PGAS Petrogress Inc (CE)

Note B - Preparation of Financial Statements

The Company follows the accrual basis of accounting in accordan ce with generally accepted accounting principles and has elected a year-end of December 31.

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 as amended (the “Securities Act”) for complying with new or revised accounting standards. As an emerging growth company, we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note B - Preparation of Financial Statements - Continued

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

For segment reporting purposes, the Company and its subsidiaries operated in only one industry segment during the periods represented in the accompanying financial statements and makes all operating decisions and allocates resources based on the best interests of the Company as a whole.

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements filed with the U. S. Securities and Exchange Commission on its Form 10-K for the year ended December 31, 2016. The information presented within these interim financial statements may not include all disclosures required by accounting principles generally accepted in the United States of America and the users of financial information provided for interim periods should refer to the annual financial information and footnotes when reviewing the interim financial results presented herein.

In the opinion of management, the accompanying interim financial statements, prepared in accordance with the U. S. Securities and Exchange Commission’s instructions for Form 10-Q, are unaudited and contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the respective interim periods presented. The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full fiscal year ending December 31, 2017.

The accompanying consolidated financial statements, as of and for the periods ended September 30, 2017 and 2016, respectively and as appropriate, contain the accounts of the Company and its wholly- or majority-owned (directly and indirectly) subsidiaries: Petrogres Co Ltd., Petronav Carriers LLC, Shiba Ship Management Ltd., Danae Marine Ltd., Invictus Marine S. A. and Entus Marine Ltd. (all incorporated in the Republic of the Marshall Islands); Petrogress Int’l LLC (a Delaware limited liability company); Petrogres Africa Co., Ltd. (incorporated in the Republic of Ghana) and Petrogress Oil & Gas, Inc. (a Texas corporation). All significant intercompany transactions have been eliminated. The consolidated entities are collectively referred to as the “Company.”

Note C - Summary of Significant Accounting Policies

1. Cash and cash equivalents

The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.

2. Accounts receivable and revenue recognition

The Company, through its subsidiaries, is primarily engaged in the purchase, transport and processing of oil and petroleum products. In the normal course of business, the Company extends unsecured credit to virtually all of its customers which are located principally in Africa. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. Because of the credit risk involved, management has provided an allowance for doubtful accounts which reflects its opinion of amounts which will eventually become uncollectible. In the event of complete non-performance, the maximum exposure to the Company is the recorded amount of trade accounts receivable shown on the balance sheet at the date of non-performance.

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note C - Summary of Significant Accounting Policies - Continued

The Company recognizes revenues after product is delivered to a contracted customer. Product in transit at the end of an accounting period is recorded at an estimated value which is adjusted upon load certification. The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition. ASC 605 requires that the following four basic criteria are met (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured. The Company recognizes revenue from commissions during the month in which commissions are earned.

3. Inventory

The Company's inventory, which consists primarily of purchased crude oil in transit on a marine vessel at the respective balance sheet date, is valued at the lower of cost or market using the mark-to-market method of valuation.

4. Marketable Securities

The Company classifies its mark etable 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 separate component of stockholders’ equity. Realized gains and losses on available-for-sale securities are included in net earnings in the period earned or incurred. Other investments, if any, that do not have a readily determinable fair value are recorded at amortized cost. For purposes of computing realized gains and losses, the specific identification method is used.

5. Property and equipment

Property and equipment are recorded at historical cost. These costs are depreciated over the estima ted useful lives of the individual assets using the straight-line method, generally 5 to 10 years.

Gains and losses from disposition of property and equipment are recognized as incurred and are included in operations.

In accordance with the appropriate s ections of the Fixed Asset topic of the FASB ASC, the Company follows the policy of evaluating all property and equipment as of the end of each reporting quarter. At September 30, 2017 and 2016, respectively, management has not provided any impairment for the future recoverability of these assets.

6. Organization costs

The Company has adopted the provisions required by the Start-Up Activities topic of the FASB ASC whereby all costs incurred with the incorporation and reorganization of the Company were ch arged to operations as incurred.

7. Income taxes

The Company files 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 regulato ry taxing authorities for any period prior to January 1, 2012.

The Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. The Company recognizes 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. The Company records 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.

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note C - Summary of Significant Accounting Policies - Continued

ASC 740-10 prescribes a recognition threshold that a tax positio n is required to meet before being recognized in the financial statements and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues. The Company classifies interest and penalties as a component of interest and other expenses. To date, the Company has not incurred any liability for unrecognized tax benefits, including assessments of penalties and/or interest.

The Company measures and records uncertain tax positi ons by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized.

Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.

Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.

As of September 30, 2017, the Company does not have any outstanding items which could be deemed to be dilutive. As of September 30, 2016, the Company had potentially dilutive securities related to the Company’s outstanding convertible debt that could have potentially converted into approximately 6,018,760 shares of common stock.

9. Accounting for Stock-based Compensation

The Company accounts for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The measurement date is the earlier of (1) the date at which a commitment for per formance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete. Stock awards granted to non-employees are valued at their respective measurement dates based on the trading price of the Company’s common stock and recognized as expense during the period in which services are provided.

10. Comprehensive Income

The Company has adopted ASC Topic 220, "Comprehensive Income." This statement establishes standards for reporting comprehe nsive income and its components in a financial statement. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Items included in the Company’s comprehensive loss consist of unrealized losses on available-for-sale securities.

11. New and Pending Accounting Pronouncements

The Company is of the opinion that any and all other pending accounting pronouncements, either in the adoption phase or not yet required to be adopted, will not have a signifi cant impact on the Company's financial position or results of operations.

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note D - Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade accounts receivables. The Company places its temporary cash investments with financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the short payment terms dictated by the industry and operating environment. As of September 30, 2017, and December 31, 2016, management is of the opinion that the Company had no significant concentrations of credit risk.

Note E - Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts receivable, inventory, marketable securities, accounts payable and accrued expenses, and convertible debt.

The carrying amount of cash, accounts receivable, inventory, accounts payable and accrued expenses, and convertible debt, as applicable, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.

Marketable securities are adjusted to fair value each balance sheet date, based on quoted prices; which are considered level 1 inputs. The Company ’s derivative liability is valued using the level 3 inputs. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.

Interest rate risk is the risk that the Company’s earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.

Financial risk is the risk that the Company’s earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to financial risk, if any.

Fair value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”). Fair value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market approach”). The Company also considers the impact of a significant decrease in volume and level of activity for an asset or liability when compared with normal activity to identify transactions that are not orderly.

The highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Securities are cl assified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The three hierarchy levels are defined as follows:

Level 1 - Quoted prices in active markets that is unadjusted and accessible at the measure ment 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;

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note E - Fair Value of Financial Instruments - Continued

Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

Cr edit 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.

The following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016, respectively, for each fair value hierarchy level:

Total depreciation expense charged to operations for the nine month periods ended September 30, 2017 and 2016, respectively, was approximately $521,404 and $505,759. Total depreciation expense for the year ended December 31, 2016 was approximately $676,328.

Note H - Convertible Notes Payable

On May 1, 2015, the Company entered into a Convertible Promissory Note with LG Capital Funding LLC in the amount of $21,500 and on May 26, 2015, entered into a Convertible Promissory Note with Crown Bridge Partners LLC in the amount of $24,000. On December 9, 2015, both of these notes were acquired by Mammoth Corporation and restructured to the principal amount of $31,259 and $38,280, respectively. The notes had a scheduled maturity of September 9, 2016.

Each note was non-interest bearing and contained a conversion feature, at the option of the holder, whereby the principal amount and any accrued interest, if any, could be converted to common stock of the Company at a conversion price of 54% of the lowest closing price for the Company’s common stock during the 20 trading days preceding the date of the conversion notice.

The Company tendered a cash payment of approximately $44,887 as payment in full on the outstanding principal and accrued interest, if any, on July 3, 2017. Mammoth Corporation i nitially rejected the tender, but later accepted a settlement of 1.2 million shares and payment of $26,767. Given the timing of this debt retirement in relation to the date of the accompanying financial statements, the underlying derivative was effectively retired as of June 30, 2017.

