PETROGRESS, INC - Quarter Report: 2021 September (Form 10-Q)

PETROGRESS, INC.

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

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

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

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

Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: changing crude oil prices; changing refining, marketing and chemicals margins; our ability to realize anticipated cost savings and expenditure reductions; actions of competitors or regulators; public health crises, such as pandemics (including coronavirus (COVID-19)) and epidemics, and any related government policies and actions; timing of exploration expenses; timing of crude oil liftings; the competitiveness of alternate-energy sources or product substitutes; technological developments; the results of operations and financial condition of the our suppliers, vendors, partners and equity affiliates, particularly during extended periods of low prices for crude oil during the COVID-19 pandemic; the inability or failure of our joint-venture partners to fund their share of operations and development activities; the potential failure to achieve expected net production from existing and future crude oil development projects; potential delays in the development, construction or start-up of planned projects; the potential disruption or interruption of our operations due to war, accidents, piracy, political events, civil unrest, severe weather, cyber threats and terrorist acts, crude oil production quotas or other actions that might be imposed by the Organization of Petroleum Exporting Countries, or other natural or human causes beyond the company's control; changing economic, regulatory and political environments in the countries in which we operate; general domestic and international economic and political conditions; the potential liability for remedial actions or assessments under existing or future environmental regulations and litigation; significant operational, investment or product changes required by existing or future environmental statutes and regulations, including international agreements and national or regional legislation and regulatory measures to limit or reduce greenhouse gas emissions; the potential liability resulting from other pending or future litigation; our future acquisition or disposition of assets or shares or the delay or failure of such transactions to close based on required closing conditions; the potential for gains and losses from asset dispositions or impairments; government-mandated sales, divestitures, recapitalizations, industry-specific taxes, changes in fiscal terms or restrictions on scope of company operations; foreign currency movements compared with the U.S. dollar; material reductions in corporate liquidity and access to debt markets; and our ability to identify and mitigate the risks and hazards inherent in operating in the global energy industry; the company’s ability to identify and mitigate the risks and hazards inherent in operating in the global energy industry; and the factors set forth under the heading “Risk Factors” on pages 10 through 14 of the company’s 2020 Annual Report on Form 10-K, and in subsequent filings with the U.S. Securities and Exchange Commission. Other unpredictable or unknown factors not discussed in this report could also have material adverse effects on forward-looking statements.

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements PETROGRESS, INC. and SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

See accompanying notes to consolidated financial statements.

PETROGRESS, INC. and SUBSIDIARIES

Consolidated Statement of Balance Sheet (Unaudited)

See accompanying notes to consolidated financial statements.

PETROGRESS, INC. and SUBSIDIARIES

Consolidated Statement of Cash Flows (Unaudited)

See accompanying notes to consolidated financial statements.

PETROGRESS, INC. and SUBSIDIARIES

Consolidated Statement of Equity (Unaudited)

See accompanying notes to consolidated financial statements.

PETROGRESS, INC.

Notes to Consolidated Financial Statements (Unaudited)

Petrogress, Inc (PGI), is an integrate energy company, engaged in the upstream, downstream and midstream segments. We sell crude oil and refined products internationally, to buyers on the spot market and to independent entrepreneurs. The company operates internationally through its wholly owned subsidiaries "Petrogress Int'l LLC.", "Petronav Carriers LLC.". The company is registered in Delaware and headquartered from Piraeus-Greece, where the company maintain its principal marketing and operating offices at 1, Akti Xaveriou, 18538 Piraeus, Greece.

Impact of the novel coronavirus (COVID-19) pandemic; the outbreak of COVID-19 and decreases in commodity prices resulting from oversupply, government-imposed travel restrictions and other constraints on economic activity caused a significant decline in the demand for our products and created disruptions and volatility in the global marketplace beginning late in the first quarter 2020, which negatively affected our results of operations and cash flows throughout 2020. While demand and commodity prices have shown signs of recovery, demand is not back to pre-pandemic levels, and financial results could continue to be challenged in future quarters. There continues to be uncertainty and unpredictability around the extent to which the COVID-19 pandemic will impact our results, which could be material

Basis of Presentation; the accompanying consolidated financial statements of Petrogress and its subsidiaries (together, Petrogress or the company) have not been reviewed by an independent registered public accounting firm. In the opinion of the company’s management, the interim data includes all adjustments necessary for a fair statement of the results for the interim periods. These adjustments were of a normal recurring nature. The results for nine-months period ended September 30, 2021, are not necessarily indicative of future financial results. The term “earnings” is defined as net income attributable to Petrogress.

