PEDEVCO CORP 10-Q

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/A for the year ended December 31, 2024, filed with the Commission on October 31, 2025 (the “ Form 10-K ”), under the heading “ Item 1A. Risk Factors ”, except as discussed 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. Current PEDEVCO stockholders will have a reduced ownership and voting interest in PEDEVCO after the Automatic Conversion Date compared to their current ownership and will exercise less influence over management. Based on the number of issued and outstanding shares of PEDEVCO common stock as of the date of this Report, it is expected that, on a fully-diluted basis, current PEDEVCO stockholders are collectively expected to own approximately 47%, and certain affiliates of Juniper are collectively expected to own approximately 53%, of the outstanding shares of PEDEVCO common stock following the Automatic Conversion Date. As a result, current PEDEVCO stockholders will own a smaller percentage of the combined company than they currently own of PEDEVCO, and as a result will have less influence on the management and policies of PEDEVCO post-automatic conversion than they now have on the management and policies of PEDEVCO, as the case may be. Securities class action and derivative lawsuits may be filed against us, or against our directors, challenging the Mergers. Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into and/or closed acquisition, merger or other similar agreements. Mergers like the Mergers are frequently subject to litigation or other legal proceedings, including actions alleging that our Board breached their fiduciary duties to our stockholders by entering into and/or closing the Merger Agreement. We cannot provide assurance that such litigation or other legal proceedings will not be brought. If litigation or other legal proceedings are in fact brought against us, or against our Board, we will defend against it, but might not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on the business, results of operation or financial position of us or the combined company, including through the possible diversion of company resources or distraction of key personnel. Combining the businesses of PEDEVCO, the Acquired Companies may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated synergies and other benefits of the Mergers, which may adversely affect the combined company’s business results and negatively affect the value of our common stock. PEDEVCO and each of the Acquired Companies have operated prior to the closing of the Mergers, independently. The success of the Mergers will depend on, among other things, the ability of PEDEVCO and the Acquired Companies to combine their businesses in a manner that facilitates growth opportunities and realizes expected cost savings. We entered into the Merger Agreement because we believe that the transactions contemplated by the Merger Agreement are fair to and in the best interests of our stockholders and that combining the businesses of PEDEVCO and the Acquired Companies will produce benefits as well as cost savings and other cost and capital expenditure synergies. 39 Table of Contents PEDEVCO and the Acquired Companies must successfully combine their respective businesses in a manner that permits these benefits to be realized. For example, the following issues, among others, must be addressed in integrating the operations of the companies in order to realize the anticipated benefits of the Mergers: · combining the companies’ operations and corporate functions; · combining the businesses of PEDEVCO and the Acquired Companies and meeting the capital requirements of the combined company, in a manner that permits the combined company to achieve any cost savings or other synergies anticipated to result from the Mergers, the failure of which would result in the anticipated benefits of the Mergers not being realized in the time frame currently anticipated or at all; · integrating personnel from the companies; · integrating and unifying our reserves and the development of our new PUDs; · identifying and eliminating underperforming or uncertain wells; · harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes; · maintaining existing agreements with customers, suppliers, distributors and vendors, avoiding delays in entering into new agreements with prospective customers, suppliers, distributors and vendors, and leveraging relationships with such third parties for the benefit of the combined company; · addressing possible differences in business backgrounds, corporate cultures and management philosophies; · consolidating the companies’ administrative and information technology infrastructure; · coordinating distribution and marketing efforts; and · effecting actions that may be required in connection with obtaining regulatory or other governmental approvals. It is possible that the integration process could result in the loss of key employees of PEDEVCO or the Acquired Companies, the disruption of either PEDEVCO’s or the Acquired Companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. In addition, the actual integration may result in additional and unforeseen expenses. If the combined company is not able to adequately address integration challenges, we may be unable to successfully integrate operations and the anticipated benefits of the integration plan may not be realized. In addition, the combined company must achieve the anticipated growth and cost savings without adversely affecting current revenues and investments in future growth. If the combined company is not able to successfully achieve these objectives, the anticipated synergies and other benefits of the Mergers may not be realized fully, or at all, or may take longer to realize than expected. Additionally, we may inherit from the Acquired Companies legal, regulatory, and other risks that occurred prior to the Mergers, whether known or unknown to us, which may be material to the combined company. Actual growth, cost and capital expenditure synergies and other cost savings, if achieved, may be lower than what we expect and may take longer to achieve than anticipated. Moreover, at times the attention of the combined company’s management and resources may be focused on the integration of the businesses of the company and diverted from day-to-day business operations or other opportunities that may have been beneficial to such company, which may disrupt the combined company’s ongoing businesses. 