PETROGRESS, INC.

 

Unless the context otherwise indicates, references to “Petrogress Inc.” “we”, “our”, or “us”, or the “Company” in this Form 10-Q are references to Petrogress Inc, -a Delaware corporation- including its wholly owned and majority-owned subsidiaries, and its ownership interests in equity method investees (corporate entities, partnerships, limited liability companies and other ventures over which Petrogress Inc exerts significant influence by virtue of its ownership interest) companies. Our significant subsidiaries are “Petronav Carriers LLC.,” and “Petrogress Int’l LLC.”.

 

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

 

This quarterly report of Petrogress Corporation contains forward-looking statements relating to Petrogress operations that are based on management’s current expectations, estimates and projections about the petroleum, chemicals, transactions, vessels and other energy-related industries. All statements in this Report that are not representations of historical fact are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and subject to the safe-harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words or phrases such as “anticipates,” “expects,” “intends,” “plans,” “targets,” “forecasts,” “projects,” “believes,” “seeks,” “schedules,” “estimates,” “positions,” “pursues,” “may,” “could,” “should,” “budgets,” “outlook,” “trends,” “guidance,” “focus,” “on schedule,” “on track,” “is slated,” “goals,” “objectives,” “strategies,” “opportunities” and similar expressions are intended to identify such forward-looking statements.

 

The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Petrogress undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 

 

Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: changing crude oil prices; changing refining, marketing and chemicals margins; our ability to realize anticipated cost savings and expenditure reductions; actions of competitors or regulators; public health crises, such as pandemics (including coronavirus (COVID-19)) and epidemics, and any related government policies and actions; timing of exploration expenses; timing of crude oil liftings; the competitiveness of alternate-energy sources or product substitutes; technological developments; the results of operations and financial condition of the our suppliers, vendors, partners and equity affiliates, particularly during extended periods of low prices for crude oil during the COVID-19 pandemic; the inability or failure of our joint-venture partners to fund their share of operations and development activities; the potential failure to achieve expected net production from existing and future crude oil development projects; potential delays in the development, construction or start-up of planned projects; the potential disruption or interruption of our operations due to war, accidents, piracy, political events, civil unrest, severe weather, cyber threats and terrorist acts, crude oil production quotas or other actions that might be imposed by the Organization of Petroleum Exporting Countries, or other natural or human causes beyond the company's control; changing economic, regulatory and political environments in the countries in which we operate; general domestic and international economic and political conditions; the potential liability for remedial actions or assessments under existing or future environmental regulations and litigation; significant operational, investment or product changes required by existing or future environmental statutes and regulations, including international agreements and national or regional legislation and regulatory measures to limit or reduce greenhouse gas emissions; the potential liability resulting from other pending or future litigation; our future acquisition or disposition of assets or shares or the delay or failure of such transactions to close based on required closing conditions; the potential for gains and losses from asset dispositions or impairments; government-mandated sales, divestitures, recapitalizations, industry-specific taxes, changes in fiscal terms or restrictions on scope of company operations; foreign currency movements compared with the U.S. dollar; material reductions in corporate liquidity and access to debt markets; and our ability to identify and mitigate the risks and hazards inherent in operating in the global energy industry; the company’s ability to identify and mitigate the risks and hazards inherent in operating in the global energy industry; and the factors set forth under the heading “Risk Factors” on pages 10 through 15 of the company’s 2020 Annual Report on Form 10-K, on pages 16 and 17 of this report and in subsequent filings with the U.S. Securities and Exchange Commission. Other unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements.

 

 

PART I – FINANCIAL INFORMATION

Item 1 – Consolidated Financial Statements

PETROGRESS, INC., AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

 

See accompanying notes to consolidated financial statements.

 

 

PETROGRESS, INC., AND SUBSIDIARIES

Consolidated Statement of Balance Sheet

 

*      Accounts Receivable includes amount of $570,281 from subsidiaries

**    Accounts Payable includes amount of $ 1,031,351 to subsidiaries

 

 

PETROGRESS, INC., AND SUBSIDIARIES

Consolidated Statement of Cash Flows

 

See accompanying notes to consolidated financial statements.

