UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 2)
☑ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
☐ 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 June 30, 2012, there were 114,997,438 shares of the registrant’s $0.001 par value common stock issued and outstanding.
Explanatory Note
This Amendment No. 2 on Form 10-Q/A (this “Second Amendment”) amends Petron Energy II, Inc.’s Quarterly Report on Form 10-Q (the “Original Filing”) originally filed on August 14, 2012 with the Securities and Exchange Commission (the “Commission”) and Amendment No. 1 on Form 10-Q/A (the “First Amendment”) originally filed with the Commission on August 15, 2012. We are filing this Amendment for the purpose of responding to certain comments received from the Staff of the Securities and Exchange Commission. 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 Second Amendment is as of August 14, 2012, the filing date of the Original Filing. Except as stated herein, this Second Amendment 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 | ||
| 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 | 11 |
| ITEM 4. | CONTROLS AND PROCEDURES | 11 |
| PART II. OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS | 11 |
| ITEM 1A. | RISK FACTORS | 11 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 12 |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 12 |
| ITEM 4. | [MINE SAFETY DISCLOSURES] | 12 |
| ITEM 5. | OTHER INFORMATION | 12 |
| ITEM 6. | EXHIBITS | 12 |
Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q/A 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," or "PEII” refer to Petron Energy II, Inc.
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| INDEX | F-1 |
| Consolidated Balance Sheet as of June 30, 2012 unaudited and Audited Consolidated Balance Sheet as of December 31, 2011 | F-2 |
| Consolidated Statement of Operations for the Three Months and Six Months Ended June 30, 2012 and 2011 (unaudited) | F-3 |
| Consolidated Statement of Cash Flows for the Three Months and Six Months Ended June 30, 2012 and 2011 (unaudited) | F-4 |
| Notes to Condensed Consolidated Financial Statements Unaudited | F-5 |
F – 1
PETRON ENERGY II, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2012 AND DECEMBER 31, 2011
| June 30, | December 31, | |
| 2012 | 2011 | |
| (unaudited) | (audited) | |
| ASSETS | ||
| Current Assets | ||
| Cash | $ 8,458 | $ 106,850 |
| Accounts Receivable--Oil & gas sales | 31,853 | 53,466 |
| Total Current Assets | 40,311 | 160,316 |
| Pipeline, net of accumulated depreciation of $212,222 | ||
| and $179,289 respectively | 775,778 | 808,711 |
| Producing Oil & Gas Properties, net of accumulated depletion | ||
| of $673,795 and $628,795, respectively | 1,543,171 | 1,433,068 |
| Other Depreciable Equipment, net of accumulated | ||
| depreciation of $45,855 and $31,339, respectively | 171,248 | 180,264 |
| Other Assets | 31,575 | 31,575 |
| TOTAL ASSETS | $ 2,562,083 | $ 2,613,934 |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
| Current Liabilities | ||
| Accounts Payable--Trade | $ 615,963 | $ 443,114 |
| Accounts Payable--Related Party | 20,061 | 50,617 |
| Accrued Liabilities | 275,676 | 72,158 |
| Total Current Liabilities | 911,700 | 565,889 |
| Asset Retirement Obligation | 25,540 | 25,540 |
| Common Stock Issuance Liability | 5,904,090 | |
| TOTAL LIABILITIES | 6,841,330 | 591,429 |
| STOCKHOLDERS' EQUITY (DEFICIT) | ||
| Preferred Stock, 10,000,000 shares authorized, 5,911,000 designated as follows: | ||
| Preferred Stock Series B, $0.001 par value, | ||
