Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 8-K
CURRENT
REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date of
Report (Date of Earliest Event Reported): June 25, 2018
001-35922
(Commission file number)
PEDEVCO CORP.
(Exact name of registrant as specified in its charter)
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Texas
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22-3755993
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(State or other jurisdiction of incorporation or
organization)
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(IRS Employer Identification No.)
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4125 Blackhawk Plaza Circle, Suite 201
Danville, California 94506
(Address of principal executive offices)
(855) 733-3826
(Issuer’s telephone number)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
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[
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
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[
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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[
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Item 1.01 Entry Into a Material Definitive
Agreement.
On June
26, 2018, PEDEVCO Corp. (the “Company”,
“PEDEVCO”,
“we”
and “us”) borrowed $7.7
million from SK Energy LLC (“SK Energy”), which amount
was evidenced by a Promissory Note dated June 25, 2018, in the
amount of $7.7 million (the “SK Energy Note”), the
terms of which are discussed below.
Also on
June 25, 2018, we entered into Debt Repayment Agreements (the
“Repayment
Agreements”, each described in greater detail below)
with (i) the holders of our outstanding Tranche A Secured
Promissory Notes (“Tranche A Notes”) and
Tranche B Secured Promissory Notes (“Tranche B Notes”), which
we entered into pursuant to the terms of that certain May 12, 2016
Amended and Restated Note Purchase Agreement, (ii) RJ Credit LLC,
which holds a subordinated promissory note issued by the Company
pursuant to that certain Note and Security Agreement, dated April
10, 2014, as amended (the “RJC Subordinated Note”),
and (iii) MIE Jurassic Energy Corporation, which holds a
subordinated promissory note issued by the Company pursuant to that
certain Amended and Restated Secured Subordinated Promissory Note,
dated February 18, 2015, as amended (the “MIEJ Note”, and together
with the “Tranche B Notes,” the “Junior Notes”), pursuant
to which, on June 26, 2018, we retired all of the then outstanding
Tranche A Notes, in the aggregate amount of approximately $5.7
million, for $3.8 million and all of the then outstanding Junior
Notes, in the aggregate amount of approximately $67.7 million, for
an aggregate of $3,876,208.
As part
of the same transactions and as required conditions to closing the
sale of the SK Energy Note, SK Energy entered into a Stock Purchase
Agreement with Golden Globe Energy (US), LLC (“GGE”), the holder of our
outstanding 66,625 shares of Series A Convertible Preferred Stock
(convertible pursuant to their terms into 6,662,500 shares of the
Company’s common stock – approximately 47.6% of the
Company’s outstanding shares post-conversion), pursuant to
which on June 25, 2018, SK Energy purchased, for $100,000, all of
the Series A Convertible Preferred Stock (the “Stock Purchase
Agreement”).
Additionally, on
June 25, 2018, we entered into a Debt Repayment Agreement (the
“Bridge Note
Repayment Agreement”) with all of the holders of our
convertible subordinated promissory notes issued pursuant to that
certain Second Amendment to Secured Promissory Notes, dated March
7, 2014, originally issued on March 22, 2013 (the
“Bridge
Notes”), pursuant to which all the holders, holding in
aggregate $475,000 of outstanding principal amount under the Bridge
Notes, agreed to the payment and full satisfaction of such
outstanding amounts for 25% of the amounts owed thereunder, i.e.,
$118,750 in aggregate.
The
result of the above transactions was that a net of approximately
$64.9 million of liabilities were removed from the Company’s
balance sheet.
SK Energy Note Terms
The SK
Energy Note accrues interest monthly at 8% per annum, payable
quarterly (beginning October 15, 2018), 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.
Additionally, in the event that the Company is prohibited from
paying the interest payments due on the SK Energy Note in cash
pursuant to the terms of its senior debt and/or the requirement
that the Company obtain shareholder approval for the approval of
issuance of shares of common stock in lieu of interest due under
the SK Energy Note due to the Share Cap (described and defined
below), such interest will continue to accrue until such time as
the Company can either pay such accrued interest in cash or
stock.
If
interest on the SK Energy Note is paid in common stock, SK Energy
will be due that number of shares of common stock as equals the
amount due divided by the average of the closing sales prices of
the Company’s common stock for the ten trading days
immediately preceding the last day of the calendar quarter prior to
the applicable payment date, rounded up to the nearest whole share
of common stock (the “Interest
Shares”).
