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Filed Pursuant to Rule 424(b)(5)
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Registration File No. 333-250904
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Prospectus Supplement
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(To prospectus dated December 2, 2020)
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PEDEVCO Corp.
5,190,000 Shares of Common Stock
Pursuant to this
prospectus supplement and the accompanying prospectus, PEDEVCO
Corp. (the “Company”,
“PEDEVCO”,
“we”,
“us”
and “our”) is offering
5,190,000 shares of common stock. Such shares of common stock will
be sold at a public offering price of $1.50 per
share.
Our
common stock is listed on the NYSE American under the symbol
“PED.”
On February 2, 2021, the last reported sales price of our common
stock was $1.75 per share.
The
aggregate market value of our outstanding common stock held by
non-affiliates is approximately $26,875,437, based on 73,489,770
shares of outstanding common stock and approximately 64,190,311
shares held by affiliates, at a price of $2.89 per share, which was
the last reported sales price of our common stock as quoted on the
NYSE American on January 28, 2021. Pursuant to General Instruction
I.B.6 of Form S-3, in no event during the period of twelve calendar
months immediately prior to, and including, the sales under this
prospectus supplement, will we sell our common stock in a public
primary offering with a value exceeding more than one-third of the
aggregate market value of the common stock held by non-affiliates
so long as our public float remains below $75 million. Not
including securities being offered in this prospectus supplement,
we have offered no securities pursuant to General Instruction I.B.6
of Form S-3 during the twelve calendar months prior to and
including the date of this prospectus supplement.
Investing
in our securities involves a high degree of risk. Before deciding
whether to invest in our securities, you should consider carefully
the risks that we have described under the caption “Risk
Factors” beginning on page S-11 of this
prospectus supplement, on page 2 of the accompanying
prospectus and under the caption “Risk Factors” in our most
recently filed Annual Report on Form 10-K and most recently filed
Quarterly Report on Form 10-Q, each as filed with the Securities
and Exchange Commission, which is incorporated herein by reference
in their entirety.
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No Exercise of
Over-Allotment
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Full Exercise of
Over-Allotment
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Public
offering price
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$1.50
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$7,785,000
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$1.50
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$8,952,750
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Underwriting
discounts and commissions (1)
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$0.09
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$467,100
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$0.09
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$537,165
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Proceeds
to us, before expenses (2)
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$1.41
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$7,317,900
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$1.41
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$8,415,585
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(1)
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Excludes
underwriters’ out-of-pocket expenses we have agreed to
reimburse. See the section captioned “Underwriting”
in this prospectus supplement for additional
information.
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(2)
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We
anticipate the total expenses associated with this offering will be
approximately $120,000.
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Delivery of the
common stock is expected to be made on or about February 5, 2021.
We have also granted the underwriters an option exercisable at any
time (but not more than once), in whole or in part, for a period of
45 days from the date of this prospectus supplement to purchase up
to an additional 778,500 shares from us, at the public offering
price less the underwriting discount, to cover over-allotments, if
any.
Neither
the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying
prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
Kingswood Capital
Markets
division of Benchmark Investments, Inc.
The
date of this prospectus supplement is February 2,
2021.
Prospectus Supplement
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Page
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S-1
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S-3
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S-9
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S-10
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S-11
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S-18
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S-18
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S-19
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S-19
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S-20
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S-21
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S-23
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S-24
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S-24
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S-25
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Prospectus
TABLE OF CONTENTS
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Page
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2
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3
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4
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6
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7
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12
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ABOUT THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS
This prospectus
supplement and the accompanying prospectus, dated December 2, 2020,
are part of a registration statement on Form S-3 (File No.
333-250904) that we filed with the Securities and Exchange
Commission, utilizing a “shelf” registration
process on November 23, 2020 and that was declared effective on
December 2, 2020. Under this process, we may sell from time to time
in one or more offerings up to an aggregate of $100,000,000 in our
securities described in the accompanying prospectus. To date, we
have not sold any securities under the “shelf” registration
statement, when not including securities proposed to be sold in
this offering.
You
should rely only on the information contained or incorporated by
reference into this prospectus supplement, the accompanying
prospectus and any free writing prospectus. We have not, and the
underwriters have not, authorized anyone to provide you with
different information. If anyone provides you with different or
additional information, you should not rely on it. We are not, and
the underwriters are not, making an offer to sell these securities
in any state or jurisdiction where the offer or sale is not
permitted. You should not assume that the information contained in
this prospectus supplement, the accompanying prospectus and any
free writing prospectus is accurate on any date subsequent to the
date set forth on the front of the document or that any information
we have incorporated by reference is correct on any date subsequent
to the date of the document incorporated by reference, even though
this prospectus supplement, the accompanying prospectus and any
free writing prospectus is delivered or securities are sold on a
later date. We have filed with the SEC a registration statement on
Form S-3 with respect to the securities offered hereby. This
prospectus supplement and the accompanying prospectus do not
contain all of the information set forth in the registration
statement, parts of which are omitted in accordance with the rules
and regulations of the SEC. For further information with respect to
us and the securities offered hereby, reference is made to the
registration statement and the exhibits that are a part of the
registration statement. We will disclose any material changes in
our affairs in a post-effective amendment to the registration
statement and the accompanying prospectus of which this prospectus
supplement is a part, a future prospectus supplement, a free
writing prospectus or a future filing with the Securities and
Exchange Commission incorporated by reference in this prospectus
supplement. It is important for you to read and consider all the
information contained in this prospectus supplement and the
accompanying prospectus, including the documents incorporated by
reference therein, in making your investment decision.
This
document is in two parts. The first part is this prospectus
supplement, which adds to and updates information contained in the
accompanying prospectus and the documents incorporated by reference
into the accompanying prospectus. The second part is the
accompanying prospectus, which gives more general information, some
of which may not apply to this offering of shares. This prospectus
supplement adds, updates and changes information contained in the
accompanying prospectus and the information incorporated by
reference. To the extent the information contained in this
prospectus supplement differs or varies from the information
contained in the accompanying prospectus or any document
incorporated by reference, the information in this prospectus
supplement shall control.
We further note that the representations, warranties and covenants
made by us or the underwriters in any agreement that is filed as an
exhibit to any document that is incorporated by reference in the
accompanying prospectus were made solely for the benefit of the
parties to such agreement, including, in some cases, for the
purpose of allocating risk among the parties to such agreements,
and should not be deemed to be a representation, warranty or
covenant to you. Moreover, such representations, warranties or
covenants were accurate only as of the date when made. Accordingly,
such representations, warranties and covenants should not be relied
on as accurately representing the current state of our
affairs.
Persons outside the United States who come into possession of this
prospectus supplement or the accompanying prospectus must inform
themselves about, and observe any restrictions relating to, the
offering of the securities and the distribution of this prospectus
supplement and accompanying prospectus outside of the United
States.
Our
logo and other trade names, trademarks, and service marks of
PEDEVCO Corp. appearing in this prospectus supplement and the
accompanying prospectus are the property of our company. Other
trade names, trademarks, and service marks appearing in this
prospectus supplement and the accompanying prospectus are the
property of their respective holders.
The
market data and certain other statistical information used
throughout this prospectus supplement and the accompanying
prospectus are based on independent industry publications,
government publications and other published independent sources.
Although we believe that these third-party sources are reliable and
that the information is accurate and complete, we have not
independently verified the information. Some data is also based on
our good faith estimates. While we believe the market data included
in this prospectus supplement, the accompanying prospectus and the
information incorporated herein and therein by reference is
generally reliable and is based on reasonable assumptions, such
data involves risks and uncertainties and is subject to change
based on various factors, including those discussed under the
heading “Risk Factors”
beginning on page S-11 of this
prospectus supplement and on page 2 of the accompanying
prospectus.
Unless
otherwise stated, information in this prospectus supplement assumes
the underwriters will not exercise their over-allotment option to
purchase additional shares of our common stock.
All
references to “we”, “our”, “us”, the
“Company”, and
“PEDEVCO” in this
prospectus supplement mean PEDEVCO Corp. and all entities owned or
controlled by us except where it is made clear that the term means
only the parent company. The term “you” refers to a
prospective investor. Please carefully read this prospectus
supplement, the accompanying prospectus, any free writing
prospectus and any pricing supplement, in addition to the
information contained in the documents we refer to under the
headings “Where You Can Find More
Information” and “Incorporation of Certain Documents by
Reference”.
In
addition, unless the context otherwise requires and for the
purposes of this prospectus and the accompanying prospectus
supplement:
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“Bbl” refers to one stock
tank barrel, or 42 U.S. gallons liquid volume, used in this report
in reference to crude oil or other liquid
hydrocarbons;
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“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;
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“Bopd” refers to barrels
of oil day;
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“Exchange Act” refers to
the Securities Exchange Act of 1934, as amended;
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“Mcf” refers to a thousand
cubic feet of natural gas;
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“NGL” refers to natural
gas liquids;
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“NYMEX” New York
Mercantile Exchange;
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“SEC” or the
“Commission” refers to the
United States Securities and Exchange Commission; and
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“Securities Act” refers to
the Securities Act of 1933, as amended.
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PROSPECTUS
SUPPLEMENT SUMMARY
The
following summary highlights material information found in more
detail elsewhere in, or incorporated by reference in, this
prospectus supplement. It does not contain all of the information
you should consider. As such, before you decide to buy our common
stock, in addition to the following summary, we urge you to
carefully read this entire prospectus supplement and documents
incorporated by reference herein, and any other prospectus
supplements or free writing prospectuses, especially the risks of
investing in our common stock as discussed under “Risk
Factors.” The following summary is qualified in
its entirety by the detailed information appearing elsewhere in
this prospectus supplement.
General Overview
We are
an oil and gas company focused on the acquisition and development
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 (the “Permian Basin”) and
in the Denver-Julesberg Basin (“D-J Basin”) in
Colorado. As of September 30, 2020, we held 37,069
net Permian Basin acres located in Chaves and Roosevelt Counties,
New Mexico, through our wholly-owned operating subsidiary, Pacific
Energy Development Corp. (“PEDCO”), which we refer
to as our “Permian
Basin Asset,” and approximately 11,948 net D-J Basin
acres located in Weld and Morgan Counties, Colorado, through our
wholly-owned operating subsidiary, Red Hawk Petroleum, LLC
(“Red
Hawk”), which asset we refer to as our
“D-J Basin
Asset.” As of September 30, 2020, we held
interests in 378 gross (298 net) wells in our Permian Basin
Asset, of which 26 were active producers, 13 were active injectors,
and two wells were active Saltwater Disposal Wells
(“SWDs”), all of which are
held by PEDCO and operated by its wholly-owned operating
subsidiaries, and interests in 75 gross (21.9 net) wells
in our D-J Basin Asset, of which 18 gross (16.2 net) wells are
operated by Red Hawk and were producing, 36 gross (5.6
net) wells are non-operated, and 21 wells have an after-payout
interest.
As
a result of the COVID-19 outbreak, and the sharp decline in oil
prices which occurred partially as a result of the decreased demand
for oil caused by such outbreak and the actions taken globally to
stop the spread of such virus, in mid-April 2020, the Company
temporarily shut-in all of its operated producing wells in its
Permian Basin Asset and D-J Basin Asset to preserve the
Company’s oil and gas reserves for production during a more
favorable oil price environment, noting that most of the
Company’s acreage is held by production with no drilling
obligations, which provides the Company with flexibility to hold
back on production and development during periods of low oil and
gas prices. Following the partial recovery in oil prices,
commencing in early June 2020, the Company resumed full production
from its operated wells in the Permian Basin and the D-J Basin that
the Company shut-in in mid-April 2020, and also completed several
carryover projects from 2019’s Phase II Permian Basin Asset
development plan which it had put on hold due to the COVID-19
outbreak. The Company has deferred into 2021 several minor projects
from the 2019 carryover projects, and all previously planned 2020
development plan projects, pending a more favorable oil price
environment.
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 our
management believes can be developed using our technical and
operating expertise and be accretive to stockholder value, provided
that, as discussed above, the price of oil
recovers.
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Specifically,
we seek to increase stockholder value through the following
strategies:
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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 have
identified approximately 150 gross drilling locations across our
Permian Basin acreage based on 20-acre spacing. 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.
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Apply
modern drilling and completion techniques and
technologies. We own and intend to own 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.
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Optimization
of well density and configuration. We own properties that are legacy
conventional oil fields characterized by widespread vertical
development and geological well control. We utilize the extensive
petrophysical and production data of such legacy properties to
confirm optimal well spacing and configuration using modern
reservoir evaluation methodologies.
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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.
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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 to grow our reserve
base and maximize stockholder value.
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Preserve
financial flexibility to pursue organic and external growth
opportunities. We intend to maintain a disciplined
financial profile that will provide us flexibility across various
commodity and market cycles. We intend to utilize our strategic
partners and public currency to continuously fund development and
operations.
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 acreage so we can dictate the pace
of development to execute our business plan. Prior to the COVID-19
outbreak, our 2020 development plan included several carryover
projects from 2019’s Phase II Permian Basin Asset development
plan, including the drilling of an SWD well in the Chaveroo field
(Chaves and Roosevelt Counties, New Mexico) and production hookup
and commencement on five horizontal San Andres wells drilled in
2019, with our original plan for the later part of 2020
contemplating the drilling of two horizontal San Andres wells on
our Permian Basin Asset, several potential San Andres well
reactivation projects, and several enhancement and facilities
projects throughout all our operated assets.
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However, due
to the COVID-19 outbreak, in April 2020 the SWD well completion was
put on hold, resulting in only two of 2019’s Phase II
carryover producing wells being placed online at reduced rates due
to water disposal constraints, and all drilling, reactivation,
enhancement and facilities projects contemplated under the 2020
development plan being halted. Following the partial recovery
in oil prices, commencing in early June 2020, we resumed full
production from our operated wells in the Permian Basin and the D-J
Basin that we shut-in in mid-April 2020, and also completed several
carryover projects from 2019’s Phase II Permian Basin Asset
development plan which we had put on hold due to the COVID-19
outbreak, including completion of a SWD well and production hookup
and commencement on three horizontal San Andres wells drilled in
2019. We have deferred several minor projects from the 2019
carryover projects, including remedial work on two wells necessary
to bring them on to production, and all previously planned 2020
development plan projects, into 2021, pending a more favorable oil
price environment.
We
expect that we will have sufficient cash available to meet our
needs over the foreseeable future, which cash we anticipate being
available from (i) funds raised in this offering, assuming it is
successfully completed, (ii) our projected cash flow from
operations, (iii) our existing cash on hand, (iv) equity
infusions or loans (which may be convertible) made available
from SK Energy LLC, which is 100% owned and controlled by Mr. Simon
Kukes, the Company’s Chief Executive Officer and director
(“SK
Energy”), which funding
SK Energy is under no obligation to provide, and (v) funding
through credit or loan facilities. In addition, we may seek
additional funding through asset sales, farm-out arrangements,
lines of credit, or public or private debt or equity financings to
fund potential acquisitions in
2021.
Recent Developments
On January 19, 2021, we issued, after
recommendation by the Compensation Committee of the Company’s
Board of Directors and approval by the Board of Directors, and in
connection with the Company’s annual compensation review, an
aggregate of 940,000 shares of restricted Company common stock and
options to purchase an aggregate of 550,000 shares of restricted
Company common stock under the Company’s Amended and Restated
2012 Equity Incentive Plan, as amended (the
“Plan”),
in consideration for services rendered, and to be rendered, by
various officers and employees of the Company. The Plan, as
amended, has been registered on various Form S-8 Registration
Statements previously filed by the
Company.
