☑
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Texas
|
|
22-3755993
|
(State
or other jurisdiction of incorporation or
organization)
|
|
(IRS
Employer Identification No.)
|
Large accelerated filer ☐
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Accelerated filer ☐
|
Non-accelerated filer ☑
|
Smaller reporting company ☑
|
Emerging growth company ☐
|
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, $0.001 par value per share
|
PED
|
NYSE American
|
Page
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||
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|
Financial
Statements
|
3
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|
|
|
|
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Consolidated
Balance Sheets as of March 31, 2019 and December 31, 2018
(Unaudited)
|
3
|
|
|
|
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Consolidated
Statements of Operations for the Three Months Ended March 31, 2019
and 2018 (Unaudited)
|
4
|
|
|
|
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Consolidated
Statements of Cash Flows for the Three Months Ended March 31, 2019
and 2018 (Unaudited)
|
5
|
|
|
|
|
Consolidated Statements of Shareholders’ Equity (Deficit) for
the Three Months Ended March 31, 2019 and 2018 (Unaudited)
|
6
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|
|
|
|
Notes
to Unaudited Consolidated Financial Statements
|
7
|
|
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
17
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|
|
|
|
Quantitative
and Qualitative Disclosures About Market Risk
|
24
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|
|
|
|
Controls
and Procedures
|
24
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|
|
|
|
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||
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|
|
Legal
Proceedings
|
25
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|
|
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Risk
Factors
|
25
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|
|
|
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Unregistered
Sales of Equity Securities and Use of Proceeds
|
26
|
|
|
|
|
Defaults
Upon Senior Securities
|
26
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|
|
|
|
Mine
Safety Disclosures
|
26
|
|
|
|
|
Other
Information
|
26
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|
|
|
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Exhibits
|
26
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|
|
|
|
Signatures
|
|
|
March
31,
2019
|
December
31,
2018
|
Assets
|
|
|
Current
assets:
|
|
|
Cash
|
$8,779
|
$3,463
|
Restricted
cash
|
2,566
|
2,316
|
Accounts
receivable – oil and gas
|
895
|
842
|
Prepaid
expenses and other current assets
|
155
|
204
|
Total
current assets
|
12,395
|
6,825
|
|
|
|
Oil
and gas properties:
|
|
|
Oil
and gas properties, subject to amortization, net
|
69,804
|
51,946
|
Oil
and gas properties, not subject to amortization, net
|
1,920
|
8,516
|
Total
oil and gas properties, net
|
71,724
|
60,462
|
|
|
|
Other
assets
|
235
|
238
|
Total
assets
|
$84,354
|
$67,525
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$10,012
|
$4,509
|
Accrued
expenses
|
1,431
|
3,391
|
Revenue
payable
|
861
|
831
|
Asset
retirement obligations - current
|
124
|
119
|
Total
current liabilities
|
12,428
|
8,850
|
|
|
|
Long-term
liabilities:
|
|
|
Accrued
expenses
|
-
|
14
|
Accrued
expenses – related party
|
-
|
943
|
Notes
payable – subordinated
|
-
|
400
|
Notes
payable – subordinated – related party
|
-
|
30,200
|
Notes
payable – related party, net of debt discount of $-0- and
$161, respectively
|
-
|
7,694
|
Asset
retirement obligations
|
2,575
|
2,452
|
Total
liabilities
|
15,003
|
50,553
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
Shareholders’
equity:
|
|
|
Common
stock, $0.001 par value, 200,000,000 shares authorized; 45,288,828
and 15,808,445 shares issued and outstanding,
respectively
|
45
|
16
|
Additional
paid-in capital
|
156,795
|
101,450
|
Accumulated
deficit
|
(87,489)
|
(84,494)
|
Total
shareholders’ equity
|
69,351
|
16,972
|
|
|
|
Total
liabilities and shareholders’ equity
|
$84,354
|
$67,525
|
|
Three
Months Ended March 31,
|
|
Revenue:
|
2019
|
2018
|
Oil
and gas sales
|
$1,568
|
$644
|
|
|
|
Operating
expenses:
|
|
|
Lease
operating costs
|
970
|
312
|
Exploration
expense
|
10
|
10
|
Selling,
general and administrative expense
|
1,328
|
738
|
Depreciation,
depletion, amortization and accretion
|
2,249
|
582
|
Total
operating expenses
|
4,557
|
1,642
|
|
|
|
Gain
on sale of oil and gas properties
|
920
|
-
|
|
|
|
Operating
loss
|
(2,069)
|
(998)
|
|
|
|
Other
income (expense):
|
|
|
Interest
expense
|
(826)
|
(3,236)
|
Other
expense
|
(100)
|
-
|
Total
other income (expense)
|
(926)
|
(3,236)
|
|
|
|
Net
loss
|
$(2,995)
|
$(4,234)
|
|
|
|
Loss
per common share:
|
|
|
Basic
and diluted
|
$(0.11)
|
$(0.58)
|
|
|
|
Weighted
average number of common shares outstanding:
|
|
|
Basic
and diluted
|
27,828,383
|
7,278,754
|
|
Three
Months Ended March 31,
|
|
|
2019
|
2018
|
Cash
Flows From Operating Activities:
|
|
|
Net
loss
|
$(2,995)
|
$(4,234)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation,
depletion and amortization
|
2,249
|
582
|
Share-based
compensation expense
|
299
|
183
|
Interest
expense deferred and capitalized in debt restructuring
|
-
|
1,911
|
Gain
on sale of oil and gas properties
|
(920)
|
-
|
Amortization
of debt discount
|
161
|
712
|
Changes
in operating assets and liabilities:
|
|
|
Accounts
receivable – oil and gas
|
(53)
|
(50)
|
Prepaid
expenses and other current assets
|
49
|
16
|
Accounts
payable
|
1,847
|
249
|
Accrued
expenses
|
(1,954)
|
308
|
Accrued
expenses – related parties
|
657
|
261
|
Revenue
payable
|
30
|
21
|
Net
