UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K/A

Amendment No. 1



☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For
the fiscal year ended December 31, 2016



OR



☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934



Commission
File Number: 333-184459



|                                                      
|------------------------------------------------------
|PETROGRESS, INC.                                      
|(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 27-2019626                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     
|757 Third Avenue, Suite 2110                                   |  |                                     
|New York, NY                                                   |  | 10017                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



|                                                    
|----------------------------------------------------
|(212) 376-5228                                      
|(Registrant’s telephone number, including area code)



Securities registered under Section 12(b)
of the Act: None



Securities registered under Section 12(g)
of the Act: None



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ☐



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  ☑



Indicate
by check mark whether the issuer (1) 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 has 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 ☐  No ☑



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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 and post such
files). Yes ☑  No ☐



Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☑



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



|Large accelerated filer ☐                                                 | Accelerated filer ☐        
|------------------------------------------------------------------------- | ---------------------------
|                                                                          |                            
|Non-accelerated filer ☐ (Do
    not check if a smaller reporting company) | Smaller reporting company ☑



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



The aggregate market value of the common
stock held by non-affiliates of the registrant, based upon the last sale price of the common stock of the Company as of the last
business day of its most recently completed second fiscal quarter, or June 30, 2016, was approximately $406,505.



The number of shares outstanding of the
registrant’s $0.001 par value Common Stock as of April 6, 2017, was 166,795,807 shares.









EXPLANATORY NOTE



This Amendment No.
1 on Form 10-K/A (this “Amendment No. 1”) is being filed to amend our Annual Report on Form 10-K for the fiscal year
ended December 31, 2016 (the “Original Filing”), filed with the U.S. Securities and Exchange Commission on April 13,
2017. The sole purpose of this Amendment No. 1 is to add the conformed signature of David S. Friedkin CPA on the Report of Independent
Registered Public Accounting Firm (the “Report”) in Item 15 of Part IV. The Report had been physically signed by David
S. Friedkin CPA prior to the Original Filing, but the conformed signature was unintentionally omitted from the Original Filing.



No other modifications
or changes have been made to the Original Filing or our financial statements included therein. This Amendment No. 1 does not reflect
the effect of any events subsequent to the Original Filing except for the inclusion of the aforementioned conformed signature.





Table of Contents





|        | PART I                                                                                                       | Page
|------- | ------------------------------------------------------------------------------------------------------------ | ----
|        |                                                                                                              |     
|Item 1  | Business                                                                                                     | 4   
|Item 1A | Risk Factors                                                                                                 | 6   
|Item 1B | Unresolved Staff Comments                                                                                    | 14  
|Item 2  | Properties                                                                                                   | 14  
|Item 3  | Legal Proceedings                                                                                            | 14  
|Item 4  | Mine Safety Disclosures                                                                                      | 15  
|        |                                                                                                              |     
|        | PART II                                                                                                      |     
|        |                                                                                                              |     
|Item 5  | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 15  
|Item 6  | Selected Financial Data                                                                                      | 15  
|Item 7  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 16  
|Item 7A | Quantitative and Qualitative Disclosures About Market Risk                                                   | 21  
|Item 8  | Financial Statements and Supplementary Data                                                                  | 21  
|Item 9  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         | 21  
|Item 9A | Controls and Procedures                                                                                      | 21  
|Item 9B | Other Information                                                                                            | 22  
|        |                                                                                                              |     
|        | PART III                                                                                                     |     
|        |                                                                                                              |     
|Item 10 | Directors, Executive Officers and Corporate Governance                                                       | 22  
|Item 11 | Executive Compensation                                                                                       | 24  
|Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               | 24  
|Item 13 | Certain Relationships and Related Transactions, and Director Independence                                    | 25  
|Item 14 | Principal Accountant Fees and Services                                                                       | 25  
|        |                                                                                                              |     
|        | PART IV                                                                                                      |     
|        |                                                                                                              |     
|Item 15 | Exhibits and Financial Statement Schedules                                                                   | 26  
|        | Signatures                                                                                                   | 27  



2





FORWARD-LOOKING STATEMENTS



This Annual Report on Form 10-K (including
the section regarding Management's Discussion and Analysis and Results of Operation) contains forward-looking statements. These
statements are based on our management’s belief and assumptions and on information currently available to our management.
Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate
to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these forward-looking statements.



Various factors, certain of which are discussed
elsewhere in this document could affect the future results of the Company and could cause
actual results to differ materially from those expressed in such forward-looking statements, including:



| | • | material
                                         adverse changes in general economic conditions or in the markets served by the Company,
                                         including changes in the prices of oil, natural gas, refined products, petrochemical
                                         products and other chemicals;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | changes
                                         in currency exchange rates and currency devaluations;
| | - | ------------------------------------------------------------------------------------------------------

| | • | the
                                         success and the economic efficiency of oil and natural gas exploration, development and
                                         production programs, including, without limitation, those that are not controlled and/or
                                         operated by us
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | uncertainties
                                         about estimates of changes in proven and potential reserves and the capabilities of production
                                         facilities;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | uncertainties
                                         about the ability to control unit costs in exploration, production, refining and marketing
                                         (including refining margins) and chemicals;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | changes
                                         in the current capital expenditure plans of the Company;
| | - | ---------------------------------------------------------------------------------------------------------

| | • | the
                                         ability of the Company to realize anticipated cost savings, synergies and operating efficiencies;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

| | • | the
                                         financial resources of competitors;
| | - | --------------------------------------------------------------------------------

| | • | changes
                                         in laws and regulations, including tax and environmental laws and industrial safety regulations;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------

| | • | the
                                         quality of future opportunities that may be presented to or pursued by the Company;
| | - | --------------------------------------------------------------------------------------------------------------------------------

| | • | the
                                         ability to generate cash flow or obtain financing to fund growth and the cost of such
                                         financing and liquidity conditions in the capital markets generally;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | the
                                         ability to obtain governmental or regulatory approvals;
| | - | ----------------------------------------------------------------------------------------------------

| | • | the
                                         ability to respond to challenges in international markets, including political or economic
                                         conditions (including national and international armed conflict) and trade and regulatory
                                         matters (including actual or proposed sanctions on companies that conduct business in
                                         certain countries);
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | the
                                         ability to complete and integrate appropriate acquisitions, strategic alliances and joint
                                         ventures;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | changes
                                         in the political environment that adversely affect exploration, production licenses and
                                         contractual rights or impose minimum drilling obligations, price controls, nationalization
                                         or expropriation, and regulation of refining and marketing, chemicals and power generating
                                         activities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | the
                                         possibility that other unpredictable events such as labor disputes or industrial accidents
                                         will adversely affect the business of the Company; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | the
                                         risk that the Company will inadequately hedge the price of crude oil or finished products
| | - | --------------------------------------------------------------------------------------------------------------------------------------



In
some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,”
“expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology.
These statements are only predictions. You should not place undue reliance on forward-looking statements, because they involve
known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially
affect results. Factors that may cause actual results to differ materially from current expectations include, among other things,
those listed under “Risk Factors” in this Annual Report on Form 10-K and the reports we file with the SEC. Actual
events or results may vary significantly from those implied or projected by the forward-looking statements due to these risk factors.
No forward-looking statement is a guarantee of future performance. You should read this Annual Report on Form 10-K and the documents
that we reference in this Annual Report on Form 10-K and have filed as exhibits thereto with the Securities and Exchange Commission,
or "SEC," with the understanding that our actual future results and circumstances may be materially different from what
we expect.



Forward-looking statements are made based on
management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update
forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as may be required
by applicable law. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or achievements.

3







Unless the context otherwise requires, the terms “Petrogress,”
“the Company,” “we,” “us,” and “our” in this Report refer to Petrogress, Inc.,
a Delaware corporation and its wholly-owned subsidiaries.







PART I



ITEM 1.  DESCRIPTION OF BUSINESS.



General Business Development



Overview



Petrogress,
Inc. (the “Company” or “Petrogress”) operates a fully integrated oil commodity business, including upstream,
midstream and downstream operations, primarily serving West African and Mediterranean countries. The Company operates primarily
as a holding company and provides its services through three wholly-owned subsidiaries: Petrogres Co. Limited, which provides
management of crude oil purchases and sales; Petronav Carriers LLC, which manages day-to-day operations of the tanker fleet currently
consisting of four vessels; and Petrogress Oil & Gas Energy Inc., which is primarily focused on purchasing interests in oil
fields in Texas and exporting liquefied natural gas.





The Company’s main
operations are managed by an experienced team located in Piraeus, Greece.



Corporate History



We were originally incorporated
in the State of Florida on February 10, 2010 under the name 800 Commerce, Inc. for the purpose of marketing credit card processing
services on behalf of merchant payment processing service providers. Effective March 25, 2016, we changed our name from 800 Commerce,
Inc. to Petrogress, Inc. and effective November 30, 2016, we changed our state of domicile from the State of Florida to the State
of Delaware.



Securities Exchange Agreement



On February 29, 2016, we
entered into a Securities Exchange Agreement (the “SEA”) with Petrogres Co. Limited, a Marshall Islands corporation
(“Petrogres”), and its sole shareholder. Pursuant to the terms of the SEA, the Company acquired 100% of Petrogres and
its affiliated companies. In exchange, the Company issued to the sole shareholder of Petrogres 136,000,000 shares of restricted
common stock, representing 85% of the issued and outstanding shares of the Company’s common stock at the closing of the transaction.
As part of the transaction, the sole shareholder and chief executive officer (“CEO”) of Petrogres, Christos Traios,
was appointed as CEO and as a director of the Company and B. Michael Friedman resigned as an officer and director. In addition,
the Company’s Board of Directors (the “Board”) approved an amendment to the Company’s Articles of Incorporation,
increasing the authorized capital to 490,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred
stock, par value $0.001 per share.



The SEA has been accounted
for as a reverse acquisition and recapitalization of the Company whereby Petrogres effectively became a public company, which has
allowed us to increase our operational efficiency and continue to expand our operations. As a result of this transaction, we acquired
both the assets and operations of Petrogres and its wholly-owned subsidiaries.



Description of Business



We operate primarily as
a holding company for our three wholly-owned subsidiaries: Petrogres, Co. Limited; Petronav Carriers LLC; and Petrogress Oil &
Gas Energy, Inc.



Petrogres Co. Limited,
a Marshall Islands corporation (“Petrogres”), was incorporated in 2009 with the purpose of supplying crude oil and
other oil products in West Africa.



Since its inception, Petrogres
has evolved its business from focusing solely on fleet and tanker ship operations to expand into the oil and gas industry as a
trader and merchant of oil. Over the last five years, Petrogres has strengthened its position in the oil and gas industry by combining
its regional market knowledge with over 25 years of experience to successfully establish both its midstream and downstream operations
to serve markets primarily located in West Africa and the Mediterranean.





4





In 2014, Petrogres entered
into a Joint Venture Agreement (the “JV Agreement”) with Platon Gas Oil Ghana Limited, an oil refinery and importer
of various petroleum products based in Ghana (“Platon”). Pursuant to the terms of the JV Agreement, Platon processes
crude oil and other products while Petrogres sells those products and other raw materials directly to local refineries in Ghana.





