EX-99.1 2 y00217exv99w1.htm EX-99.1: CONSOLIDATED FINANCIAL STATEMENTS

EX-99.1

Exhibit 99.1

StealthGas Inc.
Unaudited Condensed Consolidated Financial Statements

Index to unaudited condensed consolidated financial statements

		Pages
Unaudited Condensed Consolidated Balance Sheets — December 31, 2007 and June 30, 2008			2
Unaudited Condensed Consolidated Statements of Income for the six month periods ended June 30, 2007 and 2008			3
Unaudited Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2007 and 2008			4
Notes to the Unaudited Condensed Consolidated Financial Statements			5-18

1

StealthGas Inc.
Unaudited Condensed Consolidated Balance Sheets
December 31, 2007 and June 30, 2008 (Expressed in United States Dollars, except share data)

		December 31,				June 30,
		2007				2008
Assets
Current assets
Cash and cash equivalents			33,114,872				18,777,048
Trade receivables			2,349,275				3,081,124
Claims receivable			46,070				49,593
Inventories			836,365				890,084
Advances and prepayments			212,919				289,006
Restricted cash			7,727,272				2,573,308
Vessels held for sale			25,210,568				—
Total current assets			69,497,341				25,660,163
Non current assets
Advances for vessels under construction and acquisitions			12,450,000				22,774,244
Vessels, net			395,095,322				519,334,165
Restricted cash			200,000				600,000
Deferred finance charges, net of accumulated amortization of $162,132 and $215,500			350,663				442,170
Fair value of derivatives			—				1,996,529
Total non current assets			408,095,985				545,147,108
Total assets			477,593,326				570,807,271
Liabilities and Stockholders’ Equity
Current liabilities
Payable to related party			7,846,691				3,261,659
Trade accounts payable			3,406,421				3,564,869
Other accrued liabilities			3,928,028				4,636,437
Deferred income			3,972,370				3,375,052
Current portion of long-term debt			14,719,156				21,681,656
Current portion of long-term debt associated with vessel held for sale			3,500,000				—
Total current liabilities			37,372,666				36,519,673
Non current liabilities
Fair value of derivatives			3,288,989				3,921,723
Customer deposits			5,174,093				5,241,364
Fair value of below market acquired time charter			1,187,417				450,006
Long-term debt			127,539,373				210,176,045
Total non current liabilities			137,189,872				219,789,138
Total liabilities			174,562,538				256,308,811
Commitments and contingencies			—				—
Stockholders’ equity
Capital stock
5,000,000 preferred shares authorized and zero outstanding with a par value of $0.01 per share
100,000,000 common shares authorized 14,400,000 and 22,310,110 shares issued and outstanding with a par value of $0.01 per share			222,841				223,101
Additional paid-in capital			281,612,867				282,667,145
Retained earnings			21,650,412				30,158,215
Accumulated other comprehensive loss			(455,332	)			1,449,999
Total stockholders’ equity			303,030,788				314,498,460
Total liabilities and stockholders’ equity			477,593,326				570,807,271

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

2

StealthGas Inc.
Unaudited Condensed Consolidated Statements of Income
(Expressed in United States Dollars, except share data)

										Six Month Periods Ended
		Quarters Ended June 30,								June 30,
		2007				2008				2007				2008
Revenues
Voyage revenues			19,880,050				28,480,148				40,624,156				55,494,324
Expenses
Voyage expenses			958,144				1,319,973				2,233,592				2,223,888
Vessels’ operating expenses			5,545,968				7,893,342				10,838,762				15,179,134
Dry-docking costs			—				66,106				—				467,431
Management fees			932,890				1,120,210				1,840,850				2,257,815
General and administrative expenses			878,355				1,923,207				1,696,030				3,460,749
Depreciation			3,802,162				5,857,889				7,463,993				11,152,634
Net gain on sale of vessels			—				—				—				(1,673,321	)
Total expenses			12,117,519				18,180,727				24,073,227				33,068,330
Income from operations			7,762,531				10,299,421				16,550,929				22,425,994
Other income and (expenses)
Interest and finance costs			(2,477,626	)			(2,597,442	)			(4,869,835	)			(5,220,829	)
Change in fair value of derivatives			327,521				1,760,757				301,576				(541,536	)
Interest income			109,484				90,557				371,528				392,061
Foreign exchange loss			(32,885	)			(115,518	)			(42,719	)			(186,472	)
Other expenses, net			(2,073,506	)			(861,646	)			(4,239,450	)			(5,556,776	)
Net income			5,689,025				9,437,775				12,311,479				16,869,218
Earnings per share
- Basic			0.40				0.43				0.85				0.76
- Diluted			0.40				0.42				0.85				0.76
-Cash dividends declared			0.1875				0.1875				0.3750				0.3750
Weighted average number of shares
-Basic			14,400,000				22,114,105				14,400,000				22,114,105
-Diluted			14,400,000				22,213,808				14,400,000				22,177,285

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

3

StealthGas Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(Expressed in United States Dollars)