cash used in operating activities
|
(630)
|
(41)
|
|
|
|
Cash
Flows From Investing Activities:
|
|
|
Cash
paid for oil and gas properties
|
(700)
|
-
|
Cash
paid for drilling costs
|
(9,279)
|
-
|
Proceeds
from the sale of oil and gas property
|
1,175
|
-
|
Net
cash used in investing activities
|
(8,804)
|
-
|
|
|
|
Cash
Flows From Financing Activities:
|
|
|
Proceeds
from notes payable – related parties
|
15,000
|
-
|
Net
cash provided by financing activities
|
15,000
|
-
|
|
|
|
|
|
|
Net
increase in cash and restricted cash
|
5,566
|
(41)
|
Cash
and restricted cash at beginning of period
|
5,779
|
917
|
Cash
and restricted cash at end of period
|
$11,345
|
$876
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information
|
|
|
Cash
paid for:
|
$-
|
$-
|
Interest
|
$-
|
$-
|
Income
taxes
|
-
|
-
|
|
|
|
Noncash
investing and financing activities:
|
|
|
Change
in accrued oil and gas development costs
|
$3,656
|
$-
|
Acquisition
of asset retirement obligations
|
$33
|
-
|
Changes
in estimates of asset retirement costs
|
$11
|
-
|
Common
stock issued for debt conversion
|
$55,075
|
-
|
|
Series A
Convertible Preferred Stock
|
Common
Stock
|
Additional
|
|
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Paid-in
Capital
|
Accumulated
Deficit
|
Totals
|
Balances
at December 31, 2018
|
-
|
$-
|
15,808,445
|
$16
|
$101,450
|
$(84,494)
|
$16,972
|
Issuance
of common stock for debt conversions
|
-
|
-
|
29,480,383
|
29
|
55,046
|
-
|
55,075
|
Share-based
compensation
|
-
|
-
|
-
|
-
|
299
|
-
|
299
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(2,995)
|
(2,995)
|
Balances
at March 31, 2019
|
-
|
$-
|
45,288,828
|
$45
|
$156,795
|
$(87,489)
|
$69,351
|
|
Series A
Convertible Preferred Stock
|
Common
Stock
|
Additional
|
|
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
Paid-in
Capital
|
Accumulated
Deficit
|
Totals
|
Balances
at December 31, 2017
|
66,625
|
$-
|
7,278,754
|
$7
|
$100,954
|
$(138,101)
|
$(37,140)
|
Share-based
compensation
|
-
|
-
|
-
|
-
|
183
|
-
|
183
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
(4,234)
|
(4,234)
|
Balances
at March 31, 2018
|
66,625
|
$-
|
7,278,754
|
$7
|
$101,137
|
$(142,335)
|
$(41,191)
|
|
March
31,
2019
|
March
31,
2018
|
Oil
sales
|
$1,453
|
$549
|
Natural
gas sales
|
109
|
49
|
Natural
gas liquids sales
|
6
|
46
|
Total
revenue from customers
|
$1,568
|
$644
|
|
Balance at
December 31, 2018
|
Additions
|
Disposals
|
Transfers
|
Balance
at
March 31,
2019
|
Oil and gas
properties, subject to amortization
|
$70,803
|
$13,635
|
$(255)
|
$6,596
|
$90,779
|
Oil and gas
properties, not subject to amortization
|
8,516
|
-
|
-
|
(6,596)
|
1,920
|
Asset retirement
costs
|
2,188
|
22
|
-
|
-
|
2,210
|
Accumulated
depreciation and depletion
|
(21,045)
|
(2,140)
|
-
|
-
|
(23,185)
|
Total oil and gas
assets
|
$60,462
|
$11,517
|
$(255)
|
$-
|
$71,724
|
|
March
31,
|
December
31,
|
|
2019
|
2018
|
Notes
Payable - Subordinated
|
$-
|
$400
|
Notes
Payable - Subordinated Related Party
|
-
|
30,200
|
Notes
Payable - Related Party
|
-
|
7,855
|
|
-
|
38,455
|
Unamortized
Debt Discount
|
-
|
(161)
|
Total
Notes Payable
|
$-
|
$38,294
|
|
Three Months
Ended
March
31,
2019
|
Balance at the
beginning of the period (1)
|
$2,571
|
Accretion
expense
|
106
|
Obligations
incurred for acquisition
|
33
|
Changes in
estimates
|
(11)
|
Balance at end of
period (2)
|
$2,699
|
|
|
Common
Shares
|
|
|
Amount
|
Per
Share
|
Issued
and Outstanding Shares
|
Balance
at December 31, 2018
|
|
|
15,808,445
|
January
2019 Note Conversion*
|
$15,126
|
$1.50
|
10,083,819
|
October
2018 Note Conversion*
|
7,187
|
1.79
|
4,014,959
|
SK
Energy Note and August 2018 Notes Conversions*
|
32,763
|
2.13
|
15,381,605
|
Balance
at March 31, 2019
|
|
|
45,288,828
|
|
Number
of Warrants
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contract Term (Years)
|
Outstanding
at December 31, 2018
|
1,216,686
|
$7.44
|
1.4
|
Expired/Cancelled
|
(100,000)
|
$25.00
|
|
Outstanding
at March 31, 2019
|
1,116,686
|
$4.69
|
0.6
|
Exercisable
at March 31, 2019
|
|
|
|
March
31,
|
December
31
|
|
2019
|
2018
|
Long-term accrued
expenses
|
$-
|
$943
|
Long-term notes
payable – subordinated
|
-
|
30,200
|
Long-term notes
payable, net of discount of $-0- and $161,
respectively
|
-
|
7,694
|
Total related party
liabilities
|
$-
|
$38,837
|
●
|
business
strategy;
|
●
|
reserves;
|
●
|
technology;
|
●
|
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;
|
●
|
drilling
of wells;
|
●
|
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;
|
●
|
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 Quarterly
Report that are not historical.
|
Capital
Expenditures
|
|
Leasehold
Acquisitions
|
$37
|
Property Acquisitions (1)
|
769
|
Drilling and Facilities (2)
|
12,829
|
Other (3)
|
22
|
Total
|
$13,657
|
|
|
|
%
|
|
|
March
31,
2019
|
March
31,
2018
|
Increase
(Decrease)
|
Increase
(Decrease)
|
Sale Volumes:
|
|
|
|
|
Crude
Oil (Bbls)
|
30,207
|
9,472
|
20,735
|
219%
|
Natural
Gas (Mcf)
|
23,964
|
17,551
|
6,413
|
37%
|
NGL
(Mcf)
|
5,466
|
11,198
|
(5,732)
|
(51%)
|
Total (Boe) (1)
|
35,112
|
14,264
|
20,848
|
146%
|
|
|
|
|
|
Crude
Oil (Bbls per day)
|
336
|
105
|
231
|
220%
|
Natural
Gas (Mcf per day)
|
266
|
195
|
71
|
36%
|
NGL
(Mcf per day)
|
61
|
124
|
(63)
|
(51%)
|
Total (Boe per day) (1)
|
391
|
158
|
233
|
147%
|
|
|
|
|
|
Average Sale Price:
|
|
|
|
|
Crude
Oil ($/Bbl)
|
$48.10
|
$58.00
|
$(9.90)
|
(17%)
|
Natural
Gas ($/Mcf)
|
4.57
|
2.79
|
1.78
|
64%
|
NGL
($/Mcf)
|
1.00
|
4.11
|
(3.11)
|
(76%)
|
|
|
|
|
|
|
|
|
|
|
Net Operating Revenues (in thousands):
|
|
|
|
|
Crude
Oil
|
$1,453
|
$549
|
$904
|
164%
|
Natural
Gas
|
109
|
49
|
60
|
123%
|
NGL
|
6
|
46
|
(40)
|
(88%)
|
Total Revenues
|
$1,568
|
$644
|
$924
|
143%
|
(1)
|
Assumes
6 Mcf of natural gas and NGL equivalents to 1 barrel of
oil.