 

 

PETROGRESS, INC., AND SUBSIDIARIES

 

Consolidated Statement of Equity

(Unaudited)

 

 

See accompanying notes to consolidated financial statements.

 

 

PETROGRESS, INC.

 

Notes to Consolidated Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Key Financial Results

First quarter of 2021 compared to the First quarter of 2020

 

Earnings by product sales		Three months ended March 31,
Net sales volumes per product		2021				2020
Crude Oil Sales		$	-			$	616,000
Gas Oil Sales			870,000				1,166,000
Lubricants Sales			-				113,802
Hires & Freights Sales			230,000				252,080
Other Revenues / Discounts			404,235				-
Totals		$	1,504,235			$	2,147,882

 

Refer to the “Results of Operations” section beginning on page 12 for a discussion of our financial results.

 

Executive Overview

Petrogress, Inc., (PGI) is based in Delaware and operates. The company is an integrate energy company, engaged in the upstream, downstream and midstream segments. We sell crude oil and refined products internationally, to buyers on the spot market and to independent entrepreneurs.

 

The company maintain its principal marketing and operating offices at 1, Akti Xaveriou, 18538 Piraeus, Greece. Our telephone number at that address is +30 (210) 459-9741 and our corporate address and registered agent in Delaware is 1013 Centre Road, Suite 403-A, Wilmington, DE 19805 – USA.

 

Business Environment and Outlook

 

Earnings of the company depend mostly on the profitability of its crude oil business segment. The most significant factor affecting the results of operations is the price of crude oil, which is determined in global markets outside of the company’s control. The price of crude oil has fallen significantly since mid-year 2020. The downturn in the price of crude oil has impacted the company's results of operations, cash flows, leverage, capital and exploratory investment program and production outlook. A sustained lower price environment could result in the impairment or write-off of specific assets in future periods. Similarly, impairments or write-offs have occurred, and may occur in the future, as a result of managerial decisions not to progress certain projects in the company’s portfolio. We have reacted to the downturn by effecting reductions in operating expenses, pacing and re-focusing of capital and exploratory expenditures. Our lack of cash liquidity remains on low levels for the rest of the year and undoubtedly shall continue affecting our operations and cash flow. In addition, the sea-transpiration impacted hardly due to global low demand of oil products.

 

Response to Market Conditions and COVID-19 During the pandemic period the travel restrictions and other constraints on economic activity were implemented in many locations around the world to limit the spread of the COVID-19 virus. Lower commodity prices negatively impacted the company’s first quarter 2021 financial and operating results. While demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results will likely continue to be challenged in future quarters. Due to the rapidly changing of environment, there continues to be uncertainty and unpredictability around the extent to which the COVID-19 pandemic will impact our results, which could be material.

 

Refer to the “Cautionary Statements Relevant to Forward-Looking Information” on Page 2 and to “Risk Factors” in Part II, Item 1A, on page 16-17 for a discussion of some of the inherent risks that could materially impact the company’s results of operations or financial condition.

 

 

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* Petrogress, Inc. was incorporated on February 10, 2010 under the laws of the State of Florida as 800 Commerce, Inc. (“800 Commerce”). On February 29, 2016, 800 Commerce entered into an Agreement concerning the Exchange of Securities (“SEA”) with Petrogres Co. Limited, and its sole shareholder, Christos Traios, 800 Commerce issued 136,000,000 shares of restricted Common Stock, representing approximately 85% of the post-transaction issued and outstanding shares, to Mr. Traios in exchange for 100% of the shares of Petrogres Co. Limited. 800 Commerce’s acquisition of Petrogres Co. Limited effected a change in control and was accounted for as a “reverse acquisition” whereby Petrogres Co. was the acquirer for financial statement purposes. Accordingly, the historical financial statements of 800 Commerce are those of Petrogres Co. and its subsidiaries from their respective inception and those of the consolidated entity subsequent to the February 29, 2016 transaction date. On November 16, 2016, Petrogress, Inc., filed Articles of Merger and Plan of Merger in Florida and Delaware to change the Company’s domicile by merging with and into a Delaware corporation formed solely for the purpose of effecting the reincorporation. On July 9, 2018, the Company filed an amendment (the "Amendment") to the Company's Certificate of Incorporation with the Delaware Secretary of State to (a) effect a reverse stock split of the Company's Common Stock at a ratio of one-for-100, (b) reduce the number of authorized shares of Common Stock from 490,000,000 to 19,000,000. During 2020 the company amended its Articles of Incorporation and increase its authorized shares of common stock to 100,000,000. There was no change in the par value of the Company's Common Stock or Preferred Stock as a result of the Amendment.