		For The Six Month Periods Ended June 30,
		2007				2008
Cash flows from operating activities
Net income for the period			12,311,479				16,869,218
Items included in net income not affecting cash flows:
Depreciation and amortization			7,502,250				11,206,002
Amortization of fair value of time charter			(289,661	)			(737,411	)
Share based compensation			—				1,054,538
Change in fair value of derivatives			(301,576	)			541,536
Gain on sale of vessels			—				(1,673,321	)
Changes in operating assets and liabilities:
(Increase)/decrease in
Trade receivables			226,574				(731,849	)
Claims receivable			(4,578	)			(3,523	)
Inventories			(24,077	)			(53,719	)
Advances and prepayments			6,015				(76,087	)
Increase/(decrease) in
Payable to related party			6,115,842				(4,585,032	)
Trade accounts payable			(109,087	)			158,448
Other accrued liabilities			(180,391	)			708,409
Deferred income			(582,271	)			(597,318	)
Net cash provided by operating activities			24,670,519				22,079,891
Cash flows from investing activities
Insurance proceeds			264,122				—
Advances for vessel under construction and acquisitions			(1,700,000	)			(22,774,244	)
Proceeds from sale of vessels, net			—				26,883,889
Acquisition of vessels			(59,872,118	)			(122,941,477	)
(Increase)/decrease in restricted cash account			(554,407	)			4,753,964
Net cash (used in) investing activities			(61,862,403	)			(114,077,868	)
Cash flows from financing activities
Dividends paid			(5,400,000	)			(8,361,415	)
Deferred finance charges			(145,795	)			(144,875	)
Customer deposits			1,967,229				67,271
Loan repayment			(9,481,760	)			(13,025,828	)
Proceeds from short-term bridge facility			18,000,000				—
Proceeds from long-term debt			27,067,500				99,125,000
Net cash provided by financing activities			32,007,174				77,660,153
Net (decrease) in cash and cash equivalents			(5,184,710	)			(14,337,824	)
Cash and cash equivalents at beginning of year			11,146,871				33,114,872
Cash and cash equivalents at end of period			5,962,161				18,777,048
Supplemental Cash Flow Information:
Cash paid during the period for interest			4,419,047				5,110,761
Non Cash Items:
Fair Value of below market acquired time charter			1,019,000				—

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

4

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

1. Interim Financial Statements

The unaudited condensed consolidated financial statements include the accounts of StealthGas Inc. and its wholly consolidated owned subsidiaries (collectively referred to as the “Company”) in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information. The unaudited condensed consolidated financial statements have been prepared in accordance with the accounting policies described in the Company’s 2007 Annual Report on Form 20-F and should be read in conjunction with the consolidated financial statements and notes thereto.

Certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain reoccurring adjustments necessary to present fairly the Company’s financial position as of June 30, 2008, and the results of its operations and its cash flows for the six month periods ended June 30, 2007 and 2008.

2. Organization

StealthGas Inc. was formed under the laws of Marshall Islands on December 22, 2004 and, as of June 30, 2008 owned a fleet of thirty-six liquefied petroleum gas (LPG) carriers and two medium range (M.R.) type product carriers providing worldwide marine transportation services under long, medium or short-term charters.

As of June 30, 2008, StealthGas Inc. included the ship-owing companies listed below:

LPG carriers

				Acquisition /
Name of Company		Vessel Name		Disposition Date		cbm
VCM Trading Ltd.		Ming Long		October 12, 2004			3,515.55
Gaz De Brazil Inc.		Gas Prodigy		October 15, 2004			3,014.59
LPGONE Ltd.		Gas Tiny		October 29, 2004			1,319.96
Geneve Butane Inc.		Gas Courchevel		November 24, 2004			4,102.00
Matrix Gas Trading Ltd.		Gas Shanghai		December 7, 2004			3,525.92
Pacific Gases Ltd.		Gas Emperor		February 2, 2005			5,009.07
Semichlaus Exports Ltd.		Gas Ice		April 7, 2005			3,434.08
Ventspils Gases Ltd.		Gas Arctic		April 7, 2005			3,434.08
Industrial Materials Inc.		Birgit Kosan		April 11, 2005			5,013.33
Independent Trader Ltd.		Gas Oracle		April 26, 2005			3,014.59
				(sold on January 28, 2008)
Aracruz Trading Ltd.		Gas Amazon		May 19, 2005			6,562.41
Continent Gas Inc.		Gas Chios		May 20, 2005			6,562.09
Empire Spirit Ltd.		Sweet Dream		May 31, 2005			5,018.35
Jungle Investment Limited		Gas Cathar		July 27, 2005			7,517.18
Northern Yield Shipping Ltd.		Gas Legacy		October 27, 2005			3,500.00
Triathlon Inc.		Gas Marathon		November 2, 2005			6,572.20
Iceland Ltd.		Gas Crystal		November 11, 2005			3,211.04
Soleil Trust Inc.		Gas Sincerity		November 14, 2005			4,128.98
East Propane Inc.		Catterick		November 24, 2005			5,001.41
Petchem Trading Inc.		Gas Spirit		December 16, 2005			4,112.18
Malibu Gas Inc.		Feisty Gas*		December 16, 2005			4,111.24

5

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

2. Organization — Continued

				Acquisition /
Name of Company		Vessel Name		Disposition Date		cbm
Balkan Holding Inc.		Gas Czar		February 14, 2006			3,509.65
Transgalaxy Inc.		Gas Fortune		February 24, 2006			3,512.78
International Gases Inc		Gas Zael*		April 03, 2006			4,111.24
Balkan Profit Ltd		Gas Eternity		March 09, 2006			3,528.21
Oxfordgas Inc.		Lyne		May 19, 2006			5,013.90
Energetic Peninsula Limited		Sir Ivor		May 26, 2006			5,000.00
Ocean Blue Limited		Gas Nemesis		June 15, 2006			5,016.05
				(sold on January 29, 2008)
Baroness Holdings Inc.		Batangas		June 30, 2006			3,244.04
Evolution Crude Inc.		Gas Flawless		February 1, 2007			6,300.00
Aura Gas Inc.		Sea Bird		May 18, 2007			3,518.00
European Energy Inc.		Gas Renovatio		May 29, 2007			3,312.50
				(sold on March 19, 2008)
Fighter Gas Inc.		Gas Icon		June 27, 2007			5,000.00
Luckyboy Inc.		Chiltern		June 28, 2007			3,312.00
Italia Trades Inc.		Gas Evoluzione		July 23, 2007			3,517.00
Studio City Inc.		Gas Kalogeros		July 27, 2007			5,000.00
Gastech Inc.		Gas Sikousis		August 03, 2007			3,500.00
Espace Inc.		Gas Sophie		October 15, 2007			3,500.00
Cannes View Inc.		Gas Haralambos		October 30, 2007			7,000.00
Ecstasea Inc.		Gas Premiership		March 19, 2008			7,200.00

