cash	$	12,464		$	29,430
Accounts receivable – oil and gas		4,058			2,430
Prepaid expenses and other current assets		50			249
Total current assets		16,572			32,109
Oil and gas properties – successful efforts method:
Oil and gas properties, subject to amortization, net		82,349			79,372
Oil and gas properties, not subject to amortization, net		4,970			775
Total oil and gas properties, net		87,319			80,147
Operating lease – right-of-use asset		18			71
Other assets		3,819			3,783
Total assets	$	107,728		$	116,110
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,019		$	1,556
Accrued expenses		1,322			13,835
Revenue payable		1,011			1,018
Operating lease liabilities – current		21			81
Asset retirement obligations – current		699			472
Total current liabilities		4,072			16,962
Long-term liabilities:
Asset retirement obligations, net of current portion		2,826			2,689
Total liabilities		6,898			19,651
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.001 par value, 200,000,000 shares authorized; 87,040,267 and 85,790,267 shares issued and outstanding, respectively		87			86
Additional paid-in capital		224,148			223,114
Accumulated deficit		(123,405	)		(126,741	)
Total shareholders’ equity		100,830			96,459
Total liabilities and shareholders’ equity	$	107,728		$	116,110

See accompanying notes to unaudited consolidated financial statements.

5

PEDEVCO CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2023		2022			2023		2022
Revenue:	As Restated					As Restated
Oil and gas sales	$	8,548	$	9,547		$	16,712	$	16,637
Operating expenses:
Lease operating costs		2,830		2,802			5,296		5,158
Selling, general and administrative expense		1,332		1,296			2,820		2,888
Depreciation, depletion, amortization and accretion		2,898		2,228			5,479		4,114
Total operating expenses		7,060		6,326			13,595		12,160
Operating income		1,488		3,221			3,117		4,477
Other income (expense):
Interest income		86		4			184		7
Other income (expense)		-		(15	)		35		65
Total other income (expense)		86		(11	)		219		72
Net income	$	1,574	$	3,210		$	3,336	$	4,549
Income per common share:
Basic	$	0.02	$	0.04		$	0.04	$	0.05
Diluted	$	0.02	$	0.04		$	0.04	$	0.05
Weighted average number of common shares outstanding:
Basic		87,040,267		85,479,421			86,881,427		85,305,583
Diluted		87,040,267		85,479,421			86,881,427		85,305,583

See accompanying notes to unaudited consolidated financial statements.

6

PEDEVCO CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(amounts in thousands)

	Six Months Ended June 30,
	2023			2022
	As Restated
Cash Flows From Operating Activities:
Net income	$	3,336		$	4,549
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion		5,479			4,114
Amortization of right-of-use asset		53			50
Share-based compensation expense		1,035			1,100
Changes in operating assets and liabilities:
Accounts receivable – oil and gas		(1,628	)		(3,002	)
Prepaid expenses and other current assets		199			289
Accounts payable		(386	)		(138	)
Accrued expenses		293			73
Revenue payable		(7	)		96
Net cash provided by operating activities		8,374			7,131
Cash Flows From Investing Activities:
Cash paid for drilling and completion costs		(25,295	)		(10,047	)
Cash paid for vehicle		(45	)		-
Net cash used in investing activities		(25,340	)		(10,047	)
Cash Flows From Financing Activities:
Proceeds from issuance of shares, net of offering costs		-			50
Net cash provided by financing activities		-			50
Net decrease in cash and restricted cash		(16,966	)		(2,866	)
Cash and restricted cash at beginning of period		32,977			29,227
Cash and restricted cash at end of period	$	16,011		$	26,361
Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest	$	-		$	-
Income taxes	$	-		$	-
Noncash investing and financing activities:
Change in accrued oil and gas development costs	$	13,017		$	1,604
Changes in estimates of asset retirement costs, net	$	31		$	80
Issuance of restricted common stock	$	1		$	1

See accompanying notes to unaudited consolidated financial statements.

7

PEDEVCO CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

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

(Unaudited)

(amounts in thousands, except share amounts)

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

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

See accompanying notes to unaudited consolidated financial statements.

