PETROGRESS, INC - Quarter Report: 2019 September (Form 10-Q)

pgas20190930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

[ X ]

Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2019

[ ]	Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the transition period from ___________________________ to _________________________________

Commission File Number: 000-55854

PETROGRESS, INC.

(Exact name of registrant as specified in its charter)

Delaware	27-2019626
(State or other jurisdiction of incorporation of organization)	(I.R.S. Employer Identification No.)

1, AktiXaveriou - 5^th Floor - Piraeus - Greece	18538
(Address of principal executive offices)	(Zip Code)

+30 (210) 459-9741

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	PGAS	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ]	Smaller reporting company	[X]
		Emerging growth company	[X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: the number of shares of the registrant’s Common Stock, par value $0.001 per share, outstanding as of November 14, 2019 was 4,289,661.

Table of Contents

	Page
INTRODUCTORY COMMENT	1

Caution Regarding Forward-Looking Information	1

Part I - Financial Information

Item 1 - Financial Statements	2

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3 - Quantitative and Qualitative Disclosures About Market Risk	20

Item 4 - Controls and Procedures	20

Part II - Other Information

Item 1 - Legal Proceedings	21

Item 1A - Risk Factors	21

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 3 - Defaults Upon Senior Securities	21

Item 4 - Mine Safety Disclosures	21

Item 5 - Other Information	21

Item 6 – Exhibits	21

Signatures	22

INTRODUCTORY COMMENT

Throughout this Quarterly Report on Form 10-Q (the “Report”), the terms “we,” “us,” “our,” “Petrogress,” or the “Company” refers to Petrogress, Inc., a Delaware corporation and its subsidiary companies. Our significant subsidiaries are “Petronav Carriers LLC,”, “Petrogress Int’l LLC.” and “Petrogres Africa Co. Limited”.

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

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

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; 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; 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;

In addition to these assumptions and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:

●

general market conditions, including conditions in the shipping or the marine industries;

●

our future operating or financial results;

●

the availability of financing and refinancing;

●

material disruptions in the availability or supply of crude oil or refined petroleum products;

●

our future, pending or recent acquisitions, business strategy, areas of possible expansion, and expected capital spending or operating and maintenance expenses;

●

our ability to successfully identify, consummate, integrate, and realize the expected benefits from acquisitions;

●

our ability to maintain our business in light of our proposed business and location expansion;

●

planned capital expenditures and availability of capital resources to fund capital expenditures;

●

the outcome of legal, tax or regulatory proceedings to which we may become a party;

●

our ability to attract and retain our key suppliers and key customers;

●

our contracts and licenses with governmental entities remaining in full force and effect;

●

increased levels of competition within our industry;

●

our ability to collect accounts receivable;

●

corruption, piracy, militant activities, political instability, terrorism, and ethnic unrest in locations where we may operate;

●

the failure of counterparties to fully perform their contracts with us;

●

our levels of operating and maintenance costs;

●

other important factors described from time to time in our filings with the U.S. Securities and Exchange Commission (the “SEC”).

These factors and the other risks described in this report are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. These forward-looking statements do not guaranty our future performance, and actual results and developments may vary materially from those projected in the forward-looking statements. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation, and specifically decline any obligation, except as required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Part I

Financial Information

Item 1 - Financial Statements

PETROGRESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Nine Months Ended September 30,						Three Months Ended September 30,
	2019			2018			2019			2018

Revenues	$	8,582,943		$	8,763,141		$	6,056,265		$	2,319,142
Costs of goods sold		(6,741,221	)		(5,255,956	)		(5,335,469	)		(1,018,795	)
Gross profit		1,841,722			3,507,185			720,796			1,300,347
Operating expenses:
Corporate expenses	$	(230,463	)	$	(238,677	)	$	(146,852	)	$	227,241
Operating expenses of commodities trade		(265,431	)		(280,060	)		(86,500	)		(100,551	)
Fleet operating expenses		(607,547	)		(823,152	)		(227,429	)		(366,364	)
General and administrative expenses		(603,562	)		(796,815	)		(285,048	)		(437,059	)
Amortization expense		(6,619	)		-			68			-
Depreciation expense		(671,309	)		(693,761	)		(243,261	)		(235,081	)
Total operating expenses		(2,384,931	)		(2,832,465	)		(989,022	)		(911,814	)
Operating income/ (loss) before other expenses and income taxes		(543,209	)		674,720			(268,226	)		388,533
Other income/ (expense), net:
Interest and finance expenses		(173,604	)		(5,836	)		(158,111	)		(4,409	)
Amortization of note discount		(27,869	)		-			(27,869	)		-
Loss on settlement of loan facility from related party		-			(160,192	)		-			-
Other income / (expense), net		(323,234	)		53,826			215,068			27,987
Other income / claims to third parties		-			200,700			-			-
Change in fair market value of derivative liabilities		(23,441	)		-			(23,441	)		-

Total other income/ (expense), net		(548,148	)		88,498			5,647			23,578
Income before income taxes		(1,091,357	)		763,218			(262,579	)		412,111
Income tax expense		-			-			-			-
Net income/ (loss)	$	(1,091,357	)	$	763,218		$	(262,579	)	$	412,111

Net income/ (loss) attributable to:
Shareholders of the company		(1,087,763	)		746,481			(267,867	)		397,491
Non-controlling interests		(3,594	)		16,737			5,288			14,620
	$	(1,091,357	)	$	763,218		$	(262,579	)	$	412,111

Other comprehensive income/ (loss)
Foreign currency translation adjustment		-			-			-			-
Comprehensive income/ (loss)	$	(1,091,357	)	$	763,218		$	(262,579	)	$	412,111
Comprehensive income/ (loss) attributable to:
Shareholders of the company		(1,087,763	)		746,481			(267,867	)		397,491
Non-controlling interests		(3,594	)		16,737			5,288			14,620
	$	(1,091,357	)	$	763,218		$	(262,579	)	$	412,111
Weighted average number of shares of Common Stock:
Basic		3,860,285			3,396,798			3,894,456			3,445,671
Diluted		3,860,285			4,925,198			3,894,456			4,974,071
Basic earnings per share		(0.28	)		0.22			(0.07	)		0.12
Diluted earnings per share		(0.28	)		0.15			(0.07	)		0.08

The accompanying notes are an integral part of these consolidated financial statements.

