Securities registered pursuant to Section 12(b) of the Act: | | | Title of each class | Trading Symbol(s)Symbol(s) | Name of each exchange on which registered | | | | Common stock, par value $0.001 per share | N/A | N/A | |
Indicate by check mark whether the registrant (1) has filed all report 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 every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | Large accelerated filer | ☐ | Accelerated filer | ☐ | | Non-accelerated filer | ☐ | Smaller reporting company | ☑ | | | | Emerging growth company | ☑ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑ There were, 23,776,39335,152,658 shares of the Company’s common stock outstanding as on August 28June 30th 2020.2021. Table of Contents
| | | | | | | TABLE OF CONTENTS | | | | PAGE | | | Cautionary Statements Relevant to Forward-Looking Information | 32
| | | | | | | PART I | | | | FINANCIAL INFORMATION | | Item 1. | Consolidated Financial Statements | | | | Consolidated Statement of Comprehensive Income for the sixthree months ended June 30,March 31, 2021 and 2020 and 2019 | 43
| | | Consolidated Balance Sheet at June 30, 2020March 31, 2021 and December 31, 20192020 | 54
| | | Consolidated Statement of Cash Flows for the sixthree months Ended June 30,March 31, 2021 and 2020 and 2019 | 65
| | | Consolidated Statement of Equity for the sixthree months Ended June 30,March 31, 2021 and 2020 and 2019 | 76
| | | Notes to Consolidated Financial Statements | 8-117-11
| Item 2. | Management’s Discussion and Analysis of the Financial Condition and Results of Operations | 12-1812-16
| Item 3. | Quantitative and Qualitative Disclosures About Market Risks | 1816
| Item 4. | Controls and Procedures | 1816
| | | | | | | PART IIII | | | | OTHER INFORMATION | | Item 1. | Legal Proceedings | 1916
| Item 1A. | Risk Factors | 1916
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 20
| Item 3.
| Defaults Upon Senior Securities
| 20
| Item 4.
| Mine Safety Disclosure
| 20
| Item 5.
| Other Information
| 2017
| Item 6. | Exhibits | 2117
| | | Signatures | 2219
| | | | |
PETROGRESS, INC. Unless the context otherwise indicates, references to “Petrogress Inc.” “we”, “our”, or “us”, or the “Company” in this Form 10-Q are references to Petrogress Inc, -a Delaware corporation- including its wholly owned and majority-owned subsidiaries, and its ownership interests in equity method investees (corporate entities, partnerships, limited liability companies and other ventures over which Petrogress Inc exerts significant influence by virtue of its ownership interest) companies. Our significant subsidiaries are “Petronav Carriers LLC.,”, and “Petrogress Int’l LLC.” and “Petrogres Africa Co. Limited”. CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION This quarterly report of Petrogress Corporation contains forward-looking statements relating to Petrogress operations that are based on management’s current expectations, estimates and projections about the petroleum, chemicals, transactions, vessels and other energy-related industries. All statements in this Report that are not representations of historical fact are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and subject to the safe-harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words or phrases such as “anticipates,” “expects,” “intends,” “plans,” “targets,” “forecasts,” “projects,” “believes,” “seeks,” “schedules,” “estimates,” “positions,” “pursues,” “may,” “could,” “should,” “budgets,” “outlook,” “trends,” “guidance,” “focus,” “on schedule,” “on track,” “is slated,” “goals,” “objectives,” “strategies,” “opportunities” and similar expressions are intended to identify such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Petrogress undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: changing crude oil prices; changing refining, marketing and chemicals margins; our ability to realize anticipated cost savings and expenditure reductions; actions of competitors or regulators; public health crises, such as pandemics (including coronavirus (COVID-19)) and epidemics, and any related government policies and actions; timing of exploration expenses; timing of crude oil liftings; the competitiveness of alternate-energy sources or product substitutes; technological developments; the results of operations and financial condition of the our suppliers, vendors, partners and equity affiliates, particularly during extended periods of low prices for crude oil during the COVID-19 pandemic; the inability or failure of our joint-venture partners to fund their share of operations and development activities; the potential failure to achieve expected net production from existing and future crude oil development projects; potential delays in the development, construction or start-up of planned projects; the potential disruption or interruption of our operations due to war, accidents, piracy, political events, civil unrest, severe weather, cyber threats and terrorist acts, crude oil production quotas or other actions that might be imposed by the Organization of Petroleum Exporting Countries, or other natural or human causes beyond the company's control; changing economic, regulatory and political environments in the countries in which we operate; general domestic and international economic and political conditions; the potential liability for remedial actions or assessments under existing or future environmental regulations and litigation; significant operational, investment or product changes required by existing or future environmental statutes and regulations, including international agreements and national or regional legislation and regulatory measures to limit or reduce greenhouse gas emissions; the potential liability resulting from other pending or future litigation; our future acquisition or disposition of assets or shares or the delay or failure of such transactions to close based on required closing conditions; the potential for gains and losses from asset dispositions or impairments; government-mandated sales, divestitures, recapitalizations, industry-specific taxes, changes in fiscal terms or restrictions on scope of company operations; foreign currency movements compared with the U.S. dollar; material reductions in corporate liquidity and access to debt markets; and our ability to identify and mitigate the risks and hazards inherent in operating in the global energy industry; the company’s ability to identify and mitigate the risks and hazards inherent in operating in the global energy industry; and the factors set forth under the heading “Risk Factors” on pages 1110 through 1615 of the company’s 20192020 Annual Report on Form 10-K, on pages 2016 and 2117 of this report and in subsequent filings with the U.S. Securities and Exchange Commission. Other unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements. PART I– – FINANCIAL INFORMATION Item Item 1 – Consolidated Financial Statements
PETROGRESS, INC. and, AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | | | Six Months Ended June 30, | | | Three months Ended June 30, | | | (UNAUDITED) | | | Three months Ended March 31, | | | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | Revenues: | | | | | | | | | | | | | | | | | | | | | | | Revenues from crude oil sales | | $ | 749,200 | | | | 1,917,178 | | | | 133,200 | | | | - | | | $ | - | | | $ | 616,000 | | Revenues from gas oil sales | | | 622,000 | | | | 300,000 | | | | - | | | | 300,000 | | | | 870,000 | | | | 1,166,000 | | Revenues for lubricants sales | | | 143,501 | | | | - | | | | - | | | | - | | | | - | | | | 113,802 | | Revenues from freights & hires | | | 218,000 | | | | 298,500 | | | | (34,080 | ) | | | 104,000 | | | | 230,000 | | | | 252,080 | | Other Revenues | | | 34,080 | | | | 11,000 | | | | 34,080 | | | | - | | | | 404,235 | | | | - | | Total Revenues | | $ | 1,766,781 | | | | 2,526,678 | | | | 133,200 | | | | 404,000 | | | $ | 1,504,235 | | | $ | 2,147,882 | | Costs and other Deductions: | | | | | | | | | | | | | | | | | | | | | | | | | Costs of goods sold (crude oil) | | | (1,250,000 | ) | | | (1,165,752 | ) | | | (678,000 | ) | | | - | | | | - | | | | (572,000 | ) | Costs of goods sold (gas oil) | | | (520,000 | ) | | | (240,000 | ) | | | - | | | | (240,000 | ) | | | (630,000 | ) | | | (745,513 | ) | Costs of goods sold (lubricants) | | | (129,000 | ) | | | (41,202 | ) | | | - | | | | (41,202 | ) | | | - | | | | (35,697 | ) | Vessels Leases & charters | | | | (489,465 | ) | | | | | Total Cost and Other Deductions | | $ | (1,899,000 | ) | | | (1,446,954 | ) | | | (678,000 | ) | | | (281,202 | ) | | $ | (1,119,465 | ) | | $ | (1,353,210 | ) | Gross profit | | $ | (132,219 | ) | | | 1,079,724 | | | | (544,800 | ) | | | 122,798 | | | $ | 384,770 | | | $ | 794,672 | | Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | Corporate expenses | | | (293,168 | ) | | | (83,611 | ) | | | (217,420 | ) | | | (78,548 | ) | | | (8,661 | ) | | | (75,748 | ) | Operating expenses of commodities trade | | | | (89,796 | ) | | | - | | Fleet Operating expenses | | | | (58,970 | ) | | | - | | General and administrative expenses | | | (1,187,591 | ) | | | (877,563 | ) | | | (88,875 | ) | | | (334,691 | ) | | | (202,078 | )) | | | (1,098,716 | ) | Amortization expense | | | (8,790 | ) | | | (6,687 | ) | | | (259 | ) | | | - | | | | (1,534 | ) | | | (8,531 | ) | Depreciation expense | | | (306,895 | ) | | | (428,048 | ) | | | (152,199 | ) | | | (230,768 | ) | | | (152,822 | ) | | | (154,696 | ) | Total operating expenses | | | (1,796,444 | ) | | | (1,395,909 | ) | | | (458,753 | ) | | | (644,007 | ) | | | (513,861 | ) | | | (1,337,691 | ) | Operating income / (loss) before other expenses and income tax | | $ | (1,928,663 | ) | | | (316,185 | ) | | | (1,003,553 | ) | | | (521,209 | ) | | $ | (129,091 | ) | | $ | (543,019 | ) | Other Income / (expense), net: | | | | | | | | | | | | | | | | | | | | | | | | | Interest and finance expenses | | | (19,638 | ) | | | (15,493 | ) | | | (12,248 | ) | | | (3,130 | ) | | | - | | | | (7,390 | ) | Amortization of note discount | | | (174,292 | ) | | | - | | | | (74,590 | ) | | | - | | | | - | | | | (99,702 | ) | Change in fair market value of derivative liabilities | | | (886,487 | ) | | | - | | | | (629,679 | ) | | | - | | | | - | | | | (256,808 | ) | Other income / (expense), net | | | (68,152 | ) | | | (538,302 | ) | | | (52,327 | ) | | | (490,900 | ) | | | (17,094 | ) | | | (15,825 | ) | Total other income / (expense), net | | $ | (1,148,569 | ) | | | (553,795 | ) | | | (768,844 | ) | | | (494,030 | ) | | $ | (17,094 | ) | | $ | (379,725 | ) | Income / (loss) before income taxes | | $ | (3,077,232 | ) | | | (869,980 | ) | | | (1,772,397 | ) | | | (1,015,239 | ) | | $ | (146,185 | ) | | $ | (922,744 | ) | Income tax expense | | | - | | | | - | | | | | | | | | | | | - | | | | - | | Net income / (loss) | | $ | (3,077,232 | ) | | | (869,980 | ) | | | (1,772,397 | ) | | | (1,015,239 | ) | | $ | (146,185 | ) | | $ | (922,744 | ) | Net income / (loss) attributable to: | | | | | | | | | | | | | | | | | | | | | | | | | Shareholders of the Company | | | (3,077,232 | ) | | | (861,098 | ) | | | (1,772,397 | ) | | | (1,011,590 | ) | | | (146,185 | ) | | | (910,397 | ) | Non-controlling interests | | | - | | | | (8,882 | ) | | | - | | | | (3,649 | ) | | | - | | | | (12,347 | ) | Other comprehensive loss, net of tax | | | | | | | | | | | | | | | | | | | | | | | | | Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Comprehensive income / (loss) | | $ | (3,077,232 | ) | | | (869,980 | ) | | | (1,772,397 | ) | | | (1,015,239 | ) | | $ | (146,185 | ) | | $ | (922,744 | ) | Comprehensive income / (loss) attributable to: | | | | | | | | | | | | | | | | | | | | | | | | | Shareholders of the Company | | | (3,077,232 | ) | | | (861,098 | ) | | | (1,772,397 | ) | | | (1,011,590 | ) | | | (146,185 | ) | | | (910,397 | ) | Non-controlling interests | | | - | | | | (8,882 | ) | | | - | | | | (3,649 | ) | | | - | | | | (12,347 | ) | Weighted average number of common shares outstanding | | | | | | | | | | | | | | | | | | | | | | | | | Basic | | | 5,136,808 | | | | 3,842,916 | | | | 5,136,808 | | | | 3,857,162 | | | | 35,151,491 | | | | 4,600,584 | | Diluted | | | - | | | | 3,842,916 | | | | - | | | | 3,857,162 | | | | - | | | | - | | Basic earnings per share | | | (0.60 | ) | | | (0.22 | ) | | | (0.35 | ) | | | (0.26 | ) | | | (0.0042 | ) | | | (0.20 | ) | Diluted earnings per share | | | - | | | | (0.22 | ) | | | - | | | | (0.26 | ) | | | - | | | | - | |
See accompanying notes to consolidated financial statements. PETROGRESS, INC., AND SUBSIDIARIES Consolidated Statement of Balance Sheet (UNAUDITED) | | At March 31, | | | At December 31, | | | | | 2021 | | | 2020 | | ASSETS | | | | | | | | | Current Assets | | | | | | | | | Cash and cash equivalents | | $ | 218,159 | | | $ | 276,035 | | Accounts receivable, net* | | | 3,252,674 | | | | 2,136,790 | | Claims receivable, net | | | 738,224 | | | | 565,023 | | Inventories | | | 682,601 | | | | 903,036 | | Due from affiliated companies | | | - | | | | - | | Prepaid expenses and other current assets | | | 762,355 | | | | 1,428,407 | | Total current assets | | $ | 5,654,013 | | | $ | 5,309,291 | | Non-Current Assets | | | | | | | | | Goodwill | | | - | | | | - | | Contract-related licensing agreements | | | 258,747 | | | | 258,747 | | Investments in subsidiaries | | | 999,881 | | | | | | Right of use assets | | | 639,295 | | | | 669,065 | | Vessels and other fixed assets, net | | | 3,689,997 | | | | 3,829,714 | | Deferred charges, net | | | - | | | | 1,534 | | Security deposit | | | 15,144 | | | | 13,033 | | Total non-current assets | | $ | 5,603,064 | | | $ | 4,772,093 | | Total Assets | | $ | 11,257,077 | | | $ | 10,081,384 | | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | Current Liabilities | | | | | | | | | Accounts payable and accrued expenses** | | | 3,165,021 | | | | 2,000,721 | | Due to related party | | | 551,450 | | | | 695,321 | | Loan facility from related party | | | 185,460 | | | | 169,407 | | Accrued interest | | | 3,129 | | | | 16,682 | | Lease liabilities | | | 12,138 | | | | 12,704 | | Due to affiliated companies | | | - | | | | - | | Short-Term Loans | | | 87,000 | | | | - | | Convertible promissory notes | | | 150,000 | | | | 150,000 | | Derivative liabilities | | | - | | | | - | | Total current liabilities | | $ | 4,154,198 | | | $ | 3,044,835 | | Non-Current Liabilities | | | | | | | | | Lease liabilities | | | 688,780 | | | | 720,855 | | Total liabilities | | $ | 4,842,978 | | | $ | 3,765,690 | | Commitments and Contingencies | | | - | | | | | | Shareholders’ equity: | | | | | | | | | Series A Preferred shares, $100 par value, 100 shares authorized, 100 and 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020. | | $ | 10,000 | | | | 10,000 | | Shares of Common stock, $0.001 par value, 100,000,000 shares authorized, 35,152,558 and 35,151,058 shares issued and outstanding as of March 31, 2021 and December 31, 2020. | | | 35,153 | | | | 35,151 | | Additional paid-in capital | | | 10,800,897 | | | | 10,561,797 | | Accumulated comprehensive loss | | | (10,064 | ) | | | (15,552 | ) | Retained earnings | | | (4,421,887 | ) | | | (4,275,702 | ) | Equity attributable to Shareholders of the Company | | $ | 6,414,099 | | | $ | 6,315,694 | | Non-controlling interests | | | - | | | | - | | Total liabilities and shareholders’ equity | | | 11,257,077 | | | | 10,081,384 | |
* Accounts Receivable includes amount of $570,281 from subsidiaries ** Accounts Payable includes amount of $ 1,031,351 to subsidiaries PETROGRESS, INC. and, AND SUBSIDIARIES Consolidated Statement of Balance Sheet (Unaudited) Cash Flows | | | At June 30, | | | At December 31, | | | | | 2020 | | | 2019 | | ASSETS | | | | | | | | | Current Assets | | | | | | | | | Cash and cash equivalents | | $ | 154,404 | | | $ | 391,360 | | Accounts receivable, net | | | 1,787,917 | | | | 2,011,430 | | Claims receivable, net | | | 375,145 | | | | 478,500 | | Inventories | | | 377,948 | | | | 1,206,612 | | Prepaid expenses and other current assets | | | 2,401,798 | | | | 3,143,221 | | Total current assets | | $ | 5,097,212 | | | | 7,231,123 | | Non-Current Assets | | | | | | | | | Goodwill | | | - | | | | 900,000 | | Contract-related licensing agreements | | | 258,747 | | | | - | | Right of use assets | | | 617,139 | | | | - | | Vessels and other fixed assets, net | | | 3,983,529 | | | | 4,249,763 | | Deferred charges, net | | | 7,172 | | | | 15,629 | | Security deposit | | | 11,762 | | | | 10,584 | | Total non-current assets | | | 4,878,349 | | | | 5,175,976 | | Total Assets | | | 9,975,561 | | | | 12,407,099 | | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | Current Liabilities | | | | | | | | | Accounts payable and accrued expenses | | | 1,640,625 | | | | 1,402,198 | | Due to related party | | | 620,036 | | | | 1,271,450 | | Loan facility from related party | | | 169,407 | | | | 148,900 | | Accrued interest | | | 3,129 | | | | 23,636 | | Lease liabilities | | | 21,930 | | | | - | | Convertible promissory notes | | | 313,204 | | | | 237,197 | | Derivative liabilities | | | 1,696,364 | | | | 809,877 | | Total current liabilities | | | 4,464,695 | | | | 3,893,258 | | Non-Current Liabilities | | | | | | | | | Lease liabilities | | | 604,471 | | | | - | | Total liabilities | | | 5,069,166 | | | | 3,893,258 | | Commitments and Contingencies | | | - | | | | - | | Shareholders’ equity: | | | | | | | | | Series A Preferred shares, $100 par value, 100 shares authorized, 100 and 0 shares issued and outstanding as of June 30, 2020 and December 31, 2019. | | | 10,000 | | | | 10,000 | | Shares of Common stock, $0.001 par value, 50,000,000 shares authorized, 7,833,562 and 4,446,645 shares issued and outstanding as of June 30, 2020 and December 31, 2019. | | | 7,834 | | | | 4,447 | | Additional paid-in capital | | | 9,377,530 | | | | 10,073,810 | | Accumulated comprehensive loss | | | (9,763 | ) | | | (9,763 | ) | Retained earnings | | | (4,479,206 | ) | | | (1,634,645 | ) | Equity attributable to Shareholders of the Company | | | 4,906,395 | | | | 8,443,849 | | Non-controlling interests | | | - | | | | 69,992 | | Total liabilities and shareholders’ equity | | | 9,975,561 | | | | 12,407,099 | |
(UNAUDITED) | | Three months Ended March 31, | | | | | 2021 | | | 2020 | | | CASH FLOW FROM OPERATING ACTIVITIES | | | | | | | | | Net (loss) | | $ | (146,185 | ) | | $ | (922,744 | ) | Adjustments to reconcile net income/ (loss) to net cash provided by operating activities: | | | | | | | | | Depreciation expense | | | 152,822 | | | | 154,696 | | Change in fair value of derivative liabilities | | | - | | | | 256,808 | | Share-based compensation expense | | | 244,590 | | | | 110,119 | | Loss on disposition of fixed assets | | | - | | | | - | | Amortization of discount on convertible note | | | - | | | | 59,750 | | Amount of derivative in excess of face value of PCN | | | - | | | | - | | Gain / (loss) on settlement of convertible promissory notes | | | - | | | | - | | Changes in working capital | | | | | | | | | (Increase) / Decrease in accounts receivable, net | | | (1,115,884 | ) | | | (37,826 | ) | (Increase) / Decrease in claims receivable, net | | | (173,201 | ) | | | 99,955 | | (Increase) / Decrease in inventories | | | 220,435 | | | | (29,351 | ) | (Increase) / Decrease in amounts due from related party | | | - | | | | - | | (Increase) / Decrease in prepaid expenses | | | 666,052 | | | | 952,198 | | Increase / (Decrease) in accounts payable and accrued expenses | | | 1,164,300 | | | | (333,315 | ) | Increase / (Decrease) in amounts due to related party | | | (143,871 | ) | | | - | | Increase / (Decrease) in short terms loan | | | 87,000 | | | | - | | Increase / (Decrease) in accrued interest | | | (13,553 | ) | | | - | | Increase / (Decrease) in lease liabilities | | | (32,641 | ) | | | - | | (Increase) / Decrease in security deposit | | | (2,111 | ) | | | (806 | ) | (Increase) / Decrease in deferred charges, net | | | 1,534 | | | | 5,638 | | CASH PROVIDED BY OPERATING ACTIVITIES | | $ | 909,287 | | | $ | 315,122 | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | Purchase of property, plant and equipment | | | - | | | | (60,113 | ) | Investments in subsidiaries | | | (999,881 | ) | | | - | | Purchase of vessels and other equipment | | | (13,104 | ) | | | - | | Acquisition of intangible assets | | | 29,770 | | | | (258,747 | ) | CASH USED IN INVESTING ACTIVITIES | | | (983,215 | ) | | | (318,860 | ) | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | Proceeds from convertible promissory notes | | | - | | | | - | | Proceeds from loan facility from related party | | | 16,053 | | | | - | | CASH PROVIDED BY FINANCING ACTIVITIES | | $ | 16,053 | | | $ | - | | Effects of exchange rate changes | | | - | | | | - | | NET DECREASE IN CASH | | | (57,875 | ) | | | (3,738 | ) | CASH AT BEGINNING OF YEAR | | | 276,035 | | | | 391,360 | | CASH AT PERIOD END | | $ | 218,159 | | | $ | 387,622 | |