The SK
Energy Note is due and payable on June 25, 2021, but may be prepaid
at any time, without penalty. Other than in connection with the
Interest Shares, the principal amount of the SK Energy Note is not
convertible into common stock of the Company. The SK Energy Note
contains standard and customary events of default and upon the
occurrence of an event of default, the amount owed under the SK
Energy Note accrues interest at 10% per annum.
As
additional consideration for SK Energy agreeing to the terms of the
SK Energy Note, the Company agreed to issue SK Energy 600,000
shares of common stock (the “Loan
Shares”).
The SK
Energy Note includes a share issuance limitation preventing the
Company from issuing Interest Shares thereunder, if such issuance,
together with the number of Loan Shares, plus such number of
Interest Shares issued previously, as of the date of such new
issuance, totals more than 19.99% of the Company’s
outstanding shares of common stock as of June 25, 2018 (i.e.,
1,455,023 shares) (the “Share Cap”).
Repayment Agreement Terms
As
described above, pursuant to the Repayment Agreements, the holders
of our outstanding Tranche A Notes and Junior Notes retired all of
the then outstanding Tranche A Notes, in the aggregate amount of
approximately $5.7 million, for $3.8 million and all of the then
outstanding Junior Notes, in the aggregate amount of approximately
$67.7 million, for an aggregate of $3,876,208. The note holders
also agreed to forgive all amounts owed under the terms of the
Tranche A Notes and Junior Notes, as applicable, other than the
amounts paid.
The
Tranche A Note Repayment Agreement was entered into by and between
the Company and each of the then holders of the Company’s
Tranche A Notes, BBLN-PEDCO Corp., BHLN-PEDCO Corp.
and PBLA ULICO 2017 (collectively, the “Tranche A
Noteholders”).
The
Tranche B Note Repayment Agreement was entered into by and between
the Company and each of the then holders of the Company’s
Tranche B Notes, Senior Health Insurance Company of Pennsylvania,
Bankers Conseco Life Insurance Company, Washington National
Insurance Company, Principal Growth Strategies, LLC, Cadle Rock IV,
L.L.C., and RJ Credit LLC, and holders of the RJC Subordinated Note
held by RJ Credit LLC and the MIE Note held by MIE Jurassic Energy
Corporation (collectively, the “Junior
Noteholders”).
Pursuant to the
terms of the Repayment Agreement relating to the Tranche B Notes,
in addition to the cash consideration due to the Tranche B
Noteholders, as described above, we agreed to grant to certain of
the Junior Noteholders their pro rata share of warrants to purchase
an aggregate of 1,448,472 shares of common stock of the Company
(the “Tranche B
Warrants”). The Tranche B Warrants have a term of
three years and an exercise price equal to $0.328, one (1) cent
above the closing price of the Company’s common stock on June
26, 2018.
* * * *
* * * * *
The
foregoing description of the SK Energy Note, Repayment Agreements,
Bridge Note Repayment Agreement and Tranche B Warrants, do not
purport to be complete and is qualified in its entirety by
reference to the SK Energy Note, Tranche A Repayment Agreement,
Junior Noteholders Repayment Agreement, Bridge Note Repayment
Agreement and the Form of Warrant for the Purchase of Common Stock
relating to the Tranche B Warrants, copies of which are attached as
Exhibits 10.1, 10.2, 10.3,
10.4 and 10.5, respectively, to this Current Report on Form
8-K and incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant.
The
disclosures in Item
1.01 above regarding the SK Energy Note are incorporated by
reference in this Item
2.03 in their entirety.
Item 3.02 Unregistered Sales of Equity Securities.
We
claim an exemption from registration for the issuance and sale of
the SK Energy Note, Loan Shares and Tranche B Warrants, described
above pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D
of the Securities Act of 1933, as amended (“Securities Act”), since
the foregoing issuances did not involve a public offering, the
recipients were “accredited investors”
and/or had access to similar information as would be included in a
Registration Statement under the Securities Act. The securities
were offered without any general solicitation by us or our
representatives. No underwriters or agents were involved in the
foregoing issuance and we paid no underwriting discounts or
commissions. The securities are subject to transfer restrictions,
and the certificates evidencing the securities contain an
appropriate legend stating that such securities have not been
registered under the Securities Act and may not be offered or sold
absent registration or pursuant to an exemption therefrom. The
securities were not registered under the Securities Act and such
securities may not be offered or sold in the United States absent
registration or an exemption from registration under the Securities
Act and any applicable state securities laws.
