UNITED STATESSECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 20-F
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report ____________
Commission file number 001-37889
TOP SHIPS INC.
(Exact name of Registrant as specified in its charter)
(Translation of Registrant’s name into English)
Republic of the Marshall Islands
(Jurisdiction of incorporation or organization)
1 Vasilisis Sofias and Megalou Alexandrou Str, 15124 Maroussi, Greece
(Address of principal executive offices)
Alexandros Tsirikos, (Tel) +30 210 812 8107, info@topships.org
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
As of December 31, 2022, 10,294,906shares of common stock, par value $0.01 per share, 100,000 Series D Preferred Shares, par value $0.01 per share, 13,452 Series E Preferred Shares, par value $0.01 per share, and 5,850,748 Series F Preferred Shares, par value $0.01 per share, were outstanding.
Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has 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 for 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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
International Financial Reporting Standards as issued by the International Accounting Standards Board
Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17
Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 1163)
F-2
Consolidated Balance sheets as of December 31, 2021 and 2022
F-3
Consolidated Statements of Comprehensive (loss)/income for the years ended December 31, 2020, 2021 and 2022
F-4
Consolidated Statements of Stockholders’ equity for the years ended December 31, 2020, 2021 and 2022
F-5
Consolidated Statements of Cash flows for the years ended December 31, 2020, 2021 and 2022
F-6
Notes to consolidated financial statements
F-7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Top Ships Inc.,
Majuro, Republic of the Marshall Islands
Opinion on the Financial Statements
December 31,
2021
2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Trade accounts receivable
Prepayments and other
Inventories
Vessels held for sale (Note 4c)
Total current assets
FIXED ASSETS:
Advances for vessels under construction (Note 4a)
Vessels, net (Note 4b)
Right of use assets from operating leases (Note 6)
Other fixed assets, net
Total fixed assets
OTHER NON CURRENT ASSETS:
Restricted cash (Note 6 and 7)
Investments in unconsolidated joint ventures (Note 17)
Deposit asset (Note 19)
Total non-current assets
Total assets
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 7)
Debt related to vessels held for sale (Note 7)
Due to related parties (Note 5)
Accounts payable
Accrued liabilities
Unearned revenue
Current portion of Operating lease liabilities (Note 6)
Total current liabilities
NON-CURRENT LIABILITIES:
Non-current portion of long term debt (Note 7)
Non-current portion of Operating lease liabilities (Note 6)
Other non-current liabilities
Total non-current liabilities
COMMITMENTS AND CONTINGENCIES (Note 8)
Total liabilities
MEZZANINE EQUITY:
Preferred stock, $0.01par value; 20,000,000 shares authorized; 13,452 Series E Shares issued and outstanding at December 31, 2021 and 13,452Series E Shares and 5,850,748 Series F Shares issued and outstanding at December 31, 2022 (Note 12)
Total mezzanine equity
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.01par value; 20,000,000 shares authorized; of which 100,000 Series D Shares were outstanding at December 31, 2021 and 2022 (Note 9)
Common stock, $0.01par value; 1,000,000,000 shares authorized; 1,991,598 and 10,294,906 shares issued and outstanding at December 31, 2021 and 2022 (Note 9)
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities, mezzanine equity and stockholders’ equity
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME
FOR THE YEARS ENDED DECEMBER 31, 2020, 2021 and 2022
2020
Revenues (including $0, $0 and $7,294respectively, from related party) (Note 18 & 5)
EXPENSES:
Voyage expenses (including $761, $705 and $1,008respectively, to related party) (Note 11)
Operating lease expense (Note 6)
Vessel operating expenses (including $60, $17 and $37respectively, to related party) (Note 11)
Dry-docking costs
Vessel depreciation (Note 4b)
Management fees-related parties (Note 5)
General and administrative expenses (including $360, $360 and $360 respectively, to related party)(Note 5)
Other operating loss (Note 15)
Loss/(Gain) on sale of vessels (Note 6 and 19)
Impairment on vessels (Note 19)
Operating (loss)/ income
OTHER EXPENSES:
Interest and finance costs (including $0, $0 and $207respectively, to related party) (Note 12)
(Loss)/Gain on derivative financial instruments (Note 14)
Interest income
Equity gain in unconsolidated joint ventures
Total other expenses, net
Net (loss)/income and comprehensive (loss)/income
Less: Deemed dividend for beneficial conversion feature of Series E Shares (Note 16)
Less: Deemed dividend equivalents on preferred shares related to redemption value (Note 16)
Less: Preferred shares dividend (Note 16)
Net (loss) / income attributable to common shareholders
(Loss) / Earnings per common share, basic and diluted (Note 10)
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS’ EQUITY
(Expressed in thousands of U.S. Dollars – except number of shares and per share data)
# of
Shares
Mezzanine
Equity
Par
Value
Shares*
Value*
Paid-In
Capital*
to common
stockholders
comprehensive
loss
Total
BALANCE, December 31, 2019
Net loss
Stock-based compensation
Issuance of common stock pursuant to equity offerings (Note 9)
Cashless exercises of Class A Warrants (Note 9)
Issuance of Series E Shares (Note 16)
Deemed dividend equivalents on Series E Shares issued during the period related to redemption value
Redemptions of Series E Shares (Note 16)
Reversal of costs related to equity offerings
Excess of consideration over carrying value of acquired assets (Note 1)
Dividends of Series E shares (Note 16)
Beneficial conversion feature related to the issuance of Series E Shares
Deemed dividend related to beneficial conversion feature of Series E Shares
Reversal of Other comprehensive loss (Note 14)
BALANCE, December 31, 2020
Net Income
BALANCE, December 31, 2021
*Adjusted to reflect the reverse stock split effected in September 2022 (see Note 1)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. Dollars)
Cash Flows from Operating Activities:
Net (loss) / income
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
Vessel depreciation
Other fixed assets depreciation
Equity (gains) in unconsolidated joint ventures
Dividends from cumulative earnings of joint venture
Amortization and write off of deferred financing costs
Stock-based compensation expense
Change in fair value of derivative financial instruments
Impairment on vessels
(Increase)/Decrease in:
Increase/(Decrease) in:
Due to related parties
Net Cash provided by Operating Activities
Cash Flows used in Investing Activities:
Advances for vessels under construction and capitalized expenses
Investments in unconsolidated joint ventures (2017 Joint Venture – see Note 17)
Investments in unconsolidated joint ventures (2020 Joint Venture – see Note 17)
Returns of investments in unconsolidated joint ventures (2020 Joint Venture – see Note 17)
Net proceeds from vessel sales
Cash Flows from Financing Activities:
Proceeds from debt
Principal payments and prepayments of debt
Consideration paid in excess of purchase price over book value of vessels
Proceeds from issuance of common stock
Equity offering issuance costs
Payment of financing costs
Derivative financial instrument termination payments
Net Cash (used in)/ provided by Financing Activities
Net increase/(decrease) in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at beginning of year
Cash and cash equivalents and restricted cash at end of the year
Cash breakdown
Restricted cash, current
Restricted cash, non-current
SUPPLEMENTAL CASH FLOW INFORMATION
Capital expenditures included in Accounts payable/Accrued liabilities/Due to related parties
Interest paid, net of capitalized interest
Finance fees included in Accounts payable/Accrued liabilities/Due to related parties
Unpaid Excess of consideration over carrying value of acquired assets included in Due to Related Parties (Note 1)
Beneficial conversion feature of Series E perpetual convertible preferred stock (Note 16)
Dividends payable included in Due to related parties (Note 16)
Carrying value of net assets of companies acquired (Note 1)
Reversal of equity offering costs not payable
Prepaid rent of Navigare Lease included in initial measurement
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021 AND 2022
AND FOR THE YEARS ENDED DECEMBER 31, 2020, 2021 and 2022
(Expressed in thousands of United States Dollars – except share, per share earnings and rate per day, unless otherwise stated)
1.