Since consummation of the
SEA, Petrogres has successfully negotiated several new operational affiliations and partnerships to strengthen its existing oil
operating platform. In November 2016, Petrogres entered into an alliance agreement with Prometheus Maritime Ltd., a Nigerian corporation
(“PML”), a crude oil and gas trading company (the “Alliance Agreement”). Pursuant to the terms of the Alliance
Agreement, Petrogres and PML agreed to cooperate towards a petroleum project in Nigeria , including the supply and transportation
of oil commodities to various end-buyers throughout West Africa (the “Nigeria Petroleum Project”), with Petrogres acting
as the lead party.



Today, Petrogres operates
as an international merchant of petroleum products specializing in crude oil and refined products trade within West African and
Mediterranean countries, with a focus on the supply and trade of light petroleum fuel oil (“LPFO”), refined oil products
and other petrochemical commodities to local refineries in Ghana. Such products are shipped and delivered to these refineries by
its four beneficially-owned affiliated vessels.



Petronav Carriers
LLC, a Delaware corporation (“Petronav”), was incorporated in March 2016 with the purpose of managing the day-to-day
operations of its four vessels, which are used to transport the Company’s petroleum products within various countries in
West Africa. Petronav is currently exploring opportunities to expand its operations by identifying and acquiring additional vessels
to expand its tanker fleet under management.



In December 2016, Petronav
executed a non-binding memorandum of understanding (the “MOU”) with West Africa Fenders Ltd., a Nigerian company that
provides ship-to-ship services to the oil and shipping industries (“WA Fenders”). The MOU contemplates that Petronav
may purchase a 25% interest in the capital of WA Fenders, subject to execution of definitive agreements and customary closing
conditions. As of the date of this annual report, we are conducting due diligence.



Petrogress Oil &
Gas Energy Inc., a Texas corporation(“Petrogress Energy”), was incorporated in December 2015
and is focused on identifying and acquiring suitable interests in oil fields in Texas to allow for the Company’s expansion
of its operations to include oil refinery production based within the United States and to export liquefied natural gas (“LNG”)
to Mediterranean markets.



Our business structure
affords us with full control of the logistics involved in oil sourcing and the transportation of our products by our affiliated
vessels, which we believe to be a competitive advantage in West African markets. By directly controlling all aspects of our operations,
as opposed to engaging the services of third-parties at potentially higher costs, we are able to keep costs low and thus generate
revenue from a number of different sources.



Competition



International seaborne
transportation of LPFO and the supply of petroleum products is mainly conducted by two types of operators: independent fleet-owning
companies and fleets operated by both private and state owned oil companies. Many oil companies and other oil trading companies
also operate their own vessels and transport oil for themselves and third-party charterers in direct competition with independent
owners and operators. Competition for charters is intense and is based upon price, vessel location, the size, age, condition and
acceptability of the vessel, and the quality and reputation of the vessel’s operator.



The Company will compete
in the transportation of petroleum products with much larger companies that have significantly longer operating histories and are
much better capitalized. Most of these other operators are larger in size and with more vessels either under management or
owned. They may also operate in a larger geographical area than the Company does at present and have significantly more capital
and other resources from which to conduct their operations and as a result, face less risk in their operations.





5





Employees



As of April 6, 2017, we currently have 8 employees
located in Greece, 3 located in Ghana and 1 located in Cyprus, all of which are employed on a full-time basis. Additionally, we
have approximately 75 full-time laborers and crew members that operate our vessels.



ITEM 1A. RISK FACTORS



An investment in our common stock involves
a high degree of risk. You should carefully consider the following information about these risks, together with the other information
contained in this Annual Report on Form 10-K, before investing in our common stock. Our results of operations and financial condition
could be adversely affected by any of these risks, which could result in a decline in the market price of our common stock, causing
you to lose all or part of your investment.



Risks Related to our Business



We are a holding
company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations.



We
are a holding company, and our subsidiaries, which are all wholly-owned by us, may conduct all of our operations and may own operating
assets we may acquire in the future. We have no significant assets other than the equity interests in our wholly-owned subsidiaries.
As a result, our ability to satisfy our financial obligations depends on the ability of our subsidiaries to distribute funds to
us.



Our operating results may fluctuate seasonally.



The market in which we
operate our vessels may be affected by seasonal factors. As a result, historically we have exhibited a fluctuation in the demand
for our products. The containership market is typically stronger in the autumn and winter in anticipation of increased consumption
of consumer products, including various oil commodities, during the holiday peak seasons. In addition, unpredictable weather patterns
during these periods tend to disrupt vessel scheduling and supplies of certain commodities. Thus to the extent that seasonal variations
have the effect of reducing prevailing charter rates, our operating results may be adversely affected.



We generate
all of our revenues in U.S. dollars but may also incur a portion of our expenses in other currencies, and therefore exchange rate
fluctuations could have an adverse impact on our results of operations.



We
generate all of our revenues in U.S. dollars and but may also incur a portion of our expenses in currencies other than the U.S.
dollar. This difference could lead to fluctuations in our net income due to changes in the value of the dollar relative to the
other currencies, in particular the Euro. Expenses incurred in foreign currencies against which the U.S. dollar falls in value
could increase, further decreasing our net income or increasing our net loss and decreasing our cash flows from operations. Any
declines in the value of the U.S. dollar could also lead to higher expenses payable by us.



An increase in operating costs could
adversely affect our cash flows and financial condition.



Vessel operating expenses
include the costs of crew, provisions, deck and engine stores, lubricating oil, insurance, security and maintenance and repairs,
which depend on a variety of factors, many of which are beyond our control. Some of these costs, primarily relating to insurance
and enhanced security measures implemented after September 11, 2001 and as a result of acts of piracy, have been increasing. In
addition, in the event any of our vessels suffer damage, we our insurance may not cover the costs of repair. Such repair and maintenance
costs are difficult to predict with certainty and may be substantial. Increases in any of these costs could have a material adverse
effect on our business, results of operations, cash flows and financial condition.





6





Change to the
price of fuel, or bunkers, may adversely affect profits.



An
increase in the price of fuel beyond our expectations may adversely affect our future profitability. The price and supply of fuel
is unpredictable and fluctuates based on events outside our control, including geo-political developments, supply of and demand
for oil, actions by members of the Organization of the Petroleum Exporting Countries (OPEC) and other oil and gas producers, war
and unrest in oil producing countries and regions, regional production patterns and environmental concerns and regulations. Further,
despite the recent low fuel prices, fuel may become much more expensive in the future, which may reduce the potential profitability
and competitiveness of our business compared to other forms of transportation, such as pipelines. Alternatively, a prolonged downturn
in oil prices may cause oil companies to cut down production which could negatively impact market demand for global transportation
of petroleum products. Changes in the price of fuel may adversely affect our profitability.





The shipping industry is inherently risky
and we may not have adequate insurance to compensate us or to compensate third parties if we damage or lose our vessels.



There
are a number of risks associated with the operation of ocean-going vessels, including mechanical failure, collision, human error,
war, terrorism, piracy, property loss, cargo loss or damage and business interruption due to political circumstances in foreign
countries, hostilities and labor strikes. Any of these events may result in loss of revenues, increased costs and decreased cash
flows. In addition, the operation of any vessel is subject to the inherent possibility of marine disaster, including oil spills
and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade.



Changing economic, regulatory
and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks
on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These hazards may result in death or injury to
persons, loss of revenues or property, environmental damage, higher insurance rates, damage to our customer relationships, market
disruptions, delay or rerouting. In addition, more stringent environmental regulations have
led in the past to increased costs for, and in the future may result in the lack of availability of, protection and indemnity insurance
against risks of environmental damage or pollution. Any uninsured or underinsured loss could harm our business, results of operations,
cash flows and financial condition. In addition, any insurance we may acquire may be voidable by the insurers as a result of certain
of our actions, such as ships we may acquire failing to maintain certification with applicable maritime self-regulatory organizations.
Further, we cannot assure you that insurance policies we may have will cover all losses that we may incur, or that disputes over
insurance claims will not arise with our future insurance carriers. Any claims covered by insurance would likely be subject to
deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could
be material. In addition, insurance policies that we may have may be subject to limitations and exclusions, which may increase
our costs or lower our revenues in the future, thereby possibly having a material adverse effect on our business, results of operations,
cash flows and financial condition.



In particular, the operation
of tankers has unique operational risks associated with the transportation of oil. An oil spill may cause significant environmental
damage, and the associated costs could exceed the insurance coverage available to us. Compared to other types of vessels, tankers
are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision, or other cause, due
to the high inflammability and high volume of the oil transported in tankers.



We carry insurance to protect
against most of the accident-related risks involved in the conduct of our business. We currently maintain $25,000,000 in coverage
for each of our vessels for liability for spillage or leakage of oil or pollution, and also carry insurance covering lost revenue
resulting from vessel off-hire for all of our operating vessels. Nonetheless, risks may arise against which we are not adequately
insured. For example, a catastrophic spill could exceed our insurance coverage and have a material adverse effect on our financial
condition. In addition, we may not be able to procure adequate insurance coverage at commercially reasonable rates in the future
and we cannot guarantee that any particular claim will be paid. In the past, new and stricter environmental regulations have led
to higher costs for insurance covering environmental damage or pollution, and new regulations could lead to similar increases or
even make this type of insurance unavailable. Furthermore, even if insurance coverage is adequate to cover our losses, we may not
be able to timely obtain a replacement ship in the event of a loss. We may also be subject to calls, or premiums, in amounts based
not only on our own claim records but also the claim records of all other members of the protection and indemnity associations
through which we receive indemnity insurance coverage for tort liability. In addition, our protection and indemnity associations
may not have enough resources to cover our insurance claims. Our payment of these calls could result in significant expenses to
us which could reduce our cash flows and place strains on our liquidity and capital resources.





7





Our results of operations could be affected
by natural events in the locations in which our customers operate.



Many of our customers have
operations in locations that are subject to natural disasters, such as severe weather and geological events, which could disrupt
the operations of those customers and suppliers as well as our operations. Such geological events can cause significant damage
and can adversely affect the infrastructure and economy of regions subject to such events, and could cause our customers located
in such regions to experience shutdowns or otherwise negatively impact their operations. Upon such an event, some or all of those
customers may reduce their orders for crude oil, which could adversely affect our revenue and results of operations. In addition
to any negative direct economic effects of such natural disasters on the economy of the affected areas and on our customers and
suppliers located in such regions, economic conditions in such regions could also adversely affect broader regional and global
economic conditions. The degree to which natural disasters will adversely affect regional and global economies is uncertain at
this time. However, if these events cause a decrease in demand for crude oil, our financial condition and operations could be adversely
affected.





We are subject to international safety
regulations and requirements imposed by classification societies and the failure to comply with these regulations may subject us
to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain
ports.



The operation of our vessels
is affected by the requirements set forth in the United Nations’ International Maritime Organization’s International
Management Code for the Safe Operation of Ships and Pollution Prevention, or “ISM Code.” The ISM Code requires ship
owners, ship managers and bareboat charterers to develop and maintain an extensive “Safety Management System” that
includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation
and describing procedures for dealing with emergencies. We expect that any vessels that we acquire in the future will be ISM Code-certified
when delivered to us. The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject it to increased
liability, may invalidate existing insurance or decrease available insurance coverage for the affected vessels and may result in
a denial of access to, or detention in, certain ports, including United States and European Union ports.