PETROGRESS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	As of September 30, 2019			As of December 31, 2018
ASSETS
Current Assets
Cash and cash equivalents	$	435,335		$	661,010
Accounts receivable, net		3,136,108			4,779,432
Claims receivable, net		478,500			547,600
Inventories		816,233			417,135
Prepaid expenses and other current assets		3,779,411			1,765,276
Total current assets	$	8,645,587		$	8,170,453
Non-Current Assets
Goodwill		900,000			900,000
Vessels and other fixed assets, net		3,873,201			4,450,906
Deferred charges, net		15,629			26,750
Security deposit		10,584			10,638
Total non-current assets	$	4,799,414		$	5,388,294
Total Assets	$	13,445,001		$	13,558,747
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	1,214,693		$	1,265,452
Due to related party		1,360,592			1,176,863
Loan facility from related party		148,900			148,900
Convertible Notes		124,869			-
Derivative Liabilities		394,553			-
Accrued Interest		11,724			8,744
Total current liabilities	$	3,255,331		$	2,599,959
Total liabilities	$	3,255,331		$	2,599,959

Commitments and Contingencies		-			-
Shareholders' equity:
Series A Preferred shares, $100 par value, 100 shares authorized, 100 and 100 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		10,000			10,000
Preferred shares (undesignated), $0.001 par value, 999,900 shares authorized, 0 shares and 0 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		-			-
Shares of Common stock, $0.001 par value, 19,000,000 shares authorized, 3,956,483 and 3,828,412 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		3,957			3,829
Additional paid-in capital		9,857,272			9,535,161
Accumulated comprehensive loss		(10,231	)		(10,231	)
Retained earnings		228,107			1,315,870
Equity attributable to Shareholders of the Company		10,089,105			10,854,629
Non-controlling interests		100,565			104,159
Total liabilities and shareholders' equity	$	13,445,001		$	13,558,747

The accompanying notes are an integral part of these consolidated financial statements.

PETROGRESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/ (loss)	$	(1,091,357	)	$	763,218
Adjustments to reconcile net income/(loss) to net cash (used in) operating activities:
Depreciation		671,309			693,761
Amortization of discount on convertible note		27,869			-
Change in Fair value of derivative liabilities		23,442			-
Change in Fair value of share-based payments issued for services		-			153,178
Share-based compensation expense		92,500			1,496
Loss on disposition of fixed assets		16,331			-
Amount of derivative in excess of face value of CPN		158,111			-
Gain/ (loss) on settlement of convertible promissory notes		39,793			(12,835	)
Elimination of PGAS Africa APIC		66,405			-
Loss on settlement of loan facility from related party		-			160,192
Commitments and Contingencies		-			-
Changes in working capital:
- (Increase)/ decrease in Accounts receivable, net		1,643,324			(533,484	)
- (Increase)/ decrease in Claims receivable, net		69,100			(535,100	)
- (Increase)/ decrease in Inventories		(399,098	)		27,718
- (Increase)in Prepaid expenses and other current assets		(2,014,135	)		(825,853	)
- (Increase)/ decrease in Security deposit		54			(3,200	)
- Decrease/ (increase) in Deferred charges, net		11,121			(85,024	)
- Increase/ (decrease) in Accounts payable and accrued expenses		(275,230	)		(94,864	)
- Increase in Amounts due to related party		183,729			126,325
- Increase in Accrued Interest		2,980			9,136
Net cash (used in) operating activities		(773,752	)		(155,336	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Vessels and other fixed assets		(109,935	)		(88,154	)
Net cash (used in) investing activities		(109,935	)		(88,154	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible promissory notes		693,000			-
Payments made on convertible promissory notes		(34,988	)		-
Proceeds from loan facility from related party		-			124,500
Net cash provided by financing activities		658,012			124,500

Effect of exchange rate changes on cash		-			-

Net (decrease) in cash and cash equivalents		(225,675	)		(118,990	)

Cash and cash equivalents, Beginning of Period		661,010			1,150,999

Cash and cash equivalents, End of Period	$	435,335		$	1,032,009

Cash paid for interest expense		1,051			-
Cash paid for income taxes		-			-
Non-cash investing and financing activities:
Common stock issued for settlement of investing	$	86,334		$	297,500
OID and fees related to CPN	$	20,000			-
Discount from common shares issued in connection with CPN	$	77,000		$	210,000
Discount from derivative on CPN	$	213,000			-

The accompanying notes are an integral part of these consolidated financial statements.

Petrogress, INC. and Subsidiaries

CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

	Number								Additional			Accumulated									Non-			Total
	Preferred		Preferred		Common Stock				Paid-in			Comprehensive			Accumulated						Controlling			Shareholders
	Shares		Shares		Shares		Amount		Capital			Loss			Profit/(Deficit)			Total			Interest			Equity/(Deficit)
Balance at December 31, 2017		100	$	10,000		3,177,452	$	3,098	$	9,100,838		$	(7,744	)	$	1,008,823		$	10,115,015		$	98,758		$	10,213,773
Common stock issued for Convertible notes		-		-		76,614		77		209,923			-			-			210,000			-			210,000
Common stock issued to settle liabilities		-		-		190,705		191		457,501			-			-			457,692			-			457,692
Cancellation of common stock issued for services		-		-		-		-		(146,767	)		-			-			(146,767	)		-			(146,767	)
Common stock issued for board		-		-
Advisory services		-		-		800		80		1,416			-			-			1,496			-			1,496
Net income		-		-		-		-		-			-			746,481			746,481			16,737			763,218