Name of Company		Vessel Name		To be delivered on		cbm
Tankpunk Inc.		Gas Natalie		October 2008			3,213.92
Spacegas Inc.		Gas Defiance		August 2008			5,000.00
Financial Power Inc.		Gas Shuriken		November 2008			5,000.00
Sound Effex Inc.		Hull 411		May 2009			3,500.00
Revolution Inc.		Hull 412		July 2009			3,500.00
Pelorus Inc.		Hull K 421		September 2010			5,000.00
Rising Sun Inc.		Hull K 422		November 2010			5,000.00
Carinthia Inc.		Hull K 423		March 2011			5,000.00
Tatoosh Beauty Inc.		Hull K 424		July 2011			7,500.00
Octopus Gas Inc.		Hull K 425		December 2011			7,500.00

M.R. type product carriers

Name of Company		Vessel Name		Acquisition Date		dwt
Clean Power Inc.		Navig8 Fidelity		January 9, 2008			46,754.29
MR Roi Inc.		Navig8 Faith		February 27, 2008			46,754.29

Name of Company		Vessel Name		To be delivered on		dwt
King of Hearts Inc.		Hull 2139		June 2009			47,000.00
Castell Castle Inc.		Hull 061		January 2010			47,000.00

*On April 3, 2006, the “Feisty Gas” was delivered to International Gases Inc., subsidiary of StealthGas Inc., and renamed to “Gas Zael”.

The Company’s vessels are managed by Stealth Maritime Corporation S.A. — Liberia (the “Manager”), a
related party. The Manager is a company incorporated in Liberia and registered in Greece on May 17, 1999 under the provisions of law 89/1967, 378/1968 and article 25 of law 27/75 as amended by the article 4 of law 2234/94. (See Note 4).

6

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

3. Significant Accounting Policies

A discussion of the Company’s significant accounting policies can be found in the Annual Report on Form 20-F for the fiscal year ended December 31, 2007. There have been no material changes to these policies in the six month period ended June 30, 2008. Effective January 1, 2008, the Company adopted FASB Statement No. 157 “Fair Value Measurements” (“SFAS 157”) which had no effect on the Company’s consolidated financial statements. In addition, on January 1, 2008, the Company made no elections to account for its monetary assets and liabilities at fair values as allowed by FASB statement No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”).

4. Recent Accounting Pronouncements

In March 2008 the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods within those fiscal years, beginning after November 15, 2008, with early application allowed. SFAS 161 allows but does not require comparative disclosures for earlier periods at initial adoption. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS 161 on the Company’s consolidated financial condition, results of operations or cash flows.

In May 2008 the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“FASB No. 162”). The new standard identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. This statement is effective sixty days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. We are currently evaluating the potential impact, if any, of the adoption of SFAS No. 162 on our consolidated results of operations, cash flows and financial condition.

5. Transactions with Related Party

The Manager provides the vessels with a wide range of shipping services such as chartering, technical support and maintenance, insurance, consulting, financial and accounting services, for a fixed daily fee of $440 per vessel operating under a voyage or time charter or $125 per vessel operating under a bareboat charter and a brokerage commission of 1.25% on freight, hire and demurrage per vessel, effective after an amendment on January 1, 2007 of the Management Agreement. For the six month periods ended June 30, 2007 and 2008, total brokerage commissions of 1.25% amounted to $510,080 and $684,044, respectively, ($249,165 and $352,960 for the quarters ended June 30, 2007 and 2008, respectively) and were included in voyage expenses. For the six month periods ended June 30, 2007 and 2008, the management fees were $1,840,850 and $2,257,815, respectively ($932,890 and $1,120,210 for the quarters ended June 30, 2007 and 2008, respectively).

The Manager also acts as a sales and purchase broker of the Company in exchange for a commission fee equal to 1% of the gross sale or purchase price of vessels or companies. As of December 31, 2007 and June 30, 2008 the amounts of $1,008,090 and $1,340,000, respectively, were capitalized to the cost of the vessels and as of June 30, 2008 the amount of $272,750 was recognized as expense relating the sale of vessels and is included in the consolidated statement of income under the caption “Net gain on sale of vessels”.

The Manager has subcontracted the technical management of the vessels to three unaffiliated ship-management companies, V.Ships Limited (“V.Ships”), EMS Ship Management (“EMS”) and Swan Shipping Corporation (Manila). These companies provide technical management to the Company’s vessels for a fixed annual fee per vessel. Such fees for the six month periods ended June 30, 2007 and

7

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

5. Transactions with Related Party — Continued

2008 amounted to $487,800 and $505,872, respectively ($229,841 and $246,581 for the quarters ended June 30, 2007 and 2008, respectively) and are included in the total management fees of $1,840,850 and $2,257,815, respectively.

In addition to management services, the Company reimburses the Manager for compensation of our Chief Executive Officer, our Chief Financial Officer, our Internal Auditor and our Deputy Chairman and Executive Director for the amounts of $785,697 and $1,560,646 for the six month periods ended June 30, 2007 and 2008, respectively, ($377,344 and $793,458 for the quarters ended June 30, 2007 and 2008, respectively) and are included in the consolidated statement of income under the caption “General and administrative expenses”.

