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

 

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		As of March 31, 2019				As of December 31, 2018
		(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents			1,252,785				661,010
Accounts receivable, net of allowance for doubtful accounts of $0 and $344,466 as of March 31, 2019 and December 31, 2018, respectively			5,123,752				4,779,432
Claims receivable, net			547,600				547,600
Inventories			1,218,524				417,135
Prepaid expenses and other current assets			1,066,448				1,765,276
Total current assets			9,209,109				8,170,453
Non-Current Assets
Goodwill			900,000				900,000
Vessels and other fixed assets, net			4,267,066				4,450,906
Deferred charges, net			20,061				26,750
Security deposit			10,584				10,638
Total non-current assets			5,197,711				5,388,294
Total Assets			14,406,820				13,558,747
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses			1,931,982				1,265,452
Due to related party			1,213,297				1,176,863
Loan facility from related party			148,900				148,900
Accrued Interest			8,594				8,744
Total current liabilities			3,302,773				2,599,959
Total liabilities			3,302,773				2,599,959
Shareholders' equity:
Series A Preferred shares, $100 par value, 100 shares authorized, 100 and 100 shares issued and outstanding as of March 31, 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 March 31, 2019 and December 31, 2018, respectively			-				-
Shares of Common stock, $0.001 par value, 19,000,000 shares authorized, 3,828,412 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively			3,829				3,829
Additional paid-in capital			9,535,161				9,535,161
Accumulated comprehensive loss			(10,231	)			(10,231	)
Retained earnings			1,466,362				1,315,870
Equity attributable to Shareholders of the Company			11,005,121				10,854,629
Non-controlling interests			98,926				104,159
Total liabilities and shareholders' equity			14,406,820				13,558,747

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		Three Months Ended March 31,
		2019				2018
		(Unaudited)				(Unaudited)
Revenues		$	2,122,678			$	2,565,264
Costs of goods sold			(1,165,752	)			(1,406,537	)
Gross profit			956,926				1,158,727
Operating expenses:
Corporate expenses			(5,063	)			(300,138	)
Selling, general and administrative expenses			(549,559	)			(541,313	)
Depreciation expense			(197,280	)			(227,619	)
Total operating expenses			(751,902	)			(1,069,070	)
Operating income before other expenses and income taxes			205,024				89,657
Other income/ (expense), net:
Interest and finance expenses			(12,363	)			(1,427	)
Other income / (expense), net			(47,402	)			25,614
Total other income/ (expense), net			(59,765	)			24,187
Income before income taxes			145,259				113,844
Income tax expense			-				-
Net income		$	145,259			$	113,844
Net income attributable to:
Shareholders of the company			150,492				120,480
Non-controlling interests			(5,233	)			(6,636	)
		$	145,259			$	113,844
Other comprehensive income/ (loss)
Foreign currency translation adjustment			-				724
Comprehensive income		$	145,259			$	114,568
Comprehensive income attributable to:
Shareholders of the company			150,492				121,204
Non-controlling interests			(5,233	)			(6,636	)
		$	145,259			$	114,568
Weighted average number of shares of Common Stock:
Basic			3,828,412				3,299,234
Diluted			3,828,412				5,293,239
Basic earnings per share			0.04				0.03
Diluted earnings per share			0.04				0.02

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																		Additional				Accumulated												Non-				Total
		Preferred Stock								Common Stock								Paid-in				Comprehensive				Retained								controlling				Shareholders’
		Shares				Amount				Shares				Amount				Capital				Loss				Earnings				Total				interest				Equity
Balances 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
Common stock issued for accrued interest of LOC			-				-				382,841				383				-				-				-				383				-				383
Foreign currency translation adjustment			-				-				-				-				-				(2,487	)			-				(2,487	)			-				(2,487	)
Elimination of Petrogress Africa Ltd apic/due from shareholders			-				-				-				-				(87,750	)			-				-				(87,750	)			(12,250	)			(100,000	)
Net income			-				-				-				-				-				-				307,047				307,047				17,651				324,698
Balances 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
Net income			-				-				-				-				-				-				150,492				150,492				(5,233	)			145,259
Balances at March 31, 2019			100			$	10,000				3,828,412			$	3,829			$	9,535,161			$	(10,231	)		$	1,466,362				11,005,121				98,926			$	11,104,047