Basis of Presentation and General Information:
The consolidated financial statements include the accounts of Top Ships Inc. (formerly Top Tankers Inc. and Ocean Holdings Inc.) and its wholly owned subsidiaries (collectively the “Company”). Ocean Holdings Inc. was formed on January 10, 2000, under the laws of Marshall Islands and was renamed to Top Tankers Inc. and Top Ships Inc. in May 2004 and December 2007, respectively. The Company is an international provider of worldwide oil, petroleum products and chemicals transportation services.
As of December 31, 2022, the Company was the sole owner of all outstanding shares of the following subsidiary companies. The following list is not exhaustive as the Company has other subsidiaries relating to vessels that have been sold and that remain dormant for the periods presented in these consolidated financial statements as well as intermediary companies that own shipowning companies that are 100% subsidiaries of the Company.
Companies
Date of
Incorporation
Country of
Activity
Top Tanker Management Inc.
May 2004
Marshall Islands
Management company
Wholly owned Shipowning Companies (“SPC”) with vessels in operation during years ended December 31, 2020, 2021 and 2022
Vessel
Delivery Date
1
Monte Carlo Lax Shipping Company Limited
May 2013
M/T Nord Valiant
August 2016 (sold in 2021)
2
PCH Dreaming Inc.
January 2018
M/T Eco Marina Del Ray
March 2019
3
Santa Catalina Inc.
December 2018
M/T Eco Los Angeles
4
Santa Monica Marine Inc.
M/T Eco City of Angels
5
Roman Empire Inc.
February 2020
Eco West Coast
March 2021
6
Athenean Empire Inc.
February, 2020
Eco Malibu
May 2021
As of December 31, 2020, 2021 and 2022, the Company was the owner of 50% of outstanding shares of the following companies.
SPC
Built Date
California 19 Inc.
May 2019
M/T Eco Yosemite Park
March 2020
California 20 Inc.
M/T Eco Joshua Park
On May 6, 2020, the Company acquired for $18,000 from a company affiliated with Mr. Evangelos J. Pistiolis a 100% ownership interest in three Marshall Island companies (the “MR Transaction”) that each had a newbuilding contract for the construction of one scrubber-fitted 50,000 dwt eco MR product/chemical tanker, under construction at that time in Hyundai Mipo shipyard in South Korea, with attached time charters. The vessels, M/T Eco Van Nuys (Hull No 2789), M/T Eco Santa Monica (Hull No 2790) and M/T Eco Venice Beach (Hull No 2791) were scheduled to be delivered in the first quarter of 2021. Each of the three product tankers had time charters with Central Tankers Chartering Inc, a company affiliated with Mr. Evangelos J. Pistiolis, for a firm term of five years at a gross daily rate of $16,200, with a charterer’s option to extend for twoadditional years at $17,200 and $18,200, scheduled to commence upon delivery of each vessel. Of the consideration payable, $16,850 was paid in the year ended December 31, 2020 and the remaining $1,150 was due on the vessels’ delivery date and was included in Due to related parties in the consolidated balance sheets as of December 31, 2020.
On May 28, 2020, the Company acquired for $22,000 from a company affiliated with Mr. Evangelos J. Pistiolis, or the Suezmax Seller, a 50% ownership interest in two Marshall Island companies (the “SPVs”) that each had a newbuilding contract for the construction of one scrubber-fitted 157,000 dwt eco Suezmax tanker, M/T Eco West Coast (Hull No 865) and M/T Eco Malibu (Hull No 866) under construction at that time in Hyundai Heavy Industries shipyard in South Korea, with attached time charters with Clearlake Shipping Pte Ltd. The M/T’s Eco West Coast and Eco Malibu, scheduled to commence upon delivery of each vessel, were delivered on March 26 and May 11, 2021 respectively. The Company had the option to acquire the other 50% ownership interest in both vessels from the Seller at the same price until July 15, 2020. On June 18, 2020, the Company exercised both purchase options for a consideration of $22,000. Upon their delivery, both vessels entered into time charters with Clearlake Shipping Pte Ltd., for a firm term of three years at a gross daily rate of $33,950, with a charterer’s option to extend for twoadditional years at $34,750 and $36,750, respectively. The full amount of the consideration was paid in the year ended December 31, 2020.
On January 6, 2021 the Company sold to a related party affiliated with Mr. Evangelos J. Pistiolis (the “Buyer”) the three shipowning companies that owned M/T Eco Van Nuys (Hull No 2789), M/T Eco Santa Monica (Hull No 2790) and M/T Eco Venice Beach (Hull No 2791) in exchange for:
●
$10,000 in cash
100% ownership in a Marshall Islands company that was party to a shipbuilding contract for a high specification scrubber fitted Suezmax Tanker at the time under construction at Hyundai Samho shipyard that was delivered in March 2022 (M/T Eco Oceano Ca - Hull No 871). The shipowning company is party to a time charter, starting from the vessel’s delivery, with Central Tankers Chartering, a related party affiliated with the family of Mr. Evangelos J. Pistiolis, for a firm duration of five years at a gross daily rate of $32,450, with a charterer’s option to extend for two additional years at $33,950 and $35,450(also see Note 5).
