UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

Amendment No. 1 

 

☑ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2013

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

 

For the transition period from ______ to _______

 

Commission File Number 333-160517

 

PETRON ENERGY II, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		26-3121630
(State of incorporation)		(I.R.S. Employer Identification No.)

 

17950 Preston Road, Suite 960

Dallas, Texas 75252

(Address of principal executive offices)

 

(972) 272-8190

(Registrant’s telephone number)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ☑Yes ☐ No (Not required)

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

  

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☑

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☑ No

 

As of July 31, 2013, there were 77,984,924 shares of the registrant’s $0.001 par value common stock issued and outstanding.

Explanatory Note

 

This Amendment No. 1 on Form 10-Q/A (this "Amendment") amends Petron Energy II, Inc.'s Quarterly Report on Form 10-Q (the "Original Filing") originally filed on August 9, 2013 with the Securities and Exchange Commission (the "Commission"). We are filing this Amendment for the purpose of including certain information on the cover page of the Original Filing that was inadvertently omitted. For convenience and ease of reference, the Company is filing this Form 10-Q/A in its entirety with all applicable changes and unless otherwise stated, all information contained in this amendment is as of August 9, 2013, the filing date of the Original Filing. Except as stated herein, this Amended Form 10-Q/A does not reflect events or transactions occurring after such filing date or modify or update those disclosures in the Original Filing that may have been affected by events or transactions occurring subsequent to such filing date.

 

PETRON ENERGY II, INC.

 

TABLE OF CONTENTS

 

			Page No.
		PART I - FINANCIAL INFORMATION
Item 1.		Financial Statements	3
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	10
Item 4.		Controls and Procedures	10
		PART II - OTHER INFORMATION
Item 1.		Legal Proceedings	11
Item1A.		Risk Factors	11
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	11
Item 3.		Defaults Upon Senior Securities	11
Item 4.		Mine Safety Disclosures	11
Item 5.		Other Information	11
Item 6.		Exhibits	12
		Signatures

 

 

Special Note Regarding Forward-Looking Statements

 

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Petron Energy II, Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," "PEII," or “Petron” is in reference to Petron Energy II, Inc.

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

	PETRON ENERGY II, INC
	INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS	Page
	Consolidated Balance Sheet as of June 30, 2013 and December 31, 2012	F-2
	Consolidated Statement of Operations for the quarters and periods of six months ended June 30, 2013 and June 30, 2012	F-3
	Consolidated Statement of Cash Flows for the periods of six months ended June 30, 2013 and June 30, 2012	F-4
	Notes to Unaudited Condensed Consolidated Financial Statements	F-5

 

F-1

 

PETRON ENERGY II, INC.

CONSOLIDATED BALANCE SHEET

 

		June 30,				December 31,
		2013				2012
		(unaudited)				(audited)
ASSETS
Current Assets
Cash		$	2,098			$	17,089
Accounts Receivable			38,326				18,332
Total Current Assets			40,424				35,421
Pipeline, net of accumulated depreciation of $312,092 and $245,156, respectively			796,908				742,844
Producing Oil & Gas Properties, net of accumulated depletion of $774,795 and $731,795, respectively			1,381,729				1,424,729
Other Depreciable Equipment, net of accumulated depreciation of $59,699 and $60,985, respectively			60,122				71,915
Other  Assets			31,553				34,790
TOTAL ASSETS		$	2,310,736			$	2,309,699
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Cash Overdraft		$	63,295			$	—
Accounts Payable--Trade			883,688				716,140
Accounts Payable--Related Party			141,131				18,082
Accrued Liabilities			578,727				375,284
Derivative Liability			219,000				—
Notes Payable--current			332,436				170,500
Total Current Liabilities			2,218,277				1,280,006
Asset Retirement Obligation			40,278				40,278
Common Stock Issuance Liability			2,428,600				5,904,090
Notes Payable--long-term			275,000				250,000
TOTAL LIABILITIES			4,962,155				7,474,374
STOCKHOLDERS' EQUITY
Preferred Stock, 10,000,000 authorized, 5,911,000 designated as follows:
Series A, $0.001 par value, 1,000 shares designated, issued and outstanding			1				1
Series B, $0.001 par value, 5,910,000 shares designated, 2,217,818 and 5,910,000 shares issued and outstanding, respectively			2,218				5,910
Common Stock, $0.001 par value, 1,000,000,000 shares authorized, 59,611,033 and 11,976,942 issued and outstanding, respectively			59,611				11,977
Additional Paid-In Capital			18,814,608				14,638,660
Accumulated Deficit			(21,527,857	)			(19,821,223	)
Total Stockholders' Equity			(2,651,420	)			(5,164,675	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	2,310,736			$	2,309,699

 

The accompanying notes are an integral part of these financial statements.