| 5,910,000 issued and outstanding | 5,910 | - |
| Preferred Stock Series A, $0.001 par value, 1,000 | ||
| issued and outstanding | 1 | 1 |
| Common Stock, $0.001 par value, 1,000,000,000 shares authorized, | ||
| 115,381,149 and 110,727,511 issued and outstanding, respectively | 115,381 | 110,727 |
| Additional Paid-In Capital | 14,119,766 | 13,406,937 |
| Accumulated Deficit | (18,520,305) | (11,495,160) |
| Total Stockholders' Equity (Deficit) | (4,279,247) | 2,022,505 |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ 2,562,083 | $ 2,613,934 |
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, | ||||
| 2012 | 2011 | 2012 | 2011 | ||
| Revenues | |||||
| Oil & Gas Sales | $ 96,294 | $ 46,300 | $ 178,025 | $ 88,245 | |
| Pipeline Revenue | 8,648 | 2,314 | 17,551 | 3,378 | |
| Total Revenue | 104,942 | 48,614 | 195,576 | 91,623 | |
| Costs and Expenses: | |||||
| Cost of Revenue | 62,493 | 85,878 | 146,979 | 145,236 | |
| Depletion, Depreciation and Amortization | 34,225 | 28,522 | 92,449 | 56,489 | |
| Impairment | - | - | 5,903,000 | - | |
| General and Administrative | 480,931 | 479,760 | 1,078,293 | 915,115 | |
| Total Expenses | 577,649 | 594,160 | 7,220,721 | 1,116,840 | |
| Loss from Operations Before Income Taxes | (472,707) | (545,546) | (7,025,145) | (1,025,217) | |
| Income Tax Benefit | - | - | - | - | |
| Net Loss | (472,707) | (545,546) | (7,025,145) | (1,025,217) | |
| Preferred Stock Dividends | - | (875) | - | (875) | |
| Net Loss Available to Common Stockholders | $ (472,707) | $ (546,421) | $ (7,025,145) | $ 1,026,092) | |
| Loss per share--basic and diluted | ($0.004) | ($0.006) | ($0.062) | ($0.012) | |
| Weighted average number of shares--basic and diluted | 114,415,921 | 85,455,367 | 113,356,602 | 84,671,474 | |
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, | ||
| 2012 | 2011 | |
| OPERATING ACTIVITIES | ||
| Net Loss | ($7,025,145) | ($1,025,217) |
| Adjustments to reconcile net loss to | ||
| cash used by operating activities: | ||
| Depletion and depreciation | 92,449 | 56,489 |
| Impairment | 5,903,000 | - |
| Common stock issued for services | 149,483 | 449,709 |
| Change in other asset and liabilities: | ||
| Decrease in oil & gas receivables | 21,613 | 3,419 |
| Increase in accounts payable | 172,849 | 21,251 |
| Increase in accrued liabilities | 172,962 | 2,748 |
| Cash used in operating activities | (512,789) | (491,601) |
| INVESTING ACTIVITIES | ||
| Investment in oil & gas properties | (148,103) | (119,471) |
| Purchase of other equipment | (5,500) | (1,921) |
| Cash used in investing activities | (153,603) | (121,392) |
| FINANCING ACTIVITIES | ||
| Proceeds from sales of common stock | 568,000 | 740,000 |
| Cash dividend | - | (875) |
| Cash from financing activities | 568,000 | 739,125 |
| (Decrease)/Increase in cash | (98,392) | 126,132 |
| Cash at beginning of the period | 106,850 | 88,742 |
| Cash at end of the period | $ 8,458 | $ 214,874 |
| Supplemental Disclosure of Cash Flow Information | ||
| Non-Cash Investing and Financing Activities: | ||
| Oil & gas properties | $ 5,910,000 | $ - |
| Preferred Stock | (5,910) | - |
| Additional Paid-in Capital | (5,904,090) | - |
| $ - | $ - | |
The accompanying notes are an integral part of these financial statements.
F – 4
PETRON ENERGY II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIOD ENDING JUNE 30, 2012 AND 2011
| 1. | INCORPORATION AND NATURE OF OPERATIONS |
Petron Energy II, Inc. (“Petron Energy” or the “Company”) was formerly known as Restaurant Concepts of America, Inc. 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.
