Exhibit 99.1
Financial Statements
Years Ended December 31, 2015 and 2014
Petrogres Co. Limited and Affiliates
December 31, 2015 and 2014
TABLE OF CONTENTS
Page # | ||
INDEPENDENT AUDITOR’S REPORT | 1 | |
COMBINED BALANCE SHEET | 2 | |
COMBINED INCOME STATEMENTS | 3 | |
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY | 4 | |
COMBINED STATEMENTS OF CASH FLOWS | 5 | |
NOTES TO THE COMBINED FINANCIAL STATEMENTS | 6-8 |
David S. Friedkin CPA
CERTIFIED PUBLIC ACCOUNTANT
601 Haring Farm Court
River Vale, NJ 07675
To the Board of Directors and Shareholders
Petrogres Co. Limited and Affiliates
We have audited the accompanying combined financial statements of Petrogres Co. Limited (a foreign corporation) which comprise the combined balance sheets as of December 31, 2015 and 2014, and the related combined statements of income, retained earnings, and cash flows for the years then ended, and the related notes to the financial statements.
Management's Responsibility for the Combined Financial Statements
Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Petrogres Co. Limited and Affiliates as of December 31, 2015 and 2014, and the results of its combined operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
David S. Friedkin CPA
River Vale, New Jersey
April 25th, 2016
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Petrogres Co. Limited and Affiliates | ||||||||
Combined Balance Sheeted | ||||||||
December 31, 2015 and 2014 | ||||||||
December 31, | December 31, | |||||||
2015 | 2014 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 1,882,305 | $ | 526,656 | ||||
Accounts receivable | 2,650,171 | 1,780,611 | ||||||
Inventory | 1,209,960 | 1,305,000 | ||||||
Total Current Assets | 5,742,436 | 3,612,267 | ||||||
PROPERTY and EQUIPMENT, at cost - net of accumulated depreciation | 6,144,000 | 6,807,500 | ||||||
TOTAL ASSETS | $ | 11,886,436 | $ | 10,419,767 | ||||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 809,473 | $ | 425,007 | ||||
TOTAL LIABILITIES | 809,473 | 425,007 | ||||||
SHAREHOLDER'S EQUITY | ||||||||
Common stock, par value $0.01, 1,000,000 shares authorized, issued and outstanding | 1,000,000 | 1,000 | ||||||
Additional paid-in capital | 7,802,838 | 8,801,838 | ||||||
Retained earnings | 2,274,125 | 1,191,922 | ||||||
Total Shareholder's Equity | 11,076,963 | 9,994,760 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 11,886,436 | $ | 10,419,767 |
See Independent Auditors Report and
Accompanying Notes to Financial Statements
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Petrogres Co. Limited and Affiliates | ||||||||
Combined Income Statements | ||||||||
For the Years Ended December 31, 2015 and 2014 | ||||||||
Year Ended | Year Ended | |||||||
December 31, | December 31, | |||||||
2015 | 2014 | |||||||
Net Sales | $ | 21,579,013 | $ | 19,737,828 | ||||
Cost of goods sold | ||||||||
Crude oil purchases | 11,417,014 | 13,225,637 | ||||||
Shipping and handling costs | 4,053,217 | 2,477,285 | ||||||
Cargo insurance costs | 172,575 | 129,743 | ||||||
Cargo crew costs | 63,000 | 353,564 | ||||||
Total Costs of Goods Sold | 15,705,806 | 16,186,230 | ||||||
Gross Profit | 5,873,207 | 3,551,598 | ||||||
Operating, Management and Administrative Expenses | ||||||||
Fleet operating expenses | 3,034,938 | 1,369,209 | ||||||
Management expenses | 874,723 | 231,497 | ||||||
Administrative expenses | 136,387 | 134,297 | ||||||
Depreciation and amortization | 663,500 | 663,500 | ||||||
Total Operating, Management and Administrative Expense | 4,709,548 | 2,398,503 | ||||||
Income From Operations | 1,163,659 | 1,153,095 | ||||||
Income tax expense | 81,456 | 185,259 | ||||||
Net Income | $ | 1,082,203 | $ | 967,836 |
See Independent Auditors Report and
Accompanying Notes to Financial Statements
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Petrogres Co. Limited and Affiliates | ||||||||||||||||
Combined Statements of Shareholder's Equity | ||||||||||||||||
For the Years Ended December 31, 2015 and 2014 | ||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings | Total Shareholder's Equity | |||||||||||||
Balance - January 1, 2014 | $ | 1,000 | $ | 8,801,838 | $ | 224,086 | $ | 9,026,924 | ||||||||
Dividends | — | — | — | — | ||||||||||||
Net income for year ended 2014 | — | — | 967,836 | 967,836 | ||||||||||||
Balance - December 31, 2014 | $ | 1,000 | $ | 8,801,838 | $ | 1,191,922 | $ | 9,994,760 | ||||||||
Capital adjustment | 999,000 | (999,000 | ) | — | — | |||||||||||
Net income for year ended 2015 | — | — | 1,082,203 | 1,082,203 | ||||||||||||
Balance - December 31, 2015 | $ | 1,000,000 | $ | 7,802,838 | $ | 2,274,125 | $ | 11,076,963 |
See Independent Auditors Report and
Accompanying Notes to Financial Statements
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Petrogres Co. Limited and Affiliates | ||||||||
Combined Statements of Cash Flows | ||||||||
For the Years Ended December 31, 2015 and 2014 | ||||||||
Year Ended | Year Ended | |||||||
December 31, | December 31, | |||||||
2015 | 2014 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 1,082,203 | $ | 967,836 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Depreciation and amortization expense | 663,500 | 663,500 | ||||||
Changes in assets - (increase) decrease | ||||||||
Accounts receivable | (869,560 | ) | (1,003,735 | ) | ||||
Inventory | 95,040 | (555,000 | ) | |||||
Changes in liabilities - increase (decrease) | ||||||||
Accounts payable | 384,466 | 44,507 | ||||||
Net Cash Provided by Operating Activities | 1,355,649 | 117,108 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Dividends paid | — | — | ||||||
Net Cash Used in Financing Activities | — | — | ||||||
Increase in Cash and Cash Equivalents | 1,355,649 | 117,108 | ||||||
CASH AND CASH EQUIVALENTS -Beginning of period | 526,656 | 409,548 | ||||||
CASH AND CASH EQUIVALENTS -End of period | $ | 1,882,305 | $ | 526,656 |
See Independent Auditors Report and
Accompanying Notes to Financial Statements
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PETROGRES CO. LIMITED AND AFFILIATES
NOTES TO THE COMBINED FINANCIAL STATEMENTS
December 31, 2015 and 2014
Note 1 – Summary of Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by Petrogres Company Limited and Affiliates (the “Company”) in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles.