See accompanying notes to consolidated financial statements. PETROGRESS, INC. and, AND SUBSIDIARIES Consolidated Statement of Cash Flows Equity (Unaudited) | | | Six Months Ended June 30, | | | | | 2020 | | | 2019 | | CASH FLOW FROM OPERATING ACTIVITIES | | | | | | | | | Net income / (loss) | | $ | (3,077,232 | ) | | $ | (861,980 | ) | Adjustments to reconcile net income/ (loss) to net cash provided by operating activities: | | | | | | | | | Depreciation expense | | | 306,895 | | | | 428,048 | | Provision for losses on accounts receivable | | | - | | | | - | | Change in fair value of derivative liabilities | | | 629,679 | | | | - | | Share-based compensation expense | | | 424,940 | | | | - | | Loss on disposition of fixed assets | | | - | | | | - | | Amortization of discount on convertible note | | | 174,292 | | | | - | | Amount of derivative in excess of face value of PCN | | | 74,590 | | | | - | | Loss on settlement of loan facility from related party | | | - | | | | - | | Gain / (loss) on settlement of convertible promissory notes | | | 83,933 | | | | 46 | | Elimination of PGAS Africa APIC | | | (755,702 | ) | | | - | | Changes in working capital | | | | | | | | | (Increase) / Decrease in accounts receivable, net | | | 223,513 | | | | 601,374 | | (Increase) / Decrease in claims receivable, net | | | 103,355 | | | | (4,000 | ) | (Increase) / Decrease in inventories | | | 828,664 | | | | (563,928 | ) | (Increase) / Decrease in amounts due from related party | | | 720,000 | | | | - | | (Increase) / Decrease in prepaid expenses | | | 741,423 | | | | 245,796 | | Increase / (Decrease) in accounts payable and accrued expenses | | | 238,427 | | | | 87,763 | | Increase / (Decrease) in amounts due to related party | | | (651,414 | ) | | | 68,976 | | Increase / (Decrease) in accrued interest | | | - | | | | 2,980 | | Increase / (Decrease) in lease liabilities | | | 626,401 | | | | - | | (Increase) / Decrease in security deposit | | | (1,178 | ) | | | 54 | | (Increase) / Decrease in deferred charges, net | | | 8,457 | | | | 6,688 | | CASH PROVIDED BY OPERATING ACTIVITIES | | $ | 699,043 | | | $ | 11,817 | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | Purchase of property, plant and equipment | | | (60,113 | ) | | | (13,440 | ) | Purchase of vessels and other equipment – related party facility | | | - | | | | - | | Purchase of vessels and other equipment | | | - | | | | - | | Acquisition of intangible assets | | | (875,886 | ) | | | - | | CASH USED IN INVESTING ACTIVITIES | | | (935,999 | ) | | | (13,440 | ) | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | Proceeds from convertible promissory notes | | | - | | | | - | | Proceeds from advances from related party | | | - | | | | - | | CASH PROVIDED BY FINANCING ACTIVITIES | | $ | - | | | $ | - | | Effects of exchange rate changes | | | - | | | | - | | NET DECREASE IN CASH | | | (236,956 | ) | | | (1,623 | ) | CASH AT BEGINNING OF YEAR | | | 391,360 | | | | 661,010 | | CASH AT PERIOD END | | $ | 154,404 | | | $ | 659,387 | |
| | | Preferred Shares number | | | Preferred Shares amount | | | Common Stocks Number - Amount | | | Additional Paid -in- capital | | | Accumulated Comprehensive Loss Profit Deficit) | | | Total | | | Non- Controlling interest | | | Total Shareholders Equity | | Balances at December 31, 2019 | | | 100 | | | $ | 10,000 | | | | 4,446,645 | | | $ | 4,447 | | | $ | 10,073,810 | | | $ | ( 9,763 | ) | | $ | ( 1,634,645 | ) | | $ | 8,443,849 | | | $ | 69,992 | | | $ | 8,513,841 | | Common stock issued to settle liabilities | | | - | | | | - | | | | 325,556 | | | | 325 | | | | 101,381 | | | | - | | | | - | | | | 101,706 | | | | - | | | | 101,706 | | Common stock issued for services | | | - | | | | - | | | | 26,000 | | | | 26 | | | | 8,387 | | | | - | | | | - | | | | 8,413 | | | | - | | | | 8,413 | | Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (910,397 | ) | | | (910,397 | ) | | | (12,347 | ) | | | (922,744 | ) | Balances at March 31, 2020 | | | 100 | | | $ | 10,000 | | | | 4,798,201 | | | $ | 4,798 | | | $ | 10,183,578 | | | $ | ( 9,763 | ) | | $ | ( 2,545,042 | ) | | $ | 7,643,571 | | | $ | 57,645 | | | $ | 7,701,216 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances at December 31, 2020 | | | 100 | | | $ | 10,000 | | | | 35,151,058 | | | $ | 35,151 | | | $ | 10,561,797 | | | $ | ( 15,552 | ) | | $ | ( 4,275,702 | ) | | $ | 6,315,694 | | | $ | - | | | $ | 6,315,694 | | Common stock issued for services | | | - | | | | - | | | | 1,500 | | | | 2 | | | | 239,100 | | | | 5,488 | | | | - | | | | 244,590 | | | | , | | | | 244,590 | | Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (146,185 | ) | | | (146,185 | ) | | | - | | | | (146,185 | ) | Balances at March 31, 2021 | | | 100 | | | $ | 10,000 | | | | 35,152,558 | | | $ | 35,153 | | | $ | 10,800,897 | | | $ | ( 10,064 | ) | | $ | ( 4,421,887 | ) | | $ | 6,414,099 | | | $ | - | | | $ | 6,414,099 | |
See accompanying notes to consolidated financial statements. PETROGRESS, INC. and SUBSIDIARIES
Consolidated Statement of Equity (Unaudited)
| | | Total Equity of Petrogress, Inc. Shareholders | | | | | Preferred Shares | | | Common Shares | | | Additional Paid-in Capital | | | Retained Earnings | | | Accumulated Comprehensive (Loss) | | | Total Equity | | | Non-Controlling Interest | | | Total Shareholders Equity | | | Six Months Ended June 30, 2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2018 | | $ | 10,000 | | | $ | 3,829 | | | $ | 9,535,161 | | | $ | 1,315,870 | | | $ | (10,231 | ) | | $ | 10,854,629 | | | $ | 104,159 | | | $ | 10,958,788 | | Shares issued based on convertible notes | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Shares issued based on compensations | | | - | | | | 21 | | | | 41,836 | | | | - | | | | - | | | | 41,836 | | | | - | | | | 41,857 | | Shares issued for liabilities settlement | | | - | | | | 25 | | | | 47,475 | | | | - | | | | - | | | | 47,475 | | | | - | | | | 47,500 | | Elimination of PGAF apic / due from shareholders | | | - | | | | - | | | | 58,405 | | | | - | | | | - | | | | 58,405 | | | | 8,000 | | | | 66,405 | | Net loss | | | - | | | | - | | | | - | | | | (861,098 | ) | | | - | | | | (861,098 | ) | | | (8,882 | ) | | | (869,980 | ) | Other Comprehensive income / (loss) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | | | | | - | | June 30, 2019 Balance | | $ | 10,000 | | | $ | 3,875 | | | $ | 9,682,877 | | | $ | 454,772 | | | $ | (10,231 | ) | | $ | 10,141,293 | | | $ | 103,277 | | | $ | 10,244,570 | | Six Months Ended June 30, 2020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2019 | | $ | 10,000 | | | $ | 4,447 | | | $ | 10,073,810 | | | $ | (1,634,645 | ) | | $ | (9,763 | ) | | $ | 8,443,849 | | | $ | 69,992 | | | $ | 8,513,841 | | Shares issued based on convertible notes | | | - | | | | 3,386 | | | | 351,274 | | | | - | | | | - | | | | 354,60 | | | | - | | | | 354,660 | | Shares issued based on compensations | | | - | | | | 1 | | | | 287 | | | | - | | | | - | | | | 288 | | | | - | | | | 288 | | Shares issued for liabilities settlement | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | Elimination of PGAF apic / due from shareholders | | | - | | | | - | | | | (1,047,841 | ) | | | 232,671 | | | | - | | | | (815,170 | ) | | | (69,992 | ) | | | (885,162 | ) | Net loss | | | - | | | | - | | | | - | | | | (3,077,232 | ) | | | - | | | | (3,077,232 | ) | | | - | | | | (3,077,232 | ) | Other Comprehensive income / (loss) | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | June 30, 2020 Balance | | $ | 10,000 | | | $ | 7,834 | | | $ | 9,377,530 | | | $ | (4,479,206 | ) | | $ | (9 ,763 | ) | | $ | 4,906,395 | | | $ | - | | | $ | 4,906,395 | |
See accompanying notes to consolidated financial statements.
PETROGRESS, INC. Notes to Consolidated Financial StatementsStatements (Unaudited) Petrogress, Inc (PGI), is an integrate energy company, engaged in the upstream, downstream and midstream segments. The company operates Internationally through its wholly owned subsidiaries "Petrogress Int'l LLC.", "Petronav Carriers LLC.", “Petrogress Africa Ltd.”We sell crude oil and “PG Cypyard Offshore terminal Ltd.”. The company also provides sea-transportation services -as anrefined products internationally, to buyers on the spot market and to independent established Maritime Company- by our tankers fleet. The company is registered in Delaware and headquartered from Piraeus-Greece, where the company maintain its principal marketing and operating offices at 1, Akti Xaveriou, 18538 Piraeus, Greece. Our telephone number at that address is +30 (210) 459-9741 and our corporate address and registered agent in Delaware is 1013 Centre Road, Suite 403-A, Wilmington, DE 19805 – USA.entrepreneurs. Impact of the novel coronavirus (COVID-19) pandemic; The outbreak of COVID-19 and decreases in commodity prices resulting from oversupply, and government-imposed travel restrictions haveand other constraints on economic activity caused a significant decreasedecline in the demand for our products and has created disruptions and volatility in the global marketplace beginning late in the secondfirst quarter 2020, which negatively affected significantly our results of operations and cash flows. These conditions have persisted into the second quarter, including a further collapse in commodity prices and sea-transportations, and are expected to negatively affect our results of operations and cash flows as well.throughout 2020. While demand and commodity prices have shown signs of recovery, demand is not back to pre-pandemic levels, and financial results could continue to be challenged in future quarters. There remains a continuingcontinues to be uncertainty regardingand unpredictability around the length and impact ofextent to which the COVID-19 pandemic and associated reductions in demand forwill impact our products, on the energy industry and the outlook for our business.results, which could be material. The coronavirus pandemic has imposed the continuing lockdown of the Company’s offices in Greece and Africa and the majority of its operations ceased. While our employees, vessel’s crew and labors are staying at their homes and our fleet still remains idle.