Up to a
total of 1,448,472 shares of common stock of the Company are
issuable upon the exercise of the Tranche B Warrants pursuant to
their terms.
Item 3.03 Material Modification to Rights of Security
Holders.
In
connection with the Stock Purchase Agreement and immediately
following the closing of the acquisition described in the Stock
Purchase Agreement (discussed above under Item 1.01), we and SK Energy,
as the then holder of all of the outstanding shares of Series A
Convertible Preferred Stock, agreed to the filing of an
Amendment to Amended and Restated
Certificate of Designations of PEDEVCO Corp. Establishing the
Designations, Preferences, Limitations and Relative Rights of Its
Series A Convertible Preferred Stock (the
“Preferred
Amendment”), which amended the designation of our
Series A Convertible Preferred Stock (the “Designation”) to remove
the beneficial ownership restriction contained therein, which
prevented any holder of Series A Convertible Preferred Stock from
converting such Series A Convertible Preferred Stock into shares of
common stock of the Company if such conversion would result in the
holder thereof holding more than 9.9% of the Company’s then
outstanding common stock.
The
Company filed the Preferred Amendment with the Secretary of State
of Texas on June 25, 2018, and anticipates such amendment being
effective on or around the date hereof, once such filing is
accepted by the Secretary of State of Texas.
Shortly
after SK Energy has received confirmation of the effectiveness of
the Preferred Amendment, SK Energy has advised us that it plans to
convert all of the shares of Series A Convertible Preferred Stock
into common stock pursuant to the terms of the Designation, as
amended, i.e., to convert such shares of preferred stock into
6,662,500 shares of the Company’s common stock. Assuming that
conversion is affected, the Company plans to file a subsequent Form
8-K confirming such conversion.
The transactions
affected pursuant to the Stock Purchase Agreement (i.e., the sale
of the Series A Convertible Preferred Stock to a party other than
GGE), triggered the automatic termination, pursuant to the terms of
the Designation, of the right of GGE, upon notice to us, voting the
Series A Convertible Preferred Stock separately as a single class,
to appoint designees to fill up to two (2) seats on our Board of
Directors, one of which must be an independent director as defined
by applicable rules. As such, effective upon the closing of the
Stock Purchase Agreement, our common stockholders have the right to
appoint all members of our Board of Directors via plurality
vote.
The
foregoing description of the Preferred Amendment does not purport
to be complete and is qualified in its entirety by reference to the
Amendment to Amended and Restated Certificate of Designations of
PEDEVCO Corp. Establishing the Designations, Preferences,
Limitations and Relative Rights of Its Series A Convertible
Preferred Stock, a copy of which is filed as Exhibit 3.1 to this Current
Report on Form 8-K and incorporated in this Item 3.03 and Item 5.03, below, by
reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change
in Fiscal Year.
The
information set forth in Item 3.03 regarding the
Preferred Amendment and the terms thereof is incorporated by
reference in this Item
5.03 in its entirety. As discussed in Item 3.03, the Company
anticipates the Preferred Amendment to be effective with the
Secretary of State of Texas on or around the date of this
report.
Item 7.01 Regulation FD Disclosure.
The Company issued a press release on June 26,
2018 regarding the matters discussed in Items
1.01, 2.03,
3.02,
3.03
and 5.03
above. A copy of the press release is furnished
herewith as Exhibit 99.2
and is incorporated by reference
herein.
Item 8.01 Other Events.
Today, the Company, announced its pro forma
Stockholders’ Equity as of March 31, 2018, giving effect to
the closing of the sale of the SK Energy Note and the Repayment
Agreements, each described above. The attached unaudited proforma
condensed consolidated financial statements account for the sale of
the SK Energy Note, the Repayment Agreements and certain other
items described therein using the assumptions described in the
notes therein, which are included herewith as Exhibit
99.1. The proforma condensed
consolidated financial statements should be read in conjunction
with the separate consolidated financial statements and related
notes thereto of the Company for the quarter ended March 31, 2018,
which are attached to the Company’s Quarterly Report on Form
10-Q filed with the Securities and Exchange Commission on May 11,
2018.