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 December 31, 2011 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 2008 |
| Petron Energy II Well Service, Inc. | July 2008 |
The interim consolidated financial statements as of June 30, 2012 and 2011 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, 2011. 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 and six month period ended June 30, 2012 and 2011 and the statements of cash flows reflect the activity for the six month periods ended June 30, 2012 and 2011. Operating results for the six month period ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.
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 $7,025,145 for the six months ended June 30, 2012 (2011 - $1,026,092) and at June 30, 2012 had an accumulated deficit of $18,520,305 (2011 – $11,495,160). 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. ASSET IMPAIRMENT
On August 8, 2011, the Company entered into an “Asset Purchase Agreement” with ONE Energy Capital Corp. (“ONE Energy”). The Company purchased producing oil and gas wells owned by ONE Energy by issuing 5,910,000 shares of the Company’s Series B Preferred Stock. ONE Energy has the right to convert such Series B Preferred Shares into the number of common shares having a total value of $5,910,000 based on the trading price of the Company’s common stock on the date of such conversion. The purchase transaction was completed and the convertible preferred shares issued on February 9, 2012. Upon completion of the purchase the Company recorded the $5,910 par value of the preferred shares and a common stock issuance liability of $5,904,090 which will be recognize as additional paid-in capital at the time the preferred shares are converted to common stock.
The Company’s investment in the ONE Energy properties was as follows:
| Cash payment to ONE Energy | $ | 106,000 | |
| Other cost associated with purchase | 119,000 | ||
| Preferred stock conversion value | 5,910,000 | ||
| Total investment | $ | 6,135,000 | |
This investment was reviewed by management to determine if there was impairment. The facts considered by management in the impairment review included among other items the following:
| • | During the three year period ended December 31, 2011 the operating expenses of the purchased wells exceeded revenues by approximately $500,000. |
| • | ONE Energy’s reserve report related to the well sold estimated the discounted cash inflows of $132,000. |
| • | The Company had a reserve report for these wells prepared as of March 31, 2012 reported discounted cash inflows of $232,000. |
Management concluded that an impairment had occurred and that the investment in the purchased wells should be reduced to $232,000 at March 31, 2012, resulting in an impairment charge of $5,903,000.
[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, 2012 versus June 30, 2011
Revenue for the period ended June 30, 2012 was $104,942 compared to $48,614 for the period ended June 30, 2011. This was an increase of $56,328.
Net loss for the period ended June 30, 2012 was $(472,707) compared to $ (545,546) for the period ended June 30, 2011.
General and Administrative costs for the period ended June 30, 2012 were $480,931 compared to $479,760 for the period ended June 30, 2011.
Liquidity and Capital Resources
As of June 30, 2012, the total liabilities were $937,240, excluding the common stock issuance liability, compared to $591,429 for the period ended December 31, 2011 and the Company’s assets were $2,562,083 compared to $2,613,934 for the period ended December 31, 2011.
Cash Requirements
Our cash on hand as of June 30, 2012 was $8,458 compared to $106,850 for the period ended December 31, 2011. Company has incurred a net loss of $7,025,145 for the period ended June 30, 2012 compared to a net loss of $1,025,217 for the period ended June 30, 2011 and at June 30, 2012 had an accumulated deficit of $18,520,305 as compared to $11,495,160 in 2011. 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.
For the Six Month Period Ended June 30, 2012 versus June 30, 2011
Revenue for the period ended June 30, 2012 was $195,576 compared to $91,623 for the period ended June 30, 2011. This was increase of $103,953.
Net loss for the period ended June 30, 2012 was $7,025,145 compared to $1,025,217 net loss for the period ended June 30, 2011.
General and Administrative costs for the period ended June 30, 2012 were $1,078,293 compared to $915,115 for the period ended June 30, 2011.
Liquidity and Capital Resources
As of June 30, 2012, the total liabilities were $911,700 compared to $565,889 for the period ended December 31, 2011 and the Company’s assets were $2,562,083 compared to $2,613,934 for the period ended December 31, 2011. The Company does not have any current commitments for capital expenditures or any other commitments that would result in a change of cash flow or cash requirements.
