NOTE 2 – DESCRIPTION OF BUSINESS

PEDEVCO is 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, the Company focuses on legacy proven properties where there is a long production history, well defined geology and existing infrastructure that can be leveraged when applying modern field management technologies. The Company’s current properties are located in the Denver-Julesberg Basin (“D-J Basin”) in Colorado and Wyoming, the Powder River Basin (“PRB”) in Wyoming, and in the San Andres formation of the Permian Basin situated in West Texas and eastern New Mexico (the “Permian Basin”).

The Company’s D-J Basin assets (the “D-J Basin Assets”) are located in Weld and Morgan Counties, Colorado and Laramie County, Wyoming, are held through the Company’s wholly-owned subsidiaries, PRH Holdings LLC (“PRH”) and NPOG, and are operated by the Company’s wholly-owned operating subsidiaries, Red Hawk Petroleum, LLC (“Red Hawk”), North Silo Resources, LLC (“NSR”), and Longs Peak Resources, LLC (“LPR”).

The Company’s PRB assets (the “Powder River Basin Assets” or “PRB Assets”) are predominantly located in Laramie and Campbell Counties, Wyoming, are held through the Company’s wholly-owned subsidiary Century Oil and Gas, LLC (“Century”), and operated by the Company’s wholly-owned operating subsidiaries, Century Oil and Gas Sub-Holdings, LLC (“COG”), Navigation Powder River, LLC (“NPR”), and Pine Haven Resources, LLC (“Pine Haven”).

The Company’s Permian Basin assets (the “Permian Basin Assets”) are located in Chaves and Roosevelt Counties, New Mexico, are held by the Company’s wholly-owned subsidiary, Pacific Energy Development Corp. (“PEDCO”), and are operated by the Company’s wholly-owned subsidiary, Ridgeway Arizona Oil Corp. (“RAZO”).

On October 31, 2025, the Company completed the transactions (the “Mergers”) contemplated by that certain Agreement and Plan of Merger, dated October 31, 2025 (the “Merger Agreement”), by and among the Company; NP Merger Sub, LLC, a wholly owned subsidiary of the Company (the “First Merger Sub”); COG Merger Sub, LLC, a wholly owned subsidiary of the Company (the “Second Merger Sub,” and together with First Merger Sub, the “Merger Subs”); NPOG and COG (together with NPOG, the “Acquired Companies”); and, solely for purposes of specified provisions therein, North Peak Oil & Gas Holdings, LLC (“North Peak”), pursuant to which the Acquired Companies were merged with and into the Merger Subs, with the Acquired Companies continuing as the surviving companies and wholly-owned subsidiaries of the Company. The Acquired Companies own substantial oil-weighted producing assets and significant leasehold interests in the D-J Basin and PRB.

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

NOTE 1 – BASIS OF PRESENTATION

The accompanying interim unaudited consolidated financial statements of PEDEVCO Corp. (“PEDEVCO” or the “Company”), have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in PEDEVCO’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate disclosures contained in the audited financial statements for the most recent fiscal year, as reported in the Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 31, 2026 (the “2025 Annual Report”), have been omitted.

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

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

Reverse Stock Split

On March 13, 2026, the Company effected a 1-for-20 reverse stock split of its issued and outstanding shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split was approved by the Company’s stockholders on October 29, 2025 and became effective on February 27, 2026, subject to the determination of the Board of Directors to move forward with the Reverse Stock Split and determination of the final Reverse Stock Split ratio. On February 27, 2026, following the effectiveness of the stockholder consent, the Company’s Board of Directors determined to move forward with the Reverse Stock Split and approved the 1-for-20 reverse stock ratio.

As a result of the Reverse Stock Split:

All authorized, issued, and outstanding common stock, stock options, and other equity instruments, as well as the related exercise or conversion prices, were proportionately adjusted to reflect the Reverse Stock Split.

