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, 2014
☐ TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number 000-55278
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 30, 2014, there were
3,491,768,839 shares of the registrant’s $0.00001 par value common stock issued and outstanding.
PETRON ENERGY II, INC.
TABLE OF CONTENTS
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Page No. |
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PART I - FINANCIAL INFORMATION |
|
Item 1. |
|
Financial Statements |
F-1 |
Item 2. |
|
Management's Discussion and Analysis of Financial Condition and Results of Operations |
2 |
Item 3. |
|
Quantitative and Qualitative Disclosures About Market Risk |
7 |
Item 4. |
|
Controls and Procedures |
7 |
|
|
PART II - OTHER INFORMATION |
|
Item 1. |
|
Legal Proceedings |
8 |
Item1A. |
|
Risk Factors |
8 |
Item 2. |
|
Unregistered Sales of Equity Securities and Use of Proceeds |
8 |
Item 3. |
|
Defaults Upon Senior Securities |
10 |
Item 4. |
|
Mine Safety Disclosures |
10 |
Item 5. |
|
Other Information |
10 |
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," "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 |
|
|
|
|
CONSOLIDATED BALANCE SHEETS as of September 30, 2014 (unaudited) and December 31, 2013 |
|
|
F-2 |
CONSOLIDATED STATEMENTS OF OPERATIONS for the three months and nine months ended September 30, 2014 and 2013 (unaudited) |
|
|
F-3 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT for the year ended December 31, 2013 and the nine months ended September 30, 2014 (unaudited) |
|
|
F-4 |
CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine months ended September 30, 2014 and 2013 (unaudited) |
|
|
F-5 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS |
|
|
F-6 |
PETRON ENERGY II, INC. |
CONSOLIDATED BALANCE SHEETS |
| |
| September 30, | | |
| December 31, | |
| |
| 2014 | | |
| 2013 | |
ASSETS | |
| (unaudited) | | |
| (audited) | |
Current Assets | |
| | | |
| | |
Cash | |
$ | 53,957 | | |
$ | 105 | |
Accounts Receivable | |
| 15,603 | | |
| 24,342 | |
Total Current Assets | |
| 69,560 | | |
| 24,447 | |
| |
| | | |
| | |
Pipeline, net of accumulated depreciation of $371,340 and $320,452, respectively | |
| 646,660 | | |
| 697,548 | |
Producing Oil & Gas Properties, net of accumulated depletion of $917,795 and $837,759,
respectively | |
| 2,495,809 | | |
| 1,803,632 | |
Other Depreciable Equipment, net of accumulated depreciation of $233,437 and $125,309,
respectively | |
| 524,601 | | |
| 609,732 | |
Other Assets | |
| 5,487 | | |
| 1,532 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 3,742,117 | | |
$ | 3,136,891 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Bank Overdraft | |
$ | — | | |
$ | 57,942 | |
Accounts Payable--Trade | |
| 592,674 | | |
| 1,282,779 | |
Accounts Payable--Related Party | |
| — | | |
| 224,425 | |
Accrued Liabilities | |
| 190,610 | | |
| 219,649 | |
Derivative Liability | |
| 9,724,552 | | |
| 960,047 | |
Notes Payable--current | |
| 2,439,030 | | |
| 1,432,731 | |
Total Current Liabilities | |
| 12,946,866 | | |
| 4,177,573 | |
| |
| | | |
| | |
Asset Retirement Obligation | |
| 344,790 | | |
| 220,347 | |
Stock Issuance Liability | |
| 543,896 | | |
| 946,551 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 13,835,552 | | |
| 5,344,471 | |
| |
| | | |
| | |
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, 544,440 and 947,498 shares issued and outstanding, respectively | |
| 544 | | |
| 947 | |
Common Stock, $0.00001 par value, 5,000,000,000 shares authorized, 914,622,402 and
884,172 issued and outstanding, respectively | |
| 9,146 | | |
| 9 | |
Additional Paid-in Capital | |
| 30,634,421 | | |
| 21,913,781 | |
Accumulated Deficit | |
| (40,737,547 | ) | |
| (24,122,318 | ) |
Total Stockholders' Deficit | |
| (10,093,435 | ) | |
| (2,207,580 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | |
$ | 3,742,117 | | |
$ | 3,136,891 | |
The accompanying notes
are an integral part to these consolidated financial statements.
