0001554795-13-000662.txt : 20131107 0001554795-13-000662.hdr.sgml : 20131107 20131107135108 ACCESSION NUMBER: 0001554795-13-000662 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20130930 FILED AS OF DATE: 20131107 DATE AS OF CHANGE: 20131107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Petron Energy II, Inc. CENTRAL INDEX KEY: 0001467434 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 263121630 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-160517 FILM NUMBER: 131199796 BUSINESS ADDRESS: STREET 1: 4300 QUINLAN PARK ROAD STREET 2: SUITE 105 CITY: AUSTIN STATE: TX ZIP: 78732 BUSINESS PHONE: 512-585-5511 MAIL ADDRESS: STREET 1: 4300 QUINLAN PARK ROAD STREET 2: SUITE 105 CITY: AUSTIN STATE: TX ZIP: 78732 FORMER COMPANY: FORMER CONFORMED NAME: Restaurant Concepts of America Inc. DATE OF NAME CHANGE: 20090630 10-Q 1 peii0930form10q.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 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 October 31, 2013, there were 222,382,437 shares of the registrant’s $0.001 par value common stock issued and outstanding.

 

 

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

 

Contents Page(s)
Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012 F-2
Consolidated Statements of Operations for the three month and nine month periods ended September 30, 2013 and 2012 F-3
Consolidated Statements of Cash Flows for the periods of nine months ended September 30, 2013 and 2012 F-4
Notes to Unaudited Consolidated Financial Statements F-5

 

F-1

 

 

PETRON ENERGY II, INC.

CONSOLIDATED BALANCE SHEETS

 

   September 30,  December 31,
   2013  2012
ASSETS  (unaudited)  (audited)
Current Assets          
Cash  $8,600   $17,089 
Accounts Receivable   48,915    18,332 
Total Current Assets   57,515    35,421 
     Pipeline, net of accumulated depreciation of $330,572 and $245,156, respectively   778,428    742,844 
     Producing Oil & Gas Properties, net of accumulated depletion of $836,195 and $731,795, respectively   1,773,278    1,424,729 
     Other Depreciable Equipment, net of accumulated depreciation of $88,693 and $45,361, respectively   638,599    71,915 
Other Assets    31,531    34,790 
TOTAL ASSETS  $3,279,351   $2,309,699 
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current Liabilities          
Bank Overdraft  $61,737   $—   
Accounts Payable--Trade   1,382,699    716,140 
Accounts Payable--Related Party   214,239    18,082 
Accrued Liabilities   544,690    375,284 
Derivative Liability   85,926    —   
Notes Payable--short-term   484,679    170,500 
Total Current Liabilities   2,773,970    1,280,006 
Asset Retirement Obligation   222,000    40,278 
Stock Issuance Liability   1,525,829    5,904,090 
Notes Payable--long-term    275,000    250,000 
TOTAL LIABILITIES   4,796,799    7,474,374 
STOCKHOLDERS' DEFICIT          
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, 1,389,218 and 5,910,000 shares issued and outstanding, respectively   1,389    5,910 
     Common Stock, $0.001 par value, 1,000,000,000 shares authorized, 164,190,038 and 11,976,942  issued and outstanding, respectively   164,190    11,977 
Additional Paid-In Capital   20,313,750    14,638,660 
Accumulated Deficit   (21,996,778)   (19,821,223)
Total Stockholders' Deficit   (1,517,448)   (5,164,675)
           
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT  $3,279,351   $2,309,699 

 

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

 

F-2

 

PETRON ENERGY II, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

  

Three Months Ended September

30,

 

Nine Months Ended September

30,

   2013  2012  2013  2012
             
Revenues                    
     Oil & Gas Sales  $76,403   $78,808   $204,037   $274,384 
Costs and Expenses                    
     Cost of Revenue   133,753    42,287    475,750    189,266 
     Depletion and Depreciation   108,904    50,725    233,149    143,174 
     Impairment Charge   —      —      —      5,903,000 
     Derivative Expense   42,052    —      283,352    —   
     General and Administrative   138,497    310,221    1,120,675    1,388,514 
     Interest   122,118    5,798    266,666    5,798 
Total Expenses   545,324    409,031    2,379,592    7,629,752 
     Loss from Operations Before Income Taxes   (468,921)   (330,223)   (2,175,555)   (7,355,368)
Income Taxes   —     —     —     —  
     Net Loss  $(468,921)  $(330,223)  $(2,175,555)  $(7,355,368)
Loss per share--basic and diluted  $(0.00)  $(0.03)  $(0.04)  $(0.65)
Weighted average number of shares--basic and diluted   108,475,130    11,339,587    60,440,132    11,347,341 