Cash Requirements
Our cash on hand as of June 30, 2012 was $8,458 compared to $214,874 for the period ended June 30, 2011. The Company has incurred a net loss of $7,025,145 for the period ended June 30, 2012 compared to a net loss of $1,025,217 for the period ended June 30, 2011 and at June 30, 2012 had an accumulated deficit of $18,520,305 as compared to $11,495,160 in 2011. 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 adoption of these accounting standards had the following impact on the Company’s statements of income and financial condition:
The FASB established the FASB Accounting Standards Codification (“Codification”) as the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements issued for interim and annual periods ending after September 15, 2009. The codification has changed the manner in which U.S. GAAP guidance is referenced, but did not have an impact on the consolidated financial position, results of operations or cash flows of the Company
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Fair Value Measurements and Disclosures (Topic 820) — Improving Disclosures about Fair Value Measurements.” This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Accounting Standards Codification (“ASC”) 820. ASU 2010-06 amends ASC 820 to now require: (1) a reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and (2) in the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements. In addition, ASU 2010-06 clarifies the requirements of existing disclosures. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early application is permitted. The Company will comply with the additional disclosures required by this guidance upon its adoption in January 2010.
Also in January 2010, the FASB issued Accounting Standards Update No. 2010-03, “Extractive Activities—Oil and Gas—Oil and Gas Reserve Estimation and Disclosures.” This ASU amends the “Extractive Industries—Oil and Gas” Topic of the Codification to align the oil and gas reserve estimation and disclosure requirements in this Topic with the SEC’s Release No. 33-8995, “Modernization of Oil and Gas Reporting Requirements (Final Rule),” discussed below. The amendments are effective for annual reporting periods ending on or after December 31, 2009, and the adoption of these provisions on December 31, 2009 did not have a material impact on our consolidated financial statements.
On December 31, 2008, the Securities and Exchange Commission, referred to in this report as the SEC, issued Release No. 33-8995, “Modernization of Oil and Gas Reporting Requirements (Final Rule),” which revises the disclosures required by oil and gas companies. The SEC disclosure requirements for oil and gas companies have been updated to include expanded disclosure for oil and gas activities, and certain definitions have also been changed that will impact the determination of oil and gas reserve quantities. The provisions of this final rule are effective for registration statements filed on or after January 1, 2010, and for annual reports for fiscal years ending on or after December 31, 2009.
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
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 as previously disclosed on our Annual Report on Form 10-K
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
NONE.
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
| 1. | Quarterly Issuances: |
We did not issue any unregistered securities other than as previously disclosed.
| 2. | Subsequent Issuances: |
Subsequent to the quarter, 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 May 17, 2012, Petron Energy II, Inc. issued a press release announcing the beginning of rework operations in its Wagoner and Tulsa County operations. The company expects growth in asset base through planned new lease acquisition and the drill bit.
| Subsequent Events |
None
ITEM 6. EXHIBITS
| 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) |
| 3.2 | Bylaws of the Company (Filed as Exhibit 3.2 to Registration Statement on Form S-1, filed with the Securities and Exchange Commission on July 10, 2009) |
| 31.01 | Certification of Principal Executive Officer Pursuant to Rule 13a-14 (Filed herewith) |
| 31.02 | Certification of Principal Financial Officer Pursuant to Rule 13a-14 (Filed herewith) |
| 32.01 | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act (Filed herewith) |
| 32.02 | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act (Filed herewith) |
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: January 4, 2013
/s/ Floyd L. Smith
By: Floyd L. Smith
Its: CEO and CFO, 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.
Dated: January 4, 2013
/s/ Floyd L. Smith
By: Floyd L. Smith
Chief Executive Officer
Principal Accounting Officer and
Chief Financial Officer,
President, Treasurer and Director
Dated: January 4, 2013
/s/ David Knepper
By: David Knepper
Director
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.
| Date: January 4, 2013 | /s/ Floyd L. Smith | |
| By: Floyd L. Smith | ||
| Its: Principal Executive Officer |
Exhibit 31.02
CERTIFICATION OF PRINCIPAL FINANCIAL 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.
| Date: January 4, 2013 | /s/ Floyd L. Smith | |
| By: Floyd L. Smith | ||
| Its: Principal Financial Officer |
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 March 31, 2012 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.