PETRON ENERGY II, INC. |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(Unaudited) |
| |
| |
| |
| |
|
| |
| |
| |
| |
|
| |
Three Months Ended September 30, | |
Nine Months Ended September 30, |
| |
2014 | |
2013 | |
2014 | |
2013 |
| |
| |
| |
| |
|
Revenues | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Oil and Gas Sales | |
$ | 62,402 | | |
$ | 76,403 | | |
$ | 173,929 | | |
$ | 204,037 | |
| |
| | | |
| | | |
| | | |
| | |
Costs and Expenses | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Cost of Revenue | |
| 158,252 | | |
| 133,753 | | |
| 480,188 | | |
| 475,750 | |
Depletion and Depreciation | |
| 87,221 | | |
| 108,904 | | |
| 239,016 | | |
| 233,149 | |
Derivative Expense | |
| 9,148,620 | | |
| 42,052 | | |
| 13,608,647 | | |
| 283,352 | |
General and Administrative | |
| 565,254 | | |
| 138,497 | | |
| 1,996,057 | | |
| 1,120,675 | |
Interest | |
| 147,082 | | |
| 122,118 | | |
| 465,250 | | |
| 266,666 | |
Total Expenses | |
| 10,106,429 | | |
| 545,324 | | |
| 16,789,158 | | |
| 2,379,592 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from Operations Before Income Taxes | |
| (10,044,027 | ) | |
| (468,921 | ) | |
| (16,615,229 | ) | |
| (2,175,555 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income Taxes | |
| — | | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Net Loss | |
$ | (10,044,027 | ) | |
$ | (468,921 | ) | |
$ | (16,615,229 | ) | |
$ | (2,175,555 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Loss per share--basic and diluted | |
$ | (0.03 | ) | |
$ | (2.16 | ) | |
$ | (0.14 | ) | |
$ | (18.00 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of shares--basic and diluted | |
| 292,130,121 | | |
| 216,950 | | |
| 119,313,372 | | |
| 120,880 | |
The accompanying notes
are an integral part to these consolidated financial statements.
PETRON ENERGY II, INC. |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT |
For the year ended December 31, 2013 and the nine months ended September 30, 2014 (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
|
|
|
|
Series A |
Series B |
Common Stock |
Additional |
|
|
|
Number |
|
Number |
|
Number |
|
Paid-in |
Accumulated |
|
|
of Shares |
Amount |
of Shares |
Amount |
of Shares |
Amount |
Capital |
Deficit |
Total |
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2012 as originally reported |
1,000 |
$ 1 |
5,910,000 |
5,910 |
11,976,942 |
$ 1,198 |
$ 14,649,439 |
$ (19,821,223) |
$ (5,164,675) |
|
|
|
|
|
|
|
|
|
|
Reverse Stock Split |
|
|
|
|
(11,952,988) |
(1,198) |
1,198 |
- |
- |
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2012 (Restated) |
1,000 |
1 |
5,910,000 |
5,910 |
23,954 |
- |
14,650,637 |
(19,821,223) |
(5,164,675) |
|
|
|
|
|
|
|
|
|
|
Common Stock and Warrants Issued for Services |
|
|
|
|
16,844 |
- |
137,075 |
|
137,075 |
Common Stock Issued in Lawsuit Settlement |
|
|
|
|
5,901 |
- |
138,000 |
|
138,000 |
Common Stock Issued for Loan Fees |
|
|
|
|
6,667 |
- |
160,300 |
|
160,300 |
Common Stock Sales |
|
|
|
|
82,283 |
1 |
525,149 |
|
525,150 |
Conversion of Notes Payable |
|
|
|
|
463,216 |
5 |
586,771 |
|
586,776 |
Derivative Liability Reclassification |
|
|
|
|
|
- |
731,266 |
|
731,266 |
Conversion of Preferred Stock |
|
|
(4,962,502) |
(4,963) |
285,307 |
3 |
4,962,499 |
|
4,957,539 |
Imputed Interest on Shareholder Notes |
|
|
|
|
|
|
22,084 |
|
22,084 |
Net Loss |
|
|
|
|
|
|
|
(4,301,095) |
(4,301,095) |
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2013 |
1,000 |
1 |
947,498 |
947 |
884,172 |
9 |
21,913,781 |
(24,122,318) |
(2,207,580) |
|
|
|
|
|
|
|
|
|
|
Common Stock Issued for Services |
|
|
|
|
3,462,042 |
35 |
252,565 |
|
252,600 |
Common Stock Sales |
|
|
|
|
714,850 |
7 |
383,403 |
|
383,410 |
Issuances Related to Equity Purchase Line |
|
|
|
|
600,000 |
6 |
119,114 |
|
119,120 |
Conversion of Notes Payable |
|
|
|
|
907,640,141 |
9,076 |
2,714,265 |
|
2,723,341 |
Derivative Liability Reclassification |
|
|
|
|
|
|
4,844,162 |
|
4,844,162 |
Conversion of Preferred Stock |
|
|
(403,058) |
(403) |
1,321,197 |
13 |
402,987 |
|
402,597 |
Imputed Interest on Shareholder Notes |
|
|
|
|
|
|
4,144 |
|
4,144 |
Net Loss |
|
|
|
|
|
|
|
(16,615,229) |
(16,615,229) |
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2014 (unaudited) |
1,000 |
$ 1 |
544,440 |
$ 544 |
914,622,402 |
$ 9,146 |
$ 30,634,421 |
$ (40,737,547) |
$ (10,093,435) |
The
accompanying notes are an integral part to these consolidated financial statements.