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations 

 

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. We provide our customers with services that require sophisticated logistical operations designed to meet their strict oil quality and delivery scheduling needs. Throughout our history, we have expanded our business capabilities through strategic alliances, select business and vessel acquisitions, and the establishment of new service centers.

 

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 July. Our innovate gas-stations with their unique distinct design, have been developed to offer high performance fuels and a totally new experience to customers, with our vision to deliver a modern and compelling retail experience. The Gas-Stations shall be operated by our Hellenic branch in Greece and all are designed to provide the drivers food options, cold and hot pre-packaged items.

 

Our key business segments

 

The following are descriptions of our recent initiatives undertaken in each of our key business segments:

 

Upstream; Earnings for the upstream segment are closely aligned with industry prices for crude oil. Crude oil prices are subject to external factors over which the company has no control, including product demand connected with global economic conditions, industry production and inventory levels, technology advancements, production quotas or other actions imposed by the Organization of Petroleum Exporting Countries (OPEC) or other producers, actions of regulators, weather-related damage and disruptions, competing fuel prices, natural and human causes beyond the company's control such as the COVID-19 pandemic, and regional supply interruptions. The company is actively managing its schedule of work, contracting, procurement, and supply chain activities to effectively manage costs, ensure supply chain resiliency and continuity, and support operational goals. The spot markets for many services and materials are softening in response to the economic impact of the COVID-19 pandemic, including the drastic reductions in demand for petroleum products, including gasoline and fuel, among others, and in crude oil prices, which have resulted in significant reductions in economic activity and associated spending in the energy sector. Commodity prices have fallen below break-even levels in many regions.

 

Downstream: As on February 2018, our Partnership agreement with Platon Ghana Oil Refinery (PGOR) -an unrelated third party- is still ongoing and renewed on an annual basis and pursuant its terms Petrogress will feed and supply the crude oil for storage, refinement, marketing and distribution in Ghana jointly with PGOR. The storage capacity under the Partnership Agreement is 24,000 tons and the monthly processing capacity of the refinery is 10,000 tons. Petrogress and Platon both plans to invest additional funds to upgrade the processing monthly capacity into refined products of Gas Oil, Naphtha, and fuel in view of the high local demand. Under the Platon Partnership Agreement, all expenses of the partnership operations are shared by both Petrogress and Platon. After deducting the operating/processing expenses, the net profits from the sale of the products are split evenly between Petrogres and Platon. As of the date the Platon Partnership Agreement was executed, Petrogress ceased other sales of crude to third customers in West Africa. During the year the company expanded its operations to other sectors, engaging into gas-stations operator and lubricants distributor. 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 the first quarter 2021. Nevertheless, we believe the shipping industry will be rectified and return to the normal levels, therefore we still seek to expand our midstream operations in other international ocean routes by adding to our fleet larger and younger tanker vessels. We are monitoring the vessel market for opportunities while we are also working to secure the necessary funding for expansion. Our business strategy is based in part upon the expansion of our business to new, or within existing, markets. In order to expand our operations, we will be required to use cash from operations, incur borrowings or raise capital through the sale of debt or equity securities in the public or private markets.

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations 

 

Results of Operations

 

The following section presents the results of operations and variances on a before-tax basis for the company’s business operations, as well as for “All Other.”

 

Our operating revenues are driven primarily of the commodities trading sales and our tankers fleet employment days during which our vessels are generating revenues, while our financial results are subject to a number of sectors and reflects to the following factors:

 

Cost of commodities; is the cost we purchase the oil products -mainly the crude oil- and such cost is based either on Brent Index prices or Fixed price, the quality and quantity of the product.

