Item 1 – Financial Statements
PETROGRESS, INC. and SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
|
|
Six Months Ended June 30,
|
|
|
Three months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from crude oil sales
|
|
$
|
749,200
|
|
|
|
1,917,178
|
|
|
|
133,200
|
|
|
|
-
|
|
Revenues from gas oil sales
|
|
|
622,000
|
|
|
|
300,000
|
|
|
|
-
|
|
|
|
300,000
|
|
Revenues for lubricants sales
|
|
|
143,501
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Revenues from freights & hires
|
|
|
218,000
|
|
|
|
298,500
|
|
|
|
(34,080
|
)
|
|
|
104,000
|
|
Other Revenues
|
|
|
34,080
|
|
|
|
11,000
|
|
|
|
34,080
|
|
|
|
-
|
|
Total Revenues
|
|
$
|
1,766,781
|
|
|
|
2,526,678
|
|
|
|
133,200
|
|
|
|
404,000
|
|
Costs and other Deductions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of goods sold (crude oil)
|
|
|
(1,250,000
|
)
|
|
|
(1,165,752
|
)
|
|
|
(678,000
|
)
|
|
|
-
|
|
Costs of goods sold (gas oil)
|
|
|
(520,000
|
)
|
|
|
(240,000
|
)
|
|
|
-
|
|
|
|
(240,000
|
)
|
Costs of goods sold (lubricants)
|
|
|
(129,000
|
)
|
|
|
(41,202
|
)
|
|
|
-
|
|
|
|
(41,202
|
)
|
Total Cost and Other Deductions
|
|
$
|
(1,899,000
|
)
|
|
|
(1,446,954
|
)
|
|
|
(678,000
|
)
|
|
|
(281,202
|
)
|
Gross profit
|
|
$
|
(132,219
|
)
|
|
|
1,079,724
|
|
|
|
(544,800
|
)
|
|
|
122,798
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses
|
|
|
(293,168
|
)
|
|
|
(83,611
|
)
|
|
|
(217,420
|
)
|
|
|
(78,548
|
)
|
General and administrative expenses
|
|
|
(1,187,591
|
)
|
|
|
(877,563
|
)
|
|
|
(88,875
|
)
|
|
|
(334,691
|
)
|
Amortization expense
|
|
|
(8,790
|
)
|
|
|
(6,687
|
)
|
|
|
(259
|
)
|
|
|
-
|
|
Depreciation expense
|
|
|
(306,895
|
)
|
|
|
(428,048
|
)
|
|
|
(152,199
|
)
|
|
|
(230,768
|
)
|
Total operating expenses
|
|
|
(1,796,444
|
)
|
|
|
(1,395,909
|
)
|
|
|
(458,753
|
)
|
|
|
(644,007
|
)
|
Operating income / (loss) before other expenses and income tax
|
|
$
|
(1,928,663
|
)
|
|
|
(316,185
|
)
|
|
|
(1,003,553
|
)
|
|
|
(521,209
|
)
|
Other Income / (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and finance expenses
|
|
|
(19,638
|
)
|
|
|
(15,493
|
)
|
|
|
(12,248
|
)
|
|
|
(3,130
|
)
|
Amortization of note discount
|
|
|
(174,292
|
)
|
|
|
-
|
|
|
|
(74,590
|
)
|
|
|
-
|
|
Change in fair market value of derivative liabilities
|
|
|
(886,487
|
)
|
|
|
-
|
|
|
|
(629,679
|
)
|
|
|
-
|
|
Other income / (expense), net
|
|
|
(68,152
|
)
|
|
|
(538,302
|
)
|
|
|
(52,327
|
)
|
|
|
(490,900
|
)
|
Total other income / (expense), net
|
|
$
|
(1,148,569
|
)
|
|
|
(553,795
|
)
|
|
|
(768,844
|
)
|
|
|
(494,030
|
)
|
Income / (loss) before income taxes
|
|
$
|
(3,077,232
|
)
|
|
|
(869,980
|
)
|
|
|
(1,772,397
|
)
|
|
|
(1,015,239
|
)
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net income / (loss)
|
|
$
|
(3,077,232
|
)
|
|
|
(869,980
|
)
|
|
|
(1,772,397
|
)
|
|
|
(1,015,239
|
)
|
Net income / (loss) attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of the Company
|
|
|
(3,077,232
|
)
|
|
|
(861,098
|
)
|
|
|
(1,772,397
|
)
|
|
|
(1,011,590
|
)
|
Non-controlling interests
|
|
|
-
|
|
|
|
(8,882
|
)
|
|
|
-
|
|
|
|
(3,649
|
)
|
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Comprehensive income / (loss)
|
|
$
|
(3,077,232
|
)
|
|
|
(869,980
|
)
|
|
|
(1,772,397
|
)
|
|
|
(1,015,239
|
)
|
Comprehensive income / (loss) attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of the Company
|
|
|
(3,077,232
|
)
|
|
|
(861,098
|
)
|
|
|
(1,772,397
|
)
|
|
|
(1,011,590
|
)
|
Non-controlling interests
|
|
|
-
|
|
|
|
(8,882
|
)
|
|
|
-
|
|
|
|
(3,649
|
)
|
Weighted average number of common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