|
|
Three
Months Ended
|
|
|
|
|
March
31,
|
Increase
|
%
Increase
|
|
|
2019
|
2018
|
(Decrease)
|
(Decrease)
|
|
|
|
|
|
Lease
Operating Expenses
|
$970
|
$312
|
$658
|
211%
|
Exploration
Expenses
|
10
|
10
|
-
|
-
|
Depreciation,
Depletion,
|
|
|
|
|
Amortization
and Accretion
|
2,249
|
582
|
1,667
|
286%
|
|
|
|
|
|
General
and Administrative (Cash)
|
$1,029
|
$555
|
$474
|
85%
|
Share-Based
Compensation (Non-Cash)
|
299
|
183
|
116
|
63%
|
Total
General and Administrative Expense
|
1,328
|
738
|
590
|
80%
|
|
|
|
|
|
Interest
Expense
|
$(826)
|
$(3,236)
|
$(2,410)
|
(74%)
|
Other
Expense
|
$(100)
|
$-
|
$100
|
100%
|
|
Three
Months Ended March 31,
|
|
|
2019
|
2018
|
Cash
flows used in operating activities
|
$(630)
|
$(41)
|
Cash
flows used in investing activities
|
(8,804)
|
-
|
Cash
flows provided by financing activities
|
15,000
|
-
|
Net increase (decrease) in cash and restricted cash
|
$5,566
|
$(41)
|
|
|
Incorporated By Reference
|
|||
Exhibit No.
|
Description
|
Form
|
Exhibit
|
Filing Date/Period End Date
|
File Number
|
Purchase
and Sale Agreement dated January 11, 2019, by and between Manzano,
LLC and Manzano Energy Partners, II, LLC, as seller and Pacific
Energy Development Corp., as purchaser
|
8-K
|
2.1
|
January
14, 2019
|
001-35922
|
|
Separation
and General Release Agreement, dated December 31, 2018, between
Pacific Energy Development Corp. and Gregory
Overholtzer
|
8-K
|
10.1
|
January
4, 2019
|
001-35922
|
|
Consulting
Agreement, dated January 1, 2019, between Gregory Overholtzer and
Pacific Energy Development Corp.
|
8-K
|
10.2
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January
4, 2019
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001-35922
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$15,000,000
Convertible Promissory Note between PEDEVCO Corp., as borrower and
SK Energy LLC as lender, dated January 11, 2019
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8-K
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10.1
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January
14, 2019
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001-35922
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First
Amendment to Convertible Promissory Notes, dated February 15, 2019,
entered into by and between PEDEVCO Corp. and SK Energy
LLC
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8-K
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10.4
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February
19, 2019
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001-35922
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First
Amendment to Promissory Note, dated March 1, 2019, entered into by
and between PEDEVCO Corp. and SK Energy LLC
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8-K
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10.1
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March
4, 2019
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001-35922
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Certification
of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
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Certification
of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
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Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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101.INS*
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XBRL
Instance Document
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101.SCH*
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XBRL
Taxonomy Extension Schema Document
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101.CAL*
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XBRL
Taxonomy Extension Calculation Linkbase Document
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101.DEF*
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XBRL
Taxonomy Extension Definition Linkbase Document
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101.LAB*
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XBRL
Taxonomy Extension Label Linkbase Document
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101.PRE*
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XBRL
Taxonomy Extension Presentation Linkbase Document
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PEDEVCO Corp.
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May 15, 2019
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By:
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/s/ Dr.
Simon Kukes
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Dr.
Simon Kukes
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Chief
Executive Officer
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(Principal
Executive Officer)
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PEDEVCO Corp.
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May 15, 2019
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By:
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/s/ Paul
A. Pinkston
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Paul A.
Pinkston
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Chief
Accounting Officer
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(Principal
Financial and Accounting Officer)
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Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 12, 2019 |
|
Document And Entity Information | ||
Entity Registrant Name | PEDEVCO CORP | |
Entity Central Index Key | 0001141197 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 45,508,884 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Notes payable - related party, net of debt discount | $ 0 | $ 161 |
Stockholders' equity: | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 45,288,828 | 15,808,445 |
Common stock, shares outstanding | 45,288,828 | 15,808,445 |
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Revenue: | ||
Oil and gas sales | $ 1,568 | $ 644 |
Operating expenses: | ||
Lease operating costs | 970 | 312 |
Exploration expense | 10 | 10 |
Selling, general and administrative expense | 1,328 | 738 |
Depreciation, depletion, amortization and accretion | 2,249 | 582 |
Total operating expenses | 4,557 | 1,642 |
Gain on sale of oil and gas properties | 920 | 0 |
Operating loss | (2,069) | (998) |
Other income (expense): | ||
Interest expense | (826) | (3,236) |
Gain on debt restructuring | (100) | 0 |
Total other income (expense) | (926) | (3,236) |
Net loss | $ (2,995) | $ (4,234) |
Earnings (loss) per common share: Basic | $ (0.11) | $ (0.58) |
Earnings (loss) per common share: Diluted | $ (0.11) | $ (0.58) |
Weighted average number of common shares outstanding: Basic | 27,828,383 | 7,278,754 |
Weighted average number of common shares outstanding: Diluted | 27,828,383 | 7,278,754 |
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands |
Series A Convertible Preferred Stock |
Common Stock |
Additional Paid in Capital |
Accumulated Deficit |
Total |
---|---|---|---|---|---|
Beginning Balance, Amount at Dec. 31, 2017 | $ 0 | $ 7 | $ 100,954 | $ (138,101) | $ (37,140) |
Beginning Balance, Shares at Dec. 31, 2017 | 66,625 | 7,278,754 | |||
Shared-based compensation | 183 | 183 | |||
Net loss | (4,234) | (4,234) | |||
Ending Balance, Amount at Mar. 31, 2018 | $ 0 | $ 7 | 101,137 | (142,335) | (41,191) |
Ending Balance, Shares at Mar. 31, 2018 | 66,625 | 7,278,754 | |||
Beginning Balance, Amount at Dec. 31, 2018 | $ 0 | $ 16 | 101,450 | (84,494) | 16,972 |
Beginning Balance, Shares at Dec. 31, 2018 | 0 | 15,808,445 | |||
Issuance of common stock for debt conversions, Amount | $ 29 | 55,046 | 55,075 | ||
Issuance of common stock for debt conversions, Shares | 29,480,383 | ||||
Shared-based compensation | 299 | 299 | |||
Net loss | (2,995) | (2,995) | |||
Ending Balance, Amount at Mar. 31, 2019 | $ 0 | $ 45 | $ 156,795 | $ (87,489) | $ 69,351 |
Ending Balance, Shares at Mar. 31, 2019 | 0 | 45,288,828 |
1. BASIS OF PRESENTATION |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | The accompanying 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, 2018, filed with the SEC on April 1, 2019, 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, and the actual cost of exploration, appraisal and development of our prospects. |
2. DESCRIPTION OF BUSINESS |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | PEDEVCO is an oil and gas company focused on the development, acquisition and production of oil and natural gas assets where the latest in modern drilling and completion techniques and technologies have yet to be applied. In particular, the Company focuses on legacy proven properties where there is a long production history, well defined geology and existing infrastructure that can be leveraged when applying modern field management technologies. The Company’s current properties are located in the San Andres formation of the Permian Basin situated in West Texas and eastern New Mexico (the “Permian Basin”) and in the Denver-Julesberg Basin (“D-J Basin”) in Colorado. The Company holds its Permian Basin acres located in Chavez and Roosevelt Counties, New Mexico, through its wholly-owned operating subsidiary, Pacific Energy Development Corp. (“PEDCO”), which asset the Company refers to as its “Permian Basin Asset,” and it holds its D-J Basin acres located in Weld and Morgan Counties, Colorado, through its wholly-owned operating subsidiary, Red Hawk Petroleum, LLC (“Red Hawk”), which asset the Company refers to as its “D-J Basin Asset.”