 

F-2

 

PETRON ENERGY II, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2013				2012				2013				2012
Revenues
Oil & Gas Sales		$	20,760			$	104,942			$	127,634			$	195,576
Costs and Expenses
Cost of Revenue			238,697				62,493				341,997				146,979
Depletion and Depreciation			74,265				34,225				124,245				92,449
Impairment Charge			—				—				—				5,903,000
Derivative Expense			159,000				—				241,300				—
General and Administrative			781,857				480,931				982,178				1,078,293
Interest			89,985				—				144,548				—
Total Expenses			1,343,805				577,649				1,834,268				7,220,721
Loss from Operations Before Income Taxes			(1,323,045	)			(472,707	)			(1,706,634	)			(7,025,145	)
Income Taxes			—				—				—				—
Net Loss		$	(1,323,045	)		$	(472,707	)		$	(1,706,634	)		$	(7,025,145	)
Loss per share--basic and diluted		($	0.03	)		($	0.04	)		($	0.05	)		($	0.62	)
Weighted average number of shares--basic and diluted			43,346,004				11,441,592				32,873,120				11,335,660

 

The accompanying notes are an integral part of these financial statements.

 

F-3

 

PETRON ENERGY II, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

 

		Six Months Ended June 30,
		2013				2012
OPERATING ACTIVITIES
Net Loss		($	1,706,634	)		($	7,025,145	)
Adjustments to reconcile net loss to cash used by operating activities:
Depletion and depreciation			124,245				92,449
Amortization of debt discount			70,800				—
Derivative expense			241,300				—
Impairment charge			—				5,903,000
Penalty interest			45,250				—
Common stock issued for services			46,500				149,483
Common stock issued for lawsuit settlement			138,000				—
Change in other  asset and liabilities:
(Increase) Decrease in oil and gas receivables			(19,994	)			21,613
Decrease in other assets			3,237				—
Increase in accounts payable			169,597				172,849
Increase in accrued liabilities			203,443				172,962
Cash used in operating  activities			(684,256	)			(512,789	)
INVESTING ACTIVITIES
Investment in oil and gas properties			—				(148,103	)
Pipeline investment			(121,000	)			—
Accounts payable			121,000				—
Purchase of other equipment			(2,516	)			(5,500	)
Cash used in investing activities			(2,516	)			(153,603	)
FINANCING ACTIVITIES
Bank Overdraft			63,295				—
Proceeds from sales of common stock			256,500				568,000
Proceeds from notes payable			431,811				—
Loan fees			(79,825	)			—
Cash from financing activities			671,781				568,000
Decrease in cash			(14,991	)			(98,392	)
Cash at beginning of the period			17,089				106,850
Cash at end of the period		$	2,098			$	8,458
Supplemental Disclosure of Cash Flow Information
Non-Cash Investing and Financing Activities:
Oil & gas properties		$	—			$	(5,910,000	)
Note payable			(20,800	)			5,910
Common stock			26,067				—
Preferred stock			(3,692	)			5,904,090
Additional paid-in capital			3,869,515				—
Derivative liability			(22,300	)			—
Common stock issuance liability			(3,588,490	)			—
Loan fees			(260,300	)			—
		$	—			$	—

 

 

The accompanying notes are an integral part of these financial statements.

 

F-4

 

PETRON ENERGY II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013 and 2012

 

1. INCORPORATION AND NATURE OF OPERATIONS

Petron Energy II, Inc. (“Petron” or the “Company”) was formerly known as Petron Energy Special Corp. and was incorporated in June 2007 under the laws of the State of Texas; and, on April 2011, was reincorporated in the state of Nevada. Pursuant to a Plan of Merger, the parent company, Petron Energy Special Corp. was merged into its wholly owned subsidiary, Petron Energy II, Inc. The surviving entity was Petron Energy II, Inc. The effective date of the Plan of Merger was January 3, 2012.