5,136,808
|
|
|
|
3,842,916
|
|
|
|
5,136,808
|
|
|
|
3,857,162
|
|
Diluted
|
|
|
-
|
|
|
|
3,842,916
|
|
|
|
-
|
|
|
|
3,857,162
|
|
Basic earnings per share
|
|
|
(0.60
|
)
|
|
|
(0.22
|
)
|
|
|
(0.35
|
)
|
|
|
(0.26
|
)
|
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 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
|
|
See accompanying notes to consolidated financial statements.
PETROGRESS, INC. and SUBSIDIARIES
Consolidated Statement of Cash Flows (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
|
|
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 Statements (Unaudited)
Note 1. General
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.” and “PG Cypyard Offshore terminal Ltd.”. The company also provides sea-transportation services -as an 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.
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 have caused a significant decrease in the demand for our products and has created disruptions and volatility in the global marketplace beginning in the second 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. There remains a continuing uncertainty regarding the length and impact of the COVID-19 pandemic and associated reductions in demand for our products, on the energy industry and the outlook for our business.
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 Presentation; The accompanying consolidated financial statements of Petrogress and its subsidiaries (together, Petrogress or the company) have not been audited 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-month period ended June 30, 2020, 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. Inter-company transaction balances and unrealized gains/(losses) on transactions between the companies are eliminated.
Subsidiaries & Affiliates
|
|
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)
|
Note 2. New Accounting Standards
Financial Instruments - Credit Losses Effective January 1, 2020, Petrogress adopted Accounting Standards Update (ASU) 2016-13 and its related amendments.
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
|
|
Note 4. 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.
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, Nigeria and Cyprus 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.
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 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
|
|
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 periods ended June 30, 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,
|
|
Sales and Other Operating Revenues
|
|
|
2020
|
|
|
2019
|
|
Upstream
|
International
|
|
$
|
749,200
|
|
|
$
|
1,917,178
|
|
Downstream
|
International
|
|
|
765,501
|
|
|
|
300,000
|
|
Midstream
|
International
|
|
|
218,000
|
|
|
|
298,500
|
|
All others
|
International
|
|
|
34,080
|
|
|
|
11,000
|
|
Total Sales and Other Operating Revenues
|
|
$
|
1,766,781
|
|
|
$
|
2,526,678
|
|
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, 2020 and December 31, 2019, respectively:
Commodities and Petroproducts Inventories
|
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Crude Oil
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Gas Oil
|
|
|
|
293,018
|
|
|
|
1,039,020
|
|
Lubricants
|
|
|
|
-
|
|
|
|
59,479
|
|
Vessels Inventories & Others
|
|
|
|
|
|
|
|
|
|
Bunkers R.O.B.*
|
|
|
|
27,839
|
|
|
|
108,113
|
|
Lubricants
|
|
|
|
57,091
|
|
|
|
-
|
|
Provisions & Stores
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
$
|
377,948
|
|
|
$
|
1,206,612
|
|
*Vessels ROB of Gas Oil, lubricants and new spare parts are calculated in the balance sheets separately from goods.