 

 

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

 

F-3

 

 

PETRON ENERGY II, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

  

Nine Months Ended September

30,

   2013  2012
OPERATING ACTIVITIES          
Net Loss  $(2,175,555)  $(7,355,368)
Adjustments to reconcile net loss to cash used by operating activities:          
     Depletion and depreciation   233,148    143,174 
     Amortization of debt discount   155,760    —   
     Derivative expense   283,352    —   
     Impairment charge   —      5,903,000 
     Penalty interest   45,250    —   
     Common stock issued for services   95,198    149,483 
     Imputed interest on shareholders' notes payable   22,891    —   
     Common stock issued for lawsuit settlement   138,000    —   
     Note payable issued for services   25,000    —   
Change in other  asset and liabilities:          
     (Increase) Decrease in oil and gas receivables   (30,583)   29,704 
     Decrease in other assets   3,259    —   
     Increase in accounts payable   243,715    284,266 
     Increase in accrued liabilities   173,626    43,612 
     Decrease in asset retirement obligation   (3,900)   —   
Cash used in operating  activities   (790,839)   (802,129)
INVESTING ACTIVITIES          
Investment in oil and gas properties   (267,326)   (215,923)
Pipeline investment   (121,000)   —   
Purchase of other equipment   (610,016)   (7,810)
Accounts payable specifically for fixed asset purchases   619,000    —   
Cash used in investing activities   (379,342)   (223,733)
FINANCING ACTIVITIES          
Bank overdraft   61,737    66,433 
Proceeds from sales of common stock   505,150    813,000 
Proceeds from notes payable   674,630    63,000 
Loan fees   (79,825)   —   
Cash from financing activities   1,161,692    942,433 
           
Decrease in cash   (8,489)   (83,429)
Cash at beginning of the period    17,089    106,850 
Cash at end of the period  $8,600   $23,421 
Supplemental Disclosure of Cash Flow Information          
Non-Cash Investing and Financing Activities:          
     Oil & gas properties  $(185,622)  $(5,910,000)
     Note payable   (221,336)   —   
     Common stock   107,436    —   
     Preferred stock   (4,521)   5,910 
     Additional paid-in capital   4,996,628    —   
     Derivative liability   (197,426)   —   
     Common stock issuance liability   (4,416,261)   5,904,090 
     Accrued Interest   (4,220)   —   
     Asset Retirement Obligation   185,622    —   
     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

September 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 September 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 September 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 September 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 nine month periods ended September 30, 2013 and 2012. Operating results for the nine month period ended September 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 $2,175,555 for the nine month period ended September 30, 2013 (2012 - $7,355,368) and at September 30, 2013 had an accumulated deficit of $21,996,778 (2012 – $18,850,528). 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. 

Subsequent events

Subsequent to September 30, 2013 the Company entered into 2 convertible notes payable in the total amount of $145,000 with a financial institution. The notes bear interest at 8% and the conversion terms are a 50% discount of the stock market price based on the average of the three lowest closing prices for the ten trading days before conversion. The Company also entered into 3 convertible notes payable in the total amount of $149,000 with another financial institution. These notes bear interest at 9% and the conversion terms are a 50% discount from the lowest closing bid price during the ten trading days before conversion.

 

 

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 September 30, 2013 versus September 30, 2012

 

Revenue for the three month period ended September 30, 2013 was $76,403 compared to $78,808 for the three month period ended September 30, 2012. This was a decrease of $1,405. This decrease is due chiefly to a suspension of activity of our Knox county leases pending approval of plugging work from the Texas Railroad Commission which has been offset by production from the Edwards leases which were brought on-line in the three month period ended September 30, 2013. As of the date of this report, the plugging work required by the Texas Railroad Commission has started and we expect production to resume before the end of the year.