The current account balance with the Manager at December 31, 2007 and at June 30, 2008 was a liability of $7,846,691 and $3,261,659, respectively. The liability represents revenues collected less payments made by the Manager on behalf of the ship-owning companies.

The Company occupies office space that is owned by an affiliated company of the Vafias Group with which it has a three-year cancelable agreement for the provided office facilities. Rental expense for the six month periods ended June 30, 2007 and 2008 amounted to $16,059 and $25,271, respectively ($8,068 and $12,633 for the quarters ended June 30, 2007 and 2008, respectively).

6. Inventories

The amounts shown in the accompanying consolidated balance sheets are analyzed as follows:

		December 31, 2007				June 30, 2008
Bunkers			101,050				45,689
Lubricants			735,315				844,395
Total			836,365				890,084

7. Advances for Vessels Under Construction and Acquisitions

During the six month period ended June 30, 2008, the movement of the account, advances for vessels under construction and acquisitions, was as follows:

Balance, December 31, 2007			12,450,000
Advances for vessels acquisitions			11,500,000
Advances for vessels under construction			11,120,002
Capitalized interest			154,242
Vessels delivered			(12,450,000	)
Balance, June 30, 2008			22,774,244

The amounts shown in the accompanying consolidated balance sheets as of December 31, 2007 and June 30, 2008 amounting to $12,450,000 and $22,774,244, respectively, represent advance payments to a ship-builder for five LPG carriers under construction and to sellers for four new re-sale M.R. product tankers and one second-hand LPG carrier.

As of December 31, 2007, the two vessels under construction and the one second-hand LPG carrier, named “Navig8 Fidelity” (formerly “Hull No. 3013”) which was delivered to the Company on January 9,

8

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

7. Advances for Vessels Under Construction and Acquisitions — Continued

2008, “Navig8 Faith” (formerly “Hull No. 3014”) which was delivered to the Company on February 27, 2008 and “Gas Premiership” (formerly “Premiership”), which was delivered to the Company on March 19, 2008, had a total purchase price of $134,000,000.

On February 25, 2008, the Company signed contracts with Mitsubishi Corporation of Japan for the construction of five LPG carriers scheduled for delivery between September 2010 and December 2011, at an aggregate contract price of Yen 12,008,000,000 (approx. $111,185,185 based upon the prevailing USD/JPY exchange rate of $1.00:JPY 108). On February 29, 2008, the Company paid the first 10% installment of Yen 1,200,800,000 ($11,120,002).

On March 18, 2008, the Company entered into a memorandum of agreement to acquire from an unaffiliated entity an under construction M.R. type product carrier named “Hyundai Mipo Hull Number 2139” which is scheduled to be delivered in the second quarter of 2009. The purchase price of this vessel is $57,500,000. On March 27, 2008, the Company paid 10% of the purchase price, to a joint escrow account in the name of the seller and buyer.

On June 25, 2008, the Company entered into a memorandum of agreement to acquire from an unaffiliated entity an under construction M.R. type product carrier named “Hull No 061” which is scheduled to be delivered in the fourth quarter of 2009. The purchase price of this vessel is $57,500,000. On June 30, 2008, the Company paid 10% of the purchase price, to a joint escrow account in the name of the seller and buyer.

8. Vessels, net

						Accumulated				Net Book
		Vessel cost				Depreciation				Value
Balance, December 31, 2007			428,842,324				(33,747,002	)			395,095,322
Acquisitions			135,391,477				—				135,391,477
Depreciation for the period			—				(11,152,634	)			(11,152,634	)
Balance, June 30, 2008			564,233,801				(44,899,636	)			519,334,165

The Company acquired the vessels “Navig8 Fidelity”, “Navig8 Faith” and “Gas Premiership” on January 9, 2008, February 27, 2008 and March 19, 2008, respectively, at respective cash purchase prices of $57,500,000, $57,500,000 and $19,000,000 and related capitalized costs of $1,391,477.

On November 8, 2007 the Company concluded memoranda of agreement for the disposal of the vessels “Gas Oracle”, “Gas Nemesis” “Gas Renovatio” to unaffiliated third parties for $6,000,000, $10,750,000 (plus an amount of $443,999 which represents the dry-docking cost incurred in 2007) and $10,525,000, respectively. The vessels were delivered to her new owners on January 28, 2008, January 29, 2008 and March 19, 2008, respectively, realized an aggregate gain from the sale of vessels of approximately $1,673,321 which is included in the Company’s condensed consolidated statement of income.

On February 29, 2008, the Company entered into separate memoranda of agreement with affiliated parties to acquire one second hand LPG carrier named “Gas Natalie” with expected delivery in October 2008 and four under construction LPG carriers, the “Gas Defiance” which was delivered on August 1, 2008, the “Gas Shuriken, the “K411” and “K412” with expected delivery in November 2008, May 2009 and July 2009, respectively. There were no advance payments made for these vessels. The aggregate purchase price of all these vessels is $92,620,000.

9

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

9. Fair value of acquired time charter

The fair value of the time charters acquired at below / (above) fair market charter rates on the date of vessels’ acquisition is summarized below. These amounts are amortized on a straight-line basis to the end of the charter period. For the six month periods ended June 30, 2007 and 2008, the amounts of $289,661 and $737,411, respectively ($190,565 and $247,147 for the quarters ended June 30, 2007 and 2008, respectively), are included in voyage revenues.

