PEDEVCO CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

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

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

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

Reverse Stock Split

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

As a result of the Reverse Stock Split:

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

Retroactive Adjustment

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

NOTE 2 – DESCRIPTION OF BUSINESS

PEDEVCO is an oil and gas company focused on the acquisition and development of oil and natural gas assets where the latest in modern drilling and completion techniques and technologies have yet to be applied. In particular, the Company focuses on legacy proven properties where there is a long production history, well defined geology and existing infrastructure that can be leveraged when applying modern field management technologies. The Company’s current properties are located in the Denver-Julesberg Basin (“D-J Basin”) in Colorado and Wyoming, the Powder River Basin (“PRB”) in Wyoming, and in the San Andres formation of the Permian Basin situated in West Texas and eastern New Mexico (the “Permian Basin”).

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

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

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

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

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

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

New Accounting Pronouncements* *

Income Statement –Expense Disaggregation Disclosures. In November 2024, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update which requires disaggregated disclosures of income statement expenses for public business entities. The guidance will require companies to disclose disaggregated information about specific natural expense categories underlying certain income statement expense line items that are considered relevant because they include one or more of the five natural expense categories, as applicable: (1) purchase of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization and (5) depreciation, depletion and amortization (“DD&A”) recognized as part of oil and gas producing activities or other depletion expenses. The new guidance is effective for annual periods beginning after December 15, 2026 and interim periods within fiscal years beginning after December 31, 2027. The Company is currently evaluating the impact of this guidance on the Company’s financial disclosures. Adoption of the update is not expected to impact the Company’s financial position, results of operations or liquidity.

Other accounting standards that have been issued by the FASB or other standard-setting bodies are not expected to have a material impact on the Company’s 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.

NOTE 4 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue from Contracts with Customers. The following table disaggregates revenue by significant product type in the periods indicated (in thousands):

There were no significant contract liabilities or transaction price allocations to any remaining performance obligations as of June 30, 2026 or 2025.

NOTE 5 – CASH

The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets, which sum to the total of such amounts in the periods indicated (in thousands):

• Represents cash previously classified within other assets due to restrictions on access, as the funds served as collateral for surety bonds related to the Company’s drilling operations. These amounts are anticipated to become unrestricted within 90 days of the date of this Report and are therefore classified as current restricted cash on the Company’s consolidated balance sheet as of June 30, 2026. The increase in restricted cash from the prior period is primarily attributable to the Company’s Mergers completed in October 2025.

NOTE 6 – OIL AND GAS PROPERTIES

The following table summarizes the Company’s oil and gas activities by classification for the six months ended June 30, 2026 (in thousands):

For the three and six months ended June 30, 2026, the Company incurred $5.4 million and $9.2 million of capital expenditures, respectively primarily related to completion activities for non-operated wells in the D-J Basin, in which the Company holds working interests ranging from 1.1% to 6.3%.

Additionally, for the three and six months ended June 30, 2026, the Company recorded an impairment of oil and gas properties of $0.8 million and $2.4 million, respectively. All impairments during 2026 relate to undeveloped leases representing 5,662 net acres in the D-J Basin that the Company allowed to expire or currently has no plans to drill prior to expiration.

The Company incurred depreciation, depletion and amortization on our proved properties of $9.8 million and $21.4 million for the three and six months ended June 30, 2026.

NOTE 7 –MERGER ACQUISITION

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

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

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

The fair value of the consideration transferred was allocated to the identifiable assets acquired and liabilities assumed on a relative fair value basis and recorded as of October 31, 2025. The preliminary allocation of the fair value to the identifiable assets acquired and liabilities assumed resulted in no goodwill or bargain purchase gain being recognized. All acquisition-related costs were expensed as incurred.

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

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

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

Following the Automatic Conversion Date, the Board consisted of six directors, with the Juniper Shareholder’s nomination rights determined based on its ownership percentage of Company’s common stock at that time. For purposes of the Shareholder Agreement, “Juniper Beneficial Ownership” is defined as the ownership, together with affiliates, of 6,861,564 shares of Company common stock issued to the Juniper Shareholder and its affiliates on February 27, 2026, relative to 13,300,815 shares of common stock outstanding as of such date, as applicable.