Note 6. 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, 2020 and 2019:
|
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
|
Estimated useful
Life left (in years)
|
|
Vessels purchased costs
|
|
|
$
|
10,916,684
|
|
|
$
|
10,888,423
|
|
|
2
|
-
|
4
|
|
Furniture and equipment
|
|
|
|
182,764
|
|
|
|
182,764
|
|
|
4
|
-
|
6
|
|
Accumulated depreciation
|
|
|
|
(7,115,919
|
)
|
|
|
(6,821,424
|
)
|
|
|
|
|
|
Vessels and other fixed assets, net
|
|
|
$
|
3,983,529
|
|
|
$
|
4,249,763
|
|
|
|
|
|
|
*
|
Depreciation for the six months ended June 30, 2020 and 2019, was $306,895 and $428,048, respectively.
|
Note 7. Litigation
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.
Note 8. 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
Financial Instruments; The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from 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 results of operations during the period of change. The Company has estimated the fair value of these embedded derivatives for convertible debentures using a Black Scholes model as of June 30, 2020 and 2019. For amounts over proceeds in the initial derivative measurement, the Company recorded a derivative expense of $74,590 and $0 during the six months ended June 30, 2020 and 2019, respectively. The fair values of the derivative instruments are measured each quarter, which resulted in a loss of $629,679 and $0 during the six months ended June 30, 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 for the Company's derivative liability as at June 30, 2020 is based upon the following management assumptions:
|
|
|
Minimum
|
|
|
Maximum
|
|
Volatility
|
|
|
|
302.93%
|
|
|
|
303.08%
|
|
Risk Free rate
|
|
|
|
0.13%
|
|
|
|
1.77%
|
|
Life
|
|
|
|
0.16
|
|
|
|
1.00
|
|
Note 10. Revenue
“Sales and other operating revenue” on the Consolidated Statement of Income primarily arise from contracts 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 and $2,011,430 at June 30, 2020, and December 31, 2019, 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.
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:
|
|
June 30,
|
|
Basic EPS Calculation
|
|
2020
|
|
|
2019
|
|
Net income attributable to common shareholders
|
|
$
|
(3,077,232
|
)
|
|
$
|
(869,980
|
)
|
Denominator for basic net income per share – weighted average shares
|
|
|
5,136,808
|
|
|
|
3,842,916
|
|
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
|
)
|
Diluted net earnings per share
|
|
|
-
|
|
|
|
(0.22
|
)
|
As of June 30, 2020, and 2019, the basic weighted average number of shares of Common Stock of the Company was 5,136,808 and 3,842,916, 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 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
Key Financial Results
Second Quarter of 2020 compared to the Second Quarter of 2019
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.
Refer to the “Results of Operations” section beginning on page 14 for a discussion of our financial results.
Executive Overview
Petrogress, Inc., is based in Delaware and operates as a holding company 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 of crude oil purchases and sales;
Business Environment and Outlook
Petrogress, is an oil energy and sea transportation company with business activities in the following countries: Greece, Cyprus and Ghana. Our earnings currently depend primarily on the profitability of our crude oil sales. The biggest factor affecting the results of operations is the price of crude oil. The price of crude oil has fallen significantly since mid-year 2019. 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. We have reacted to the downturn by effecting reductions in operating expenses, pacing and re-focusing of capital and exploratory expenditures. We anticipate that crude oil prices will increase in the future, as continued growth in demand and a reduction in supply growth should bring global markets into balance. However, the timing or sustainability of any such increase in prices is unknown. In the Company's downstream business, crude oil is the largest cost component of refined products. Nevertheless, it is our objective to deliver competitive results and shareholder value in any business environment.