The Company’s strategy is to be the operator, directly or through its subsidiaries and joint ventures, in the majority of its acreage so it can dictate the pace of development in order to execute its business plan. The majority of its capital expenditure budget through 2019 will be focused on the development of the Company’s Permian Basin Asset, with a secondary focus on development of its D-J Basin Asset. The Company’s 2019 total development plan calls for the deployment of an estimated $52.1 million in capital, of which approximately $22.0 million has been raised to date. On the Company’s Permian Basin Asset, four initial horizontal wells were drilled in December 2018 and January 2019 in Phase One of its development plan, followed by Phase Two which contemplates the drilling and completion of an additional eight horizontal wells through 2020, subject to, and based upon, the results from Phase One, and in each case, available funding. The Company’s 2019 D-J Basin Asset development plan is currently under evaluation for its operated acreage and its non-operated acreage, and is projected to require approximately $7.6 million in capital through 2019. Due to the held-by-production nature of the Company’s Permian Basin assets, the Company believes capital can be readily allocated to its D-J Basin assets if needed. The Company expects that it will have sufficient cash available to meet its needs over the foreseeable future, which cash the Company anticipates being available from (i) its projected cash flows from operations, (ii) its existing cash on hand, (iii) equity infusions or loans (which may be convertible) made available from SK Energy LLC, which is 100% owned and controlled by Dr. Simon Kukes, the Company’s Chief Executive Officer and director (“SK Energy”), which funding SK Energy is under no obligation to provide, and (iv) funding through credit or loan facilities. In addition, the Company may seek additional funding through asset sales, farm-out arrangements, lines of credit, or public or private debt or equity financings to fund additional 2019 capital expenditures and/or acquisitions. If market conditions are not conducive to raising additional funds, the Company may choose to extend the drilling program and associated capital expenditures further into 2020. |
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | The Company has provided a discussion of significant accounting policies, estimates and judgments in its 2018 Annual Report. There have been no changes to the Company’s significant accounting policies since December 31, 2018.
Recently Adopted Accounting Pronouncements
Revenue Recognition. Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”, supersedes the revenue recognition requirements and industry-specific guidance under Revenue Recognition (Topic 605). Topic 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The Company adopted Topic 606 on January 1, 2018, using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. Under the modified retrospective method, prior period financial positions and results will not be adjusted. The cumulative effect adjustment recognized in the opening balances included no significant changes as a result of this adoption. While the Company’s net earnings are not materially impacted by revenue recognition timing changes, Topic 606 requires certain changes to the presentation of revenues and related expenses beginning January 1, 2018. Refer to Note 4 – Revenue from Contracts with Customers for additional information.
Leases. In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases (Topic 842)”. The new lease guidance supersedes Topic 840. The core principle of the guidance is that entities should recognize the assets and liabilities that arise from leases. Topic 840 does not apply to leases to explore for or use minerals, oil, natural gas and similar nonregenerative resources, including the intangible right to explore for those natural resources and rights to use the land in which those natural resources are contained. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements”, which provides entities with an alternative modified transition method to elect not to recast the comparative periods presented when adopting Topic 842. The Company adopted Topic 842 as of January 1, 2019, using the alternative modified transition method, for which, comparative periods, including the disclosures related to those periods, are not restated.
In addition, the Company elected practical expedients provided by the new standard whereby, the Company has elected to not reassess its prior conclusions about lease identification, lease classification, and initial direct costs and to retain off-balance sheet treatment of short-term leases (i.e., 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise). As a result of the short-term expedient election, the Company has no leases that require the recording of a net lease asset and lease liability on the Company’s consolidated balance sheet or have a material impact on consolidated earnings or cash flows as of March 31, 2019. Moving forward, the Company will evaluate any new lease commitments for application of Topic 842.
Compensation-Stock Compensation. In June 2018, the FASB issued ASU 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”. The amendments in this update maintain or improve the usefulness of the information provided to the users of financial statements while reducing cost and complexity in financial reporting. The areas for simplification in this update involve several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, to include share-based payment transactions for acquiring goods and services from nonemployees. Some of the areas for simplification apply only to nonpublic entities. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company adopted the standard as of January 1, 2019. There was no impact of the standard on its consolidated financial statements.
Recently Issued Accounting Pronouncements
The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant impact on its financial position, results of operations, or cash flows.
Subsequent Events
The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration. |
4. REVENUE FROM CONTRACTS WITH CUSTOMERS |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue From Contracts With Customers | ||||||||||||||||||||||||||||||||||||||||||||||
REVENUE FROM CONTRACTS WITH CUSTOMERS | Change in Accounting Policy. The Company adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, on January 1, 2018, using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. Refer to Note 3 – Summary of Significant Accounting Policies above for additional information.
Exploration and Production. There were no significant changes to the timing or valuation of revenue recognized for sales of production from exploration and production activities.
Disaggregation of Revenue from Contracts with Customers. The following table disaggregates revenue by significant product type for the three months ended in the periods indicated (in thousands):
There were no significant contract liabilities or transaction price allocations to any remaining performance obligations as of March 31, 2019 or 2018, respectively.
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5. OIL AND GAS PROPERTIES |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oil and Gas Property [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OIL AND GAS PROPERTIES | The following table summarizes the Company’s oil and gas activities by classification for the three months ended March 31, 2019 (in thousands):
On February 1, 2019, for consideration of $700,000, the Company completed an asset purchase from Manzano, LLC and Manzano Energy Partners II, LLC, whereby the Company purchased approximately 18,000 net leasehold acres, ownership and operated production from one horizontal well currently producing from the San Andres play in the Permian Basin, ownership of three additional shut-in wells and ownership of one saltwater disposal well. The Company subsequently drilled one Manzano well, which has yet to be completed as March 31, 2019.
