10-Q/A 1 peii0331form10qa.htm FORM 10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

Amendment No. 1 

 

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

 

For the quarterly period ended March 31, 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 May 20, 2013, there were 39,318,438 shares of the registrant’s $0.001 par value common stock issued and outstanding.

 
 

 

EXPLANATORY NOTE

 

The purpose of this Amendment No. 1 to the Quarterly Report of Petron Energy II, Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2013, filed with the Securities and Exchange Commission on May 20, 2013 (the “Form 10-Q”), is to make adjustments to certain financial statements set forth therein.  This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

 
 

 

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 11
    Signatures 12

 

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," or "PEII" Petron Energy II, Inc.

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

  Index to Financial Statements Page
  INDEX F-1
  Unaudited Consolidated Balance Sheet as of March 31, 2013 and Audited Consolidated Balance Sheet as of December 31, 2012 F-2
  Unaudited Consolidated Statement of Operations for the Three Months Ended March 31, 2013 and 2012 F-3
  Unaudited Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2013 and 2012 F-4
  Notes to Unaudited Consolidated Financial Statements F-5

 

F-1

 
 

 

PETRON ENERGY II, INC.

CONSOLIDATED BALANCE SHEET

 

   March 31,  December 31,
   2013  2012
   (unaudited)  (audited)
ASSETS          
Current Assets          
Cash  $380   $17,089 
Accounts Receivable--oil & gas sales   23,290    18,332 
Total Current Assets   23,670    35,421 
Pipeline, net of accumulated depreciation of $261,625 and $245,156, respectively   726,374    742,844 
Producing Oil & Gas Properties, net of accumulated depletion of $757,895 and $731,795, respectively   1,398,630    1,424,729 
Other Depreciable Equipment, net of accumulated depreciation of $49,646 and $45,361, respectively   64,505    71,915 
Other  Assets   31,553    34,790 
TOTAL ASSETS  $2,244,732   $2,309,699 
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current Liabilities          
Cash Overdraft  $65,849   $—   
Accounts Payable--Trade   635,004    716,140 
Accounts Payable--Related Party   101,900    18,082 
Accrued Liabilities   305,325    375,284 
Notes Payable--short-term   225,750    170,500 
Total Current Liabilities   1,333,828    1,280,006 
Notes Payable--long-term   250,000    250,000 
Asset Retirement Obligation   40,278    40,278 
Common Stock Issuance Liability   1,781,102    5,904,090 
Derivative Liability   74,000     —  
TOTAL LIABILITIES   3,479,208    7,474,374 
STOCKHOLDERS' DEFICIT          

Preferred stock 10,000,000 shares authorized, shares issued and outstanding designated as follows:

        
Preferred Stock Series B, $0.001 par value, 1,787,012 and 5,910,000 issued and outstanding, respectively   1,787    5,910 
 Preferred Stock Series A, $0.001 par value, 1,000 shares authorized, issued and outstanding   1    1 
Common Stock, $0.001 par value, 1,000,000,000 shares authorized, 34,756,103 and 11,976,942 issued and outstanding, respectively   34,756    11,977 
Additional Paid-In Capital   18,933,792    14,638,660 
Accumulated Deficit   (20,204,812)   (19,821,223)
Total Stockholders' Deficit   (1,234,476)   (5,164,675)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT  $2,244,732   $2,309,699 
           

 

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

 

F-2

 
 

 

PETRON ENERGY II, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

 

   Three Months Ended March 31,
   2013  2012
Revenues          
     Oil & Gas Sales  $103,220   $81,731 
Pipeline   3,654    8,903 
          Total Revenue   106,874    90,634 
Costs and Expenses          
     Cost of Revenue   103,300    84,486 
     Depletion, Depreciation and Amortization   49,980    58,224 
     Impairment   —      5,903,000 
     General and Administrative   200,321    597,362 
Derivative Expense   82,300    —  
     Interest   54,562    —   
          Total Expenses   490,463    6,643,072 
     Loss from Operations Before Income Taxes   (383,589)   (6,552,438)
Income Tax Benefit   —      —   
          Net Loss Available to Common Stockholders  $(383,589)  $(6,552,438)
Loss per share--basic and diluted  $(0.02)  $(0.58)
Weighted average number of shares--basic and diluted   22,870,982    11,214,751 
           