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

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

The Shareholder Agreement also provides registration rights. The Company is required to use commercially reasonable efforts to file a registration statement within 45 days of the Automatic Conversion Date covering resale of shares issuable upon conversion of the Series A Preferred Stock, using Form S-3 or Form S-1 if necessary. The Company plans to file the registration statement during the quarter ending September 30, 2026. No penalties are incurred for the Company’s failure to file within the original deadline set forth in the Shareholder Agreement. The agreement permits underwritten offerings of at least $10 million, subject to customary conditions, underwriter approval, frequency limits, and applicable grace periods. Piggyback registration rights are also provided, subject to customary underwriter and priority provisions. The Company will bear related expenses and provide customary indemnification under the Securities Act of 1933, as amended. The Shareholder Agreement became effective at Closing and terminates in accordance with its terms.

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

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

NOTE 8 – REVOLVING CREDIT FACILITY

On October 31, 2025, the Company entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”), which amended and restated its prior senior secured revolving credit agreement dated September 11, 2024, with Citibank, N.A., as administrative agent, and the lenders party thereto.

The A&R Credit Agreement matures on October 31, 2029 and provides for an initial borrowing base and elected commitments of $120 million, with a maximum revolving commitment of $250 million. The borrowing base is subject to scheduled semiannual redeterminations beginning December 1, 2025, as well as unscheduled redeterminations and other adjustments, and is determined by the lenders in their discretion. Borrowings are subject to customary conditions, including compliance with financial covenants.

The obligations are guaranteed by the Company’s subsidiaries and secured by first-priority liens on substantially all assets of the Company and its subsidiaries, including mortgages on oil and gas properties representing at least 90% of proved reserves.

Borrowings may be alternate base rate (“ABR”) loans or SOFR loans. SOFR loans bear interest at the forward-looking term rate based on the secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”) plus a margin of 300–400 basis points, and ABR loans bear interest at the applicable base rate plus a margin of 200–300 basis points, in each case depending on borrowing base utilization.

For the six months ended June 30, 2026, total interest expense was $4.0 million, consisting of $3.6 million of contractual interest and $0.4 million of amortization of deferred financing costs, resulting in an effective interest rate of 4.6% per annum. The weighted-average balance outstanding under the facility was $86 million. The Company also pays a commitment fee on unused commitments of 37.5 or 50 basis points, depending on the percentage of the borrowing base utilized. Amounts may be prepaid without penalty, and mandatory prepayments apply upon certain events. For the six months ended June 30, 2026, the Company paid $64,000 in commitment fees.

The A&R Credit Agreement includes customary representations, warranties, affirmative and negative covenants, and events of default, including a change in control. Financial covenants require (i) a minimum current ratio of 1.0 to 1.0 and (ii) a maximum leverage ratio of 3.0 to 1.0. Additional covenants restrict, among other things, indebtedness, liens, dividends, investments, asset sales, affiliate transactions, mergers, and hedging activities.

The Company is required to hedge at least 75% of its projected proved developed producing reserves (PDP) oil and gas production at the time of entry into the A&R Credit Agreement, for the first 24 months of the agreement, and 50% of its projected PDP of oil and gas production for months 25-36. Afterward, within 60 days after each fiscal quarter, the Company must show it has hedged at least 50% of expected oil and gas production for the next 18 months. The Company may hedge crude oil, natural gas, or natural gas liquids (on a barrel of oil equivalent basis) to meet these requirements, but may not hedge more than 75% of anticipated production (on a barrel of oil equivalent basis) for any month.

On December 2, 2025, the parties to the A&R Credit Agreement entered into a First Amendment to Credit Agreement, which amended the A&R Credit Agreement to add an additional lender and re-allocate commitments among the lender group, which amendment was deemed immaterial by the Company.

On May 5, 2026, the parties to the A&R Credit Agreement entered into a Second Amendment to Credit Agreement which, among other amendments set forth therein, (i) amended the definition of “EBITDAX” to (A) update the cap on permitted transaction cost add-backs to EBITDAX for any acquisition or disposition of the Company’s oil and gas properties which form the collateral for the agreement, to the greater of $6,000,000 or five percent (5%) of the then-current borrowing base (currently $125 million), and (B) add back an estimated EBITDAX for the month of October 2025 attributable to the companies acquired in by the Company in October 2025 from Juniper Capital Advisors, L.P. for any test period that includes the fiscal quarter ended December 31, 2025; (ii) amended the definition of "Test Period" to provide for annualization of EBITDAX beginning with the Test Period ended December 31, 2025, building to a full trailing twelve-month calculation for the Test Period ending September 30, 2026; (iii) revised the borrowing base redetermination schedule so that the next scheduled redetermination occurs on or about July 1, 2026, with semi-annual redeterminations thereafter on or about April 1 and October 1 of each year; and (iv) updated the reserve report delivery schedule so that the next reserve report is due on or about June 1, 2026, with subsequent reports thereafter due on or about March 1 and September 1 of each year.