Balance at September 30, 2018		100	$	10,000		3,445,571	$	3,446	$	9,622,911		$	(7,744	)	$	1,755,304		$	11,383,917		$	115,495		$	11,499,412

Balance at December 31, 2018		100	$	10,000		3,828,412	$	3,829	$	9,535,161		$	(10,231	)	$	1,315,870		$	10,854,629		$	104,159		$	10,958,788
Common stock issued to settle liabilities		-				43,071		43		86,291			-			-			86,334			-			86,334
Common stock issued for services		-				50,000		50		92,450			-			-			92,500			-			92,500
Common stock issued as commitment		-				35,000		35		76,965			-			-			77,000			-			77,000
Elimination of Petrogres Africa Ltd apic/due from shareholders		-				-		-		66,405			-			-			66,405			-			66,405
Net loss		-				-		-		-			-			(1,087,763	)		(1,087,763	)		(3,594	)		(1,091,357	)

Balance at September 30, 2019		100	$	10,000		3,956,483	$	3,957	$	9,857,272		$	(10,231	)	$	228,107		$	10,089,105		$	100,565		$	10,189,670

The accompanying notes are an integral part of these consolidated financial statements.

Petrogress,INC. and Subsidiaries

NOTES TO Consolidated Financial Statements

(Unaudited)

Note 1 – The Company and our Subsidiaries

History and Development of the Company

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, a Marshall Islands corporation, and its sole shareholder and founder, Christos Traios. Under the terms of the SEA, 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. Limited was the acquirer for financial statement purposes.

On March 9, 2016, our Board of Directors approved an amendment to our Articles of Incorporation to change the Company’s name to Petrogress, Inc. On March 15, 2016, Mr. Traios was appointed Chief Executive Officer. 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 and (c) reduce the number of authorized shares of Preferred Stock from 10,000,000 to 1,000,000. The Amendment took effect on July 18, 2018. There was no change in the par value of the Company's Common Stock or Preferred Stock as a result of the Amendment.

We maintain our 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 Overview

Petrogress operates as a holding company and conduct business primarily through its wholly-owned subsidiaries: Petronav Carriers LLC., which manages day-to-day operations of our affiliated tanker fleet; Petrogress Int’l LLC., which engages in crude-oil purchase and sales and is the holding company of the subsidiaries that currently conducting business in U.S., Greece, Cyprus and Ghana.

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. This, together with the capital-intensive nature of our industry and the limited available shuttle vessels in the areas of our operation, represent a significant barrier to entry for competitors. 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. In February 2019, we commenced negotiations with government of Ghana to lease a free zone land in Takoradi port to build a tanks farm with storage capacity of 100,000 cubic meters. We are also negotiating the lease of Ada shipyard where we expect to provide shelter and repairs facilities to our fleet and customers, and provide additional service and support to offshore oil rigs and platforms around the area of West Africa. Furthermore, we have applied our LOI to Ghana National Petroleum Co., by expressing our interest to lease two off shore blocks at Salt Pond basin, where we intend to explore the production of oil. In addition, a proposal for the renovation and repairs of the idle oil platform “AGK 1” given to Ghana Energy Ministry and GNPC, to operate the platform and commence the oil production in the existence oil field of Salt pond under a petroleum agreement that will be executed among Petrogress and the Ghanaian authorities. Meanwhile, as a maritime company, we are in the market seeking to add more tankers ships to our fleet.

Apart of our operations described above, we commenced the marketing and distribution of lubricants under an exclusive agreement with Dana Lubricants Company (a company based in Dubai of UAE), which we market through our subsidiary Petrogres Africa Co. Ltd. We view this business as complementary to our downstream operations. We plan to expand the distribution of lubricants throughout our service center in Ghana and other countries in West and Central Africa.

Sales and Marketing

Most of our marketing, sales, ship-management and other related functions are performed at our main office in Piraeus, Greece. We also market products and services through our offices in Ghana and Cyprus and through our representations in Nigeria. Our sales force interacts with our established customers and markets our oil sales and services to local distributors. We believe our level of customer service, years of experience in the industry, and reputation for reliability are significant factors in retaining our customers and attracting new customers. Our sales and marketing approach are designed to create awareness of the benefits and advantages of our sales and services. We are active in industry trade shows and other available public forums.

Description of Significant Subsidiaries

Petronav Carriers LLC.(“PCL”),was formed in Delaware in March 2016 for the purpose of managing the day-to-day operations of four vessels, which are used to transport petroleum products to various countries in West Africa. PCL manages our fleet from its business office at Piraeus, Greece.

Currently PCL owns our vessels through separate wholly-owned subsidiaries described below:

Vessel-Owned Subsidiary	Incorporation	Vessel’s name
Shiba ship-management Ltd.	Marshall Islands	APECUS
Danae Marine Ltd.	Marshall Islands	OPTIMUS
Invictus Marine S.A.	Marshall Islands	INVICTUS
Entus Marine Ltd.	Marshall Islands	ENTUS

Petrogress Int’l LLC.(“PIL”), is a Delaware limited liability company. PIL serves as a holding company for interests in various entities conducting business across the world, including Cyprus, the Middle East, and West Africa as an oil energy corporation.

In September 2017, PIL acquired 90% of the shares of Petrogres Africa Company Limited (“Petrogres Africa Co. Ltd”) from Christos Traios, our President, Chief Executive Officer. Petrogres Africa Co. Ltd holds a current Ghanaian Oil business permit, and is authorized to conduct local sales of oil products and operations of a shipping business from the Port of Tema in Greater Accra. Port facilities in Tema provide a service and operations hub for our tankers currently involved in West Africa and Nigerian oil trading and transport. The Port of Tema also serves as a secondary hub for repair, supply and transport ship operators servicing Ghana’s Tano Basin offshore oil fields in the Gulf of Guinea.