In addition, the hull and
machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification
society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of
registry of the vessel and the Safety of Life at Sea Convention. If a vessel does not maintain its class and/or fails any annual
survey, intermediate survey or special survey, the vessel will be unable to trade between ports and will be unemployable, which
will negatively impact our revenues and results from operations.



The risks associated with older vessels
could adversely affect our operations.



In general, the costs to
maintain a vessel in good operating condition increase as the vessel ages. As of March 15, 2016, 4 of the 4 operating vessels
we own were built prior to 1995. Due to improvements in engine technology, older vessels typically are less fuel-efficient than
more recently constructed vessels. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable
to charterers.



Governmental regulations,
safety or other equipment standards related to the age of tankers may require expenditures for alterations or the addition of new
equipment to our vessels, and may restrict the type of activities in which our vessels may engage. There is no assurance that,
as our vessels age, market conditions will justify any required expenditures or enable us to operate our vessels profitably during
the remainder of their useful lives.



If we do not set aside
funds and are unable to borrow or raise funds for vessel replacement, we will be unable to replace the vessels in our fleet upon
the expiration of their remaining useful lives, which we estimate to be 10 years from their build dates. Our cash flows and
income are dependent on the revenues earned by our vessels. If we are unable to replace the vessels in our fleet upon the expiration
of their useful lives, our revenue will decline and our business, results of operations, financial condition, and cash flow would
be adversely affected.





8





Consolidation and governmental regulation
of suppliers may increase the cost of obtaining supplies or restrict our ability to obtain needed supplies, which may have a material
adverse effect on our results of operations and financial condition.



We rely on third-parties
to provide supplies and services necessary for our operations, including brokers, equipment suppliers, caterers and machinery suppliers.
Various mergers have reduced the number of available suppliers, resulting in fewer alternatives for sourcing key supplies. With
respect to certain items, we are generally dependent upon the original equipment manufacturer for repair and replacement of the
item or its spare parts. Such consolidation may result in a shortage of supplies and services thereby increasing the cost of supplies
and/or potentially inhibiting the ability of suppliers to deliver on time. These cost increases or delays could have a material
adverse effect on our results of operations and result in downtime, and delays in the repair and maintenance of our vessels.



We could be adversely affected by violations
of the U.S. Foreign Corrupt Practices Act, U.K. Bribery Act, and other applicable worldwide anti-corruption laws.





The U.S. Foreign Corrupt
Practices Act, or “FCPA,” and other applicable worldwide anti-corruption laws generally prohibit companies and their
intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. These
laws include the U.K. Bribery Act which is broader in scope than the FCPA, as it contains no facilitating payments exception. We
charter our vessels into some jurisdictions that international corruption monitoring groups have identified as having high levels
of corruption. Our activities create the risk of unauthorized payments or offers of payments by one of our employees or agents
that could be in violation of the FCPA or other applicable anti-corruption laws. Although we have policies, procedures and internal
controls in place to monitor compliance, we cannot assure that our policies and procedures will protect us from governmental investigations
or inquiries surrounding actions of our employees or agents. If we are found to be liable for violations of the FCPA or other applicable
anti-corruption laws (either due to our own acts or our inadvertence, or due to the acts or inadvertence of others), we could suffer
from civil and criminal penalties or other sanctions.



We could be negatively impacted by future
changes in applicable tax laws, or our inability to take advantage of favorable tax regimes.



We may be subject to income
or non-income taxes in various jurisdictions, including those in which we transact business, own property or reside. We may be
required to file tax returns in some or all of those jurisdictions. We may be required to pay non U.S. taxes on dispositions of
non U.S. property, or operations involving non U.S. property may give rise to non U.S. income or other tax liabilities in amounts
that could be substantial.



Our tax position could
be adversely impacted by changes in tax laws, tax treaties or tax regulations or the interpretation or enforcement thereof by any
tax authority. The various tax regimes to which we are currently subject result in a relatively low effective tax rate on our worldwide
income. These tax regimes, however, are subject to change, possibly with retroactive effect. Moreover, we may become subject to
new tax regimes and may be unable to take advantage of favorable tax provisions afforded by current or future law. For example,
there have been legislative proposals that, if enacted, could change the circumstances under which we would be treated as a U.S.
person for U.S. federal income tax purposes, which could materially and adversely affect our effective tax rate and cash tax position
and require us to take action, at potentially significant expense, to seek to preserve our effective tax rate and cash tax position.
We cannot predict the outcome of any specific legislative proposals.



We may be subject to litigation that,
if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on us.



We may be, from time to
time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury
claims, environmental claims or proceedings, asbestos and other toxic tort claims, employment matters, governmental claims for
taxes or duties, securities litigation, and other litigation that arises in the ordinary course of our business. Although we intend
to defend these matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter,
and the ultimate outcome of any litigation or the potential costs to resolve them may have a material adverse effect on us. Insurance
may not be applicable or sufficient in all cases and/or insurers may not remain solvent, which may have a material adverse effect
on our financial condition.





9





Risks Relating to Ownership of Our Common
Stock



We are an “emerging growth company,”
and the reduced disclosure requirements applicable to “emerging growth companies” may make our common stock less attractive
to investors.



We
qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS
Act. As an emerging growth company, we intend to take advantage of specified reduced disclosure and other requirements that are
otherwise applicable generally to public companies. These provisions include:





|• | allowance to provide only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly Operations” disclosure;reduced “Management’s Discussion and Analysis of Financial Condition and Results of
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | reduced disclosure about our executive compensation arrangements;                                                                                                                                                                                                     
|• | no non-binding advisory votes on executive compensation or golden parachute arrangements; and                                                                                                                                                                         
|• | exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.                                                                                                                                                







We
may take advantageof these provisions for up to five years or such earlier time
that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest
of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) the last day of
our fiscal year following the fifth anniversary of the date of the completion of our initial public offering (our “IPO”);
(iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the
date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission. We have
taken advantage of reduced reporting requirements in this report. Accordingly, the information contained herein may be different
than the information you receive from other public companies in which you have beneficial ownership. In addition, we have elected
to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b)
of the Exchange Act. As a result, our financial statements may not be comparable to those of companies that comply with public
company effective dates.



We cannot predict whether
investors will find investing in our common stock to be less attractive to the extent we rely on the exemptions available to emerging
growth companies. If some investors find our common stock less attractive as a result, there may be a less active trading market
for our common stock and our stock price may be more volatile.



Notwithstanding the above,
we are also currently a “smaller reporting company,” meaning that we are not an investment company, an asset-backed
issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less
than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that
we are still considered a “smaller reporting company,” at such time as we cease being an “emerging growth company,”
the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were
not considered either an “emerging growth company,” or a “smaller reporting company.” Specifically, similar
to “emerging growth companies,” “smaller reporting companies” are able to provide simplified executive
compensation disclosures in their filings, are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring
that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over
financial reporting, , and have certain other decreased disclosure obligations in their SEC filings, including, among other things,
only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings
due to our status as an “emerging growth company” or “smaller reporting company” may make it harder for
investors to analyze the Company’s results of operations and financial prospects.



Because we have elected
to defer compliance with new or revised accounting standards, our financial statement disclosure may not be comparable to similar
companies.



We have elected to use
the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.
This allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and
private companies until those standards apply to private companies. As a result of our election, our financial statements may not
be comparable to companies that comply with public company effective dates.





10





The rights of the holders of common stock may be impaired
by the potential issuance of preferred stock.



Our board of directors has the right, without stockholder approval,
to issue preferred stock with voting, dividend, conversion, liquidation or other rights which could adversely affect the voting
power and equity interest of the holders of common stock, which could be issued with the right to more than one vote per share,
and could be utilized as a method of discouraging, delaying or preventing a change of control. The possible negative impact on
takeover attempts could adversely affect the price of our common stock. Although we have no present intention to issue any shares
of preferred stock or to create any series of preferred stock, we may issue such shares in the future.



We will incur increased costs as a result
of being a public company. These costs will adversely impact our results of operations.



As a public company, we
incur significant legal, accounting and other expenses that a private company does not incur. We estimate these costs to be approximately
$200,000 annually and include the costs associated with having our financial statements prepared, audited and filed with the Securities
and Exchange Commission (“SEC”) via EDGAR (the Electronic Data Gathering, Analysis, and Retrieval system) and XBRL
(eXtensible Business Reporting Language) costs. In addition, we have costs associated with corporate counsel and our transfer agent.
The Sarbanes-Oxley Act of 2002 (SOX) and related rules resulted in an increase in costs of maintaining compliance with the public
reporting requirements, as well as making it more difficult and more expensive for us to obtain directors' and officers' liability
insurance. These added costs will delay the time in which we may expect to achieve profitability, if at all.





If you invest in our stock, your investment
may be disadvantaged by future funding, if we are able to obtain it.



To the extent we obtain
equity funding by issuance of convertible securities or common stock, or common stock purchase warrants in connection with either
type of funding, you may suffer significant dilution in percentage of ownership and, if such issuances are below the then value
of stockholder equity, in stockholder equity per share. Future increases in the number of our shares outstanding will have a negative
impact on earnings per share; increasing the earnings we must achieve to sustain higher prices for our common stock. In addition,
any debt financing we may secure could involve restrictive covenants relating to our capital raising activities and other financial
and operational matters, which may make it more difficult for us to obtain additional capital with which to pursue our business
plan, and to pay dividends. You have no assurance we will be able to obtain any additional financing on terms favorable to us,
if at all.



The majority of our common stock is beneficially
owned by management, which means other stockholders will have little influence over our management.



Currently, our CEO and
sole Director holds approximately 81.5% of our common stock. Each issued and outstanding share of common stock is entitled to one
vote on each nominee for a directorship and on other matters presented to stockholders for approval. Our Certificate of Incorporation
does not authorize cumulative voting for the election of directors. Any person or group who controls or can obtain more than fifty
percent of the votes cast for the election of each director will control the election of all directors and other stockholders will
not be able to elect any directors or exert any influence over management decisions. Removal of a director for any reason requires
a majority vote of our issued and outstanding shares of common stock.



U.S. investors may experience difficulties
in attempting to effect service of process and to enforce judgments based upon U.S. federal securities laws against the company
and its non-U.S. resident officer and sole director.



Our CEO and sole Director,
Christos Traios, is not resident of the United States. Consequently, it may be difficult for investors to effect service of process
on Mr. Traios in the United States and to enforce in the United States judgments obtained in United States courts against Mr. Traios
based on the civil liability provisions of the United States securities laws. Since substantially all of our tangible assets are
located in Europe and Africa, it may be difficult or impossible for U.S. investors to collect a judgment against us. Further, any
judgment obtained in the United States against us may not be enforceable in those foreign jurisdictions.





11





We have assessed the effectiveness of
our disclosure controls and procedures and our internal control over financial reporting and management concluded they are not
effective. If there is a material weakness in either, there are no assurances that our financial statements will not contain errors
which could require us to restate our financial statements.