The Company is engaged primarily in the acquisition, development, production, exploration for and the sale of oil, gas and gas liquids in the United States. As of June 30, 2013 the Company is operating in the states of Texas and Oklahoma. In addition, the Company operates two gas gathering systems located in Tulsa, Wagoner, Rogers and Mayes counties of Oklahoma. The pipeline consists of approximately 132 miles of steel and poly pipe, a gas processing plant and other ancillary equipment. The Company sells its oil and gas products primarily to a domestic pipeline and to another oil company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries:

Subsidiary Name	Organization Date
Petron Energy II Pipeline, Inc.	April 1, 2008
Petron Energy II Well Service, Inc.	July 1, 2008

 

The interim consolidated financial statements as of June 30, 2013 and 2012 have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these consolidated financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. These interim unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2012. In the opinion of management, the interim unaudited consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim periods presented.

 

The consolidated statements of operations reflect the results of operations of the Company for the three month and six month periods ended June 30, 2013 and 2012. Operating results for the six month period ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

 

Going concern uncertainty

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred a net loss of $1,706,634 for the six month period ended June 30, 2013 (2012 - $7,025,145) and at June 30, 2013 had an accumulated deficit of $21,527,857 (2012 – $18,520,305). While the Company has recognized revenues from operations, the revenues generated are not sufficient to sustain operations. The Company does not have sufficient funds to acquire new business assets or maintain its existing operations at this time. Management’s plan is to raise equity and/or debt financing as required but there is no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters cannot be predicted at this time.

These financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

 3. LITIGATION SETTLEMENT

 

On June 27, 2013, the District Court of Dallas County, Texas issued an Agreed Final Judgment resolving the lawsuits filed against the Company and Mr. Floyd Smith, the Company’s CEO, by ASL Energy Corp. (“ASL Energy”). The Agreed Final Judgment was issued in order to confirm the settlement agreement entered into by and between the parties to the underlying lawsuits. The significant items of the settlement agreement were a cash amount of $455,000, an adjustment of the common shares issued in relation to the Series B Preferred shares conversion of 6,462,603, and issuance of common shares valued at $138,000 to an individual for services rendered.

4. RELATED PARTIES

Effective April 1, 2013, the Company entered into an agreement with Petron, Inc. to pay a management fee of $25,000 per month for the wells for which Petron, Inc. holds the operating license.

5. SUBSEQUENT EVENTS

In July 2013 the Company entered into a Liabilities Purchase Agreement with a financial entity in which designated liabilities of approximately $1,720,000, including approximately $600,000 applicable to future equipment purchases, are to be assumed by the financial entity, and once the legal claim is perfected, the Company will issue common stock to the financing entity in settlement of its claim. The stock is to be issued to the financing entity at a 25% discount from market. As of the date of this report, the claim has been filed with the court but the final decision has not been made.

 

 

F-5

 

 

 

 

[End Notes to Financial Statements] 

 

 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENTS

 

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 

Results of Operations

 

For the Three Month Period Ended June 30, 2013 versus June 30, 2012

 

Revenue for the period ended June 30, 2013 was $20,760 compared to $104,942 for the period ended June 30, 2012. This was a decrease of $84,182. This decrease is due chiefly to a suspension of activity of our Knox county leases pending sending information to the Texas Rail Road Commission. As of the date of this report the information has been sent and we expect production to resume in the next few weeks.

 

Net loss for the period ended June 30, 2013 was $(1,323,045) compared to $ (472,707) for the period ended June 30, 2012. In addition to the revenue decrease noted above, we incurred derivative expense of $159,000 for which we had none last year, due to a pipeline acquisition depreciation increased approximately $35,000, the company recorded an additional $150,000 accrued expense related to a litigation settlement and approximately $124,000 of major workover projects were expensed since the company believes that this amount would have to be expensed as the result of a ceiling test.

 

General and Administrative costs for the period ended June 30, 2013 were $781,857 compared to $480,931 for the period ended June 30, 2012. This was an increase of $300,926. The above mentioned litigation accrual is the chief reason for the increase in the General and Administrative costs. The Company also incurred a one-time fee for title work on leases of approximately $40,000.

 

 

For the Six Month Period Ended June 30, 2013 versus June 30, 2012

 

Revenue for the period ended June 30, 2013 was $127,634 compared to $195,576 for the period ended June 30, 2012. This was a decrease of $67,942. This decrease is due chiefly to a suspension of activity in the second quarter of our Knox county leases pending sending information to the Texas Rail Road Commission. As of the date of this report the information has been sent and we expect production to resume in the next few weeks.

 

Net loss for the period ended June 30, 2013 was $1,706,634 compared to $7,025,145 net loss for the period ended June 30, 2012. The loss is less in 2012 due to the $5,903,000 impairment recorded in 2012 which more than offset items mentioned above.