8

PEDEVCO CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION AND RESTATEMENT OF FINANCIAL STATEMENTS

Basis of Presentation

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

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

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

Restatement of Previously-Issued Unaudited Financial Statements 

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

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

Balance Sheet

(in thousands)	June 30, 2023
	As Reported			Adjustments			Revised
Accounts receivable – oil and gas		6,441			(2,383	)		4,508
Total current assets		18,955			(2,383	)		16,572
Oil and gas properties, subject to amortization, net		82,012			337			82,349
Total oil and gas properties, net		86,982			337			87,319
Total assets	$	109,774		$	(2,046	)	$	107,728
Accumulated deficit		(121,359	)		(2,046	)		(123,405	)
Total shareholders’ equity		102,876			(2,046	)		100,830
Total liabilities and shareholders’ equity	$	109,774		$	(2,046	)	$	107,728

Statements of Operations

(in thousands)	Three Months Ended  June 30,2023
	As Reported		Adjustments			Revised
Oil and gas sales	$	10,910	$	(2,362	)	$	8,548
Lease operating costs		2,809		21			2,830
Depreciation, depletion, amortization and accretion		3,235		(337	)		2,898
Total operating expenses		7,376		(316	)		7,060
Net income	$	3,620	$	(2,046	)	$	1,574
Earnings per common share:
Basic	$	0.04	$	(0.02	)	$	0.02
Diluted	$	0.04	$	(0.02	)	$	0.02
(in thousands)	Six Months Ended June 30, 2023
	As Reported		Adjustments			Revised
Oil and gas sales	$	19,074	$	(2,362	)	$	16,712
Lease operating costs		5,275		21			5,296
Depreciation, depletion, amortization and accretion		5,816		(337	)		5,479
Total operating expenses		13,911		(316	)		13,595
Net income	$	5,382	$	(2,046	)	$	3,336
Earnings per common share:
Basic	$	0.06	$	(0.02	)	$	0.04
Diluted	$	0.06	$	(0.02	)	$	0.04

Statement of Cash Flows

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

Statements of Stockholders’ Equity

(in thousands)	Retained Earnings
	As Reported			Adjustments			As Restated
Net income		3,620			(2,046	)		1,574
Balances at June 30, 2023		(121,359	)		(2,046	)		(123,405	)
	Total Stockholder Equity
	As Reported			Adjustments			As Restated
Net income		3,620			(2,046	)		1,574
Balances at June 30, 2023		102,876			(2,046	)		100,830

NOTE 2 – DESCRIPTION OF BUSINESS

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

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

9

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Recently Issued Accounting Pronouncements

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

Subsequent Events

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

NOTE 4 – REVENUE FROM CONTRACTS WITH CUSTOMERS

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

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

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

NOTE 5 – CASH

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

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

10

NOTE 6 – OIL AND GAS PROPERTIES

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

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

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

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

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

NOTE 7 – ASSET RETIREMENT OBLIGATIONS

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

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

(1)	Includes $472,000 of current asset retirement obligations at December 31, 2022.
(2)	Includes $699,000 of current asset retirement obligations at June 30, 2023.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Lease Agreements

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

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

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

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

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

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

	June 30, 2023
Operating lease – right-of-use asset	$	18
Operating lease liabilities - current	$	21
Operating lease liabilities - long-term		-
Total lease liability	$	21

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

Leasehold Drilling Commitments

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

Other Commitments

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

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

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

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NOTE 9 – SHAREHOLDERS’ EQUITY

Common Stock

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

NOTE 10 – SHARE-BASED COMPENSATION

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

Common Stock

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

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

Options

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

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

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

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

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

NOTE 11 – EARNINGS PER COMMON SHARE

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

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Numerator:	As Restated				As Restated
Net income	$	1,574	$	3,210	$	3,336	$	4,549
Denominator:
Weighted average common shares – basic		87,040,267		85,479,421		86,881,427		85,305,583
Dilutive effect of common stock equivalents:
Options		-		-		-		-
Denominator:
Weighted average common shares – diluted		87,040,267		85,479,421		86,881,427		85,305,583
Earnings per share – basic	$	0.02	$	0.04	$	0.04	$	0.05
Earnings per share – diluted	$	0.02	$	0.04	$	0.04	$	0.05

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

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NOTE 12 – INCOME TAXES

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

NOTE 13 – SUBSEQUENT EVENTS

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

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

Introduction

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

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

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

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

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

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

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

● “Bopd” refers to barrels of oil day;

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

● “NGL” refers to natural gas liquids;

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

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

● “SWD” means a saltwater disposal well; and

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

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Available Information

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

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

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

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

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

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

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

General Overview

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

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Strategy

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

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

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

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

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

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

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

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

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

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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 estimated net capital expenditures for 2023 are estimated at the time of this Quarterly Report to range between $23 million to $27 million (of which we have incurred approximately $12.3 million in expenses through June 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 $4.8 million in expenses through June 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 $3.1 million in expenses through June 30, 2023), and approximately $5.0 million for leasehold acquisitions and mineral acquisitions (of which we have incurred approximately $3.9 million for leasehold acquisitions and $0.5 million for mineral acquisitions through June 20, 2023). Our 2023 capital expenditure estimate includes $0.6 million for additional opportunistic leasehold and mineral acquisitions and other extraordinary projects, but the actual amount of expenses incurred over the remainder of 2023 may vary as these expenses are difficult to predict and forecast.  We also paid approximately $12.5 million in accrued capital expenditures for amounts related to our 2022 capital budget in 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 six-month periods ended June 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/A. The majority of the numbers presented below are rounded numbers and should be considered as approximate.