The Company determined that the conversion feature of the Mammoth Notes represent an embedded derivative since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the Mammoth Notes were not considered to be conventional debt under EITF 00-19 and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments being recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to each Note. Such discount is being amortized from the date of issuance to the maturity dates of the Notes. The change in the fair value of the liability for derivative contracts are recorded in other income or expenses in the consolidated statements of operations at the end of each quarter, with the offset to the derivative liability on the balance sheet. The embedded feature included in the Mammoth Notes resulted in a debt discount of $48,975 on the date the Mammoth Notes were assumed and a derivative liability of $300,321.

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note H - Convertible Notes Payable

     A summary of the derivative liability of the Mammoth Notes as of September 30, 2017 and December 31, 2016, is as follows:

September 30, 2017

December 31, 2016

The fair value at the assumption and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of September 30, 2017 and December 31, 2o16, respectively:

A summary of the convertible notes payable balance as of September 30, 2017 and December 31, 2016 is as follows:

Note I - Note Payable to Stockholder

In conjunction with the aforementioned change-in-control transaction on February 29, 2016, the Company and its current controlling stockholder, Christos Traios, recognized that sufficient working capital would be required for the foreseeable future to support the operations of the parent holding company, including the maintenance of the corporate entity and compliance with the periodic reporting requirements of the Securities Exchange Act of 1934, as amended.

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note I - Note Payable to Stockholder - Continued

For the period February 29, 2016 through July 13, 2017, this arrangement was undocumented and informal. On July 13, 2017, the Company issued a $1,000,000 Revolving Line of Credit Note (the “LOC Note”) in favor of the Company’s principal stockholder and sole officer/director, Christos Traios. As previously mentioned, Mr. Traios has agreed to provide the Company with additional working capital as required from time-to-time to support its operations, and the LOC Note formalizes that commitment and confirms amounts previously advanced under an informal agreement between Mr. Traios and the Company.

The LOC Note bears interest payable on the outstanding principal at eight percent (8%) per annum. The principal and any accrued but unpaid interest on the LOC Note is due and payable on or before July 13, 2018. At the maturity date, provided that the Company is not in default, the Company, at the Company’s option may extend and renew the LOC Note for additional terms of twelve (12) months, with a new effective and maturity date assigned for each successive extension and renewal.

Interest is due and payable every six (6) months and on the Maturity Date, and each successive iteration of such dates upon extension and renewal thereafter. The principal amount of the LOC Note may be prepaid by the Company, in whole or in part, without penalty, at any time.

Upon the interest due date or maturity date, or any of them, regardless of any event of default, the LOC Note holder may demand payment of any or all of the interest due on the principal amount by delivery of a number of common shares converted at a rate of $0.001 per share. There is no provision for any of the principal to be repaid in common stock of the Company. Except in the event of a default, in no instance may the LOC Note holder convert amounts due for accrued interest to the extent that said repayment in common stock will cause the Company to issue a number of shares constituting ten percent (10%) or more of the Company’s then issued and outstanding common shares.

In consideration of Lender's extending the Credit Line to the Company, the Company agreed to issue to Mr. Traios a Warrant (the "Warrant") to purchase 15,000,000 shares of the Company’s common stock at an exercise price of $0.05 for a period of five years. The Warrant will provide for cashless exercise privileges, and be transferrable or assignable at the Holder’s option, with the Company’s approval.

A dvances from Christos Traios from inception, including activity on the LOC Note, is as follows:

Note J - Common Stock Transactions

On November 16, 2016, the Company filed Articles of Merger and Plan of Merger with the State of Florida and the State of Delaware to change the Company’s domicile from Florida to Delaware by means of a merger with and into a Delaware corporation formed solely for the purpose of effecting the reincorporation. The Articles of Incorporation and Bylaws of the Delaware corporation are the Articles of Incorporation and Bylaws of the surviving corporation. Such Articles of Incorporation maintained the Company’s corporate name of Petrogress, Inc. and modified the Company’s capital structure to allow for the issuance of up to 490,000,000 shares of $0.001 par value common stock and up to 10,000,000 shares of $0.001 par value preferred stock. The effect of this action is reflected in the accompanying financial statements as of the first day of the first period presented.