Included as part of the issuances was the issuance
of: (a) 140,000 shares to Mr. Paul Pinkston, the Company’s
Chief Accounting Officer, which shares vest at the rate of (i) 1/3
of such shares on the one (1) year anniversary of the January 19,
2021 grant date (the “Grant
Date”); (ii) 1/3 on the
two (2) year anniversary of the Grant Date; and (iii) 1/3 on the
three (3) year anniversary of the Grant Date (collectively, the
“Three Year Vesting
Terms”), subject to Mr.
Pinkston’s continued service to the Company on such vesting
dates, and subject to the terms and conditions of a Restricted
Shares Grant Agreement entered into between the Company and Mr.
Pinkston; (b) 300,000 shares to Mr. Simon G. Kukes, the Chief
Executive Officer of the Company, all of which are subject to the
Three Year Vesting Terms, subject to Mr. Kukes’
continued service to the Company on such vesting dates, and subject
to the terms and conditions of a Restricted Shares Grant Agreement
entered into between the Company and Mr. Kukes;
(c) 250,000 shares to Mr. J. Douglas Schick, the President of
the Company, all of which are subject to the Three Year Vesting
Terms, subject to Mr. Schick’s continued service to the
Company on such vesting dates, and subject to the terms and
conditions of a Restricted Shares Grant Agreement entered into
between the Company and Mr. Schick; (d) 250,000 shares to Mr. Clark
R. Moore, the Executive Vice President, General Counsel and
Secretary of the Company, all of which are subject to the Three
Year Vesting Terms, subject to Mr. Moore’s continued
service to the Company on such vesting dates, and subject to the
terms and conditions of a Restricted Shares Grant Agreement entered
into between the Company and Mr. Moore; (f) options to
purchase 10,000 shares of restricted Company common stock with an
exercise price of $1.39 per share to Mr. Kukes’ wife, who
serves as an employee of the Company, all of which are subject to
the Three Year Vesting Terms, subject to Mrs. Kukes’
continued service to the Company on such vesting dates, and subject
to the terms and conditions of a Stock Option Grant Agreement
entered into between the Company and Mrs. Kukes; and
(g) options to purchase 540,000 shares of restricted Company
common stock with an exercise price of $1.39 per share to certain
other non-executive employees of the Company, all of which are
subject to the Three Year Vesting Terms, subject to such
recipient’s continued service to the Company on such vesting
dates, and subject to the terms and conditions of a Stock Option
Grant Agreement entered into between the Company and each such
recipient.
On January 29,
2021, the Company announced that, in connection with the
Company’s preparation of its audited financial statements for
the year-ended December 31, 2020 and estimates of the value of the
Company’s reserves as of December 31, 2020, that the Company
believes that it will recognize a material impairment of the value
of its oil and gas assets located in the Northwest Shelf of the
Permian Basin in eastern New Mexico and in the D-J Basin in Weld
and Morgan Counties, Colorado for the year-ended December 31, 2020.
Based on preliminary assessments applying SEC mandated pricing and
reserves methodologies, the Company believes that, due primarily to
the material decrease in oil and gas pricing in 2020, coupled with
the Company’s cessation of development in 2020 due to such
low pricing, the Company will be required to take a one-time oil
and gas asset impairment charge in the range of 60% to 70% of the
estimated discounted value of its reserves (PV-10) as calculated
the year prior as of December 31, 2019, which was $122.7 million.
The Company notes that this is only a preliminary estimate of the
anticipated impairment charge, with the final impairment charge
anticipated to be determined by the Company in the upcoming months
and announced by the Company in the Company’s Annual Report
on Form 10-K for the year-ended December 31, 2020, which impairment
may be higher or lower than the range anticipated by the Company
today. Further, the Company notes that it is not reducing the
magnitude of oil and gas reserves it holds – rather, only the
year-end value as calculated in accordance with SEC-mandated
pricing and reserves methodologies – and that such impairment
affects neither the quantity of oil and gas resources held, nor the
going forward economics of the underlying oil and gas reserves,
which are anticipated to increase in value assuming market pricing
improves and all other factors remain constant, further noting that
the price of West Texas Intermediate crude (WTI) has already
significantly improved from the SEC’s mandated pricing of
$39.57 per barrel, which SEC pricing the Company must use for its
impairment analysis.
Impact of COVID-19
In
December 2019, a novel strain of coronavirus, which causes the
infectious disease known as COVID-19, was reported in Wuhan, China.
The World Health Organization declared COVID-19 a
“Public Health
Emergency of International Concern” on January 30, 2020, and a global pandemic
on March 11, 2020. COVID-19 has, since the early part of 2020,
reduced worldwide economic activity. Due to COVID-19, the Company
or its employees, suppliers, and other partners may be prevented
from conducting business activities at full capacity for an
indefinite period of time, including due to the spread of the
disease within these groups or due to shutdowns that may be
requested or mandated by governmental authorities. While it is not
possible at this time to estimate the full impact that COVID-19
will have on the Company’s business, the continued spread of
COVID-19 and the measures taken by the governments of countries
affected and in which the Company operates have disrupted, and may
continue to disrupt, the operation of the Company’s business
for a prolonged period. The COVID-19 outbreak and mitigation
measures have also had an adverse impact on global economic
conditions, as well as an adverse effect on the Company’s
business and financial condition, and may continue to have an
adverse effect on the Company, including on its potential to
conduct financings on terms acceptable to the Company, if at all.
In addition, the Company has taken temporary precautionary measures
intended to help minimize the risk of the virus to its employees,
vendors, and guests, including limiting the number of occupants at
the Company’s Houston headquarters and requiring all others
to work remotely, and discouraging employee attendance at in-person
work-related meetings, which could negatively affect the
Company’s business. The extent to which the COVID-19 outbreak
will continue to impact the Company’s results will depend on
future developments that are highly uncertain and cannot be
predicted, including new information that may emerge concerning the
severity of the virus, the availability and efficacy of vaccines,
the ability of the general public to obtain such vaccines and the
willingness of individuals to be vaccinated, and the actions to
contain its impact. However, any further decrease in the price of
oil, or the demand for oil and gas, will likely have a negative
impact on our results of operations and cash
flows.
As
discussed above, we shut-in our operated production from mid-April
through early June 2020, which directly contributed to a decrease
in production volumes from 96,515 Boe for the three months ended
March 31, 2020, to 46,530 Boe for the three months ended June 30,
2020, representing a decrease of 52%. Similarly, our crude oil,
natural gas, and NGLs sales revenues decreased from $2,832,000 for
the three months ended March 31, 2020, to $656,000 for the three
months ended June 30, 2020, representing a decrease of 77%, largely
due to our decreased production, as well as decreases in NYMEX
pricing and significantly widened differentials, largely due to the
global COVID-19 pandemic, and the sharp decline in the demand for,
and price of, oil and gas, in connection therewith. During the
three-month period ended September 30, 2020, our production
regained some momentum and increased to 73,200 Boe;
however, the increased production was not able to
overcome the significant price declines and as a result, our sales
revenues of $2,417,000 for the current period were not able to
match our pre-COVID-19 first quarter 2020 sales revenues of
$2,832,000.
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In
response to the effects of COVID-19, the Company has adopted
policies, procedures, and practices both in its Houston office
headquarters and across its field operations to protect its
employees, contractors, and guests from COVID-19, including the
adoption of a COVID-19 Response Plan, implementation of contractor
questionnaires to assess COVID-19 risk and exposure prior to
entering any Company facility or worksite, adopting best practices,
guidelines and protocols recommended by the Centers for Disease
Control (the “CDC”) and the Office of the Texas Governor for
the prevention of exposure and spread of COVID-19, and instituting
weekly management calls discussing the Company’s ongoing
response to the COVID-19 pandemic and effectiveness thereof.
Consistent with the Office of the Texas Governor’s executive
orders, the Company has limited occupancy at the Company’s
Houston headquarters; however, given the Company’s robust
online systems and workflow practices and procedures, the Company
has not experienced any material challenges or reductions in
efficiency or effectiveness of its office-based workforce, while
its field personnel continues to attend to their daily field
operations uninterrupted, while mindful of social distancing and
other preventative measures and safeguards recommended by the
CDC.
Further, to help conserve its operating cash, in
April 2020 the Company initiated significant general and
administrative (“G&A”)
cost-reduction measures, including reducing all employee and
officer salaries by 20%, until market conditions significantly
improve, cutting all discretionary spending, undertaking additional
actions resulting in a nearly 20% cash G&A reduction in the
second and third quarters of 2020, from our original G&A
budget, and negotiating reductions of approximately $1 million in
vendor accounts payable, with further meaningful discounts going
forward. Additionally, the Company has taken cost-reduction
measures anticipated to reduce lease operating expenses by over 25%
in 2020. The Company also deferred its planned 2020 development
plan into 2021, and completed certain of its 2019 carryover
projects, including the completion of a SWD well and the production
hookup and commencement of three horizontal San Andres wells
drilled in 2019, which changes reduced the Company’s total
capital expenditures in 2020 from the originally budgeted $14.5
million to $7 million, all of which have been deployed to
date.
Risks That We
Face
An investment in our securities
involves a high degree of risk. You should carefully consider the
risks summarized below. The risks are discussed more fully in, and
incorporated by reference in, the “Risk
Factors” section of this prospectus supplement and
the accompanying prospectus. These risks include, but are not
limited to, the following:
●
Risks
associated with this offering, including dilution investors will
experience; the use of proceeds associated therewith; and further
dilution investors may experience;
●
The future
price of oil, natural gas and NGL;
●
The effect of
COVID-19 on the Company’s operations, future prospects, the
value of its properties, and the economy in general, including the
related effect on the supply and demand, and ultimate price of oil
and natural gas;
●
Current and
future declines in economic activity and rescissions, and their
effect on the Company, its property, prospects and the supply and
demand, and ultimate price of oil and natural
gas;
●
The status and
availability of oil and natural gas gathering, transportation, and
storage facilities owned and operated by third
parties;
●
An increase in
the differential between the NYMEX or other benchmark prices of oil
and natural gas and the wellhead price we receive for our
production may adversely affected our business, financial
condition, and results of operations;
●
New or amended environmental legislation or regulatory initiatives
which could result in increased costs, additional operating
restrictions, or delays, or have other adverse effects on
us;
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The
effect of future shut-ins of our operated production, should market
conditions significantly deteriorate;
●
Anticipated
significant write-downs of a material portion of our assets due to
the recent economic downturn resulting from COVID-19;
●
Our
need for additional capital to complete future acquisitions,
conduct our operations and fund our business, and our ability to
obtain such necessary funding on favorable terms, if at
all;
●
Our
ability to generate sufficient cash flow to meet any future debt
service and other obligations due to events beyond our
control;
●
The
fact that all our assets and operations are located in the Permian
Basin and the D-J Basin, making us vulnerable to risks associated
with operating in only two geographic areas;
●
The
speculative nature of our oil and gas operations, and general risks
associated with the exploration for, and production of oil and gas;
including accidents, equipment failures or mechanical problems
which may occur while drilling or completing wells or in production
activities; operational hazards and unforeseen interruptions for
which we may not be adequately insured; the threat and impact of
terrorist attacks, cyber-attacks or similar hostilities; declining
reserves and production; and losses or costs we may incur as a
result of title deficiencies or environmental issues in the
properties in which we invest, any one of which may adversely
impact our operations;
●
Potential
conflicts of interest that could arise for certain members of our
management team and board of directors that hold management
positions with other entities and our largest
stockholder;
●
The
limited control we have over activities on properties we do not
operate;
●
The
estimates of the value of our oil and gas properties and accounting
in connection therewith;
●
Intense
competition in the oil and natural gas industry;
●
Our
competitors use of superior technology and data resources that we
may be unable to afford or obtain the use of;
●
Changes in the legal and regulatory environment
governing the oil and natural gas industry, including
new
or amended environmental legislation or regulatory initiatives
which could result in increased costs, additional operating
restrictions, or delays, or have other adverse effects on
us;
●
Uncertainties
associated with enhanced recovery methods which may result in us
not realizing an acceptable return on our investments in such
projects or suffering losses;
●
Requirements
that we must drill on certain of acreage in order to hold such
acreage by production;
●
Improvements
in or new discoveries of alternative energy technologies that could
have a material adverse effect on our financial condition and
results of operations;
●
Future
litigation or governmental proceedings which could result in
material adverse consequences, including judgments or
settlements;
●
The currently illiquid and volatile market for our common
stock;
●
Our
dependence on the continued involvement of our present
management;
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The
fact that Mr. Simon Kukes, our Chief Executive Officer and a member
of board of directors, beneficially owns a majority of our common
stock and that his interests may be different from other
shareholders; and
●
Our
ability to maintain the listing of our common stock on the NYSE
American.
Corporate Information
Our
principal executive offices are located at 575 N. Dairy Ashford,
Suite 210, Houston, Texas 77079, and our telephone number is (713)
221-1768.
Additional
information about us is available on our website at
www.pacificenergydevelopment.com. We do not incorporate the
information on or accessible through our websites into this
prospectus supplement or the accompanying prospectus, and you
should not consider any information on, or that can be accessed
through, our websites as part of this prospectus supplement or the
accompanying prospectus.
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THE OFFERING
Issuer:
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PEDEVCO
Corp.
|
Common Stock offered hereby:
|
5,190,000
shares of common stock.
|
Common stock to outstanding prior to this offering:
|
73,489,770
shares.
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Common stock to be outstanding after this offering:
|
78,679,770 shares (or 79,458,270 shares if the
underwriters exercise their option to purchase additional shares in
full).
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Public Offering Price:
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$1.50
per share.
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Over-allotment option:
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We have granted the underwriters an
option for a period of 45 days from the date of this prospectus
supplement to purchase up to an additional 778,500 shares of
common stock.
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Use of proceeds:
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We
estimate that our net proceeds from this offering, after deducting
underwriting discounts and estimated fees and expenses, will be
approximately $7.2 million (or
$8.3 million if the underwriters exercise their
over-allotment option to purchase 778,500 additional shares of our
common stock in full).
We
intend to use the majority of the net proceeds from this offering,
if any, (i) to fund the Company’s 2021 Permian Basin and D-J
Basin asset development programs, (ii) to fund potential
acquisition and business combination opportunities, and (iii) for
general corporate purposes and working capital or for other
purposes that the Board of Directors, in their good faith, deems to
be in the best interest of the Company. See “Use of Proceeds” for
more information.
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Risk factors:
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An
investment in our common stock involves a significant degree of
risk. You should read the “Risk Factors”
section of this prospectus supplement and in the documents
incorporated by reference in this prospectus supplement and the
accompanying prospectus for a discussion of factors to consider
before deciding to purchase shares of our common
stock.
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NYSE American Symbol for our common stock:
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PED
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In this
prospectus supplement, unless otherwise indicated, the number of
shares of our common stock and other capital stock, and the other
information based thereon, is as of February 2, 2021, and
excludes:
●
150,329
shares of common stock issuable upon the exercise of outstanding
warrants to purchase shares of common stock at a weighted-average
exercise price of $0.32 per share;
●
1,544,850
shares of common stock issuable upon the exercise of outstanding
options to purchase shares of common stock at a weighted-average
exercise price of $2.17 per share;
●
153,939
shares of our common stock that are reserved for equity awards that
may be granted under our equity incentive plans.
Additionally,
unless otherwise stated, all information in this prospectus
supplement:
●
assumes
no exercise of the underwriters’ over-allotment
option;
●
assumes
no exercise of outstanding options and warrants to purchase common
stock, and no issuance of shares available for future issuance
under our equity compensation plans; and
●
reflects
all currency in United States dollars.