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

We reported net income for the three-month period ended June 30, 2023 of $1.6 million, or $0.02 per share, compared to net income for the three-month period ended June 30, 2022 of $3.2 million or $0.04 per share. The decrease in net income of $1.6 million, when comparing the current period to the prior year’s period, was primarily due to a $1.0 million decrease in net revenues coupled with a $0.7 million increase in total operating expenses and offset by a $0.1 million gain in interest 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 June 30,				Increase			% Increase
	2023		2022		(Decrease)			(Decrease)
	As Restated
Sale Volumes:
Crude Oil (Bbls)		112,405		79,439		32,966			41%
Natural Gas (Mcf)		121,026		67,429		53,597			79%
NGL (Bbls)		18,439		7,978		10,461			131%
Total (Boe) (1)		151,015		98,655		52,360			53%
Crude Oil (Bbls per day)		1,235		873		362			41%
Natural Gas (Mcf per day)		1,330		741		589			79%
NGL (Bbls per day)		203		88		115			131%
Total (Boe per day) (1)		1,660		1,085		575			53%
Average Sale Price:
Crude Oil ($/Bbl)	$	69.49	$	109.82	$	(40.33	)	(37%)
Natural Gas ($/Mcf)		2.19		7.01		(4.82	)	(69%)
NGL ($/Bbl)		25.55		43.78		(18.23	)	(42%)
Net Operating Revenues (in thousands):
Crude Oil	$	7,812	$	8,725	$	(913	)	(10%)
Natural Gas		265		473		(208	)	(44%)
NGL		471		349		122			35%
Total Revenues	$	8,548	$	9,547	$	(999	)	(10%)

(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 June 30, 2023, decreased $1.0 million, or 10%, to $8.6 million, compared to $9.5 million for the same period a year ago, due to a favorable volume variance of $2.7 million, offset by an unfavorable price variance of $3.7 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 June 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
	June 30,					Increase			% Increase
	2023		2022			(Decrease)			(Decrease)
	As Restated
Direct Lease Operating Expenses	$	1,224	$	1,164		$	60			5%
Workovers		366		743			(377	)	(51%)
Gain on ARO Settlement		-		(6	)		(6	)	(100%)
Other*		1,240		901			339			38%
Total Lease Operating Expenses	$	2,830	$	2,802		$	28			1%
Depreciation, Depletion,
Amortization and Accretion	$	2,898	$	2,228		$	670			30%
General and Administrative (Cash)	$	815	$	759		$	56			7%
Share-Based Compensation (Non-Cash)		517		537			(20	)	(4%)
Total General and Administrative Expense	$	1,332	$	1,296		$	36			3%
Interest Income	$	86	$	4		$	82			2,050%
Other Expense	$	-	$	(15	)	$	15			100%

*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 nominal increase in overall lease operating expenses when comparing the prior period.

Depreciation, Depletion, Amortization and Accretion. The $0.7 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 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, decreased nominally due to the forfeiture of certain employee stock-based options due to certain voluntary employee terminations. Share-based compensation is utilized for the purpose of conserving cash resources for use in field development activities and operations.

Interest Income and Other Expense. 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 expense in the prior period is primarily related to a $15,000 royalty adjustment.

Six Months Ended June 30, 2023 vs. Six Months Ended June 30, 2022

We reported net income for the six-month period ended June 30, 2023 of $3.3 million, or $0.04 per share, compared to net income for the six-month period ended June 30, 2022 of $4.5 million or $0.05 per share. The decrease in net income of $1.2 million was primarily due to a $0.1 million increase in revenue, coupled with a $0.1 million increase in interest and other income, offset by an increase of $1.4 million in total operating expenses in the current period (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:

	Six Months Ended June 30,				Increase			% Increase
	2023		2022		(Decrease)			(Decrease)
	As Restated
Sale Volumes:
Crude Oil (Bbls)		215,732		157,276		58,456			37%
Natural Gas (Mcf)		208,684		132,666		76,018			57%
NGL (Bbls)		29,014		13,483		15,531			115%
Total (Boe) (1)		279,527		192,870		86,657			45%
Crude Oil (Bbls per day)		1,192		869		323			37%
Natural Gas (Mcf per day)		1,153		733		420			57%
NGL (Bbls per day)		160		74		86			116
Total (Boe per day) (1)		1,544		1,065		479			45%
Average Sale Price:
Crude Oil ($/Bbl)	$	70.79	$	96.14	$	(25.35	)		(26%)
Natural Gas ($/Mcf)		3.68		6.74		(3.06	)		(45%)
NGL ($/Bbl)		23.14		46.20		(23.06	)		(50%)
Net Operating Revenues (in thousands):
Crude Oil	$	15,271	$	15,120	$	151			1%
Natural Gas		769		894		(125	)		(14%)
NGL		672		623		49			8%
Total Revenues	$	16,712	$	16,637	$	75			-%

(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 six-month period ended June 30, 2023 nominally increased $0.1 million, or less than 1%, to $16.7 million, compared to $16.6 million for the same period a year ago, due primarily to a favorable volume variance of $4.8 million, offset by an unfavorable price variance of $4.7 million, due to the average sales prices for crude oil, natural gas and NGLs realized by the Company decreasing considerably from the six-month period ended June 30, 2023. 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 (Expense)

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

	Six Months Ended
	June 30,
	As Restated					Increase			% Increase
	2023		2022			(Decrease)			(Decrease)
Direct Lease Operating Expenses	$	2,371	$	2,197		$	174			8%
Workovers		940		1,412			(472	)	(33%)
Gain on ARO Settlement		-		(6	)		6			100%
Other*		1,985		1,555			430			28%
Total Lease Operating Expenses	$	5,296	$	5,158		$	138			3%
Depreciation, Depletion,
Amortization and Accretion	$	5,479	$	4,114		$	1,365			33%
General and Administrative (Cash)	$	1,785	$	1,788		$	(3	)	-%
Share-Based Compensation (Non-Cash)		1,035		1,100			(65	)	(6%)
Total General and Administrative Expense	$	2,820	$	2,888		$	(68	)	(2%)
Interest Income	$	184	$	7		$	177			2,529%
Other Income	$	35	$	65		$	(30	)	(46%)

*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 $0.1 million increase in overall lease operating expenses when comparing periods.

Depreciation, Depletion, Amortization and Accretion. The $1.4 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 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. Share-based compensation is utilized for the purpose of conserving cash resources for use in field development activities and operations.

23

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 offset by a vendor dispute settlement while other income in the prior period is primarily related to an $80,000 vendor dispute settlement, offset by a $15,000 royalty adjustment.

Liquidity and Capital Resources

The primary sources of cash for the Company during the six-month period ended June 30, 2023 were from $16.7 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 June 30, 2023, the Company’s total current assets of $16.6 million exceeded its total current liabilities of $4.1 million, resulting in a working capital surplus of $12.5 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 $2.6 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.

Cash Flows (in thousands)

	Six Months Ended June 30,
	2023			2022
Net cash provided by operating activities	$	8,374		$	7,131
Net cash used in investing activities		(25,340	)		(10,047	)
Net cash provided by financing activities		-			50
Net decrease in cash and restricted cash	$	(16,966	)	$	(2,866	)

 Net cash provided by operating activities. Net cash provided by operating activities increased by $1.2 million for the current year’s period, when compared to the prior year’s period, primarily due to a decrease in net income of $1.2 million, offset by a $1.4 million increase in depreciation, depletion and amortization (due to increased sales production), and a $1.0 million net increase to our other components of working capital (predominantly from our lower oil and gas sales receivable) in the current period, related to our increased revenue and operational activity.

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Net cash used in investing activities. Net cash used in investing activities increased by $15.3 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):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
	As Restated				As Restated
Net income	$	1,574	$	3,210	$	3,336	$	4,549
Add (deduct)
Depreciation, depletion, amortization and accretion		2,898		2,228		5,479		4,114
EBITDA		4,472		5,438		8,815		8,663
Add (deduct)
Share-based compensation		517		537		1,035		1,100
Adjusted EBITDA	$	4,989	$	5,975	$	9,850	$	9,763

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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.

26

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.

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 material 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 June 30, 2023, that our disclosure controls and procedures were not designed at a reasonable assurance level and were 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.

27

Changes in Internal Control over Financial Reporting

The Company has determined that a material weakness in internal control over financial reporting existed during the three months ended June 30, 2023 that materially affected the Company’s internal control over financial reporting.  The Company is accessing potential remedial actions relating to the Company’s internal controls, as well as additional procedures and process improvements, relating to the oil, NGL and natural gas revenue accrual process, and plans to implement such remedial actions.

