Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - PETROGRESS, INC | pgas0513form8kaexh99_1.htm |
| EX-23.1 - EXHIBIT 23.1 - PETROGRESS, INC | pgas0513form8kaexh23_1.htm |
| 8-K/A - FORM 8-K/A AMENDMENT NO. 1 - PETROGRESS, INC | pgas0513form8ka.htm |
Exhibit 99.2
Petrogress, Inc.
Introduction to Unaudited Pro Forma Combined Financial Information
The following unaudited pro forma combined financial information is presented to illustrate the estimated effects of our merger with Petrogres Co Limited.
On February 29, 2016, we entered into a Share Exchange Agreement (the “Exchange Agreement”) with Petrogres Co Limited., a Marshall Islands corporation (“Petrogres”) and the sole stockholders of Petrogres (the “Petrogres Shareholder”).
Pursuant to the Exchange Agreement, we acquired all of the outstanding shares of Petrogres in exchange for the issuance of 136,000,000 shares of our common stock to the Petrogres Shareholder. The shares issued to the Petrogres Shareholder constituted 85% of our issued and outstanding shares of common stock as of and immediately after the consummation of the Exchange Agreement.
Upon closing of the Exchange Agreement, Petrogres became our wholly owned subsidiary and the Company plans on ceasing its prior operations.
The Exchange Agreement is being accounted for as a reverse merger and recapitalization of Petrogres whereby Petrogres is deemed to be the acquirer in the reverse merger for accounting purposes. The consolidated financial statements after the acquisition include the balance sheets of both companies at historical cost, the historical results of Petrogres and the results of the Company from the acquisition date.
Upon the closing of the transaction, a new board of directors and new officers were appointed which consists of Mr. Christos Traios. Mr. Traios was appointed as Chief Executive Officer and President of the Company.
The unaudited pro forma combined financial information assumes the Exchange Agreement was consummated as of December 31, 2015. The financial statements of the Company included in the following unaudited pro forma combined financial information are derived from the audited financial statements of the Company for the year ended December 31, 2015 contained on Form 10-K as filed with the Securities and Exchange Commission on April 19, 2016. The financial statements of Petrogres, included in the following unaudited pro forma combined financial information are derived from the audited financial statements for the year ended December 31, 2015 contained elsewhere in the Form 8-K/A. The unaudited pro forma combined balance sheet is prepared as though the transactions occurred at the close of business on January 1, 2015.
The information presented in the unaudited pro forma combined financial information does not purport to represent what our financial position would have been had the Exchange Agreement occurred as of the dates indicated, nor is it indicative of our future financial position for any period. You should not rely on this information as being indicative of the historical results that would have been achieved had the companies always been consolidated or the future results that the consolidated company will experience after the Share Exchange Agreement Transaction.
The pro forma adjustments are based upon available information and certain assumptions that the Company believes is reasonable under the circumstances. The unaudited pro forma combined financial information should be read in conjunction with the historical financial statements and related notes of the Company.
| PETROGRESS, INC | ||||||||||||||||||||
| Pro Forma Consolidated Balance Sheet | ||||||||||||||||||||
| December 31, 2015 | ||||||||||||||||||||
| Historical | Historical Petrogres Co |
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| Petrogress, Inc | Limited | Pro forma | Pro forma | |||||||||||||||||
| December 31, 2015 | December 31, 2015 | Adjustments | Note | Consolidated | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Current Assets | ||||||||||||||||||||
| Cash | $ | 317 | $ | 1,882,305 | $ | — | $ | 1,882,622 | ||||||||||||
| Accounts receivable | 340 | 2,650,171 | — | 2,650,511 | ||||||||||||||||
| Inventory | — | 1,209,960 | — | 1,209,960 | ||||||||||||||||
| Marketable securities | 780 | — | — | 780 | ||||||||||||||||
| Total current assets | 1,437 | 5,742,436 | — | 5,743,873 | ||||||||||||||||
| Property and equipment, net | 868 | 6,144,000 | — | 6,144,868 | ||||||||||||||||
| Total assets | $ | 2,305 | $ | 11,886,436 | $ | — | $ | 11,888,741 | ||||||||||||
| Liabilities and Shareholders’ Deficit | ||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||