FORWARD-LOOKING
STATEMENTS
Certain information included in this prospectus supplement, the
prospectus, any free writing prospectus we may file, the documents
or information incorporated by reference herein, other reports
filed by us under the Exchange Act contain forward-looking
statements within the meaning of Section 27A of the Securities Act,
Section 21E of the Exchange Act, and the Private Securities
Litigation Reform Act of 1995, as amended. These forward-looking
statements are based on our management’s belief and
assumptions and on information currently available to our
management. Although we believe that the expectations reflected in
these forward-looking statements are reasonable, these statements
relate to future events or our future financial performance, and
involve known and unknown risks, uncertainties and other factors
that may cause our actual results, levels of activity, performance
or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or
implied by these forward-looking statements.
In some
cases, you can identify forward-looking statements by terminology
such as “may,” “should,”
“expects,”
“intends,”
“plans,”
“anticipates,”
“believes,”
“estimates,”
“predicts,”
“potential,”
“continue” or the negative
of these terms or other comparable terminology. These statements
are only predictions. You should not place undue reliance on
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, which are, in some cases,
beyond our control and which could materially affect results.
Factors that may cause actual results to differ materially from
current expectations include, among other things, those listed
under, and incorporated by reference in, “Risk
Factors” and elsewhere in this
prospectus.
If one
or more of these risks or uncertainties occur, or if our underlying
assumptions prove to be incorrect, actual events or results may
vary significantly from those implied or projected by the
forward-looking statements. No forward-looking statement is a
guarantee of future performance. You should read this prospectus,
those documents incorporated by reference herein, and those
documents which we have filed with the SEC as exhibits to the
registration statement, of which this prospectus is a part,
completely and with the understanding that our actual future
results may be materially different from any future results
expressed or implied by these forward-looking
statements.
Forward-looking
statements speak only as of the date of this prospectus supplement
or the date of any document incorporated by reference in this
prospectus supplement or any free writing prospectus, as
applicable. We anticipate that subsequent events and developments
will cause our views to change. However, while we may elect to
update these forward-looking statements at some point in the
future, we have no current intention of doing so except to the
extent required by applicable law. You should therefore not rely on
these forward-looking statements as representing our views as of
any date subsequent to the date of this prospectus.
You
should also consider carefully the statements under “Risk
Factors” and other sections of this prospectus
supplement, and the documents we incorporate by reference or file
as part of any free writing prospectus, which address additional
facts that could cause our actual results to differ from those set
forth in the forward-looking statements. We caution investors not
to place significant reliance on the forward-looking statements
contained in this prospectus supplement, any free writing
prospectus, and the documents we incorporate by reference. We
undertake no obligation to publicly update or review any
forward-looking statements, whether as a result of new information,
future developments or otherwise, except as otherwise required by
law.
Before
making an investment decision, you should consider the
“Risk
Factors” discussed below, in the section
entitled “Risk
Factors”
contained under Item 1A of Part I of our most recent annual report
on Form 10-K, and under “Risk
Factors” under
Item 1A of Part II of our subsequent quarterly reports on Form
10-Q, as the same may be amended, supplemented or superseded from
time to time by our subsequent filings and reports under the
Securities Act or the Exchange Act, each of which are incorporated
by reference in this prospectus supplement. For more information,
see “Incorporation
of Certain Documents by Reference.” The
market or trading price of our securities could decline due to any
of these risks. In addition, please read “Forward-Looking
Statements” in this prospectus supplement, where
we describe additional uncertainties associated with our business
and the forward-looking statements included or incorporated by
reference in this prospectus supplement.
The
securities offered herein are highly speculative and should only be
purchased by persons who can afford to lose their entire investment
in us. You should carefully consider the following risk factors and
the aforementioned risk factors that are incorporated herein by
reference and other information in this prospectus supplement
before deciding to become a holder of our common stock. The risks
and uncertainties described in these incorporated documents and
described below are not the only risks and uncertainties that we
face. Additional risks and uncertainties not presently known to us
may also impair our business operations. If any of these risks
actually occur, our business and financial results could be
negatively affected to a significant extent. In that event, the
trading price of our common stock could decline, and you may lose
all or part of your investment in our common stock.
Our
securities are subject to the following risk factors:
We have a limited operating history and expect to continue to incur
losses for an indeterminable period of time.
We
have a limited operating history and are engaged in the initial
stages of exploration, development and exploitation of our
leasehold acreage and will continue to be so until commencement of
substantial production from our oil and natural gas properties,
which will depend upon successful drilling results, additional and
timely capital funding, and access to suitable infrastructure.
Companies in their initial stages of development face substantial
business risks and may suffer significant losses. We have generated
substantial net losses and negative cash flows from operating
activities in the past and expect to continue to incur substantial
net losses as we continue our drilling program. In considering an
investment in our common stock, you should consider that there is
only limited historical and financial operating information
available upon which to base your evaluation of our
performance. We have incurred net losses
of $104,887,000 from the date of inception (February 9,
2011) through September 30, 2020. Additionally, we are
dependent on obtaining additional debt and/or equity financing to
roll-out and scale our planned principal business operations.
Management’s plans in regard to these matters consist
principally of seeking additional debt and/or equity financing
combined with expected cash flows from current oil and gas assets
held and additional oil and gas assets that we may acquire. Our
efforts may not be successful and funds may not be available on
favorable terms, if at all.
We face challenges and uncertainties in financial planning as a
result of the unavailability of historical data and uncertainties
regarding the nature, scope and results of our future activities.
New companies must develop successful business relationships,
establish operating procedures, hire staff, install management
information and other systems, establish facilities and obtain
licenses, as well as take other measures necessary to conduct their
intended business activities. We may not be successful in
implementing our business strategies or in completing the
development of the infrastructure necessary to conduct our business
as planned. In the event that one or more of our drilling programs
is not completed or is delayed or terminated, our operating results
will be adversely affected and our operations will differ
materially from the activities described in, and incorporated by
reference in, this prospectus. As a result of industry factors or
factors relating specifically to us, we may have to change our
methods of conducting business, which may cause a material adverse
effect on our results of operations and financial condition, and
may impede our ability to economically find, develop, exploit and
acquire oil and natural gas reserves. As a result, we may not be
able to achieve or sustain profitability or positive cash flows
provided by our operating activities in the future.
You will experience immediate and substantial dilution as a result
of this offering and may experience additional dilution in the
future.
Because
the price per share of our common stock being offered is higher
than the book value per share of our common stock, you will suffer
substantial dilution in the net tangible book value of the common
stock you purchase in this offering. Based on the public offering
price of $1.50 per share and the net tangible book value of the
common stock of $1.35 per share as of September 30, 2020, if you
purchase shares of common stock in this offering, you will suffer
dilution of $0.15 per share in the net tangible book value of
the common stock, which will be $1.35 per share following the
offering (on a pro forma basis). See “Dilution” below for
a more detailed discussion of the dilution you will incur if you
purchase our common stock in the offering.
Management will have broad discretion as to the use of the proceeds
from this offering, and may not use the proceeds
effectively.
Our
management will have broad discretion in the application of the net
proceeds from this offering and could spend the proceeds in ways
that may not improve our results of operations or enhance the value
of our common stock. Our failure to apply these funds effectively
could have a material adverse effect on our business and cause the
price of our common stock to decline.
There may be future sales of our common stock, which could
adversely affect the market price of our common stock and dilute a
shareholder’s ownership of common stock.
The
exercise of the underwriters’ over-allotment option, the
exercise of any options granted to executive officers and other
employees under our equity compensation plans, and other issuances
of our common stock could have an adverse effect on the market
price of the shares of our common stock. Other than the
restrictions set forth in the section titled “Underwriting,” we are not restricted
from issuing additional shares of common stock, including any
securities that are convertible into or exchangeable for, or that
represent the right to receive shares of common stock, provided
that we are subject to the requirements of the NYSE American (which
generally requires shareholder approval for any transactions which
would result in the issuance of more than 20% of our then
outstanding shares of common stock or voting rights representing
over 20% of our then outstanding shares of stock). Sales of a
substantial number of shares of our common stock in the public
market or the perception that such sales might occur could
materially adversely affect the market price of the shares of our
common stock. Because our decision to issue securities in any
future offering will depend on market conditions and other factors
beyond our control, we cannot predict or estimate the amount,
timing or nature of our future offerings. Accordingly, our
shareholders bear the risk that our future offerings will reduce
the market price of our common stock and dilute their stock
holdings in us.
You may experience future dilution as a result of future equity
offerings.
In
order to raise additional capital, we may in the future offer
additional shares of our common stock or other securities
convertible into or exchangeable for our common stock. We cannot
assure you that we will be able to sell shares or other securities
in any other offering at a price per share that is equal to or
greater than the price per share paid by investors in this
offering, and investors purchasing our shares or other securities
in the future could have rights superior to existing shareholders.
The price per share at which we sell additional shares of our
common stock or other securities convertible into or exchangeable
for our common stock in future transactions may be higher or lower
than the price per share in this offering.
We do not intend to pay dividends on our common stock for the
foreseeable future.
We have
never paid cash dividends on our capital stock and do not
anticipate paying any cash dividends on our common stock for the
foreseeable future. Investors should not rely on an investment in
us if they require income generated from dividends paid on our
capital stock. Because we do not intend to pay dividends on our
common stock, any income derived from our common stock would only
come from a rise in the market price of our common stock, which is
uncertain and unpredictable.
Future sales of our common stock could cause our stock price to
decline.
If our shareholders
sell substantial amounts of our common stock in the public market,
the market price of our common stock could decrease significantly.
The perception in the public market that our shareholders might
sell shares of our common stock could also depress the market price
of our common stock. Up to $100,000,000 in total aggregate value of
securities have been registered by us on a “shelf” registration
statement on Form S-3 (File No. 333-250904) that we filed with the
Securities and Exchange Commission on November 23, 2020, and which
was declared effective on December 2, 2020. To date, we have not
sold any securities under the “shelf” registration
statement, when not including securities proposed to be sold in
this offering, leaving an aggregate of $100,000,000 in securities
which will be eligible for sale in the public markets from time to
time, not including the securities offered pursuant to the offering
described in this prospectus, when sold and issued by us, subject
to the requirements of Form S-3, which limits us, until such time,
if ever, as our public float exceeds $75 million, from selling
securities in a public primary offering under Form S-3 with a value
exceeding more than one-third of the aggregate market value of the
common stock held by non-affiliates of the Company every twelve
months. Additionally, if our existing shareholders sell, or
indicate an intention to sell, substantial amounts of our common
stock in the public market, the trading price of our common stock
could decline significantly. The market price for shares of our
common stock may drop significantly when such securities are sold
in the public markets. A decline in the price of shares of our
common stock might impede our ability to raise capital through the
issuance of additional shares of our common stock or other equity
securities.
Declines in oil and, to a lesser extent, NGL and natural gas
prices, have in the past, and will continue in the future to,
adversely affect our business, financial condition or results of
operations and our ability to meet our capital expenditure
obligations or targets and financial commitments.
The price we receive for our oil and, to a lesser
extent, natural gas and NGLs, heavily influences our revenue,
profitability, cash flows, liquidity, access to capital, present
value and quality of our reserves, the nature and scale of our
operations, and future rate of growth. Oil, NGL, and natural gas
are commodities and, therefore, their prices are subject to wide
fluctuations in response to relatively minor changes in supply and
demand. In recent years, the markets for oil and natural gas have
been volatile. These markets will likely continue to be volatile in
the future. Further, oil prices and natural gas prices do not
necessarily fluctuate in direct relation to each
other. Because approximately 88% of our estimated proved
reserves as of December 31, 2020,
were oil, our financial results are more sensitive to movements in
oil prices. The price of crude oil has experienced significant
volatility over the last five years, with the price per barrel of
West Texas Intermediate (“WTI”) crude rising from a low of $27 in
February 2016 to a high of $76 in October 2018, then, in 2020,
dropping below $20 per barrel due in part to reduced global demand
stemming from the recent global COVID-19 outbreak, and most
recently climbing back above $50 a barrel. A prolonged period of
low market prices for oil and natural gas, or further declines in
the market prices for oil and natural gas, will likely result in
capital expenditures being further curtailed and will adversely
affect our business, financial condition and liquidity and our
ability to meet obligations, targets or financial commitments and
could ultimately lead to restructuring or filing for bankruptcy,
which would have a material adverse effect on our stock price and
indebtedness. Additionally, lower oil and natural gas prices have,
and may in the future, cause, a decline in our stock price. During
the year ended December 31, 2019, the daily NYMEX WTI oil spot
price ranged from a high of $66.24 per Bbl to a low of $46.31 per
Bbl and the NYMEX natural gas Henry Hub spot price ranged from a
high of $4.25 per MMBtu to a low of $1.75 per MMBtu. During
the year ended December 31, 2020, the daily NYMEX WTI oil spot
price ranged from a high of $63.27 per Bbl to a low of ($36.98) per
Bbl and the NYMEX natural gas Henry Hub spot price ranged from a
high of $3.14 per MMBtu to a low of $1.33 per
MMBtu.
Our success is dependent on the prices of oil, NGLs, and natural
gas. Low oil or natural gas prices and the substantial volatility
in these prices will adversely affect and are expected to continue
to adversely affect, our business, financial condition and results
of operations, and our ability to meet our capital expenditure
requirements and financial obligations.
The
prices we receive for our oil, NGLs and natural gas heavily
influence our revenue, profitability, cash flow available for
capital expenditures, access to capital, and future rate of growth.
Oil, NGLs, and natural gas are commodities and, therefore, their
prices are subject to wide fluctuations in response to relatively
minor changes in supply and demand. Historically, the commodities
market has been volatile. For example, the price of crude oil has
experienced significant volatility over the last five years, with
the price per barrel of WTI crude rising from a low of $27 in
February 2016 to a high of $76 in October 2018, then dropping below
$20 per barrel in April 2020 due in part to reduced global demand
stemming from the recent global COVID-19 outbreak, before
recovering to between $45-$55 per barrel more recently. Prices for
natural gas and NGLs experienced declines of similar magnitude. An
extended period of continued lower oil prices, or additional price
declines, will have further adverse effects on us. The prices we
receive for our production, and the levels of its production, will
continue to depend on numerous factors, including the
following:
●
the
domestic and foreign supply of oil, NGLs and natural
gas;
●
the
domestic and foreign demand for oil, NGLs and natural
gas;
●
the
prices and availability of competitors’ supplies of oil, NGLs
and natural gas;
●
the
actions of the Organization of Petroleum Exporting Countries, or
OPEC, and state-controlled oil companies relating to oil price and
production controls;
●
the
price and quantity of foreign imports of oil, NGLs and natural
gas;
●
the
impact of U.S. dollar exchange rates on oil, NGLs, and natural gas
prices;
●
domestic
and foreign governmental regulations and taxes;
●
speculative
trading of oil, NGLs, and natural gas futures
contracts;
●
localized
supply and demand fundamentals, including the availability,
proximity, and capacity of gathering and transportation systems for
natural gas;
●
the
availability of refining capacity;
●
the
prices and availability of alternative fuel sources;
●
the
threat, or perceived threat, or results, of viral pandemics, for
example, as experienced with the COVID-19 pandemic in 2020 and
2021;
●
weather
conditions and natural disasters;
●
political
conditions in or affecting oil, NGLs, and natural gas producing
regions, including the Middle East and South America;
●
the
continued threat of terrorism and the impact of military action and
civil unrest;
●
public
pressure on, and legislative and regulatory interest within,
federal, state and local governments to stop, significantly limit,
or regulate hydraulic fracturing activities;
●
the
level of global oil, NGL, and natural gas inventories and
exploration and production activity;
●
authorization
of exports from the United States of liquefied natural
gas;
●
the
impact of energy conservation efforts;
●
technological
advances affecting energy consumption; and
●
overall
worldwide economic conditions.