 

Net loss for the three month period ended September 30, 2013 was $468,921 compared to $330,223 for the three month period ended September 30, 2012. We incurred derivative expense of $42,052 for which we had none last year and we also incurred $122,118 in interest expense (including amortized loan fees) that the Company did not have last year. General and Administrative costs for the three month period ended September 30, 2013 were $138,497 compared to $310,221 for the three month period ended September 30, 2012. This was a decrease of $171,724. This decrease is attributable chiefly to a change in legal and consulting expenses. Other significant changes that contributed to the increase in the net loss were and increase in depreciation and depletion ($58,178) due to asset acquisitions and an increase in the cost of revenue due to the finalization of an administrative services agreement.

 

For the Nine Month Period Ended September 30, 2013 versus September 30, 2012

 

Revenue for the nine month period ended September 30, 2013 was $204,037 compared to $274,384 for the nine month period ended September 30, 2012. This was a decrease of $70,347. This decrease is due chiefly to a suspension of activity of our Knox county leases pending sending completion of plugging work required by the Texas Rail Road Commission. As of the date of this report, the plugging work required by the Texas Railroad Commission has started and we expect production to resume before the end of the year. The decrease was not as great since we put the Edwards leases into production in September of 2013.

 

Net loss for the nine month period ended September 30, 2013 was $2,175,555 compared to $7,355,368 net loss for the nine month period ended September 30, 2012. The loss is less in 2013 due to the $5,903,000 impairment recorded in 2012 for which there was no additional amount in 2013, plus a decrease in legal and consulting fees (recorded in General and Administrative expenses), offset to a certain extent by derivative expense of $283,352, which the Company did not have last year, and an increase in interest expense of 260,868 which reflects the cost of the financings entered into in 2013.

 

Liquidity and Capital Resources

 

As of September 30, 2013, the total liabilities were $3,270,970, excluding the stock issuance liability, compared to $1,570,284 as of 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, and an increase of over $900,000 in accounts payable. The Company’s assets were $3,279,351 at September 30, 2013 compared to $2,309,699 at December 31, 2012. The increase in the assets is from fixed asset purchases funded by the increase in accounts payable.

 

Cash Requirements

 

Our cash on hand as of September 30, 2013 was $8,600 compared to $17,089 as of December 31, 2012. The Company has incurred a net loss of $2,175,555 for the nine month period ended September 30, 2013 compared to a net loss of $7,355,368 for the nine month period ended September 30, 2012 and at September 30, 2013 had an accumulated deficit of $21,996,778 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 and debt proceeds 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. 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 effective enough 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.

 

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, other than the hiring of a Chief Financial Officer, 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.

  

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

 

The following sales and issuances of the Company’s common stock have been made since July 1, 2013 pursuant to the rule 506 exemption. All proceeds were used for general corporate purposes.

 

Quarterly Issuances:

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

During the quarter ended September 30, 2013, 952,762 shares of its Series B Preferred Convertible Stock were converted into 42,605,570 shares of the Company’s common stock.

Issuance to AGS Capital Group, LLC

During the quarter ended September 30, 2013, the Company issued 7,178,925 shares of its common stock to AGS Capital Group, LLC in connection with a convertible promissory note entered into by and between the Company and AGS Capital Group, LLC.

Issuance to ASC Recap, LLC

During the quarter ended September 30, 2013, the Company issued 7,593,037 shares of its common stock to ASC Recap, LLC in connection with a convertible promissory note entered into by and between the Company and ASC Recap, LLC.

Issuance to Asher Enterprises

During the quarter ended September 30, 2013, the Company issued 23,991,370 shares of its common stock to Asher Enterprises (“Asher”) in connection with two convertible promissory notes entered into by and between the Company and Asher.

Issuances to Certain Vendors

During the quarter ended September 30, 2013, the Company issued 2,489,283 shares of its common stock to certain vendors for services rendered.