35% ownership in one Marshall Islands company that was a party to a shipbuilding contract for a high specification scrubber fitted VLCC tanker under construction at Hyundai Heavy Industries shipyard that was delivered in January 2022 (Julius Caesar - Hull No. 3213). The shipowning company is party to a time charter, starting from the vessel’s delivery, with a major oil trader, for a firm duration of three years at a gross daily rate of $36,000, with a charterer’s option to extend for two additional years at $39,000 and $41,500.
35% ownership in one Marshall Islands company that is party to a shipbuilding contract for a high specification scrubber fitted VLCC tanker at the time under construction at Hyundai Heavy Industries shipyard that was delivered in March 2022(Legio X Equestris - Hull No. 3214). The shipowning company is party to a time charter, starting from the vessel’s delivery, with a major oil trader, for a firm duration of three years at a gross daily rate of $35,750, with a charterer’s option to extend for two additional years at $39,000 and $41,500.
A settlement of $1,150 in related party payables to the Buyer.
The Buyer remained the guarantor on the shipbuilding contracts towards the shipyard and in addition, the Buyer provided the Company with an option for a credit line up to 10% of the total shipbuilding cost at market terms, to be negotiated when the option is exercised, amounting to $23,815.
On September 8, 2021 the Company purchased from the Buyer for a consideration of $29,750 an additional 65% ownership interest in Julius Caesar Inc. - Hull No. 3213 and Legio X Inc. - Hull No. 3214 (the “VLCC Companies”). Following this transaction, the Company is the 100% owner of the VLCC Companies. The Buyer remained the guarantor on the shipbuilding contracts towards the shipyard and in addition the Buyer provided a financing option to the Company by remaining responsible to the shipyard for up to 20% of the shipbuilding cost per vessel (increased from 10%, as previously agreed on January 6, 2021,), at the option of the Company, to be exercised until each vessel’s delivery date.
Due to the abovementioned purchase of the remaining 65% of the VLCC Companies, which were initially accounted for as Investments in affiliates, the Company consolidates the VLCC Companies.
Each of the abovementioned transactions were approved by a special committee of the Company’s board of directors (the “Special Committee”), of which all of the directors were independent and for each transaction the Special Committee obtained a fairness opinion relating to the consideration of each transaction from an independent financial advisor. The Company accounted for the abovementioned acquisitions as a transfer of assets between entities under common control and has recognized the vessels at their historical carrying amounts at the date of transfer.
The amount of the consideration given in excess of the historical carrying value of the net assets acquired is recognized as a reduction to the Company’s additional paid in capital and presented as Excess of consideration over the carrying value of acquired assets in the Company’s consolidated statement of stockholders’ equity for the twelve months ended December 31, 2020, 2021 and 2022 respectively. An analysis of the consideration paid is presented in the table below:
As of December 31,
Consideration
Carrying value of net assets of companies sold
Less: Carrying value of net assets of companies acquired
Less: Consideration received in cash
Less: Settlement of related party payables
Excess of consideration over acquired assets
On March 11, 2020, the World Health Organization declared the coronavirus (“COVID-19”) outbreak a pandemic. In response to the pandemic, many countries, ports and organizations, including those where the Company conducts a large part of its operations, have implemented measures to combat the pandemic, such as quarantines and travel restrictions. Such measures have caused and will likely continue to cause severe trade disruptions. During the years ended December 31, 2020 and 2021 the Company encountered certain prolonged delays embarking and disembarking crew onto the Company’s ships as a result of restrictions at ports placed by various countries due to COVID-19 resulting to an increase in off-hire days or approximately $487 and $519 respectively of reduction in revenue as well as a slight increase in operating expenses relating to crew as well as an increase in fuel expenses during off-hires in both periods. During the year ended December 31, 2022 such instances of increased off-hires and delays were greatly subsided.
The extent to which COVID-19 will impact the Company’s future results of operations and financial condition, including possible vessel impairments, will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the emergence of new virus variants and the additional actions to contain or treat its impact.
On September 23, 2022 the Company effected a 1-for-20 reverse stock split of its common stock. There was no change in the number of authorized common shares of the Company, or the floor price of the Company’s Series E Shares, or the number of votes of the Company’s Series D, E and F Shares. All numbers of common share and earnings per share amounts, as well as warrant shares eligible for purchase under the Company’s warrants, exercise price of said warrants and conversion prices of the Company’s Series E Shares, in these consolidated financial statements have been retroactively adjusted to reflect this 1-for-20 reverse stock split.
2.
Significant Accounting Policies:
(a)
Principles of Consolidation: The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts and operating results of Top Ships Inc. and its subsidiaries referred to in Note 1.Intercompany balances and transactions have been eliminated on consolidation. Non-controlling interests are stated at the non-controlling interest’s proportion of the net assets of the subsidiaries where the Company has less than 100% interest. Subsequent to initial recognition the carrying amount of non-controlling interest is increased or decreased by the non-controlling interest’s share of subsequent changes in the equity of such subsidiaries. Total comprehensive income is attributed to a non-controlling interest even if this results in a deficit balance. Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions and the carrying amounts of the Company’s interests and the non-controlling interests are adjusted to reflect these changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
Description
Useful Life (years)
Cars
Office equipment
Furniture and fittings
Computer equipment
Operating lease- The Company as a lessee: The Company recognizes right-of-use assets (“ROU”) and corresponding lease liabilities for its operating leases. ROU assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made to the lessor prior to lease commencement, less any lease incentives, and initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.
3.
Going Concern:
At December 31, 2022, the Company had a working capital deficit of $9,343 and for the year ended December 31, 2022 realized a net income of $18,948 and generated cash flow from operations of $33,419.
4(a)
Advances for vessels acquisitions / under construction:
An analysis of Advances for vessels acquisitions / under construction is as follows:
Advances for vessels
acquisitions /
under construction
Balance, December 31, 2020
— Advances paid
— Capitalized expenses
— Transferred to Vessels, net
Balance, December 31, 2021
Balance, December 31, 2022
4(b)
Vessels, net:
The amounts in the consolidated balance sheets are analyzed as follows:
Vessel Cost
Accumulated Depreciation
Net Book Value
— Transferred from advances for vessels under construction
— Transferred to Assets held for sale
— Disposals (see Note 19)
— Depreciation
In 2021 and 2022 the Company took delivery of the following vessels and hence advances paid and capitalized expenses relating to these vessels were transferred from Advances for vessels under construction to Vessels, net:
Vessel Name
Yard
Installments
Capitalized Expenses
Final Cost
M/T Eco West Coast
M/T Eco Malibu
Total 2021
M/T Julius Caesar
January 17, 2022
M/T Legio X Equestris
March 2, 2022
Total 2022
As of December 31, 2022 title of ownership is held by the relevant lenders in respect of vessels with a carrying value of $270,029 to secure the relevant sale and lease back financing transactions and in the case of vessels financed via bank loans vessels with a carrying value of $119,030have been mortgaged as security under their respective loan facilities (see Note 7).