PETRON ENERGY II, INC. |
CONSOLIDATED STATEMENTS OF CHANGES IN CASH FLOW |
(Unaudited) |
| |
Nine Months Ended September 30, |
| |
2014 | |
2013 |
OPERATING ACTIVITIES | |
| | | |
| | |
Net Loss | |
$ | (16,615,229 | ) | |
$ | (2,175,555 | ) |
Adjustments to reconcile net loss to | |
| | | |
| | |
cash used by operating activities: | |
| | | |
| | |
Depletion and depreciation | |
| 239,016 | | |
| 233,149 | |
Accretion of asset retirement obligation | |
| 12,442 | | |
| — | |
Amortization of debt discount | |
| 87,125 | | |
| 155,760 | |
Imputed interest on shareholder loans | |
| 4,144 | | |
| 22,891 | |
Derivative expense | |
| 13,608,647 | | |
| 283,352 | |
Penalty interest | |
| — | | |
| 45,249 | |
Common stock issued for services | |
| 252,600 | | |
| 95,198 | |
Note payable issued for services | |
| — | | |
| 25,000 | |
Common stock issued for lawsuit settlement | |
| — | | |
| 138,000 | |
Change in other assets and liabilities: | |
| | | |
| | |
Decrease/(Increase) in oil and gas receivables | |
| 8,739 | | |
| (30,583 | ) |
(Increase)/Decrease in other assets | |
| (3,955 | ) | |
| 3,259 | |
(Decrease)/Increase in accounts payable | |
| (941,962 | ) | |
| 243,715 | |
Increase in accrued liabilities | |
| 1,830 | | |
| 173,626 | |
Decrease in accrued liabilities | |
| — | | |
| (3,900 | ) |
| |
| (3,346,603 | ) | |
| (790,839 | ) |
INVESTING ACTIVITIES | |
| | | |
| | |
Investment in oil and gas properties | |
| (565,318 | ) | |
| (267,326 | ) |
Proceeds from the sale of equipment | |
| 24,500 | | |
| — | |
Pipeline investment | |
| — | | |
| (121,000 | ) |
Accounts payable dedicated for asset purchase | |
| — | | |
| 619,000 | |
Purchase of other equipment | |
| (55,996 | ) | |
| (610,016 | ) |
Cash used in investing activities | |
| (596,814 | ) | |
| (379,342 | ) |
FINANCING ACTIVITIES | |
| | | |
| | |
Bank overdraft | |
| (57,942 | ) | |
| 61,737 | |
Proceeds from sales of common stock | |
| 383,410 | | |
| 505,150 | |
Proceeds from equity line | |
| 119,120 | | |
| — | |
Proceeds from notes payable | |
| 4,567,024 | | |
| 674,630 | |
Repayment of notes payable | |
| (1,095,530 | ) | |
| — | |
Increase in deposit to lender | |
| 81,187 | | |
| — | |
Loan fees | |
| — | | |
| (79,825 | ) |
Cash from financing activities | |
| 3,997,269 | | |
| 1,161,692 | |
| |
| | | |
| | |
Decrease in cash | |
| 53,852 | | |
| (8,489 | ) |
Cash at beginning of period | |
| 105 | | |
| 17,089 | |
| |
| | | |
| | |
Cash at end of period | |
$ | 53,957 | | |
$ | 8,600 | |
| |
| | | |
| | |
Supplemental Disclosure of Cash Flow Information | |
| | | |
| | |
Non-Cash Investing and Financing Activities: | |
| | | |
| | |
Notes payable | |
$ | (2,224,133 | ) | |
$ | (221,336 | ) |
Common stock | |
| 1,526,838 | | |
| 107,436 | |
Preferred stock | |
| (403 | ) | |
| (4,521 | ) |
Additional paid-in capital | |
| 5,221,928 | | |
| 4,996,628 | |
Derivative liability | |
| (4,010,872 | ) | |
| (197,426 | ) |
Common stock issuance liability | |
| (402,597 | ) | |
| (4,416,261 | ) |
Accrued liabilities | |
| (64,403 | ) | |
| (4,220 | ) |
Loan fees | |
| — | | |
| (260,300 | ) |
Oil and gas properties | |
| 231,359 | | |
| (185,622 | ) |
Asset retirement obligation | |
| (231,359 | ) | |
| 185,622 | |
Other assets | |
| (46,358 | ) | |
| — | |
| |
$ | — | | |
$ | — | |
The accompanying
notes are an integral part to these consolidated financial statements.