The Sarbanes-Oxley Act
of 2002 (SOX) requires public companies to establish disclosure controls and procedures and controls over financial reporting and
to periodically assess the effectiveness of the controls and procedures. We are required to maintain “disclosure controls
and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 and to report on a quarterly
basis, in our quarterly and annual reports which we file with the SEC, our management’s conclusion regarding the effectiveness
of our disclosure controls and procedures. As of December 31, 2016, we conducted an evaluation, under the supervision and with
the participation of our Chief Executive Officer and Chief Financial Officer of our disclosure controls and procedures (as defined
in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation our Chief Executive Officer and Chief Financial
Officer concluded that, at December 31, 2016, our disclosure controls and procedures are not effective.



There is a more than remote
likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not
be prevented or detected.



We are not subject
to certain corporate governance requirements applicable to listed companies.



Because
our securities are not listed on a national securities exchange, we are not subject to corporate governance requirements that are
applicable to listed companies. For instance, we are not required to have a majority of independent directors, a separate audit
committee comprised entirely of independent directors or a separate compensation committee comprised entirely of independent directors.
In addition, we are not required to have our board nominees selected, or recommended for the board’s selection, either by
a nominating committee comprised entirely of independent directors or by a majority of our independent directors. Accordingly,
our stockholders may not have the same protections afforded to stockholders of companies that are subject to the corporate governance
requirements applicable to listed companies.





The price of our common stock may be
volatile as a result of factors that are beyond our control and if the price of our common stock fluctuates, you could lose a significant
part of your investment.



The
trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors,
some of which are beyond our control. The stock market in general has experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of companies with securities traded in those markets. Broad
market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual
operating performance. All of these factors could adversely affect your ability to sell your shares of common stock or, if you
are able to sell your shares, to sell your shares at a price that you determine to be fair or favorable.



Our Common Stock
is categorized as “penny stock,” which may make it more difficult for investors to sell their shares of Common Stock
due to suitability requirements.



Our
common stock is categorized as “penny stock”. The SEC has adopted Rule 15g-9 which generally defines “penny stock”
to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. The price of our common stock is significantly less than $5.00 per share, and is therefore
considered “penny stock.” This designation imposes additional sales practice requirements on broker-dealers who sell
to persons other than established customers and accredited investors. The penny stock rules require a broker-dealer buying our
securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine
that the purchaser is reasonably suitable to purchase the securities given the increased risks generally inherent in penny stocks.
These rules may restrict the ability and/or willingness of brokers or dealers to buy or sell our common stock, either directly
or on behalf of their clients, may discourage potential stockholders from purchasing our common stock, or may adversely affect
the ability of stockholders to sell their shares.





12





Financial Industry
Regulatory Authority, Inc. (“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy
and sell our Common Stock, which could depress the price of our Common Stock.



In
addition to the “penny stock” rules described above, the FINRA has adopted rules that require a broker-dealer to have
reasonable grounds for believing that the investment is suitable for that customer before recommending an investment to a customer.
Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will
not be suitable for at least some customers. Thus, the FINRA requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy and sell our shares of common stock, have an adverse
effect on the market for our shares of common stock, and thereby depress our price per share of common stock.



We have raised capital through the use
of convertible debt instruments that causes substantial dilution to our stockholders.



Prior to the consummation
of the Securities Exchange Agreement on February 29, 2016, it was difficult for us to raise capital or find adequate sources of
financing due to the size of our company, operations, and “penny stock” status. As a result, we were forced to raise
capital through the issuance of convertible notes and other debt instruments. These debt instruments carry favorable conversion
terms to their holders of up to 50% discounts to the market price of our common stock on conversion and in some cases provide for
the immediate sale of our securities into the open market. Accordingly, this has caused and will continue to cause dilution to
our stockholders in 2016 and may for the foreseeable future. As of December 31, 2016, we had approximately $44,887 in convertible
debt and potential convertible debt outstanding. This convertible debt balance as well as additional convertible debt we incur
in the future will cause substantial dilution to our stockholders.



There is a limited trading market for
our common stock and there is no guarantee of a liquid public market for you to resell our common shares.



Our common stock trades
under the symbol “PGAS” on the OTC Pink of the OTC Markets. OTC Pink is often highly illiquid, in part because it does
not have a national quotation system by which potential investors can follow the market price of shares except through information
received and generated by a limited number of broker-dealers that make markets in particular stocks. There is a greater chance
of volatility for securities that are quoted on the OTC Pink compared to a national exchange or quotation system. This volatility
may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative
supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience
high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur,
have a negative effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair
price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market
for our common stock improves.



Because we do not intend to pay any cash
dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.



We intend to retain any
future earnings to finance the development and expansion of our business. We do not anticipate paying cash dividends on our common
stock in the foreseeable future. Declaring and paying future dividends, if any, will be determined by our Board, based upon earnings,
financial condition, capital resources, capital requirements, restrictions in our Certificate of Incorporation, contractual restrictions,
and such other factors as our Board in its sole discretion deems relevant. There is no assurance that we will pay any dividends
in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless we pay
dividends, our stockholders will not be able to receive a return on their shares unless they sell them.





13





The market price for our common shares
is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float.



The market for our common
shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable
to a number of factors. First, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity,
the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares
in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our
common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those
sales without adverse impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited
operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence
of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of
negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than
would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market
price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the
prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their
current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will
have on the prevailing market price.



Stockholders should be
aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud
and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related
to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading
press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale
dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with
the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that
have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of
the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.



ITEM 1B. UNRESOLVED STAFF COMMENTS



Not required for a smaller reporting company.



ITEM 2. PROPERTIES.



Petrogres leases office
space in Piraeus, Greece for monthly rent of €2,500 (approximately USD$2,658) (the “Piraeus Lease”). The Piraeus
Lease expires on May 31, 2018. We believe that this office space is adequate for Petrogres’ current operations.



Effective June 13, 2016,
the Company entered into a thirteen (13) month lease for a corporate apartment in New York City, to be used by the Company’s
CEO during his travel to New York. Mr. Traios spends approximately 35% of his time in New York on business matters. The monthly
lease is for $4,575 and expires July 12, 2017.



Effective October 1, 2016, the Company entered
into a one year Office Services Agreement for office space and other services for a total base monthly fee of $2,800. The Company
utilizes the New York office space for administrative purposes.



ITEM 3.  LEGAL PROCEEDINGS.



No officer, director, or
persons nominated for these positions, and no promoter or significant employee of our corporation has been involved in legal proceedings
that would be material to an evaluation of our management. We are not aware of any pending or threatened legal proceedings which
involve the Company, its directors or officers.





14





ITEM 4.  MINE SAFETY DISCLOSURES



Not applicable.





PART II



ITEM 5.  MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.



(a) Market Information



Our common stock is quoted on the OTC Pink
under the symbol “PGAS”. The following table sets forth for the periods indicated the high and low bid quotations for
our common stock.  These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown,
or commission and may not represent actual transactions.



|Period                                               | High  | Low  
|---------------------------------------------------- | ----- | -----
|Fiscal Year 2016                                     |       |      
|First Quarter (January 1, 2016 – March 31, 2016)     | $0.05 | $0.01
|Second Quarter (April 1, 2016 – June 30, 2016)       | $0.09 | $0.01
|Third Quarter (July 1, 2016 – September 30, 2016)    | $0.05 | $0.01
|Fourth Quarter (October 1, 2016 – December 31,2016)  | $0.07 | $0.01
|                                                     |       |      
|Fiscal Year 2015                                     |       |      
|First Quarter (January 1, 2015 – March 31, 2015)     | $0.05 | $0.01
|Second Quarter (April 1, 2015 – June 30, 2015)       | $0.04 | $0.02
|Third Quarter (July 1, 2015 - September 30, 2015)    | $0.02 | $0.01
|Fourth Quarter (October 1, 2015 – December 31, 2015) | $0.03 | $0.01



(b) Holders.



As of April 6, 2017, we
had 52 holders of record. One holder of record is CEDE & CO., a nominee of The Depository Trust Company, which held 23,329,240
shares of our common stock as of April 6, 2017. We estimate that there are over 9,000 stockholders who hold their shares of common
stock in street name.



(c) Dividends



Petrogress, Inc. did not
declare any cash dividends for the year ended December 31, 2016. Our Board of Directors does not intend to distribute any
cash dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of
the Board of Directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition,
operating and capital requirements, and other factors as the Board of Directors considers relevant. There is no assurance that
future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.



(d) Securities authorized for issuance under
equity compensation plans



None.



Recent Sales of Unregistered Equity Securities



None.



ITEM 6.  SELECTED FINANCIAL DATA.



Not required for a smaller
reporting company.





15





ITEM 7.  MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OR PLAN OF OPERATION.



The following is management’s discussion
and analysis of certain significant factors that have affected our financial position and operating results during the periods
included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management.
This report includes forward-looking statements. Generally, the words “believes,” “anticipates,” “may,”
“will,” “should,” “expect,” “intend,” “estimate,” “continue,”
and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports
or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes
to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak
only as of the date hereof. We undertake no obligation to update these forward-looking statements, except as may be required under
applicable law.



The following discussion
and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and
notes thereto for the years ended December 31, 2016 and 2015.



(a) Liquidity
and Capital Resources



For
the year ended December 31, 2016, net cash provided by operating activities was $730,369 compared to $1,335,649 for the year ended
December 31, 2015. The Company had net income of $223,144 for the year ended December 31, 2016 compared to $1,082,203 for the year
ended December 31, 2015. Cash flows for the year ended December 31, 2016 was a result of the net income, depreciation expense of
$676,328, non-cash interest expense of $48,974 reduced by the change in the fair value of derivative liabilities of $152,169 and
the net change in operating assets and liabilities of $66,426. Cash flows for the year ended
December 31, 2015 was a result of the net income and depreciation expense of $663,500 offset by the change in operating assets
and liabilities of $390,054.



During the year ended December
31, 2016, cash used in investing activities was primarily a result of capital improvements of vessels and other property and equipment
purchases of $450,591. There were no investing activities for the year ended December 31, 2015.



Prior to the SEA in February
2016, Petrogres Co. Limited paid a dividend of $1,800,000 to its sole shareholder.



For the year ended December
31, 2016, cash and cash equivalents decreased by $1,520,222 compared to an increase of $1,355,649 for the year ended December 31,
2015. Ending cash and cash equivalents at December 31, 2016 was $362,083 compared to $31,882,305 at December 31, 2015.



Since the reverse
acquisition of Petrogres on February 29, 2016, the Company’s principal sources of cash are net cash provided by operating
activities, which includes the sale and shipment of petroleum products. Our need for capital resources is driven by our expansion
plans, ongoing maintenance of our vessels and support of our operational expenses and corporate overhead and infrastructure. Based
on our current plan, we believe our expected cash flows from operations will be sufficient to finance our present activities and
capital expenditures for at least the next ten months. Our intention to expand our operations or increase the oil sales or go into
new projects-operations will be subject to extra financing support through individual sources.



Our liquidity may be adversely affected
as described in “Risks Related to our Business” as described in Item 1A. “Risk Factors.”





16





(b) Results of Operations



Overview



We operate a fully integrated
oil commodity business, including upstream, midstream and downstream operations, primarily serving West African and Mediterranean
countries. The Company operates primarily as a holding company and provides its services through three wholly-owned subsidiaries:
Petrogres Co. Ltd., which provides management of crude oil purchases and sales; Petronav Carriers LLC, which manages day-to-day
operations of the tanker fleet currently consisting of four vessels; and Petrogress Oil & Gas Energy Inc., which is primarily
focused on purchasing interests in oil fields in Texas and exporting liquefied natural gas.