| Due to stockholders | $ | 519,542 | $ | — | $ | (519,542 | ) | A,D | $ | 0 | ||||||||||
| Accounts payable and accrued expenses | 47,733 | 809,473 | (47,733 | ) | D | 809,473 | ||||||||||||||
| Convertible promissory notes (net of discount of $63,946) | ||||||||||||||||||||
| 5,673 | — | — | 5,673 | |||||||||||||||||
| Derivative liability | 141,436 | — | — | 141,436 | ||||||||||||||||
| Total current liabilities | 714,384 | 809,473 | (567,275 | ) | 956,582 | |||||||||||||||
| Shareholders’ equity (deficit): | ||||||||||||||||||||
| Preferred stock | — | — | — | — | ||||||||||||||||
| Common stock | 21,898 | 1,000,000 | 1,102 | A | 159,000 | |||||||||||||||
| — | — | (1,000,000 | ) | C | ||||||||||||||||
| — | — | 136,000 | B | |||||||||||||||||
| Common stock to be issued | 1,000 | — | — | 1,000 | ||||||||||||||||
| Additional paid-in capital | 1,443,614 | 7,802,838 | 279,946 | A | 8,498,033 | |||||||||||||||
| — | — | 1,000,000 | C | |||||||||||||||||
| — | — | (2,028,365 | ) | B | ||||||||||||||||
| Accumulated comprehensive loss | (113,220 | ) | — | 113,220 | B | — | ||||||||||||||
| Retained earnings (deficit) | (2,065,372 | ) | 2,274,125 | 2,065,372.28 | B,D | 2,274,125 | ||||||||||||||
| Total shareholders' equity (deficit) | (712,080 | ) | 11,076,963 | 567,275 | 10,932,158 | |||||||||||||||
| Total liabilities and shareholders' equity (deficit) | $ | 2,305 | $ | 11,886,436 | $ | — | $ | 11,888,741 | ||||||||||||
| PETROGRESS, INC | ||||||||||||||||||||
| Pro Forma Consolidated Statement of Operations | ||||||||||||||||||||
| For the Year Ended December 31, 2015 | ||||||||||||||||||||
| Historical | Historical Petrogres Co |
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| Petrogress, Inc | Limited | Pro forma | Pro forma | |||||||||||||||||
| December 31, 2015 | December 31, 2015 | Adjustments | Note | Consolidated | ||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Revenues | $ | 115,514 | $ | 21,579,013 | $ | (115,514 | ) | E | $ | 21,579,013 | ||||||||||
| Cost of revenues | 106,884 | 15,705,806 | (106,884 | ) | E | 15,705,806 | ||||||||||||||
| Gross profit | 8,631 | 5,873,207 | (8,630 | ) | 5,873,208 | |||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||
| Fleet operating expenses | — | 3,034,938 | — | 3,034,938 | ||||||||||||||||
| Management and consulting fees, related parties | 141,856 | 874,723 | (81,856 | ) | E | 934,723 | ||||||||||||||
| Administration expenses | 163,901 | 136,387 | (141,290 | ) | E | 158,998 | ||||||||||||||
| Depreciation and amortization | 573 | 663,500 | (573 | ) | E | 664,073 | ||||||||||||||
| Total operating costs and expenses | 306,330 | 4,709,548 | (223,719 | ) | 4,792,732 | |||||||||||||||
| Income (loss) from operations | (297,700 | ) | 1,163,659 | 215,089 | 1,080,476 | |||||||||||||||
| Other income (expenses) | ||||||||||||||||||||
| Interest expense, related parties | — | — | — | — | ||||||||||||||||
| Interest expense, other | (44,529 | ) | — | — | (44,529 | ) | ||||||||||||||
| Fair value adjustment of derivative liabilities | (186,988 | ) | — | — | (186,988 | ) | ||||||||||||||
| Gain on debt extinguishment | 113,676 | — | 286,227 | D | 399,903 | |||||||||||||||
| Total other income (expenses) | (117,841 | ) | — | 286,227 | 168,386 | |||||||||||||||
| Net income (loss) before income taxes | (415,540 | ) | 1,163,659 | 501,316 | 1,248,862 | |||||||||||||||
| Income taxes | — | 81,456 | — | 81,456 | ||||||||||||||||
| Net income (loss) | $ | (415,540 | ) | $ | 1,082,203 | $ | 501,316 | $ | 1,167,406 | |||||||||||
| Other Comprehensive loss, net of tax: | ||||||||||||||||||||
| Unrealized gain (loss) on marketable securities | $ | (29,220 | ) | |||||||||||||||||
| Comprehensive loss | $ | (444,760 | ) | |||||||||||||||||
| Basic and diluted net income (loss) per common share | $ | (0.03 | ) | 0.01 | ||||||||||||||||
| Basic and diluted weighted average common shares outstanding | 24,000,000 | 160,000,000 | ||||||||||||||||||
| A | Accrued liabilities, related parties | 281,048 | ||||||
| Common stock | (1,102 | ) | ||||||
| Additional paid-in capital | (279,946 | ) | ||||||
| Record issuance of shares for debt conversions | ||||||||
| B | Additional paid-in capital | 2,028,365 | ||||||
| Common stock | (136,000 | ) | ||||||
| Accumulated comprehensive loss | (113,220 | ) | ||||||
| Retained earnings | (1,779,145 | ) | ||||||
| Issue 136 million shares and to eliminate old pubco historical deficit | ||||||||
| C | Common Stock | 1,000,000 | ||||||
| Additional aid in Capital | (1,000,000 | ) | ||||||
| Eliminate Petrogres shares | ||||||||
| D | Accounts payable | 238,494 | ||||||
| Due to stockholders | 47,733 | |||||||