On March 7, 2019, Red Hawk sold rights to 85.5 net acres of oil and gas leases located in Weld County, Colorado, to a third party, for aggregate proceeds of $1.2 million and recognized a gain on sale of oil and gas properties of $920,000 on the statement of operations. The sale agreement included a provision whereby the purchaser was required to assign Red Hawk 85 net acres of leaseholds in an area located where the Company already owns other leases in Weld County, Colorado, within nine months from the date of the sale, or to repay the Company up to $200,000 (proportionally adjusted for the amount of leasehold delivered). The purchaser has not yet identified or assigned the required leasehold acreage to the Company.
For the three-month period ended March 31, 2019, the Company has incurred $12.8 million in drilling costs for the drilling of five wells, four of which were completed. There were no drilling costs for the three-month period ended March 31, 2018.
The depletion recorded for production on proved properties for the three months ended March 31, 2019 and 2018, amounted to $2,140,000, compared to $563,000, respectively.
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6. OTHER CURRENT ASSETS |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
OTHER CURRENT ASSETS | On September 11, 2013, the Company entered into a Shares Subscription Agreement (“SSA”) to acquire an approximate 51% ownership in Asia Sixth Energy Resources Limited (“Asia Sixth”), which held an approximate 60% ownership interest in Aral Petroleum Capital Limited Partnership (“Aral”), a Kazakhstan entity. In August 2014 the SSA was restructured (the “Aral Restructuring”), in connection with which the Company received a promissory note in the principal amount of $10.0 million from Asia Sixth (the “A6 Promissory Note”), which was to be converted into a 10.0% interest in Caspian Energy, Inc. (“Caspian Energy”), an Ontario, Canada company listed on the NEX board of the TSX Venture Exchange, upon the consummation of the Aral Restructuring. The Aral Restructuring was consummated on May 20, 2015, upon which date the A6 Promissory Note was converted into 23,182,880 shares of common stock of Caspian Energy.
In February 2015, the Company expanded its D-J Basin position through the acquisition of acreage from Golden Globe Energy (US), LLC (“GGE”)(the “GGE Acquisition” and the “GGE Acquired Assets”). In connection with the GGE Acquisition, on February 23, 2015, the Company provided GGE an option to acquire its interest in Caspian Energy for $100,000 payable upon exercise of the option (which was to expire on May 12, 2019) recorded in prepaid expenses and other current assets. As a result, the carrying value of the 23,182,880 shares of common stock of Caspian Energy which were issued upon conversion of the A6 Promissory Note at December 31, 2015 was $100,000. The $100,000 option was classified as part of other current assets as of December 31, 2018, and, since the option expired without being exercised on May 12, 2019 prior to the filing date of these financial statements, the Company fully reserved the $100,000 and recognized no value related to the option on the Company’s balance sheet as of March 31, 2019.
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7. NOTES PAYABLE |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE | The Company’s notes payable consisted of the following (in thousands):
Convertible Note Issuances
On June 26, 2018, the Company borrowed $7.7 million from SK Energy under a Promissory Note dated June 25, 2018, in the amount of $7.7 million (the “June 2018 SK Energy Note”) and shown on the balance sheet as Note Payable – Related Party, net of debt discount from the issuance of 600,000 shares of common stock (as described below) with a fair value of $185,000 based on the market price at the issuance date. The June 2018 SK Energy Note accrues interest monthly at 8% per annum, payable quarterly, in either cash or shares of common stock (at the option of the Company), or, with the consent of SK Energy, such interest may be accrued and capitalized.
As additional consideration for SK Energy agreeing to the terms of the June 2018 SK Energy Note, the Company agreed to issue SK Energy 600,000 shares of common stock (the “Loan Shares”), with a fair value of $185,000 based on the market price on the date of issuance that was accounted for as a debt discount and is being amortized over the term of the note.
Based on a conversion price equal to $2.18, pursuant to the conversion terms of the June 2018 SK Energy Note, the amount of interest under the June 2018 SK Energy Note as of December 31, 2018 equaled $155,000 and was included in the outstanding principal balance of $7,855,000, for interest not paid or issued in common stock when due, the amount is recapitalized into the face value of the note, per the terms of the June 2018 SK Energy Note. The total amount of the remaining debt discount reflected on the accompanying balance sheet as of December 31, 2018 was $161,000, which was amortized in full as of March 31, 2019, due to the note conversions, which included $107,000 of additional interest that was included in the principal balance, noted below under “Convertible Notes Amendment and Conversion” and “SK Energy Note Amendment; Note Purchases and Conversion”.
On August 1, 2018, the Company received total proceeds of $23,600,000 from the sale of multiple Convertible Promissory Notes (the “Convertible Notes”). A total of $22,000,000 in Convertible Notes were purchased by SK Energy (the “August 2018 SK Energy Note”); $200,000 in Convertible Notes were purchased by an executive officer of SK Energy; $500,000 in Convertible Notes were purchased by a trust affiliated with John J. Scelfo, a director of the Company; $500,000 in Convertible Notes were purchased by an entity affiliated with Ivar Siem, our director, and J. Douglas Schick, President of the Company; $200,000 in Convertible Notes was purchased by H. Douglas Evans (who became a Director and related party on September 27, 2018); and $200,000 in Convertible Notes were purchased by an unaffiliated party. The $23,600,000 is accounted for on the balance sheet as $23,200,000 of subordinated notes payable – related party and $400,000 as subordinated notes, as these notes are subordinated to the original June 2018 SK Energy Note.
The Convertible Notes accrue interest monthly at 8.5% per annum, which interest is payable on the maturity date unless otherwise converted into our common stock as described below. The accrued interest is accounted for on the balance sheet as of December 31, 2018 as $943,000 of accrued interest – related party and $14,000 of accrued interest. As of March 31, 2019, there was no accrued interest – related party or accrued interest, as $347,000 of accrued interest – related party and $6,000 of accrued interest incurred during 2019 together with the accrued interest outstanding as of December 31, 2018 was converted into shares of common stock due to the note conversions described below.
The Convertible Notes and all accrued interest thereon are convertible into shares of our common stock, from time to time after August 29, 2018, at the option of the holders thereof, at a conversion price equal to $2.13 per share, per terms of the Convertible Notes.
On October 25, 2018, the Company borrowed an additional $7.0 million from SK Energy, through the sale of a convertible promissory note in the amount of $7.0 million (the “October 2018 SK Energy Note”). The October 2018 SK Energy Note had substantially similar terms as the August 2018 SK Energy Note, except that it had a conversion price of $1.79 per share. The October 2018 SK Energy Note is due and payable on October 25, 2021, but may be prepaid at any time without penalty. The accrued interest expense related to this note for the year ended December 31, 2018 was $109,000 and is accounted for on the balance sheet as accrued interest – related party. As of March 31, 2019, there was no accrued interest – related party, as accrued interest of $78,000 incurred during 2019 together with the accrued interest outstanding as of December 31, 2018 was converted into shares of common stock due to the note conversions described below.