Declines
in oil, NGL or natural gas prices will not only reduce our
revenue, but will reduce the amount of oil, NGL, and natural gas
that we can produce economically. Should natural gas, NGL, or oil
prices remain at current levels for an extended period, we will
continue to shut-in our operated wells, delay some or all of our
exploration and development plans for our prospects, and cease
exploration or development activities on certain prospects due to
the anticipated unfavorable economics from such activities, and, as
a result, we will have to make substantial downward adjustments to
our estimated proved reserves, each of which would have a material
adverse effect on our business, financial condition, and results of
operations.
Our business and
operations have been adversely affected by, and are expected to
continue to be adversely affected by, the recent COVID-19
outbreak, and may be adversely affected by other similar
outbreaks.
As
a result of the recent COVID-19 outbreak or other adverse
public health developments, including voluntary and mandatory
quarantines, travel restrictions, and other restrictions, our
operations, and those of our subcontractors, customers, and
suppliers, have and are anticipated to continue to experience
delays or disruptions and temporary suspensions of operations. In
addition, our financial condition and results of operations have
been and are likely to continue to be adversely affected by
the COVID-19 outbreak.
The
timeline and potential magnitude of the COVID-19 outbreak
are currently unknown. The continuation or amplification of
this virus could continue to more broadly affect the United States
and global economy, including its business and operations, and the
demand for oil and gas. For example, the outbreak of
coronavirus has resulted in a widespread health crisis that will
adversely affect the economies and financial markets of many
countries, resulting in an economic downturn that will affect our
operating results. Other contagious diseases in the human
population could have similar adverse effects. In addition, the
effects of COVID-19 and concerns regarding its global spread have
negatively impacted the domestic and international demand for crude
oil and natural gas, which has contributed to price volatility,
impacted the price we receive for oil and natural gas, and
materially and has materially and adversely affected the demand for
and marketability of our production, which production we
temporarily shut-in from mid-April 2020 through early June 2020,
and is anticipated to continue to adversely affect the same for the
foreseeable future. As the potential impact from COVID-19 is
difficult to predict, the extent to which it will negatively affect
our operating results, or the duration of any potential business
disruption is uncertain. The magnitude and duration of any impact
will depend on future developments and new information that may
emerge regarding the severity and duration of COVID-19 and the
actions taken by authorities to contain it or treat its impact,
including the efficiency of recent vaccines, the ability of the
government to roll such vaccines out to the general public, and the
willingness of individuals to obtain such vaccines, all of which
are beyond our control. These potential impacts, while uncertain,
have already negatively affected our 2020 results of operations,
and are anticipated to have a negative impact on multiple future
quarters’ results as well.
Declining general economic, business or industry conditions have,
and will continue to have, a material adverse effect on our results
of operations, liquidity, and financial condition, and are expected
to continue having a material adverse effect for the foreseeable
future.
Concerns
over global economic conditions, the threat of pandemic diseases
and the results thereof, energy costs, geopolitical issues,
inflation, the availability and cost of credit, the United States
mortgage market, and a declining real estate market in the United
States have contributed to increased economic uncertainty and
diminished expectations for the global economy. These factors,
combined with volatile prices of oil and natural gas, declining
business and consumer confidence, and increased unemployment, have
precipitated an economic slowdown and a recession, which could
expand to a global depression. Concerns about global economic
growth have had a significant adverse impact on global financial
markets and commodity prices and are expected to continuing having
a material adverse effect for the foreseeable future. If the
economic climate in the United States or abroad continues to
deteriorate, demand for petroleum products could diminish, which
could further impact the price at which we can sell our oil,
natural gas, and natural gas liquids, affect the ability of our
vendors, suppliers and customers to continue operations, and
ultimately adversely impact our results of operations, liquidity
and financial condition to a greater extent than it has
already.
The marketability of our production is dependent upon oil and
natural gas gathering, transportation, and storage facilities owned
and operated by third parties, and the unavailability of
satisfactory oil and natural gas transportation arrangements have
had a material adverse effect on our revenue.
The
unavailability of satisfactory oil and natural gas transportation
arrangements has hindered our access to oil and natural gas markets
and has delayed production from our wells. The availability of a
ready market for our oil and natural gas production depends on a
number of factors, including the demand for, and supply of, oil and
natural gas and the proximity of reserves to pipelines, terminal
facilities, and storage facilities. Our ability to market our
production depends in substantial part on the availability and
capacity of gathering systems, pipelines, processing facilities,
and storage facilities owned and operated by third parties. Our
failure to obtain these services on acceptable terms could
materially harm our business. Due to the current lack of demand,
low prices, and high transportation costs, we have elected to
shut-in all of our operated wells, resulting in a nearly complete
loss of production revenue. Furthermore, we are obligated to pay
shut-in royalties to certain mineral interest owners in order to
maintain our leases with respect to certain shut-in wells. We do
not expect to purchase firm transportation capacity on third-party
facilities. Therefore, we expect the transportation of our
production to be generally interruptible in nature and lower in
priority to those having firm transportation
arrangements.
The
disruption of third-party facilities due to maintenance and/or
weather could negatively impact our ability to market and deliver
our products. The third parties' control when or if such facilities
are restored after disruption, and what prices will be charged for
products. Federal and state regulation of oil and natural gas
production and transportation, tax and energy policies, changes in
supply and demand, pipeline pressures, damage to or destruction of
pipelines, and general economic conditions could adversely affect
our ability to produce, gather and transport oil and natural
gas.
An increase in the differential between the NYMEX or other
benchmark prices of oil and natural gas and the wellhead price we
receive for our production has adversely affected our business,
financial condition, and results of operations.
The prices that we will receive for our oil and
natural gas production sometimes may reflect a discount to the
relevant benchmark prices, such as the New York Mercantile Exchange
(“NYMEX”),
that are used for calculating hedge positions. The difference
between the benchmark price and the prices we receive is called a
differential. Increases in the differential between the benchmark
prices for oil and natural gas and the wellhead price we receive
has recently adversely affected and is anticipated to continue to
adversely affect, our business, financial condition, and results of
operations. We do not have, and may not have in the future, any
derivative contracts or hedging covering the amount of the basis
differentials we experience in respect of our production. As such,
we will be exposed to any increase in such
differentials.
Downturns and volatility in global economies and commodity and
credit markets have materially adversely affected our business,
results of operations, and financial condition.
Our
results of operations are materially adversely affected by the
conditions of the global economies and the credit, commodities, and
stock markets. Among other things, we have recently been adversely
impacted, and anticipate to continue to be adversely impacted, due
to a global reduction in consumer demand for oil and gas, and
consumer lack of access to sufficient capital to continue to
operate their businesses or to operate them at prior levels. In
addition, a decline in consumer confidence or changing patterns in
the availability and use of disposable income by consumers can
negatively affect the demand for oil and gas and as a result our
results of operations.
New or amended environmental legislation or regulatory initiatives
could result in increased costs, additional operating restrictions,
or delays, or have other adverse effects on us.
The environmental laws and regulations to which we are subject
change frequently, often to become more burdensome and/or to
increase the risk that we will be subject to significant
liabilities. New or amended federal, state, or local laws or
implementing regulations or orders imposing new environmental
obligations on, or otherwise limiting, our operations could make it
more difficult and more expensive to complete oil and natural gas
wells, increase our costs of compliance and doing business, delay
or prevent the development of resources (especially from shale
formations that are not commercial without the use of hydraulic
fracturing), or alter the demand for and consumption of our
products. Any such outcome could have a material and adverse impact
on our cash flows and results of operations.
For example, in 2014,
2016, and 2018, opponents of hydraulic fracturing sought statewide
ballot initiatives in Colorado that would have restricted oil and
gas development in Colorado and could have had materially adverse
impacts on us. One of the proposed initiatives would have made the
vast majority of the surface area of the state ineligible for
drilling, including substantially all of our planned future
drilling locations. By further example, in April 2019, Colorado
Senate Bill 19-181 (the “Bill”) was
passed into law, which prioritizes the protection of public safety,
health, welfare, and the environment in the regulation of the oil
and gas industry by modifying the State’s oil and gas
statutes and clarifying, reinforcing, and establishing local
governments’ regulatory authority over the surface impacts of
oil and gas development in Colorado. This Bill, among other things,
gives more power to local government entities in making land-use
decisions about oil and gas development and regulation, and directs
the Colorado Oil & Gas Conservation Commission
(“COGCC”) to
promulgate rules to ensure, among other things, proper wellbore
integrity, allow public disclosure of flowline information, and
evaluate when inactive or shut-in wells must be inspected before
being put into production or used for injection. In addition, the
Bill requires that owners of more than 50% of the mineral interests
in lands to be pooled must have joined in the application for a
pooling order and that the application must include proof that the
applicant received approval for the facilities from the affected
local government or that the affected local government does not
regulate such facilities. In addition, the Bill provides that an
operator cannot use the surface owned by a nonconsenting owner
without permission from the nonconsenting owner and increases
nonconsenting owners’ royalty rates during a well’s
pay-back period from 12.5% to 13.0%. Pursuant
to the Bill, in December 2019 the COGCC proposed new regulatory
requirements to enhance safety and environmental protection during
hydraulic fracturing and to enhance wellbore
integrity. We anticipate that
the Bill may make it more difficult and more costly for us to
undertake oil and gas development activities in Colorado. In
addition, on September 28, 2020, the COGCC voted in favor of a
preliminary approval establishing a new 2,000-foot setback rule
from buildings for drilling and fracturing operations statewide,
increasing the previous 500-foot setback rule, which new rule
became effective January 1, 2021, and could likewise make it more
difficult for us to undertake oil and gas development activities in
Colorado.
Similar to the Bill
described above, proposals are made from time to time to adopt new,
or amend existing, laws and regulations to address hydraulic
fracturing or climate change concerns through further regulation of
exploration and development activities. We cannot predict the
nature, outcome, or effect on us of future regulatory initiatives,
but such initiatives could materially impact our results of
operations, production, reserves, and other aspects of our
business.
For example, in 2019, the United States
Environmental Protection Agency increased the state of
Colorado’s non-attainment ozone classification for the Denver
Metro/North Front Range nonattainment area
(“NAA”) from “moderate”
to “serious”
under the 2008 National Ambient Air Quality Standards. This
“serious”
classification will trigger significant additional obligations for
the state under the Clean Air Act and could result in new and more
stringent air quality control requirements, which may in turn
result in significant costs and delays in obtaining necessary
permits applicable to our operations.
During
2020, we temporarily shut-in all of our operated producing
wells in our Permian Basin Asset and D-J Basin Asset to preserve
our oil and gas reserves for production during a more favorable oil
price environment, and while we have resumed full production, we
may again shut-in some or all of our operated production, should
market conditions significantly deteriorate.
As
a result of the recent COVID-19 outbreak, and the sharp decline in
oil prices which occurred partially as a result of the decreased
demand for oil caused by such outbreak and the actions taken
globally to stop the spread of such virus, in mid-April 2020 we
temporarily shut-in all of our operated producing wells in our
Permian Basin and D-J Basin to preserve our oil and gas reserves
for production during a more favorable oil price environment,
noting that most of our acreage is held by production with no
drilling obligations, which provides us with the flexibility to
hold back on production and development during periods of low oil
and gas prices. Following a partial recovery in oil prices,
commencing in early June 2020, we reactivated over 90% of our
operated wells in the Permian Basin and the D-J Basin that we
shut-in in mid-April 2020, and we have subsequently resumed full
production of all operated wells. However, we may again shut-in
some or all of our production, should market conditions deteriorate
into the mid- to low-$20 per barrel realized wellhead price range
in the future. While our producing wells are shut-in, we do not
generate revenues from such wells and would need to use our cash on
hand and funds we receive from borrowings and the sale of equity in
order to pay our operating expenses. A continued period of
low-priced oil may make it non-economical for us to operate our
wells, which would have a material adverse effect on our operating
results and the value of our assets. We cannot estimate the future
price of oil, and as such cannot estimate, when we may again
determine to begin producing oil at our operated
wells.
We anticipate writing-down a material portion of our assets in our
consolidated financial statements for the year ended December 31,
2020.
The recent COVID-19 outbreak has led to an
economic downturn resulting in lower oil prices, which in turn
required us to shut-in all of our production from mid-April through
early June 2020 as it was uneconomical for us to operate our
producing wells during such time. In connection with the Company’s preparation
of its audited financial statements for the year-ended December 31,
2020 and estimates of the value of the Company’s reserves as
of December 31, 2020, the Company believes that it will recognize a
material impairment of the value of its oil and gas assets located
in the Northwest Shelf of the Permian Basin in eastern New Mexico
and in the D-J Basin in Weld and Morgan Counties, Colorado for the
year-ended December 31, 2020. Based on preliminary assessments
applying SEC mandated pricing and reserves methodologies, the
Company believes that, due primarily to the material decrease in
oil and gas pricing in 2020, coupled with the Company’s
cessation of development in 2020 due to such low pricing, the
Company will be required to take a one-time oil and gas asset
impairment charge in the range of 60% to 70% of the estimated
discounted value of its reserves (PV-10) as calculated the year
prior as of December 31, 2019, which was $122.7 million. The
Company notes that this is only a preliminary estimate of the
anticipated impairment charge, with the final impairment charge
anticipated to be determined by the Company in the upcoming months
and announced by the Company in the Company’s Annual Report
on Form 10-K for the year-ended December 31, 2020, which impairment
may be higher or lower than the range anticipated by the Company
today. Further, the Company notes that it is not reducing the
magnitude of oil and gas reserves it holds – rather, only the
year-end value as calculated in accordance with SEC-mandated
pricing and reserves methodologies – and that such impairment
affects neither the quantity of oil and gas resources held, nor the
going forward economics of the underlying oil and gas reserves,
which are anticipated to increase in value assuming market pricing
improves and all other factors remain constant, further noting that
the price of West Texas Intermediate crude (WTI) has already
significantly improved from the SEC’s mandated pricing of
$39.57 per barrel, which SEC pricing the Company must use for its
impairment analysis.
The Federal Government has instituted a moratorium on new oil and
gas leases and permits on federal onshore and offshore lands, which
if extended, or leads to a change in regulatory schemes, may have a
material adverse effect on the Company and its results of
operations.
On
January 20, 2021, the Acting U.S. Interior Secretary, instituted a
60-day moratorium on new oil and gas leases and permits on federal
onshore and offshore lands. A total of approximately 26% of the
Company’s acreage in New Mexico and 1% of the Company’s
acreage in Colorado are located on federal lands. It is currently
unclear whether the moratorium will be extended when it expires on
March 21, 2021, or whether such moratorium is the start of a change
in federal policies regarding the grant of oil and gas permits on
federal lands. The current moratorium does not affect the Company,
as the Company has no plans to drill new wells on any leases held
on federal lands; however, if such moratorium was to become
permanent, or the federal government in the future were to grant
less permits on federal lands, make such permitting process more
difficult, costly, or to institute more stringent rules relating to
such permitting process, it could have a material adverse effect on
the value of the Company’s leases and/or its ability to
undertake oil and gas operations on such the portion of its leases
on federal lands.
Mr.