PETRON ENERGY II, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
September 30, 2014 and 2013
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 September 30, 2014 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 two other oil companies.
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, 2014 and 2013 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,
2013. 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, 2014
and 2013. Operating results for the nine month period ended September 30, 2014 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2014.
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 $16,615,229 for the nine month period ended September 30, 2014 (2013 - $2,175,555)
and at September 30, 2014 had an accumulated deficit of $40,737,547 (2013 - $21,996,778). 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. CAPITAL STRUCTURE
On July 3, 2014, the Company
effectuated a reverse stock split of its common shares whereby every five hundred (500) pre-split shares of common stock were exchanged
for one (1) post-split share of the Company’s common stock. All shares of common stock in the financial statements have been
adjusted to reflect this reverse stock split.
On July 14, 2014 the Company
amended its Articles of Incorporation to reduce the number of authorized shares of common stock from 25,000,000,000 to 2,000,000,000.
4. SUBSEQUENT EVENTS
On October 3, 2014 the
Company amended its Articles of Incorporation to increase the number of authorized shares of common stock from 2,000,000,000 to
5,000,000,000.
The Company has applied
for a reverse stock split of its common shares whereby every one thousand five hundred (1,500) pre-split shares of common stock
were exchanged for one (1) post-split share of the Company’s common stock. As of the date of this report, final approval
has not been received.
[End Notes to Financial Statements]
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, 2014 and September 30, 2013
Our net loss for the three
month period ended September 30, 2014 was $10,044,027 as compared to a loss for the three month period ended September 30, 2013
of $468,921. The most significant factor contributing to this loss was related to our effort to satisfy our accounts payable through
the issuance of convertible debt. The significance of this effort can be seen in the following condensed comparison of the results
of operations for the three month periods ended September 30, 2014 and 2013:
| |
For the three Months Ended | |
| |
|
| |
September
30, 2014 | |
September 30, 2013 | |
Increase or (Decrease) | |
% Change |
| |
| |
| |
| |
|
Revenue | |
| 62,402 | | |
| 76,403 | | |
| (14,001 | ) | |
| -18 | % |
Cost of Revenue | |
| 158,252 | | |
| 133,753 | | |
| 24,499 | | |
| 18 | % |
Depletion and Depreciation | |
| 87,221 | | |
| 108,904 | | |
| (21,683 | ) | |
| -20 | % |
Derivative Expense | |
| 9,148,620 | | |
| 42,052 | | |
| 9,106,568 | | |
| 21,655 | % |
General and Administrative Expense | |
| 565,254 | | |
| 138,497 | | |
| 426,757 | | |
| 308 | % |
Interest Expense | |
| 147,082 | | |
| 122,118 | | |
| 24,964 | | |
| 20 | % |
The decrease in revenue
for the quarter is due to lower sales price of approximately 10% plus the timing of a pick-up of the oil from the tanks. There
was a pick-up made on October 2, 2014 that would have added approximately $4,200 to the revenue had the pick-up been made in September.
In the third quarter of
2014 work was done to bring the Knox county wells back on line since approval had been received from the Texas Railroad Commission.
There were no comparable costs in the third quarter of 2013.