Our midstream segment relies and depends on our crude oil sales contracts to keep our vessels employed. We rely primarily on the revenues generated from our business of physical supply of crude oil and marketing of refined products to our end customers.
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. 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.
* 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, the Company filed an amendment (the "Amendment") to the Company's Certificate of Incorporation with the Delaware Secretary of State to increase the number of authorized shares of Common Stock from 19,000,000 to 50,000,000. The Amendment took effect on July 6, 2020. 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 Conditions and COVID-19
During the second quarter of 2020, 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. 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.
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.
Operating 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. The gas Stations shall be operated by our Hellenic branch in Greece and we expect to be ready by June 2020.
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. 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, 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 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.
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 Greece, Cyprus, 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, 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
|
)
|
Operating losses of during the second quarter of 2020 amount to $(1,928,663), compared to operating losses of $(316,185) 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,
|
|
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
|
|
Cost of Goods Sold provided in the below table:
|
|
|
Six months Ended
June 30,
|
|
Cost of goods sold
|
|
|
2020
|
|
|
2019
|
|
Crude Oil purchased costs
|
|
|
$
|
(1,250,000
|
)
|
|
$
|
(1,165,752
|
)
|
Gas Oil purchased costs
|
|
|
|
(520,000
|
)
|
|
|
(240,000
|
)
|
Lubricants purchased costs
|
|
|
|
(129,000
|
)
|
|
|
(41,202
|
)
|
Totals
|
|
|
$
|
(1,899,000
|
)
|
|
$
|
(1,446,954
|
)
|
●
|
Sales: Total operating sales for the six months ended June 30, 2020 and 2019, were $1,766,781 and $2,526,678, respectively, a decrease of $759,897 or approximately 30%.
|
●
|
Cost of goods sold: For the six months ended June 30, 2020 and 2019, cost of goods sold was $1,219,049 and $1,446,954, respectively, an increase of $452,046 or approximately 31%.
|
●
|
Corporate expenses: Corporate expenses mainly include the expenses incurred by Petrogress, Inc. Our Corporate expenses for the six months ended June 30, 2020 and 2019 were $293,168 and $83,611, respectively, an increase of $209,557 or approximately 251%.
|
●
|
General and administrative expenses: For the six months ended June 30, 2020, General and administrative expenses increased to $1,187,591 compared to $877,563 for the six months ended June 30, 2019, an increase of $310,028 or approximately 35%.
|
●
|
Net income / (loss) attributable PGI: For the six months ended June 30, 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 of $861,098, an increase of $2,216,134 or approximately 257%.
|
●
|
EBITDA: For the six months ended June 30, 2020, EBITDA amounted to $(1,928,663) compared to $(316,185) for the six months ended June 30, 2019.
|
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%
|
|
|
|
*
|
|
|
●
|
None of the balances listed in the table above have become overdue as of June 30, 2020.
|
|
●
|
Amounts indicated with an * denote amounts less than 10%.
|
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, we had a working capital of $632,517 consisting of $154,404 in cash and cash equivalents, $1,787,917 in accounts receivable, $375,145 in claims receivable, $377,948 in inventories, and $2,401,798 in prepaid expenses and other current assets.
For the six months ended June 30, 2020, net cash provided by operating activities was $699,043 compared to $11,817 for the same period in 2019.
Assets included in the calculation of the Company’s working capital have decreased by $2,133,911 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 notes and Derivative liabilities which have increased by $76,007 and $886,487 respectively, during the six months ended June 30, 2020.
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 use of cash and cash equivalents:
|
|
|
Six months Ended June 30,
|
|
Sources of cash and cash equivalents
|
|
|
2020
|
|
|
2019
|
|
Operating activities
|
|
|
$
|
699,043
|
|
|
$
|
605,215
|
|
Borrowing
|
|
|
|
-
|
|
|
|
-
|
|
Others
|
|
|
|
-
|
|
|
|
-
|
|
Total sources of cash and cash equivalents
|
|
|
$
|
699,043
|
|
|
$
|
605,215
|
|
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.