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		Three Months Ended March 31,
		2019				2018
		(Unaudited)				(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	145,259			$	113,844
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			197,280				227,619
Change in Fair value of share-based payments issued for services			-				153,178
Gain on settlement of convertible promissory notes			-				(12,835	)
Changes in working capital:
- (Increase)/ decrease in Accounts receivable, net			(344,320	)			(1,632,138	)
- (Increase)/ decrease in Inventories			(801,389	)			(1,876	)
- Amounts due from related party			-				58,529
- (Increase)/ decrease in Prepaid expenses and other current assets			705,517				(102,146	)
- (Increase)/ decrease in Security deposit			54				-
Increase/(decrease) in:
- Increase/ (decrease) in Accounts payable and accrued expenses			666,530				562,692
- Increase/ (decrease) in Amounts due to related party			36,434				-
- Increase/ (decrease) in Accrued Interest			(150	)			3,196
Net cash provided by/ (used in) operating activities			605,215				(629,937	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property plant and equipment			(13,440	)			(84,600	)
Acquisition of subsidiary			-				-
Net cash used in investing activities			(13,440	)			(84,600	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan facility from related party			-				63,000
Net cash provided by/ (used in) financing activities			-				63,000
Effect of exchange rate changes on cash			-				724
Net (decrease)/ increase in cash and cash equivalents			591,775				(650,813	)
Cash and cash equivalents, Beginning of Period			661,010				1,150,999
Cash and cash equivalents, End of Period		$	1,252,785			$	500,186
Cash paid for interest expense		$	-			$	-
Cash paid for income taxes		$	-			$	-
Non-cash investing and financing activities:
Common stock issued for settlement of notes and interest payable		$	-			$	297,500
Common stock issued for settlement of services		$	-			$	210,000

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Note 1 - Background and Description of Business and Preparation of Financial Statements

 

Nature of the Business

 

Petrogress, Inc. was incorporated on February 10, 2010 under the laws of the State of Florida as 800 Commerce, Inc. ("800 Commerce") for the purpose of marketing credit card processing services on behalf of merchant payment processing service providers. 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, Christos Traios, a Greek citizen. 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. Accordingly, the historical financial statements of 800 Commerce are those of Petrogres Co. Limited and its subsidiaries from their respective inception and those of the consolidated entity subsequent to the February 29, 2016 transaction date.

 

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.

 

The Company operates as a fully integrated international merchant of petroleum products, focused on the supply and trade of light petroleum fuel oil (LPFO), refined oil products and other petrochemical products to local refineries in West Africa and Mediterranean countries. The Company operates as a holding company and provides its services primarily through its wholly-owned and majority-owned subsidiaries: Petrogres Co. Limited, which provides management of crude oil purchases and sales; Petronav Carriers LLC, which manages day-to-day operations of our affiliated tanker fleet, currently consisting of four vessels; Petrogress Int’l LLC, which is a holding company for subsidiaries currently conducting business in Cyprus and Ghana. including a 90% interest in Petrogres Africa Co. Limited, which attends to and services our tanker fleet in Ghana.

 

The accompanying unaudited condensed interim consolidated financial statements (the "Interim Statements") have been prepared pursuant to the rules and regulations for reporting on Securities and Exchange Commission (the "SEC") Form 10-Q. Accordingly, certain information and disclosures required by generally accepted accounting principles for complete consolidated financial statements are not included herein. The Interim Statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the SEC on April 12, 2019. In the opinion of management, all adjustments, consisting of normal recurring adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The interim results for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any future interim periods.

 

The Company's management team operates from its principal offices located in Piraeus, Greece.

 

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, 2018. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the full year.

 

 

Principles of consolidation

 

The consolidated financial statements of the Company include the consolidated accounts of the Company and its wholly-owned and majority-owned subsidiaries. Our significant subsidiaries are described below.  

 

Petrogres Co. Limited

 

Petrogres Co. Limited, is a Marshall Islands corporation, incorporated in 2009.

 

Petronav Carriers LLC

 

Petronav Carriers LLC, was formed in Delaware in April 2016.

 

Petrogress Int'l LLC

 

Petrogress Int’l LLC, is a Delaware limited liability company, acquired by the Company in September 2017.

 

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.

 

 

Note 2 - Summary of Significant Accounting Policies

 

Cash and Cash Equivalents

 

We consider all highly liquid investments with an original term of three months or less to be cash equivalents.

 

Accounts Receivable, net

 

The amount shown as accounts receivable, 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 March 31, 2019, and December 31, 2018, 0 and $344,466 of allowances for doubtful accounts were recorded.