Effective February 29, 2016, the Company issued 1,101,642 shares of the Company’s common stock to Agritek Holdings, Inc. pursuant to a Debt Settlement Agreement in full settlement of the amount owed to Agritek of $283,547.

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note J - Common Stock Transactions - Continued

Upon completion of the Securities Exchange Agreement on February 29, 2016 between the Company and Petrogres, the Company issued to Christos P. Traios, the sole Petrogres shareholder, 136,000,000 shares of common stock in exchange for one hundred percent (100%) of the issued and outstanding share capital of Petrogres.

On April 11, 2016, the Company issued 6,800,000 shares of common stock to Mammoth upon the conversion of $22,032 of principal at a conversion price of $0.00324 per share.

On September 19, 2017, the Company issued 1,200,000 shares of common stock to Mammoth upon the conversion of the balance of principal at a conversion price of .02 per share. This transactio n and a cash payment of $26,767, retired the Mammoth debt.

On September 20, 2017, the Company issued 10,000,000 shares of common stock to Charles L. Stidham as compensation for past and future services to Petrogress Oil & Gas, Inc. These share considerat ion and the agreement with Mr. Stidham were disclosed in a Form S-8 registration statement effective September 22, 2017.

Note K - Preferred Stock

The Company is authorized to issue up to 10,000,000 shares of preferred stock, $0.001 par value. As of September 30, 2017, there were 100 shares of preferred stock issued and outstanding.

On July 14, 2017, the Company ’s Board of Directors approved a resolution authorizing the establishment of Series A Preferred Stock. The Series A Preferred Stock consists of 100 shares in total with a re-designated par value of $100.00 per share; all of these shares were issued to Christos P. Traios, our sole director, President and Chief Executive Officer as provided in his employment agreement. The holder(s) of the Series A shares has/have rights as a class to a number of votes equal to two (2) times the sum of: (i) the total number of shares of common stock which are issued and outstanding at the time of any election or vote by the shareholders; plus (ii) the number of shares of Preferred Stock issued and outstanding of any other class that has voting rights, if any. These voting rights may be exercised for any matter requiring shareholder approval by vote or consent, and may, if required, permit a number of votes in excess of the total number of shares authorized. The holder(s) of the Series A shares is/are not entitled to convert the Series A shares to shares of Common Stock or any other class of the Corporation’s stock. The Series A shares shall not be entitled to dividends, but, in the event of liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holder(s) of the Series A shares will be entitled to receive out of the assets of the Corporation, prior to and in preference to any distribution of the assets or surplus funds of the Corporation to the holders of any other class of preferred stock or the Common Stock, the amount of One Hundred Dollars ($100.00) per share, and will not be entitled to receive any portion of the remaining assets of the Company except by reason of ownership of shares of any other class of the Company’s stock. The Series A shares are not subject to redemption by the Company.

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note L - Common Stock Warrants

The Company has issued an aggregate 15,000,000 warrants to purchase an equivalent number of shares of common stock at a price of $0.05 per share as a component of the July 13, 2017 Revolving Line of Credit Agreement by and between the Company and Christos Traios, the Company’s Chief Executive Officer.

As of September 30 , 2017, the warrants are accounted for as follows:

Note M - Officer Compensation

On April 1, 2016, the Company entered into an Employment Agreement (“Employment Agreement”) between Christos P. Traios, Piraeus, Greece (“Executive”) and the Company.

The Company agreed to employ the Executive to perform managerial and executive functions for the Company and the Executive agreed to perform such services on the terms and conditions defined in the Employment Agreement, subject to the directives of the Company’s Board of Directors. The term of this Employment Agreement commenced on April 1, 2016 and terminates on March 31, 2021, provided, however, that the Employment Agreement shall automatically renew on a year-to-year basis unless terminated by either party via written notice at least four (4) months prior written notice during any given year, unless terminated as provided for in the Employment Agreement.

The Executive is entitled to receive:

(a)     Base Salary at an annual rate of U.S. $120,000.00. The Base Salary will be payable in monthly installments of U.S.$10,000 on the 1st day of each calendar month, commencing on the starting date of the Employment Agreement.