On May 19, 2026, the parties to the A&R Credit Agreement entered into a Third Amendment to Credit Agreement to increase the borrowing base and elected commitment amount from $120 million to $125 million. The redetermination of the borrowing base pursuant to the Third Amendment constituted the redetermination originally scheduled for on or about December 1, 2025, with the next redetermination scheduled to occur on or about July 1, 2026.

In connection with the closing of the Mergers, the Company drew $87 million under the A&R Credit Agreement (see Note 7 – Merger Acquisition above), representing the outstanding balance as of December 31, 2025. The Company subsequently borrowed an additional $6.0 million on January 8, 2026 and $5.0 million on February 5, 2026, representing an outstanding balance of $98.0 million as of March 31, 2026. The proceeds from these borrowings were used to fund the Company’s participation in certain non-operated well operations and to pay other Company obligations. During Q2 2026, the Company paid $13 million, resulting in an outstanding balance of $85.0 million as of June 30, 2026.

NOTE 9 – DERIVATIVES

Derivative instruments are utilized to manage exposure to commodity price fluctuations and to achieve a more predictable cash flow in connection with oil and gas sales. These instruments limit exposure to declines in prices but also limit the benefits that would be realized if prices increased. The Company does not hold or issue derivative financial instruments for speculative trading purposes.

The Company may use a combination of commodity derivatives (costless collars, producer three-way collars, standalone put options, and fixed-price swaps) to manage exposure to commodity price volatility. Costless collar and three-way producer collar agreements are combinations of put and call options used to establish floor and ceiling commodity prices for a fixed volume of production during a certain time period. All collar agreements provide for payments between the counterparties if the settlement price under the agreement exceeds the ceiling or if the settlement price under the agreement is below the floor. Standalone put options are floors that are purchased for a cost and provide that counterparties make payments to us if the settlement price is below the established floor. The fixed-price swap agreements call for payments to, or receipts from, counterparties depending on whether the index price of oil or natural gas for the period is greater or less than the fixed price established for the period contracted under the fixed-price swap agreement.

On November 1, 2025, the Company assumed the derivative liabilities (novated hedges) associated with its Mergers (see Note 7 above) which are subject to master netting agreements. Additional derivative contracts with the same counterparty are also subject to netting. Still, in accordance with ASC 815, the Company will classify the fair value of all its derivative positions on a gross basis in its corresponding consolidated balance sheets.

The Company has not designated its derivative instruments as accounting hedges. Accordingly, changes in the fair value of outstanding derivatives and settlements of derivative contracts are recognized in earnings and included in “Other Income (Expense)” under the caption “Net income (loss) on derivative contracts” in the consolidated statements of operations.

“Derivative contract assets” and “Derivative contract liabilities” represent the estimated fair value of open derivative positions, which reflects the difference between current forward commodity prices and the contractual hedge prices for the remaining hedged volumes as of June 30, 2026 (the “mark-to-market” valuation).

As of June 30, 2026, the Company had the following open crude oil and natural gas derivative contracts:

NOTE 10 – FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Authoritative guidance establishes a framework for measuring fair value and requires that fair value measurements be classified and disclosed in one of the following categories:

Assets and liabilities measured at fair value are classified based on the lowest level input that is significant to the measurement. The determination of the significance of inputs requires judgment and may affect the classification within the fair value hierarchy. There were no transfers between levels of the fair value hierarchy during any period presented.

The Company measures its derivative instruments at fair value on a recurring basis using a market approach. Fair value is estimated using observable commodity futures prices for the underlying commodities obtained from a third-party pricing source. These measurements are classified within Level 2 of the fair value hierarchy. The fair values of the Company’s derivatives are not based on quoted prices for identical instruments in active markets.