Going Concern - Substantial Doubt; The management of the Company assesses the Company’s ability to continue as a going concern at each period end. The assessments evaluate whether there are conditions that give rise to substantial doubt to continue as a going concern within one year from the consolidated financial statements issuance date. Management cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report.

On the ground of management evaluation and consideration for the next period of twelve months, the company will be in the

need of significant working capital to continue its oil trading operations, to keep repairing and provide the necessary maintenance on its tankers fleet, to complete the renovation of the leased gas stations and supplies the fuels, and furthermore, to support all the corporate expenses of the parent company. Management plans to continue seek debt and/or equity capital to fund its operations but there can be no assurance that management will be able to do so. The accompanying consolidated financial statements do not contain any adjustments related to this uncertainty.

The coronavirus pandemic has imposed the continuing lockdown of the Company’s office, and the majority of its operations ceased. Furthermore, the Covid-19 outbreaks created additional downward pressure on the demand for oil products in which we transact our business and we may not be able to fully assess the effects on our future operations. In addition, the lack of cash liquidity has a material adverse impact to our oil trade, and we expect a further depress on our sales.

In of that said and under the present circumstances we believe that our incomes undoubtedly will be heavily affected during the period, and that raises substantial doubt for the company’s ability to continue its business unless the company succeed to raise extra cash financing in the very near future.

Subsidiaries and Affiliated Companies; the Consolidated Financial Statements include the accounts of controlled subsidiary companies more than 50 percent owned and any variable-interest entities in which the company is the primary beneficiary. All significant intercompany transactions and accounts have been eliminated.

Principles of consolidation; the consolidated financial statements include the consolidated accounts of the Company and its wholly owned and majority-owned subsidiaries as listed in the below table. Inter-company transaction balances and unrealized gains/(losses) on transactions between the companies are eliminated.

Notes to Consolidated Financial Statements (continued)

Recently adopted; Effective January 1, 2021, we adopted Accounting Standards Update (ASU) 2016-13 and its related amendments

Read Cash Flow statement - page 5

The summarized financial information for Petrogress Inc (PGI) presented as follows:

The company’s primary country is the United States of America, its country of Domicile; while Greece is the head operating location. Most of our marketing, sales, ship-management and other related functions are performed at our main office in Piraeus, Greece. The company evaluate the performance of its operating earnings based on its subsidiaries sales.

Segment Information; Petrogress’ chief operating decision maker is the chief executive officer (“CEO”) of its general partner. The CEO reviews Petrogress’ discrete financial information, makes operating decisions, assesses financial performance and allocates resources on a type of service basis. Petrogress has two reportable segments: Commodities and Other (C&O) revenues and Hires & Freights (H&F). Each of these segments is organized and managed based upon the nature of the products and services it offers.

Notes to Consolidated Financial Statements (continued)

Segment Sales and Other Operating Revenues; Segment sales and other operating revenues, including internal transfers, for the nine-month periods ended September 30, 2021 and 2020, are presented in the following table. Products are transferred between operating segments at internal product values that approximate market prices. Revenues for the upstream segment are derived primarily from the purchase and sale of crude oil, as well as the sales to third-parties. Revenues for the downstream segment are derived from the refining and marketing of petroleum products such as gasoline, gas oils, lubricants, residual fuel oils and other products derived from crude oil. Revenues for the midstream segment generated from the vessels chartering and employment of transportation crude oil or refined products, the storing, the wholesale marketing and the retailing in our gas stations. “All Other” activities include revenues from shipping agency service and other operations.

Crude oil, Gas oil and bunkers onboard our vessels are recorded at weighted average cost and carried at the lower of cost or net realizable value. Supplies and other items consist principally of items, spare-parts, consumable goods and equipment supplied to our vessel which are valued at weighted average cost and reviewed periodically for obsolescence or impairment when market conditions indicate.

The table below presents our inventories as of September 30, 2021 and December 31, 2020, respectively:

*Vessels ROB of Gas Oil, lubricants and new spare parts are calculated in the balance sheets separately from goods.

We depreciate our vessels on a straight-line basis over the estimated useful life which is 8 years from the date of being placed in service by the Company or its affiliate. Depreciation is calculated based on a vessel’s cost less the estimated residual value.