The management of the Company assesses the Company’s ability to continue as a going concern at each period end. The assessments evaluate whether there are conditions that give rise to substantial doubts to continue as a going concern within the year from the present issuance of our financial statements. In addition, under the present circumstances and market condition, we believe that our incomes undoubtedly will be heavily affected during the year, and that raises substantial doubt for the company’s ability to continue its business unless the company succeed to raise extra cash financing.
Basis of PresentationPresentation; ;The accompanying consolidated financial statements of Petrogress and its subsidiaries (together, Petrogress or the company) have not been audited nor reviewed by an independent registered public accounting firm. In the opinion of the company’s management, the interim data includes all adjustments necessary for a fair statement of the results for the interim periods. These adjustments were of a normal recurring nature. The results for the six-monththree months period ended June 30, 2020,March 31, 2021, are not necessarily indicative of future financial results. The term “earnings” is defined as net income attributable to Petrogress. Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the company’s 2019 Annual Report on Form 10-K.
Subsidiaries and Affiliated Companies;The Consolidated Financial Statements include the accounts of controlled subsidiary companies more than 50 percent owned and any variable-interest entities in which the company is the primary beneficiary.
All significant intercompany transactions and accounts have been eliminated.
Principles of consolidation;The consolidated financial statements include the consolidated accounts of the Company and its wholly owned and majority-owned subsidiaries as listed in the below table.subsidiaries. Inter-company transaction balances and unrealized gains/(losses) on transactions between the companies are eliminated. Subsidiaries & AffiliatesNote 2.
| | Incorporation
| | | Percentage Participation
| Petrogress Int’l LLC. (PIL)
| | Delaware
| | | 100 | % | (owned to PG)
| Petronav Carriers LLC. (PCL)
| | Delaware
| | | 100 | % | (owned to PG)
| Petrogress Hellas (PGH)
| | Greece
| | | 100 | % | (owned to PGI)
| PG-Cypyard & Offshore Terminal Ltd. (PGC)
| | Cyprus
| | | 100 | % | (owned to PGI)Accounting Standards
|
Note Recently adopted; 2. New Accounting Standards
Financial Instruments - Credit LossesEffective January 1, 2020, Petrogress2021, we adopted Accounting Standards Update (ASU) 2016-13 and its related amendments.
Note 3. | Discontinue and Dissolved of the subsidiaries |
As of January 2nd 2021, in order to mitigate the operating and administrative expenses, the company withdraw and discontinued its ownership interest participation of the two subsidiaries Petrogress Int’l llc and Petronav Carriers llc, respectively. At the end of the fiscal year 2020, both subsidiaries declared losses, Petrogress Int’l llc $(1,365,945) and Petronav Carriers llc $(807,379) respectively. The subsidiaries are under process to dissolving and termination, while their operations assigned to PGI. Note 4. | Information relating to the consolidated statement of cash flows |
Read Cash Flow statement - page 5 Note 5. | Summarized Financial Data – Petrogress, Inc. |
The summarized financial information for Petrogress Inc (PGI) presented as follows: | | | Three months Ended | | | | | March 31, | | | | | 2021 | | | 2020 | | Sales and other operating revenues | | $ | 1,504,235 | | | $ | 2,147,882 | | Costs and other deductions | | | (1,650,420 | ) | | | (3,058,279 | ) | Net income (loss) attributable to PGI | | | (146,185 | ) | | | (910,397 | ) | Current assets | | | 5,654,014 | | | | 6,242,409 | | Other assets | | | 5,603,064 | | | | 5,888,839 | | Current liabilities | | | 4,154,198 | | | | 5,891,978 | | Other liabilities | | | 688,780 | | | | 538,054 | | Total PGI net equity | | $ | 6,414,099 | | | $ | 7,643,571 | |
Notes to Consolidated Financial Statements (continued) Note 3. Information Relating to the Consolidated Statement of Cash Flows
| | | | Six Months Ended | | | | | | June 30, | | | | | | 2020 | | | 2019 | | Decrease in Accounts receivable, net | | | $ | 223,513 | | | $ | 601,374 | | (Increase) / decrease in Claims receivable, net | | | | 103,355 | | | | (4,000 | ) | (Increase) / decrease in Inventories | | | | 828,664 | | | | (563,928 | ) | (Increase) / decrease due from related party | | | | 720,000 | | | | - | | Decrease in Prepaid expenses and other assets | | | | 741,423 | | | | 245,796 | | Increase in Accounts payable and accrued expenses | | | | 238,427 | | | | 87,763 | | Increase / (decrease) in Amounts due to related party | | | | (651,414 | ) | | | 68,976 | | Increase / (decrease) in Accrued interest | | | | - | | | | 2,980 | | Increase in lease liabilities | | | | 626,401 | | | | - | | (Increase) / decrease in Security deposit | | | | (1,178 | ) | | | 54 | | Decrease in Deferred charges, net | | | | 8,457 | | | | 6,688 | | Net increase in operating capital | | | $ | 2,837,648 | | | $ | 445,704 | |
Note4. Operating Segments & Geographic presence
Although each subsidiary of Petrogress is responsible for its own affairs, Petrogress manages the operations in these subsidiaries and affiliates. The operations are grouped into three business segments, Upstream, Midstream and Downstream, representing the company’s “operating segments” as described in Item 1, Executive Overview.
Note 6. | Operating Segments & Geographic presence |
The company’s primary country is the United States of America, its country of Domicile; while Greece is the head operating location. Other components of the Company’s operations in Ghana, NigeriaEurope and CyprusAfrica are reported as “International” (outside the United States). Most of our marketing, sales, ship-management and other related functions are performed at our main office in Piraeus, Greece. Piraeus. The company evaluate the performance of its operating earnings based on its major’s subsidiaries and goods sales. (a)
| Earnings by major operating subsidiaries and their trading areas
Earnings by major operating area and products for the three-month periods ended March 31, 2021 and 2020, are presented in the following table: |
| | | | Six months Ended June 30, | | Operating Subsidiaries (1) | | 2020 | | | 2019 | | ● Petrogress Int’l LLC. | (Internationally) | | $ | 1,514,701 | | | | 1,928,178 | | ● Petronav Carriers LLC. | (Internationally) | | | 252,080 | | | | 298,500 | | ● Petrogres Africa Co Ltd. | (Nationally Ghana) | | | - | | | | 300,000 | | ● Petrogress (Hellas) Co. | (Internationally) | | | - | | | | - | | Totals | | $ | 1,766,781 | | | $ | 2,526,678 | |
(b)
| Earnings by products and other services are presented in the following table:
|
| | | Six months Ended June 30, | | Sales volumes per product & service (2) | | 2020 | | | 2019 | | ● Crude oil | | $ | 749,200 | | | | 1,917,178 | | ● Gas oil | | | 622,000 | | | | 300,000 | | ● Lubricants | | | 143,501 | | | | - | | ● Vessel’s hires & freights | | | 218,000 | | | | 298,500 | | ● Others | | | 34,080 | | | | 11,000 | | Totals | | $ | 1,766,781 | | | $ | 2,526,678 | |
| | | | Three months Ended March 31, | | Segment earnings per product & services | Operating area | | 2021 | | | 2020 | | ● Crude oil | Internationally | | $ | - | | | | 616,000 | | ● Gas oil | Internationally | | | 870,000 | | | | 1,166,000 | | ● Lubricants | Internationally | | | - | | | | 113,802 | | ● Vessel’s hires & freights | Internationally | | | 230,000 | | | | 252,080 | | ● Others | Internationally | | | 404,235 | | | | - | | Totals | | $ | 1,504,235 | | | $ | 2,147,882 | |
Segment Information; Petrogress’ chief operating decision maker is the chief executive officer (“CEO”) of its general partner. The CEO reviews Petrogress’ discrete financial information, makes operating decisions, assesses financial performance and allocates resources on a type of service basis. Petrogress has two reportable segments: Commodities and Other (C&O) revenues and Hires & Freights (H&F). Each of these segments is organized and managed based upon the nature of the products and services it offers. Segment Sales and Other Operating Revenues; Segment sales and other operating revenues, including internal transfers, for the six-month periodsthree-month period ended June 30,March 31, 2021 and 2020, and 2019, are presented in the following table. Products are transferred between operating segments at internal product values that approximate market prices. Revenues for the upstream segment are derived primarily from the purchase and sale of crude oil, as well as the sale of third-party. Revenues for the downstream segment are derived from the refining and marketing of petroleum products such as gasoline, gas oils, lubricants, residual fuel oils and other products derived from crude oil. Revenues for the midstream segment generated from the vessels chartering and employment of transportation crude oil or refined products, the storing, the wholesale marketing and the retailing in our gas stations. “All Other” activities include revenues from shipping agency service and other operations. | | | | Six months Ended June 30, | | | | Three months Ended March 31, | | Sales and Other Operating Revenues | | | 2020 | | | 2019 | | | Sales and Other Operating Revenues | | | | 2021 | | | 2020 | | Upstream | International | | $ | 749,200 | | | $ | 1,917,178 | | Internationally | | $ | - | | | $ | 616,000 | | Downstream | International | | | 765,501 | | | | 300,000 | | Internationally | | | 870,000 | | | | 1,279,802 | | Midstream | International | | | 218,000 | | | | 298,500 | | Internationally | | | 230,000 | | | | 252,080 | | All others | International | | | 34,080 | | | | 11,000 | | Internationally | | | 404,235 | | | | - | | Total Sales and Other Operating Revenues | Total Sales and Other Operating Revenues | | $ | 1,766,781 | | | $ | 2,526,678 | | Total Sales and Other Operating Revenues | | $ | 1,504,235 | | | $ | 2,147,882 | |
Notes to Consolidated Financial Statements (continued) Note 5. Inventories
Crude oil, Gas oil and bunkers onboard our vessels are recorded at weighted average cost and carried at the lower of cost or net realizable value. Supplies and other items consist principally of items, spare-parts, consumable goods and equipment supplied to our vessel which are valued at weighted average cost and reviewed periodically for obsolescence or impairment when market conditions indicate. The table below presents our inventories as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively: Commodities and Petroproducts Inventories | | | June 30, 2020 | | | December 31, 2019 | | | March 31, 2021 | | | December 31, 2020 | | Crude Oil | | | $ | - | | | $ | - | | | $ | 570,000 | | | $ | 570,000 | | Gas Oil | | | | 293,018 | | | | 1,039,020 | | | | - | | | | - | | Lubricants | | | | - | | | | 59,479 | | | | 68,661 | | | | 68,661 | | Vessels Inventories & Others | | | | | | | | | | | | | | | | | | Bunkers R.O.B.* | | | | 27,839 | | | | 108,113 | | | | 33,500 | | | | 253,936 | | Lubricants | | | | 57,091 | | | | - | | | | 10,440 | | | | 10,439 | | Provisions & Stores | | | | - | | | | - | | | | - | | | | - | | Total | | | $ | 377,948 | | | $ | 1,206,612 | | | $ | 682,601 | | | $ | 903,036 | |
*Vessels*Vessels ROB of Fuel Oil, Gas Oil, lubricants and new spare parts are calculated in the balance sheets separately from goods.goods.