Retroactive Adjustment

All share amounts, per-share data, earnings (loss) per share, and weighted-average shares outstanding presented in the accompanying consolidated financial statements and related notes have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented, unless otherwise indicated.  The Reverse Stock Split did not affect the Company’s total stockholders’ equity or the proportionate voting rights of stockholders, and no fractional shares were issued in connection with the reverse stock split. Stockholders who would otherwise have been entitled to receive fractional shares received cash in lieu thereof, based on the closing price of the Company’s common stock on March 12, 2026, the trading day immediately prior to the effective date of the Reverse Stock Split.

NOTE 7 –MERGER ACQUISITION

On October 31, 2025, the Company completed the transactions contemplated by the Merger Agreement discussed in “Note 2 – Description Of Business”.

Pursuant to the Merger Agreement, (i) the First Merger Sub merged with and into NPOG, with NPOG surviving as a wholly-owned subsidiary of PEDEVCO, and (ii) the Second Merger Sub merged with and into COG, with COG surviving as a wholly-owned subsidiary of PEDEVCO. The Acquired Companies own substantial oil-weighted producing assets and significant leasehold interests in the D-J Basin and Powder River Basin located in Wyoming.

The aggregate fair value of the consideration paid in the Mergers was approximately $179.9 million. Of this amount, $115.6 million was paid in cash at closing (October 31, 2025), including (a) $87.0 million drawn under the Company’s Amended and Restated Credit Agreement (net of $1.3 million in debt issuance costs) and (b) proceeds from certain investors who subscribed for and purchased an aggregate of 6,363,637 shares of PEDEVCO Series A Preferred Stock at a purchase price of $5.50 per share ($11.00 per common stock share issuable upon conversion thereof, on a post-reverse stock split basis), resulting in gross proceeds of $35.0 million. The cash consideration was further reduced by $4.7 million in transaction costs directly related to the Mergers. On February 27, 2026, the Series A Preferred Stock converted into 3,181,818 shares of PEDEVCO common stock automatically pursuant to its terms (the “Automatic Conversion Date”).

The acquisition was accounted for as a business combination under the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. The fair value of the consideration transferred was allocated to the identifiable assets acquired and liabilities assumed on a relative fair value basis and recorded as of October 31, 2025. The preliminary allocation of the fair value to the identifiable assets acquired and liabilities assumed resulted in no goodwill or bargain purchase gain being recognized. Acquisition-related costs were expensed as incurred in accordance with ASC 805.

Determining the fair value of the acquired assets and assumed liabilities required significant judgment and the use of various assumptions, the most significant of which related to the valuation of NPOG’s and COG’s oil and gas properties. The inputs and assumptions used in valuing these properties were classified as Level 3 within the fair value hierarchy.

Unaudited pro forma financial information. Presented below are the Company’s condensed consolidated results of operations for the period presented on an unaudited pro forma basis, as if the Mergers had occurred on January 1, 2025. The information reflects adjustments based on available data and assumptions the Company believes are factual and supportable. The unaudited pro forma financial information is not necessarily indicative of the results that would have occurred had the Mergers been completed on the assumed date, nor is it indicative of future results. It also does not give effect to any expected cost savings, synergies, or integration costs associated with the Mergers or the Acquired Assets.

At the closing of the Mergers (the “Closing”), the Company entered into a Shareholder Agreement with Century and North Peak (together, the “Juniper Shareholder”) and, for certain limited provisions, Dr. Simon G. Kukes, then Executive Chairman of the Company, and The SGK 2018 Revocable Trust (of which Dr. Kukes serves as trustee and beneficiary). The agreement grants the Juniper Shareholder board nomination rights from the Closing until the Automatic Conversion Date, including the right to designate one director nominee and one non-voting observer.

Following the Automatic Conversion Date, the Board consisted of six directors, with the Juniper Shareholder’s nomination rights determined based on its ownership percentage of Company’s common stock at that time. For purposes of the Shareholder Agreement, “Juniper Beneficial Ownership” is defined as the ownership, together with affiliates, of 3,181,818 shares of Company common stock issued to the Juniper Shareholder and its affiliates on February 27, 2026, relative to 13,300,815 shares of common stock outstanding as of such date, as applicable.

Based on Juniper Beneficial Ownership: (i) at 50% or more, the Juniper Shareholder may nominate three directors, including one independent director; (ii) from 30% to 49.9%, two directors; (iii) from 10% to 29.9%, one director; and (iv) below 10%, no nomination rights.