January 2019 SK Energy Convertible Note
On January 11, 2019, the Company borrowed an additional $15.0 million from SK Energy, through the sale of a convertible promissory note in the amount of $15.0 million (the “January 2019 SK Energy Note”). The January 2019 SK Energy Note had substantially similar terms as the August 2018 SK Energy Note, except that it had a conversion price of $1.50 per share. The January 2019 SK Energy Note is due and payable on January 11, 2022, but may be prepaid at any time without penalty. As of March 31, 2019, there was no outstanding principal or accrued interest – related party due to the note conversions noted below. Accrued interest-related party for this note prior to the conversion totaled $126,000.
Convertible Notes Amendment and Conversion
On February 15, 2019, the Company and SK Energy agreed to amend the Convertible Notes (including the August 2018 SK Energy Note), October 2018 SK Energy Note, and the January 2019 SK Energy Note, to remove the conversion limitation that previously prevented SK Energy from converting any portion of the notes into common stock of the Company if such conversion would have resulted in SK Energy beneficially owning more than 49.9% of the Company’s outstanding shares of common stock
Immediately following the entry into the amendment, on February 15, 2019, SK Energy elected to convert (i) all $15,000,000 of the outstanding principal and all $126,000 of accrued interest then owed under the January 2019 SK Energy Note into common stock of the Company at a conversion price of $1.50 per share, as set forth in the January 2019 SK Energy Note into 10,083,819 shares of restricted common stock of the Company, and (ii) all $7,000,000 of the outstanding principal and all $187,000 of accrued interest under the October 2018 SK Energy Note into common stock of the Company at a conversion price of $1.79 per share, as set forth in the October 2018 SK Energy Note, into 4,014,959 shares of restricted common stock of the Company.
On March 1, 2019, the Company and SK Energy amended the June 2018 SK Energy Note, to provide SK Energy the right, at any time, at its option, to convert the principal and interest owed under such June 2018 SK Energy Note, into shares of the Company’s common stock, at a conversion price of $2.13 per share.
In addition, on March 1, 2019, the holders of $1,500,000 in aggregate principal amount of Convertible sold their Convertible Notes at face value plus accrued and unpaid interest through March 1, 2019 to SK Energy (the “Convertible Note Sale”). Holders which sold their Convertible Notes pursuant to the Convertible Note Sale to SK Energy, including an executive officer of SK Energy ($200,000 in principal amount of Convertible Notes); a trust affiliated with John J. Scelfo, a director of the Company ($500,000 in principal amount of Convertible Notes); an entity affiliated with Ivar Siem, a director of the Company, and J. Douglas Schick the President of the Company ($500,000 in principal amount of Convertible Notes); and Harold Douglas Evans, a director of the Company ($200,000 in principal amount of Convertible Notes).
Immediately following the effectiveness of the SK Energy Note Amendment and Convertible Note Sale, on March 1, 2019, SK Energy and the Unaffiliated Holder elected to convert all $31,300,000 of outstanding principal and an aggregate of $1,460,000 of accrued interest under the June 2018 SK Energy Note, SK Energy’s $22 million Convertible Note and all other Convertible Notes, into common stock of the Company at a conversion price of $2.13 per share (the “Conversion Price” and the “Conversions”) as set forth in the June 2018 SK Energy Note, as amended, and the Convertible Notes (including SK Energy’s $22 million Convertible Note (collectively, the “Notes”), into an aggregate of 15,381,605 shares of restricted common stock of the Company (the “Conversion Shares”).
|
8. ASSET RETIREMENT OBLIGATIONS |
3 Months Ended | ||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||
Asset Retirement Obligations | |||||||||||||||||||||||||||||||||||
ASSET RETIREMENT OBLIGATIONS | Activity related to the Company’s asset retirement obligations is as follows (in thousands):
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9. COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Office Lease
Change in Accounting Policy. The Company adopted ASU No. 2016-02, “Leases (Topic 842)” and ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements”, January 1, 2019, using the alternative modified transition method, for which, comparative periods, including the disclosures related to those periods, are not restated as of January 1, 2019. Refer to Note 3 – Summary of Significant Accounting Policies above for additional information.
In June 2018, the Company assumed the lease for its corporate office space located in Houston, Texas from American Resources, Inc., an entity beneficially owned and controlled by Ivar Siem, a director of the Company, and J. Douglas Schick, the Company’s President. The term of the lease ends on August 31, 2019, and the obligation for the remainder of this lease is $55,000.
The Company also leased space for its former corporate headquarters in Danville, California that was scheduled to expire July 31, 2019, but was terminated in January 2019 without penalty or other amounts due. The obligation for this lease through January 2019 was $5,000. In February 2019, the Company entered into a six-month lease agreement for 187 square feet of new office space located in Danville, California for the Company’s general counsel. The monthly rent is $1,000, and the Company paid a $1,000 security deposit. The total current obligation for the remainder of this lease through July 2019 is $5,000.
For the three months ended March 31, 2019 and 2018, the Company incurred lease expense of $23,000 and $14,000, respectively, for the combined leases.
Leasehold Drilling Commitments
The Company’s oil and gas leasehold acreage is subject to expiration of leases if the Company does not drill and hold such acreage by production or otherwise exercises options to extend such leases, if available, in exchange for payment of additional cash consideration. In the D-J Basin Asset, 49 net acres expire during the remainder of 2019, and 170 net acres expire thereafter (net to our direct ownership interest only). In the Permian Basin Asset, no net acres are due to expire in 2019 and 2,886 net acres expire thereafter (net to our direct ownership interest only). For the Manzano acquisition (the assets acquired on February 1, 2019), 6,981 net acres expire during the remainder of 2019 and 6,526 net acres expire thereafter (net to our direct ownership interest only). The Company plans to hold significantly all of this acreage through a program of drilling and completing producing wells. If the Company is not able to drill and complete a well before lease expiration, the Company may seek to extend leases where able.
Other Commitments
Although the Company may, from time to time, be involved in litigation and claims arising out of its operations in the normal course of business, the Company is not currently a party to any material legal proceeding. In addition, the Company is not aware of any material legal or governmental proceedings against it or contemplated to be brought against it.
As part of its regular operations, the Company may become party to various pending or threatened claims, lawsuits and administrative proceedings seeking damages or other remedies concerning its commercial operations, products, employees and other matters.
Although the Company provides no assurance about the outcome of these or any other pending legal and administrative proceedings and the effect such outcomes may have on the Company, the Company believes that any ultimate liability resulting from the outcome of such proceedings, to the extent not otherwise provided for or covered by insurance, will not have a material adverse effect on the Company’s financial condition or results of operations.