Vessels and other fixed assets, net consisted of the following as of September 30, 2021 and December 31, 2020:

Notes to Consolidated Financial Statements (continued)

As of September 30, 2021, the company has no classified any properties as “Assets held for sale” on the Consolidated Balance Sheet.

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.  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.

There are currently no material pending legal or governmental proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is subject.

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

The three levels of the fair value hierarchy of inputs the company uses to measure the fair value of an asset or liability are described as follows:

Marketable Securities; We classify marketable securities as available-for-sale securities, which are carried at their fair value based on the quoted market prices of the securities with unrealized gains and losses, net of deferred income taxes, reported as accumulated other comprehensive income/ (loss), a separate component of shareholders’ equity. Realized gains and losses on available-for-sale securities are included in net earnings in the period earned or incurred

Derivatives; The company records its derivative instruments – other than any commodity derivative contracts that are designated as normal purchase and normal sale – on the Consolidated Balance Sheet at fair value, with the offsetting amount to the Consolidated Statement of Income.

Cash and Cash Equivalents; The company hold cash equivalents in US Dollars and Non-US Dollars. The instruments classified as cash equivalents are primarily bank time deposits with maturities of 90 days or less, and money market funds. “Cash and cash equivalents” had carrying/fair values of $17,774 at September 30, 2021.

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.

Notes to Consolidated Financial Statements (continued)

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

“Sales and other operating revenue” on the Consolidated Statement of Income primarily arise from contracts with customers and consistent with ASC Topic 606. Related receivables are included in “Accounts and notes receivable, net” on the Consolidated Balance Sheet, net of the current expected credit losses.

As of September 30, 2021, the net balance of these receivables was $2,796,341 and $2,136,790 at September 30, 2021, and December 31, 2020 respectively. Amount of $ 1,094,167 consists receivables from/due of affiliates.

The table below presents the calculation of basic and diluted net income / (loss) attributable to common shareholders per share as of September 30, 2021:

As of September 30, 2021, and 2020, the basic weighted average number of shares of Common Stock of the Company was 35,173,965 and 9,803,712, respectively.

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

Key Financial Results

Third Quarter of 2021 compared to the Third Quarter of 2020

Refer to the “Results of Operations” section beginning on page 14 for a discussion of our financial results.

Executive Overview

Petrogress, Inc., is based in Delaware and operates as a holding company and conducts its business through its wholly-owned subsidiaries: Petronav Carriers LLC., (PCL), which manages day-to-day operations of its beneficially-owned affiliated and chartered tankers fleet; and Petrogress Int’l LLC. (PIL), which provides management of crude oil purchases and sales; PIL is acting also as a holding company of its branches;

The company maintain its principal marketing and operating offices at 1, Akti Xaveriou, 18538 Piraeus, Greece. Our telephone number at that address is +30 (210) 459-9741.

Business Environment and Outlook

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

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

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

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

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

Operating sectors

Our business operates in the downstream and midstream sectors of the energy industry, where we acquire and supply crude oil, and engage in the refining and marketing of refined products and lubricants. As a supplier, we procure crude oil from our direct sources and deliver by our tankers fleet to buyers’ destinations. We provide our customers with services that require sophisticated logistical operations designed to meet their strict oil quality and delivery scheduling needs. Throughout our history, we have expanded our business capabilities through strategic alliances, select business and vessel acquisitions, and the establishment of new service centers.

Other Businesses

Effected as on November 2020, the company concluded the negotiations to lease three Gas refilling stations in the Mainland of South Greece. The procedures for the obtaining the operating licenses from the local authorities are in progress, simultaneously with the preparation of gas stations designs and drawings in order to commence the modernization and renovation under our brand names. As of mid of September 2021 the first fueling station commenced its operations. Our innovate gas-stations with their unique distinct design, have been developed to offer high performance fuels and a totally new experience to customers, with our vision to deliver a modern and compelling retail experience. The Gas-Stations shall be operated by our branch in Greece and all are designed to provide the drivers food options, cold and hot pre-packaged items.