On April 1, 2019, Petrogress Int’l LLC. and Petrogres Co. Limited entered into a merger agreement pursuant to which Petrogres Co. Limited, a wholly owned subsidiary of Petrogress, merged with and into PIL, the surviving company. The merger became effective as of April 1, 2019.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles (“GAAP”) and has elected a year-end of December 31.

All significant intercompany transactions and accounts have been eliminated.

These interim consolidated financial statements are unaudited; however, in the opinion of our management, these statements reflect all adjustments necessary for a fair statement of the results for the periods reported. All such adjustments are of a normal, recurring nature unless otherwise disclosed. These interim consolidated financial statements, including the notes, have been prepared in accordance with the rules of the SEC applicable to interim period financial statements and do not include all of the information and disclosures required by GAAP for complete financial statements.

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018as filed with the SEC on April12, 2019. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year or any future interim period.

Principles of consolidation

The consolidated financial statements include the consolidated accounts of the Company and its wholly-owned and majority-owned subsidiaries: Petrogress Int’l LLC., Petronav Carriers LLC., Petrogres Africa Co. Ltd., Petrogres (Hellas), and PG Cypyard & Offshore Services Terminal Ltd. All intercompany balances have been eliminated.

Percentages Participation in subsidiaries

Company		Participation
Petrogress Int’l LLC. (Delaware)		100% (owned by the corporation)
Petronav Carriers LLC. (Delaware)		100% (owned by the corporation)
Petrogres Africa Co. Ltd. (Ghanaian)		90% (owned by Petrogress Int’l LLC.)
Petrogres (Hellas) Branch (Hellenic)		100% (owned by Petrogress Int’l LLC)
PG CYPYARD & Offshore Services Terminal Ltd.		100% (owned by Petrogress Int’l LLC.)

Non-controlling interests

Ownership interests in the Company’s subsidiaries held by parties other than the Company are presented separately from the Company’s equity on the Consolidated Balance Sheet. The amount of consolidated net income attributable to the Company and the non-controlling interests are both presented on the face of the Consolidated Statement of Income.

Emerging Growth Company

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

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.

Derivative Liabilities

On August 27, 2019, the company entered into a note payable with an unrelated party at a percentage discount (variable) exercise price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying stock price could approach zero. Accordingly, all convertible instruments, including standalone warrants, issued after August 27, 2019 are considered derivatives according to the Company’s sequencing policy.

The Company values these convertible notes payable using the Black-Scholes method that values the derivative liability within the notes based on a probability weighted discounted cash flow model. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations

Note 3 - 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 September 30, 2019 and December 31, 2018. For amounts over proceeds in the initial derivative measurement, the Company recorded a derivative expense of $158,111 and $0during the nine months ended September 30, 2019 and 2018, respectively. The fair values of the derivative instruments are measured each quarter, which resulted in a loss of $23,441 and $0 during the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, and December 31, 2018, the fair market value of the derivatives aggregated $394,553 and $0, respectively, using the following assumptions: estimated 1-0 year term, estimated volatility of 232.41 – 191.90 %, and a discount rate of 1.78 – 1.77%.

Note 4 – Fair Value Measurements

Our financial instruments consist primarily of cash, accounts receivable, accounts payable and accrued expenses, and convertible debt.

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

Interest rate risk is the risk that our earnings are subject to fluctuations in interest rates on either investments or on debt. We do not use derivative instruments to moderate exposure to interest rate risk, if any.

Financial risk is the risk that our earnings are subject to fluctuations in interest rates or foreign exchange rates. We do not use derivative instruments to moderate exposure to financial risk, if any.

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

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

The three hierarchy levels are defined as follows:

Level 1 - Quoted prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 - Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly;

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

Credit risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s own credit risk as observed in the credit default swap market.

Financial instruments measured at fair value on a recurring basis at September 30, 2019, are summarized as follows:

		Level 1				Level 2				Level 3				Total
Fair value of derivatives		$	-			$	-			$	394,553			$	394,553

Liabilities measured at fair value on a recurring basis at December 31, 2018, are summarized as follows:

Level 1

Level 2

Level 3

Total

Fair value of derivatives

Note 5 – Information relating to the Consolidated Statement of cash flows

	Nine Months Ended
	September 30
	2019			2018
(Increase)/ decrease in Accounts receivable, net	$	1,643,324		$	(533,484	)
(Increase) in Claims receivable, net		69,100			(535,100	)
(Increase)/ decrease in Inventories		(399,098	)		27,718
(Increase)/ decrease in Prepaid expenses and other assets		(2,014,135	)		(825,853	)
Increase/ (decrease) in Accounts payable and accrued expenses		(275,230	)		(94,864	)
Increase in Amounts due to related party		183,729			126,325
Increase in Accrued interest		2,980			9,136
(Increase)/ decrease in Security deposit		54			(3,200	)
(Increase)/ decrease in Deferred charges, net		11,121			(85,024	)
Net increase in operating capital	$	(778,155	)	$	(1,914,346	)

Net repayment (borrowing) of loans by equity affiliates consisted of the following gross amounts:

	Nine Months Ended
	September 30
	2019		2018
Borrowing of loans by equity affiliates	$	-	$	-
Repayment of loans by equity affiliates		-		63,000
Net repayment of loans by equity affiliates	$	-	$	63,000

Note 6 – Summarized Financial Data – Petrogress, Inc.

Petrogress, Inc.

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.

The summarized financial information for the Company and its consolidated subsidiaries as of September 30, 2019 and 2018 are presented in the below tables:

	Nine Months Ended
	September 30
	2019			2018
Sales and other operating revenues	$	-		$	-
Cost and other expenses		(670,676	)		(637,190	)
Net (loss) to PGI	$	(670,676	)	$	(637,190	)

	Nine Months Ended
	September 30
	2019			2018
Current assets	$	167,324		$	29,935
Other assets		7,775			45,075
Current liabilities		(1,459,861	)		(697,772	)
Total Petrogress, Inc. net equity	$	(1,284,762	)	$	(622,762	)

Petronav Carriers LLC.