 

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

 

F-3

 
 

 

PETRON ENERGY II, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

 

   Three Months Ended March 31,
   2013  2012
       
OPERATING ACTIVITIES          
Net Loss  $(383,589)  $(6,552,438)
Adjustments to reconcile net loss to          
     cash used by operating activitites:          
     Depletion and depreciation   49,980    58,224 
Stock issued for services   29,000    —  
Derivative expense   82,300    —  
     Impairment   —      5,903,000 
Penalty interest   45,250    —  
Change in other  asset and liabilities:          
     Decrease (Increase) in oil & gas receivables   (4,958)   13,187 
     Decrease in other assets   3,237    —   
     (Decrease) Increase in accounts payable   2,681    281,767 
     Increase in accrued liabilities   (69,959)   38,635 
Cash used in operating  activities   (246,058)   (257,625)
INVESTING ACTIVITIES          
Investment in oil & gas properties   —      (23,698)
Purchase of other equipment   —      (2,300)
Cash used in investing activities   —      (25,998)
FINANCING ACTIVITIES          
Cash overdraft   65,849    —   
Proceeds from note payable   25,000    —   
Proceeds from sales of common stock   138,500    238,000 
Cash provided by financing activities   229,349    238,000 
Decrease in cash   (16,709)   (45,623)
Cash at beginning of quarter   17,089    106,850 
Cash at end of quarter  $380   $61,227 
Supplemental Disclosure of Cash Flow Information          
Non-Cash Investing and Financing Activities:          
     Oil & gas properties  $—     $(5,910,000)
     Preferred Stock   (4,123)   5,910
Common Stock   19,117   —   
     Additional Paid-in Capital   4,131,294   —  
Derivative Liability   (8,300)    —   
Common Stock Issuance Liability   (4,122,988)   5,904,090
Notes Payable   (15,000)  —   
   $—     $ —   

 

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

 

F-4

 
 

 

PETRON ENERGY II, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013 and 2012

 

1. INCORPORATION AND NATURE OF OPERATIONS

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

The Company is engaged primarily in the acquisition, development, production, exploration for and the sale of oil, gas and gas liquids in the United States. As of 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 1, 2008
Petron Energy II Well Service, Inc. July 1, 2008

 

The interim consolidated financial statements as of March 31, 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 and cash flows reflect the results of operations and the changes in cash flows of the Company for the three month period ended March 31, 2013 and 2012. Operating results for the three month period ended March 31, 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 $383,589 for the quarter ended March 31, 2013 (2012 - $6,552,438) and at March 31, 2013 had an accumulated deficit of $20,204,812 (2012 – $19,821,223). 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.

 

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

 

Revenue for the period ended March 31, 2013 was $106,874 compared to $90,634 for the period ended March 31, 2012. This was increase of $16,240.

 

Net loss for the period ended March 31, 2013 was $383,589 compared to $6,552,438 for the period ended March 31, 2012. This is a decrease of $6,168,849 of net loss from the year prior. This decrease is due chiefly to a $5,903,000 impairment charge recognized in the first quarter last year.

 

General and Administrative costs for the period ended March 31, 2013 were $200,321 compared to $597,362 for the period ended March 31, 2012. This decrease was related to lower legal and accounting costs and expenses compared to the year prior during which the Company was a party to a merger.

 

Liquidity and Capital Resources

 

As of March 31, 2013, the current liabilities were $1,333,838 and the Company’s assets were $2,244,732. Cash for the period ended March 31, 2013 was $380 compared to $17,089 for the period ended March 31, 2012, a decrease of $16,709.

 

Effective April 16, 2013, we entered into a Credit Agreement with TCA Global Master Fund, LP (“TCA”). Under the terms of a credit agreement the Company has pledged all of its oil and gas assets as collateral. The Company makes requests for drawdowns periodically and the lender, in its sole discretion, will approve the requests. The funds are to be used for enhancing the oil and gas producing assets of the Company. The first draw, under terms of an 11% note payable due October 17, 2013 was received April 17, 2013 for $450,000. Other than stated herein, the Company does not have any current commitments for capital expenditures or any other commitments that would result in a change in cash flow or cash requirements.