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note M - Officer Compensation - Continued

(b)     Shares of Preferred stock with super-voting rights, which he shall hold until the parties, either of them, terminate the Employment Agreement.

(c)     An expense allowance of U.S.$5,000 per month. Any expenses in excess of that amount require the prior approval of the Company’s Board of Directors.

(d)     The Executive is also be eligible to participate in any future bonus, profit sharing and/or ESOP plans approved and enacted by the Company’s Board of Directors on the same basis with all other senior executives of the Company, subject to the terms thereof.

(e)     The Executive is also entitled to receive any other normal and ordinary benefits offered by the Company on a basis equal to any other senior executive(s) of the Company.

The Employment Agreement may be terminated as follows: (a) at any time by the mutual written consent of the Executive and the Company; (b) at any time for cause (as defined in the Employment Agreement) by the Company upon written notice to the Executive; (c) upon the Executive’s death or upon the Executive’s permanent disability (as defined in the Employment Agreement) continuing for a period of ninety (90) days; (d) at any time by the Executive with sixty (60) days written notice of intent to terminate to the Company; or (e) at any time without cause (as defined in the Employment Agreement) by the Company upon written notice to the Executive of not less than thirty (30) days, subject to the caveats that the Company will pay the Executive the Executive’s Base Salary for a period of six (6) months as severance pay and shall pay any unpaid bonus and benefits in each case through the effective date of termination.

During the nine months ended September 30, 2017 and the year ended December 31, 2016, the Company paid or accrued approximately $90,000 and $100,000 pursuant to this Employment Agreement.

Note N - Rental Commitments

The Company leases office and other facilities benefitting the Company on long-term operating leases, as follows:

Office space in Piraeus, Greece for monthly rent of €2,500 (approximately US$2,942 at August 1, 2017). The lease, as amended, expires on May 31, 2018. The Company believes that this office space is adequate for its operations at the present time.

Effective June 13, 2016, the Company entered into a thirteen (13) month lease, with extension periods, for a corporate apartment in New York City, to be used by the Company’s Chief Executive Officer during his travel to New York. Mr. Traios spends approximately 35% of his time in New York on business matters. The monthly rental is for $4,100 through July 12, 2018.

Effective October 1, 2016, the Company entered into a one-year Office Services Agreement, with renewal provisions, for office space and other services for a total base monthly fee of $2,800. The Company utilizes the New York office space for administrative purposes.

Future minimum rental payments on the above leases are as follows:

For the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively, the Company paid an aggregate of $100,254 and $88,181 for rent under these agreements.

Petrogress, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

September 30, 2017 and December 31, 2016

Note O - Related Party Transactions

The Company has accounts receivable from affiliated entities of approximately $452,879 and $-0-at September 30, 2017 and December 31, 2016, respectively.

On September 26, 2017, the Company purchased 100% of the units of Petrogress Int ’l LLC, a Delaware limited liability company formed in 2016 (“PIL”), from Christos P. Traios, its CEO and Chairman. The purchase price was $1.00. PIL was formed and capitalized by Mr. Traios individually for the purpose of pursuing speculative business in Africa and elsewhere. Certain of this business, including the acquisition of an interest in the Port of Limassol, Cyprus; a joint venture to acquire an interest in a Libyan refinery project; and certain business prospects in Ghana, had sufficiently developed such that they were suitable prospects for the Company. PIL was acquired as a special purpose vehicle, and the Company’s business in Africa and the eastern Mediterranean will be effected through it; its results are consolidated with and reported on the Company’s financial statements.

Effective September 30, 2017, PIL purchased 90% of the shares of Petrogres Africa Co., Ltd., a limited company formed in late 2016, under The Companies Act in Ghana (“PAF”). The purchase price was $1.00. The remaining 10% of PAF is owned by unaffiliated Ghanian citizens. PAF has been granted a license to operate as a shipper in the Port of Tema, Greater Accra, and will bid to operate an offshore oil production platform in the Saltpond field, along with certain other oil and gas concessions. PAF was acquired by PIL as a special purpose vehicle to pursue these interests in Ghana; its results area consolidated with and reported on the Company’s financial statements.