Petron Energy II, Inc. company history: the story so far

History

A shell company that once ran restaurants was taken over by Petron in 2011 to become an oil and gas business, then leaned on debt and stock-based financing.

2011-2012: From restaurants to oil and gas

The company's filings began under the name Restaurant Concepts of America Inc. On August 9-10, 2011, Petron Energy II, controlled by Floyd L. Smith, bought 10,000,000 restricted shares, 98.9% of the company, from three selling shareholders for $232,750. Smith became sole officer and director.

A deal signed on August 12 and amended on August 15 had the company buy substantially all of Petron's oil and gas assets for 200,000 common shares and 1,000 preferred shares giving Smith 51% of the vote. Of Petron's purchased shares, 9,400,000 were to be cancelled, leaving Petron with 87.9%. Closing was required by August 28, 2011, and the company expected to drop its restaurant operations. The deal also covered a $8,000-a-month management agreement with ASL Energy Corp and a five-year, $200,000-a-year employment agreement for Smith. The records seen do not confirm that the Petron purchase closed.

On February 9, 2012, the company agreed to acquire all assets of ONE Energy International Corp and its affiliates for 5,910,000 shares of a new Series B Convertible Preferred stock, which could dilute common holders when converted. The auditor LBB & Associates was replaced by Killman, Murrell & Company; LBB's reports for 2010 and 2011 had carried a going-concern warning, meaning doubt that the company could keep operating.

2013-2014: Borrowing and stock-funded financing

The record is quiet for 2012 after February. In 2013 the company turned to outside funding. A credit agreement with TCA Global Credit Master Fund, effective April 16, 2013, let the company and its two Texas subsidiaries borrow up to $5,000,000 at 11% interest, secured by a first-priority lien on their property. It ran six months with an option to renew for six more, and TCA received 3,333,334 restricted shares. It was the first debt facility in the filings seen.

On December 12, 2013, the company agreed that PUS Income Group could buy up to $10,000,000 of its stock over 36 months at a 30% discount to the lowest recent closing price. It reserved 150,866,346 shares, 42.68% of shares then outstanding.

On April 3, 2014, an institutional investor holding $393,268 of debt securities and options bought from TCA agreed to swap them for stock, starting with 30,303,030 shares, with more exchanges possible. The share counts show a reduction to 884,172 by 2013 and a rise to 3,491,768,839 by 2014; the beats do not explain either change. As of April 7, 2014, the going-concern doubt and the debt exchanges remained open.

Written from the 5 story beats below (2011 to 7 Apr 2014), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

shares on issue market cap (log scale)

20141.86bn shares · US$4.5m market cap

7 Apr
On April 3, 2014, Petron Energy II agreed to let an unnamed institutional investor swap $393,268 of company debt securities and options, which the investor bought from TCA, for common stock. The investor gets 30,303,030 shares for the first exchange and may exchange the rest when it chooses, so more dilution may follow. This turns part of the debt that originated with the TCA facility into shares; the filing does not say how that debt relates to the $5,000,000 credit agreement.
capital raising announcement
1.86bn shUS$4.5m

2013222m shares · US$778k market cap

13 Dec
On December 12, 2013, Petron Energy II agreed with PUS Income Group, LLC (also named CP Us Income Group in the exhibits) that it can sell up to $10,000,000 of common stock to that investor over 36 months, at a 30% discount to the lowest closing price in the prior ten trading days. The company reserved 150,866,346 shares for this, which the filing says would be 42.68% of current shares outstanding, so heavy dilution is possible if it is used fully. It also owes a $12,500 commitment fee paid in shares and must file a resale registration statement within 21 days of closing.
material agreement
222m shUS$778k
7 May
Petron Energy II signed a credit agreement dated March 31, 2013 (effective April 16, 2013) with TCA Global Credit Master Fund, LP, letting the company and its two Texas subsidiaries (Petron Energy II Pipeline and Petron Energy II Well Service) borrow up to $5,000,000 in revolving loans at 11% interest. The loans are secured by a first-priority lien on the borrowers' property, run for six months with an option to renew for six more, and come with fees plus 3,333,334 restricted common shares issued to TCA, which dilutes existing holders. This is the company's first debt facility in the filings seen, which previously showed none.
capital raising announcement
34.8m sh

201211.1m shares

17 Feb
On February 9, 2012 Petron Energy II agreed to acquire all assets of ONE Energy International Corp and its affiliates in exchange for 5,910,000 shares of a new Series B Convertible Preferred stock (up to 6 million authorized). This carries out the ONE Energy asset acquisition described in the August 2011 deal; existing common holders face possible dilution when the preferred converts (inference). The filing also reports that the auditor LBB & Associates was dismissed and Killman, Murrell & Company engaged, with no disagreements, though LBB's reports for 2010 and 2011 carried a going-concern uncertainty.
asset acquisition disposition
11.1m sh

2011111m shares

16 Aug
This filing is made under the name Restaurant Concepts of America Inc. (same file number 333-160517 as Petron Energy II, which later files under that name). On August 9-10, 2011 Petron Energy II, controlled by Floyd L. Smith, bought 10,000,000 restricted shares (98.9% of the company) from three selling shareholders for $232,750, and Smith became sole officer and director. A deal signed August 12 (amended August 15) has the company buy substantially all of Petron's oil and gas assets for 200,000 common shares and 1,000 preferred shares giving Smith 51% of the vote, with 9,400,000 of Petron's purchased shares to be cancelled so Petron would hold 87.9%. Closing was required by August 28, 2011 subject to conditions, and the company expected to drop restaurant operations for oil and gas. It also involves assigning a $8,000-a-month management agreement with ASL Energy Corp. and an agreement to acquire ONE Energy Capital and ONE Energy International assets for convertible preferred stock valued at $5,910,000. Smith would get a five-year, $200,000-a-year employment agreement.
capital raising announcement
111m sh