Private Placement Issuances

During the quarter ended September 30, 2013, the Company sold an aggregate of 20,720,820 shares of the Company’s restricted common stock to 23 “accredited investors” in private transactions.

Subsequent Issuances:

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

Subsequent to September 30, 2013, 304,520 Preferred Series B shares were converted into 35,500,000 shares of the Company’s common stock.

Issuance to Directors

Subsequent to September 30, 2013, the Company issued 1,089,100 shares to two of the Company’s directors for their fees.

Issuance to AGS Capital Group, LLC

Subsequent to September 30, 2013, the Company issued 16,650,668 shares of its common stock to AGS Capital Group, LLC in connection with a convertible promissory note entered into by and between the Company and AGS Capital Group, LLC.

Private Placement Issuances

Subsequent to September 30, 2013, the Company sold an aggregate of 833,332 shares of the Company’s restricted common stock to 2 “accredited investors” in private transactions.

Subsequent to September 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

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 which it announced early production progress from rework operations in Oklahoma.

 

On July 24, 2013 the Company issued a press release in which it announced an additional 15% production increase from several wells in its Oklahoma properties.

 

On July 26, 2013 the Company issued a press release in which it announced the Company had obtained a new oil and gas lease in Oklahoma.

 

On August 1, 2013 the Company issued a press release in which it gave an update on the LaNina and Covenant wells in Oklahoma.

 

On August 6, 2013 the Company issued a press release in which it announced a 50% increase in gas production from rework operations.

 

On August 13, 2013 the Company announced that it will likely become profitable in the second quarter of 2014.

 

On August 22, 2013 the Company gave an update on the press release dated August 1, 2013.

 

On September 4, 2013, the Company announced a 15% increase in production from its Edwards lease in Oklahoma.

 

On September 24, 2013 the Company announced a 30% increase in production from its Edwards Leases in Oklahoma.

 

 

Subsequent Events

 

On October 30, 2013 the Company announced the signing of a letter of intent to acquire a 5% non-operating interest in six wells in the Bakken shale in North Dakota from Phoenix Energy, Inc. The Company also reported successful fracture stimulations on the Covenant #5 and Gerner #2 wells.

 

Subsequent to September 30, 2013 the Company entered into 2 convertible notes payable in the total amount of $145,000 with a financial institution. The notes bear interest at 8% and the conversion terms are a 50% discount of the stock market price based on the average of the three lowest closing prices for the ten trading days before conversion. The Company also entered into 3 convertible notes payable in the total amount of $149,000 with another financial institution. These notes bear interest at 9% and the conversion terms are a 50% discount from the lowest closing bid price during the ten trading days before conversion.

 

 

ITEM 6. EXHIBITS

 

Exhibit Number Description of Exhibit
Exhibit 3.1(1) Articles of Incorporation
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 filed herewith.
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 filed herewith.
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

 

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: November 6, 2013 By: /s/ Floyd L. Smith
  Floyd L. Smith
  Chief Executive Officer
  President, and Treasurer

 

 

  PETRON ENERGY II, INC.
   
Dated: November 6, 2013 By: /s/ Bob Currier
  Bob Currier
  Chief Financial Officer

 

 

 

EX-31.01 2 peii0930form10qex311.htm EXHIBIT 31.1

Exhibit 31.01

 

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14

 

I, Floyd L. Smith, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Petron Energy II, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

   
Dated: November 6, 2013 By: /s/ Floyd L. Smith
  Floyd Smith
  Principal Executive Officer

EX-31.02 3 peii0930form10qex312.htm EXHIBIT 31.2

Exhibit 31.02

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14

 

I, Bob Currier, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Petron Energy II, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

   
Dated: November 6, 2013 By: /s/ Bob Currier
  Bob Currier
  Principal Financial Officer

EX-32.01 4 peii0930form10qex321.htm EXHIBIT 32.1

Exhibit 32.01

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Petron Energy II, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Floyd L. Smith, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

   
Dated: November 6, 2013 By: /s/ Floyd L. Smith
  Floyd L. Smith
  Chief Executive Officer

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.02 5 peii0930form10qex322.htm EXHIBIT 32.2

Exhibit 32.02

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Petron Energy II, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bob Currier, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