/s/ Floyd L. Smith
By: Floyd L. Smith
Chief Executive Officer
Dated: January 4, 2013
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.
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 March 31, 2012 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.
/s/ Floyd L. Smith
By: Floyd L. Smith
Chief Financial Officer
Dated:
January 4, 2013
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.
|
ASSET IMPAIRMENT
|
3 Months Ended | |||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Jun. 30, 2012
|
||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||
| ASSET IMPAIRMENT |
3. ASSET IMPAIRMENT On August 8, 2011, the Company entered into an “Asset Purchase Agreement” with ONE Energy Capital Corp. (“ONE Energy”). The Company purchased producing oil and gas wells owned by ONE Energy by issuing 5,910,000 shares of the Company’s Series B Preferred Stock. ONE Energy has the right to convert such Series B Preferred Shares into the number of common shares having a total value of $5,910,000 based on the trading price of the Company’s common stock on the date of such conversion. The purchase transaction was completed and the convertible preferred shares issued on February 9, 2012. Upon completion of the purchase the Company recorded the $5,910 par value of the preferred shares and a common stock issuance liability of $5,904,090 which will be recognize as additional paid-in capital at the time the preferred shares are converted to common stock.
The Company’s investment in the ONE Energy properties was as follows:
This investment was reviewed by management to determine if there was impairment. The facts considered by management in the impairment review included among other items the following:
Management concluded that an impairment had occurred and that the investment in the purchased wells should be reduced to $232,000 at March 31, 2012, resulting in an impairment charge of $5,903,000. |
|||||||||||||||||||||||||||||
|
Going concern uncertainty
|
3 Months Ended |
|---|---|
|
Jun. 30, 2012
|
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| 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 $7,025,145 for the six months ended June 30, 2012 (2011 - $1,026,092) and at June 30, 2012 had an accumulated deficit of $18,520,305 (2011 – $11,495,160). While the Company has recognized revenues from operations, the revenues generated are not sufficient to sustain operations. The Company does not have sufficient funds to acquire new business assets or maintain its existing operations at this time. Management’s plan is to raise equity and/or debt financing as required but there is no certainty that such financing will be available or that it will be available at acceptable terms. The outcome of these matters cannot be predicted at this time. These financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty. |
+`-AEHZ52E;N,JDC3H$U)!+S@"Q
MJ!F^G"=\\?&2G@Q4S5MJF'6AUG)M&(PJ]0'KT78]>L5J%A3.B*3Q&][;D3O7
MZ4DZJ70V.ND743I^U2)I6<8:[5,\E:S"$6>UJB`F7GU<`J7`60!D,0&[/?OJ1:S^IU$#P;U_H[=
MY0-!8SV2M %8'4]:N[Q"\\$&XP+$4
M%#:;^#H&)KGX5D(T@LFL:`A(QKC4`!.0FDV150B?5#5V@)E.EWR?+-E0?=!'
M2">(8B*S*;5C`%13AQW0*<-U#$3UA&>J'
|
INCORPORATION AND NATURE OF OPERATIONS
|
3 Months Ended | ||
|---|---|---|---|
|
Jun. 30, 2012
|
|||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
| INCORPORATION AND NATURE OF OPERATIONS |
Petron Energy II, Inc. (“Petron Energy” or the “Company”) was formerly known as Restaurant Concepts of America, Inc. 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.