The Company’s main
operations are managed by an experienced team, located in Piraeus, Greece.



Results of operations for the year ended
December 31, 2016 vs. December 31, 2015



Net Sales



Net sales for the year
ended December 31, 2016 and 2015 was $18,075,328 and $21,579,013, respectively, a decrease of $3,503,685 or approximately 16.2%.
Sales were comprised of the following:



|                      |  | Year ended December 31,
|--------------------- |  | -----------------------
|                      |  | 2016                   
|Crude oil gross sales |  | $                      
|Gas oil gross sales   |  |                        
|Other                 |  |                        
|Total                 |  | $                      



The decrease
in sales resulted primarily from the increase in dry-docking expenses incurred as a result of the repair and maintenance of two
of our vessels, which consequently caused a reduction in shipments and deliveries of our products.



Cost of Sales



Cost of goods sold for
the year ended December 31, 2016 and 2015, were $12,497,214 and $15,705,806, respectively, a decrease of $3,208,592 or approximately
20.4%, and were comprised of the following:



|                            |  | Year ended December 31,
|--------------------------- |  | -----------------------
|                            |  | 2016                   
|Oil purchase costs          |  | $                      
|Shipping and handling costs |  |                        
|Other                       |  |                        
|Total                       |  | $                      



Operating Expenses



Total operating expenses
for the year ended December 31, 2016 and 2015 were $5,402,265 and $4,709,548, respectively, an increase of $692,716, or approximately
14.7%. The increase in operating expenses is primarily due to increased administrative, US travel, legal and accounting expenses
in the aggregate of approximately $524,000 as a result of the merger transaction and public company expenses. This increase was
offset by lower fleet operating expenses due to the decrease in shipment of barrels from the 2015 period compared to 2016 period.





17





Net Income



Net income for the year
ended December 31, 2016 was $223,143 compared to $1,082,203 for the ended December 31, 2015 as a result of the decrease in gross
profit and increase in operating costs.



Off-Balance Sheet Arrangements



There are no off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is
material to investors.



Critical Accounting Policies



Emerging Growth Company



We qualify as an “emerging
growth company” under the 2012 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 accounting principles generally accepted in the United States of America 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.



Cash and Cash Equivalents



The Company considers all
highly liquid investments with an original term of three months or less to be cash equivalents.



Accounts Receivable



The Company records accounts
receivable from amounts due from its processors. The Company charges certain merchants for processing services at a bundled rate
based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are charged for each transaction.
The Company charges other merchant customers a flat fee per transaction, and may also charge miscellaneous fees to customers, including
fees for returns, monthly minimums, and other miscellaneous services. All the charges and collections thereon flow through processors
who then remit the fee due the Company within the month following the actual charges.



Marketable Securities



The Company classifies
its 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 stockholders’ equity. Realized gains and losses on available-for-sale securities are included
in net earnings in the period earned or incurred.



Property and Equipment



Fixed assets consisted of the following as of
December 31, 2016 and 2015:



18







|                               |  | 2016 |            | 2015
|------------------------------ |  | ---- | ---------- | ----
|Vessels                        |  | $    | 9,999,380  |     
|Furniture and equipment        |  |      | 89,328     |     
|                               |  |      | 10,088,708 |     
|Less: accumulated depreciation |  |      | (4,169,641 | )   
|                               |  | $    | 5,919,067  |     





Property and equipment
are stated at cost, and depreciation is provided by use of straight-line methods over the estimated useful lives of the assets.
The estimated useful lives of property and equipment are as follows:



|Vessels                        | 10 years
|------------------------------ | --------
|Office equipment and furniture | 10 years
|Computer hardware              | 5 years 



Revenue Recognition



The Company recognizes
revenue in accordance with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are met (1) persuasive
evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and
(4) collectability is reasonably assured. The Company recognizes revenue during the month in which commissions are earned.



Fair Value of Financial Instruments



Pursuant
to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based
on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s
categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:



| | • | Level
                                         1 applies to assets or liabilities for which there are quoted prices in active markets
                                         for identical assets or liabilities.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Level
                                         2 applies to assets or liabilities for which there are inputs other than quoted prices
                                         that are observable for the asset or liability such as quoted prices for similar assets
                                         or liabilities in active markets; quoted prices for identical assets or liabilities in
                                         markets with insufficient volume or infrequent transactions (less active markets); or
                                         model-derived valuations in which significant inputs are observable or can be derived
                                         principally from, or corroborated by, observable market data.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Level
                                         3 applies to assets or liabilities for which there are unobservable inputs to the valuation
                                         methodology that are significant to the measurement of the fair value of the assets or
                                         liabilities.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.



The Company’s financial
instruments consist principally of marketable securities, the fair value of which is determined based on “Level 1”
inputs. “Level 1” inputs consist of quoted prices in active markets for identical assets. The recorded values of all
other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.



The Company’s derivative
liability resulting from the issuance of convertible debt is adjusted to fair value based on recent sales of the underlying common
stock and the use of an option pricing model, which are consistent with “Level 3” inputs. See Note 6.





19





The following table represents
the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2016 for each
fair value hierarchy level:



|December 31, 2016 |  | Derivative Liability |        | Marketable Securities |  | Total
|----------------- |  | -------------------- | ------ | --------------------- |  | -----
|Level I           |  | $                    | —      |                       |  | $    
|Level II          |  | $                    | —      |                       |  | $    
|Level III         |  | $                    | 65,499 |                       |  | $    



Income Taxes



The Company accounts for
income taxes in accordance with ASC 740-10, Income Taxes. The Company recognizes 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. The Company records
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. The Company classifies interest and penalties as a component of interest and other expenses. To date, the Company has not
been assessed, nor has the Company paid, any interest or penalties.



The Company measures and
records 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. The Company’s tax years subsequent to 2010 remain subject
to examination by federal and state tax jurisdictions.



Earnings (Loss) Per Share



The Company reports earnings
(loss) 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 net income by the weighted-average
number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period.
Potentially dilutive securities for the year ended December 31, 2016 including outstanding convertible debt that is convertible
into approximately 2,380,266 shares of common stock were not included in the calculation of diluted loss per share because their
impact was anti-dilutive.



Accounting for Stock-Based Compensation



The Company accounts 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 the Company’s common stock and recognized as expense during the
period in which services are provided.



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.





20





Comprehensive Income



The Company has 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 the Company’s comprehensive gain consist of unrealized gains on available-for-sale
securities.





ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK



Not required for smaller
reporting companies.



ITEM 8.  FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA



See Index to Financial
Statements and Financial Statement Schedules appearing on pages F-1 to F-12 of this annual report on Form 10-K.



ITEM 9.  CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.



None.



ITEM 9A. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures



A review and evaluation
was performed by the Company's management, including the Company's Principal Executive Officer and Chief Financial Officer (the
“CFO”), as of the end of the period covered by this annual report on Form 10-K, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures. Based on that review and evaluation, the Principal Executive
Officer and CFO have concluded that as of December 31, 2016 disclosure controls and procedures were not effective at ensuring that
the material information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported as
required in the application of SEC rules and forms.



Management’s Report on Internal Controls
over Financial Reporting



Our management is responsible
for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a set of processes designed by, or under the
supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP and includes those policies and procedures that:



|• | Pertain
    to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and disposition of
    our assets;                                                                                                                                       
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|• | Provide
    reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance
    with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and
    directors; and
|• | Provide
    reasonableassurance regarding prevention or timely detection of unauthorized acquisition,
    use or disposition of our assets that could have a material effect on the financial statements.                                                                                   



Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system
of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives
of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.





21





Our Principal Executive
Officer and Chief Financial Officer have evaluated the effectiveness of our internal control over financial reporting as described
in Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report based upon criteria established
in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) (2013). As a result of this evaluation, we concluded that our internal control
over financial reporting was not effective as of December 31, 2016 as described below.



We assessed the effectiveness
of the Company’s internal control over financial reporting as of evaluation date and identified the following material weaknesses:





Insufficient Resources:We have
an inadequate number of personnel with requisite expertise in the key functional areas of finance and accounting.



Inadequate Segregation of Duties: We
have an inadequate number of personnel to properly implement control procedures.



Lack of Audit Committee:We do
not have a functioning audit committee, resulting in lack of independent oversight in the establishment and monitoring of required
internal controls and procedures.



We are committed to improving
the internal controls and (1) will consider using third party specialists to address shortfalls in staffing and to assist us with
accounting and finance responsibilities, (2) will increase the frequency of independent reconciliations of significant accounts
which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) may consider appointing additional
outside directors and audit committee members in the future.



We have discussed the material
weakness noted above with our independent registered public accounting firm. Due to the nature of these material weaknesses, there
is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could
occur that would not be prevented or detected.



This Annual Report does
not include an attestation report of our independent registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant
to the rules of the SEC that permit us to provide only management’s report in this annual report.



Changes in Internal Control over Financial
Reporting



During the quarter ended
December 31, 2016, there have been no changes in the Company’s internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.



ITEM 9B.  OTHER INFORMATION



None.





PART III



ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS
AND CORPORATE GOVERNANCE



Identification of directors and executive
officers



Set forth below is information
regarding the Company’s current directors and executive officers. There are no family relationships between any of our directors
or executive officers. The directors are elected annually by stockholders. The executive officers serve at the pleasure of the
Board of Directors:



|Name            |  | Age |  | Positions Held                                                          
|--------------- |  | --- |  | ------------------------------------------------------------------------
|Christos Traios |  | 56  |  | President, Chief Executive Officer, Chief Financial Officer and Director
|John Moraites   |  | 65  |  | Executive Vice President and Secretary                                  







22





Christos Traios,President,
Chief Executive Officer, Chief Financial Officer and Director. Mr. Traios became our President, Chief Executive Officer, Chief
Financial Officer and Director on February 29, 2016. Mr. Traios has been in the maritime industry for more than 25 years and has
been in the oil business for eight years. Since the incorporation of Petrogres, Mr. Traios has served as its sole director and
CEO. He currently serves as Chief Executive Officer and Managing Director of Navigas Carriers Inc., a sea transporter of liquiefied
natural gas, and Oceanus Natfiki LLC, a provider of vessel management services within the dry-bulk industry. Mr. Traios attended
Master Mariner & Law Maritime School for three years and served as second captain in the shipping industry for three years.
Mr. Traios is a citizen of Greece.





Mr. Traios’s experience
as our President and in management generally, as well as his extensive experience in the areas crude oil purchasing and selling,
and tanker vessel shipping and management of operations qualify him to serve as a director of our Company.



John Moraites, Executive
Vice President and Secretary. Mr. Moraites joined us as Secretary on June 15, 2016, and is presently employed as a Regional
Vice President for Capacity Marine Corporation. Capacity Marine specializes in marine insurance nationally and internationally.
Mr. Moraites has been at Capacity Marine for the past five years. Mr. Moraites has been involved in marine insurance for more than
40 years and has an extensive background and knowledge concerning all aspects of marine insurance and the marine industry as well.
Mr. Moraites has Bachelor of Science degrees in history and government.