   
Dated: November 6, 2013 By: /s/ Bob Currier
  Bob Currier
  Chief Financial Officer

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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The outcome of these matters cannot be predicted at this time.</font></p> <p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">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.&#160;</font></p> <p style="font: 11pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif"><b>Subsequent events</b></font></p> <p style="font: 11pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Subsequent to September 30, 2013 the Company entered into 2 convertible notes payable in the total amount of $145,000 with a financial institution. The notes bear interest at 8% and the conversion terms are a 50% discount of the stock market price based on the average of the three lowest closing prices for the ten trading days before conversion. The Company also entered into 3 convertible notes payable in the total amount of $149,000 with another financial institution. These notes bear interest at 9% and the conversion terms are a 50% discount from the lowest closing bid price during the ten trading days before conversion.</font></p> 145000 149000 EX-101.SCH 7 peii-20130930.xsd XBRL SCHEMA FILE 00000001 - Document - Document and Entity Information link:presentationLink link:calculationLink link:definitionLink 00000002 - Statement - Consolidated Balance Sheets (Unaudited) link:presentationLink link:calculationLink link:definitionLink 00000003 - Statement - Consolidated Balance Sheets (Parenthetical) link:presentationLink link:calculationLink link:definitionLink 00000004 - Statement - Consolidated Statements of Operations (Unaudited) link:presentationLink link:calculationLink link:definitionLink 00000005 - Statement - Consolidated Statements of Cash Flows (Unaudited) link:presentationLink link:calculationLink link:definitionLink 00000006 - Disclosure - Incorporation and Nature of Operations link:presentationLink link:calculationLink link:definitionLink 00000007 - Disclosure - Summary of Significant Accounting Policies link:presentationLink link:calculationLink link:definitionLink 00000008 - Disclosure - Summary of Significant Accounting Policies (Policies) link:presentationLink link:calculationLink link:definitionLink 00000009 - Disclosure - Summary of Significant Accounting Policies (Details Narrative) link:presentationLink link:calculationLink link:definitionLink EX-101.CAL 8 peii-20130930_cal.xml XBRL CALCULATION FILE EX-101.DEF 9 peii-20130930_def.xml XBRL DEFINITION FILE EX-101.LAB 10 peii-20130930_lab.xml XBRL LABEL FILE Document And Entity Information Entity Registrant Name Entity Central Index Key Document Type Document Period End Date Amendment Flag Current Fiscal Year End Date Is Entity a Well-known Seasoned Issuer? 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Entity Filer Category Entity Public Float Entity Common Stock, Shares Outstanding Document Fiscal Period Focus Document Fiscal Year Focus Statement of Financial Position [Abstract] ASSETS Current Assets Cash Accounts Receivable Total Current Assets Pipeline, net of accumulated depreciation of $330,195 and $245,156, respectively Producing Oil & Gas Properties, net of accumulated depletion of $836,195 and $731,795, respectively Other Depreciable Equipment, net of accumulated depreciation of $88,693 and $45,361, respectively Other Assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Bank Overdraft Accounts Payable--Trade Accounts Payable--Related Party Accrued Liabilities Derivative Liability Notes Payable-- short-term Total Current Liabilities Asset Retirement Obligation Common Stock Issuance Liability Notes Payable--long-term TOTAL LIABILITIES STOCKHOLDERS' EQUITY Series A, $0.001 par value, 1,000 shares designated, issued and outstanding Series B, $0.001 par value, 5,910,000 shares designated, 1,389,218 and 5,910,000 shares issued and outstanding, respectively Common Stock, $0.001 par value, 1,000,000,000 shares authorized, 164,190,038 and 11,976,942 issued and outstanding, respectively Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY Accumulated depreciation of Pipeline Accumulated depletion of Producing Oil and Gas Properties Other Depreciable Equipment, net of accumulated depreciation Series B Preferred stock, par value Series B Preferred stock, authorized Series B Preferred stock, issued Series B Preferred stock, outstanding Series A Preferred stock, par value Series A Preferred stock, authorized Series A Preferred stock, issued Series A Preferred stock, outstanding Common stock, par value Common stock, authorized Common stock, issued