 

General and Administrative costs for the period ended June 30, 2013 were $982,178 compared to $1,078,293 for the period ended June 30, 2012. In the first three months of 2012, the professional and consulting expenses were high enough to offset the 2013 litigation settlement accrual.

 

Liquidity and Capital Resources

 

As of June 30, 2013, the total liabilities were $2,533,555, excluding the stock issuance liability, compared to $1,570,284 for the period ended December 31, 2012. The major reasons for the increase in the liabilities is the $450,000 draw on the line-of-credit, the increase in accruals for the litigation settlement previously mentioned, and a derivative liability of $219,000 related to the Company’s convertible debt. The Company’s assets were $2,310,736 at June 30, 2013 compared to $2,309,699 for the period ended December 31, 2012.

 

Cash Requirements

 

Our cash on hand as of June 30, 2013 was $2,098 compared to $17,089 for the period ended December 31, 2012. Company has incurred a net loss of $1,706,634 for the six month period ended June 30, 2013 compared to a net loss of $7,025,145 for the period ended June 30, 2012 and at June 30, 2013 had an accumulated deficit of $21,527,857 as compared to $19,821,223 at December 31, 2012. While the Company has recognized revenues from operations, the revenues generated are not sufficient to sustain operations. The Company does not have sufficient funds to acquire new business assets or maintain its existing operations at this time. Management’s plan is to raise equity and/or debt financing as required but there is no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters cannot be predicted at this time.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Contractual Obligations

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Future Financings

 

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

 

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in note 2 of the notes to our financial statements. In general, management's estimates are based on historical experience, information from third party professionals, and various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

(a) Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934, as amended (“Exchange Act”) Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report (the "Evaluation Date"), has concluded that as of the Evaluation Date, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Based on this evaluation, our principal executive and principal financial and accounting officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were not effective.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.

 

On June 27, 2013, the District Court of Dallas County, Texas issued an Agreed Final Judgment resolving the lawsuits filed against the Company and Mr. Floyd Smith, the Company’s CEO, by ASL Energy Corp. (“ASL Energy”). The Agreed Final Judgment was issued in order to confirm the settlement agreement entered into by and between the parties to the underlying lawsuits. The significant items of the settlement agreement were a cash amount of $455,000, an adjustment of the common shares issued in relation to the Series B Preferred shares conversion of 6.462,603, and issuance of common shares valued at $138,000 to an individual for services rendered.

 

Other than the foregoing, we know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Quarterly Issuances:

 

Issuance to TCA

 

On April 18, 2013, in connection with the TCA credit agreement mentioned above, the Company issued 3,333,334 shares of its common stock to TCA.

Issuance to CFO Advisory Services

On April 26, 2013, the Company issued 150,000 shares of its common stock to CFO Advisory.

Issuance to Daniel Vesco Pursuant to Conversion of Series B Preferred Convertible Stock

During the quarter ended June 30, 2013, 138,758 Preferred Series B shares were converted into 1,684,003 shares of the Company’s common stock.

Issuance to Asher Enterprises

On June 20, 2013, the Company issued 1,933,333 shares of its common stock to Asher Enterprises (“Asher”) in connection with a convertible promissory note entered into by and between the Company and Asher.

Issuance to Synergy Business Consultants

On June 17, 2013, the Company issued 1,000,000 shares of its common stock to Synergy Business Consultants for services rendered.

Private Placement Issuances

During the quarter ended June 30, 2013, the Company sold an aggregate of 7,791,657 shares of the Company’s restricted common stock to 21 “accredited investors” in private transactions.

Subsequent Issuances:

Issuance to Daniel Vesco Pursuant to Conversion of Series B Preferred Convertible Stock

Subsequent to June 30, 2013, 50,894 Preferred Series B shares were converted into 5,816,632 shares of the Company’s common stock.

Issuance to Asher Enterprises

Subsequent to June 20, 2013, the Company issued 16,021,785 shares of its common stock to Asher Enterprises (“Asher”) in connection with a convertible promissory note entered into by and between the Company and Asher.

Subsequent to the quarter ended June 30, 2013, the Company sold an aggregate of 10,970,818 shares of the Company’s restricted common stock to 15 “accredited investors” in private transactions.

Subsequent to the quarter ended June 30, 2013, we did not issue any unregistered securities other than as previously disclosed.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

NONE.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

NONE.