Note 6. Properties, Vessels and Equipment
Note 8. | Properties, Vessels and Equipment |
We depreciate our vessels on a straight-line basis over the estimated useful life which is 10 years from the date of being placed in service by the Company or its affiliate. Depreciation is calculated based on a vessel’s cost less the estimated residual value. Vessels and other fixed assets, net consisted of the following as of June 30, 2020March 31, 2021 and 2019:December 2020: | | | | June 30, 2020 | | | December 31, 2019 | | | Estimated useful Life left (in years) | | | March 31, 2021 | | | December 31, 2020 | | | Estimated useful Life left (in years) | | Vessels purchased costs | | | $ | 10,916,684 | | | $ | 10,888,423 | | | 2 | - | 4 | | | Vessels purchased costs* | | | $ | 10,888,423 | | | $ | 10,888,423 | | | | 2 | | Furniture and equipment | | | | 182,764 | | | | 182,764 | | | 4 | - | 6 | | | | 387,150 | | | | 387,150 | | | | 4 | | Accumulated depreciation | | | | (7,115,919 | ) | | | (6,821,424 | ) | | | | | | | Accumulated depreciation** | | | | (7,585,576 | ) | | | (7,445,859 | ) | | | | | Vessels and other fixed assets, net | | | $ | 3,983,529 | | | $ | 4,249,763 | | | | | | | | $ | 3,689,997 | | | $ | 3,829,714 | | | | | |
* On April 1, 2016, Vessels properties passed by a virtue of deed transfer (Private Placement) from the CEO Christos Traios (the “Transferor”) to PGI (the “Transferee-guarantor”) and such purchase cost has not been repaid to the beneficiary Transferor; ** Depreciation for the three months ended March 31, 2021 and 2020, was $152,822 and $154,696 respectively; *Note 8. B
| DepreciationAssets held for the six months ended June 30, 2020 and 2019, was $306,895 and $428,048, respectively.sale
|
As of March 31, 2021, the company has no classified any properties as “Assets held for sale” on the Consolidated Balance Sheet. Note 9. | Changes in Accumulated Compresence Income |
Note7
We file income tax returns in various jurisdictions, as appropriate and required. The Company was not subject to U.S. federal, state and local, as applicable, income tax examinations by regulatory taxing authorities for any period prior to January 1, 2012. We account for income taxes in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740-10, Income Taxes. Litigation We recognize deferred tax assets and liabilities to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. We record a valuation allowance related to a deferred tax asset when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment. We classify interest and penalties as a component of interest and other expenses. To date, we have not incurred any liability for unrecognized tax benefits, including assessments of penalties and/or interest. Notes to Consolidated Financial Statements (continued) There are currently no material pending legal or governmental proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is subject. Note8.Other Contingencies and Commitments
Note 12. | Other Contingencies and Commitments |
The Company is not a party to any litigation, and, to its best knowledge, no action, suit or proceeding has been threatened against the Company. Note 9. Financial and Derivative Instruments
Note 13. | Fair Value Measurements |
Financial Instruments;The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately fromthree levels of the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in resultshierarchy of operations duringinputs the period of change. The Company has estimatedcompany uses to measure the fair value of these embedded derivatives for convertible debentures usingan asset or liability are described as follows:
● | Level 1 - Quoted prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; |
● | Level 2 - Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; |
● | Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. |
Marketable Securities;We classify marketable securities as available-for-sale securities, which are carried at their fair value based on the quoted market prices of the securities with unrealized gains and losses, net of deferred income taxes, reported as accumulated other comprehensive income/ (loss), a Black Scholes model asseparate component of June 30, 2020shareholders’ equity. Realized gains and 2019. For amounts over proceedslosses on available-for-sale securities are included in net earnings in the initialperiod earned or incurred Derivatives; The company records its derivative measurement,instruments – other than any commodity derivative contracts that are designated as normal purchase and normal sale – on the Company recorded a derivative expenseConsolidated Balance Sheet at fair value, with the offsetting amount to the Consolidated Statement of $74,590Income. Cash and $0 during the six months ended June 30, 2020Cash Equivalents;The company hold cash equivalents in US Dollars and 2019, respectively.Non-US Dollars. The instruments classified as cash equivalents are primarily bank time deposits with maturities of 90 days or less, and money market funds. “Cash and cash equivalents” had carrying/fair values of the derivative instruments are measured each quarter, which resulted in a loss of $629,679$36,101 and $0 during the six months ended June 30,$27,952, at March 31, 2021 and December 31, 2020, and 2019, respectively. As of June 30, 2020, and 2019, the fair market value of the derivatives aggregated $1,911,049 and $0, respectively. The fair value forInterest rate risk; is the Company'srisk that our earnings are subject to fluctuations in interest rates on either investments or on debt. We do not use derivative liability as at June 30, 2020 is based upon the following management assumptions:instruments to moderate exposure to interest rate risk, if any.
Notes to Consolidated Financial Statements (continued) | | | | Minimum | | | Maximum | | Volatility | | | | 302.93% | | | | 303.08% | | Risk Free rate | | | | 0.13% | | | | 1.77% | | Life | | | | 0.16 | | | | 1.00 | |
Financial risk; is the risk that our earnings are subject to fluctuations in interest rates or foreign exchange rates. We do not use derivative instruments to moderate exposure to financial risk, if any. Credit risk adjustments; are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments but incorporates the Company’s own credit risk as observed in the credit default swap market Note 10. Revenue
“Sales and other operating revenue” on the Consolidated Statement of Income primarily arise from contracts or spot sales with customers and consistent with ASC Topic 606. Related receivables are included in “Accounts and notes receivable, net” on the Consolidated Balance Sheet, net of the current expected credit losses. The net balance of these receivables was $1,787,917$3,252,674 and $2,011,430 at June 30, 2020,$2,136,790 on March 31, 2021, and December 31, 2019,2020, respectively. Other items included in “Accounts and notes receivable, net” represent amounts due from partners for their share of joint venture operating and project costs. Notes to Consolidated Financial Statements (continued) Note 15. | Earnings / (Losses) per Share and Shareholders’Note 11. Earnings / (Losses) per Share and Shareholders’ Equity |
The table below presents the calculation of basic and diluted net income / (loss) attributable to common shareholders per share as of June 30, 2020:March 31, 2021: | | | June 30, | | | March 31, | | Basic EPS Calculation | | 2020 | | | 2019 | | | 2021 | | | 2020 | | Net income attributable to common shareholders | | $ | (3,077,232 | ) | | $ | (869,980 | ) | | Net loss attributable to common shareholders | | | $ | (146,185 | ) | | $ | (910,937 | ) | Denominator for basic net income per share – weighted average shares | | | 5,136,808 | | | | 3,842,916 | | | | 35,151,491 | | | | 4,600,584 | | Conversion of accrued interest on debt held by related party | | | - | | | | - | | | | | | | | - | | Denominator for diluted net income per share | | | - | | | | 3,842,916 | | | | | | | | - | | Basic net earnings per share | | | (0.60 | ) | | | (0.22 | ) | | | (0.0042 | ) | | | (0.20 | ) | Diluted net earnings per share | | | - | | | | (0.22 | ) | | | | | | | - | |
As of June 30,March 31, 2021, and 2020, and 2019, the basic weighted average number of shares of Common Stock of the Company was 5,136,80835,151,491 and 3,842,916,4,600,584, respectively. Note 12.Other information
On May 27, 2020, Petrogress Int’l LLC. (the “Company”) entered into an Amendment No. 2 to Securities Purchase Agreement with Christos Traios, amending the terms of acquisition of Petrogress Africa Limited. As a result, the Company returned 864,000 shares of PGAF (the “Option Shares” representing 72% of the PGAF) for which the Company has not paid the purchase price to date. However, the Company retained ownership of 216,000 of PGAF shares for which remains obliged to pay the purchase price of $1.20 per share in cash to Christos Traios, under the of the Security Purchase Agreement. Future financial statements will be shown as 18 percent equity ownership interest in PGAF, provided the company will comply to its obligations as per amended agreement. The company accounted for this investment using the equity method of accounting.
Item 2 – 2Management’ –Management’ss Discussion and Analysis of Financial Condition and Results of Operations Key Financial Results
Second Quarter First quarter of 20202021 compared tothe Second Quarter First quarter of 20192020
Earnings by product sales | | | Six months ended June 30, | | Net sales volumes per product | | | 2020 | | | 2019 | | Crude Oil Sales | | | $ | 749,200 | | | $ | 1,917,178 | | Gas Oil Sales | | | | 622,000 | | | | 300,000 | | Lubricants Sales | | | | 143,501 | | | | - | | Hires & Freights Sales | | | | 218,000 | | | | 298,500 | | Other Revenues / Discounts | | | | 34,080 | | | | 11,000 | | Totals | | | $ | 1,766,781 | | | $ | 2,526,678 | |
Net loss attributable to Petrogress for the second quarter of 2020 was $(3,077,232) ($(0.60) per share), compared to a net loss of $(1,011,590) ($(0.26) per share) for the second quarter of 2019.
Earnings by product sales | | Three months ended March 31, | | Net sales volumes per product | | 2021 | | | 2020 | | Crude Oil Sales | | $ | - | | | $ | 616,000 | | Gas Oil Sales | | | 870,000 | | | | 1,166,000 | | Lubricants Sales | | | - | | | | 113,802 | | Hires & Freights Sales | | | 230,000 | | | | 252,080 | | Other Revenues / Discounts | | | 404,235 | | | | - | | Totals | | $ | 1,504,235 | | | $ | 2,147,882 | |
Refer to the “Results of Operations” section beginning on page 1412 for a discussion of our financial results. Executive Overview Petrogress, Inc., (PGI) is based in Delaware and operates as a holdingoperates. The company is an integrate energy company, engaged in the upstream, downstream and conducts its business through its wholly-owned subsidiaries: Petronav Carriers LLC., which manages day-to-day operations of its beneficially-owned affiliated tanker fleet; and Petrogress Int’l LLC., which is a holding company for subsidiaries currently conducting business in Greece, Cyprus and Ghana, and provides management ofmidstream segments. We sell crude oil purchases and sales;refined products internationally, to buyers on the spot market and to independent entrepreneurs. The company maintain its principal marketing and operating offices at 1, Akti Xaveriou, 18538 Piraeus, Greece. Our telephone number at that address is +30 (210) 459-9741 and our corporate address and registered agent in Delaware is 1013 Centre Road, Suite 403-A, Wilmington, DE 19805 – USA. Business Environment and Outlook Petrogress, is an oil energy and sea transportationEarnings of the company with business activities in the following countries: Greece, Cyprus and Ghana. Our earnings currently depend primarilymostly on the profitability of ourits crude oil sales.business segment. The biggestmost significant factor affecting the results of operations is the price of crude oil.oil, which is determined in global markets outside of the company’s control. The price of crude oil has fallen significantly since mid-year 2019.2020. The downturn in the price of crude oil has impacted the company's results of operations, cash flows, leverage, capital and exploratory investment program and production outlook. A sustained lower price environment could result in the impairment or write-off of specific assets in future periods. Similarly, impairments or write-offs have occurred, and may occur in the future, as a result of managerial decisions not to progress certain projects in the company’s portfolio. We have reacted to the downturn by effecting reductions in operating expenses, pacing and re-focusing of capital and exploratory expenditures. We anticipate that crudeOur lack of cash liquidity remains on low levels for the rest of the year and undoubtedly shall continue affecting our operations and cash flow. In addition, the sea-transpiration impacted hardly due to global low demand of oil products.