The Company obtained approximately
$1,200,000 of convertible debt during the three month period ended September 30, 2014. The cost of the original issue discount
is the reason for the increase in the derivative expense as well as the expense recognized upon conversion of debt incurred previous
to this quarter. The Company’s plan is to decrease the use of convertible debt in the future which will decrease the derivative
expense.
The following table shows
the major changes in the components of the General and Administrative expenses for the three month period ended September 30, 2014
as compared to the three month period ended September 30, 2013:
|
For the three Months Ended |
|
|
|
|
September
30, 2014 |
September 30, 2013 |
Increase or (Decrease) |
|
|
|
|
|
|
|
|
Reclassification of attorney fees |
- |
(139,000) |
139,000 |
|
Prior legal fees billed to the Company in error. Correct billing is to a related party |
Lawsuit accrual |
- |
(20,000) |
20,000 |
|
Lawsuit was settled in 2013, therefore, no further accrual needed in 2014 |
Convertible debt fees |
154,000 |
25,000 |
129,000 |
|
Fees associated with the convertible debt issuances which were much higher in 2014 |
Capitalize prior leasehold costs |
- |
(40,000) |
40,000 |
|
Capitalization of leasehold acquisition costs that were expensed prior to July 2013 |
Directors' fees |
30,000 |
20,000 |
10,000 |
|
Director fees did not start until August 2013 |
Investor relations |
90,000 |
- |
90,000 |
|
Significantly more investor relations activity in 2014 |
Working interest receivable write-off |
7,500 |
- |
7,500 |
|
Instead of trying to collect currently, we will collect from future production |
All other items |
283,754 |
292,497 |
(8,743) |
|
|
Total |
565,254 |
138,497 |
426,757 |
|
|
The increase in debt of
approximately $2,000,000 at September 30, 2014 as compared to September 30, 2013 accounted for approximately $40,000 of increase
in interest. In 2013 we were still amortizing some debt costs. This amortization, which was included in interest, was approximately
$86,000. Included in interest is 2014 are costs of refinancing of approximately $50,000.
For the Nine Month Period Ended September
30, 2014 and September 30, 2013
Our net loss for the nine
month period ended September 30, 2014 was $16,615,229 as compared to a loss for the nine month period ended September 30, 2013
of $2,175,555. As with the period of three months ended September 30,2014 compared to the same period in 2013, the chief contributing
factor to the loss is the derivative expense and interest expense. The derivative expense is due to the impact of the convertible
debt that was obtained by the Company in order to pay the accounts payable. A condensed summary of operations for the period of
nine months ended September 30, 2014 compared to the period of nine months ended September 30, 2013 follows:
| |
For the nine Months Ended | |
| |
|
| |
September
30, 2014 | |
September 30, 2013 | |
Increase or (Decrease) | |
% Change |
| |
| |
| |
| |
|
Revenue | |
| 173,929 | | |
| 204,037 | | |
| (30,108 | ) | |
| -15 | % |
Cost of Revenue | |
| 480,188 | | |
| 475,750 | | |
| 4,438 | | |
| 1 | % |
Depletion and Depreciation | |
| 239,016 | | |
| 233,149 | | |
| 5,867 | | |
| 3 | % |
Derivative Expense | |
| 13,608,647 | | |
| 283,352 | | |
| 13,325,295 | | |
| 4,703 | % |
General and Administrative Expense | |
| 1,996,057 | | |
| 1,120,675 | | |
| 875,382 | | |
| 78 | % |
Interest Expense | |
| 465,250 | | |
| 266,666 | | |
| 198,584 | | |
| 74 | % |
The biggest operating difference
that affected revenue when comparing 2013 and 2014, in addition to the items mentioned above, was the forced stoppage of production
in Knox County Texas as of the end of March 2013. The Texas Railroad Commission required us to cease production until some plugging
work and other items were completed to their satisfaction. Production did not resume in Knox County until July of 2014. The value
of production for the first three months of 2013 was approximately $26,700.
The cost of revenue change
for the six months ended June 30, 2013 compared to the six months ended June 30, 2014 is due to fees related to a Consulting and
Operating Agreement with Petron Energy, Inc. of $25,000 that started in May 2013 being offset by capitalized workover projects
in 2014.
The increase in depletion
and depreciation reflects the depreciation recorded in the first quarter of 2014 related to a significant equipment purchase made
in the third quarter of 2013.
We have raised approximately
$4,090,000 of convertible debt in the nine month period ended September 30, 2014 as compared to $88,000 of convertible debt raised
during the period of nine months ended June 30, 2013. There are beneficial conversion options included in the convertible debt.