Our key business segments

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

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

Midstream; The outbreak of COVID-19 pandemic occurred the ceased of our entire fleet operations and employments which resulted the complete elimination of freight and hire incomes, while the fleet expenses remained on the same levels during the third quarter 2021. Nevertheless, we believe the shipping industry will be rectified and return to the normal levels, therefore we still seek to expand our midstream operations in other international ocean routes by adding to our fleet larger and younger tanker vessels. We are monitoring the vessel market for opportunities while we are also working to secure the necessary funding for expansion. Our business strategy is based in part upon the expansion of our business to new, or within existing, markets. In order to expand our operations, we will be required to use cash from operations, incur borrowings or raise capital through the sale of debt or equity securities in the public or private markets.

Strategic Alliances. We are dedicated to rapid growth through acquisitions, partnerships and agreements that will enable us to enter and expand into new markets. Our strategy in pursuing these alliances is based on the target’s ability to generate positive cash flow, effectively meet customer needs, and supply desirable products, services, among other considerations.

Results of Operations

The following section presents the results of operations and variances on a before-tax basis for the company’s business operations, as well as for “All Other.” Our operating revenues are driven primarily of the commodities trading sales and our tankers fleet employment days during which our vessels are generating revenues while our financial results are subject to a number of sectors and reflects to the following factors:

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

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

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

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

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

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

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

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

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

Operating Earnings/(losses) of during the third quarter of 2021 amount to $(1,652,034), compared to operating Earnings/(Losses) of $(3,107,281) for the same period in 2020.

Consolidated Statement of Income; Sales of products provided in the below table:

Cost of Goods Sold provided in the below table:

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

Summarized Financial Data – Subsidiaries

The management and operation of our business is performed directly and independently by each subsidiary. Assets, inventories, partnership interests, joint venture interests and contracts are held by the subsidiaries. Petrogress, Inc., the parent company, does not have revenues while it suffers all the necessary operating and general and administrative expenses in order to comply with the regulatory requirements of the SEC.

Petrogress Int’l LLC. (PIL)

Summarized financial information is presented in the following table:

* 100% Net income / (loss) attributable to Petrogress, Inc.

Petronav Carriers LLC. (PCL)

Summarized financial information is presented in the following table:

* 100% Net income / (loss) attributable to Petrogress, Inc.

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

Petrogress, Inc. (PGI)

The following table presents the results of equity interest PGI has into the subsidiaries:

Net income / (loss) attributable from ownership interest of the subsidiaries.

Liquidity & Capital Resources

Our main sources of liquidity are cash and cash equivalents, accounts receivable and internally generated cash flow from operations. At September 30, 2021, we had a working capital of $(578,740) consisting of $17,774 in cash and cash equivalents, $2,796,341 in accounts receivable, $338,946 in claims receivable, $270,733 in inventories, and $372,763 in prepaid expenses and other current assets.

For the nine months ended September 30, 2021, net cash provided by operating activities was $(260,896) compared to $794,469 for the same period in 2020. Assets included in the calculation of the Company’s working capital have decreased by $2,122,341 mainly from the increase in accounts receivable.

The company’s future debt level is dependent primarily on results of operations, cash that may be generated from asset dispositions, the capital program, lending commitments to affiliates, and shareholder contributions. Our need for capital resources is driven by our expansion plans, ongoing maintenance and improvement of our vessels, support of our operational expenses, corporate overhead and the expenses we suffer in order to comply with the regulatory requirements of SEC.

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

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

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

Information about market risks for the nine months ended September 30, 2021, does not differ materially from that discussed under Item 7A of Petrogress 2020 Annual Report on Form 10-K.

Item 4 – Controls and Procedures

(a) Evaluation of disclosure controls and procedures

The company’s management has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, the effectiveness of the company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures were effective as of September 30, 2021.

(b) Changes in internal control over financial reporting

During the nine months ended September 30, 2021, there were no changes in the company’s internal control over financial reporting that have materially affected or are reasonably likely to affect, the company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

Information about legal proceedings for the nine months ended September 30, 2021, does not differ materially from that discussed under Item 3 of Petrogress 2020 Annual Report on Form 10-K.

Item 1A – Risk Factors

Some inherent risks could materially impact the company’s financial results of operations or financial condition. Information about risk factors for the nine months ended September 30, 2021, does not differ materially from that set forth under the heading “Risk Factors” on pages 10 through 14 of the company’s 2020 Annual Report on Form 10-K.

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

The table below presents the issued shares during the quarter ended September 30, 2020:

Item 5 – Other Information

None

Item 6- Exhibits

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

Exhibits Index

SIGNATURES

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