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10. SHAREHOLDERS' EQUITY |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS' EQUITY | Preferred Stock
The Company is authorized to issue 100,000,000 shares of preferred stock with a par value of $0.001 per share, of which 25,000,000 shares have been designated “Series A” preferred stock. As of March 31, 2019 and December 31, 2018, there were no shares of the Company’s Series A Convertible Preferred Stock outstanding, respectively.
Common Stock
At March 31, 2019, the Company was authorized to issue 200,000,000 shares of its common stock with a par value of $0.001 per share.
The following summarizes the Company’s common stock activity during the three-month period ended March 31, 2019 (amounts in thousands, except share and per share amounts):
*See Note 7 above for further discussion of the Note Conversions.
Stock-based compensation expense recorded related to the vesting of restricted stock for the three months ended March 31, 2019 and 2018 was $186,000 and $166,000, respectively. The remaining unamortized stock-based compensation expense at March 31, 2019 related to restricted stock was $781,000.
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11. STOCK OPTIONS AND WARRANTS |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK OPTIONS AND WARRANTS | Blast 2003 Stock Option Plan and 2009 Stock Incentive Plan
Prior to June 2005, the Company was known as Blast Energy Services, Inc. (“Blast”). Under Blast’s 2003 Stock Option Plan and 2009 Stock Incentive Plan, options to acquire 298 shares of common stock were granted and remained outstanding and exercisable as of March 31, 2018 and December 31, 2018, respectively. No new options were issued under these plans in 2019 or 2018.
2012 Incentive Plan
On July 27, 2012, the shareholders of the Company approved the 2012 Equity Incentive Plan (the “2012 Incentive Plan”), which was previously approved by the Board of Directors on June 27, 2012, and authorizes the issuance of various forms of stock-based awards, including incentive or non-qualified options, restricted stock awards, performance shares and other securities as described in greater detail in the 2012 Incentive Plan, to the Company’s employees, officers, directors and consultants. The 2012 Incentive Plan was amended on June 27, 2014, October 7, 2015 and December 28, 2016, December 28, 2017 and September 27, 2018 to increase by 500,000, 300,000, 500,000, 1,500,000, and 3,000,000 (to 6,000,000 currently), respectively, the number of shares of common stock reserved for issuance under the 2012 Incentive Plan.
A total of 6,000,000 shares of common stock are eligible to be issued under the 2012 Incentive Plan as of March 31, 2019, of which 3,200,130 shares have been issued as restricted stock, 768,250 shares are subject to issuance upon exercise of issued and outstanding options, and 2,031,620 shares remain available for future issuance as of March 31, 2019.
PEDCO 2012 Equity Incentive Plan
As a result of the July 27, 2012 merger by and between the Company, Blast Acquisition Corp., a wholly-owned Nevada subsidiary of the Company (“MergerCo”), and Pacific Energy Development Corp., a privately-held Nevada corporation (“PEDCO”) pursuant to which MergerCo was merged with and into PEDCO, with PEDCO continuing as the surviving entity and becoming a wholly-owned subsidiary of the Company, in a transaction structured to qualify as a tax-free reorganization (the “Merger”), the Company assumed the PEDCO 2012 Equity Incentive Plan (the “PEDCO Incentive Plan”), which was adopted by PEDCO on February 9, 2012. The PEDCO Incentive Plan authorized PEDCO to issue an aggregate of 100,000 shares of common stock in the form of restricted shares, incentive stock options, non-qualified stock options, share appreciation rights, performance shares, and performance units under the PEDCO Incentive Plan. As of March 31, 2019, options to purchase an aggregate of 31,016 shares of the Company’s common stock and 55,168 shares of the Company’s restricted common stock have been granted under this plan (all of which were granted by PEDCO prior to the closing of the merger with the Company, with such grants being assumed by the Company and remaining subject to the PEDCO Incentive Plan following the consummation of the merger). The Company does not plan to grant any additional awards under the PEDCO Incentive Plan.
Options
During the three months ended March 31, 2019, no options were granted, exercised or expired. As of March 31, 2019, a total of 890,232 stock options are outstanding, with exercise prices ranging from $0.3088 to $302.40 per share and a weighted-average exercise price of $3.26 per share. Of the total amount of stock options outstanding, 595,232 are exercisable as of March 31, 2019, with a weighted-average exercise price of $4.06 per share
During the three months ended March 31, 2019 and 2018, the Company recognized stock option expense of $113,000 and $17,000, respectively. The remaining amount of unamortized stock options expense at March 31, 2019, was $207,000.
The intrinsic value of outstanding and exercisable options at March 31, 2019 and December 31, 2018 was $448,000 and $36,000, respectively.
Warrants
During the three months ended March 31, 2019, no warrants were granted or exercised, and warrants to purchase 100,000 shares of common stock expired.
The intrinsic value of outstanding, as well as exercisable, warrants at March 31, 2019 and December 31, 2018, was $536,000 compared to $65,000, respectively.
Warrant activity during the three months ended March 31, 2019 was:
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12. RELATED PARTY TRANSACTIONS |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
RELATED PARTY TRANSACTIONS | The following table reflects the related party amounts for SK Energy, Directors and Officers included in the balance sheets of the period indicated (in thousands):
See Note 7 above for further discussion of the debt conversions and subsequent retirement of all related party debt.
|
13. INCOME TAXES |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The Company has estimated that its effective tax rate for U.S. purposes will be zero for the 2019 and 2018 fiscal years as a result of net losses and a full valuation allowance against the net deferred tax assets. Consequently, the Company has recorded no provision or benefit for income taxes for the three months ended March 31, 2019 and 2018. |
14. SUBSEQUENT EVENTS |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Effective April 1, 2019, the Company issued 60,056 total shares of common stock upon the cashless exercise of two warrants to purchase an aggregate of 596,280 shares of common stock with an exercise price of $2.50 per share, based on a current market value of $2.78 per share, under the terms of each warrant.
In April 2019, restricted stock awards were granted to three new employees and one consultant an aggregate of 160,000 shares of the Company’s common stock, under the Company’s Amended and Restated 2012 Equity Incentive Plan. The grant for a total of 50,000 of the restricted stock awards vest as follows: 100% on the one-year anniversary of the grant date, subject to the recipient’s continued service with the Company. These shares have a total fair value of $135,000 based on the market price on the issuance date. The grants for 110,000 shares of restricted stock vest as follows: 50% on the one-year anniversary of the grant date and 50% on the second-year anniversary of the grant date, subject to the recipient’s continued service with the Company. These shares have a total fair value of $253,000 based on the market price on the issuance date.