The value of these beneficial conversion options is the reason for the increase in the derivative expense. The Company’s
plan is to decrease the use of convertible debt in the future which will decrease the derivative expense.
The following table shows
the major changes in the components of the General and Administrative expenses for the period of nine months ended September 2014
as compared to the period of nine months ended September 2013:
|
For the nine Months Ended |
|
|
|
|
September
30, 2014 |
September
30, 2013 |
Increase or (Decrease) |
|
|
|
|
|
|
|
|
Debt issuance costs--TCA |
- |
196,500 |
(196,500) |
|
Fees associated with new debt in 2013 were not repeated in 2014 |
Reclassification of attorney fees |
- |
(139,000) |
139,000 |
|
Prior legal fees billed to the Company in error. Correct billing is to a related party |
Lawsuit accrual |
- |
185,000 |
(185,000) |
|
Lawsuit was settled in 2013, therefore, no further accrual needed in 2014 |
Convertible debt fees |
549,000 |
100,000 |
449,000 |
|
Fees associated with the convertible debt issuances which were much higher in 2014 |
Capitalize prior leasehold costs |
- |
(40,000) |
40,000 |
|
Capitalization of leasehold acquisition costs that were expensed prior to July 2013 |
S-1 fees |
13,500 |
- |
13,500 |
|
No S-1 was file in 2013 |
Directors' fees |
120,000 |
20,000 |
100,000 |
|
Director fees did not start until August 2013 |
Payroll |
60,000 |
- |
60,000 |
|
CFO was added to payroll in July 2013. The amount represents net increase over CFO costs in professional fees. |
Investor relations |
435,500 |
27,000 |
408,500 |
|
Significantly more investor relations activity in 2014 |
Working interest receivable write-off |
48,500 |
- |
48,500 |
|
Instead of trying to collect currently, we will collect from future production |
All other items |
769,557 |
771,175 |
(1,618) |
|
|
Total |
1,996,057 |
1,120,675 |
875,382 |
|
|
In addition to the
increase in the outstanding debt, costs related to early debt retirements in 2014 have been recorded in interest expense. These
two factors are the chief reasons for the increase in the interest expense.
Liquidity and Capital Resources
As of September 30, 2014,
we had a working capital deficit of approximately $12,880,000 as compared to a deficit in working capital of approximately $4,153,000
at December 31, 2013. The increase in the working capital deficit is due the combination of an increase in the derivative liability
and current notes payable of approximately $9,800,000 which more than offset a decrease in accounts payable and accrued expenses
of approximately $1,000,000. We intend to fund ongoing operations by continuing to raise capital from debt and equity sources.
Our efforts for the quarter ended September 30, 2014 resulted in capital being raised in the amount of approximately $1,522,000.
A significant part of our capital plan is to continue to draw down from the $10,000,000 investment agreement with CPUS Investment
Group, LLC dated December 13, 2013 (the “Investment Agreement”) that is in place. Pursuant to the terms of the Investment
Agreement, the investor must fund requests made by the Company to purchase stock as long as the ownership limits are met. The purchase
price of the stock per the Investment Agreement is 70% of the lowest closing bid price in the 10 days immediately before a funding
request. In addition, management plans to continue to raise additional funds through equity and/or debt financing, but there is
no certainty that such financing will be available or that it will be available at acceptable terms.
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 sales of our common stock and debt 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
Evaluation of disclosure controls and
procedures
Our Chief Executive Officer
and Principal Financial Officer, after evaluating the effectiveness of our "disclosure controls and procedures" (as defined
in the Securities Exchange Act of 1934, as amended (“Exchange Act”) Rules 13a-15(e) and 15d-15(e)) as of the end of
the period covered by this quarterly report (the "Evaluation Date"), has concluded that as of the Evaluation Date, our
disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose
in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.
Based on this evaluation,
our principal executive and principal financial and accounting officer concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were not effective.
Changes in Internal Control over Financial Reporting
There have been no changes
in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange
Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the
Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the
Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it
makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current
information and legal advice and may be adjusted from time to time according to developments.