 

Inventories

 

The Company's inventories consist primarily of purchased crude oil for re-sale and gas oil in transit on a marine vessel at the respective balance sheet date, and both are valued at the purchased cost or market using the mark-to-market method of valuation.

 

 

 

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. 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:

 

 

Income taxes

 

The Company files income tax returns in various jurisdictions, as appropriate and required. The Company was not subject to U.S. federal, state and local, as applicable, income tax examinations by 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.

 

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.

 

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. 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.

 

Revenue Recognition

 

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 Petrogres Co. Limited.

 

 

Fair Value of Financial Instruments

 

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.

 

Effects of Recent Accounting Pronouncements not yet adopted

 

In January 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This standard affects the accounting for equity instruments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. In February 2018, the FASB issued ASU 2018-03, “Technical Corrections and Improvements to Financial Instruments (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities”. This update was issued to clarify certain narrow aspects of guidance concerning the recognition of financial assets and liabilities established in ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. This includes an amendment to clarify that an entity measuring an equity security using the measurement alternative may change its measurement approach to a fair valuation method in accordance with Topic 820, Fair Value Measurement, through an irrevocable election that would apply to that security and all identical or similar investments of the same issued. The update is effective for fiscal years beginning after December 15, 2018. We have evaluated the impact of the adoption of this standard and we do not expect this guidance to have a significant impact on our consolidated financial statements and related disclosures.

 

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”). In January 2018, the FASB issued ASU 2018-01, which provides additional implementation guidance on the previously issued ASU 2016-02. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. We have evaluated the impact on the consolidated financial statements which is immaterial.

 

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The amendments should be applied prospectively as of the beginning of the period of adoption. We have evaluated the impact of the adoption of this standard and we do not expect this guidance to have a significant impact on our consolidated financial statements and related disclosures.

 

 

Note 3 - 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. As of March 31, 2019 and December 31, 2018, management is of the opinion that the Company had no significant concentrations of credit risk, except as disclosed in Note 7.

 

 

Note 4 - Vessels and other fixed assets, net

 

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

 

 

Depreciation for the three months ended March 31, 2019 and March 31, 2018, was $197,280 and $227,619, respectively.

  

 

Note 5 - Preferred stock

 

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

 

On October 6, 2017, the Company issued the above 100 Series A shares of Preferred stock to Christos Traios, our President, Chief Executive Officer and sole Director as provided in his employment agreement.

 

On July 9, 2018, the Company filed the Amendment to the Company's Certificate of Incorporation with the Delaware Secretary of State to, among other things, 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 Preferred Stock.

 

 

 

Note 6 - Related party transactions

 

Officer's compensation

 

During the three months ended March 31, 2019 and March 31, 2018, the Company recorded officers’ compensation of $45,000 and $60,000, respectively. For the period ended March 31, 2019, $7,129 was paid and the remaining amount was accrued and included in Amounts Due to Related Party on the Consolidated Balance Sheets as of March 31, 2019.

 

Revolving Line of Credit

 

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 issued in connection with the Credit Agreement will become due upon the current maturity date, July 13, 2019.

 

The Company accounts for this agreement under ASC 808-10, Collaborative Agreements, and has recognized the portion of revenues and expenses attributed to the Company.

 

During the three months ended March 31, 2019, the Company recognized revenues totaling $1,917,178 from sales of crude oil to Platon Gas Oil Ghana Limited (“PGO”).  These revenues are not subject to the Company’s collaborative arrangement with PGO and are those solely of the Company.  No other costs related to the collaborative arrangement have been incurred directly by the Company and a formal accounting to determine profit or loss has not yet occurred. 

 

The table below presents the movement of the amounts due to Christos Traios during the three months ended March 31, 2019:

 

 

 

Note 7 - Revenue Concentrations

 

The Company sells to commercial customers in foreign markets. The following is a summary of customers who accounted for more than five percent (5%) of the Company’s revenues for the periods ended March 31, 2019 and 2018:

 

 

The following is a summary of customers who accounted for more than five percent (5%) of the Company’s accounts receivable for the periods ended March 31, 2019 and December 31, 2018:

 

 

 

Note 8 – Subsequent Events

 

On April 1, 2019, Petrogress Int’l LLC and Petrogres Co. Limited entered into a merger agreement, pursuant to which Petrogres Co. Limited was merged with and into Petrogress Int’l LLC, which survived the merger. The merger became effective April 23, 2019.

 

 

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 between Petrogress Int’l LLC and Christos P. Traios, pursuant to which the Company purchased its interest in Petrogres Africa Company Limited. 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 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).

 

 

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