The Company applies fair value guidance on a non-recurring basis to certain non-financial assets and liabilities, which are not measured at fair value on an ongoing basis but are subject to adjustment if events or changes in circumstances indicate impairment or other adjustments may be necessary.

The following table sets forth by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value as of June 30, 2026 (in thousands).

Derivative contracts listed above as Level 2 include fixed-price swaps and costless put/call collars that are carried at fair value. The Company classifies the net change in fair value of these positions under the caption “Net income (loss) on derivative contracts” in the consolidated statements of operations.

*Asset retirement obligations.*The fair value of asset retirement obligation is estimated using discounted cash flow projections with primarily Level 3 inputs, using numerous estimates, assumptions and judgments regarding such factors as the existence of a legal obligation, estimated plugging and abandonment costs, timing of remediation, the credit adjusted risk-free rate and inflation rate.

Merger Acquisition. On October 31, 2025, the Company completed the Mergers with the Acquired Companies, recording assets and liabilities at fair value. Oil and gas properties and asset retirement obligations were valued using discounted cash flows with primarily Level 3 inputs, including estimated future production based upon the estimation of reserves, future operating and development costs, future commodity prices (adjusted for basis differentials), and discount rates (see Note 7—Merger Acquisition).

NOTE 11 – ASSET RETIREMENT OBLIGATIONS

The Company’s asset retirement obligations primarily relate to the Company’s portion of future plugging and abandonment costs for wells and related facilities. The following table presents the changes in the asset retirement obligations for the six months ended June 30, 2026 (in thousands):

In New Mexico, the Company, through its New Mexico operating subsidiary RAZO, has entered into a Stipulated Final Order (“SFO”) with Director of the Oil and Gas Conservation Division of New Mexico (the “OCD”) pursuant to which, among other things, RAZO agreed to reimburse the OCD for actual costs incurred by the OCD for plugging and abandoning approximately 299 inactive legacy wells in the Permian Basin Asset at a rate of $2.00 per gross barrel of oil sold by RAZO during any production reporting period, subject to a minimum payment of $30,000 per month by RAZO. RAZO has been timely paying each reimbursement invoice received from the OCD in accordance with the SFO and is in full compliance with the SFO. The SFO superseded all previous Agreed Compliance Orders, as amended, entered into by and between RAZO and the OCD. During the six months ended June 30, 2026, the Company reimbursed the OCD $226,000 in plugging and abandoning costs related to the SFO.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Lease Agreements

In December 2022, the Company entered into a lease agreement for approximately 5,200 square feet of office space in Houston, Texas, that commenced on September 1, 2023, which expires on February 28, 2027. The remaining monthly payments are approximately $16,000 through the end of the lease.

The Company’s office lease does not provide an implicit rate. Accordingly, the Company is required to use its incremental borrowing rate in determining the present value of lease payments based on the information available at the commencement date. The Company’s incremental borrowing rate would reflect the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. However, at the time of implementation, the Company did not maintain debt at the time, and in order to apply an appropriate discount rate, the Company used a borrowing rate obtained from a financial institution at which it maintains banking accounts.

Supplemental cash flow information related to the Company’s operating office lease is included in the table below (in thousands):

Supplemental balance sheet information related to operating leases is included in the table below (in thousands):

The remaining lease term for the Company’s office lease is 8 months as of June 30, 2026, with discount rate of 7.90%.

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.

For the D-J Basin Assets, 16,138 total net acres were set to expire during 2026, of which 3,310 net acres expired during the first half of 2026, with 2,133 and 638 net acres set to expire for the years ending December 31, 2027 and 2028 respectively, and 8,081 net acres thereafter, if we fail to meet drilling commitments or obtain term assignment extensions (net to our direct ownership interest only).

For the PRB Assets, 4,822 total net acres were set to expire during 2026, of which 720 net acres expired during the first half of 2026, with 34,999 and 15,828 net acres set to expire for the years ending December 31, 2027 and 2028, respectively

All of the Company’s acreage in the Permian Basin Assets is currently held by production. As such, no net acres are set to expire for the year ending December 31, 2026.

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.