Involvement in Certain Legal Proceedings



No director, executive
officer, significant employee or control person of the Company has been involved in any legal proceeding listed in Item 401(f)
of Regulation S-K in the past 10 years.



Code of Ethics



We adopted a Code of Ethics
for Senior Financial Management to promote honest and ethical conduct and to deter wrongdoing. This Code applies to our Chief Executive
Officer, Chief Financial Officer, controller, principal accounting officer and other employees performing similar functions. Our
Code of Ethics is available on our website (www.petrogressinc.com).



Corporate Governance



There have been no material
changes to procedures by which security holders may recommend nominees to our Board of Directors.



We currently have no standing
audit or nominating committees of our Board of Directors. Our entire Board of Directors currently performs these functions. We
do not have an audit committee financial expert because we do not currently have the resources to retain one.



Board Leadership Structure and Role in Risk Oversight



We have not adopted a formal
policy on whether the Chairman and Chief Executive Officer positions should be separate or combined. Christos Traios currently
serves as our Chief Executive Office and sole director.



Our Board of Directors
is primarily responsible for overseeing our risk management processes.  The Board of Directors receives and reviews periodic
reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment
of risks. The Board of Directors focuses on the most significant risks facing our company and our company’s general risk
management strategy, and also ensures that risks undertaken by our company are consistent with the Board’s appetite for risk.
While the Board oversees our company, our company’s management is responsible for day-to-day risk management processes. We
believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our
Board leadership structure supports this approach.





23





Director Independence



The sole director of our
Board of Directors does not qualify as an independent director in accordance with the published listing requirements of the NASDAQ
Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has
not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged
in various types of business dealings with us.



Section 16(a) Beneficial Ownership Report
Compliance



Because we do not have
a class of equity securities registered pursuant to Section 12 of the Exchange Act, we are not subject to Section 16(a) of the
Exchange Act.





ITEM 11.  EXECUTIVE COMPENSATION.



The following tables set
forth all of the compensation awarded to, earned by or paid to: (i) each individual serving as our principal executive officer;
(ii) each other individual that served as an executive officer at the conclusion of the fiscal year ended December 31, 2016 and
who received in excess of $100,000.



2016 Summary Compensation of Executive Officers

|Name & Principal Position                                      |  | Year |      | Salary |  | Restricted Stock Awards |         | Option Awards |  | All Other Compensation |   | Total
|-------------------------------------------------------------- |  | ---- | ---- | ------ |  | ----------------------- | ------- | ------------- |  | ---------------------- | - | -----
|Christos Traios                                                |  |      | 2016 |        |  | $                       | 100,000 |               |  | $                      | — |      
|President, Chief Executive Officer and Chief Financial Officer |  |      | 2015 |        |  | $                       | —       |               |  | $                      | — |      



| | (1) | Beginning on April 1, 2016, the Company has agreed to monthly compensation
of $10,000 per month for Christos Traios.
| | --- | --------------------------------------------------------------------------------------------------------------------



We do
not presently have pension, health, annuity, insurance, profit sharing, or similar benefit plans; however, we may adopt plans in
the future. There are presently no personal benefits available to our directors and officers.



Outstanding Equity Awards at Fiscal Year-End



There were no outstanding
equity awards as of December 31, 2016.



Director Compensation



We do not pay fees to our
directors for attendance at meetings of the board; however, we may adopt a policy of making such payments in the future. We will
reimburse out-of-pocket expenses incurred by directors in attending board and committee meetings.



Employment Agreements with Executive Officers



Effective April 1, 2016,
we entered into an employment agreement with Christos Traios who serves as our President, Chief Executive Officer and Chief Financial
Officer. Pursuant to our employment agreement with Mr. Traios, we agreed to pay Mr. Traios an annual salary of $120,000, which
is payable in monthly installments of $10,000.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.



The following table sets
forth information known to the Company with respect to the beneficial ownership (as such term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of the outstanding common stock of the Company as of April 6, 2017, by: (1) each
person known by the Company to beneficially own 5% or more of the Company’s outstanding common stock; (2) each of the
named executive officers as defined in Item 402(a)(3); (3) each of the Company’s directors; and (4) all of the
Company’s named executive officers and directors as a group. The number of shares beneficially owned is determined under
rules promulgated by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. 
Including those shares in the tables does not, however, constitute an admission that the named stockholder is a direct or indirect
beneficial owner of those shares.

24









|Name and Address of Beneficial Owner              |  |    | Common Stock Number of Shares Beneficially Owned |  | Common Stock Percentage of Shares Beneficially Owned (1)
|------------------------------------------------- |  | -- | ------------------------------------------------ |  | --------------------------------------------------------
|Christos Traios, Chief Executive Officer          |  | (2 | )                                                |  |                                                         
|John Moraites, Secretary                          |  | (2 | )                                                |  |                                                         
|All directors and officers as a group – 2 persons |  |    |                                                  |  |                                                         



| | (1) | Based on 166,795,807 shares of common stock outstanding as of April
6, 2017.
| | --- | ----------------------------------------------------------------------------

| | (2) | The address for Mr. Traios and Mr. Moraites is c/o Petrogress, Inc.,
757 Third Avenue, Suite 2110, New York, New York 10017.
| | --- | ----------------------------------------------------------------------------------------------------------------------------





ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.



Related Party Transactions



In connection with the
SEA, Christos Traios was appointed as sole director, Chief Executive Officer and Chief Financial Officer of the Company. During
the years ended December 31, 2016 and 2015 the Company has incurred a total of $100,000 and $0, respectively, representing Mr.
Traios’ services to the Company. This amount, which is accrued and unpaid, is included within accrued expenses in the consolidated
balance sheet.



During 2016, Mr. Traios
made advances to the Company in the amount of $172,100. As of December 31, 2016, the Company has repaid Mr. Traios a total of $37,500.
The remaining balance of $134,600 due to Mr. Traios is included within accrued expenses in the consolidated balance sheet.



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



The following
table shows the fees that were billed to the Company for the audit and other services provided by L & L CPA’s, RBSM LLP
and David S Friedkin CPA.



|                   |  | 2016 |        | 2015
|------------------ |  | ---- | ------ | ----
|Audit Fees         |  | $    | 38,250 |     
|Audit-Related Fees |  |      | —      |     
|Tax Fees           |  |      | —      |     
|All Other Fees     |  |      | —      |     
|Total              |  | $    | 38,250 |     



Audit Fees —
This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports
on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements
for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of,
the audit or the review of interim financial statements.



Audit-Related Fees —
This category consists of assurance and related services by the independent registered public accounting firm that are reasonably
related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.”



Tax Fees —
This category consists of professional services rendered for tax compliance and tax advice. The services for the fees disclosed
under this category include tax return preparation and technical tax advice.



All Other Fees — This category
consists of fees for other miscellaneous items.



Our board of directors
has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure,
the board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval
by the board.





25







PART IV



ITEM 15.  EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES



|(a) | 1. | Financial Statements                                                                                                                                                                                                                                                                                                                              
|--- | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |    |                                                                                                                                                                                                                                                                                                                                                   
|    |    | The financial statements and Reports of Independent Registered Public Accounting Firms are included on pages F-1 through F-12.                                                                                                                                                                                                                    
|    |    |                                                                                                                                                                                                                                                                                                                                                   
|    | 2. | Financial Statement Schedules                                                                                                                                                                                                                                                                                                                     
|    |    |                                                                                                                                                                                                                                                                                                                                                   
|    |    | All schedules for which provisions made in the applicable accounting regulations of the Securities and Exchange Commission (the “Commission”) are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.
|    |    |                                                                                                                                                                                                                                                                                                                                                   
|    | 3. | Exhibits (including those incorporated by reference).                                                                                                                                                                                                                                                                                             





|Exhibit
        Number |  | Description of Exhibit                                                                                                                                                                                                                                                                         
|---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1                    |  | Certificate of Conversion filed with the State of Florida, dated November 18, 2016 (Incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as filed with the Commission on December 1, 2016).                                                             
|2.2                    |  | Certificate of Conversion filed with the State of Delaware, dated November 18, 2016 (Incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K as filed with the Commission on December 1, 2016).                                                            
|3.1                    |  | Articles of Incorporation (Incorporated herein by reference to Exhibit 3.1 as part of the Company’s Registration Statement on Form S-1 as filed with the Commission on October 17, 2012).                                                                                                      
|3.2                    |  | Articles of Amendment to the Articles of Incorporation filed October 11, 2011 (Incorporated herein by reference to Exhibit 3.2 as part of the Company’s Registration Statement on Form S-1 as filed with the Commission on October 17, 2012).                                                  
|3.3                    |  | Articles of Amendment to the Articles of Incorporation filed February 29, 2016 (Incorporated herein by reference to Exhibit 3.1 as part of the Company’s Current Report on Form 8–K as filed with the Commission on March 3, 2016).                                                            
|3.4                    |  | Articles of Amendment to the Articles of Incorporation filed March 10, 2016 (Incorporated herein by reference to Exhibit 3.3 as part of the Company’s Current Report on Form 8–K as filed with the Commission on April 1, 2016).                                                               
|3.5                    |  | Certificate of Incorporation filed on November 16, 2016 with the State of Delaware (Incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the Commission on December 1, 2016).                                                             
|3.6                    |  | By-Laws of Petrogress, Inc., effective November 30, 2016 (Incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K as filed with the Commission on December 1, 2016).                                                                                       
|10.1                   |  | Securities Exchange Agreement, dated February 29, 2016, by and among the Company, Petrogres Co. Ltd., and the sole shareholder of Petrogres Co. Ltd. (Incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on March 3, 2016).
|10.2**                 |  | Employment Agreement, dated April 1, 2016, by and between Petrogress, Inc. and Christos Traios                                                                                                                                                                                                 
|14.1**                 |  | Code of Business Conduct and Ethics (Incorporated herein by reference to Exhibit 14.1 as part of the Company’s Registration Statement on Form S-1 as filed with the Commission on October 17, 2012).                                                                                           
|21**                   |  | Subsidiaries                                                                                                                                                                                                                                                                                   
|31.1**                 |  | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive and Financial Officer                                                                                                                                                                                                            
|32.1**                 |  | Certification of Principal Executive and Financial Officer pursuant to Section 1350                                                                                                                                                                                                            
|101.INS**              |  | XBRL Instance                                                                                                                                                                                                                                                                                  
|101.SCH**              |  | XBRL Taxonomy Extension Schema                                                                                                                                                                                                                                                                 
|101.CAL**              |  | XBRL Taxonomy Extension Calculation Linkbase                                                                                                                                                                                                                                                   
|101.DEF**              |  | XBRL Taxonomy Extension Definition Linkbase                                                                                                                                                                                                                                                    
|101.LAB**              |  | XBRL Taxonomy Extension Labels Linkbase                                                                                                                                                                                                                                                        
|101.PRE**              |  | XBRL Taxonomy Extension Presentation Linkbase                                                                                                                                                                                                                                                  



* Filed herewith.