4(c)
Vessels held for sale:
As of December 31, 2021, the M/T’s Eco Los Angeles and Eco City of Angels met the criteria to be classified as assets held for sale according to guidance in ASC 360. Consequently, the Company has treated the vessels as vessels held for sale. Since their fair value less costs to sell were higher than their carrying amount the Company did not incur any impairment charges. As of December 31, 2021, each of the M/T’s Eco Los Angeles and Eco City of Angels carrying amount is $35,818. The vessels were sold on February 28 and March 15, 2022 to unaffiliated third parties.
5.
Transactions with Related Parties:
As of December 31, 2021 and 2022 the amounts due to Central Mare were $32 and $0respectively and are presented in Due to related parties, on the consolidated balance sheets.
The fees charged by and expenses relating to Central Mare for the years ended December 31, 2020, 2021 and 2022 are as follows:
Year Ended December 31,
Presented in:
Executive officers and other personnel expenses
General and administrative expenses – Statement of comprehensive (loss)/income
Amortization of awarded shares*
Management fees – related parties – Statement of comprehensive (loss)/income
(b) Central Shipping Inc (“CSI”) – Letter Agreement and Management Agreements: On January 1, 2019, the Company entered into a letter agreement with CSI (“CSI Letter Agreement”), a related party affiliated with the family of Evangelos J. Pistiolis and between January 1, 2019 and September 8, 2021 the Company entered into management agreements, or Management Agreements, between CSI and the Company’s vessel-owning subsidiaries. The CSI Letter Agreement can only be terminated subject to an eighteen-month advance notice, subject to a termination fee equal to twelve months of fees payable under the CSI Letter Agreement.
Pursuant to the CSI Letter Agreement, as well as the Management Agreements concluded between CSI and the Company’s vessel-owning subsidiaries, the Company pays a management fee of $600per day per vessel for the provision of technical, commercial, operation, insurance, bunkering and crew management, commencing three monthsbefore the vessel is scheduled to be delivered by the shipyard. In addition, the Management Agreements provide for payment to CSI of: (i) $546per day for superintendent visits plus actual expenses; (ii) a chartering commission of 1.25% on all freight, hire and demurrage revenues; (iii) a commission of 1.00% on all gross vessel sale proceeds or the purchase price paid for vessels and (iv) a financing fee of 0.2% on derivative agreements and loan financing or refinancing. CSI also performs supervision services for all of the Company’s newbuilding vessels while the vessels are under construction, for which the Company pays CSI the actual cost of the supervision services plus a fee of 7% of such supervision services.
CSI provides, at cost, all accounting, reporting and administrative services. Finally, the CSI Letter Agreement provides for a performance incentive fee for the provision of management services to be determined at the discretion of the Company’s Board of Directors. The management agreements have an initial term of five years, after which they will continue to be in effect until terminated by either party subject to an eighteen-month advance notice of termination. Pursuant to the terms of the management agreements, all fees payable to CSI are adjusted annually according to the US Consumer Price Inflation (“CPI”) of the previous year and if CPI is less than 2% then a 2% increase is effected. On September 15, 2021 the Company entered into an amendment to the CSI Letter Agreement, whereby the payment for the already agreed commission for sale and purchase of vessels in the case of the purchase of a vessel under construction is denoted as “Newbuilding vessels monitoring fee” and is payable as follows: 25% of the commission on the purchase of the newbuilding construction contract, 25% of the commission on the steel cutting of the newbuilding vessel, 25% of the commission on launching of the newbuilding vessel and 25% of the commission on the delivery of the newbuilding vessel to the Company (“steel cutting” and “launching” are newbuilding vessel construction milestones, evidenced by notices received by the shipyard).
As of December 31, 2021 and 2022, the amounts due to CSI were $1,193 and $237respectively and are presented in Due to related parties, on the consolidated balance sheets.
The fees charged by and expenses relating to CSI for the years ended December 31, 2020, 2021 and 2022 are as follows:
Management fees
Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet
Management fees – related parties –Statement of comprehensive (loss)/ income
Supervision services fees
Superintendent fees
Vessel operating expenses –Statement of comprehensive (loss)/income
Accounting and reporting cost
Commission for sale and purchase of vessels
Loss/(Gain) from vessel sales –Statement of comprehensive (loss)/income
Capitalized in Investments in unconsolidated joint ventures –Balance sheet
Capitalized in Right of use assets from operating leases – Balance Sheet
Impairment on vessels – Statement of comprehensive (loss)/income
Newbuilding vessels monitoring fee
Financing fees
Net in Current and Non-current portions of long-term debt – Balance sheet
Commission on charter hire agreements
Voyage expenses - Statement of comprehensive (loss)/income
For the years ended December 31, 2020, 2021 and 2022 CSI charged the Company newbuilding supervision related pass-through costs amounting to $967, $1,207 and $236 respectively, which are not included in the table above and are presented within Vessels, net / Advances for vessels acquisitions / under construction in the Company’s consolidated balance sheet.
(c) Issuance of Series E Shares: On March 29, 2019 the Company entered into a stock purchase agreement with Family Trading Inc (“Family Trading”), a related party owned by the Lax Trust, an irrevocable trust established for the benefit of certain family members of Mr. Evangelos J. Pistiolis, pursuant to which the Company exchanged the outstanding principal, fees and interest of the Further Amended Family Trading Credit Facility with 27,129 Series E Shares (defined below, also see Note 16). For the year ended December 31, 2021 and 2022 the Company declared dividends of $1,883 and $2,046 respectively and accrued interest on unpaid dividends amounted to $0 and $30 for the same periods. As of December 31, 2021 and 2022, dividends due to Family Trading were $968and $0 and are presented in Due to related parties, on the consolidated balance sheets.