 

Cash Requirements

 

Our cash on hand as of March 31, 2013 was $380. The Company has incurred a net loss of $383,589 for the period ended March 31, 2013 and at March 31, 2013 had an accumulated deficit of $20,204,812 as compared to $18,047,597 at March 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.

9
 

 

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 fter 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

 

(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 quatery report (the "Evaluation Date"), has concluded that as of the Evaluation Date, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

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

 

Changes in Internal Control over Financial Reporting

 

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

10
 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

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

 

On November 21, 2012, ASL Energy Corp. (“ASL Energy”) filed a Complaint against the Company and Floyd Smith, our Chief Executive Officer, in the District Court of Dallas County, Texas to enforce certain terms of the Management Service Agreement (the “MSA”) entered into by and between ASL Energy, LLC and Petron Energy Special Corp. dated August 8, 2011. ASL Energy alleges that the Company owes ASL Energy a total of $28,697. Although the parties are currently engaged in settlement negotiations regarding this matter, the Company plans to aggressively defend against any claims made by ASL Energy against the Company and will not fail to assert the Company’s legal and equitable rights in any court of law. A judgment has yet to be entered on the matter.

 

On November 27, 2012, ASL Energy Corp. (“ASL Energy”) filed a Complaint against the Company in the District Court of Dallas County, Texas to enforce certain terms of the Convertible Note Issuance Agreement (the “Note”) entered into by and between ASL Energy and the Company dated August 9, 2012. ASL Energy alleges that the Company owes ASL Energy a total of $65,000. Although the parties are currently engaged in settlement negotiations regarding this matter, the Company plans to aggressively defend against any claims made by ASL Energy against the Company and will not fail to assert the Company’s legal and equitable rights in any court of law. A judgment has yet to be entered on the matter.

 

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

 

ITEM 1A. RISK FACTORS

 

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

 

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

 

1. Quarterly Issuances:

 

During the quarter ended March 31, 2013, the Company sold an aggregate of 3,462,500 shares of the Company’s restricted common stock to 43 “accredited investors” in private transactions for aggregate consideration of $138,500.

During the quarter ended March 31, 2013, 4,122,988 shares of the Company’s Series B Convertible preferred stock converted into an aggregate of 18,901,144 shares of the common stock of the Company. At March 31, 2013, we had 1,787,012 shares of Series B Convertible Preferred Stock issued and outstanding, which had not converted because of the Ownership Limitation The Ownership Limitation is defined as follows; The Series B Convertible Preferred Stock cannot be converted by a holder thereof if such conversion would result in the acquisition by such holder of more than 9.99% of the Company’s outstanding common stock.

 

2. Subsequent Issuances:

 

In connection with the TCA financing agreement mentioned above, the Company issued 3,333,334 shares of its common stock.

 

Subsequent to the quarter ended March 31, 2013, the Company sold an aggregate of 875,000 shares of the Company’s restricted common stock to 5 “accredited investors” in private transactions for aggregate consideration of $35,000.

Subsequent to the quarter ended March 31, 2013, 66,554 Preferred Series B shares were converted into 354,001 shares of the Company’s common stock.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

NONE.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

NONE.

 

ITEM 5. OTHER INFORMATION

  

  Quarterly Events

 

NONE

 

  Subsequent Events

 

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

 

 

 
 

 

ITEM 6. EXHIBITS

 

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

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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: May 21, 2013 By: /s/ Floyd L. Smith
  Floyd Smith
  Chief Executive Officer
  Chief Financial Officer and President, Treasurer and Director

 

 

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

 

  PETRON ENERGY II, INC.
   
Dated: May 21, 2013 By: /s/ Floyd L. Smith
  Floyd Smith
  Chief Executive Officer
  Chief Financial Officer and President, Treasurer and Director

 

 

  PETRON ENERGY II, INC.
   
Dated: May 21, 2013 By: /s/ David Knepper
  David Knepper
  Director

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