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 Company
issued its common stock during the quarter ended September 30, 2014 in the following transactions:
|
• |
Sold an aggregate
of 120,000 shares of the Company’s restricted common stock to 1 accredited investor in a private
transaction for consideration of $30,000. |
|
• |
24,998 shares of the Company’s Series B Convertible Preferred Stock were converted into an aggregate of 713,063 shares of the common stock of the Company. |
|
• |
Issued 3,167,682 shares of the Company’s restricted common stock to the Company’s directors as compensation for services rendered to the Company. |
|
• |
Issued 78,252,380 shares of its common stock to AGS Capital Group, LLC in connection with convertible promissory notes entered into by and between the Company and AGS Capital Group, LLC related to 3(a)(9) transactions. |
|
• |
Issued 63,024,428 shares of its common stock to WHC Capital, LLC in connection with convertible promissory notes entered into by and between the Company and WHC Capital, LLC related to 3(a)(9) transactions. |
|
• |
Issued 86,642,124 shares of its common stock to Asher Enterprises, Inc. in connection with convertible promissory notes entered into by and between the Company and Asher Enterprises, Inc. |
|
• |
Issued 86,760,193 shares of its common stock to LG Capital Funding, LLC in connection with convertible promissory notes entered into by and between the Company and LG Capital Funding, LLC related to 3(a)(9) transactions. |
|
• |
Issued 124,736,913 shares of its common stock to Union Capital, LLC in connection with convertible promissory notes entered into by and between the Company and Union Capital, LLC related to 3(a)(9) transactions. |
|
• |
Issued 106,062,259 shares of its common stock to Darling Capital, LLC in connection with convertible promissory notes entered into by and between the Company and Darling Capital, LLC related to 3(a)(9) transactions. |
|
• |
Issued 14,190,000 shares of its common stock to an Institutional Investor in connection with a debt exchange agreement entered into by and between the Company and the Institutional Investor related to 3(a)(9) transactions. |
|
• |
Issued 48,400,000 shares of its common stock to JMJ Financial in connection with a convertible promissory note entered into by and between the Company and JMJ Financial. |
|
• |
Issued 112,289,908 shares of its common stock to GEL Properties, LLC in connection with a convertible promissory note entered into by and between the Company and GEL Properties, LLC related to 3(a)(9) transaction. |
|
• |
Issued 155,614,596 shares of its common stock to Redwood Management, LLC in connection with convertible promissory notes entered into by and between the Company and Redwood Management, LLC related to 3(a)(9) transactions. |
|
• |
Issued 14,060,000 shares of its common stock to investors related to debt assumption agreements by and between
the investors and the Company related to 3(a)(9) transactions.
|
|
• |
Issued 14,000,000 shares of its common stock to Carebourn Capital, LP in connection with a convertible promissory note entered into by and between the Company and Carebourn Capital, LP related to a 3(a)(9) transaction. |
Subsequent
to the quarter ended September 30, 2014, the Company issued shares of common stock in the following transactions:
|
• |
Issued 10,659,898 shares of the Company’s restricted common
stock to the Company’s directors as compensation for services rendered to the Company. |
|
• |
Issued 510,700,227 shares of its common stock to Redwood Management, LLC in connection with convertible promissory notes entered into by and between the Company and Redwood Management, LLC related to 3(a)(9) transactions. |
|
• |
Issued 281,951,552 shares of its common stock to LG Capital Funding, LLC in connection with convertible promissory notes entered into by and between the Company and LG Capital Funding, LLC related to 3(a)(9) transactions. |
|
• |
Issued 47,678,087 shares of its common stock to Union Capital, LLC in connection with convertible promissory notes entered into by and between the Company and Union Capital, LLC related to 3(a)(9) transactions. |
|
• |
Issued 50,000 shares of its common stock to an investor related to a debt assumption agreement by and between
the investor and the Company
related to a 3(a)(9) transaction.
|
|
• |
Issued 151,317,464 shares
of its common stock to AGS Capital Group, LLC in connection with convertible promissory notes entered into by and between the
Company and AGS Capital Group, LLC related to 3(a)(9) transactions. |
|
• |
Issued 173,685,714
shares of its common stock to Asher Enterprises, Inc. in connection with convertible promissory notes entered into by and between
the Company and Asher Enterprises, Inc.
|
|
• |
Issued 326,000,000
shares of its common stock to Carebourn Capital, LP in connection with a convertible promissory note entered into by and between
the Company and Carebourn Capital, LP related to a 3(a)(9) transaction.
|
|
• |
Issued 482,092,938
shares of its common stock to Darling Capital, LLC in connection with convertible promissory notes entered into by and between
the Company and Darling Capital, LLC related to 3(a)(9) transactions.