(d) Vessel Acquisitions from affiliated entities: From February 20, 2020 to September 8, 2021 the Company entered into a series of transactions with a number of entities affiliated with Mr. Evangelos J. Pistiolis (see Notes 1 and 5). As of December 31, 2021 and 2022, the Company owes $27,562 and $0 respectively to the previous owners of the newbuilding vessels presented in Due to related parties in the consolidated balance sheets.
(e) Charter Party with Central Tankers Chartering Inc (“Central Tankers Chartering”): As part of the MR Transaction (see Note 1) Central Tankers Chartering was the charterer of the vessels M/T Eco Van Nuys, M/T Eco Santa Monica and M/T Eco Venice Beach. The time charters were for a firm period of five years at a daily rate of $16,200 with two optional years at daily rates of $17,200 and $18,200at Central Tankers Chartering’s option and would have commenced upon each vessel’s delivery from the shipyard in the first quarter of 2021. The vessels M/T Eco Van Nuys, M/T Eco Santa Monica and M/T Eco Venice Beach were exchanged as part of the VLCC Transaction on January 6, 2021 (see Note 1). On January 6, 2021 the Company acquired a shipowning company from an entity affiliated with Mr. Evangelos J. Pistiolis that owned M/T Eco Oceano Ca which was party to a time charter, with CTC, for a firm duration of five years at a gross daily rate of $32,450, with two optional years at $33,950 and $35,450 at CTC’s option. On February 22, 2022 the Company amended the previously agreed time charter with CTC and increased its firm period from 5 years to 15 years and reduced the daily rate from $32,450to $24,500. This amendment was approved by a committee of the Company’s board of directors, of which all of the directors were independent, after obtaining a fairness opinion from an independent financial advisor. The time charter commenced on the date of delivery. For the year ended December 31, 2022 the CTC charter generated $7,294 of revenue presented in Time charter revenues in the accompanying consolidated statements of comprehensive (loss)/income. As of December 31, 2021 and 2022, there are no amounts due to Central Tankers Chartering.
(f) Personal Guarantees by Mr. Evangelos J. Pistiolis and Related Amendments to the Series D Preferred Shares: As a prerequisite for the Navigare Lease (defined below, see Note 6), Mr. Evangelos J. Pistiolis personally guaranteed the performance of the bareboat charters connected to the lease and in exchange, the Company agreed to indemnify him for any losses suffered as a result of the guarantee provided, and the Company amended the Certificate of Designations governing the terms of the Series D Preferred Shares (see Note 7), to adjust the voting rights per share of Series D Preferred Shares such that during the term of the Navigare Lease, the combined voting power controlled by Mr. Evangelos J. Pistiolis and the Lax Trust does not fall below a majority of the Company’s total voting power, irrespective of any new common or preferred stock issuances, and thereby complying with a relevant covenant of the bareboat charters entered in connection with the Navigare Lease. This personal guarantee comes into effect in the case 120 days have passed and the Company is still unable to pay down all amounts due under the Navigare lease, with the exception of amounts due to Navigare due to a total loss, where in this case the personal guarantee will cover an amount equal to all unpaid charter hire and a further amount equivalent to all future charter hire that would have accrued from the date of the total loss up to the end of the charter period and is callable 200 days after the date of the total loss. Due to the related party nature of the transactions involving Mr. Evangelos J. Pistiolis, such transactions were unanimously approved by our Board of Directors, including all three independent directors.
(g) Issuance of Series F Shares: On January 17, 2022, the Company entered into a stock purchase agreement with Africanus Inc., an affiliate of Evangelos J. Pistiolis for the sale of up to 7,560,759 newly-issued Series F Non-Convertible Perpetual Preferred Shares (“Series F Shares”, see Note 16). The issuance of the Series F Shares was approved by a committee of the Company’s board of directors, of which all of the directors were independent. In December 2022, 100% of Africanus Inc shares were transferred to Three Sororibus Trust of Cyprus, which is an irrevocable trust established for the benefit of certain family members of Mr. Pistiolis. For the year ended December 31, 2022 the Company declared dividends of $10,344 and accrued interest on unpaid dividends amounted to $8 for the same period. As of December 31, 2022 there are no dividends due to Africanus Inc.
(h) Short term loan from Central Mare (“Central Mare Bridge Loan”): On January 5, 2022 the Company entered into an unsecured credit facility for up to $20,000 with Central Mare in order to finance part of the cost of its newbuilding program (see Note 7). Related party interest expense, commitment fees and arrangement fees for the year ended December 31, 2022 incurred in connection with this credit facility, amounted to $169, $18 and $400 respectively and are included in interest and finance costs in the accompanying consolidated statements of comprehensive (loss)/income. The Central Mare Bridge Loan was terminated on March 4, 2022 and as of December 31, 2022, there are no interest, arrangement fees nor commitment fees due to Central Mare.
6.
Leases
A. Lease arrangements, under which the Company acts as the lessee
Bareboat Chartered-in Vessels:
The Company has treated the Navigare lease as an operating lease. An operating lease ROU asset amounting to $45,765 was recognized at the inception of the lease together with a lease liability of $43,759 based on the present value of lease payments over the lease term. The operating lease ROU asset also includes initial direct costs of $1,666 and deferred losses from the sale of the vessels of $340. The discount rate used to calculate the present value of lease payments was calculated by taking into account the original lease term and lease payments and was estimated to be 6.72% (same as the weighted average), which was the Company’s estimated incremental borrowing rate, that reflects the interest the Company would have to pay to borrow funds on a collateralized basis over a similar term and similar economic environment. Losses from the sale of these two vessels and initial direct costs which were included in the respective ROU assets are amortized on a straight-line basis over the duration of the lease and are included in operating lease expense in the statement of consolidated (loss)/income. The cash paid for operating leases with original terms greater than 12 months was $12,228 and $12,083 for the years ended December 31, 2021 and 2022 respectively. The revenue generated from vessels under operating leases with original terms greater than 12 months was $17,887 and $ 17,625 for the years ended December 31, 2021 and 2022 respectively.
The Company’s future minimum operating lease payments required to be made after December 31, 2022, relating to the bareboat chartered-in vessels M/T Eco Beverly Hills and M/T Eco Bel Air are as follows:
Year ending December 31,
Bareboat charter lease payments
2023
2024
2025
Less imputed interest
Total Lease Liability
Presented as follows:
Short-term lease liability
Long-term lease liability
The average remaining lease term on our chartered-in contracts greater than 12 months is 35.2 months.