						Fair				Total accumulated				Amortization
						value of				amortization				for the				Unamortized
		End of Time				acquired time				as at				quarter ended				balance as at
Vessel		Charter				Charter				December 31, 2007				June 30, 2008				June 30, 2008
Fair value of acquired time charter — Liability
Sir Ivor		April 2009					479,000				(262,417	)			(81,780	)			134,803
Lyne		April 2009					483,000				(266,035	)			(81,925	)			135,040
Batangas		June 2008					340,000				(255,349	)			(84,651	)			—
Sea Bird II		May 2009					409,000				(127,007	)			(101,830	)			180,163
Gas Renovatio		January 2008					310,000				(271,093	)			(38,907	)			—
Chiltern		March 2008					300,000				(201,444	)			(98,556	)			—
Gas Kalogeros		May 2008					411,000				(231,280	)			(179,720	)			—
Gas Sikousis		May 2008					142,000				(71,958	)			(70,042	)			—
Total							2,874,000				(1,686,583	)			(737,411	)			450,006

10. Deferred Finance Charges

Gross deferred finance charges amounting to $512,795 and $657,670 as at December 31, 2007 and June 30, 2008, respectively, represent fees paid to the lenders for obtaining the related loans, net of amortization. For the six month periods ended June 30, 2007 and 2008, the amortization of deferred financing charges amounted to $20,847 and $53,368, respectively ($17,410 and $16,146 for the quarters ended June 30, 2007 and 2008, respectively) and is included in Interest and finance costs in the accompanying condensed consolidated statements of income.

11. Deferred Income

The amounts shown in the accompanying consolidated balance sheets amounted to $3,972,370 and $3,375,052 represent time charter revenues received in advance as of December 31, 2007 and as of June 30, 2008, respectively.

12. Customer Deposits

These amounts represent deposits received from charterers as guarantees and comprised as follows:

(a) On September 26, 2006 an amount of $1,320,000 was received from the bareboat charterer of LPG carrier “Ming Long” which is equal to one-year hire. This amount plus any interest earned ($105,774 up to June 30, 2008) will be returned to the charterer at the end of the three years bareboat charter.

(b) On December 6, 2006 an amount of $643,500, net of commission of $16,500, was received from the charterer of LPG carrier “Gas Oracle” which is equal to three-months hire. On October 15, 2007 the amount of $420,000 was deducted from the above deposit and transferred under the “Gas Tiny” new charter as deposit equal to three-months hire. This amount will be returned to the charterer at the end of the two years new charter or when an acceptable letter of guarantee is presented to the Company.

10

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

12. Customer Deposits — Continued

(c) On January 30, 2007 an amount of $367,500 was received from the bareboat charterer of LPG carrier “Gas Eternity” which is equal to three-months hire. This amount followed by a subsequent receipt of an nine-months hire on April 12, 2007 amounted to $1,102,500 plus any interest earned ($72,097 up to June 30, 2008) will be returned to the charterer at the end of the three years bareboat charter.

(d) On June 8, 2007 an amount of $449,978 was received from the bareboat charterer of LPG carrier “Gas Monarch” which is equal to three-months hire. This amount followed by a subsequent receipt of an nine-months hire on October 23, 2007 amounted to $1,349,978 plus any interest earned ($53,537 up to June 30, 2008) will be returned to the charterer at the end of the three years bareboat charter.

13. Long-term Debt

		Fortis Bank				DnB Nor Bank				Scotia Bank				Deutsche Bank				Total
December 31, 2007			62,705,000				76,556,015				6,497,514				—				145,758,529
Additions			—				15,750,000				43,125,000				40,250,000				99,125,000
Payments			(3,034,860	)			(7,488,218	)			(1,877,750	)			(625,000	)			(13,025,828	)
June 30, 2008			59,670,140				84,817,797				47,744,764				39,625,000				231,857,701

On January 8, 2008, the Company, under the terms of Scotiabank Facility, drewdown the second advance of $43,125,000 to part finance the acquisition of the “Navig8 Fidelity” (formerly “Hull No 3013”).

On January 17, 2008 the Company signed a commitment letter with the Deutsche Bank to partially finance the acquisition of one new, under construction M.R. product carrier, named “Navig8 Faith”, by one of the Company’s wholly owned subsidiaries. The senior secured term loan facility amounted to $40,250,000 and was fully drawn down in one tranche on February 19, 2008. The tranche is repayable in forty-seven consecutive quarterly installments of $625,000 each three months after the drawdown, plus a balloon payment of $10,875,000 payable together with the last installment. The term loan charges interest at LIBOR plus 0.70% and is secured by first priority mortgage over the vessel involved, plus the assignment of the vessel insurances, earnings and the pledge of the Company’s earnings account with the lender, and the guarantee of the ship-owning company, as owner of the vessel.

On February 13, 2008 the Company signed a commitment letter with the DnB NOR Bank to partially finance the acquisition of one second hand LPG vessel, named “Gas Premiership”, by one of the Company’s wholly owned subsidiaries. The senior secured term loan facility amounted to $15,750,000 and was fully drawn down on March 19, 2008 and is repayable in sixteen semi-annual installments of $690,000 each plus a balloon payment of $4,710,000 payable together with the last installment.
The term loan charges interest at LIBOR plus 0.85% and is secured by a first priority mortgage over the vessel involved and cross-collateralized with security vessels under the “DnB Loan” plus the assignment of the vessel’s insurances, earnings and the vessel’s operating and retention account, and the guarantee of StealthGas Inc.