Milnesand Sale Dispute and Tilloo Note Default and Litigation

On November 9, 2023, in accordance with the sale of our then wholly-owned subsidiary EOR Operating Company (“EOR”) to Tilloo Exploration and Production LLC (“Tilloo”), the Company entered into a five-year secured promissory note (the “Note”) with Tilloo, bearing interest at 10% per annum, with no payments due until January 8, 2025, and fully-amortized payments due monthly over the remaining four years of the term thereafter until maturity. The Note contains customary events of default and is secured by a lien over all the assets and capital shares of EOR created under a Security Agreement, a Security Agreement (Pledge of Corporate Securities), and a Mortgage entered into by and between the Company and Tilloo.

Tilloo failed to make its initial installment payment on January 8, 2025, and has not made any subsequent payments as of December 31, 2025. The Company issued a notice of default under the Note to Tilloo in mid-January 2025, and sought to work with Tilloo into April 2025, in an effort to either restructure the Note or arrange for the sale of the assets securing the same to an unaffiliated third-party buyer, with proceeds of such sale to be applied toward repayment of the Note. On September 18, 2025, Tilloo filed a civil lawsuit against the Company in the District Court of Harris County, Texas, alleging breach of contract, fraudulent inducement, and negligent misrepresentation. In November 2025, the Company issued to Tilloo a notice of acceleration and demand for payment under the Note and also filed a counterclaim against Tilloo for breach of contract seeking full recovery under the Note. In February 2026, the Company filed a motion for summary judgement with respect to Tilloo’s claims and the Company’s counterclaims asserted against Tilloo for breach of contract related to the Note. The court denied that motion. The Company has filed a motion for reconsideration and, in the alternative, to certify the motion for summary judgment ruling for immediate appeal. Discovery is ongoing, with trial set for March 1, 2027. The Company does not anticipate that the Company will incur any material losses related to this matter.

Phoenix Litigation

Upon the consummation of the Mergers, effective October 31, 2025, a wholly-owned subsidiary of NPOG, Navigation Powder River, LLC (“NPRLLC”), became an indirect wholly-owned subsidiary of the Company. On July 31, 2025, NPRLLC and Phoenix Energy One, LLC (“Phoenix”) entered into that certain Purchase and Sale Agreement (the “Phoenix PSA”) whereby NPRLLC agreed to sell to Phoenix certain oil and gas properties located in Campbell and Converse Counties, Wyoming. On September 10, 2025, NPRLLC filed a Petition against Phoenix in the Eleventh Division of the Texas Business Court (Navigation Powder River, LLC v. Phoenix Energy One, LLC) alleging a breach of contract by Phoenix Energy for its failure to consummate the transactions contemplated by the Phoenix PSA (the “Phoenix Litigation”). On June 1, 2026, the parties entered into a Settlement Agreement (the “Phoenix Settlement Agreement”) whereby the parties settled all disputes arising under the Phoenix PSA, and exchanged mutual releases related thereto, with Phoenix agreeing to pay to NPRLLC (i) $2.0 million on June 26, 2026 (which amount has been paid and received), (ii) $2.0 million on July 6, 2026 (which amount has been paid and received), (iii) $1.75 million on July 30, 2026 (which amount has been paid and received), and (iv) $1,000,000 on September 30, 2026. NPRLLC also retains the $250,000 first payment already received under the Phoenix PSA. Upon receipt of the $1.75 million payment on July 30, 2026, Phoenix filed the Assignment and Bill of Sale transferring the assets subject to the Phoenix PSA from NPRLLC to Phoenix, as originally contemplated under the Phoenix PSA. Upon receipt of the final $1.0 million payment on September 30, 2026, NPRLLC is required to dismiss the Phoenix Litigation with prejudice.

The Company’s receipt of $2.0 million on June 26, 2026 has been classified as a deposit on sale of oil and gas property within the consolidated balance sheet as of June 30, 2026.

NOTE 13 – SHAREHOLDERS’ EQUITY

All share and per-share amounts presented below have been retroactively adjusted to reflect the 1-for-20 reverse stock split effected on March 13, 2026.

Series A Convertible Preferred Stock

As part of the Mergers, the Company issued newly designated Series A Convertible Preferred Stock of the Company in two separate transactions. First, in connection with the Mergers,10,650,000 shares of Series A Convertible Preferred Stock were issued to Century and North Peak in exchange for their interests in the Acquired Companies (the “Merger Shares”). These Merger Shares were fully paid and nonassessable and were designed to automatically convert into common stock at a 0.5-to-1 ratio yielding 5,325,000 shares upon full conversion (see Note 7 – Merger Acquisition above for the purchase price consideration allocated to the aforementioned Series A Convertible Preferred Stock issuance).