a. | Business Activity -Petrogres Co. Limited (the “Company”) was incorporated in the Republic of the Marshall Islands in March 2009 for the purposes of overseeing the day –to-day operations of the Petrogres Group of companies in shipping and petroleum product refining industries. The Company maintains a fleet of four (4) oil transport sea vessels in addition to commodity trading and crude refining operations in the Southern Europe and East African regions. |
b. | Affiliates and Principles of Combination– The accompanying financial statements include the financial position and results of operations of the following affiliated entities (all incorporated in The Republic of the Marshall Islands): |
Petrogres Co. Limited (Management Company)
Shiba Ship Management Ltd. (Shipowners of Mt. Apecus)
Danae Marine Ltd. (Shipowners of Mt. Optimus)
Invictus Marine S.A. (Shipowners of Mt. Invictus)
Entus Marine Ltd. (Shipowners of Mt. Entus)
All intercompany balances and transactions have been eliminated in combination. The entities are affiliated through common ownership and control.
c. | Basis of Accounting - The accompanying financial statements are prepared on the accrual basis of accounting, in accordance with generally accepted accounting principles. |
d. | Use of Estimates - The preparation of the financial statements in conformity with generally accepted accounting principles required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. |
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PETROGRES CO. LIMITED AND AFFILIATES
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
December 31, 2015 and 2014
Note 1 – Summary of Significant Accounting Policies (continued)
e. | Cash and Cash Equivalents -For purposes of the statements of cash flows, the Company considers all highly liquid debts instruments purchased with a maturity of three months or less to be cash equivalents.All banking, transactions and reporting of the Company is conducted in US Dollars (US$). |
f. | Concentrations of Credit Risk -The Company and its affiliates are engaged primarily in the purchase, transport and processing of crude oil petroleum products. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade accounts receivables. The Company places its temporary cash investments with financial institutions and limits the amount of credit exposure to any one financial institution. 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 December 31, 2014 and 2013, the Company had no significant concentrations of credit risk. |
g. | Depreciation -The Company's vessels and other assets are depreciated using primarily the straight-line method over the estimated useful lives. |
h. | Inventory- The Company's inventory, which consists primarily of crude oil purchases on the vessel in transport, is valued at the lower of cost or market using the mark-to-market method of valuation. |
i. | Date of Management's Review -Management has evaluated subsequent events through April 26th, 2016, the date on which the financial statements were available to be issued. |
j. | Revenue Recognition -The Company recognizes revenues when product is delivered to contracted customer. Product in transit at the end of an accounting period is recorded at an estimated value which is adjusted upon load certification. |
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PETROGRES CO. LIMITED AND AFFILIATES
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
December 31, 2015 and 2014
Note 2 – FixedAssets
Fixed assets consisted of the following as of December 31, 2015 and 2014:
2015 | 2014 | |||||||
Vessels | $ | 9,550,000 | $ | 9,550,000 | ||||
Furniture and equipment | 85,000 | 85,000 | ||||||
9,635,000 | 9,635,000 | |||||||
Less: accumulated depreciation | (3,491,000 | ) | (2,824,500 | ) | ||||
$ | 6,144,000 | $ | 6,807,500 |
Depreciation expense totaled $663,500 in both 2015 and 2014.
Note 3 – Taxes
The Company is subject to various income and gross receipts taxes in the countries it conducts business. Filings and payments are made as required by local law, and amounts are included as income tax expense on the combined statements of income.
FASB Accounting Standards Codification Topic 740,Accounting for Uncertainty in Income Taxes, provides guidance on the recognition, measurement, classification and disclosures related to uncertain tax positions, along with any related interest and penalties. The Company is not aware of any uncertain tax positions that may have a material impact on its financial statements.
Note 4 – Operating Leases
The Company maintains offices in several countries to assure functions and resources are properly deployed. In addition to Company headquarters being located in Hella, Greece, the Legal and Banking operations are housed exclusively in Cyprus while a local operations branch is located in Ghana. All locations are leased on an annual basis with informal renewal options being standard and customary. Rent expense for the years ended December 31, 2015 and 2014 was approximately $143,000 and $77,000, respectively.
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