Response to Market Conditions and COVID-19 During the pandemic period the travel restrictions and other constraints on economic activity were implemented in many locations around the world to limit the spread of the COVID-19 virus. Lower commodity prices will increase innegatively impacted the future, as continued growth incompany’s first quarter 2021 financial and operating results. While demand and a reductioncommodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results will likely continue to be challenged in supply growth should bring global markets into balance. However,future quarters. Due to the timing or sustainabilityrapidly changing of any such increase in prices is unknown. Inenvironment, there continues to be uncertainty and unpredictability around the Company's downstream business, crude oil isextent to which the largest cost component of refined products. Nevertheless, it isCOVID-19 pandemic will impact our objective to deliver competitive results, and shareholder value in any business environment.which could be material. Our midstream segment reliesRefer to the “Cautionary Statements Relevant to Forward-Looking Information” on Page 2 and dependsto “Risk Factors” in Part II, Item 1A, on our crude oil sales contracts to keep our vessels employed. We rely primarily onpage 16-17 for a discussion of some of the revenues generated from our businessinherent risks that could materially impact the company’s results of physical supply of crude oil and marketing of refined products to our end customers.operations or financial condition.
The company continually evaluates opportunities
* Petrogress, Inc. was incorporated on February 10, 2010 under the laws of the State of Florida as 800 Commerce, Inc. (“800 Commerce”). On February 29, 2016, 800 Commerce entered into an Agreement concerning the Exchange of Securities (“SEA”) with Petrogres Co. Limited, and its sole shareholder, Christos Traios, 800 Commerce issued 136,000,000 shares of restricted Common Stock, representing approximately 85% of the post-transaction issued and outstanding shares, to disposeMr. Traios in exchange for 100% of assets thatthe shares of Petrogres Co. Limited. 800 Commerce’s acquisition of Petrogres Co. Limited effected a change in control and was accounted for as a “reverse acquisition” whereby Petrogres Co. was the acquirer for financial statement purposes. Accordingly, the historical financial statements of 800 Commerce are not expectedthose of Petrogres Co. and its subsidiaries from their respective inception and those of the consolidated entity subsequent to provide sufficient long-term value or to acquire assets or operations complementary to its asset base to help augment the company’s financial performance and value growth. Asset dispositions and restructurings may result in significant gains or losses in future periods. The company continually evaluates opportunities to dispose of assets that are not expected to provide sufficient long-term value or to acquire assets or operations complementary to its asset base to help augment the company’s financial performance and value growth. Asset dispositions and restructurings may result in significant gains or losses in future periods.
*February 29, 2016 transaction date. On November 16, 2016, Petrogress, Inc., filed Articles of Merger and Plan of Merger in Florida and Delaware to change the Company’s domicile by merging with and into a Delaware corporation formed solely for the purpose of effecting the reincorporation. On July 6, 2020,9, 2018, the Company filed an amendment (the "Amendment") to the Company's Certificate of Incorporation with the Delaware Secretary of State to increase(a) effect a reverse stock split of the Company's Common Stock at a ratio of one-for-100, (b) reduce the number of authorized shares of Common Stock from 19,000,000490,000,000 to 50,000,000. The Amendment took effect on July 6, 2020.19,000,000. During 2020 the company amended its Articles of Incorporation and increase its authorized shares of common stock to 100,000,000. There was no change in the par value of the Company's Common Stock or Preferred Stock as a result of the Amendment.
Response to Market ConditionsManagement’s Discussion and COVID-19
During the second quarterAnalysis of 2020, travel restrictionsFinancial Condition and other constraints on economic activity were implemented in many locations around the world to limit the spreadResults of the COVID-19 virus. As a result, demand for our products has fallen steeply and commodity prices, including crude oil and other petroleum products, have followed suit. The drop in commodity prices is expected to negatively impact the company’s future financial and operating results. Due to the rapidly changing environment, there continues to be uncertainty and unpredictability around the impact of the COVID-19 pandemic on our results, which could be material. Petrogress, entered into this crisis with a weak balance sheet and low cash liquidity. Accordingly, to protect its long-term health and value, the company is responding to such market condition by adjusting items it can control. Additionally, the company has suspended its repayments of short-terms debts and reduced also the purchase of the crude oil from its suppliers. A number of our vessels crew dismissed to mitigate the daily non-operating expenses of our fleet. Together, these actions are consistent with our financial priorities: to protect our ongoing projects, to prioritize capital spend that drives long-term value and to maintain our position in the energy and shipping market. The company relies in its receivables in order to continue with a sufficient liquidity on its operations.Operations
Refer to the “Cautionary Statements Relevant to Forward-Looking Information” on Page 3 and to “Risk Factors” in Part II, Item 1A, on page 19 for a discussion of some of the inherent risks that could materially impact the company’s results of operations or financial condition.
OperatingOperating sectors
Our business operates in the downstream and midstream sectors of the energy industry, where we acquire and supply crude oil, and engage in the refining and marketing of refined products and lubricants. As a supplier, we procure crude oil from our direct sources and deliver by our tankers fleet to buyers’ destinations. With service centers in East Mediterranean and West Africa, we believe that we are one of a limited number of independent physical suppliers that owns and operates a fleet of supplying vessels and conducts physical supply operations in multiple jurisdictions. We provide our customers with services that require sophisticated logistical operations designed to meet their strict oil quality and delivery scheduling needs. We believe that our extensive experience and management systems allow us to meet our customers' specific requirements when they purchase and take delivery of crude oil, refined products and lubricants around the areas in which we operate. We have devoted our efforts to building a global brand and believe that our customers recognize our brand as representing high quality service and products at each of our locations. We also perform our technical ship operations in-house, which helps us maintain high levels of customer service. Throughout our history, we have expanded our business capabilities through strategic alliances, select business and vessel acquisitions, and the establishment of new service centers. The company maintain its principal marketing and operating offices at 1, Akti Xaveriou, 18538 Piraeus, Greece. Our telephone number at that address is +30 (210) 459-9741 and our corporate address and registered agent in Delaware is 1013 Centre Road, Suite 403-A, Wilmington, DE 19805 – USA.
Other Businesses Effected as on November 2019, the company concluded the negotiations to lease three Gas refilling stations in the Mainland of South Greece. The procedures for the obtaining the operating licenses from the local authorities are in progress, simultaneously with the preparation of gas stations designs and drawings in order to commence the modernization and renovation under our brand names. We estimate to complete and have them ready for operations within six months’ time.July. Our innovate gas-stations with their unique distinct design, have been developed to offer high performance fuels and a totally new experience to customers, with our vision to deliver a modern and compelling retail experience. The gas StationsGas-Stations shall be operated by our Hellenic branch in Greece and we expectall are designed to be ready by June 2020.provide the drivers food options, cold and hot pre-packaged items. Our key business segments The following are descriptions of our recent initiatives undertaken in each of our key business segments: Upstream; Earnings for the upstream segment are closely aligned with industry prices for crude oil. Crude oil prices are subject to external factors over which the company has no control, including product demand connected with global economic conditions, industry production and inventory levels, technology advancements, production quotas or other actions imposed by the Organization of Petroleum Exporting Countries (OPEC) or other producers, actions of regulators, weather-related damage and disruptions, competing fuel prices, natural and human causes beyond the company's control such as the COVID-19 pandemic, and regional supply interruptions. The company is actively managing its schedule of work, contracting, procurement, and supply chain activities to effectively manage costs, ensure supply chain resiliency and continuity, and support operational goals. The spot markets for many services and materials are softening in response to the economic impact of the COVID-19 pandemic, including the drastic reductions in demand for petroleum products, including gasoline and fuel, among others, and in crude oil prices, which have resulted in significant reductions in economic activity and associated spending in the energy sector. Commodity prices have fallen below break-even levels in many regions. Downstream: As on February 2018, our Partnership agreement with Platon Ghana Oil Refinery (PGOR) -an unrelated third party- is still ongoing and renewed on an annual basis and pursuant its terms Petrogress will feed and supply the crude oil for storage, refinement, marketing and distribution in Ghana jointly with PGOR. The storage capacity under the Partnership Agreement is 24,000 tons and the monthly processing capacity of the refinery is 10,000 tons. Petrogress and Platon both plans to invest additional funds to upgrade the processing monthly capacity into refined products of Gas Oil, Naphtha, and fuel in view of the high local demand. Under the Platon Partnership Agreement, all expenses of the partnership operations are shared by both Petrogress and Platon. After deducting the operating/processing expenses, the net profits from the sale of the products are split evenly between Petrogres and Platon. As of the date the Platon Partnership Agreement was executed, Petrogress ceased other sales of crude to third customers in West Africa. During the year the company expanded its operations to other sectors, engaging into gas-stations operator and lubricants distributor. Earnings for the downstream segment are closely tied to margins on the refining, manufacturing and marketing of products that include gasoline, diesel, fuel oil and lubricants additives, and petrochemicals. Industry margins are sometimes volatile and can be affected by the global and regional supply-and-demand balance for refined products and petrochemicals, and by changes in the price of crude oil, other refinery and petrochemical feedstocks. Industry margins can also be influenced by inventory levels, geopolitical events, costs of materials and services, refinery or chemical plant capacity utilization, maintenance programs, and disruptions at refineries resulting from unplanned outages due to severe weather, fires or other operational events. Other factors affecting profitability for downstream operations include the reliability and efficiency of the company’s refining, marketing, the effectiveness of its crude oil supply functions, and the volatility of tanker-charter rates for the company’s shipping operations, which are driven by the industry’s demand for crude oil and product tankers. Other factors beyond the company’s control include the general level of inflation and energy costs to operate the company’s refining process and marketing, including the changes in tax laws and regulations.