At the lease’s inception, the carrying amounts of the M/T Eco Beverly Hills and M/T Eco Bel Air were less than the vessels fair value, as this was determined by a third party broker valuation. Hence in accordance with ASC 842-40-30-1 that stipulates that sale-and-leaseback transactions are accounted for at fair value, the Company recognized a loss on the sale and leaseback transactions of $10,688 included in Loss/(Gain) on sale of vessels in the Company’s consolidated statements of comprehensive (loss) / income.
B. Lease arrangements, under which the Company acts as the lessor
Charter agreements:
During the year ended December 31, 2022, the Company operated one vessel (M/T Marina Del Ray) under a time charter with Cargill International SA, another vessel (M/T Eco Oceano Ca) with Central Tankers Chartering Inc, twovessels (M/T Eco West Coast and M/T Eco Malibu) with Clearlake Shipping Pte Ltd and four vessels (M/T Eco Bel Air, M/T Eco Beverly Hills, M/T Julius Caesar and M/T Legio X Equestris) under time charters with Trafigura Maritime Logistics Pte Ltd (“Trafigura”).
Future minimum time-charter receipts of the Company’s vessels in operation as of December 31, 2022, based on commitments relating to non-cancellable time charter contracts as of December 31, 2022, are as follows :
Time Charter
receipts
In arriving at the minimum future charter revenues, an estimated 20 days off-hire time to perform scheduled dry-docking in the year the dry-docking is expected on each vessel has been deducted, and it has been assumed that no additional off-hire time is incurred, although there is no assurance that such estimate will be reflective of the actual off-hire in the future.
7.
Debt:
The amounts in the consolidated balance sheets are analyzed as follows (facility names defined below):
Bank / Vessel(s)
Total long term debt:
2nd ABN Facility (M/T Eco West Coast)
2nd Alpha Bank Facility (M/T Eco Malibu)
Cargill Facility (M/T Eco Marina Del Ray)
Total long term debt
Less: Deferred finance fees
Total long term debt net of deferred finance fees
Presented:
Current portion of long term debt
Long term debt
Debt related to Vessels held for sale:
AVIC Facility (M/T Eco Los Angeles and M/T Eco City of Angels)
Debt related to Vessels held for sale net of deferred finance fees
Total Debt net of deferred finance fees
2nd ABN Facility
On March 18, 2021, the Company entered into a credit facility with ABN Amro for $36,800 for the financing of the vessel M/T Eco West Coast (Hull No 865). This facility was drawn down in full. The credit facility is repayable in 24 consecutive quarterly installments of $615 commencing in June 2021, plus a balloon installment of $22,040 payable together with the last installment.
The facility contains various covenants, including (i) an asset cover ratio of 125%, (ii) a ratio of total net debt to the aggregate market value of the Company’s fleet, current or future, of no more than 75% (iii) minimum free liquidity of $500 per delivered vessel owned/operated by the Company and (iv) market adjusted total assets of the Company minus total liabilities to be at least $60,000. Additionally, the facility contains restrictions on the shipowning company incurring further indebtedness or guarantees and change of control provisions (whereby Mr. Evangelos J. Pistiolis may not control less than 50.1% of the voting rights of the Company). It also restricts the shipowning company from paying dividends if such a payment will result in an event of default or in a breach of covenants under the loan agreement.
The facility is secured as follows:
First priority mortgage over M/T Eco West Coast;
Assignment of insurance and earnings of the mortgaged vessel;
Corporate guarantee of the Company;
Pledge of the shares of the shipowning subsidiary;
Pledge over the earnings account of the vessel.
The facility bears interest at LIBOR plus a margin of 2.50%. The applicable LIBOR as of December 31, 2022 was approximately 4.73%.
2nd Alpha Bank Facility
On May 6, 2021, the Company entered into a credit facility with Alpha Bank for $38,000 for the financing of the vessel M/T Eco Malibu (Hull No 866). This facility was drawn down in full. The credit facility is repayable in 12 consecutive quarterly installments of $750 and 12 consecutive quarterly installments of $625, commencing three months from draw down, and a balloon payment of $21,500 payable together with the last installment.
The facility contains various covenants, including (i) an asset cover ratio of 125%, (ii) a ratio of total net debt to the aggregate market value of the Company’s fleet, current or future, of no more than 75% and minimum free liquidity of $500 per delivered vessel owned/operated by the Company. Additionally, the facility contains restrictions on the shipowning company incurring further indebtedness or guarantees and change of control provisions (whereby Mr. Evangelos J. Pistiolis may not control less than 50.1% of the voting rights of the Company). It also restricts the shipowning company from paying dividends if such a payment will result in an event of default or in a breach of covenants under the loan agreement.
First priority mortgage over M/T Eco Malibu;
Specific assignment of any time charters with duration of more than 12 months;
The facility bears interest at LIBOR plus a margin of 3.00%. The applicable LIBOR as of December 31, 2022 was approximately 4.22%.
FINANCINGS COMMITTED UNDER SALE AND LEASEBACK AGREEMENTS
The majority of the below sale and leaseback agreements (“SLB”s) contain, customary covenants and event of default clauses, including cross-default provisions and restrictive covenants and performance requirements including (i) a ratio of total net debt to the aggregate market value of the Company’s fleet, current or future, of no more than 75% and (ii) minimum free liquidity of $500 per vessel at the guarantors level.
Additionally, all the SLBs contain restrictions on the relative shipowning company incurring further indebtedness or guarantees and paying dividends, if such dividend payment would result in an event of default or termination event under the SLB agreements.
All the below SLBs are secured mainly by the following:
Ownership of the vessel financed;
Assignment of insurances and earnings of the vessel financed;
Specific assignment of any time charters of the vessel financed with duration of more than 12 months;
Corporate guarantee of Top Ships Inc.;
Pledge of the shares of the relative shipowning subsidiary;
Pledge over the earnings account of the vessel financed.
On June 29, 2018 the Company entered into a sale and leaseback agreement (“SLB”) and a five-year time charter with Cargill, a non-affiliated party, for its newbuilding vessel M/T Eco Marina Del Ray (Hull No 8242) delivered in March 2019. Consummation of the SLB took place on the vessel’s delivery date. Following the sale, the Company has bareboat chartered back the vessel at a bareboat hire rate of $8,600 per day and simultaneously the vessel commenced its five-year time charter with Cargill. As part of this transaction, the Company has the obligation to buy back the vessel at the end of the five-year period for $22,680. The gross proceeds from the sale were $32,387.