Common stock, outstanding Income Statement [Abstract] Revenues Oil & Gas Sales Costs and Expenses Cost of Revenue Depletion and Depreciation Impairment Charge Derivative Expense General and Administrative Interest Expense Total Expenses Loss from Operations Before Income Taxes Income Taxes Net Loss Loss per share--basic and diluted Weighted average number of shares--basic and diluted Statement of Cash Flows [Abstract] OPERATING ACTIVITIES Adjustments to reconcile net loss to cash used by operating activitites: Depletion and depreciation Amortization of debt discount Derivative expense Impairment charge Penalty interest Common stock issued for services Imputed interest on shareholders notes payable Common stock issued for lawsuit settlement Note payable issued for services Change in other asset and liabilities: Decrease (Increase) in oil & gas receivables Decrease in other assets Increase in accounts payable Increase in accrued liabilities Decrease in asset retirement obligation Cash used in operating activities INVESTING ACTIVITIES Investment in oil & gas properties Pipeline investment Accounts payable specifically for fixed asset purchases Purchase of other equipment Cash used in investing activities FINANCING ACTIVITIES Bank overdraft Proceeds from sales of common stock Proceeds from notes payable Loan fees Cash from financing activities Decrease in cash Cash at beginning of period Cash at end of period Supplemental Disclosure of Cash Flow Information Non-Cash Investing and Financing Activities: Oil & gas properties Notes Payable Common Stock Preferred Stock Additional Paid-in Capital Derivative liability Common stock issuance liability Accrued Interest Asset Retirement Obligation Loan fees Organization, Consolidation and Presentation of Financial Statements [Abstract] Incorporation and Nature of Operations Accounting Policies [Abstract] Summary of Significant Accounting Policies Basis of presentation Going concern uncertainty Subsequent events Net loss Accumulated deficit Convertible notes payable Additional convertible notes payable Pipeline Net Of Accumulated Depreciation. Producing Oil Gas Properties Net Of Accumulated Depletion. Other Depreciable Equipment Net Of Accumulated Depreciation. Preferred Stock Additional Series A. Accumulated Depreciation of Pipeline. 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Consolidated Statements of Operations (Unaudited) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Revenues        
Oil & Gas Sales $ 76,403 $ 78,808 $ 204,037 $ 274,384
Costs and Expenses        
Cost of Revenue 133,753 42,287 475,750 189,266
Depletion and Depreciation 108,904 50,725 233,149 143,174
Impairment Charge          5,903,000
Derivative Expense 42,052    283,352   
General and Administrative 138,497 310,221 1,120,675 1,388,514
Interest Expense 122,118 5,798 266,666 5,798
Total Expenses 545,324 409,031 2,379,592 7,629,752
Loss from Operations Before Income Taxes (468,921) (330,223) (2,175,555) (7,355,368)
Income Taxes            
Net Loss $ (468,921) $ (330,223) $ (2,175,555) $ (7,355,368)
Loss per share--basic and diluted $ 0.00 $ (0.03) $ (0.04) $ (0.65)
Weighted average number of shares--basic and diluted 108,475,130 11,339,587 60,440,132 11,347,341
XML 14 Show.js IDEA: XBRL DOCUMENT /** * Rivet Software Inc. * * @copyright Copyright (c) 2006-2011 Rivet Software, Inc. All rights reserved. * Version 2.4.0.3 * */ var Show = {}; Show.LastAR = null, Show.hideAR = function(){ Show.LastAR.style.display = 'none'; }; Show.showAR = function ( link, id, win ){ if( Show.LastAR ){ Show.hideAR(); } var ref = link; do { ref = ref.nextSibling; } while (ref && ref.nodeName != 'TABLE'); if (!ref || ref.nodeName != 'TABLE') { var tmp = win ? win.document.getElementById(id) : document.getElementById(id); if( tmp ){ ref = tmp.cloneNode(true); ref.id = ''; link.parentNode.appendChild(ref); } } if( ref ){ ref.style.display = 'block'; Show.LastAR = ref; } }; Show.toggleNext = function( link ){ var ref = link; do{ ref = ref.nextSibling; }while( ref.nodeName != 'DIV' ); if( ref.style && ref.style.display && ref.style.display == 'none' ){ ref.style.display = 'block'; if( link.textContent ){ link.textContent = link.textContent.replace( '+', '-' ); }else{ link.innerText = link.innerText.replace( '+', '-' ); } }else{ ref.style.display = 'none'; if( link.textContent ){ link.textContent = link.textContent.replace( '-', '+' ); }else{ link.innerText = link.innerText.replace( '-', '+' ); } } }; XML 15 R6.htm IDEA: XBRL DOCUMENT v2.4.0.8
Incorporation and Nature of Operations
3 Months Ended
Sep. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Incorporation and Nature of Operations