On February 25, 2008, the Company signed a commitment letter with Emporiki Bank, secured by the Gas Sikousis and the Gas Kalogeros, two vessels already owned by two of the Company’s wholly-owned subsidiaries. The senior secured term loan facility amounted to $29,437,000 and is expected to be drawn down in full in September 2008 in connection with the part funding of deposits required for vessels under construction as ordered by the Company. The term loan is repayable in twenty four semi-annual installments of $858,583 each plus a balloon payment of $8,831,008 payable together with the last installment. The term loan’s interest rate is LIBOR plus 0.90%. In addition to first priority mortgages

11

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

13. Long-term Debt — Continued

over the Gas Sikousis and the Gas Kalogeros, the term loan is secured by the assignment of these vessels’ insurances, earnings and operating and retention accounts and Company’s guarantee.

The annual principal payments to be made, for the four loans, after June 30, 2008 are as follows:

Year ended		Amount
2009			21,681,656
2010			19,767,120
2011			19,767,120
2012			19,767,120
2013			19,767,120
Thereafter			131,107,565
Total			231,857,701

Total bank loan interest expense for the six month periods ended June 30, 2007 and 2008 amounted to $4,686,282 and $5,041,462, respectively ($2,361,718 and $2,358,867 for the quarters ended June 30, 2007 and 2008, respectively), and is included in Interest and finance costs in the accompanying condensed consolidated statements of income.

At June 30, 2008, the Company was in compliance with all covenants under the term loans and the amount outstanding of $231,857,701 bore an average interest rate (including the margin) of 4.37%.

14. Interest Rate Swap Agreements

On January 15, 2008, the Company entered into an agreement to enter into an interest rate swap in regard to the “Fortis Loan” in order to hedge the Company’s variable interest rate exposure. The amount of the swap will be $41,702,995 over its five-year life commencing January 17, 2008. The rate is fixed throughout the period at 3.66%.

On March 18, 2008, the Company entered into an agreement to enter into an interest rate swap in regard to the “Deutsche Bank Loan” in order to hedge the Company’s variable interest rate exposure. The notional amount of the swap will be $40,250,000 over its five-year life commencing March 20, 2008. The rate is fixed throughout the period at 3.09%.

As of June 30, 2008, the Company is a party to six floating-to-fixed interest rate swaps, which are designated and qualified as cash flow hedges, with various major financial institutions covering notional amounts aggregating approximately $166,395,140 pursuant to which it pays fixed rates ranging from 3.09% to 5.58% and receives floating rates based on LIBOR (approximately 2.8% as of June 30, 2008).

Three from the above swap agreements did not meet hedge accounting criteria and accordingly changes in its fair value amounted to $301,576 (income) and $541,536 (loss) for the six month periods ended June 30, 2007 and 2008, respectively, ($327,521 (income) and $1,760,757 (income) for the quarters ended June 30, 2007 and 2008, respectively) were recognized in the accompanying condensed consolidated statement of income. The changes in fair value of the three swap agreements which qualified as effective cash flow hedge were recorded as a component in comprehensive income and as of June 30, 2007 and 2008 amounted to $371,849 (loss) and $1,905,331 (income), respectively, and changes in ineffective portion of the swaps of $13,143 (income) and $13,129 (loss), respectively, charged in the consolidated statement of income under the caption “Change in fair value of derivatives”.These agreements contain no leverage features and have maturity dates ranging from September 2011 to March 2016.

Under SFAS No. 157, the interest rate (LIBOR) used in the measurement of the swaps’ fair value falls

12

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

14. Interest Rate Swap Agreements — Continued

into level 2 of the hierarchy for ranking the quality and reliability of the information used to determine fair values. As of June 30, 2008, the Company has recorded an asset of $1,996,529 and a liability of $3,921,723 related to the fair values of these swaps.

15. Equity Compensation Plan

The Company’s board of directors has adopted an Equity Compensation Plan (“the Plan”), under which the Company’s employees, directors or other persons or entities providing significant services to the Company or its subsidiaries are eligible to receive stock-based awards including restricted stock, restricted stock units, unrestricted stock, bonus stock, performance stock and stock appreciation rights. The Plan is administered by the Compensation Committee of the Company’s board of directors and the aggregate number of shares of common stock reserved under this plan cannot exceed 10% of the number of shares of Company’s common stock issued and outstanding at the time any award is granted. The Company’s board of directors may terminate the Plan at any time. The Plan expires ten years from the date of adoption.

On March 18, 2008, the Company granted 9,396 of non-vested restricted shares to the Deputy Chairman of the Board and Executive Director of the Company and 16,609 restricted shares to certain employees of the “Manager” (a related party) under the Plan, treated as non-employees for stock based compensation recording purposes. The fair value of each share granted was $13.52 which is equal to the market value of the Company’s common stock on the day of a grant. The restricted shares will be vested over 3 years from the grant date, (13,003 shares on March 18, 2009, 6,501 shares on March 18, 2010 and 6,501 shares on March 18, 2011).

As of June 30, 2007 a total of 250,005 restricted shares had been granted under the Plan since the first grant in the third quarter of 2007.

Management has selected the accelerated method allowed by SFAS No. 123(R) Share-Based Payment with respect to recognizing stock based compensation expense for restricted share awards with graded vesting because it considers that this method to better match expense with benefits received. In addition, non-vested awards granted to non-employees are measured at its then-current fair value as of the financial reporting dates until non-employees complete the service. The stock based compensation expense for the restricted vested and unvested shares for the six month periods ended June 30, 2008 amounted to $1,054,538 ($553,887 for the quarter ended June 30, 2008), and is included in the consolidated statement of income under the caption “General and administrative expenses”.

A summary of the status of the Company’s vested and non-vested restricted shares for the six month periods ended June 30, 2008, is presented below:

						Weighted average
		Number of				grant date fair value
		restricted shares				per non-vested share
Non-vested, January 1, 2			170,000				16.34
Granted			26,005				13.52
Vested			—				—
Forfeited			—				—
Non-vested, June 30, 2008			196,005				15.97

As of June 30, 2008, there was $1,674,011 of total unrecognized compensation cost related to non-vested restricted shares granted under this Plan. That cost is expected to be recognized over an average period of 2.7 years.