The company’s most significant marketing areas are the West Coast of Africa and East Mediterranean where Petrogress affiliates have significant ownership interests, representations and partnership agreements, in these areas. Midstream; The outbreak of COVID-19 pandemic occurred the ceased of our entire fleet operations and employments which resulted the complete elimination of freight and hire incomes, while the fleet expenses remained on the same levels during and March, April and May 2020.the first quarter 2021. Nevertheless, we believe the shipping industry will be rectified and return to the normal levels, therefore we still seek to expand our midstream operations in other international ocean routes by adding to our fleet larger and younger tanker vessels. We are monitoring the vessel market for opportunities while we are also working to secure the necessary funding for expansion. Our business strategy is based in part upon the expansion of our business to new, or within existing, markets. In order to fund future vessel acquisitions, expansion into new and existing markets and products, increased working capital levels, or capital expenditures,expand our operations, we will be required to use cash from operations, incur borrowings or raise capital through the sale of debt or equity securities in the public or private markets. The company closely monitors developments in the financial and credit markets, the level of worldwide economic activity, and the implications for the Company of movements in prices for crude oil and refined products. Management takes these developments into account in the conduct of daily operations and for business planning.
The company continually evaluates opportunities to disposeManagement’s Discussion and Analysis of assets that are not expected to provide sufficient long-term value or to acquire assets or operations complementary to its asset base to help augment the company’s financial performanceFinancial Condition and value growth. Asset dispositions and restructurings may result in significant gains or losses in future periods.Results of Operations
Results of Operations The following section presents the results of operations and variances on a before-tax basis for the company’s business operations, as well as for “All Other.” Our operating revenues are driven primarily of the commodities trading sales and our tankers fleet employment days during which our vessels are generating revenues, while our financial results are subject to a number of sectors and reflects to the following factors: Cost of commodities; is the cost we purchase the oil products -mainly the crude oil- and such cost is based either on Brent Index prices or Fixed price, the quality and quantity of the product. Commodities Operating Expenses; relates to products surveys before and after the shipment, bunkers supplied to the employment vessel, cargoes surveys, loading/unloading expenses, agency and representative services.
Shipping & Logistic Expenses; includes the sea freight and mobilization cost, the performed loading and discharging of the product, and any expenses occurred during the shipping time from the loading point up to unloading facilities. Vessels Operating Expenses; includes crew wages and bonuses, their medical support and travelling, maintenance and repairs to the vessels hull and their machineries, expenses for supplies of spare-parts and consumable stores, paints, lubricants, fresh water, bunkers, agency services, etc. General and Administrative Expenses; relates to our directors, officers and managers salaries and compensations, shore staff wages, employee’s federal insurance, offices lease and utilities, telecommunications, travelling and representations of our officers, our agency fees we pay to our branch’s offices in USA, Greece, Cyprus, Monaco, Ghana and Nigeria. Corporate Expenses; are all company’s expenses and includes, our executive’s compensations, attorney’s fee, Auditors and accountant fees, Consultant’s and P/R fees, Transfer agents of our stock, and miscellaneous. Other factors may affect our Results of Operations; In addition to the said expenses there are factors beyond of our control which may affect seriously our operations results. Inasmuch as we trade also West Africa, which is considered as high risky area, we are expose in a serious amount of risks, such as piracies and hijacks, civil wars, stolen of properties, economy distress, and credit risks. EBITDA and Adjustment; EBITDA represents net income before expenses, taxes and depreciation. Adjusted EBITDA represents net income before expense, taxes, taxes, depreciation and amortization of dry-docking. | | | Six months ended June 30, | | | | | 2020 | | | 2019 | | Operating Earnings / (losses) | | $ | (1,928,663 | ) | | $ | (316,185 | ) |
| | | Three months ended March 31, | | | | | 2021 | | | 2020 | | Operating Earnings / (losses) | | $ | (129,091 | ) | | $ | (543,019 | ) |
Operating losses of during the secondfirst quarter of 20202021 amount to $(1,928,663)$(129,091), compared to operating losses of $(316,185)$(543,019) for the same period in 2019. The decrease was primarily due to lower crude oil sales prices and the cease of operations as of June 30, 2020. Consolidated Statement of Income Sales of products provided in the below table: | | | | Six months Ended June 30, | | | Three months Ended March 31, | | Net sales volumes per product | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | Crude Oil Sales | | | $ | 749,200 | | | $ | 1,917,178 | | | $ | - | | | $ | 616,000 | | Gas Oil Sales | | | | 622,000 | | | | 300,000 | | | | 870,000 | | | | 1,166,000 | | Lubricants Sales | | | | 143,501 | | | | - | | | | - | | | | 113,802 | | Hires & Freights Sales | | | | 218,000 | | | | 298,500 | | | | 230,000 | | | | 252,080 | | Other Revenues/Discounts | | | | 34,080 | | | | 11,000 | | | | 404,235 | | | | - | | Totals | | | $ | 1,766,781 | | | $ | 2,526,678 | | | $ | 1,504,235 | | | $ | 2,147,882 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations Cost of Goods Sold provided in the below table: | | | | Six months Ended June 30, | | | Three months Ended March 31, | | Cost of goods sold | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | Crude Oil purchased costs | | | $ | (1,250,000 | ) | | $ | (1,165,752 | ) | | $ | - | | | $ | (572,000 | ) | Gas Oil purchased costs | | | | (520,000 | ) | | | (240,000 | ) | | | (630,000 | ) | | | (745,513 | ) | Lubricants purchased costs | | | | (129,000 | ) | | | (41,202 | ) | | | - | | | | (35,697 | ) | Vessels leases & charters | | | | (489,465 | ) | | | - | | Others | | | | - | | | | - | | Totals | | | $ | (1,899,000 | ) | | $ | (1,446,954 | ) | | $ | (1,119,465 | ) | | $ | (1,353,210 | ) |
● | Sales: Total operating sales for the sixthree months ended June 30,March 31, 2021 and 2020, were $1,504,235 and 2019, were $1,766,781 and $2,526,678,$2,147,882 respectively, a decrease of $759,897$643,647 or approximately 30%. |
● | Cost of goods sold: For the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, cost of goods sold was $1,219,049$1,119,465 and $1,446,954,$1,353,210, respectively, an increasea decrease of $452,046$233,745 or approximately 31%17%. |
● | Corporate expenses: Corporate expenses mainly include the expenses incurred by Petrogress, Inc. Our Corporate expenses for the sixthree months ended June 30,March 31, 2021 and 2020 were $8,661 and 2019 were $293,168 and $83,611,$75,748, respectively, an increasea decrease of $209,557$67,087 or approximately 251%89%. |
● | General and administrative expenses: For the sixthree months ended June 30, 2020,March 31, 2021, General and administrative expenses increased to $1,187,591$202,078 compared to $877,563$1,098,716 for the sixthree months ended June 30, 2019,March 31, 2020, an increasedecrease of $310,028$896,638 or approximately 35%82%. |
● | Net income/ (loss) attributable PGI: For the sixthree months ended June 30,March 31, 2021, the Company had a net loss of $146,185 while for the three months ended March 31, 2020, the Company had a net loss of $3,077,232 while for the six months ended June 30, 2019, the Company had a net loss$910,397, an decrease of $861,098, an increase of $2,216,134$764,212 or approximately 257%84%. |
● | EBITDA: For the sixthree months ended June 30, 2020,March 31, 2021, EBITDA amounted to $(1,928,663)$(146,185) compared to $(316,185)$(922,744) for the sixthree months ended June 30, 2019.March 31, 2020. |
Consolidated results of Operation (after eliminations) | | Six months Ended June 30, | | | | | 2020 | | | 2019 | | Total Operating Revenues | | $ | 1,766,781 | | | $ | 2,526,678 | | Total Operating Expenses & Cost of Goods Sold* | | $ | (3,695,444 | ) | | $ | (2,842,863 | ) |
* Operating expenses includes, corporate expenses, shipping & logistic, commodities purchase cost, fleet expenses, General and Administrative expenses, and Depreciation expense;
Summarized Financial Data – Subsidiaries The management and operation of our business is performed directly and independently by each subsidiary. Assets, inventories, partnership interests, joint venture interests and contracts are held by the subsidiaries. Petrogress, Inc., the parent company, does not have revenues while it suffers all the necessary operating and general and administrative expenses in order to comply with the regulatory requirements of the SEC.
Petrogress Int’l LLC. (PIL)
Petrogress Int’l LLC. (PIL), performs most of the trading of the oil products. PIL, is the company which serves as a holding company for conducting business across the world through its affiliates and subsidiaries.
Summarized financial information is presented in the following table:
| | | Six months Ended | | | | | June 30 | | | | | 2020 | | | 2019 | | Sales and other operating revenues | | $ | 1,514,701 | | | $ | 2,214,180 | | Cost and other expenses | | | (2,097,517 | ) | | | (1,574,755 | ) | Net income / (loss) attributable to Petrogress, Inc.* | | $ | (582,816 | ) | | $ | 639,425 | |
________
* 100% Net income / (loss) attributable to Petrogress, Inc.
Petronav Carriers LLC. (PCL)
Petronav Carriers LLC., (PCL) is the company that serves as the manager and operator of our tanker fleet of four vessels wholly owned by its five subsidiaries. PCL operates and charter the tankers fleet to PIL and third-party charterers.
Summarized financial information is presented in the following table:
| | | Six months Ended | | | | | June 30 | | | | | 2020 | | | 2019 | | Sales and other operating revenues | | $ | 447,080 | | | $ | 528,333 | | Cost and other expenses | | | (1,451,300 | ) | | | (1,674,142 | ) | Net income / (loss) attributable to Petrogress, Inc. * | | $ | (1,004,220 | ) | | $ | (1,145,809 | ) |
________
* 100% Net income / (loss) attributable to Petrogress, Inc.
Petrogress Hellas Branch (PGH)
Petrogress Hellas (PGH) is the branch of PIL in Greece and operates-monitoring and managed the entire day-to-day activities of the company’s subsidiaries. Through PGH, PIL has commenced the Gas-Fueling Stations in Greece.
Summarized financial information is presented in the following table:
| | | Six months Ended | | | | | June 30 | | | | | 2020 | | | 2019 | | Sales and other operating revenues | | $ | 76,133 | | | $ | 48,000 | | Cost and other expenses | | | (78,388 | ) | | | (68,738 | ) | Net income / (loss) attributable to Petrogress Int’l LLC.* | | $ | (2,255 | ) | | $ | (20,738 | ) |
_______
100% Net income / (loss) attributable to Petrogress Int’l LLC.
Petrogress, Inc. (PGI)
Petrogress, Inc. (PGI) is the parent holding company of the group and doesn’t make any revenues from operations while it suffers all the necessary operating and general and administrative expenses in order to comply with the regulatory requirements of SEC. The following table presents the results of equity interest PGI has into the subsidiaries:
| | | Six months Ended | | | | | June 30 | | | | | 2020 | | | 2019 | | Sales and other operating revenues | | $ | - | | | $ | - | | Corporate, Administrative and other expenses | | | (1,487,941 | ) | | | (254,038 | ) | Net income / (loss) attributable to Petrogress, Inc.* | | $ | (1,487,941 | ) | | $ | (254,038 | ) |
_______
Net income / (loss) attributable from ownership interest of the subsidiaries.