 

ITEM 5. OTHER INFORMATION

 

Quarterly Events

 

Effective April 16, 2013 and under the terms of a credit facility agreement with TCA Global Master Fund, LP (“TCA”), the Company has pledged all of its oil & gas assets as collateral. The Company makes requests for drawdowns periodically and TCA, in its sole discretion, will approve the requests. The funds are to be used for enhancing the producing assets of the Company. The first draw was received April 17, 2013 for $450,000 and is subject to an 11% note due October 17, 2013.

 

On April 22, 2013, the Company issued a press release in which it reported the closing of the Credit Facility Agreement with TCA.

 

On June 24, 2013, the Company issued a press release in which it reported on its rework and pipeline operations, reported the receipt of the first tranche of funding from TCA under the Credit Facility Agreement, reported the proposed engagement with Southridge Fund Management (“Southridge”) to provide financing to the Company and reported its DTC eligibility.

 

On June 27, 2013, the Company issued a press release reporting early production results from the Company’s operations in Oklahoma.

 

Subsequent Events

 

On July 1, 2013, the Company issued a press release in which it announced that Mr. Smith, the CEO of the Company, will be interviewed by The Wall Street Analyst

 

On July 2, 2013, the Company issued a press release in it which announced early production progress from rework operations in Oklahoma.

 

On July 11, 2013, the Company issued a press release in which it announced that it expects to add Mr. Judson F. Hoover (“Mr. Hoover”) to its Board of Directors in the near future. Mr. Hoover received his Bachelor of Science degree from Regis University in 1986. Shortly after graduation, he received his Certificate of Public Accounting in the State of Colorado. He has extensive experience in financial matters, mergers, acquisitions, restructuring, public company compliance, oil and gas operations, and real estate. From December 2004 to March 2007, Mr. Hoover served as CFO for Ness Energy International, a publicly traded oil and gas company with operations in Texas and Israel. From June 2007 to June 2009, he served as Controller for Union Drilling, Inc., a publicly traded oil services company. From 1997 to 2004 and from 2007 through 2010, Mr. Hoover provided consulting services relating to various aspects of international and national publicly held energy companies. From March 31, 2011 to September 28, 2012, Mr. Hoover had served as the Chief Financial Officer of Sun River Energy, Inc. With over 20 years of national and international experience in executive management, of which 10 years were in oil and gas and 22 years were served on behalf of publicly traded companies. As a result of the anticipated appointment of Mr. Hoover to the Company’s Board of Directors, the Board will be composed of three directors.

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ITEM 6. EXHIBITS

 

Exhibit Number	Description of Exhibit
Exhibit 3.1	Articles of Incorporation (Filed as Exhibit 3.1 to Registration Statement on Form S-1, filed with the Securities and Exchange Commission on July 10, 2009)
Exhibit 3.2(2)	Certificate of Amendment to Articles of Incorporation (100:1 Forward Split)
Exhibit 3.3(2)	Series A Preferred Stock Designation
Exhibit 3.4(1)	Bylaws
Exhibit 3.5(3)	Series B Preferred Stock Designation
Exhibit 3.6(3)	Plan of Reorganization and Asset Purchase Agreement with One Energy
Exhibit 10.23(2)	Oil and Gas Lease – Wagoner, Oklahoma
Exhibit 10.24(2)	Independent Petroleum Engineer Report
Exhibit 31.01	Certificate of the Chief Executive Officer and the Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.02	Certificate of the Chief Executive Officer and the Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.01	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act (Filed herewith)
Exhibit 32.02	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act (Filed herewith)
101.INS	XBRL Instance Document Filed herewith.
101.SCH	XBRL Taxonomy Extension Schema Document filed herewith.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document filed herewith.
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document filed herewith.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document filed herewith.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document filed herewith.

 

Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

(1) Filed as exhibits to the Company’s Form S-1 Registration Statement filed with the Commission on July 10, 2009, and incorporated herein by reference.

 

(2) Filed as an exhibit to the Company’s Report on Form 8-K, filed with the Commission on October 18, 2011, and incorporated herein by reference.

 

(3) Filed as an exhibit to the Company’s Report on Form 8-K, filed with the Commission on February 17, 2012, and incorporated herein by reference.

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

PETRON ENERGY II, INC.
Dated: August 9, 2013	By: /s/ Floyd L. Smith
	Floyd Smith
	Chief Executive Officer, President, Treasurer and Director

 

 

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

	PETRON ENERGY II, INC.
Dated: August 9, 2013	By: /s/ Floyd L. Smith
	Floyd Smith
	Chief Executive Officer
	President, Treasurer and Director

 

 

	PETRON ENERGY II, INC.
Dated: August 9, 2013	By: /s/ David Knepper
	David Knepper
	Director