Petrogress, Inc. owns 100% of the equity interest in Petronav Carriers LLC., the company that serves as the manager and operator of our tanker fleet of four vessels wholly-owned by its four subsidiaries. Summarized financial information is presented in the following table:

	Nine Months Ended
	September 30
	2019			2018
Sales and other operating revenues	$	847,333		$	2,209,442
Cost and other expenses*		(2,180,448	)		(1,530,810	)
Net income/ (loss) to Petronav Carriers LLC. **	$	(1,333,115	)	$	678,632

______________

* Cost and other expenses include the ransom paid as well as all expenses related to the hijacking of one of our vessels.

** 100% Net income attributable to Petrogress, Inc.

Petrogress Int’l LLC.

Petrogress, Inc. owns 100% of the equity interest in Petrogress Int’l LLC., 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:

	Nine Months Ended
	September 30
	2019			2018
Sales and other operating revenues	$	8,647,152		$	6,287,006
Cost and other expenses		(7,621,775	)		(5,731,321	)
Net income/ (loss) to Petrogress Int’l LLC.*	$	1,025,377		$	555,685

______________

* 100% Net income attributable to Petrogress, Inc.

Petrogres Africa Co. Ltd.

Petrogress Int’l LLC. owns 90% of the equity interest in Petrogres Africa Co. Ltd., the company that holds a Ghanaian permit and is authorized to conduct local sales of oil trade and servicing as a ship agent within Ghana ports. Summarized financial information is presented in the following table:

	Nine Months Ended
	September 30
	2019			2018
Sales and other operating revenues	$	633,000		$	470,257
Cost and other expenses		(668,943	)		(302,891	)
Net income/ (loss) to Petrogres Africa Co. Ltd.*	$	(35,943	)	$	167,366

______________

* 90% Net income attributable to Petrogress Int’l LLC.

Note 7 – 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.

Goods Inventories	September 30, 2019		December 31, 2018
Crude Oil	$	-	$	279,196
Gas Oil		533,500		-
Lubricants		101,585		-
Total Inventories	$	635,085	$	279,196

Note 8 – Properties, Vessels, inventories & equipment

	September 30, 2019		December 31, 2018
Vessel’s value, at historical cost	$	3,797,661	$	4,354,147
Bunkers R.O.B.		181,148		137,939
Equipment, Machineries, Fenders, Vehicles & Trucks		75,540		96,759
Total	$	4,054,349	$	4,588,845

* Vessels ROB in Gas Oil and lubricants and new stores of spare parts are calculated and included in the balance sheets separately from goods inventories;

Note 9 – Vessels and other fixed assets, net

We depreciate our vessels on a straight-line basis over the estimated useful life which is 10 years from the date of their transfer to the Company or its affiliate. Depreciation is calculated based on a vessel’s cost less the estimated residual value. The estimated useful lives of vessels and equipment are as follows:

Tanker Vessels (in years)			10
Supply boats (in years)			10
Fenders (in years)			10
Oil hoses (in years)			10
Vehicles & trucks (in years)			10
Office equipment and furniture (in years)			10
Computer hardware (in years)			5

Vessels and other fixed assets, net consisted of the following as of September 30, 2019 and December 31, 2018:

	September 30, 2019			December 31, 2018			Estimated useful Life (in years)
Marine vessels	$	10,268,423		$	10,171,930			10
Furniture and equipment		182,764			189,848			10
Accumulated depreciation		(6,577,986	)		(5,910,872	)
Vessels and other fixed assets, net	$	3,873,201		$	4,450,906

Depreciation for the nine months ended September 30, 2019 and September 30, 2018, was $671,309 and $693,761, respectively.

Note 10 - Income Taxes

We file income tax returns in various jurisdictions, as appropriate and required. The Company was not subject to U.S. federal, state and local, as applicable, income tax examinations by regulatory taxing authorities for any period prior to January 1, 2012.

We account for income taxes in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740-10, Income Taxes. We recognize deferred tax assets and liabilities to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. We record a valuation allowance related to a deferred tax asset when it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.

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

We measure and record uncertain tax positions by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. Our tax years subsequent to 2011 remain subject to examination by federal and state tax jurisdictions.

Note 11 – Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Companies may use either a full retrospective or a modified retrospective approach to adopt these ASUs. On January 1, 2018, the Company adopted ASU 2014-09, using the full retrospective method, which requires reporting entities to apply the standard as of the earliest period presented in their financial statements. The Company completed its review of its material revenue streams and determined that the adoption of Topic 606 did not have a material impact on the Company’s consolidated statements of operations and consolidated balance sheets.

The Company recognizes revenue for crude oil sales and gas oil sales, its primary sources of revenue, at an amount that reflects the consideration that the Company expects to be entitled to receive in exchange for transferring goods or services to its customers. The Company's policy is to record revenue when, (a) control of the goods (crude oil, gas oil and other petrochemical products) is passed to its customers and (b) the vessels charter (voyages and long term) service is rendered to its independent charterers or Petrogress Int’l LLC.

Note 12 - Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivables. Concentrations of credit risk with respect to trade receivables are limited due to the short payment terms dictated by the industry and operating environment.

Note 13 – Officers compensations

During the nine months ended September 30, 2019 and 2018, the Company had recorded officers’ compensation of $215,000 and $110,000, respectively. For the period ended September 30, 2019, $25,045 was paid and the remaining amount was accrued and included in “Amounts Due to Related Party” on the Consolidated Balance Sheets as of September 30, 2019.

Note 14 - Commitments and Contingencies

The Company is not a party to any litigation and, to its knowledge, no action, suit or proceeding has been threatened against the Company.