** Filed in the Original Filing.

26









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.



|Petrogress, Inc.
|----------------



|By:   | /s/ Christos Traios                  
|----- | -------------------------------------
|      | Christos Traios                      
|      | President and Chief Executive Officer
|      |                                      
|Date: | May15, 2017                          
|      |                                      



Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.



|Signature           |  | Title                                                                                                                    |  | Date            
|------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ----------------
|                    |  |                                                                                                                          |  |                 
|/s/ Christos Traios |  | President, Chief Executive, Chief Executive Officer and Director (principal executive, financial and accounting officer) |  | May 15,
    2017
|                    |  |                                                                                                                          |  |                 







27







PETROGRESS, INC. AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

INDEX TO FINANCIAL STATEMENTS





|Report of Independent Registered Public Accounting Firm                                                 | F-1
|------------------------------------------------------------------------------------------------------- | ---
|Consolidated Balance Sheets as of December 31, 2016 and 2015                                            | F-2
|Consolidated Statements of Income for the years ended December 31, 2016 and 2015                        | F-3
|Consolidated Statement of Changes in Stockholders Equity for the years ended December 31, 2016 and 2015 | F-4
|Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015                    | F-5
|Notes to the Consolidated Financial Statements                                                          | F-6















David
S. Friedkin CPA
CERTIFIED PUBLIC ACCOUNTANT601 Haring Farm CourtRiver Vale, NJ 07675

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and StockholdersPetrogress, Inc.



We have audited the accompanying consolidated balance
sheets of Petrogress, Inc. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of income,
changes in stockholder’s equity, and cash flows for the years then ended. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these 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. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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 provide a reasonable basis for our
opinion.



In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial position of Petrogress, Inc. and subsidiaries as of December 31,
2016 and 2015, and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally
accepted accounting principles.







/s/ David S. Friedkin CPA



David S. Friedkin CPARiver Vale, New JerseyMarch 31st, 2017







F-1







|PETROGRESS, INC. AND SUBSIDIARIES                                                                                                  
|-----------------------------------------------------------------------------------------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                                                                                                        
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|                                                                                                                                   
|ASSETS                                                                                                                             
|Current
    Assets:                                                                                                                
|Cash and cash
    equivalents                                                                                                      
|Accounts receivable                                                                                                                
|Accounts receivable, related
    party                                                                                             
|Prepaid expenses and other
    current assets, including advances to shareholder of $395,009 in 2016 and $331,877 in 2015          
|Marketable
    securities                                                                                                          
|Total
    current assets                                                                                                           
|                                                                                                                                   
|Property and equipment,
    net                                                                                                    
|                                                                                                                                   
|Security
    deposit                                                                                                               
|                                                                                                                                   
|Total
    Assets                                                                                                                   
|                                                                                                                                   
|LIABILITIES
    AND STOCKHOLDERS' EQUITY                                                                                           
|                                                                                                                                   
|Current
    Liabilities:                                                                                                           
|Accounts payable and accrued
    expenses                                                                                          
|Due to related party                                                                                                               
|Convertible promissory note                                                                                                        
|Derivative
    liability                                                                                                           
|Total
    current liabilities                                                                                                      
|                                                                                                                                   
|Commitments
    and Contingencies                                                                                                  
|                                                                                                                                   
|Stockholders'
    Equity:                                                                                                          
|Preferred stock, $0.001
    par value; 10,000,000 shares authorized, none issued                                                   
|Common stock, $0.001 par
    value; 490,000,000 shares authorized; 166,795,807 (2016) and 136,000,000 (2015) issued and outstanding
|Additional paid-in capital                                                                                                         
|Accumulated comprehensive
    loss                                                                                                 
|Retained
    earnings                                                                                                              
|Total
    stockholders' equity                                                                                                     
|                                                                                                                                   
|Total
    liabilities and stockholders' equity                                                                                     
|                                                                                                                                   
|                                                                                                                                   
|See independent
    auditor's report and accompany notes to consolidated financial statements.                                     





F-2







|PETROGRESS, INC.
    and SUBSIDIARIES                                                         
|----------------------------------------------------------------------------------------------
|CONSOLIDATED
    STATEMENTS OF NET INCOME                                                     
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Revenues                                                                                      
|Costs
    of goods sold                                                                       
|                                                                                              
|Gross
    profit                                                                              
|                                                                                              
|Operating
    expenses:                                                                       
|Operating
    Costs                                                                           
|Administration
    Costs                                                                      
|Depreciation                                                                                  
|Total
    operating expenses                                                                  
|                                                                                              
|Operating
    income before other expenses and income taxes                                   
|                                                                                              
|Other
    income (expense):                                                                   
|Amortization
    of note discount                                                             
|Change
    in fair market value of derivative liabilities                                     
|Total
    other income, net                                                                   
|                                                                                              
|Income
    before income taxes                                                                
|                                                                                              
|Income
    tax expense                                                                        
|                                                                                              
|Net
    Income                                                                                
|                                                                                              
|Other comprehensive
    loss, net of tax                                                      
|Unrealized
    loss on marketable securities                                                  
|                                                                                              
|Comprehensive
    income (loss)                                                               
|                                                                                              
|Net
    income per share                                                                      
|                                                                                              
|Weighted
    average number of common shares outstanding                                      
|Basic
    and fully diluted                                                                   
|                                                                                              
|                                                                                              
|See
    independent auditor's report and accompany notes to consolidated financial statements.



F-3







|PETROGRESS,
    INC. and SUBSIDIARIES                                                         
|----------------------------------------------------------------------------------------------
|CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS' EQUITY                                           
|For
    the Years Ended December 31, 2016 and 2015                                            
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Balances,
    January 1, 2015                                                                 
|                                                                                              
|Net
    income for year ended December 31, 2015                                               
|                                                                                              
|Balances, December 31,
    2015                                                               
|                                                                                              
|Reorganization
    due to recapitalization                                                    
|                                                                                              
|Reclassification
    of derivative liability upon conversion of convertible note              
|                                                                                              
|Unrealized
    gain on marketable securities                                                  
|                                                                                              
|Common
    stock shares cancelled                                                             
|                                                                                              
|Reclassification
    of note discount upon conversion of convertible note                     
|                                                                                              
|Common
    stock issued for convertible notes                                                 
|                                                                                              
|Dividend
    paid                                                                             
|                                                                                              
|Net
    income for year ended December 31, 2016                                               
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|See
    independent auditor's report and accompany notes to consolidated financial statements.



F-4







|PETROGRESS,
    INC.                                                                           
|-----------------------------------------------------------------------------------------------
|CONSOLIDATED  STATEMENTS
    OF CASH FLOWS                                                     
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Cash
    Flows from operating activities:                                                      
|Net
    income                                                                                 
|Adjustments
    to reconcile net income to net cash provided by (used in) operating activities:
|Depreciation                                                                                   
|Amortization
    of discount on convertible note                                               
|Interest
    expense on converted notes payable                                                
|Net
    cash acquired in recapitalization                                                      
|Change
    in fair value of derivative liabilities                                             
|Changes
    in operating assets and liabilities:                                               
|Decrease
    (increase) in accounts receivable                                                 
|Decrease
    (increase) in prepaid assets                                                      
|Increase
    in amount due to shareholders                                                     
|(Decrease)
    increase in accounts payable and accrued expenses                               
|Increase
    in security deposits                                                              
|Net
    cash provided by (used in) operating activities                                        
|                                                                                               
|Cash
    flows from investing activities:                                                      
|Purchase
    of property plant and equipment                                                   
|Net
    cash used in investing activities                                                      
|                                                                                               
|Cash
    flows from financing activities:                                                      
|Dividends
    paid                                                                             
|Net
    cash used in financing activities                                                      
|                                                                                               
|Net
    decrease in cash and cash equivalents                                                  
|                                                                                               
|Cash
    and cash equivalents, Beginning of Period                                             
|                                                                                               
|Cash
    and cash equivalents, End of Period                                                   
|                                                                                               
|Supplemental
    disclosure of cash flow information:                                          
|                                                                                               
|Schedule
    of non-cash investing and financing activities:                                   
|Reclassification
    of derivative liability upon repayment of convertible debt                
|Common
    stock issued for conversion of notes and interest payable                           
|Change
    in fair value for available for sale marketable securities                          
|                                                                                               
|                                                                                               
|See
    independent auditor's report and accompany notes to consolidated financial statements. 



F-5









PETROGRESS, INC.

NOTES TO FINANCIAL STATEMENTS



Note 1 - Organization



Petrogress, Inc. (the “Company”
or “Petrogress”) operates a fully integrated oil commodity business, including upstream, midstream and downstream operations,
primarily serving West African and Mediterranean countries. The Company operates primarily as a holding company and provides its
services through three wholly-owned subsidiaries: Petrogres Co. Limited, which provides management of crude oil purchases and sales;
Petronav Carriers LLC, which manages day-to-day operations of the tanker fleet currently consisting of four vessels; and Petrogress
Oil & Gas Energy Inc., which is primarily focused on purchasing interests in oil fields in Texas and exporting liquefied natural
gas.



We were originally incorporated
in the State of Florida on February 10, 2010 under the name 800 Commerce, Inc. for the purpose of marketing credit card processing
services on behalf of merchant payment processing service providers. Effective March 25, 2016, we changed our name from 800 Commerce,
Inc. to Petrogress, Inc. and effective November 30, 2016, we changed our state of domicile from the State of Florida to the State
of Delaware.



Securities Exchange Agreement



On February 29, 2016, we
entered into a Securities Exchange Agreement (the “SEA”) with Petrogres Co. Limited, a Marshall Islands corporation
(“Petrogres”), and its sole shareholder. Pursuant to the terms of the SEA, the Company acquired 100% of Petrogres and
its affiliated companies. In exchange, the Company issued to the sole shareholder of Petrogres 136,000,000 shares of restricted
common stock, representing 85% of the issued and outstanding shares of the Company’s common stock at the closing of the transaction.
As part of the transaction, the sole shareholder and chief executive officer (“CEO”) of Petrogres, Christos Traios,
was appointed as CEO and as a director of the Company and B. Michael Friedman resigned as an officer and director. In addition,
the Company’s Board of Directors (the “Board”) approved an amendment to the Company’s Articles of Incorporation,
increasing the authorized capital to 490,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred
stock, par value $0.001 per share.



The SEA has been accounted
for as a reverse acquisition and recapitalization of the Company whereby Petrogres effectively became a public company, which has
allowed us to increase our operational efficiency and continue to expand our operations. As a result of this transaction, we acquired
both the assets and operations of Petrogres and its wholly-owned subsidiaries.



Description of Business



We operate primarily as
a holding company for our three wholly-owned subsidiaries: Petrogres, Co. Limited; Petronav Carriers LLC; and Petrogress Oil &
Gas Energy, Inc.



Note 2 - Summary of Significant Accounting
Policies



Basis of Presentation



The accompanying consolidated
financial statements are prepared on the accrual basis of accounting in accordance with Generally Accepted Accounting Principles
in the United States of America ("US GAAP"). The consolidated financial statements of the Company include
the consolidated accounts of the Company and its’ wholly owned subsidiaries listed below. All intercompany accounts and transactions
have been eliminated in consolidation.



|Petrogres Co. Limited (Marshall
        Islands)
        Petrogress Oil & Gas
        Energy, Inc. (Texas)
        Petronav Carriers
LLC (Delaware)
|---------------------------------------------------------------------------------------------------------------------------------------------------





F-6





Emerging Growth Company



We qualify
as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “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 of 1933 as amended (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.