 

Commodities Operating Expenses; relates to products surveys before and after the shipment, bunkers supplied to the employment vessel, cargoes surveys, loading/unloading expenses, agency and representative services.

 

Shipping & Logistic Expenses; includes the sea freight and mobilization cost, the performed loading and discharging of the product, and any expenses occurred during the shipping time from the loading point up to unloading facilities.

 

Vessels Operating Expenses; includes crew wages and bonuses, their medical support and travelling, maintenance and repairs to the vessels hull and their machineries, expenses for supplies of spare-parts and consumable stores, paints, lubricants, fresh water, bunkers, agency services, etc.

 

General and Administrative Expenses; relates to our directors, officers and managers salaries and compensations, shore staff wages, employee’s federal insurance, offices lease and utilities, telecommunications, travelling and representations of our officers, our agency fees we pay to our branch’s offices in USA, Greece, Cyprus, Monaco, Ghana and Nigeria.

 

Corporate Expenses; are all company’s expenses and includes, our executive’s compensations, attorney’s fee, Auditors and accountant fees, Consultant’s and P/R fees, Transfer agents of our stock, and miscellaneous.

 

Other factors may affect our Results of Operations; In addition to the said expenses there are factors beyond of our control which may affect seriously our operations results. Inasmuch as we trade also West Africa, which is considered as high risky area, we are expose in a serious amount of risks, such as piracies and hijacks, civil wars, stolen of properties, economy distress, and credit risks.

 

EBITDA and Adjustment; EBITDA represents net income before expenses, taxes and depreciation. Adjusted EBITDA represents net income before expense, taxes, taxes, depreciation and amortization of dry-docking.

 

		Three months ended March 31,
		2021				2020
Operating Earnings / (losses)		$	(129,091	)		$	(543,019	)

 

Operating losses of during the first quarter of 2021 amount to $(129,091), compared to operating losses of $(543,019) for the same period in 2020.

 

Consolidated Statement of Income

 

Sales of products provided in the below table:

 

		Three months Ended March 31,
Net sales volumes per product		2021				2020
Crude Oil Sales		$	-			$	616,000
Gas Oil Sales			870,000				1,166,000
Lubricants Sales			-				113,802
Hires & Freights Sales			230,000				252,080
Other Revenues/Discounts			404,235				-
Totals		$	1,504,235			$	2,147,882

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations 

 

Cost of Goods Sold provided in the below table:

 

		Three months Ended March 31,
Cost of goods sold		2021				2020
Crude Oil purchased costs		$	-			$	(572,000	)
Gas Oil purchased costs			(630,000	)			(745,513	)
Lubricants purchased costs			-				(35,697	)
Vessels leases & charters			(489,465	)			-
Others			-				-
Totals		$	(1,119,465	)		$	(1,353,210	)

 

●	Sales: Total operating sales for the three months ended March 31, 2021 and 2020, were $1,504,235 and $2,147,882 respectively, a decrease of $643,647 or approximately 30%.

 

●	Cost of goods sold: For the three months ended March 31, 2021 and 2020, cost of goods sold was $1,119,465 and $1,353,210, respectively, a decrease of $233,745 or approximately 17%.

 

●	Corporate expenses: Corporate expenses mainly include the expenses incurred by Petrogress, Inc. Our Corporate expenses for the three months ended March 31, 2021 and 2020 were $8,661 and $75,748, respectively, a decrease of $67,087 or approximately 89%.

 

●	General and administrative expenses: For the three months ended March 31, 2021, General and administrative expenses increased to $202,078 compared to $1,098,716 for the three months ended March 31, 2020, an decrease of $896,638 or approximately 82%.

 

●	Net income / (loss) attributable PGI: For the three months ended March 31, 2021, the Company had a net loss of $146,185 while for the three months ended March 31, 2020, the Company had a net loss of $910,397, an decrease of $764,212 or approximately 84%.

 

●	EBITDA: For the three months ended March 31, 2021, EBITDA amounted to $(146,185) compared to $(922,744) for the three months ended March 31, 2020.