Material Weakness in Internal Control Over Financial Reporting  

In the course of the Company’s evaluation of the material misstatements contained in the Original Filing, management determined that the Company’s internal controls had not been effectively designed to ensure the accuracy of the accounts receivable – oil and gas and of oil and gas sales recorded for the three and six months ended June 30, 2023. Specifically, the Company determined that it did not have adequate controls for ensuring that existing accruals were accurately recorded and/or properly relieved in corresponding periods for 14 new third-party wells which led to the misstatement of oil, NGL and natural gas sales for the three and six months ended June 30, 2023.

In light of the misstatements described above, the Company has reassessed its conclusions regarding its disclosure controls and procedures as of June 30, 2023. As a result, the Company has determined that a material weakness in internal control over financial reporting existed as of June 30, 2023, and consequently that the Company’s disclosure controls and procedures as of June 30, 2023, were not effective. The Company’s previous evaluation of its disclosure controls and procedures as of June 30, 2023, should no longer be relied upon. Based on the Company’s revised assessment, the Company’s overall controls over financial reporting were determined to be not effective as of June 30, 2023.   

To address the material weakness described above, the Company has already developed a plan to implement new controls and procedures designed to address the identified material weakness. The Company believes these new controls and procedures will remediate the material weaknesses in a future period. However, there is the potential that the Company’s already implemented efforts to remedy the material weakness will be ineffective and/or that additional material weaknesses could occur regardless of the remediation or additional controls implemented by the Company.

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.

28

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.

Management has identified a material weakness in internal controls over financial reporting and has already developed a plan to implement new controls and procedures designed to address the identified material weakness. While management believes these new controls and procedures will remediate the material weaknesses in a future period, there is the potential that the Company's already implemented efforts to remedy the material weakness will be ineffective and/or that additional material weaknesses could occur regardless of the remediation or additional controls implemented by the Company.  Failure to remediate this material weakness or to develop, implement and 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.

Maintaining effective internal control over financial reporting and effective disclosure controls and procedures is necessary for us to produce reliable financial statements. Management has identified a material weakness in the Company’s internal controls over the accuracy of the Company’s oil, NGL and natural gas sales revenue accrual process. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis. Specifically, the Company determined that it did not have adequate controls for ensuring that existing accruals were accurately recorded and/or properly relieved in corresponding periods for 14 new third-party wells which led to the misstatement of oil, NGL and natural gas sales for the three and six months ended June 30, 2023. As a result of the material weakness, management concluded that the Company’s internal control over financial reporting was not effective as of June 30, 2023.

Management has already developed a plan to implement new controls and procedures designed to address the identified material weakness. The Company believes these new controls and procedures will remediate the material weaknesses in a future period. However, there is the potential that the Company's already implemented efforts to remedy the material weakness will be ineffective and/or that additional material weaknesses could occur regardless of the remediation or additional controls implemented by the Company.

Any failure to effect or maintain new or improved controls, or any difficulties encountered in the implementation thereof, could result in additional material weaknesses or material misstatements in the Company’s financial statements. These misstatements could necessitate restatements of the Company’s financial statements in the future, cause us to fail to meet its reporting obligations, cause investors to lose confidence in or their ability to rely on the Company’s reported financial information, harm the Company’s ability to obtain financing, increase the costs associated with future financing transactions and/or increase remediation costs relating to any such misstatements and any weaknesses underlying the same. In addition, even if we are successful in strengthening our controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or facilitate the fair presentation of our financial statements or our periodic reports filed with the SEC.

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 June 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.

ITEM 5. OTHER INFORMATION

Mr. Ivar Siem, a then member of the Board of Directors, passed away on July 18, 2023 following a prolonged battle with cancer. As a result of Mr. Siem’s passing, the Board reduced the size of the Board of Directors from four to three.

29

ITEM 6. EXHIBITS

		Incorporated By Reference
Exhibit No.	Description	Form	Exhibit	Filing Date	File Number
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/A, included in the Exhibit 101 Inline XBRL Document Set

* Filed herewith.

** Furnished herewith.

# Indicates management contract or compensatory plan or arrangement. 

30

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.
October 13, 2023	By:	/s/ Dr. Simon G. Kukes
		Dr. Simon G. Kukes
		Chief Executive Officer
		(Principal Executive Officer)

	PEDEVCO Corp.
October 13, 2023	By:	/s/ Paul A. Pinkston
		Paul A. Pinkston
		Chief Accounting Officer
		(Principal Financial and Accounting Officer)

31