Revenue Concentrations
The following table is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the six months ended June 30, 2020 and 2019:
Customer | | | June 30, 2020 | | | June 30, 2019 | | A | | | | 42% | | | | 74% | | B | | | | 22% | | | | * | | C | | | | 13% | | | | * | |
Summary of customers who accounted for more than ten percent (10%) of the Company’s accounts receivable for the periods ended June 30, 2020 and December 31, 2019 is showing on the below table:
Customer | | | June 30, 2020 | | | December 31, 2019 | | A | | | | 31% | | | | 55% | | B | | | | 30% | | | | * | | C | | | | 11% | | | | 23% | | | D | | | | 13% | | | | * | |
Petrogress, Inc. (PGI) | | Three months Ended | | Consolidated results of Operation | | March 31, | | | | | 2021 | | | 2020 | | Sales and other operating revenues | | $ | 1,504,235 | | | $ | 2,147,882 | | Cost of goods sold, Corporate, Administrative and other expenses* | | | (1,650,420 | ) | | | (3,058,279 | ) | Net income / (loss) attributable to Petrogress, Inc. | | $ | (146,185 | ) | | $ | (910,397 | ) |
| | ● | None of the balances listed in the table above have become overdue as of June 30, 2020.
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| Amounts indicated with an * denote amounts less than 10%.Operating expenses includes, corporate expenses, shipping & logistic, commodities purchase cost, fleet expenses, General and Administrative expenses, and Depreciation expense;
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Liquidity & Capital Resources Our main sources of liquidity are cash and cash equivalents, accounts receivable and internally generated cash flow from operations. At June 30, 2020,As of March 31, 2021, we had a working capital of $632,517$1,499,816 consisting of $154,404$218,159 in cash and cash equivalents, $1,787,917$3,252,674 in accounts receivable, $375,145$738,224 in claims receivable, $377,948$682,601 in inventories, and $2,401,798$1,063,311 in prepaid expenses and other current assets. For the sixthree months ended June 30, 2020,March 31, 2021, net cash provided by operating activities was $699,043$909,287 compared to $11,817$315,122 of net cash used in for the same period in 2019. 2020. Assets included in the calculation of the Company’s working capital have decreasedincreased by $2,133,911$344,723 mainly from the decrease in inventories which have decreased by $828,664. This decrease has been financed mainly by our net income and the increase of our liabilities included in working capital, namely the increase in Convertible promissory notesaccounts receivable. Management’s Discussion and Derivative liabilities which have increased by $76,007Analysis of Financial Condition and $886,487 respectively, during the six months ended June 30, 2020.Results of Operations The company’s future debt level is dependent primarily on results of operations, cash that may be generated from asset dispositions, the capital program, lending commitments to affiliates, and shareholder contributions. Our need for capital resources is driven by our expansion plans, ongoing maintenance and improvement of our vessels, support of our operational expenses, corporate overhead and the expenses we suffer in order to comply with the regulatory requirements of SEC. Specifically, Petrogress, Inc., the parent company, does not have revenues while it suffers all the necessary operating and general and administrative expenses to comply with the regulatory requirements of the SEC. Cash and Cash Equivalents; The following table presents sources and useuses of cash and cash equivalents: | | | | Six months Ended June 30, | | | Three months Ended March 31, | | Sources of cash and cash equivalents | | | 2020 | | | 2019 | | | 2021 | | | 2020 | | Operating activities | | | $ | 699,043 | | | $ | 605,215 | | | $ | 909,287 | | | $ | 315,122 | | Borrowing | | | | - | | | | - | | | | - | | | | - | | Others | | | | - | | | | - | | | | - | | | | - | | Total sources of cash and cash equivalents | | | $ | 699,043 | | | $ | 605,215 | | | $ | 909,287 | | | $ | 315,122 | |
Management seeks to secure the necessary financing for the expansion of Company’s operations. Based on our current plan, we believe our expected cash flows from operations will be sufficient to finance our present activities and capital expenditures only for a period of the next 6 months. The company needs to raise a reasonable finance in order to expand its operations, increase the oil sales and support its projects-operations.projects of the gas-stations. Item 3 3– –Quantitative and Qualitative Disclosures About Market Risk Information about market risks for the sixthree months ended June 30, 2020,March 31, 2021, does not differ materially from that discussed under Item 7A of Petrogress’s 20192020 Annual Report on Form 10-K. Item 4 4– –Controls and Procedures (a) Evaluation of disclosure controls and procedures The company’s management has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures were effective as of June 30, 2020.March 31, 2021. (b) Changes in internal control over financial reporting During the quarter ended June 30, 2020,March 31, 2021, there were no changes in the company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting. PART II –II – OTHER INFORMATION Item 1 1– Legal Proceedings Information about legal proceedings for the sixthree months ended June 30, 2020,March 31, 2021, does not differ materially from that discussed under Item 7A3 of Petrogress’s 20192020 Annual Report on Form 10-K. Item 1A 1A– Risk Factors Information about risk factors for the sixthree months ended June 30, 2020,March 31, 2021, does not differ materially from that set forth under the heading “Risk Factors” on pages 1110 through 1615 of the company’s 20192020 Annual Report on Form 10-K, other than as reflected in the risk factor below. Impacts of the novel coronavirus (COVID-19) pandemic and geopolitical factors have resulted in a significant decrease in demand for Petroleum products and caused a precipitous drop in commodity prices, which has had and is expected to continue to have an adverse, and potentially materialadverse, effect on Petrogress’s future financial and operating results.
As of the date of this Quarterly Report on Form 10-Q, the economic, business, and oil and gas industry impacts from the COVID-19 pandemic and the disruption to capital markets have been far reaching. Crude oil prices, the single largest variable that affects the company’s results of operations, have fallen dramatically to historic lows, even going negative in some cases, due to a combination of a severely reduced demand for crude oil, gasoline, jet fuel, diesel fuel, and other refined products resulting from government-mandated travel restrictions and an economic standstill resulting from the COVID-19 pandemic.
As a result, a market imbalance has existed and may continue to exist, with oil supplies vastly exceeding current and expected near-term demand. Although OPEC and other countries have agreed to cut global oil supply, the commitments and actions to date have not matched the dramatic decrease in global demand, which is driving increasing inventory levels with refineries, pipelines and storage facilities at or close to storage capacity in a growing number of locations.
Extended periods of low prices for crude oil are expected to have a material adverse effect on the company’s results of operations, financial condition and liquidity. Among other things, the company’s earnings, cash flows, and capital and exploratory expenditure programs are expected to be negatively affected. As a result, the value of the company’s assets may also become impaired in future periods.
The company’s operations and workforce are being impacted by the COVID-19 pandemic, causing certain operations to be curtailed to various degrees, which may become suspended completely if adverse conditions persist. As a result of decreased demand for its products, the company has made significant cuts to its operations during March and second quarter of 2020, which are expected to negatively Some inherent risks could materially impact our future operations, cash flows and assets.
The company’s suppliers and customers are also being heavily impacted by the COVID-19 pandemic and access to materials, supplies, and contracts has been strained. In certain cases, the company has received notices invoking force majeure provisions in supplier contracts and receivables. This strain on the financial health of the company’s customers could put further pressure on the company’s financial results and may negatively impact supply and sales assurance and performance for the company.
In light of the significant uncertainty around the duration and extent of the impact of the COVID-19 pandemic, management is currently unable to develop with any level of confidence estimates and assumptions that may have a material impact on the company’s consolidated financial statements and financial or operational performance in any given period. In addition, the unprecedented nature of such market conditions could cause current management estimates and assumptions to be challenged in hindsight.
There continues to be uncertainty and unpredictability around the impact of the COVID-19 pandemic on our financial and operating results in future periods. The extent to which the COVID-19 pandemic adversely impacts our future financial and operating results, and for what duration and magnitude, depends on several factors that are continuing to evolve, are difficult to predict and, in many instances, are beyond the company's control. Such factors include the duration and scope of the pandemic, including any resurgences of the pandemic, and the impact on our workforce and operations; the negative impact of the pandemic on the economy and economic activity, including travel restrictions and prolonged low demand for our products; the ability of our affiliates, suppliers and partners to successfully navigate the impacts of the pandemic; the actions taken by governments, businesses and individuals in response to the pandemic; the actions of OPEC and other countries that otherwise impact supply and demand and correspondingly, commodity prices; the extent and duration of recovery of economies and demand for our products after the pandemic subsides; and Petrogress ability to keep its cost model in line with changing demand for petroleum products and shipping.
The impact of the COVID-19 pandemic is rapidly evolving, and the continuation or a resurgence of the pandemic could precipitate or aggravate the other risk factors identified in our 2019 Form 10-K, which in turn could further materially and adversely affect our business, financial condition, liquidity, results of operations and profitability, including in ways not currently known or considered by us to present significant risks.financial condition.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds The table below presents the issued shares during the quarter ended June 30, 2020:March 31, 2021: Period | | Total Number of Shares | | Class | AprilJanuary 1 – April 30, 2020 January 31, 2021
| | | 440,000- | | Common shares | MayFebruary 1 – May 31, 2020 February 28, 2021
| | | 463,000- | | Common shares | JuneMarch 1 – June 30, 2020 March 31, 2021
| | | 2,131,8611,500 | | Common shares | Total | | | 3,035,3611,500 | | |
Item 3 – Defaults Upon Senior Securities
None
Item 4 – Mine Safety Disclosure
None
Item 5 –Other Informationinformation On May 27, 2020, Petrogress Int’l LLC. (the “Company”) entered into an Amendment No. 2 to Securities Purchase Agreement with Christos Traios, amending the terms of acquisition of Petrogress Africa Limited. As a result, the Company returned 864,000 shares of PGAF (the “Option Shares” representing 72% of the PGAF) for which the Company has not paid the purchase price to date. However, the Company retained ownership of 216,000 of PGAF shares for which remains obliged to pay the purchase price of $1.20 per share in cash to Christos Traios, under the of the Security Purchase Agreement. Future financial statements will be shown as 18 percent equity ownership interest in PGAF, provided the company will comply to its obligations as per amended agreement. The company accounted for this investment using the equity method of accounting.None
Item 6- 6- Exhibits The information required by this Item 6 is set forth in the Exhibit Index accompanying this Form 10Q Exhibits Index _____ Exhibit Number | Exhibits Description | | Page(s) |
* Filed herewith ** Furnished herewith SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. | | | | Date: August 28, 2020July 2, 2021 | PETROGRESS, INC. | | | | | | | | | | By: | /s/ Christos Traios | | | Christos Traios | | | President and Chief Executive Officer (Principal Executive Officer) | | | | | | | | | By: | /s/ Evangelos Makris | | | Evangelos Makris | | | Chief Financial Officer (Principal Financial and Accounting Officer) |
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