Note 15 – Shareholders

As of September 30, 2019, we had 49 shareholders on record and 3,956,483 shares of common stock issued and outstanding, the large majority of which were located in the United States and held an aggregate of 557,149 shares of our common stock, representing approximately 14% of our outstanding shares of common stock. However, one of the U.S. shareholders of record is Cede & Co., a nominee of The Depository Trust Company, which held 368,586 shares of our common stock, as of September 30, 2019. Accordingly, we believe that the shares held by Cede & Co. include shares of common stock beneficially owned by both holders in the United States and non-U.S. beneficial owners. We are not aware of any arrangements the operation of which may at a subsequent date result in our change of control.

Note 16 - Related party transactions

As of April 24, 2019, Petrogress, Inc., Petrogress Int’l LLC. and Christos P. Traios agreed on an amendment to the Securities Purchase Agreement dated effective as of September 30, 2017, pursuant to which the Company purchased its interest in Petrogres Africa Co. Ltd. The amendment adjusts the aggregate purchase price to $900,000, which is to be paid to Mr. Traios on or before October 23, 2019. In the event that the purchase price is not paid in full by the payment date, any outstanding and unpaid amount of the purchase price is convertible at the option of Mr. Traios, in whole or in part, into shares of Common Stock at a conversion price equal to 65% of the lowest trading price during the last 10 trading days. Notwithstanding the foregoing, the conversion rights are capped at 3,500,000 shares of Common Stock (as such number may be equitably adjusted for stock splits, stock dividends, rights offerings, combinations, recapitalization, reclassifications, extraordinary distributions and similar events by Petrogress).

Note 17 - Loan facility from related party

On October 31, 2018, Christos P. Traios, notified the Company that he was terminating the Revolving Line of Credit Agreement dated July 13, 2017 (the “Credit Agreement”) pursuant to which Mr. Traios provided a revolving line of credit in the principal amount of up to $1,000,000 to the Company. As such, no further advances have been made under the Credit Agreement and existing advances in principal amount of $148,900 under the Line of Credit Note have become due upon the maturity date, July13, 2019; however, the maturity date has been extended to July 13, 2020.

The table below presents the amounts due to Christos Traios during the nine months ended September 30, 2019:

Amounts due to related party December 31, 2018	$	1,176,863
Wages accrued to Christos Traios		215,000
Wages paid to Christos Traios, in cash		(25,045	)
Expenses paid to Christos Traios		(6,226	)
Amounts due to related party September 30, 2019	$	1,360,592

Note 18 – Revenue Concentrations

The Company sells to commercial customers in foreign markets. The following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the periods ended September 30, 2019 and 2018:

Customer		September 30, 2019				September 30, 2018
A			80	%			69	%

The following is a summary of customers who accounted for more than ten percent (10%) of the Company’s accounts receivable for the periods ended September 30, 2019 and December 31, 2018:

Customer	September 30, 2019			December 31, 2018
A		32	%		60	%
B		27	%		16	%
C		15	%		*
D		10	%		*

None of the balances listed in the table above have become overdue as of October31, 2019. Amounts indicated with an * denote amounts less than 10%.

Note 19 – Convertible Note

On August 27, 2019, the Company executed a Convertible Note in favor of EMA FINANCIAL LLC., a Delaware limited liability company, in the principal amount of $310,000. The Note bears interest at a rate of 8% per annum. The Note carries an original issue discount of $10,000, to cover the Holder’s monitoring costs associated with the purchase and sale of the Note, which is included in the principal balance of this Note. The company has the right to repay the note in full or partially under the prepayment factors: 110% within 1-60 days, 115% within 61-120 days, and 120% within 121-180 days. After the initial 180 days the holder has the right to convert any outstanding balance of the principal and interest into common stocks shares at a discount of 25% of the lowest trading stock price.

The Company determined that the conversion feature of the Convertible Note represents an embedded derivative since the Note is convertible into a variable number of shares upon conversion. Additionally, the note contains a ratchet provision. The Company determined under ASC 815, that the embedded conversion feature (if offering of common stock is at no consideration or at a price that is lower than the effective conversion price on the date shares are offered for sale, then a ratchet down of effective exercise price to price per share offered for common stock would be used to determine additional shares to be issued). The Company has determined that this ratchet provision indicates that these shares, if issued, are not indexed to the Company’s own stock and, therefore, is an embedded derivative financial liability. Accordingly, all convertible instruments issued after August 27, 2019 are considered derivatives according to the Company’s sequencing policy.

The fair value for the Company's derivative liability as at September 30, 2019 is based upon the following management assumptions:

	Minimum			Maximum
Volatility		191.90	%		232.41	%
Risk Free rate		1.77	%		1.78	%
Life		0.91			1.00

Note 20 – Subsequent Events

On October 14, 2019, the Board of Directors of Petrogress, Inc. increased the number of members constituting the Board of directors to two and appointed Dr. Demetrios Pierides to serve as a director and Executive Vice President.

On October 22, 2019, Petrogress, Inc. entered into a Securities Purchase Agreement with Christos Traios, a director and officer of the Company, to acquire all of the issued and outstanding shares of capital stock of Libertus Marine Ltd., a Marshall Islands limited liability company, which upon closing became a wholly owned subsidiary of the Company. As consideration for the acquisition, the Company issued to Mr. Traios 142,858 shares of Company Common Stock, par value $0.001 per share. LML was primarily organized to negotiate the purchase of a new vessel to be added to the Company’s fleet. LML has negotiated the purchase of a vessel which is expected to be purchased and delivered within November 2019.

On October 1, 2019, the Company concluded the negotiations to lease two Gas refilling stations in the Main land 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 expect to complete the renovation and have them ready for operations within three months’ time. The gas Stations will be operated by our Hellenic branch in Greece.