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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Recently Adopted Accounting Pronouncements | Revenue Recognition. Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”, supersedes the revenue recognition requirements and industry-specific guidance under Revenue Recognition (Topic 605). Topic 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. The Company adopted Topic 606 on January 1, 2018, using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. Under the modified retrospective method, prior period financial positions and results will not be adjusted. The cumulative effect adjustment recognized in the opening balances included no significant changes as a result of this adoption. While the Company’s net earnings are not materially impacted by revenue recognition timing changes, Topic 606 requires certain changes to the presentation of revenues and related expenses beginning January 1, 2018. Refer to Note 4 – Revenue from Contracts with Customers for additional information.
Leases. In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, “Leases (Topic 842)”. The new lease guidance supersedes Topic 840. The core principle of the guidance is that entities should recognize the assets and liabilities that arise from leases. Topic 840 does not apply to leases to explore for or use minerals, oil, natural gas and similar nonregenerative resources, including the intangible right to explore for those natural resources and rights to use the land in which those natural resources are contained. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements”, which provides entities with an alternative modified transition method to elect not to recast the comparative periods presented when adopting Topic 842. The Company adopted Topic 842 as of January 1, 2019, using the alternative modified transition method, for which, comparative periods, including the disclosures related to those periods, are not restated.
In addition, the Company elected practical expedients provided by the new standard whereby, the Company has elected to not reassess its prior conclusions about lease identification, lease classification, and initial direct costs and to retain off-balance sheet treatment of short-term leases (i.e., 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise). As a result of the short-term expedient election, the Company has no leases that require the recording of a net lease asset and lease liability on the Company’s consolidated balance sheet or have a material impact on consolidated earnings or cash flows as of March 31, 2019. Moving forward, the Company will evaluate any new lease commitments for application of Topic 842.
Compensation-Stock Compensation. In June 2018, the FASB issued ASU 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”. The amendments in this update maintain or improve the usefulness of the information provided to the users of financial statements while reducing cost and complexity in financial reporting. The areas for simplification in this update involve several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, to include share-based payment transactions for acquiring goods and services from nonemployees. Some of the areas for simplification apply only to nonpublic entities. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company adopted the standard as of January 1, 2019. There was no impact of the standard on its consolidated financial statements. |
Recently Issued Accounting Pronouncements | The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant impact on its financial position, results of operations, or cash flows. |
Subsequent Events | The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration. |
4. REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue From Contracts With Customers Tables Abstract | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue by significant product type |
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5. OIL AND GAS PROPERTIES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oil and Gas Property [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oil and gas interests |
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7. NOTES PAYABLE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt restructuring |
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8. ASSET RETIREMENT OBLIGATIONS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||
Asset Retirement Obligations Tables Abstract | |||||||||||||||||||||||||||||||
Asset retirement obligation |
|
10. SHAREHOLDERS' EQUITY (DEFICIT) (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders Equity Deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock option and warrant activity |
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11. STOCK OPTIONS AND WARRANTS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock option and warrant activity |
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Warrant | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock option and warrant activity |
|
12. RELATED PARTY TRANSACTIONS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party transactions |
|
4. REVENUE FROM CONTRACTS WITH CUSTOMERS (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Total revenue from customers | $ 1,568 | $ 644 |
Oil Sales | ||
Total revenue from customers | 1,453 | 549 |
Natural Gas Sales | ||
Total revenue from customers | 109 | 49 |
Natural Gas Liquids Sales | ||
Total revenue from customers | $ 6 | $ 46 |
5. OIL AND GAS PROPERTIES (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Oil And Gas Properties | ||
Depletion | $ 2,140 | $ 563 |
7. NOTES PAYABLE (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Notes Payable | $ 0 | $ 38,455 |
Unamortized Debt Discount | 0 | (161) |
Notes Payable | 0 | 38,294 |
Note 1 | ||
Notes Payable | 0 | 400 |
Note 2 | ||
Notes Payable | 0 | 30,200 |
Note 3 | ||
Notes Payable | $ 0 | $ 7,855 |
8. ASSET RETIREMENT OBLIGATIONS (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Asset Retirement Obligations Details Abstract | ||
Balance at the beginning of the period | $ 2,571 | |
Accretion expense | 106 | |
Obligations incurred for acquisition | 33 | |
Changes in estimates | (11) | $ 0 |
Balance at end of period | $ 2,699 |
10. SHAREHOLDERS' EQUITY (Details) - USD ($) $ / shares in Units, $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Total [Member] | ||
Common stock shares | 45,288,828 | 15,808,445 |
Stock Option 1 [Member] | ||
Exercise Price | $ 1.50 | |
Amounts | $ 15,126 | |
Common stock shares | 10,083,819 | |
Stock Option 2 [Member] | ||
Exercise Price | $ 1.79 | |
Amounts | $ 7,187 | |
Common stock shares | 4,014,959 | |
Stock Option 3 [Member] | ||
Exercise Price | $ 2.13 | |
Amounts | $ 32,763 | |
Common stock shares | 15,381,605 |
10. SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Equity [Abstract] | |||
Preferred stock shares authorized | 100,000,000 | ||
Preferred stock shares par value | $ 0.001 | ||
Preferred stock shares outstanding | 0 | ||
Common stock, par value | $ 0.001 | $ 0.001 | |
Common stock, shares authorized | 200,000,000 | 200,000,000 | |
Common stock, shares outstanding | 45,288,828 | 15,808,445 | |
Stock compensation expense recorded related to restricted stock | $ 186 | $ 166 | |
Unamortized stock compensation expense | $ 781 |
11. STOCK OPTIONS AND WARRANTS (Details) - Warrant |
3 Months Ended |
---|---|
Mar. 31, 2019
$ / shares
shares
| |
Number of Shares | |
Number of Options Outstanding, Beginning | shares | 1,216,686 |
Number of Options Forfeited and cancelled | shares | (100,000) |
Number of Options Outstanding, Ending | shares | 1,116,686 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 7.44 |
Weighted Average Exercise Price Forfeited and cancelled | $ / shares | 25.00 |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 4.69 |
Weighted Average Remaining Contractual Life (in years) | |
Weighted Average Remaining Contractual Life (in years) Outstanding, Beginning | 1 year 4 months 24 days |
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending | 7 months 6 days |
11. STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Option | |||
Recognized stock option based compensation expense | $ 113 | $ 17 | |
Unamortized stock options expense | 207 | ||
Intrinsic value of options outstanding | 448 | $ 36 | |
Warrant | |||
Intrinsic value of options outstanding | $ 536 | $ 65 | |
2012 Incentive Plan | |||
Common stock authorized to issue | 6,000,000 | ||
Restricted stock issued | 3,200,130 | ||
Shares issued upon exercise | 768,250 | ||
Shares remain available for future issuancce | 2,031,620 |
12. RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Related Party Transactions [Abstract] | ||
Long-term accrued expenses | $ 0 | $ 943 |
Long-term notes payable - subordinated | 0 | 30,200 |
Long-term notes payable, net of discount of $-0- and $161, respectively | 0 | 7,694 |
Total related party liabilities | $ 0 | $ 38,837 |
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