40 Table of Contents An inability to realize the full extent of the anticipated benefits of the Mergers, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may adversely affect the value of the PEDEVCO common stock following the consummation of the Mergers. Moreover, if the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Mergers, PEDEVCO stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Mergers. The combined company may not be able to retain suppliers or distributors, or suppliers or distributors may seek to modify contractual relationships with the combined company, which could have an adverse effect on the combined company’s business and operations. Third parties may terminate or alter existing contracts or relationships with the combined company. As a result of the Mergers, the combined company may experience impacts on relationships with suppliers and distributors that may harm the combined company’s business and results of operations. Certain suppliers or distributors may seek to terminate or modify contractual obligations following the Mergers whether or not contractual rights are triggered as a result of the Mergers. There can be no guarantee that customers, suppliers and distributors will remain with or continue to have a relationship with the combined company or do so on the same or similar contractual terms following the Mergers. If any customers, suppliers or distributors seek to terminate or modify contractual obligations or discontinue the relationship with the combined company, then the combined company’s business and results of operations may be harmed. If the combined company’s suppliers were to seek to terminate or modify an arrangement with the combined company, then the combined company may be unable to procure necessary supplies from other suppliers in a timely and efficient manner and on acceptable terms, or at all. Our hedging activities may prevent us from fully benefiting from increases in crude oil, natural gas and NGLs prices and may expose us to other risks, including counterparty risk, and our future production may not be sufficiently protected from any declines in commodity prices by our existing or future hedging arrangements. We use financial derivative instruments (primarily financial fixed price swaps and collar contracts) to hedge the impact of fluctuations in commodity prices on our results of operations and cash flows. As of the date of this Report we have hedged 2,512,600 Bbls of oil and 2,312,905 MMBTUs of natural gas. Such hedges may prevent us from fully realizing the benefits of increases in commodity prices above the prices established by our hedging contracts. In addition, our hedging activities may expose us to the risk of financial loss in certain circumstances, including instances in which the counterparties to our hedging contracts fail to perform under the contracts. After the Automatic Conversion Date, affiliates of Juniper will have the ability to control or significantly influence all matters submitted to the combined company’s stockholders for approval. After the Automatic Conversion Date, affiliates of Juniper, will, in the aggregate, beneficially own approximately 53% of the combined company’s outstanding shares of capital stock, on a fully diluted basis. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to the combined company’s stockholders for approval, as well as the combined company’s management and affairs. As such, affiliates of Juniper will be able to control the outcome of all matters requiring a stockholder vote, including the election of directors, the adoption of amendments to our certificate of formation or bylaws and the approval of mergers and other significant corporate transactions, subject to requirements under Texas law which require the approval of two-thirds of the outstanding voting stock. 41 Table of Contents Additionally, from the Closing Date until the Automatic Conversion Date the holders of PEDEVCO Series A Preferred Stock, voting as a separate class, are entitled to elect one member of PEDEVCO’s Board. If a Preferred Director position becomes vacant, a majority in interest in the holders of the PEDEVCO Series A Preferred Stock may fill the vacancy. Any preferred director so elected or appointed serves for the remainder of the original term, subject to prior death, resignation, retirement, disqualification, or removal. A preferred director may be removed, with or without cause, only by the affirmative vote or written consent of the majority in interest of holders of such Series A Preferred Stock. The initial preferred director is Josh Schmidt. Finally, under the Shareholder Agreement, from and after the Automatic Conversion Date, the Board of Directors of the Company will consist of six directors, or a greater number as approved in accordance with the Company’s organizational documents. On that date, the Juniper Shareholder will have the right to nominate up to three directors (the “Juniper Directors”), including at least one independent director. The Juniper Shareholder’s nomination rights will depend on its, together with its affiliates’, ownership of the shares of common stock issuable upon conversion of the Series A Preferred Stock on the Automatic Conversion Date, as determined on the applicable date of determination as measured relative to the total number of shares of PEDEVCO common stock issued and outstanding on the Automatic Conversion Date (“Juniper Beneficial Ownership”), as follows: if Juniper Beneficial Ownership is 50% or more, it may nominate three Juniper Directors including