13

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

16. Earnings per share

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period. The weighted-average number of common shares outstanding does not include any potentially dilutive securities or any unvested restricted shares of common stock. These unvested restricted shares are considered contingently returnable until the restrictions lapse and will not be included in the basic net income per share calculation until the shares are vested.

Diluted earnings per share give effect to all potentially dilutive securities. Our unvested restricted shares were potentially dilutive securities during the six month periods ended June 30, 2008. The difference between basic and diluted weighted-average number of shares outstanding was the dilutive effect of the unvested restricted shares and is computed as follows:

		Quarters ended								Six Month Periods ended
		June 30,								June 30,
		2007				2008				2007				2008
Net income			5,689,025				9,437,775				12,311,479				16,869,218
Basic Weighted average shares — outstanding			14,400,000				22,114,105				14,400,000				22,114,105
Effect on dilutive securities:
Unvested restricted shares			—				99,703				—				63,180
Diluted Weighted average shares — outstanding			14,400,000				22,213,808				14,400,000				22,177,285
Basic earnings per share			0.40				0.43				0.85				0.76
Diluted earnings per share			0.40				0.42				0.85				0.76

17. Dividends Paid

On February 19, 2008 the Company’s Board of Directors declared a cash dividend for 22,284,105 common shares outstanding of $0.1875 per common share, payable on March 5, 2008 to stockholders of record on February 29, 2008. The total amount of $4,178,270 was paid on March 03, 2008.

On May 27, 2008 the Company’s Board of Directors declared a cash dividend for 22,310,110 common shares outstanding of $0.1875 per common share, payable on June 13, 2008 to stockholders of record on June 6, 2008. The total amount of $4,183,146 was paid on June 11, 2008.

14

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

18. Voyage Expenses and Vessel Operating Expenses

The amounts in the accompanying condensed consolidated statements of income are analyzed as follows:

										Six Month Periods
		Quarters ended June 30,								ended June 30,
Voyage Expenses		2007				2008				2007				2008
Port expenses			165,767				154,490				502,208				186,252
Bunkers			210,422				386,959				463,399				544,360
Commissions charged by third parties			318,963				419,980				655,675				800,745
Commissions charged by related party			249,165				352,960				510,080				684,044
Other voyage expenses			13,827				5,584				102,230				8,487
Total			958,144				1,319,973				2,233,592				2,223,888

										Six Month Periods
		Quarters ended June 30,								ended June 30,
Vessels' Operating Expenses		2007				2008				2007				2008
Crew wages and related costs			3,092,773				4,529,513				5,922,075				8,724,258
Insurance			363,838				345,249				747,408				726,894
Repairs and maintenance			789,553				1,361,607				1,405,446				2,186,388
Spares and consumable stores			898,146				1,117,558				1,840,816				2,322,238
Miscellaneous expenses			401,658				539,415				923,017				1,219,356
Total			5,545,968				7,893,342				10,838,762				15,179,134

19. Commitments and Contingencies

	•		From time to time the Company expects to be subject to legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any significant legal proceedings or claims.
	•		In January 2005, the Company entered into a three-year cancelable operating lease for its office facilities that terminated in January 2008. In January 2008, the Company entered into a new two-year cancelable operating lease for its office facilities that terminates in January 2010. Rental expense for the six month periods ended June 30, 2007 and 2008 amounted to $16,059 and $25,271, respectively ($8,068 and $12,633 for the quarters ended June 30, 2007 and 2008, respectively). In October 2005, the Company entered into a three-year cancelable operating lease for an armored car that terminates in October 2008. Rental expense for the six month periods ended June 30, 2007 and 2008 amounted to $22,642 and $26,210, respectively ($11,552 and $13,388 for the quarters ended June 30, 2007 and 2008, respectively) and is recorded in the consolidated statement of income under the caption “General and administrative expenses”.

     Future rental commitments were payable as follows:

June 30,		Office Lease				Car Rent				Total
2009			47,056				13,500				60,556
2010			23,528				—				23,528
			70,584				13,500				84,084

15

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

19. Commitments and Contingencies — Continued

	•		As described in Note 6, during the six month periods ended June 30, 2008 the Company entered into memoranda of agreement with third parties to acquire two vessels under construction and signed contracts with a shipyard for the construction of five vessels. As of June 30, 2008, the unpaid balance of the purchase price for these vessels was $226,185,186, net of $22,618,519 already advanced to the sellers in 2008.
	•		As described in Note 7, during the six month periods ended June 30, 2008 the Company entered into separate memoranda of agreement with affiliated parties to acquire four vessels under construction and one second-hand vessel. As of June 30, 2008, the unpaid balance of the purchase price for these vessels was $92,620,000.