Effective as on November 8, 2019, the Company through its subsidiary Libertus Marine Ltd., concluded the acquisition of MV RESTA. Arrangements are in progress to shift the vessel from her delivered Gythio port to the Company’s base at Piraeus port to commence the necessary repairs, reflagging and her re-classification.

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Petrogress, Inc. 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.

Business Environment and Outlook

Petrogress, Inc. 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 2018. 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 effective tax rate for our business is volatile. This is due to the level of earnings or losses during a particular period and whether they arise in higher or lower tax rate jurisdictions. As a result, a decline or increase in the effective tax rate in one period may not be indicative of expected results in future periods.

A principal focus of our strategy is to grow by expanding our business. Our future growth depends, in part, on our ability to obtain financing for our existing and new operations and business lines. In recent years, global financial markets have experienced volatility following contraction, deleveraging and reduced liquidity in the global credit markets. In addition, a number of major financial institutions have experienced serious financial difficulties and, in some cases, have entered into bankruptcy proceedings or are subject to regulatory enforcement actions. These difficulties have been compounded by a general decline in the willingness by banks and other financial institutions to extend credit and may adversely affect the financial institutions that may provide us with credit to support our working capital requirements. These economic factors may have a material adverse effect on our ability to expand our business.

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

Upstream: The Company through its affiliate in Ghana is under negotiations to conclude a Petroleum Agreement with Ghana National Petroleum Company (GNPC) for a long-term lease of the Salt-Pond oil field and to take over management of the oil rig-platform known as “Mr. Louie” and to conduct necessary repairs and maintenance to facilitate oil production in the area.

Downstream: In February 28, 2018, our wholly owned subsidiary, Petrogres Co. Limited entered into the Platon Partnership Agreement creating an equal partnership between Petrogres Co. Limited and Platon Gas Oil Ghana Limited (“PGO”), an unrelated third party which owns an oil refinery and serves as a refiner of crude oil and various petroleum products based in Ghana. The Platon Partnership Agreement is intended to be renewed by both Petrogres Co. Limited and PGO on an annual basis and pursuant its terms. Petrogres Co. Limited will feed and supply the crude oil for storage, refinement, marketing and distribution in Ghana jointly with PGO. The storage capacity under the Platon Partnership Agreement is 24,000 tons and the monthly processing capacity of the refinery is 10,000 tons. Petrogres Co. Limited and PGO 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 Petrogres Co. Limited and PGO. After deducting the operating expenses, the net profits from the sale of the petroleum products are split evenly between Petrogres Co. Limited and PGO. As of the date the Platon Partnership Agreement was executed, PGL ceased other sales of crude to third customers in West Africa.

Midstream: We 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.

Other Business

On March 6, 2019, we entered into an Exclusive Distribution Agreement with Dana Lubricants Factory LLC. (“Dana Lubes”), a United Arab Emirates based lubricant oil manufacturer, pursuant to which, Petrogress Int’l LLC. is designated as the exclusive agent for distribution of products manufactured and branded by Dana Lubes throughout western Africa.

In addition to our operations described above, we commenced the marketing and distribution of lubricants under the exclusivity Agreement with Dana Lubricants Company (a company based in Dubai – UAE), which we market through our subsidiary in Ghana Petrogres Africa Co. Ltd. We view this business as complementary to our downstream operations. We plan to expand the distribution of lubricants throughout our service centers and other countries in West and Central Africa.

On October 1, 2019, we concluded the negotiations to lease two Gas refilling stations in the Main land 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 expect to complete the renovation and have them ready for operations within three months’ time. The gas Stations will be operated by our Hellenic branch in Greece.

Results of Operations

Comparison of Three Months Ended September 30, 2019 and 2018

Total revenues for the three months ended September 30, 2019, increased by $3,737,123 or approximately 161%.

Key Financial Results	Three Months Ended September 30,
	2019		2018
Revenues from crude oil sales	$	4,984,265	$	1,902,142
Revenues from gas oil sales		828,000		-
Revenues from freights and hires		244,000		264,500
Other Revenues		-		152,500
Total Revenues	$	6,056,265	$	2,319,142

Directly related to our sales activity and volumes, we experienced the following cost of sales amounts for the three months ended September 30, 2019 and 2018:

	Three Months Ended September 30,
	2019		2018
Crude oil purchase cost	$	4,765,469	$	923,141
Gas oil purchase cost		570,000		-
Shipping expenses		-		95,654
Total cost of goods sold	$	5,335,469	$	1,018,795

General and administrative expenses for the three months ended September 30, 2019 and 2018 were $285,048and $437,059, respectively.

For the three months ended September 30, 2019, the Company experienced net loss of $262,579 compared to net income of $412,111 for the three months ended September 30, 2018.

Comparison of Nine Months Ended September 30, 2019 and 2018

Total revenues for the nine months ended September 30, 2019, decreased by $180,198 or approximately 2%.

Key Financial Results	Nine Months Ended September 30,
	2019		2018
Revenues from crude oil sales	$	6,901,443	$	5,774,306
Revenues from gas oil sales		1,128,000		738,500
Revenues from freights and hires		542,500		1,812,600
Other Revenues		11,000		437,735
Total Revenues	$	8,582,943	$	8,763,141

Directly related to our sales activity and volumes, we experienced the following cost of sales amounts for the nine months ended September 30, 2019 and 2018:

	Nine Months Ended September 30,
	2019		2018
Crude oil purchase cost	$	5,931,221	$	3,308,856
Gas oil purchase cost		810,000		171,500
Shipping expenses		-		1,775,600
Total cost of goods sold	$	6,741,221	$	5,255,956

General and administrative expenses for the nine months ended September30, 2019 and 2018 were $603,562 and $796,815, respectively.

For the nine months ended September 30, 2019, the Company experienced net loss of $1,091,357 compared to net income of $763,218 for the nine months ended September 30, 2018.