one which must be an independent director; if Juniper Beneficial Ownership is between 30% and 49.9%, it may nominate two Juniper Directors; if Juniper Beneficial Ownership is between 10% and 29.9%, it may nominate one Juniper Director; and if Juniper Beneficial Ownership is less than 10%, it loses the right to nominate any Juniper Directors. Finally, one independent director will be mutually agreed in writing by the Juniper Shareholder and the Governance Committee, excluding current Juniper Directors on the committee. The nomination of such Juniper appointed directors is subject to such persons not being prohibited from serving as a member of the Board. In the event any Juniper director ceases serving as a member of the Board of PEDEVCO for any reason, the Juniper Shareholder has the right to designate a replacement, and subject to certain customary exceptions, the Board is required to take all reasonable actions within its control to appoint such replacement person as a member of the Board of the Company to fill such vacancy. The Juniper Shareholder also has the right to remove any Juniper appointed director at any time for any reason. In some instances Juniper may have interests different than the rest of our stockholders. The influence or control of our company by such persons may have the effect of delaying or preventing a change of control of our company and may adversely affect the voting and other rights of other stockholders. Additionally, the interests of such persons may differ from the interests of the other stockholders and thus result in corporate decisions that are adverse to other stockholders. The PEDEVCO Series A Preferred Stock provides the holders thereof certain rights which may have a material adverse effect on our stock price and operations. As long as any PEDEVCO Series A Preferred Stock is outstanding, PEDEVCO and its subsidiaries may not, without approval of holders of a majority in interest of the outstanding shares of the PEDEVCO Series A Preferred Stock (a “Majority In Interest”), voting as a single class: (a) amend the governing documents of such entity (including as to PEDEVCO, the designation of the PEDEVCO Series A Preferred Stock), or other governing documents in a way that adversely affects rights of the holders of PEDEVCO Series A Preferred Stock; (b) change the size or composition of the board or the committees of the board of such entity; (c) alter the line or nature of the business of such entity; (d) issue securities (including securities convertible, exchangeable or exercisable for equity) ranking pari passu with or senior to the Series A Preferred Stock, or convertible into PEDEVCO common stock (except under approved equity plans); (e) issue securities of the subsidiaries of PEDEVCO; (f) repurchase or redeem equity, except between wholly-owned subsidiaries or under permitted employee plans; (g) declare or pay dividends or similar distributions, except within wholly-owned subsidiaries; (h) effect any merger, consolidation, recapitalization, reclassification, sale of substantially all assets, or other change of control of such entity; (i) adopt any plan of liquidation or dissolution of such entity; (j) complete acquisitions, dispositions, or divestitures exceeding $500,000 in any fiscal year; (k) make or commit to capital expenditures exceeding $250,000, other than in accordance with a budget then in effect, (l) incur indebtedness or issue debt over $500,000, other than in the ordinary course; (m) enter any joint venture or similar alliance; (n) hire, terminate, or designate executive officers, or appoint or remove the board chair; (o) enter into or amend any transaction with shareholders, affiliates, or related parties; (p) adopt or materially modify incentive or equity plans (except existing ones); (q) change auditors or such entity’s fiscal year; (r) commence or settle litigation involving more than $500,000; (s) adopt any shareholder rights plan or “poison pill”; (t) exchange, reclassify, or cancel any PEDEVCO Series A Preferred Stock shares; (u) create exchange rights into PEDEVCO Series A Preferred Stock shares; (v) alter the rights or preferences of the PEDEVCO Series A Preferred Stock to adversely affect the rights thereof; (w) amend or modify any Support Agreement; or (x) announce or commit to any of the foregoing. 42 Table of Contents Additionally, until the Automatic Conversion Date, the holders of PEDEVCO Series A Preferred Stock, voting as a separate class, are entitled to elect one member of PEDEVCO’s Board. If a Preferred Director position becomes vacant, a Majority in Interest may fill the vacancy. Any Preferred Director so elected or appointed serves for the remainder of the original term, subject to prior death, resignation, retirement, disqualification, or removal. A Preferred Director may be removed, with or without cause, only by the affirmative vote or written consent of the Majority in Interest. The initial Preferred Director is [Josh Schmidt]. The rights and preferences of the PEDEVCO Series A Preferred Stock holders could adversely affect the value and trading price of the PEDEVCO common stock. As discussed above the PEDEVCO Series A Preferred Stock includes certain approval and protective provisions, including the right to appoint one member of our board of directors. These rights give the holders of the PEDEVCO Series A Preferred Stock significant influence over matters that may be important to PEDEVCO common stock holders, including corporate actions and fundamental business decisions. The interests of the holders of the PEDEVCO Series A Preferred Stock may differ from or conflict with those of holders of the PEDEVCO common stock, which could result in decisions that are not aligned with the interests of the PEDEVCO common stock holders. As a result, the market price of the PEDEVCO common stock may be lower than it would be if we did not have PEDEVCO Series A Preferred Stock outstanding or if PEDEVCO Series A Preferred Stock did not include such rights and protections. In