|
|
• |
Issued 226,310,328
shares of its common stock to GEL Properties, LLC in connection with a convertible promissory note entered into by and between
the Company and GEL Properties, LLC related to a 3(a)(9) transaction.
|
|
• |
Issued 249,500,000
shares of its common stock to JMJ Financial in connection with a convertible promissory note entered into by and between the Company
and JMJ Financial.
|
|
• |
Issued 25,170,000
shares of its common stock to WHC Capital, LLC in connection with convertible promissory notes entered into by and between the
Company and WHC Capital, LLC related to 3(a)(9) transactions.
|
We believe that the issuance and sale of
the above securities were exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue
of Section 4(2), Regulation D and/or Regulation S. The securities were issued directly by us and did not involve a public offering
or general solicitation. The recipient of the securities was afforded an opportunity for effective access to files and records
of our company that contained the relevant information needed to make their investment decision, including our financial statements
and 34 Act reports. We reasonably believed that the recipient, immediately prior to issuing the securities, had such knowledge
and experience in our financial and business matters that she was capable of evaluating the merits and risks of its investment.
The recipient had the opportunity to speak with our management on several occasions prior to her investment decision. There were
no commissions paid on the issuance and sale of the shares
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4. MINE SAFETY DISCLOSURES
NONE.
ITEM 5. OTHER INFORMATION
Quarterly Events
NONE
Subsequent Events
NONE
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 |
Exhibit 3.2a(4) |
Certificate of Amendment to Articles of Incorporation dated December 5, 2013 increasing authorized common stock to 2,989,999,999 shares |
Exhibit 3.2b(5) |
Certificate of Amendment to Articles of Incorporation dated February 4, 2014 increasing authorized common stock to 6,000,000,000 shares |
Exhibit 3.2c(5) |
Certificate of Amendment to Articles of Incorporation dated February 27, 2014 increasing authorized common stock to 15,000,000,000 shares |
Exhibit 3.2d(6) |
Certificate of Amendment to Articles of Incorporation dated March 27, 2014 changing the par value of the common stock from $0.001 to $0.0001 |
Exhibit 3.2e(8) |
Certificate of Amendment to Articles of Incorporation dated May 30, 2014 increasing authorized common stock to 25,000,000,000 shares |
Exhibit 3.2f(9)
|
Certificate of Amendment to Articles
of Incorporation dated June 20, 2014 changing the par value of the common stock from $0.0001 to $0.00001 |
Exhibit 3.2g |
Certificate of Amendment to Articles of Incorporation
dated October 3, 2014 changing the authorized common stock to 5,000,000,000 shares filed herewith |
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(7) |
Reserve Report of Forrest A. Garb & Associates, Inc., Independent Petroleum Engineers for the Year Ended December 31, 2013 |
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.
(4) Filed as an
exhibit to the Company’s S-1 Registration Statement filed with the Commission on December 16, 2013 and incorporated herein
by reference.
(5) Filed as an
exhibit to the Company’s Amendment 2 to its S-1 Registration Statement filed with the Commission on March 3, 2014 and incorporated
herein by reference.
(6) Filed as an
exhibit to the Company’s Report on Form 8-K filed with the Commission on April 3, 2014 and incorporated herein by reference.
(7) Filed as an
exhibit to the Company’s Report on Form 10-K filed with the Commission on April 9, 2014, and incorporated herein by reference.
(8) Filed as an
exhibit to the Company’s Report on Form 8-K filed with the Commission on June 3, 2014, and incorporated herein by reference.
(9) Filed as an exhibit
to the Company’s Report on Form 8-K filed with the Commission on June 20, 2014, and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
Petron Energy II, Inc. |
|
|
Dated: November 7, 2014 |
By: /s/ Floyd L. Smith |
|
Floyd L. Smith |
|
Chief Executive Officer |
|
Petron Energy II, Inc. |
|
|
Dated: November 7, 2014 |
By: /s/ Bob Currier |
|
Bob Currier |
|
Chief Financial Officer |
Exhibit 3.2
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 7, 2014 |
By: /s/ Floyd L. Smith |
|
Floyd Smith |
|
Principal Executive Officer |
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 7, 2014 |
By: /s/ Bob Currier |
|
Bob Currier |
|
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 September 30, 2014 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 7, 2014 |
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.
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, 2014 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 7, 2014 |
By: /s/Bob Currier |
|
Bob Currier |
|
Chief Financial Officer |