| Gain on debt extinguishment | (286,227 | ) | ||||||
| To write off all liabilities except conv note and derivative liabilities | ||||||||
| E | Retained earnings | 215,089 | ||||||
| Management fees | (81,856 | ) | ||||||
| Administration expenses | (141,290 | ) | ||||||
| Depreciation | (573 | ) | ||||||
| Cost of sales | (106,884 | ) | ||||||
| Sales | 115,514 | |||||||
| Eliminate prior pubco operations except for pubco expenses |
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
On February 29, 2016 (the “Effective Date”), the Company entered into and closed on a share exchange agreement (the “Share Exchange Agreement”) with Petrogres Co Limited, a Marshall Islands corporation and Mr. Christos Traios, its sole shareholder. As a result of the transaction, Petrogres would become a wholly owned subsidiary of the Company and the board of the Company will consist solely of Mr. Traios. The Company feels that it is in the best interests of the shareholders to maximize value with respect to this transaction. Petrogres is an oil trading and shipping company acting internationally and has been in business for seven (7) years. Petrogres conducts its operations through four subsidiaries, each one of which owns and operates a shipping vessel used in international and domestic shipping.
Pursuant to the Exchange Agreement, we acquired all of the outstanding shares of Petrogres in exchange for the issuance of 136,000,000 shares of our common stock to the Petrogres Shareholder. The shares issued to the Petrogres Shareholder constituted 85% of our issued and outstanding shares of common stock as of and immediately after the consummation of the Exchange Agreement.
The transaction is accounted for using the purchase method of accounting. As a result of the recapitalization and change in control, Petrogres is the acquiring entity in accordance with ASC 805, Business Combinations. The accumulated earnings of Petrogres will be carried forward after the completion of the Merger.
1. BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma condensed combined balance sheets have been derived from the historical December 31, 2015 balance sheet of the Company after giving effect to the acquisition with Petrogres. The pro forma balance sheet and statement of operations and comprehensive loss present this transaction as if they had been consummated as of December 31, 2015, as required under Article 11 of Regulation S-X.
Historical financial information has been adjusted in the pro forma balance sheet to pro forma events that are: (1) directly attributable to the Acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the Company’s results of operations. This share exchange will be treated as a reverse acquisition, and therefore Petrogres is treated as the accounting acquirer. The pro forma adjustments presented in the pro forma condensed combined balance sheet and statement of operations are described in Note 3— Pro Forma Adjustments.
The unaudited pro forma combined financial information is for illustrative purposes only. These companies may have performed differently had they actually been combined for the periods presented. You should not rely on the pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined companies will experience after the merger. Unaudited pro forma financial information and the notes thereof should be read in conjunction with the accompanying historical financial statements of Petrogres included elsewhere in this report.
2. ACCOUNTING PERIODS PRESENTED
The unaudited pro forma condensed combined balance sheet as of December 31, 2015 is presented as if the Petrogres acquisition had occurred on December 31, 2015, and combines the historical balance sheet of the Company at December 31, 2015 and the historical balance sheet of Petrogres at December 31, 2015.
The unaudited pro forma condensed combined statement of operations and comprehensive loss of the Company and Petrogres for the year ended December 31, 2015, are presented as if the Petrogres acquisition had taken place on January 1, 2015.
3. PRO FORMA ADJUSTMENTS
The adjustments included in the pro forma balance sheet and statement of operations and comprehensive loss are as follows:
| (A) | To record issuance of 1,104,642 shares of common stock for debt extinguishment. |
| (B) | To record issuance of 136,000,000 shares of common stock to acquire 100% of Petrogres Co Limited. |
| (C) | To eliminate Petrogres shares. |
| (D) | To write off all liabilities of 800 Commerce, Inc. pursuant to Share Exchange Agreement. |
| (E) | To eliminate 800 Commerce 2015 operations, except for expenses related to being a public company. |