The Company had also entered into a fair value appreciation sharing agreement with Cargill whereby it would share with the latter 25% of the excess of the fair market value of the vessel over a predetermined amount amortized on a daily basis to the facility’s maturity when the vessel was sold or when the loan matured. As a result of Cargill’s entitlement to participate in the appreciation of the market value of the vessel and the significant increase in tankers’ fair values as of December 31, 2022 compared to December 31, 2021, the Company recognized a participation liability of $0 and $3,271 as of December 31, 2021 and 2022 respectively, presented in “Vessel fair value participation liability” in the consolidated balance sheets, with a corresponding debit to a debt discount account, presented contra to the loan balance, broken down to current and non-current long-term debt accordingly.
The SLB with Cargill is accounted for as a financing transaction, as control remains with the Company and the M/T Eco Marina Del Ray will continue to be recorded as an asset on the Company’s balance sheet. In addition, the Company has an obligation to repurchase the vessel.
On September 30, 2019 the owning companies of the M/T Eco Los Angeles and M/T Eco City of Angels entered into an SLB with AVIC, a non-affiliated party, for their newbuilding vessels M/T Eco Los Angeles and M/T Eco City of Angels. Consummation of the SLB and drawdown of funds took place on the vessel’s delivery dates from the shipyard, namely on February 10 and February 17, 2020 respectively. Following the sale, the Company bareboat chartered back the vessels for a period of ten years at a bareboat hire rate of $9,435for the first 5 years and $9,090 for the next 5 years per day per vessel, with a balloon installment of $11,288 for each vessel on the final charter hire date. As part of this transaction, the Company had continuous options, after the second year, to buy back the vessels at purchase prices stipulated in the bareboat agreement depending on when the option was exercised and at the end of the ten yearperiod it had an obligation to buy back the vessels at a cost represented by the balloon payment. The gross proceeds from the sale amounted to $60,200for both vessels.
The SLB with AVIC contained a covenant requiring that there is no change of control of the Company, save with the prior written consent of AVIC.
The SLB with AVIC was accounted for as a financing transaction, as control would remain with the Company and the vessels would continue to be recorded as assets on the Company’s balance sheet. In addition, the Company had the obligation to repurchase the vessels.
On December 31, 2021 the Company classified the M/T Eco Los Angeles and M/T Eco City of Angels as Vessels held for sale (see Note 4c). Hence, the AVIC facility was also classified as short term in a separate balance sheet line from the other non-current portion of debt in the consolidated balance sheets.
On February 28 and March 15, 2022, the company exercised its purchase option on the M/T Eco Los Angeles and M/T Eco City of Angels respectively and purchased the vessels for $27,197 and $27,163 respectively. The vessels were sold on the same dates to unaffiliated third parties.
2nd CMBFL Facility
On November 23, 2021 the Company entered into an SLB with CMBFL, for its newbuilding vessels M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214). Consummation of the SLB took place on January 17 and March 2 2022, respectively. Following the sale, the Company has bareboat chartered back the vessels for a period of eight years at bareboat hire rates comprising of 32 consecutive quarterly installments of $675 and a balloon payment of $32,403payable together with the last installment, plus interest based on the three months LIBOR plus 2.60%.
As part of this transaction, the Company has continuous options to buy back the vessels at purchase prices stipulated in the bareboat agreements depending on when the option was exercised and at the end of the eight year period it has an option to buy back the vessels at a cost represented by the balloon payment. The gross proceeds from the sale of the two vessels were $54,005 and $53,997 for M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214) respectively.
The 2nd CMBFL facility was accounted for as a financing transaction, as control will remain with the Company and the two vessels will continue to be recorded as assets on the Company’s balance sheet. In addition, the Company has continuous options to repurchase the vessels below fair value.
Scheduled Principal Repayments: The Company’s annual principal payments required to be made after December 31, 2022 on its loan obligations, are as follows (including the financings under sale and leaseback agreements):
Years
December 31, 2023
December 31, 2024
December 31, 2025
December 31, 2026
December 31, 2027 and thereafter
As of December 31, 2022, the Company was in compliance with all debt covenants with respect to its loans and credit facilities. The fair value of debt outstanding on December 31, 2022, after excluding unamortized financing fees and debt discounts, amounted to $238,893 when valuing the Cargill Sale and Leaseback on the basis of the Commercial Interest Reference Rates (“CIRR”s) as applicable on December 31, 2022, which is considered to be a Level 2 item in accordance with the fair value hierarchy.
Financing Costs: The net additions in deferred financing costs amounted to $1,204 and $3,417 during the years ended December 31, 2021 and 2022 respectively.
Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. As part of the normal course of operations, the Company’s customers may disagree on amounts due to the Company under the provision of the contracts which are normally settled through negotiations with the customer. Disputed amounts are normally reflected in revenues at such time as the Company reaches agreement with the customer on the amounts due.
Other than the cases mentioned above, the Company is not a party to any material litigation where claims or counterclaims have been filed against the Company other than routine legal proceedings incidental to its business.
On December 10, 2020, the Company entered into a corporate guarantee agreement with Alpha Bank of Greece (which was amended on February 2, 2022) in respect of the obligations of its 50% subsidiary California 19 Inc. and California 20 Inc. under the Loan Agreement dated March 12, 2020 for a secured loan facility of $37,660 ($18,830 for each vessel) for the financing of M/T Eco Yosemite Park and M/T Eco Joshua Park (the “Alpha Corporate Guarantee”). The Company assigns zero probability of default to said loan agreements and hence has not established any provisions for losses relating to this matter.
Environmental Liabilities:
The Company accrues for the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. Currently, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the consolidated financial statements.
9.
Common and Preferred Stock, Additional Paid-In Capital and Dividends:
Reverse stock split:On September 23, 2022 the Company effected a 1-for-20 reverse stock split of its common stock. There was no change in the number of authorized common shares of the Company, or the floor price of the Company’s Series E Shares, or the number of votes of the Company’s Series D, E and F Shares. All numbers of common share and earnings per share amounts, as well as warrant shares eligible for purchase under the Company’s warrants, exercise price of said warrants and conversion prices of the Company’s Series E Shares, in these consolidated financial statements have been retroactively adjusted to reflect this 1-for-20 reverse stock split.