In addition, concurrently with the Mergers, certain investors (the “PIPE Investors”) purchased 6,363,637 shares of the same Series A Convertible Preferred Stock at $5.50 per share ($11.00 per share of common stock issuable upon conversion thereof, on a post-reverse stock split basis) under subscription agreements (“PIPE Preferred Shares”). Like the Merger Shares, these PIPE Preferred Shares were convertible into common stock at a 0.5-to-1 ratio, yielding 3,181,818 shares upon full conversion. The PIPE Investors included(a) The SGK 2018 Revocable Trust, a family trust of which Dr. Simon Kukes, the then Executive Chairman of PEDEVCO is trustee and beneficiary ($15,409,977); (b) American Resources, Inc., an entity partially owned and controlled by J. Douglas Schick, the Chief Executive Officer, President and member of the Board ($250,003); (c) Clark R. Moore, the Executive Vice President, General Counsel and Secretary of the Company ($25,003); (d) John J. Scelfo Revocable Trust Dated October 8, 2003, a trust of which John J. Scelfo, a then member of the Board, is trustee and beneficiary ($550,000); (e) Jody D. Crook, the Chief Commercial Officer of the Company ($25,003); (f) J PED, LLC, an entity affiliated with Juniper Capital Advisors, L.P. (“Juniper”) ($18,550,004); (g) Reagan T. Dukes, the then Chief Executive Officer of the Acquired Companies, who was appointed Chief Operating Officer of PEDEVCO at the closing of the Mergers ($52,503) and (h) Robert J. Long, the then Chief Financial Officer of the Acquired Companies, who was appointed Chief Financial Officer, Treasurer and Principal Accounting/Financial Officer of the Company at the closing of the Mergers ($52,503). The PIPE Preferred Share investment (the “PIPE Financing”) closed concurrently with the Mergers and the $35.0 million of net proceeds raised by the Company pursuant to the PIPE Financing was used to pay off certain liabilities of the Acquired Companies in connection with the Mergers and certain expenses of the PIPE Financing and Mergers.

In both preferred stock issuances noted above, the preferred stock functioned as a temporary equity instrument that subsequently and automatically converted into 8,506,818 shares of common stock on February 27, 2026. The Company has no preferred stock issued or outstanding subsequent to that date.

Common Stock

As noted above,17,013,637 shares of Series A preferred stock automatically converted into 8,506,818 shares of the Company’s common stock on February 27, 2026.

NOTE 14 – SHARE-BASED COMPENSATION

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award over the vesting period.

Restricted Stock Awards

The Company grants restricted stock awards to employees and directors. As of June 30, 2026, all restricted stock awards are accounted for as equity-classified awards. The grant-date fair value is recognized as compensation cost on a straight-line basis over the requisite service period and forfeitures are accounted for as they occur.

The following table summarizes activity for nonvested restricted stock awards for the period presented:

*To satisfy employee tax withholding obligations, these shares were surrendered and cancelled and were recorded as a reduction to additional paid-in capital.

Stock-based compensation expense recorded related to the vesting of restricted stock for the three and six months ended June 30, 2026, was $364,000 and $836,000, respectively. The remaining unamortized stock-based compensation expense related to our restricted stock units at June 30, 2026 was $1.4 million.

Restricted Stock Units

The Company grants restricted stock units (“RSU”) to employees and directors. As of June 30, 2026, all RSU grants are accounted for as equity-classified awards. The grant-date fair value is recognized as compensation cost on a straight-line basis over the requisite service period and forfeitures are accounted for as they occur.

The following table summarizes activity for nonvested restricted stock awards for the period presented:

Stock-based compensation expense recorded related to the vesting of RSUs for the three and six months ended June 30, 2026, was $22,000. The remaining unamortized stock-based compensation expense related to our restricted stock units at June 30, 2026 was $1.1 million.

Performance Based Restricted Stock Units

In June 2026, the Company began granting performance based restricted stock units (“PBRSUs”) to certain employees. PBRSUs contain both market and service vesting conditions and are accounted for as equity-classified stock-based compensation awards. Vesting of PBRSUs can range from 0% to 200% of the target awards granted based on the Company’s relative total shareholder return as compared to the total shareholder return of the Company’s performance peer group over the applicable performance period.