The Juniper Shareholder also has the right to remove or replace its designees, subject to Board approval and applicable SEC and NYSE independence and suitability requirements. At least one Juniper designee will serve on each Board committee (other than the Audit Committee) and will chair the Compensation and Nominating and Corporate Governance Committees, subject to limited exceptions.

The Shareholder Agreement also provides registration rights. The Company is required to use commercially reasonable efforts to file a registration statement within 45 days of the Automatic Conversion Date covering resale of shares issuable upon conversion of the Series A Preferred Stock, using Form S-3 or Form S-1 if necessary. The agreement permits underwritten offerings of at least $10 million, subject to customary conditions, underwriter approval, frequency limits, and applicable grace periods. Piggyback registration rights are also provided, subject to customary underwriter and priority provisions. The Company will bear related expenses and provide customary indemnification under the Securities Act of 1933, as amended. The Shareholder Agreement became effective at Closing and terminates in accordance with its terms.

On February 27, 2026, and at the request of the Juniper Shareholder pursuant to the Shareholder Agreement, the Board, upon recommendation of the Nominating and Corporate Governance Committee, increased its size from five (5) to six (6) directors and appointed Edward Geiser to the Board and as Chair of the Nominating and Corporate Governance Committee, to serve until his successor is duly elected and qualified or earlier resignation, death, or removal.

Also, effective February 27, 2026, Josh Schmidt, another Juniper Shareholder appointee, was appointed Chairman of the Board.

NOTE 18 – SUBSEQUENT EVENTS

On April 30, 2026, in connection with his service on the Board, Director John K. Howie was granted 782 shares of restricted common stock under the 2021 Plan for services rendered during the period from January 31, 2026 through April 30, 2026, in lieu of cash compensation for his services as a director. The shares had an aggregate fair value of $12,500, representing the cash compensation otherwise payable to Mr. Howie.

On May 5, 2026, the Company entered into a Second Amendment to the A&R Credit Agreement which, among other changes, amended certain EBITDAX calculation provisions, including updates to permitted transaction cost add-backs and the inclusion of estimated EBITDAX related to the Company’s October 2025 acquisitions from Juniper Capital Advisors, L.P. for applicable test periods. The amendment also revised the definition of “Test Period” to provide for phased annualization of EBITDAX beginning with the quarter ended December 31, 2025, updated the borrowing base redetermination schedule, and revised the reserve report delivery schedule (see Note 8 above).

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company has provided a discussion of significant accounting policies, estimates and judgments in its 2025 Annual Report. There have been no changes to the Company’s significant accounting policies since December 31, 2025.

Recently Adopted Accounting Pronouncement

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity's effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. The Company adopted this ASU on December 31, 2025, and has reflected the required disclosures in the accompanying notes to the consolidated financial statements. The ASU had no impact on the Company’s consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows.

Subsequent Events

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

NOTE 17 — SEGMENT INFORMATION

Operating segments are defined as components of an enterprise for which separate financial information is available and regularly evaluated by the Chief Operating Decision Maker (“CODM”) for the purpose of making key operating decisions, allocating resources, and assessing operating performance. The Company operates in one reportable operating segment, oil and natural gas development, exploration and production. The Company’s oil and gas properties are managed as a whole rather than through discrete operating segments. Financial and operational information is tracked by geographic area; however, financial performance is assessed as a single enterprise and not on a geographic basis. Allocation of resources is made on a project basis across the Company’s entire portfolio without regard to geographic area, and considers among other things, return on investment, current market conditions, including commodity prices and market supply, availability of services and human resources, and contractual commitments. The Company’s President and Chief Executive Officer is its CODM.

The Company’s profitability measure is consolidated net income which is used to assess budgeted versus actual results and drives the Company’s operating cash flow. The CODM reviews significant consolidated forecasts and results of operations, including return on capital, operating expenses, and cash flow when making decisions such as the allocation of capital. The financial position, results of operations and cash flows of the Company’s reportable operating segment are consistent with the Company’s consolidated financial statements included herein.