Accounts Receivable, net

The amount shown as accounts receivables, net at each balance sheet date includes estimated recoveries from customers and charterers for sales of oil products, hires, freight and demurrage billings, net of allowance for doubtful accounts. Accounts receivable involve risk, including the credit risk of non-payment by the customer. Accounts receivable are considered past due based on contractual and invoice terms. An estimate is made of the allowance for doubtful accounts based on a review of all outstanding amounts at each period, and an allowance is made for any accounts which management believes are not recoverable. The determination of bad debt allowances constitutes a significant estimate.

As of September 30, 2019, and December 31, 2018, allowances for doubtful accounts were $130,550 and $344,466, respectively.

Organization costs

We have adopted the provisions required by the Start-Up Activities topic of the FASB ASC whereby all costs incurred with the incorporation and reorganization of the Company were charged to operations as incurred.

Earnings Per Share

The Company reports earnings per share in accordance with ASC 260, "Earnings per Share." Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period.

As of September 30, 2019, and 2018, the basic weighted average number of shares of Common Stock of the Company was 3,860,285 and 3,396,798, respectively. Since the Company has a net loss for both periods there is no dilutive effect for those specific periods.

Accounting for Equity-based Payments

We account for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees, including ASU 2018/17 amendments. The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty's performance is complete. Stock awards granted to non-employees are valued at their respective measurement dates based on the trading price of our common stock and recognized as expense during the period in which services are provided.

Comprehensive Income

We adopted ASC Topic 220, Comprehensive Income. This statement establishes standards for reporting comprehensive income and its components in a financial statement. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Items included in Comprehensive loss consist of cancellation of available-for-sale securities and foreign currency translation adjustments.

Off Balance Sheet Arrangements

As of September 30, 2019, we did not have any material off-balance sheet arrangements.

Liquidity and Capital Resources

At September 30, 2019and December 31, 2018, the Company had cash and cash equivalents of $435,335 and $661,010, with corresponding working capital of $5,390,256 and $5,570,494, respectively.

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 expenses associated with SEC regulatory compliance. Petrogress, Inc. depends on its subsidiary’s incomes, inasmuch as the Company's principal sources of cash are net cash provided from operating subsidiaries activities, which includes the sale and shipment of petroleum products, and cash contributed to the Company by Christos Traios, our President, Chief Executive Officer and controlling stockholder. On August 27, 2019, the Company also executed a Convertible Note, in the principal amount of $310,000.

Management continues to seek the necessary financing for the expansion of Company's operations. Additional funding is expected to be generated through equity financing from the sale of common stock and/or the issuance of debt. If the Company is successful in completing equity financing, existing stockholders will experience dilution of their interest in our Company. However, the Management cannot provide investors with any assurance that the Company will be able to raise sufficient funding from the sale of our common stock or a debt finance on acceptable terms to fund our plans to expand the Company's operations.

Critical Accounting Policies

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in the notes accompanying our consolidated financial statements included with this report. While all of these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates.

Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.

Item3 - Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item4 - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Christos Traios, our Chief Executive Officer and Evangelos Makris, our Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of September 30, 2019, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, the Company's principal executive officer concluded that the Company's disclosure controls and procedures as of September 30, 2019 were not effective to provide reasonable assurance that information required to be disclosed in the Company's periodic filings under the Exchange Act is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Controls

Our disclosure controls and procedures provide our principal executive officer and principal financial officer with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within our company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.

Management is aware that there is a lack of segregation of duties due to the fact that the Company only has one director and two executive officers dealing with general administrative and financial matters. This constitutes a significant deficiency in the internal controls. Management has decided that considering the officer(s) and director involved, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation were low and the potential benefits of adding additional employees to clearly segregate duties did not justify the expenses associated with such increases. Management periodically reevaluates this situation. In light of the Company's current cash flow situation, the Company does not intend to increase staffing to mitigate the current lack of segregation of duties within the general administrative and financial functions.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the three months ended September 30, 2019 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

Part II - Other Information

Item 1 - Legal Proceedings

None.

Item 1A - Risk Factors

We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information under this item.

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

On August 27, 2019, the Company issued an 8% Convertible Note in favor of EMA FINANCIAL LLC., a Delaware limited liability company, in the principal amount of $310,000. The Note bears interest at a rate of 8% per annum. The Note carries an original issue discount of $10,000 which is included in the principal balance of the Note. The Company has the right to repay the note in full or partially under the prepayment factors: 110% within 1-60 days, 115% within 61-120 days, and 120% within 121-180 days. After the initial 180 days the holder has the right to convert any outstanding balance of the principal and interest into common stocks shares at a discount of 25% of the lowest trading stock price.

The issuance of the 8% Convertible Note was made in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act.

Item 3 - Defaults Upon Senior Securities

None.

Item 4 - Mine Safety Disclosure

None.

Item 5 - Other Information

Effective November 8, 2019, the Company, through its subsidiary Libertus Marine Ltd., concluded the acquisition of a new vessel known as MV RESTA. Arrangements are in progress to shift the vessel from her delivered Gythio port to the Company’s base at Piraeus port to commence the necessary repairs, reflagging and her re-classification.

Item 6 - Exhibits

The following exhibits are filed with this Quarterly Report on Form 10-Q or are incorporated by reference as described below.

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

*	Filed herewith.
**	Furnished herewith

SIGNATURES

Pursuant to the requirements 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.

November 14, 2019	Petrogress, Inc.

	By:	/s/ Christos P. Traios
		Christos P. Traios
		President and Chief Executive Officer (Principal Executive Officer)

By:

/s/ EvangelosMakris

Evangelos Makris

Chief Financial Officer (Principal

Financial and Accounting Officer)

Exhibit Index

Exhibit	Description
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350**
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350**
101.1	Interactive data files pursuant to Rule 405 of Regulation S-T*
*	Filed herewith.
**	Furnished herewith