The grant-date fair value of the PBRSUs was estimated using a Monte Carlo simulation model. The model incorporated certain assumptions, including the expected term, expected stock price volatility of the Company and its peer group, correlation coefficients between the Company and each peer group company, the risk-free interest rate, and the expected dividend yield. The expected term is based on the time remaining in the performance period as of the grant date. Expected volatilities for the Company and each peer group company were estimated using historical stock price volatility over a period consistent with the remaining performance period as of the grant date. The risk-free interest rate is based on the yield of the U.S. Treasury Constant Maturity for a term consistent with the remaining performance period. The expected dividend yield is based on management's expectation that the Company will not declare or pay cash dividends during the remaining performance period.

The table below reflects the ranges for the assumptions used in the Monte Carlo model for the PBRSUs:

The grant-date fair value is recognized as compensation cost on a straight-line basis. The Company recognizes compensation cost over the requisite service or performance period. The Company accounts for forfeitures as they occur.

Compensation costs related to PBRSUs are recorded as general and administrative expense. The unrecognized cost associated with PBRSU awards was $0.6 million at June 30, 2026. The Company expects to recognize the unrecognized compensation cost for PBRSU awards over a weighted-average period of approximately 2.5 years.

The following table summarizes information regarding the PBRSU activity for the period presented:

(1) Determined by dividing the aggregate grant-date fair value of awards by the number of awards issued.

(2) The aggregate grant-date fair value of PSUs issued for the six months ended June 30, 2026 was $0.7 million

Options

During the six months ended June 30, 2026, no stock options were granted, and the Company recognized stock option expense of $39,000. The remaining amount of unamortized stock options expense at June 30, 2026 was $61,000.

The intrinsic value of outstanding and exercisable options at June 30, 2026 was $0.

Option activity during the six months ended June 30, 2026, was:

NOTE 15 – EARNINGS (LOSS) PER COMMON SHARE

Earnings (loss) per common share-basic is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Net income (loss) per common share-diluted assumes the conversion of all potentially dilutive securities and is calculated by dividing net income (loss) by the sum of the weighted average number of shares of common stock, as defined above, outstanding plus potentially dilutive securities. Net income (loss) per common share-diluted considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares, as defined above, would have an anti-dilutive effect.

The calculation of earnings (loss) per share for the periods indicated below were as follows (amounts in thousands, except share and per share data):

For the three and six months ended June 30, 2026, and 2025, share equivalents related to options to purchase 88,200 and 2,294,000 shares of common stock, respectively, were excluded from the computation of diluted net income per share as the inclusion of such shares would be anti-dilutive.

NOTE 16 – INCOME TAXES

The effective tax rates for the six months ended June 30, 2026 and 2025 was (1.7%) and 21.3%, respectively. The difference between the statutory U.S. federal income tax rate of 21% and the effective tax rate for the six months ended June 30, 2026 was primarily attributable to the change in the valuation allowance recorded for the period, which was not recorded in previous period.

The Company’s current income tax benefit (expense) was ($9,000) and ($37,000) for the three and six months ended June 30, 2026, respectively. The Company had no current income tax benefit (expense) for the three and six months ended June 30, 2025.

The Company’s deferred income tax benefit (expense) was ($1.0 million) and ($121,000) for the three and six months ended June 30, 2026, respectively. The Company’s deferred income tax benefit (expense) was $490,000 and $414,000 for the three and six months ended June 30, 2025, respectively.

NOTE 17 — SEGMENT INFORMATION

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

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

NOTE 18 — SUBSEQUENT EVENTS

On July 30, 2026, the Company entered into a Purchase and Sale Agreement to sell its interests in certain properties within Weld County, Colorado. In exchange for the sale and transfer of its interests, the Company received $2.5 million.

On August 5, 2026, the Company entered into a Membership Interest Purchase Agreement to sell its interests in Pine Haven effective July 1, 2026. In exchange for the sale and transfer of its interests, the Company agreed to pay the buyer an aggregate purchase price equal to $3.8 million. Upon close, the Company will pay $0.5 million. The balance of the purchase price will be paid by installment payments through August 2028.