Simon Kukes, our Chief Executive Officer and a member of board of
directors, beneficially owns 73.6% of our common stock, which
gives him majority voting control over stockholder matters and his
interests may be different from your
interests.
Mr. Simon Kukes, our Chief Executive
Officer and member of the board of directors, through his
individual ownership of the Company and through his position as the
principal and sole owner of SK Energy LLC, beneficially owns
approximately 73.6% our issued and outstanding common stock, and
will continue to beneficially own approximately 68.7% of our issued
and outstanding common stock after this offering (assuming no
exercise of the underwriters’ over-allotment option). As
such, Mr. Kukes can, and 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 any fiduciary duties
owed to the stockholders generally, while Mr. Kukes’
interests may generally be aligned with the interests of our
stockholders, in some instances Mr. Kukes may have interests
different than the rest of our stockholders, including but not
limited to, future potential company financings in which SK Energy
may participate, or his leadership at the Company. Mr. Kukes’
influence or control of our company as a stockholder 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. Because Mr. Kukes controls the
stockholder vote, investors may find it difficult to replace Mr.
Kukes (and such persons as he may appoint from time to
time) as members of our management if they disagree with the
way our business is being operated. Additionally, the interests of
Mr. Kukes may differ from the interests of the other stockholders
and thus result in corporate decisions that are adverse to other
stockholders.
We are
subject to the Continued Listing Criteria of the NYSE American and
our failure to satisfy these criteria may result in delisting of
our common stock.
Our common stock is currently listed on the NYSE
American. In order to maintain this listing, we must maintain
certain share prices, financial and share distribution targets,
including maintaining a minimum amount of stockholders’
equity and a minimum number of public stockholders. In addition to
these objective standards, the NYSE American may delist the
securities of any issuer if, in its opinion, the issuer’s
financial condition and/or operating results appear unsatisfactory;
if it appears that the extent of public distribution or the
aggregate market value of the security has become so reduced as to
make continued listing on the NYSE American inadvisable; if the
issuer sells or disposes of principal operating assets or ceases to
be an operating company; if an issuer fails to comply with the NYSE
American’s listing requirements; if an issuer’s common
stock sells at what the NYSE American considers a
“low selling
price” (generally trading
below $0.20 per share for an extended period of time) and the
issuer fails to correct this via a reverse split of shares after
notification by the NYSE American (provided that issuers can also
be delisted if any shares of the issuer trade below $0.06 per
share); or if any other event occurs or any condition exists which
makes continued listing on the NYSE American, in its opinion,
inadvisable.
If
the NYSE American delists our common stock, investors may face
material adverse consequences, including, but not limited to, a
lack of trading market for our securities, reduced liquidity,
decreased analyst coverage of our securities, and an inability for
us to obtain additional financing to fund our
operations.
We estimate the net proceeds to us from our sale of the common
stock in this offering will be approximately $7.2 million (or $8.3
million if the underwriters exercise their over-allotment option in
full), based on a public offering price of $1.50 per share, after
deducting the underwriting discount and estimated offering expenses
payable by us.
We currently intend to use the net proceeds from this offering, if
any, (i) to fund the Company’s 2021 Permian Basin and
D-J Basin asset development programs, (ii) to fund potential
acquisition opportunities, and (iii) for general corporate purposes
and working capital. We may also use all or a portion of the net
proceeds from this offering to fund possible investments in, or
acquisitions of, complementary businesses or assets, but we
currently have no agreements or commitments with respect to any
investment or acquisition.
Notwithstanding the above, the amounts and timing of our actual
expenditures will depend on numerous factors. We may find it
necessary or advisable to use portions of the net proceeds for
other purposes, and we will have broad discretion in the
application and allocation of the net proceeds from this offering.
Pending the use of the net proceeds from this offering as described
above, we intend to invest the proceeds in investment grade,
interest-bearing instruments.
DESCRIPTION OF
SECURITIES WE ARE OFFERING
In this offering,
we are offering 5,190,000 shares of common stock at a public
offering price of $1.50 per share. The material terms and
provisions of our common stock are described in the section
entitled “Description of Capital
Stock - Common Stock” in the accompanying base
prospectus forming a part of this registration
statement.
The
following table sets forth our capitalization as of September 30,
2020:
●
|
|
on an
actual basis; and
|
|
|
|
●
|
|
on an
as-adjusted basis, to give effect to the sale by us, in this
offering, of 5,190,000 shares of our common stock at a public
offering price of $1.50 per share, after deducting underwriting
discounts and fees and estimated offering expenses payable by us,
assuming no exercise by the
underwriters of their over-allotment option.
|
You should read this table together with the
“Use of
Proceeds” section
included in this prospectus, the “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” section and
our consolidated financial statements and related notes included in
our Annual Report on Form
10-K for the year ended
December 31, 2019 and our Quarterly Report on
Form 10-Q for the quarter
ended September 30, 2020, each of which are incorporated by
reference into this prospectus supplement and accompanying base
prospectus.
|
As
of September 30, 2020 (In thousands, except share and per share
amounts) (unaudited)
|
|
|
|
Cash
|
$8,482
|
$15,580
|
|
|
|
Stockholders’
equity:
|
|
|
Common stock,
$0.001 par value, 200,000,000 shares authorized; 72,463,340 and
77,653,340 shares issued and outstanding, at September 30, 2020,
and on an adjusted basis, respectively
|
$72
|
$78
|
Additional paid-in
capital
|
203,099
|
210,291
|
Accumulated
deficit
|
(104,887)
|
(104,887)
|
Total
stockholders’ equity
|
$98,284
|
$105,482
|
The
number of issued and outstanding shares as of September 30, 2020,
in the table excludes (except otherwise indicated) the
following and assumes no exercise by the underwriters of their
over-allotment option:
|
|
●
|
150,329
shares of common stock issuable upon the exercise of outstanding
warrants to purchase shares of common stock at a weighted-average
exercise price of $0.32 per share;
|
|
●
|
1,234,849 shares of common stock
issuable upon the exercise of outstanding options to purchase
shares of common stock at a weighted-average exercise price of
$2.43 per share; and
|
|
|
|
|
●
|
shares
of our common stock that are reserved for equity awards that may be
granted under our equity incentive plans.
|
If you
invest in our common stock in this
offering, your interest will be diluted immediately
to the extent of the difference between the public offering price
per share and the pro forma net tangible book value per share of
our common stock after this offering.
Our net
tangible book value as of September 30, 2020 was approximately
$98.0 million, or $1.35 per share. “Net tangible book value”
is total assets minus the sum of liabilities and intangible assets.
“Net tangible book
value per share” is net tangible book value divided by
the total number of shares of common stock
outstanding.
Dilution in net
tangible book value per share represents the difference between the
public offering price per share of our common stock and the
adjusted net tangible book value per share of our common stock
after giving effect to this offering. After giving effect to the
sale of 5,190,000 shares of our common stock in this offering at
the public offering price of $1.50 per share, and after deducting
the underwriting discount and commissions and estimated offering
expenses payable by us, and assuming no exercise by the underwriters of
their over-allotment option, our adjusted net tangible book value per share of
our common stock at September 30, 2020 would have been
approximately $105.2 million, or $1.35 per share. This represents
no change in net tangible book value per share of our common stock
and an immediate dilution of approximately $0.15 per share to
purchasers in this offering. All calculations of dilution in this
prospectus supplement assume the sale of all of the shares of
common stock offered in this offering. The following table
illustrates this per-share dilution:
Public offering
price per share
|
|
$1.50
|
Net tangible book
value per share as of September 30, 2020
|
$1.35
|
|
Increase per share
attributable to this offering
|
$—
|
|
As adjusted net
tangible book per share after this offering
|
|
$1.35
|
Dilution per share
to investors participating in this offering
|
|
$(0.15)
|
The
information above is as of September 30, 2020, assumes no exercise
by the underwriters of their over-allotment option
and excludes, as of that date:
|
|
●
|
150,329
shares of common stock issuable upon the exercise of outstanding
warrants to purchase shares of common stock at a weighted-average
exercise price of $0.32 per share;
|
|
●
|
1,234,849 shares of common stock
issuable upon the exercise of outstanding options to purchase
shares of common stock at a weighted-average exercise price of
$2.43 per share; and
|
|
|
|
|
●
|
shares
of our common stock that are reserved for equity awards that may be
granted under our equity incentive plans.
|
The
foregoing discussion and table do not take into account further
dilution to new investors that could occur upon the exercise of
outstanding options or warrants. In addition, we may choose to
raise additional capital due to market conditions or strategic
considerations even if we believe we have sufficient funds for our
current or future operating plans. To the extent that additional
capital is raised through the sale of equity or convertible debt
securities, the issuance of these securities could result in
further dilution to our stockholders.
We do
not currently intend to pay any cash dividends on our common stock
in the foreseeable future. We expect to retain all available funds
and future earnings, if any, to fund the development and growth of
our business. Any future determination to pay dividends, if any, on
our common stock will be at the discretion of our Board of
Directors and will depend on, among other factors, our results of
operations, financial condition, capital requirements and
contractual restrictions.
Kingswood Capital Markets, division of Benchmark
Investments, Inc. is acting as the representative of the
underwriters of the offering (the “representative”).
We have entered into an underwriting agreement dated February 2,
2021 with the representative. Subject to the terms and conditions
of such underwriting agreement, we have agreed to sell to the
underwriters named below and the underwriters named below has
agreed to purchase, at the public offering price less the
underwriting discounts and commissions set forth on the cover page
of this prospectus supplement, the following respective number of
shares of our Common
Stock:
Name of
Underwriters
|
|
Kingswood Capital
Markets
|
4,523,333
|
Dawson James Securities,
Inc.
|
666,667
|
Total
|
5,190,000
|
The underwriters have advised us that they propose
to offer the shares of common stock to the public at an offering
price of $1.50. The underwriters propose to offer the shares of
common stock to certain dealers at the same price less a concession
of not more than
$0.0525. After the offering, these figures may be changed
by the underwriters.
The
common stock sold in this offering are expected to be ready for
delivery on or about February 5, 2021, against payment in
immediately available funds. The underwriters may reject all or
part of any order.
Over-Allotment
Option
We
have granted to the underwriters an option to purchase up to an
additional 778,500 shares of common stock from us at the same
price to the public, and with the same underwriting discount, as
set forth in the table below. The underwriters may exercise this
option any time during the 45-day period after the date of this
prospectus supplement, but only to cover over-allotments, if any.
To the extent the underwriters exercise the option, the
underwriters will become obligated, subject to certain conditions,
to purchase the shares of common stock for which they exercise the
option.
Discounts and
Expenses
The
table below summarizes the underwriting discounts that we will pay
to the underwriters. These amounts are shown assuming both no
exercise and full exercise of the over-allotment option. In
addition to the underwriting discount, we have agreed to pay up to
$50,000 of the fees and expenses of the representative of the
underwriters, which may include the fees and expenses of counsel to
the representative. In the event there is not a closing, we have
agreed to pay up to $25,000 of the underwriters' external counsel
legal costs. The fees and expenses of the
representative that we have agreed to reimburse are not included in
the underwriting discounts set forth in the table below. The
underwriting discount and reimbursable expenses the representative
will receive were determined through arms’ length
negotiations between us and the representative.
|
|
Total with no
Over-Allotment
|
Total with
Over-Allotment
|
Public offering
price
|
$1.50
|
$7,785,000
|
$8,952,750
|
Underwriting
discount
|
$0.09
|
$467,100
|
$537,165
|
Proceeds, before
expenses, to us
|
$1.41
|
$7,317,900
|
$8,415,585
|
We
estimate that the total expenses of this offering, excluding
underwriting discounts, will be $120,000. This includes $50,000 of
the fees and expenses of the representative. These expenses are
payable by us.
Indemnification
We also have
agreed to indemnify the underwriters against certain liabilities,
including civil liabilities under the Securities Act of 1933, as
amended, or to contribute to payments that the underwriters may be
required to make in respect of those
liabilities.
Lock-Up Agreements
Our officers
and directors have agreed, subject to limited exceptions, for a
period of 45 days after the closing of this offering, not to offer,
sell, contract to sell, pledge, grant any option to purchase, make
any short sale or otherwise dispose of, directly or indirectly any
shares of common stock or any securities convertible into or
exchangeable for our common stock either owned as of the date of
the underwriting agreement or thereafter acquired without the prior
written consent of the representative, except pursuant to certain
exceptions, including sales pursuant to previously established
10b5-1 trading plans. The representative may, in its sole
discretion and at any time or from time to time before the
termination of the lock-up period, without notice, release all or
any portion of the securities subject to lock-up
agreements.
Subsequent Equity Sales and Capital
Changes
Subject to certain exceptions, until
the later of (i) 45 days following the closing of this offering or
(ii) 30 days following the date of the underwriting agreement,
neither we nor any of our subsidiaries may issue, or solicit,
negotiate with, or enter into any agreement with any source of
financing (whether equity, debt or otherwise) other than the
representative, including, but not limited to, any underwriter,
potential underwriter, placement agent, financial advisor,
investment banking firm or any other person or entity, in
connection with an offering or proposed offering of the
Company’s debt or equity securities or any other financing by
the Company.
We have also agreed that, until 45
days following the closing of this offering, we may not effect or
enter into any agreement to effect any issuance of common stock or
common stock equivalents, including a variable rate transaction (as
defined in the underwriting agreement that we entered into with the
representative).
Until 60 days following the closing
of this offering, we have agreed not to undertake a reverse or
forward stock split or reclassification of the common stock without
the prior written consent of the representative, which shall not be
unreasonably withheld or delayed.
Price Stabilization, Short Positions, and Penalty Bids
In
connection with this offering, each underwriter may engage in
transactions that stabilize, maintain or otherwise affect the price
of our securities. Specifically, such underwriter may over-allot in
connection with this offering by selling more securities than are
set forth on the cover page of this prospectus. This creates a
short position in our securities for such underwriter’s own
accounts. The short position may be either a covered short position
or a naked short position. In a covered short position, the number
of securities over-allotted by such underwriter is not greater than
the number of securities that it may purchase in the over-allotment
option. In a naked short position, the number of securities
involved is greater than the number of securities in the
over-allotment option. To close out a short position, such
underwriter may elect to exercise all or part of the over-allotment
option. Such underwriter may also elect to stabilize the price of
our securities or reduce any short position by bidding for, and
purchasing, securities in the open market.
The
underwriters may also impose a penalty bid. This occurs when a
particular underwriter or dealer repays selling concessions allowed
to it for distributing a security in this offering because the
underwriter repurchases that security in stabilizing or short
covering transactions.
Finally, each underwriter may bid for, and
purchase, shares of our securities in market-making transactions,
including “passive” market-making transactions as
described below.
These
activities may stabilize or maintain the market price of our
securities at a price that is higher than the price that might
otherwise exist in the absence of these activities. The
underwriters are not required to engage in these activities, and
may discontinue any of these activities at any time without notice.
These transactions may be affected on the NYSE American, in the
over-the-counter market, or otherwise.
In
connection with this offering, the underwriters and selling group
members, if any, or their affiliates may engage in passive
market-making transactions in our common stock immediately prior to
the commencement of sales in this offering, in accordance with Rule
103 of Regulation M under the Exchange Act. Rule 103 generally
provides that:
●
a
passive market maker may not affect transactions or display bids
for our securities in excess of the highest independent bid price
by persons who are not passive market makers;
●
net
purchases by a passive market maker on each day are generally
limited to 30% of the passive market maker’s average daily
trading volume in our common stock during a specified two-month
prior period or 200 shares, whichever is greater, and must be
discontinued when that limit is reached; and
●
passive
market-making bids must be identified as such.