 

Summarized Financial Data

 

 

Petrogress, Inc. (PGI)		Three months Ended
Consolidated results of Operation		March 31,
		2021				2020
Sales and other operating revenues		$	1,504,235			$	2,147,882
Cost of goods sold, Corporate, Administrative and other expenses*			(1,650,420	)			(3,058,279	)
Net income / (loss) attributable to Petrogress, Inc.		$	(146,185	)		$	(910,397	)

 

●

Operating expenses includes, corporate expenses, shipping & logistic, commodities purchase cost, fleet expenses, General and Administrative expenses, and Depreciation expense;

 

Liquidity & Capital Resources

 

Our main sources of liquidity are cash and cash equivalents, accounts receivable and internally generated cash flow from operations. As of March 31, 2021, we had a working capital of $1,499,816 consisting of $218,159 in cash and cash equivalents, $3,252,674 in accounts receivable, $738,224 in claims receivable, $682,601 in inventories, and $1,063,311 in prepaid expenses and other current assets.

 

For the three months ended March 31, 2021, net cash provided by operating activities was $909,287 compared to $315,122 of net cash used in for the same period in 2020. Assets included in the calculation of the Company’s working capital have increased by $344,723 mainly from the increase in accounts receivable.

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations 

 

The company’s future debt level is dependent primarily on results of operations, cash that may be generated from asset dispositions, the capital program, lending commitments to affiliates, and shareholder contributions. Our need for capital resources is driven by our expansion plans, ongoing maintenance and improvement of our vessels, support of our operational expenses, corporate overhead and the expenses we suffer in order to comply with the regulatory requirements of SEC. Specifically, Petrogress, Inc., the parent company, does not have revenues while it suffers all the necessary operating and general and administrative expenses to comply with the regulatory requirements of the SEC.

 

Cash and Cash Equivalents; The following table presents sources and uses of cash and cash equivalents:

 

		Three months Ended March 31,
Sources of cash and cash equivalents		2021				2020
Operating activities		$	909,287			$	315,122
Borrowing			-				-
Others			-				-
Total sources of cash and cash equivalents		$	909,287			$	315,122

 

Management seeks to secure the necessary financing for the expansion of Company’s operations. The company needs to raise a reasonable finance in order to expand its operations, increase the oil sales and support its projects of the gas-stations.

 

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

 

Information about market risks for the three months ended March 31, 2021, does not differ materially from that discussed under Item 7A of Petrogress’s 2020 Annual Report on Form 10-K.

 

Item 4 – Controls and Procedures

 

(a) Evaluation of disclosure controls and procedures

 

The company’s management has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures were effective as of March 31, 2021.

 

(b) Changes in internal control over financial reporting

 

During the quarter ended March 31, 2021, there were no changes in the company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1 – Legal Proceedings

 

Information about legal proceedings for the three months ended March 31, 2021, does not differ materially from that discussed under Item 3 of Petrogress’s 2020 Annual Report on Form 10-K.

 

Item 1A – Risk Factors

 

Information about risk factors for the three months ended March 31, 2021, does not differ materially from that set forth under the heading “Risk Factors” on pages 10 through 15 of the company’s 2020 Annual Report on Form 10-K, other than as reflected in the risk factor below. Some inherent risks could materially impact the company’s financial results of operations or financial condition.

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations 

 

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

 

The table below presents the issued shares during the quarter ended March 31, 2021:

 

Period		Total Number of Shares			Class
January 1 – January 31, 2021			-		Common shares
February 1 – February 28, 2021			-		Common shares
March 1 – March 31, 2021			1,500		Common shares
Total			1,500

 

Item 5 – Other information

 

None

 

Item 6- Exhibits

 

The information required by this Item 6 is set forth in the Exhibit Index accompanying this Form 10Q

 

 

Exhibits Index

_____

 

Exhibit Number

Exhibits Description

Page(s)

 

31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*		Page 20
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*		Page 21
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.*		Page 22
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.*		Page 23
101.1	Interactive data files pursuant to Rule 405 of Regulation S-T*

*          Filed herewith

**        Furnished herewith

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: July 2, 2021	PETROGRESS, INC.
	By:	/s/ Christos Traios
		Christos Traios
		President and Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Evangelos Makris
		Evangelos Makris
		Chief Financial Officer (Principal Financial and Accounting Officer)