Although the pro
forma attached as Exhibit
99.1 does not include adjustments for the Company’s
results of operations from April 1, 2018, through the June 26, 2018
date of the closing of the sale of the SK Energy Note, the Company
has not to date undertaken, and the Company’s management does
not anticipate undertaking subsequent hereto, any significant
transactions during the quarter ended June 30, 2018, other than as
disclosed herein. Additionally’ the Company’s
management does not currently anticipate reporting a net loss for
the three months ended June 30, 2018 significantly different than
the net loss reported for the three months ended March 31, 2018, of
$4.2 million. Consequently, the Company’s management believes
that, due to the transactions described herein, it will have
stockholders’ equity of significantly more than $4.5 million,
the minimum stockholders’ equity required to meet the
continued listing requirements of the NYSE American, as of the
quarter ended June 30, 2018.
Item 9.01 Financial Statements and
Exhibits.
(d) Exhibits.
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Exhibit
No.
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Description
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3.1*
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Amendment
to Amended and Restated Certificate of Designations of PEDEVCO
Corp. Establishing the Designations, Preferences, Limitations and
Relative Rights of Its Series A Convertible Preferred Stock filed
with the Secretary of State of Texas on June 25, 2018
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10.1*
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$7.7
Million Promissory Note between PEDEVCO Corp., as borrower and SK
Energy LLC, as lender, dated June 25, 2018
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10.2*
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Tranche
A Note Repayment Agreement dated June 25, 2018, by and between
PEDEVCO Corp. and the Tranche A Noteholders name
therein
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10.3*
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Junior
Notes Repayment Agreement dated June 25, 2018, by and between
PEDEVCO Corp. and the Junior Noteholders name therein
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10.4*
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Bridge Note Repayment Agreement dated June 25, 2018, between
PEDEVCO Corp. and the Bridge Noteholders name therein
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10.5*
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Form of Warrant for the Purchase of Common Stock dated June 25,
2018 (Tranche B Noteholders)
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99.1**
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Unaudited Proforma Condensed Consolidated Financial Statements and
Notes Thereto as of March 31, 2018
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99.2**
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Press Release dated June 26, 2018
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* Filed herewith.
** Furnished herewith.
Forward-Looking
Statements
Some of the statements contained in this report discuss future
expectations, contain projections of results of operations or
financial condition, or state other “forward-looking”
information. The words “believe,”
“intend,”
“plan,”
“expect,”
“anticipate,”
“estimate,”
“project,”
“goal”
and similar expressions identify such a statement was made,
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
Securities and Exchange Commission 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.
PEDEVCO’s forward-looking statements are based on assumptions
that PEDEVCO believes to be reasonable but that may not prove to be
accurate. PEDEVCO cannot guarantee future results, level of
activity, performance or achievements. Moreover, PEDEVCO does not
assume responsibility for the accuracy and completeness of any of
these forward-looking statements. PEDEVCO assumes no obligation to
update or revise any forward-looking statements as a result of new
information, future events or otherwise, except as may be required
by law. Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date
hereof.
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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PEDEVCO CORP.
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By:
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/s/ Frank C. Ingriselli
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Frank
C. Ingriselli
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President
and Chief Executive Officer
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Date: June
26, 2018
EXHIBIT INDEX
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Exhibit
No.
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Description
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3.1*
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Amendment
to Amended and Restated Certificate of Designations of PEDEVCO
Corp. Establishing the Designations, Preferences, Limitations and
Relative Rights of Its Series A Convertible Preferred Stock filed
with the Secretary of State of Texas on June 25, 2018
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10.1*
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$7.7
Million Promissory Note between PEDEVCO Corp., as borrower and SK
Energy LLC, as lender, dated June 25, 2018
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10.2*
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Tranche
A Note Repayment Agreement dated June 25, 2018, by and between
PEDEVCO Corp. and the Tranche A Noteholders name
therein
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10.3*
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Junior
Note Repayment Agreement dated June 25, 2018, by and between
PEDEVCO Corp. and the Junior Noteholders name therein
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10.4*
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Bridge Note Repayment Agreement dated June 25, 2018, between
PEDEVCO Corp. and the Bridge Noteholders name therein
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10.5*
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Form of Warrant for the Purchase of Common Stock dated June 25,
2018 (Tranche B Noteholders)
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99.1**
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Unaudited Proforma Condensed Consolidated Financial Statements and
Notes Thereto as of March 31, 2018
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99.2**
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Press Release dated June 26, 2018
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* Filed herewith.
** Furnished herewith.