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 September 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 September 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. 

XML 16 R8.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Sep. 30, 2013
Accounting Policies [Abstract]  
Basis of presentation

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 September 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 nine month periods ended September 30, 2013 and 2012. Operating results for the nine month period ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

Going concern uncertainty

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 $2,175,555 for the nine month period ended September 30, 2013 (2012 - $7,355,368) and at September 30, 2013 had an accumulated deficit of $21,996,778 (2012 – $18,850,528). 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. 

Subsequent events

Subsequent events

Subsequent to September 30, 2013 the Company entered into 2 convertible notes payable in the total amount of $145,000 with a financial institution. The notes bear interest at 8% and the conversion terms are a 50% discount of the stock market price based on the average of the three lowest closing prices for the ten trading days before conversion. The Company also entered into 3 convertible notes payable in the total amount of $149,000 with another financial institution. These notes bear interest at 9% and the conversion terms are a 50% discount from the lowest closing bid price during the ten trading days before conversion.

XML 17 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
Summary of Significant Accounting Policies (Details Narrative) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Dec. 31, 2012
Accounting Policies [Abstract]          
Net loss $ (468,921) $ (330,223) $ (2,175,555) $ (7,355,368)  
Accumulated deficit (21,996,778) (18,850,528) (21,996,778) (18,850,528) (19,821,223)
Convertible notes payable 145,000   145,000    
Additional convertible notes payable $ 149,000   $ 149,000    
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Consolidated Balance Sheets (Parenthetical) (USD $)
Sep. 30, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]    
Accumulated depreciation of Pipeline $ 330,572 $ 245,156
Accumulated depletion of Producing Oil and Gas Properties 836,195 731,795
Other Depreciable Equipment, net of accumulated depreciation $ 88,693 $ 45,361
Series B Preferred stock, par value $ 0.001 $ 0.001
Series B Preferred stock, authorized 5,910,000 5,910,000
Series B Preferred stock, issued 1,389,218 5,910,000
Series B Preferred stock, outstanding 1,389,218 5,910,000
Series A Preferred stock, par value $ 0.001 $ 0.001
Series A Preferred stock, authorized 1,000 1,000
Series A Preferred stock, issued 1,000 1,000
Series A Preferred stock, outstanding 1,000 1,000
Common stock, par value $ 0.001 $ 0.001
Common stock, authorized 1,000,000,000 1,000,000,000
Common stock, issued 164,190,038 11,976,942
Common stock, outstanding 164,190,038 11,976,942
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Consolidated Statements of Cash Flows (Unaudited) (USD $)
9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
OPERATING ACTIVITIES    
Net Loss $ (2,175,555) $ (7,355,368)
Adjustments to reconcile net loss to cash used by operating activitites:    
Depletion and depreciation 233,148 143,174
Amortization of debt discount 155,760   
Derivative expense 283,352   
Impairment charge    5,903,000
Penalty interest 45,250   
Common stock issued for services 95,198 149,483
Imputed interest on shareholders notes payable 22,891   
Common stock issued for lawsuit settlement 138,000   
Note payable issued for services 25,000   
Change in other asset and liabilities:    
Decrease (Increase) in oil & gas receivables (30,583) 29,704
Decrease in other assets 3,259   
Increase in accounts payable 243,715 284,266
Increase in accrued liabilities 173,626 43,612
Decrease in asset retirement obligation (3,900)   
Cash used in operating activities (790,839) (802,129)
INVESTING ACTIVITIES    
Investment in oil & gas properties (267,326) (215,923)
Pipeline investment (121,000)   
Accounts payable specifically for fixed asset purchases 619,000   