Determination of Offering Price
The public offering price of the
shares of common stock that we are offering was negotiated between
us and the underwriters based on the trading price of our common
stock prior to the offering, among other things. Other factors
considered in determining the public offering price of such shares
of common stock include our history and prospects, the stage of
development of our business, our business plans for the future and
the extent to which they have been implemented, an assessment of
our management, general conditions of the securities markets at the
time of the offering and such other factors as were deemed
relevant.
Transfer Agent and Registrar
The
transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company, LLC.
Listing
Our common stock is listed on the NYSE American
under the symbol “PED.”
Electronic Distribution
This prospectus supplement and accompanying base prospectus in
electronic or printed format may be made available on websites or
through other online services maintained by the underwriters, or by
their affiliates. Other than this prospectus supplement and
accompanying base prospectus in electronic or printed format, the
information on the underwriters’ websites and any information
contained in any other websites maintained by an underwriter is not
part of this prospectus supplement and accompanying base
prospectus, or the registration statement of which this prospectus
supplement and accompanying base prospectus form a part, has not
been approved and/or endorsed by us or the underwriters in their
respective capacities as underwriters, and should not be relied
upon by investors.
Certain Relationships
From
time to time, the underwriters and/or their affiliates may provide
various investment banking and other financial services for us for
which services they may in the future receive, customary
fees.
Except
for the services provided in connection with this offering and as described
above, the underwriters have not
provided any investment banking or other financial services to us
preceding the date of this prospectus supplement.
Offers Outside the United States
Other than in the United States, no
action has been taken by us or the underwriters that would permit a
public offering of the shares of common stock offered by this
prospectus supplement and accompanying base prospectus in any
jurisdiction where action for that purpose is required. The shares
of common stock offered by this prospectus supplement and
accompanying base prospectus may not be offered or sold, directly
or indirectly, nor may this prospectus supplement and accompanying
base prospectus or any other offering material or advertisements in
connection with the offer and sale of any such shares of common
stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable
rules and regulations of that jurisdiction. Persons into whose
possession this prospectus supplement and accompanying base
prospectus comes are advised to inform themselves about and to
observe any restrictions relating to the offering and the
distribution of this prospectus supplement and accompanying base
prospectus. This prospectus supplement and accompanying base
prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any shares of common stock offered by this
prospectus supplement and accompanying base prospectus in any
jurisdiction in which such an offer or a solicitation is
unlawful.
The
Loev Law Firm, PC, Bellaire, Texas, will issue an opinion with
respect to the validity of the shares of common stock offered
hereby. Sullivan &
Worcester LLP, New York, New York is acting as counsel to the
underwriters in this offering.
The
consolidated balance sheets of PEDEVCO Corp. as of December 31,
2019 and 2018, the related consolidated statements of operations,
shareholders’ equity and cash flows for the years ended
December 31, 2019 and 2018, including the related notes,
incorporated by reference into this prospectus supplement and the
accompanying prospectus have been so incorporated by
reference in reliance on the reports of Marcum LLP, an independent
registered public accounting firm, given on the authority of said
firm as experts in auditing and accounting.
The
information incorporated by reference into this prospectus
supplement and the accompanying
prospectus regarding PEDEVCO’s estimated
quantities of proved developed producing reserves and the future
net revenues from those reserves as of December 31, 2019 is based
on the proved reserve report prepared by Cawley, Gillespie &
Associates, PEDEVCO’s independent petroleum engineers. These
estimates are incorporated by reference in reliance upon the
authority of such firm as an expert in these matters.
No
expert or counsel named in this prospectus supplement or the
accompanying prospectus as having prepared or
certified any part of this prospectus supplement or the
accompanying prospectus or having given an opinion
upon the validity of the securities being registered or upon other
legal matters in connection with the registration or offering of
the common stock was employed on a contingency basis, or had, or is
to receive, any interest, directly or indirectly, in our Company or
any of our parents or subsidiaries, nor was any such person
connected with us or any of our parents or subsidiaries, if any, as
a promoter, managing or principal underwriter, voting trustee,
director, officer, or employee.
WHERE YOU CAN FIND MORE
INFORMATION
We file
annual, quarterly, and current reports, proxy statements and other
information with the SEC. Our SEC filings are available to the
public over the Internet at the SEC’s web site
at www.sec.gov and on the
“Investors—SEC
filings” page of our website at www.pacificenergydevelopment.com.
Information on our website is not part of this prospectus
supplement and accompanying base
prospectus, and we do not desire to incorporate by
reference such information herein. The SEC maintains an Internet
site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with
the SEC like us. Our SEC filings are also available to the public
from the SEC’s website at http://www.sec.gov.
This
prospectus supplement is part of the registration statement and the
accompanying base prospectus contained therein and does not contain
all of the information included in the registration statement or
the accompanying base prospectus. Whenever a reference is made in
this prospectus supplement to any of our contracts or other
documents, the reference may not be complete and, for a copy of the
contract or document, you should refer to the exhibits that are a
part of the registration statement. You should rely only on the
information contained or incorporated by reference in this
prospectus supplement, the accompanying base prospectus and any
supplement or amendment hereto. We have not authorized anyone to
provide you with information different from that contained in this
prospectus supplement and the accompanying base prospectus. The
shares of common stock offered under this prospectus supplement and
the accompanying base prospectus are offered only in jurisdictions
where offers and sales are permitted. The information contained in
this prospectus supplement and the accompanying base prospectus,
and any free writing prospectus, is accurate only as of the date of
this prospectus supplement, the accompanying base prospectus and
any such free writing prospectus, regardless of the time of
delivery of this prospectus supplement, the accompanying base
prospectus, or any free writing prospectus, or any sale of the
shares of common stock.
This prospectus
supplement and the accompanying base prospectus constitute a part
of a registration statement we filed with the SEC under the
Securities Act. This prospectus supplement and the accompanying
base prospectus do not contain all of the information set forth in
the registration statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further
information with respect to us and the shares offered hereby,
reference is hereby made to the registration statement. The
registration statement may be inspected at the public reference
facilities maintained by the SEC at the addresses set forth in the
paragraph above. Statements contained herein concerning any
document filed as an exhibit are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed
as an exhibit to the registration statement. Each such statement is
qualified in its entirety by such
reference.
INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us
to “incorporate by
reference” into this prospectus supplement and accompanying base prospectus
the information that we file with it, which means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is considered
to be part of this prospectus supplement and accompanying base prospectus
from the date on which we file that document. Any reports filed by
us with the SEC (i) on or after the date of filing of the
registration statement of which this prospectus supplement and accompanying base
prospectus form a part and (ii) on or after the date of this
prospectus supplement and accompanying
base prospectus and before the termination of the offering
of the shares of common stock by means of this prospectus
supplement and accompanying base
prospectus will automatically update and, where applicable,
supersede information contained in this prospectus supplement and accompanying base prospectus
or incorporated by reference into this prospectus supplement and accompanying base
prospectus.
We incorporate by
reference the documents listed below, all filings filed by us
pursuant to the Exchange Act after the date of the registration
statement of which this prospectus supplement and accompanying base prospectus
form a part, and any future filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to
the time that all shares of common stock covered by this prospectus
supplement and accompanying base
prospectus have been sold; provided, however, that we are
not incorporating any information furnished under either Item 2.02
or Item 7.01 of any current report on Form 8-K:
●
Our Quarterly
Report on Form 10-Q for the quarter ended March 31,
2020, filed with the SEC on May 15, 2020, Quarterly
Report on Form 10-Q for the quarter ended June 30, 2020,
filed with the SEC on August 14, 2020 and Quarterly
Report on Form 10-Q for the quarter ended September 30,
2020, filed with the SEC on November 16,
2020;
●
The description of
our common stock contained in our Registration
Statement on Form 8-A/A, filed with the SEC on September
5, 2013 (File No. 001-35922) pursuant to Section 12(b) of the
Exchange Act, as updated by
Exhibit 4.1 to
our Annual Report on Form 10-K for the year ended December 31, 2019
filed with the SEC on March 30, 2020, together with any amendment
or report filed for the purpose of updating such
description.
These
documents contain important information about us, our business and
our financial condition. Copies of documents incorporated by
reference, excluding exhibits except to the extent such exhibits
are specifically incorporated by reference, are available from us
without charge, upon oral or written request to:
PEDEVCO
Corp.
Attn:
Clark R. Moore, Secretary
575 N.
Dairy Ashford
Suite
210
Houston,
Texas 77079
(713) 221-1768
All
documents filed by us pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Act or the Exchange Act, excluding any
information in those documents that are deemed by the rules of the
SEC to be furnished but not filed, after the date of this
prospectus supplement and before the
termination of this offering shall be deemed to be incorporated in
this prospectus supplement and accompanying
base prospectus and to be a part hereof from the date
of the filing of such document. Any statement contained in a
document incorporated by reference herein shall be deemed to be
modified or superseded for all purposes to the extent that a
statement contained in this prospectus supplement, or in any other
subsequently filed document which is also incorporated or deemed to
be incorporated by reference, modifies or supersedes such
statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part
of this prospectus supplement and accompanying base
prospectus. You will be deemed to have notice of all
information incorporated by reference in this prospectus
supplement as if that information
was included in this prospectus supplement.
Nothing
in this prospectus supplement shall be deemed to incorporate
information furnished but not filed with the SEC pursuant to Item
2.02 or 7.01 of Form 8-K.
Statements made in
this prospectus supplement and accompanying base
prospectus or in any document incorporated by
reference in this prospectus supplement and
accompanying base prospectus as to the contents of
any contract or other document referred to herein or therein are
not necessarily complete, and in each instance, reference is made
to the copy of such contract or other document filed as an exhibit
to the documents incorporated by reference, each such statement
being qualified in all material respects by such
reference.
The
information described above can also be accessed on the
“Investors—SEC
filings” page of our website at www.pacificenergydevelopment.com.
Neither this website nor the information on this website is
included or incorporated in, or is a part of, this prospectus
supplement and accompanying base
prospectus.
PROSPECTUS
$100,000,000
PEDEVCO Corp.
Common Stock
Preferred Stock
Warrants
Units
We may from time to time, in one or more offerings
at prices and on terms that we will determine at the time of each
offering, sell common stock, preferred stock, warrants, units or a
combination of these securities (collectively referred to as
“securities”)
for an aggregate initial offering price of up to $100 million. This
prospectus describes the general manner in which our securities may
be offered using this prospectus. Each time we offer and sell
securities, we will provide you with a prospectus supplement that
will contain specific information about the terms of that offering.
We may also authorize one or more free writing prospectuses to be
provided to you in connection with these offerings. Any prospectus
supplement and any related free writing prospectus may also add,
update, or change information contained in this prospectus. You
should carefully read this prospectus, the applicable prospectus
supplement and any related free writing prospectus as well as the
documents incorporated or deemed to be incorporated by reference
herein or therein before you purchase any of the securities offered
hereby.
This prospectus may not be used to offer or sell our securities
unless accompanied by a prospectus supplement. The information
contained or incorporated in this prospectus or in any prospectus
supplement is accurate only as of the date of this prospectus, or
such prospectus supplement, as applicable, regardless of the time
of delivery of this prospectus or any sale of our
securities.
Securities may be sold by us to or through
underwriters or dealers, directly to purchasers or through agents
designated from time to time. For additional information on the
methods of sale, you should refer to the section entitled
“Plan of
Distribution” in this
prospectus. If any underwriters are involved in the sale of any
securities with respect to which this prospectus is being
delivered, the names of such underwriters and any applicable
discounts or commissions and over-allotment options will be set
forth in a prospectus supplement. The price to the public of such
securities and the net proceeds we expect to receive from such sale
will also be set forth in a prospectus
supplement.
Our
principal executive offices are located at 575 N. Dairy Ashford,
Energy Center II, Suite 210, Houston, Texas 77079, and our phone
number at this address is (713) 221-1768.
Our common stock is
listed on the NYSE American under the symbol
“PED.”
On November 20, 2020, the last reported sales price of our common
stock was $1.32. There is currently no
market for the other securities we may offer. You are urged to
obtain current market quotations of our common stock (and any other
securities we may offer for which there is a current market),
before purchasing any of the securities being offered for sale
pursuant to this prospectus or any prospectus supplement. The
prospectus supplement will contain information, where applicable,
as to any other listing of the securities on the NYSE American or
any other securities market or exchange covered by the prospectus
supplement.
Pursuant to General
Instruction I.B.6 of Form S-3, in no event will we sell securities
in a public primary offering with a value exceeding more than
one-third of our public float in any 12-month period so long as our
public float remains below $75 million. As of the date of this
prospectus, the aggregate market value of our outstanding voting
and nonvoting common equity held by non-affiliates (i.e., our
public float) was $11,488,701 based on 72,463,340 shares of
common stock outstanding, of which 8,703,562 shares are held by
non-affiliates, and a per share value
of $1.32 based on the closing price of our common stock on the NYSE
American on November 20, 2020. We have not offered any
securities pursuant to General Instruction I.B.6 of Form S-3 during
the 12 calendar months prior to and including the date of this
prospectus.
Investing in our securities involves risks. You should carefully
consider the risks described under the heading
“Risk
Factors” beginning
on page 2 of this prospectus and set forth in the
documents incorporated by reference herein before making any
decision to invest in our securities.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is December 2,
2020.
TABLE OF CONTENTS
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Page
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About This Prospectus
|
1
|
Risk Factors
|
2
|
About PEDEVCO
|
3
|
Forward-Looking Statements
|
4
|
Use of Proceeds
|
6
|
Description of Capital Stock
|
7
|
Description of Warrants
|
12
|
Description of Units
|
13
|
Plan of Distribution
|
14
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Legal Matters
|
16
|
Experts
|
16
|
Where You Can Find More Information
|
17
|
Incorporation of Certain Documents by Reference
|
17
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ABOUT THIS PROSPECTUS
This prospectus is a part of a registration
statement that we filed with the Securities and Exchange Commission
(the “SEC”) utilizing a “shelf”
registration process. Under this shelf registration process, we may
offer to sell any combination of the securities described in this
prospectus, either individually or in units, in one or more
offerings up to a total dollar amount that will not exceed the
lesser of $100,000,000 or such aggregate amount permitted under
General Instruction I.B.6 of Form S-3. This prospectus provides you
with a general description of the securities we may offer. Each
time we sell securities under this shelf registration, we will
provide a prospectus supplement that will contain specific
information about the terms of that offering. We may also authorize
one or more free writing prospectuses to be provided to you that
may contain material information about the terms of that offering.
The prospectus supplement and any related free writing prospectus
that we may authorize to be provided to you may also add, update or
change information contained in this prospectus. To the extent that
any statement that we make in a prospectus supplement and any
related free writing prospectus that we may authorize to be
provided to you is inconsistent with statements made in this
prospectus, the statements made in this prospectus will be deemed
modified or superseded by those made in the prospectus supplement.
You should read this prospectus and any prospectus supplement and
free writing prospectus, including all documents incorporated
herein or therein by reference, together with additional
information described under “Where You Can Find
More Information” and
“Incorporation of
Certain Documents by Reference” before making an investment decision. We
may only use this prospectus to sell the securities if it is
accompanied by a prospectus supplement.