addition, the presence of PEDEVCO Series A Preferred Stock with such rights could make the PEDEVCO common stock less attractive to investors or limit the potential appreciation of the PEDEVCO common stock relative to companies that do not have preferred stock with similar rights. The combined company may be exposed to increased litigation, including stockholder litigation, which could have an adverse effect on the combined company’s business and operations. The combined company may be exposed to increased litigation from stockholders, suppliers and other third parties due to the combination of PEDEVCO’s business and the Acquired Companies business following the Mergers. Such litigation may have an adverse impact on the combined company’s business and results of operations or may cause disruptions to the combined company’s operations. In addition, in the past, stockholders have initiated class action lawsuits against oil and gas companies following periods of volatility in the market prices of these companies’ stock. Such litigation, if instituted against the combined company, could cause the combined company to incur substantial costs and divert management’s attention and resources, which could have a material adverse effect on the combined company’s business, financial condition and results of operations. A future reverse stock split may decrease the liquidity of the shares of our common stock. On October 30, 2025, (a) Dr. Simon Kukes, the then Executive Chairman of PEDEVCO; (b) The SGK 2018 Revocable Trust, a family trust of which Dr. Kukes, serves as trustee and beneficiary; (c) J. Douglas Schick, the Chief Executive Officer, President and member of the Board; (d) Clark R. Moore, the Executive Vice President, General Counsel and Secretary of PEDEVCO; (e) Paul A. Pinkston, the Chief Accounting Officer of PEDEVCO; (f) Jody D. Crook, the Chief Commercial Officer of PEDEVCO; (g) John J. Scelfo, a then member of the Board; (h) H. Douglas Evans, a then member of the Board; and (i) John K. Howie, a member of the Board (collectively, the “Majority Shareholders”), who collectively held more than two-thirds of the combined voting power of the total issued and outstanding PEDEVCO common stock, executed a written consent in lieu of a special meeting of shareholders of PEDEVCO (the “Written Consent”), approving the Merger Agreement and the Mergers, and the shares of PEDEVCO common stock upon conversion of the Series A Preferred Stock shares issued pursuant to the Merger Agreement and Subscription Agreement, and among other things, the grant of discretionary authority to the Company’s Board of Directors to (A) approve an amendment to the Company’s Certificate of Formation, as amended, to effect a reverse stock split of our issued and outstanding shares of PEDEVCO common stock, by a ratio of between one-for-ten to one-for-twenty, inclusive, with the exact ratio to be set at a whole number to be determined by our Board or a duly authorized committee thereof in its discretion, at any time after approval of the amendment and prior to October 30, 2026 (the “Reverse Stock Split”), and (B) determine whether to arrange for the disposition of fractional interests by shareholder entitled thereto, to pay in cash the fair value of fractions of a share of PEDEVCO common stock as of the time when those entitled to receive such fractions are determined, or to entitle shareholder to receive from the Corporation’s transfer agent, in lieu of any fractional share, the number of shares of PEDEVCO common stock rounded up to the next whole number (the “Reverse Split Authority”). Pursuant to rules adopted by the SEC under the Exchange Act, an information statement will be filed with the SEC and mailed or provided to the shareholders of the Company in accordance with the Exchange Act and the terms set forth in the Merger Agreement, and the corporate actions discussed above, will become effective no earlier than the 21st day following the mailing date of such information statement. 43 Table of Contents In the event the Board of Directors moves forward with a Reverse Stock Split in the future, the liquidity of the shares of the PEDEVCO common stock may be affected adversely by the Reverse Stock Split given the reduced number of shares that will be outstanding following the Reverse Stock Split. In addition, the Reverse Stock Split may increase the number of stockholders who own odd lots (less than 100 shares) of the PEDEVCO common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty affecting such sales. Our Reverse Stock Split may not result in a proportional increase in the per share price of the PEDEVCO common stock. The Majority Shareholders authorized the Board to affect a Reverse Stock Split in a ratio of between 1-for-10 and 1-for-20. The effect of the Reverse Stock Split on the market price for the PEDEVCO common stock cannot be accurately predicted. In particular, we cannot assure you that the proportionate increase in the prices of the PEDEVCO common stock immediately after the Reverse Stock Split from the prices for shares of the PEDEVCO common stock immediately before the Reverse Stock Split will be maintained for a substantial period of time. It is not uncommon for the market price of a company’s common stock to decline in the period following a Reverse Stock Split. If the market price of the PEDEVCO common stock declines following the Reverse Stock Split, the percentage decline may be greater than would occur in the absence of a Reverse Stock Split. The market price of the PEDEVCO common stock may also be affected by other factors which may be unrelated to the Reverse Stock Split or the number of shares outstanding. Moreover, because some investors may view the Reverse Stock Split negatively, we cannot assure you that the Reverse Stock Split will not adversely impact the market price of the PEDEVCO common stock. Accordingly, our total market capitalization after the Reverse Stock Split may be lower than the market capitalization before the Reverse Stock Split.