Purchase of other equipment (610,016) (7,810)
Cash used in investing activities (379,342) (223,733)
FINANCING ACTIVITIES    
Bank overdraft 61,737 66,433
Proceeds from sales of common stock 505,150 813,000
Proceeds from notes payable 674,630 63,000
Loan fees (79,825)   
Cash from financing activities 1,161,692 942,433
Decrease in cash (8,489) (83,429)
Cash at beginning of period 17,089 106,850
Cash at end of period 8,600 23,421
Non-Cash Investing and Financing Activities:    
Oil & gas properties (185,622) (5,910,000)
Notes Payable (221,336)   
Common Stock 107,436   
Preferred Stock (4,521) 5,910
Additional Paid-in Capital 4,996,628   
Derivative liability (197,426)   
Common stock issuance liability (4,416,261) 5,904,090
Accrued Interest (4,220)   
Asset Retirement Obligation 185,622   
Loan fees $ (260,300)   
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Consolidated Balance Sheets (Unaudited) (USD $)
Sep. 30, 2013
Dec. 31, 2012
Current Assets    
Cash $ 8,600 $ 17,089
Accounts Receivable 48,915 18,332
Total Current Assets 57,515 35,421
Pipeline, net of accumulated depreciation of $330,195 and $245,156, respectively 778,428 742,844
Producing Oil & Gas Properties, net of accumulated depletion of $836,195 and $731,795, respectively 1,773,278 1,424,729
Other Depreciable Equipment, net of accumulated depreciation of $88,693 and $45,361, respectively 638,599 71,915
Other Assets 31,531 34,790
TOTAL ASSETS 3,279,351 2,309,699
Current Liabilities    
Bank Overdraft 61,737   
Accounts Payable--Trade 1,382,699 716,140
Accounts Payable--Related Party 214,239 18,082
Accrued Liabilities 544,690 375,284
Derivative Liability 85,926   
Notes Payable-- short-term 484,679 170,500
Total Current Liabilities 2,773,970 1,280,006
Asset Retirement Obligation 222,000 40,278
Common Stock Issuance Liability 1,525,829 5,904,090
Notes Payable--long-term 275,000 250,000
TOTAL LIABILITIES 4,796,799 7,474,374
STOCKHOLDERS' EQUITY    
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, 1,389,218 and 5,910,000 shares issued and outstanding, respectively 1,389 5,910
Common Stock, $0.001 par value, 1,000,000,000 shares authorized, 164,190,038 and 11,976,942 issued and outstanding, respectively 164,190 11,977
Additional Paid-In Capital 20,313,750 14,638,660
Accumulated Deficit (21,996,778) (19,821,223)
Total Stockholders' Equity (1,517,448) (5,164,675)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,279,351 $ 2,309,699
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Summary of Significant Accounting Policies
3 Months Ended
Sep. 30, 2013
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

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 September 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 nine month periods ended September 30, 2013 and 2012. Operating results for the nine month period ended September 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 $2,175,555 for the nine month period ended September 30, 2013 (2012 - $7,355,368) and at September 30, 2013 had an accumulated deficit of $21,996,778 (2012 – $18,850,528). 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. 

Subsequent events

Subsequent to September 30, 2013 the Company entered into 2 convertible notes payable in the total amount of $145,000 with a financial institution. The notes bear interest at 8% and the conversion terms are a 50% discount of the stock market price based on the average of the three lowest closing prices for the ten trading days before conversion. The Company also entered into 3 convertible notes payable in the total amount of $149,000 with another financial institution. These notes bear interest at 9% and the conversion terms are a 50% discount from the lowest closing bid price during the ten trading days before conversion.

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Document and Entity Information
3 Months Ended
Sep. 30, 2013
Oct. 31, 2013
Document And Entity Information    
Entity Registrant Name Petron Energy II, Inc.  
Entity Central Index Key 0001467434  
Document Type 10-Q  
Document Period End Date Sep. 30, 2013  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   222,382,437
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2013