You
should rely only on the information included or incorporated by
reference in this prospectus and any accompanying prospectus
supplement or free writing prospectus. We have not authorized any
dealer, salesman or other person to provide you with additional or
different information. This prospectus and any accompanying
prospectus supplement and free writing prospectus are not an offer
to sell or the solicitation of an offer to buy any securities other
than the securities to which they relate and are not an offer to
sell or the solicitation of an offer to buy securities in any
jurisdiction to any person to whom it is unlawful to make an offer
or solicitation in that jurisdiction. You should not assume that
the information contained in this prospectus and the accompanying
prospectus supplement, and any free writing prospectus, is accurate
on any date subsequent to the date set forth on the front of the
document or that any information we have incorporated by reference
is correct on any date subsequent to the date of the document
incorporated by reference, even though this prospectus and any
accompanying prospectus supplement and free writing prospectus is
delivered or securities are sold on a later date. We will disclose
any material changes in our affairs in a post-effective amendment
to the registration statement of which this prospectus is a part, a
prospectus supplement, free writing prospectus or a future filing
with the SEC incorporated by reference in this prospectus. We do
not imply or represent by delivering this prospectus that PEDEVCO
Corp., or its business, financial condition or results of
operations, are unchanged after the date on the front of this
prospectus or that the information in this prospectus is correct at
any time after such date.
Persons outside the United States (the
“U.S.”)
who come into possession of this prospectus must inform themselves
about, and observe any restrictions relating to, the offering of
the securities and the distribution of this prospectus outside of
the U.S.
Unless the context otherwise requires, references
in this prospectus and the accompanying prospectus supplement to
“we,” “us,” “our,”
the “Company,”
and “PEDEVCO”
refer to PEDEVCO Corp. and its subsidiaries.
Investing in our securities involves certain
risks. You should carefully consider the risk factors and all of
the other information included in, or incorporated by reference
into, this prospectus, including those included in our most recent
Annual Report on Form 10-K and in our Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, in evaluating an investment
in our securities. If any of these risks were to occur, our
business, financial condition or results of operations could be
adversely affected. In that case, you could lose all or part of
your investment. For access to documents that are incorporated by
reference into this prospectus, please see the sections entitled,
“Where You Can Find
More Information” and
“Incorporation of
Certain Documents by Reference.”
We
are an oil and gas company focused on the acquisition and
development 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-Julesberg Basin in
Colorado.
Our principal executive offices are located at 575
N. Dairy Ashford, Energy Center II, Suite 210, Houston, Texas
77079, and our phone number at this address is (713) 221-1768. Our
website address is www.pedevco.com.
Information on our website or any other website is not, and will
not be, a part of this prospectus and is not, and will not be,
incorporated by reference into this prospectus.
FORWARD-LOOKING
STATEMENTS
This registration statement, of which this
prospectus forms a part, and the documents to which we refer you in
this registration statement, include forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities
Act”) and Section 21E of
the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”). The words
“believe,”
“intend,”
“plan,”
“expect,”
“anticipate,”
“estimate,”
“project,”
“goal”
and similar expressions identify such statements, although not all
forward-looking statements contain such identifying words. These
statements are subject to known and unknown risks, uncertainties,
and other factors that could cause the actual results to differ
materially from those contemplated by the statements. The
forward-looking information is based on various factors and is
derived using numerous assumptions. Factors that might cause or
contribute to such a discrepancy include, but are not limited to,
the risks discussed in this and our other SEC filings. We do not
promise to or take any responsibility to update forward-looking
information to reflect actual results or changes in assumptions or
other factors that could affect those statements except as required
by law. Future events and actual results could differ materially
from those expressed in, contemplated by, or underlying such
forward-looking statements.
Forward-looking
statements may include statements about our:
●
cash
flows and liquidity;
●
financial
strategy, budget, projections, and operating results;
●
oil
and natural gas realized prices;
●
timing
and amount of future production of oil and natural
gas;
●
availability
of oil field labor;
●
the
amount, nature, and timing of capital expenditures, including
future exploration and development costs;
●
government
regulation and taxation of the oil and natural gas
industry;
●
marketing
of oil and natural gas;
●
exploitation
projects or property acquisitions;
●
costs
of exploiting and developing our properties and conducting other
operations;
●
general
economic conditions in the U.S. and around the world, including the
effect of regional or global health pandemics (such as
COVID-19);
●
the
effect of COVID-19 on the U.S. and global economy, the effect of
U.S. and global efforts to reduce the spread of the virus,
including ‘stay-at-home’ and other orders, and the
resulting effect of such pandemic and governmental responses
thereto on the market for oil and gas and the U.S. and global
economy in general;
●
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;
●
future
operating results;
●
future
acquisition transactions;
●
estimated
future reserves and the present value of such reserves;
and
●
plans,
objectives, expectations, and intentions contained in this
registration statement, prospectus and the documents incorporated
herein by reference that are not historical.
All forward-looking statements speak only at the
date of which they are made. 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 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 our Annual Report on Form 10-K for the year ended December 31,
2019, filed with the SEC on March 30, 2020, in our Quarterly
Reports, and in our other filings with the SEC. 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 U.S. and the rules and regulations of the
SEC.
Unless
otherwise indicated in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities
offered in the prospectus and any prospectus supplement for future
drilling and development, additional leasehold acquisitions,
repayment of debt, working capital and general corporate purposes.
We may also use a portion of the net proceeds to acquire or invest
in businesses and assets that are complementary to our own,
although we have no current plans, commitments or agreements with
respect to any acquisitions as of the date of this prospectus.
Pending the uses described above, we intend to invest the net
proceeds in short-term, interest bearing, investment-grade
securities.
DESCRIPTION OF CAPITAL STOCK
This
section describes the general terms and provisions of the capital
stock offered by this prospectus. The applicable prospectus
supplement will describe the specific terms of the capital stock
offered under that applicable prospectus supplement.
The following summary of the terms of PEDEVCO
Corp.’s capital stock is not meant to be complete and is
qualified by reference to the relevant provisions of our
certificate of formation, as amended (“Certificate of
Formation”), our
certificates of designation for our preferred stock
(“Certificates of
Designation”) and our
bylaws, as amended (“Bylaws”).
Copies of our Certificate of Formation, Certificates of Designation
and Bylaws are incorporated herein as exhibits to the registration
statement for which this prospectus forms a part. For purposes of
this description, references to “the
Company,”
“we,” “our” and “us” refer only to PEDEVCO Corp. and not to its
subsidiaries.
Only
our common stock is registered under Section 12 of the Exchange
Act.
Authorized Capitalization
The
total number of authorized shares of our common stock is
200,000,000 shares, $0.001 par value per share.
The total number of “blank
check” authorized shares
of our preferred stock is 100,000,000 shares, $0.001 par value per
share. The total number of designated shares of our Series A
Convertible Preferred Stock is 66,625. No shares of any class of
our preferred stock are outstanding.
Voting
Rights. Each share of our
common stock is entitled to one vote on all stockholder matters.
Shares of our common stock do not possess any cumulative voting
rights.
Except
for the election of directors, if a quorum is present, an action on
a matter is approved if it receives the affirmative vote of the
holders of a majority of the voting power of the shares of capital
stock present in person or represented by proxy at the meeting and
entitled to vote on the matter, unless otherwise required by
applicable law, Texas law, our Certificate of Formation or Bylaws.
The election of directors will be determined by a plurality of the
votes cast in respect of the shares present in person or
represented by proxy at the meeting and entitled to vote, meaning
that the nominees with the greatest number of votes cast, even if
less than a majority, will be elected. The rights, preferences and
privileges of holders of common stock are subject to, and may be
impacted by, the rights of the holders of shares of any series of
preferred stock that we have designated, or may designate and issue
in the future.
Dividend
Rights. Each share of our
common stock is entitled to equal dividends and distributions per
share with respect to the common stock when, as and if declared by
our board of directors (the “Board”),
subject to any preferential or other rights of any outstanding
preferred stock.
Liquidation and Dissolution
Rights. Upon liquidation,
dissolution or winding up, our common stock will be entitled to
receive pro rata on a share-for-share basis, the assets available
for distribution to the stockholders after payment of liabilities
and payment of preferential and other amounts, if any, payable on
any outstanding preferred stock.
Other
Matters. No holder of any
shares of our common stock has a preemptive right to subscribe for
any of our securities, nor are any shares of our common stock
subject to redemption or convertible into other
securities.
NYSE. Our common stock is listed for trading on
the NYSE American under the symbol “PED.”
Transfer Agent and
Registrar. The transfer agent
and registrar for our common stock is American Stock Transfer &
Trust Company, LLC.
Preferred Stock
A
prospectus supplement relating to any series of preferred stock
being offered will include specific terms relating to the offering.
Such prospectus supplement will include:
●
the
title and stated or par value of the preferred stock;
●
the
number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred
stock;
●
the
dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to the preferred stock;
●
whether
dividends shall be cumulative or non-cumulative and, if cumulative,
the date from which dividends on the preferred stock shall
accumulate;
●
the
provisions for a sinking fund, if any, for the preferred
stock;
●
any
voting rights of the preferred stock;
●
the
provisions for redemption, if applicable, of the preferred stock
and any restriction on the repurchase or redemption of shares by
the Company while there is any arrearage in the payment of
dividends or sinking fund installments;
●
any
listing of the preferred stock on any securities
exchange;
●
the
terms and conditions, if applicable, upon which the preferred stock
will be convertible into our common stock, including the conversion
price or the manner of calculating the conversion price and
conversion period;
●
if
appropriate, a discussion of federal income tax consequences
applicable to the preferred stock; and
●
any
other specific terms, preferences, rights, limitations or
restrictions of the preferred stock.
The
terms, if any, on which the preferred stock may be convertible into
or exchangeable for our common stock will also be stated in the
preferred stock prospectus supplement. The terms will include
provisions as to whether conversion or exchange is mandatory, at
the option of the holder or at our option, and may include
provisions pursuant to which the number of shares of our common
stock to be received by the holders of preferred stock would be
subject to adjustment.
When
we issue shares of preferred stock, the shares will be fully paid
and non-assessable, which means the full purchase price of the
shares will have been paid and holders of the shares will not be
assessed any additional monies for the shares. Unless the
applicable prospectus supplement indicates otherwise, each series
of the preferred stock will rank equally with any outstanding
shares of our preferred stock and each other series of the
preferred stock. Unless the applicable prospectus supplement states
otherwise, the preferred stock will have no preemptive rights to
subscribe for any additional securities which are issued by us,
meaning, the holders of shares of preferred stock will have no
right to buy any portion of the issued securities.
In addition, unless the applicable
prospectus indicates otherwise, we will have the right to
“reopen”
a previous issue of a series of preferred stock by issuing
additional preferred stock of such series.
The
transfer agent, registrar, dividend disbursing agent and redemption
agent for shares of each series of preferred stock will be named in
the prospectus supplement relating to such series.
Limitation of Liability and Indemnification of Officers and
Directors
Section 7.001 of the Texas Business Organizations
Code (the “TBOC”)
permits a Texas corporation to limit the personal liability of
directors to it or its shareholders for monetary damages for any
act or omission in a director’s capacity as director. Under
the provisions of Chapter 8 of the TBOC, we may indemnify our
directors, officers, employees and agents and purchase and maintain
liability insurance for those persons. Chapter 8 of the TBOC
provides that any director or officer of a Texas corporation may be
indemnified against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by him or her in connection
with or in defending any action, suit or proceeding in which he or
she is a party by reason of his or her position. With respect to
any proceeding arising from actions taken in his or her official
capacity as a director or officer, he or she may be indemnified so
long as it shall be determined that he or she conducted himself in
good faith and that he or she reasonably believed that such conduct
was in the corporation’s best interests. In cases not
concerning conduct in his or her official capacity as a director or
officer, a director may be indemnified as long as he or she
reasonably believed that his or her conduct was not opposed to the
corporation’s best interests. In the case of any criminal
proceeding, a director or officer may be indemnified if he or she
had no reasonable cause to believe his or her conduct was unlawful.
If a director or officer is wholly successful, on the merits or
otherwise, in connection with such a proceeding, such
indemnification is mandatory.
Our
Certificate of Formation provides that our directors are not
personally liable to our shareholders or us for monetary damages
for an act or omission in their capacity as a director. A director
may, however, be found liable for, and we may be prohibited from
indemnifying them against:
●
any
breach of the director’s duty of loyalty to our shareholders
or us;
●
acts
or omissions not in good faith that constitute a breach of the
director’s duty to the Company;
●
acts
or omissions that involve intentional misconduct or a knowing
violation of law;
●
any
transaction from which the director receives an improper benefit;
or
●
acts
or omissions for which the liability is expressly provided by an
applicable statute.
Our
Certificate of Formation also provides that we will indemnify our
directors, and may indemnify our agents, to the fullest extent
permitted by applicable Texas law from any expenses, liabilities or
other matters. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted for directors, officers
and controlling persons of the Company under our Certificate of
Formation, it is the position of the SEC that such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
Indemnification Agreements
We
have entered into indemnification agreements with each of our
officers and directors pursuant to which we have agreed, to the
maximum extent permitted by applicable law and subject to the
specified terms and conditions set forth in each agreement, to
indemnify a director or officer who acts on our behalf and is made
or threatened to be made a party to any action or proceeding
against expenses, judgments, fines and amounts paid in settlement
that are incurred by such officer or director in connection with
the action or proceeding. The indemnification provisions apply
whether the action was instituted by a third party or by us. We
also maintain insurance on behalf of our officers and directors
that provides coverage for expenses and liabilities incurred by
them in their capacities as officers and directors.
Business Combinations under Texas Law
A
number of provisions of Texas law, our Certificate of Formation and
Bylaws could make it more difficult for the acquisition of the
Company by means of a tender offer, a proxy contest or otherwise
and the removal of incumbent officers and directors. These
provisions are intended to discourage coercive takeover practices
and inadequate takeover bids and to encourage persons seeking to
acquire control of the Company to negotiate first with our
Board.
We are subject to the provisions of Title 2,
Chapter 21, Subchapter M of the Texas Business Organizations Code
(the “Texas Business
Combination Law”). That
law provides that a Texas corporation may not engage in specified
types of business combinations, including mergers, consolidations
and asset sales, with a person, or an affiliate or associate of
that person, who is an “affiliated
shareholder”, for a
period of three years from the date that person became an
affiliated shareholder, subject to certain exceptions (described
below). An “affiliated
shareholder” is generally
defined as the holder of 20% or more of the corporation’s
voting shares. The law’s prohibitions do not apply if the
business combination or the acquisition of shares by the affiliated
shareholder was approved by the board of directors of the
corporation before the affiliated shareholder became an affiliated
shareholder; or the business combination was approved by the
affirmative vote of the holders of at least two-thirds of the
outstanding voting shares of the corporation not beneficially owned
by the affiliated shareholder, at a meeting of shareholders called
for that purpose, not less than six months after the affiliated
shareholder became an affiliated shareholder.
Because we have more than 100 of record
shareholders, we are considered an “issuing public
corporation” for purposes
of this law. The Texas Business Combination Law does not apply to
the following:
●
the
business combination of an issuing public corporation: where the
corporation’s original charter or bylaws contain a provision
expressly electing not to be governed by the Texas Business
Combination Law; or that adopts an amendment to its charter or
bylaws, by the affirmative vote of the holders, other than
affiliated shareholders, of at least two-thirds of the outstanding
voting shares of the corporation, expressly electing not to be
governed by the Texas Business Combination Law and so long as the
amendment does not take effect for 18 months following the date of
the vote and does not apply to a business combination with an
affiliated shareholder who became affiliated on or before the
effective date of the amendment;
●
a
business combination of an issuing public corporation with an
affiliated shareholder that became an affiliated shareholder
inadvertently, if the affiliated shareholder divests itself, as
soon as possible, of enough shares to no longer be an affiliated
shareholder and would not at any time within the three-year period
preceding the announcement of the business combination have been an
affiliated shareholder but for the inadvertent
acquisition;
●
a
business combination with an affiliated shareholder who became an
affiliated shareholder through a transfer of shares by will or
intestacy and continuously was an affiliated shareholder until the
announcement date of the business combination; or
●
a
business combination of a corporation with its wholly owned Texas
subsidiary if the subsidiary is not an affiliate or associate of
the affiliated shareholder other than by reason of the affiliated
shareholder’s beneficial ownership of voting shares of the
corporation.