20. Subsequent Events

	(a)		On July 4, 2008, the Company signed a Letter of Intent with a shipyard in China to construct two 156,000 deadweight Suezmax oil tankers with a contract price of $85,800,000 each for delivery between May and July and between July and September 2011 respectively. We also have an option to be exercised at a later date to construct two further such vessels with delivery dates in the first and second quarters of 2012.
	(b)		On July 30, 2008 the Company entered into a $33,600,000 facility agreement with the National Bank of Greece (the “NBG Facility”) to partially finance the acquisition of two under construction LPG carriers, named “Gas Defiance”, and “Gas Shuriken” by two of the Company’s wholly owned subsidiaries. The NBG facility will be fully drawn down in two tranches of up to $16,800,000 in August and October 2008 upon delivery of each vessel. The first tranche amounted to $16,620,000 was drawn down on August 1, 2008. The tranches will be repayable in twenty-four consecutive semi-annual installments of $980,000 each six months after the final drawdown and in no case later than nine months after the first drawdown, plus a balloon payment of $10,080,000 payable together with the last installment. The first tranche amounted to mi$16,620,000 was drawn down on August 1, 2008 to part finance the acquisition of the “Gas Defiance”. The term loan will charge interest at LIBOR plus 0.95% until the repayment of the third installment and 0.80% thereafter and will be secured by first priority mortgage over the vessels involved, plus the assignment of the vessel insurances, earnings and the pledge of the Company’s earnings account with the lender, and the guarantee of the ship-owning company, as owner of the vessel.
	(c)		On August 1, 2008, the Company took delivery of the “Gas Defiance”.
	(d)		On August 4, 2008 the Company signed a commitment letter with the Nordea Bank Finland Plc, London Branch (“Nordea”) to provide financing of its working capital with an amount of $70,000,000 (the “Nordea Facility”). The senior secured credit facility will be fully drawn down in up to three tranches at any time in the next three months. The facility will be repayable in twenty eight consecutive quarterly installments of $1,350,000 each three months after the loan agreement date, plus a balloon payment of $33,550,000 payable together with the last installment. The term loan charges interest at LIBOR plus 1.30% and is secured by first priority cross collateralized mortgages over the seven collateral vessels involved (Gas Haralambos, Gas Zael, Gas Spirit, Chiltern, Gas Natalie, Catterick, Gas Sophie) plus the assignment of the collateral vessels insurances, earnings and the pledge of the Company’s shares and earnings account with the lender, and the guarantee of the ship-owning companies, as owners of the vessels.

16

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

20. Subsequent Events — Continued

	(e)		On August 5, 2008 the Company entered into a foreign currency forward contract to hedge part of its exposure to fluctuations of its anticipated cash payments in Japanese Yen relating to certain vessels under construction described in note 6. Under the contract the Company will convert approximately JPY5.4 billion of cash outflows to U.S. dollars at various dates from 2009 to 2011.
	(f)		On August 19, 2008 the Company’s Board of Directors declared a cash dividend for 22,310,110 common shares outstanding of $0.1875 per common share, payable on September 5, 2008 to stockholders of record on August 29, 2008. The total amount of $4,183,146 was paid on September 03, 2008.
	(g)		On September 1, 2008 the Company signed a commitment letter with Scotiabank (Ireland) Limited to part finance the construction of a 156,000 deadweight Suezmax tanker to be constructed in China for delivery in July 2011. The senior secured term loan facility amounted to $64,350,000 and is expected to be drawn down in stages as the vessel is constructed. The term loan once fully drawn down upon the delivery of the vessel, which is expected in July 2011, is repayable, commencing six months after drawdown in 14 consecutive semi-annual installments of $1,935,000 each plus a balloon payment of $37,260,000 payable together with the last installment. The term loan’s interest rate is LIBOR plus 1.30%. In addition to first priority mortgage over the vessel, the term loan is secured by the assignment of the vessel’s insurances, refund guarantees from the shipyard, earnings, operating and retention accounts and the guarantee of the ship owning subsidiary. As at September 26, 2008 this facility was undrawn.
	(h)		On September 2, 2008 the Company concluded a memorandum of agreement for the disposal of the vessel “Gas Amazon” to an unaffiliated third party for $11,000,000 with expected delivery date in November 2008. The Company expects to realize a gain from the sale of the above vessel of approximately $3,020,000 and will be included in the Company’s consolidated statement of income in the quarter in which the vessel will be delivered to her new owners.
	(i)		On September 11, 2008, the Company signed a commitment letter with KFW IPEX-Bank Limited to part finance the construction of a 156,000 deadweight Suezmax tanker to be constructed in China for delivery in April 2011. The senior secured term loan facility amounted to $64,500,000 and is expected to be drawn down in stages as the vessel is constructed. The term loan once fully drawn down upon the delivery of the vessel, which is expected in April 2011, is repayable, commencing three months after drawdown in 40 consecutive quarterly installments of $1,075,000 each plus a balloon payment of $21,500,000 payable together with the last installment. The term loan’s interest rate is LIBOR plus 1.30%. In addition to first priority mortgage over the vessel, the term loan is secured by the assignment of these vessels’ insurances, refund guarantees from the shipyard, earnings, operating and retention accounts and the guarantee of the ship owning subsidiary. As at September 26, 2008 this facility was undrawn.

17

StealthGas Inc.
Notes to the condensed consolidated financial statements (unaudited)
(Expressed in United States Dollars)

20. Subsequent Events — Continued

(j) On September 18, 2008, the Company signed a commitment letter with EFG Eurobank Ergasias S.A. to part finance the acquisition of one under construction M.R. type product carrier named “Hyundai Mipo Hull Number 2139” to be constructed in Korea for delivery in the second quarter of 2009. The senior secured term loan facility will be the lesser of the amount of $41,000,000 and the 75% of the vessel’s charter free market value at the time of delivery. The term loan will be drawn down in one tranche upon the delivery of the vessel, which is expected in April 2009, and will be repayable, with the first installment commencing three months after the drawdown in ten consecutive quarterly installments of $850,000 each and thirty consecutive quarterly installments of $550,000 each plus a balloon payment of $16,000,000 payable together with the last installment. The term loan’s interest rate is LIBOR plus 1.50%. In addition to first priority mortgage over the vessel, the term loan is secured by the assignment of these vessels’ insurances, earnings, operating and retention accounts and the guarantee of the ship owning subsidiary.

18