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 December 31, 2011 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. |
"+ text.join( "
\n" ) +"
" + text[p] + "
\n"; } } }else{ formatted = '' + raw + '
'; } html = ''+ "\n"+''+ "\n"+'| '+ "\n"+' formatted: '+ ( this.Default == 'raw' ? 'as Filed' : 'with Text Wrapped' ) +''+ "\n"+' | '+ "\n"+'
| '+ "\n"+' '+ "\n"+' | '+ "\n"+'
| '+ "\n"+' '+ "\n"+' | '+ "\n"+'
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
3 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
|
Jun. 30, 2012
|
|||||||
| 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:
The interim consolidated financial statements as of June 30, 2012 and 2011 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, 2011. 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 and six month period ended June 30, 2012 and 2011 and the statements of cash flows reflect the activity for the six month periods ended June 30, 2012 and 2011. Operating results for the six month period ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.
|
|
CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $)
|
Jun. 30, 2012
|
Dec. 31, 2011
|
|---|---|---|
| Pipeline, net of accumulated depreciation | $ 212,222 | $ 179,289 |
| Producing Oil & Gas Properties, net of accumulated depletion | 673,795 | 628,795 |
| Other Depreciable Equipment, net of accumulated depreciation | $ 45,855 | $ 31,339 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, authorized | 1,000,000,000 | 1,000,000,000 |
| Common stock, issued | 115,381,149 | 110,727,511 |
| Common stock, outstanding | 115,381,149 | 110,727,511 |
|
Preferred Stock, Series A
|
||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, authorized | 10,000,000 | 10,000,000 |
| Preferred stock, issued | 1,000 | 1,000 |
| Preferred stock, outstanding | 1,000 | 1,000 |
|
Preferred Stock, Series B
|
||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, authorized | 10,000,000 | 10,000,000 |
| Preferred stock, issued | 5,910,000 | |
| Preferred stock, outstanding | 5,910,000 |
|
Document and Entity Information
|
3 Months Ended |
|---|---|
|
Jun. 30, 2012
|
|
| Document And Entity Information | |
| Entity Registrant Name | Petron Energy II, Inc. |
| Entity Central Index Key | 0001467434 |
| Document Type | 10-Q |
| Document Period End Date | Jun. 30, 2012 |
| Amendment Flag | true |
| 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? | No |
| Entity Filer Category | Smaller Reporting Company |
| Entity Common Stock, Shares Outstanding | 114,997,438 |
| Amendment Description | This Amendment No. 2 on Form 10-Q/A (this “Second Amendment”) amends Petron Energy II, Inc.’s Quarterly Report on Form 10-Q (the “Original Filing”) originally filed on August 14, 2012 with the Securities and Exchange Commission (the “Commission”) and Amen |
| Document Fiscal Period Focus | Q2 |
| Document Fiscal Year Focus | 2012 |
|
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (USD $)
|
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
| Revenues | ||||
| Oil & Gas Sales | $ 96,294 | $ 46,300 | $ 178,025 | $ 88,245 |
| Pipeline Revenue | 8,648 | 2,314 | 17,551 | 3,378 |
| Total Revenue | 104,942 | 48,614 | 195,576 | 91,623 |
| Costs and Expenses | ||||
| Cost of Revenue | 62,493 | 85,878 | 146,979 | 145,236 |
| Depletion, Depreciation and Amortization | 34,225 | 28,522 | 92,449 | 56,489 |
| Impairment Charge | 5,903,000 | |||
| General and Adminstrative | 480,931 | 479,760 | 1,078,293 | 915,115 |
| Total Expenses | 577,649 | 594,160 | 7,220,721 | 1,116,840 |
| Loss from Operations Before Impairment and Income Taxes | (472,707) | (545,546) | (7,025,145) | (1,025,217) |
| Income Tax Benefit | ||||
| Net Loss | (472,707) | (545,546) | (7,025,145) | (1,025,217) |
| Preferred Stock Dividends | (875) | (875) | ||
| Net Loss Available to Common Stockholders | $ (472,707) | $ (546,421) | $ (7,025,145) | $ (1,026,092) |
| Loss per share--basic and diluted | $ (0.004) | $ (0.006) | $ (0.062) | $ (0.012) |
| Weighted average number of shares--basic and diluted | 114,415,921 | 85,455,367 | 113,356,602 | 84,671,474 |