Neither
our Certificate of Formation nor our Bylaws contain any provision
expressly providing that we will not be subject to the Texas
Business Combination Law. The Texas Business Combination Law may
have the effect of inhibiting a non-negotiated merger or other
business combination involving the Company, even if that event
would be beneficial to our shareholders.
Anti-Takeover Provisions of Our Certificate of Formation and
Bylaws
Our
Certificate of Formation and Bylaws contain various provisions
intended to promote the stability of our stockholder base and
render more difficult certain unsolicited or hostile attempts to
take over the Company, that could disrupt the Company, divert the
attention of our directors, officers and employees and adversely
affect the independence and integrity of our business. These
provisions include:
●
Special Meetings of
Stockholders — Our
Bylaws provide that special meetings of the stockholders may only
be called by our Chairman, President, a committee of our Board duly
designated and whose powers and authority include the power to call
meetings, or upon written notice to our Board by our stockholders
holding not less than 30% of our outstanding voting capital
stock.
●
Amendment of
Bylaws — Our Bylaws
may be amended by our Board alone.
●
Advance Notice
Procedures — Our
Bylaws establish an advance notice procedure for stockholder
proposals to be brought before an annual meeting of our
stockholders. At an annual meeting, our stockholders elect a Board
of Directors and transact such other business as may properly be
brought before the meeting. By contrast, at a special meeting, our
stockholders may transact only the business for the purposes
specified in the notice of the meeting.
●
No cumulative
voting — Our
Certificate of Formation and Bylaws do not include a provision for
cumulative voting in the election of directors.
●
Vacancies — Our Bylaws provide that vacancies on
our Board may be filled by a majority of directors in office,
although less than a quorum, and not by the
stockholders.
●
Preferred
Stock — Our
Certificate of Formation allows us to issue up to 100,000,000
shares of preferred stock, of which 66,625 shares have been
designated as Series A Convertible Preferred Stock. The
undesignated preferred stock may have rights senior to those of the
common stock and that otherwise could adversely affect the rights
and powers, including voting rights, of the holders of common
stock. In some circumstances, this issuance could have the effect
of decreasing the market price of the common stock as well as
having an anti-takeover effect.
●
Authorized but Unissued
Shares — Our Board
may cause the Company to issue authorized but unissued shares of
common stock in the future without stockholders’ approval.
These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The
existence of authorized but unissued shares of common stock could
render more difficult or discourage an attempt to obtain control of
a majority of common stock by means of a proxy contest, tender
offer, merger or otherwise.
We
may issue warrants for the purchase of common stock, preferred
stock or units, in one or more series. We may issue warrants
independently or together with common stock, preferred stock and
units, and the warrants may be attached to or separate from these
securities. In this prospectus, we have summarized certain general
features of the warrants. We urge you, however, to read the
applicable prospectus supplement (and any free writing prospectus
that we may authorize to be provided to you) related to the
particular series of warrants being offered, as well as the
complete warrant agreements and warrant certificates that contain
the terms of the warrants. Each issue of warrants will be the
subject of a warrant agreement which will contain the terms of the
warrants. We will distribute a prospectus supplement with regard to
each issue of warrants. Each prospectus supplement will describe,
as to the warrants to which it relates:
●
the
securities which may be purchased by exercising the warrants (which
may be common stock, preferred stock, or units consisting of two or
more of those types of securities);
●
the
exercise price of the warrants (which may be wholly or partly
payable in cash or wholly or partly payable with other types of
consideration);
●
the
period during which the warrants may be exercised;
●
the
number of warrants outstanding as of the date specified in the
applicable prospectus supplement;
●
any
provision adjusting the securities which may be purchased on
exercise of the warrants and the exercise price of the warrants in
order to prevent dilution or otherwise;
●
the
place or places where warrants can be presented for exercise or for
registration of transfer or exchange; and
●
any
other material terms of the warrants.
We
will evidence each series of warrants by warrant certificates that
we will issue. Warrants may be issued under an applicable warrant
agreement that we enter into with a warrant agent. We will indicate
the name and address of the warrant agent, if applicable, in the
prospectus supplement relating to the particular series of warrants
being offered.
The descriptions of the warrant agreements in this
prospectus and in any prospectus supplement are summaries of the
applicable provisions of the applicable agreements. These
descriptions do not restate those agreements in their entirety and
do not contain all of the information that you may find useful. We
urge you to read the applicable agreements because they, and not
the summaries, define your rights as holders of the warrants or any
warrant units. For more information, please review the form of the
relevant agreements, which will be filed with the SEC promptly
after the offering of the warrants or warrant units and will be
available as described in the heading “Where You Can Find
More Information”
below.
We
may issue securities in units, each consisting of two or more types
of securities. For example, we might issue units consisting of a
combination of preferred stock and warrants to purchase common
stock or preferred stock. If we issue units, the prospectus
supplement relating to the units will contain the information
described above with regard to each of the securities that is a
component of the units. In addition, each prospectus supplement
relating to units will describe:
●
the
designation and terms of the units and of the securities comprising
the units, including whether and under what circumstances the
securities comprising the units may be held or transferred
separately;
●
the
terms of any unit agreement governing the units;
●
the
provisions for the payment, settlement, transfer or exchange of the
units;
●
whether
the units will be issued in fully registered or global
form;
●
how
long, if at all, the securities that are components of the units
must be traded in units and when they can be traded
separately;
●
whether
we will apply to have the units traded on a securities exchange or
securities quotation system; and
●
how,
for U.S. federal income tax purposes, the purchase price paid for
the units is to be allocated among the component
securities.
The descriptions of the units in this prospectus
and in any prospectus supplement are summaries of the material
provisions that may be included in the applicable unit agreements.
These descriptions do not restate the terms of any such agreements
in their entirety and may not contain all the information that you
may find useful. We urge you to read the applicable agreements
because they, and not the summaries, will define your rights as
holders of the units. For more information, please review the form
of the relevant agreements, which will be filed with the SEC
promptly after the offering of any units and will be available as
described under the heading “Where You Can Find
More Information”
below.
We
may sell any of the securities being offered pursuant to this
prospectus in any manner specified in a prospectus supplement or in
any of the following manners:
●
directly
to purchasers;
●
to
or through underwriters;
●
through
dealers or agents; or
●
through
a combination of methods.
We
may distribute the securities from time to time in one or more
transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to
the prevailing market prices or at negotiated prices. We may also
determine the price or other terms of the securities offered under
this prospectus by use of an electronic auction. The securities may
be sold through an at-the-market offering or similar
arrangements.
The
prospectus supplement with respect to the securities being offered
will set forth the terms of the offering, including the names of
the underwriters, dealers or agents, if any, the purchase price of
the securities and the public offering price, the net proceeds to
us, any underwriting discounts and other items constituting
underwriters’ compensation, any discounts or concessions
allowed or reallowed or paid to dealers and any securities
exchanges on which the securities may be listed. Also, if
applicable, we will describe in the prospectus supplement how any
auction will determine the price or any other terms, how potential
investors may participate in the auction and the nature of the
underwriters’ obligations with respect to the
auction.
If
underwriters are used in an offering, we will execute an
underwriting agreement with the underwriters and will specify the
name of each underwriter and the terms of the transaction
(including any underwriting discounts and other terms constituting
compensation of the underwriters and any dealers) in a prospectus
supplement. If an underwriting syndicate is used, the managing
underwriter(s) will be specified on the cover of the prospectus
supplement. If underwriters are used in the sale, the offered
securities will be acquired by the underwriters for their own
accounts and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale.
Any public offering price and any discounts or concessions allowed
or reallowed or paid to dealers may be changed from time to time.
Unless otherwise set forth in the prospectus supplement, the
obligations of the underwriters to purchase the offered securities
will be subject to conditions precedent, and the underwriters will
be obligated to purchase all of the offered securities if any are
purchased.
If
dealers are used in an offering, we will sell the securities to the
dealers as principals. The dealers then may resell the securities
to the public at varying prices which they determine at the time of
resale. The names of the dealers and the terms of the transaction
will be specified in a prospectus supplement.
The
securities may be sold directly by us or through agents we
designate. If agents are used in an offering, the names of the
agents and the terms of the agency will be specified in a
prospectus supplement. Unless otherwise indicated in a prospectus
supplement, the agents will act on a best-efforts basis for the
period of their appointment.
We
may engage in at-the-market offerings into an existing trading
market in accordance with Rule 415(a)(4) under the Securities Act.
In addition, we may enter into derivative transactions with third
parties, or sell securities not covered by this prospectus to third
parties in privately negotiated transactions. If the applicable
prospectus supplement so indicates, in connection with those
derivatives, the third parties may sell securities covered by this
prospectus and the applicable prospectus supplement, including in
short sale transactions. If so, the third party may use securities
pledged by us or borrowed from us or others to settle those sales
or to close out any related open borrowings of securities, and may
use securities received from us in settlement of those derivatives
to close out any related open borrowings of securities. The third
party in such sale transactions will be an underwriter and, if not
identified in this prospectus, will be named in the applicable
prospectus supplement (or a post-effective amendment). In addition,
we may otherwise loan or pledge securities to a financial
institution or other third party that in turn may sell the
securities short using this prospectus and an applicable prospectus
supplement. Such financial institution or other third party may
transfer its economic short position to investors in our securities
or in connection with a concurrent offering of other
securities.
We
may also make direct sales through subscription rights distributed
to our existing stockholders on a pro rata basis, which may or may
not be transferable. In any distribution of subscription rights to
our stockholders, if all of the underlying securities are not
subscribed for, we may then sell the unsubscribed securities
directly to third parties or may engage the services of one or more
underwriters, dealers or agents, including standby underwriters, to
sell the unsubscribed securities to third parties.
Dealers
and agents named in a prospectus supplement may be deemed to be
underwriters (within the meaning of the Securities Act) of the
securities described therein. In addition, we may sell the
securities directly to institutional investors or others who may be
deemed to be underwriters within the meaning of the Securities Act
with respect to any resales thereof.
Underwriters,
dealers and agents may be entitled to indemnification by us against
specific civil liabilities, including liabilities under the
Securities Act or to contribution with respect to payments which
the underwriters or agents may be required to make in respect
thereof, under underwriting or other agreements. The terms of any
indemnification provisions will be set forth in a prospectus
supplement. Certain underwriters, dealers or agents and their
associates may engage in transactions with, and perform services
for, us in the ordinary course of business.
In
compliance with guidelines of the Financial Industry Regulatory
Authority, or FINRA, the maximum consideration or discount to be
received by any FINRA member or independent broker dealer may not
exceed 8% of the aggregate amount of the securities offered
pursuant to this prospectus and any applicable prospectus
supplement.
Each series of securities is expected to be a new
issue of securities with no established trading market, other than
the common stock which is listed on the NYSE American under the
symbol “PED.”
Any common stock sold pursuant to a prospectus supplement will be
eligible for listing and trading on the NYSE American, subject to
official notice of issuance. Any underwriters to whom securities
are sold by us for public offering and sale may make a market in
the securities, but the underwriters will not be obligated to do so
and may discontinue any market making at any time without notice.
The securities, other than the common stock, may or may not be
listed on a national securities exchange.
The
validity of the securities offered by this prospectus will be
passed upon for us by Jones Walker LLP, New Orleans,
Louisiana. If legal matters in connection with offerings made
by this prospectus are passed on by other counsel for us or by
counsel for any agents or underwriters retained in connection with
an offering of securities hereunder, that counsel will be named in
the applicable prospectus supplement.
The
consolidated balance sheets of PEDEVCO Corp. as of December 31,
2019 and 2018, the related consolidated statements of operations,
shareholders’ equity and cash flows for the years ended
December 31, 2019 and 2018, including the related notes,
incorporated by reference into this prospectus have been so
incorporated by reference in reliance on the reports of Marcum LLP,
an independent registered public accounting firm, given on the
authority of said firm as experts in auditing and
accounting.
The
information incorporated by reference into this prospectus
regarding PEDEVCO’s estimated quantities of proved developed
producing reserves and the future net revenues from those reserves
as of December 31, 2019 is based on the proved reserve report
prepared by Cawley, Gillespie & Associates, PEDEVCO’s
independent petroleum engineers. These estimates are incorporated
by reference in reliance upon the authority of such firm as an
expert in these matters.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports,
proxy statements and other information with the SEC. Our SEC
filings are available to the public over the Internet at the
SEC’s website at www.sec.gov.
Copies of certain information filed by us with the SEC are also
available on our website at www.pedevco.com.
Our website is not a part of this prospectus and information on, or
accessible through, our website is not part of this prospectus. You
may also read and copy any document we file at the SEC’s
Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on
the operation of the Public Reference Room.
This
prospectus is part of a registration statement we filed with the
SEC. This prospectus omits some information contained in the
registration statement in accordance with SEC rules and
regulations. You should review the information and exhibits in the
registration statement for further information about us and our
consolidated subsidiaries and the securities we are offering.
Statements in this prospectus concerning any document we filed as
an exhibit to the registration statement or that we otherwise filed
with the SEC are not intended to be comprehensive and are qualified
by reference to these filings. You should review the complete
document to evaluate these statements.
INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE
The
SEC allows us to incorporate by reference much of the information
we file with the SEC, which means that we can disclose important
information to you by referring you to those publicly available
documents. The information that we incorporate by reference in this
prospectus is considered to be part of this prospectus. Because we
are incorporating by reference future filings with the SEC, this
prospectus is continually updated and those future filings may
modify or supersede some of the information included or
incorporated in this prospectus. This means that you must look at
all of the SEC filings that we incorporate by reference to
determine if any of the statements in this prospectus or in any
document previously incorporated by reference have been modified or
superseded.
This
prospectus incorporates by reference the documents listed below and
any future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act (in each case, other than
those filings, documents or the portions of those documents not
deemed to be filed, including any information furnished pursuant to
Items 2.02 or 7.01 of a Current Report on Form 8-K) (i) after the
date of the initial registration statement and prior to
effectiveness of the registration statement and (ii) after the
effectiveness of the registration statement until the offering of
the securities under the registration statement is terminated or
completed:
●
The
description of our common stock contained in our Registration
Statement on Form 8-A/A, filed with the SEC on September
5, 2013 (File No. 001-35922) pursuant to Section 12(b) of the
Exchange Act, including any amendment or report filed for the
purpose of updating such description.
These
documents contain important information about us, our business and
our financial condition. We will provide to each person, including
any beneficial owner, to whom this prospectus is delivered, upon
written or oral request and without charge, a copy of the
incorporated documents referred to above. You may request a copy of
such documents by writing or telephoning us at:
PEDEVCO Corp.
575 N. Dairy Ashford
Suite 210
Houston, Texas 77079
(713) 221-1768
Those
copies will not include exhibits unless the exhibits have
specifically been incorporated by reference in these documents or
you specifically request them.
5,190,000 Shares of Common Stock
PROSPECTUS SUPPLEMENT
February 2, 2021
Kingswood Capital
Markets
division of Benchmark Investments, Inc.
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