Cash and Cash Equivalents



The Company considers all
highly liquid investments with an original term of three months or less to be cash equivalents.



Accounts Receivable /Concentrations of
Credit Risk



The Company
and its affiliates are engaged primarily in the purchase, transport and processing of oil and 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, 2016 and 2015, the Company
had no significant concentrations of credit risk.



Marketable Securities



The Company classifies
its 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 stockholders’ equity. Realized gains and losses on available-for-sale securities are included
in net earnings in the period earned or incurred.



Depreciation



The Company's vessels and other assets are depreciated
using primarily the straight-line method over the estimated useful lives.



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.



Revenue Recognition



The Company recognizes
revenues after products are delivered to contracted customers. Products in transit at the end of an accounting period are recorded
at an estimated value which is adjusted upon load certification. The Company recognizes revenue in accordance with the Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition.
ASC 605 requires that the following four basic criteria are met (1) persuasive evidence of an arrangement exists, (2) delivery
of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured.





F-7





Fair Value of Financial Instruments



Pursuant
to ASC 820, Fair Value Measurements and Disclosures, an entity is required to
maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes
a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.
A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant
to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:



- Level 1 applies to assets or liabilities for
which there are quoted prices in active markets for identical assets or liabilities.



- Level 2 applies to assets or liabilities for
which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar
assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.



- Level 3 applies to assets or liabilities for
which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the
assets or liabilities.



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.



The Company’s financial
instruments consist principally of marketable securities, the fair value of which is determined based on “Level 1”
inputs. “Level 1” inputs consist of quoted prices in active markets for identical assets. The recorded values of all
other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.



The Company’s derivative
liability resulting from the issuance of convertible debt is adjusted to fair value based on recent sales of the underlying common
stock and the use of an option pricing model, which are consistent with “Level 3” inputs. See Note 6.



The following table represents
the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2016 for each
fair value hierarchy level:



|December 31, 2016 |  | Derivative Liability |        | Marketable Securities |  | Total
|----------------- |  | -------------------- | ------ | --------------------- |  | -----
|Level I           |  | $                    | —      |                       |  | $    
|Level II          |  | $                    | —      |                       |  | $    
|Level III         |  | $                    | 65,499 |                       |  | $    



The carrying amount of the Company’s
accounts payable approximate fair value to their short term.



Income Taxes



The Company accounts for
income taxes in accordance with ASC 740-10, Income Taxes. The Company recognizes 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. The Company records
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. The Company classifies interest and penalties as a component of interest and other expenses. To date, the Company has not
been assessed, nor has the Company paid, any interest or penalties.





F-8





The Company measures and
records 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. The Company’s tax years subsequent to 2010 remain subject
to examination by federal and state tax jurisdictions.



Earnings (Loss) Per Share



The Company reports earnings
(loss) 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.
Potentially dilutive securities for the periods ended December 31, 2016 includes the Company’s outstanding convertible debt
that is convertible into approximately 2,380,266 shares of common stock were not included in the calculation of diluted income
per share because their impact was anti-dilutive.



Accounting for Stock-based Compensation



The Company accounts 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 the Company’s common stock and recognized as expense during the
period in which services are provided.



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.



Comprehensive Income



The Company has 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 the Company’s comprehensive loss consist of unrealized losses on available-for-sale
securities.



Date of Management's Review



Management has evaluated
subsequent events through March 31st, 2017, the date on which the financial statements were available to be issued.



Note 3 – Fixed Assets



Fixed assets consisted of the following as of December
31, 2016 and 2015:



|                               |  | 2016 |            | 2015
|------------------------------ |  | ---- | ---------- | ----
|Vessels                        |  | $    | 9,999,380  |     
|Furniture and equipment        |  |      | 89,328     |     
|                               |  |      | 10,088,708 |     
|Less: accumulated depreciation |  |      | (4,169,641 | )   
|                               |  | $    | 5,919,067  |     





F-9





Property and equipment
are stated at cost, and depreciation is provided by use of straight-line methods over the estimated useful lives of the assets.
The estimated useful lives of property and equipment are as follows:



|Vessels                        | 15 years
|------------------------------ | --------
|Office equipment and furniture | 10 years
|Computer hardware              | 5 years 



Depreciation expense of
$676,328 and $663,500 was recorded for the years ended December 31, 2016 and 2015, respectively.



Note 4 - Sales Concentration and Concentration
of Credit Risk



Sales and Accounts Receivable



The following is a summary
of customers who accounted for more than ten percent (10%) of the Company’s revenues for the years ended December 31, 2016
and 2015 and the accounts receivable balance as of December 31, 2016:



|Customer |   | Sales % 2016 |  | Sales % 2015 |      | Accounts Receivable Balance as of December 31, 2016
|-------- | - | ------------ |  | ------------ | ---- | ---------------------------------------------------
|         | A |              |  |              | 25.4 | %                                                  
|         | B |              |  |              | 21.6 | %                                                  
|         | C |              |  |              | 20.1 | %                                                  
|         | D |              |  |              | 13.7 | %                                                  
|         | E |              |  |              | —    |                                                    
|         |   |              |  |              |      |                                                    



Note 5 - Convertible Notes Payable



Effective with the SEA,
Petrogres assumed and acquired two convertible promissory notes that were issued to Mammoth Corporation (“Mammoth”).
Mammoth Note 1 had a balance of $31,339 and Mammoth Note 2 had a balance of $38,280. Mammoth Note 1 and Mammoth Note 2 are referred
to as the Mammoth Notes. The Mammoth Notes became due on September 9, 2016.



The Company determined
that the conversion feature of the Mammoth Notes represent an embedded derivative since the Notes are convertible into a variable
number of shares upon conversion. Accordingly, the Mammoth Notes were not considered to be conventional debt under EITF 00-19
and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability. Accordingly,
the fair value of these derivative instruments being recorded as a liability on the consolidated balance sheet with the corresponding
amount recorded as a discount to each Note. Such discount is being amortized from the date of issuance to the maturity dates of
the Notes. The change in the fair value of the liability for derivative contracts are recorded in other income or expenses in
the consolidated statements of operations at the end of each quarter, with the offset to the derivative liability on the balance
sheet. The embedded feature included in the Mammoth Notes resulted in a debt discount of $48,975 on the date the Mammoth Notes
were assumed and a derivative liability of $300,321.



A summary of the derivative liability balance of the Mammoth Notes as of December
31, 2016 is as follows:



|                         |  | 2016
|------------------------ |  | ----
|Balance assumed          |  | $   
|Reduction for conversion |  |     
|Fair Value Change        |  |     
|Ending Balance           |  | $   





F-10





The fair value at the assumption and re-measurement dates for the
Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2016:



|                         |  |  | Assumption date |   |  |  | Remeasurement date |  
|------------------------ |  |  | --------------- | - |  |  | ------------------ | -
|Expected dividends       |  |  | -0-             |   |  |  | -0-                |  
|Expected volatility      |  |  | 363             | % |  |  | 366                | %
|Expected terms in months |  |  | 6               |   |  |  | 3                  |  
|Risk yield               |  |  | .49             | % |  |  | .28                | %



A summary of the convertible notes payable balance as of December
31, 2016 is as follows:



|                                |  | 2016
|------------------------------- |  | ----
|Assumed Balance                 |  | $   
|Conversion of convertible notes |  |     
|Ending Balance                  |  | $   



Note 6 - Related Party Transactions



Due to Stockholders



Officer’s compensation



For the years ended December
31, 2016 and 2015, the Company recorded expenses to its officers the following amounts, included in Administration Costs in the
statements of operations, included herein:



|                                                               |  | Years ended December 31,
|-------------------------------------------------------------- |  | ------------------------
|                                                               |  | 2016                    
|President, Chief Executive Officer and Chief Financial Officer |  | $                       



The Company accrued $100,000
(included in Due to Stockholders on the balance sheet presented herein) of officer’s compensation during the year ended December
31, 2016, in recognition of agreeing to compensate the Company’s President, Chief Executive Officer and Chief Financial Officer
$10,000 per month effective April 1, 2016.



Officer’s advances



During the year ended December
31, 2016, our Chief Executive Officer advanced the Company $172,100 and was repaid $37,500. As of December 31, 2016, the Company
owed the Chief Executive Officer $134,600 (included in Due to Stockholders on the balance sheet presented herein).



Intercompany transactions



All intercompany accounts
and transactions have been eliminated in consolidation, including:



| | • | $224,065
                                         that Petrogress, Inc. owes to Petrogres Co. Limited for travel expenses paid by Petrogres
                                         Co. Limited on behalf of Petrogress, Inc.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | $5,000
                                         that Petrogres Co. Limited advanced to Petrogress, Inc.
| | - | -------------------------------------------------------------------------------------------------------

| | • | $100,000
                                         that Petrogres Oil & Gas advanced to Petrogress, Inc.
| | - | -------------------------------------------------------------------------------------------------------



Note 7 - Stockholders’ Equity



Common Stock



Effective February 29,
2016, the Company issued 1,101,642 shares of the Company’s common stock to Agritek Holdings, Inc. pursuant to a Debt Settlement
Agreement in full settlement of the amount owed to Agritek of $283,547.





F-11





Upon completion of the
SEA between the Company and Petrogres, the Company issued to the sole Petrogres shareholder 136,000,000 shares of common
stock of the Company in exchange for one hundred percent (100%) of the issued and outstanding share capital of Petrogres from the
sole shareholder of Petrogres.



On March 7, 2016, the Company
issued 1,000,000 shares of common stock to Mammoth upon the conversion of $2,700 of principal at a conversion price of $0.0027
per share.



On April 11, 2016, the
Company issued 6,800,000 shares of common stock to Mammoth upon the conversion of $22,032 of principal at a conversion price of
$0.00324 per share.



Note 8 - Income Taxes



Deferred income taxes reflect
the net tax effects of operating loss and tax credit carry forwards and temporary differences between carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of
deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
during the periods in which temporary differences representing net future deductible amounts become deductible. Due to the uncertainty
of the Company’s ability to realize the benefit of the deferred tax assets, the deferred tax assets are fully offset by a
valuation allowance at December 31, 2016.



Note 9 - 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.



Lease Agreements



Petrogres leases office space in Piraeus, Greece
for monthly rent of €2,500 (approximately USD$2,658) (the “Piraeus Lease”). The Piraeus Lease expires on May 31,
2018. We believe that this office space is adequate for Petrogres’ current operations.



Effective June 13, 2016, the Company entered
into a thirteen (13) month lease for a corporate apartment in New York City, to be used by the Company’s Chief Executive
Officer during his travel to New York. Mr. Traios spends approximately 35% of his time in New York on business matters. The monthly
lease is for $4,575 and expires July 12, 2017.



Effective October 1, 2016, the Company entered
into a one year Office Services Agreement for office space and other services for a total base monthly fee of $2,800. The Company
utilizes the New York office space for administrative purposes.



Future
rent payments based on the terms for the Company’s leases are as follows:





|Twelve months ending December 31, |      | Amount
|--------------------------------- | ---- | ------
|                                  | 2017 |       
|                                  | 2018 |       
|                                  |      |       



NOTE 10 – SUBSEQUENT EVENTS



Management has evaluated
subsequent events through March 31, 2017, which is the date the financial statements were available for issuance.





F-12