Series D preferred shares: On May 8, 2017, the Company issued 100,000 shares of Series D preferred shares (the “Series D shares”) to Tankers Family Inc., a company controlled by Lax Trust for one thousand dollars ($1,000) pursuant to a stock purchase agreement. The Series D shares are not convertible into common shares and each Series D share has the voting power of 1,000 common shares. The Series D shares have no dividend or distribution rights and shall expire and all outstanding Series D shares shall be redeemed by the Company for par value on the date that any financing facility with any financial institution, which contain covenants that require that any member of the family of Mr. Evangelos J. Pistiolis maintain a specific minimum ownership or voting interest (either directly and/or indirectly through companies or other entities beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of the Company’s issued and outstanding common shares, respectively, are fully repaid or reach their maturity date. The Series D shares shall not be otherwise redeemable and upon any liquidation, dissolution or winding up of the Company, the Series D shares shall have a liquidation preference of $0.01 per share. Currently the SLBs with CMBFL, AVIC Leasing, the Alpha Corporate Guarantee, the Navigare Leaseand the ABN Amro and Alpha Bank facilities have similar provisions that are satisfied via the existence of the Series D Shares. As a prerequisite for the Navigare Lease, Mr. Evangelos J. Pistiolis guaranteed the performance of the bareboat charters, under certain circumstances, and in exchange, the Company agreed to indemnify him for any losses suffered as a result of the guarantee provided and in addition, the Company has amended the Certificate of Designation governing the terms of the Series D Shares, to adjust the voting rights per share of Series D Shares such that during the term of the Navigare Lease, the combined voting power controlled by Mr. Evangelos J. Pistiolis and the Lax Trust does not fall below a majority of the total voting power of the Company, irrespective of any new common or preferred stock issuances, and thereby complying with a relevant covenant of the bareboat charters entered in connection with the Navigare Lease. Due to the related party nature of the transactions involving Mr. Evangelos J. Pistiolis, such transactions were unanimously approved by the Company’s Board of Directors, including all three independent directors.
Equity distribution agreement: On April 15, 2022, the Company, entered into an equity distribution agreement, or as they are commonly known, at-the-market offering (“ATM”), with Maxim Group LLC (“Maxim”). Under the ATM the Company could sell up to $19,700 of its common stock with Maxim acting as a sales agent. Since Maxim was acting solely as a sales agent, it had no right to require any common stock sales. No warrants, derivatives, or other share classes were associated with this ATM. The Company terminated the ATM on October 6, 2022. The Company has received proceeds from the ATM (net of 2% fees), amounting to $2,025, issued 129,442 common shares and incurred $81 of expenses related to this equity distribution agreement.
10.
(Loss)/Earnings Per Common Share:
All shares issued are included in the Company’s common stock and have equal rights to vote and participate in dividends and in undistributed earnings.
The components of the calculation of basic and diluted (loss) / earnings per share for the years ended December 2020, 2021 and 2022 are as follows:
(Loss) / Net Income
Less: Deemed dividend for beneficial conversion feature of Series E Shares
Less: Deemed dividend equivalents on preferred shares related to redemption value
Less: Dividends of preferred shares
(Loss) / gain attributable to common shareholders
(Loss) /Earnings per share:
Weighted average common shares outstanding, basic and dilutive
(Loss) / earnings per share, basic and diluted
For the years ended December 31, 2020, 2021 and 2022, 38,514, 635,818 and 974,783 dilutive shares on an as-if converted basis relating to Series E Shares were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the period presented.
11.
Voyage and Vessel Operating Expenses:
The amounts in the consolidated statements of comprehensive (loss)/income are as follows:
Voyage Expenses
Port charges / other voyage expenses
Bunkers
Commissions (including $761, $705 and $1,008 respectively, to related party)
Vessel Operating Expenses
Crew wages and related costs
Insurance
Repairs and maintenance (including $60, $17 and $37 respectively, to related party)
Spares and consumable stores
Registration and taxes (Note 13)
12.
Interest and Finance Costs:
The amounts in the consolidated statements of comprehensive (loss)/income are analyzed as follows:
Interest and Finance Costs
Interest on debt (including $-, $- and $207 respectively, to related party)
Bank charges and loan commitment fees
Amortization and write-off of financing fees
Less interest capitalized
13.
Income Taxes:
Marshall Islands and Greece does not impose a tax on international shipping income. Under the laws of Marshall Islands and Greece the countries of the companies’ incorporation and vessels’ registration, the companies are subject to registration and tonnage taxes, which have been included in Vessel operating expenses in the consolidated statements of comprehensive (loss)/income.
Under the United States Internal Revenue Code of 1986, as amended (the “Code”), the U.S. source gross transportation income of a ship-owning or chartering corporation, such as the Company, is subject to a 4% U.S. Federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury Regulations promulgated thereunder. U.S. source gross transportation income consists of 50% of the gross shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States.
Under Section 883 of the Code and the regulations thereunder, the Company will be exempt from U.S. federal income tax on our U.S.-source shipping income if:
(1) the Company is organized in a foreign country, or its country of organization, grants an “equivalent exemption” to corporations organized in the United States; and
(2) either
A. more than 50% of the value of the Company’s stock is owned, directly or indirectly, by individuals who are “residents” of the Company’s country of organization or of another foreign country that grants an “equivalent exemption” to corporations organized in the United States (each such individual a “qualified shareholder” and such individuals collectively, “qualified shareholders”), which the Company refers to as the “50% Ownership Test,” or
B. the Company’s stock is “primarily and regularly traded on an established securities market” in the Company’s country of organization, in another country that grants an “equivalent exemption” to U.S. corporations, or in the United States, which the Company refers to as the “Publicly-Traded Test.”
The Marshall Islands, the jurisdiction where the Company and the Company’s ship-owning subsidiaries are incorporated, grants an “equivalent exemption” to U.S. corporations. Therefore, the Company will be exempt from U.S. federal income tax with respect to the Company’s U.S.-source shipping income if either the 50%Ownership Test or the Publicly-Traded Test is met.
Treasury Regulations provide, in pertinent part, that stock of a foreign corporation will be considered to be “primarily traded” on an established securities market if the number of shares of each class of stock that are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. The Company’s common shares, which is the Company’s sole class of issued and outstanding stock that is traded, is and the Company anticipates will continue to be “primarily traded” on the Nasdaq Capital Market.
The Treasury Regulations also require that the Company’s stock be “regularly traded” on an established securities market. Under the Treasury Regulations, the Company’s stock will be considered to be “regularly traded” if one or more classes of the Company’s stock representing more than 50% of the Company’s outstanding shares, by total combined voting power of all classes of stock entitled to vote and by total combined value of all classes of stock, are listed on one or more established securities markets, which the Company refers to as the “listing threshold.” The Company’s common stock, which is listed on the Nasdaq Capital Market and is the Company’s only class of publicly-traded stock, did not constitute more than 50% of the Company’s outstanding shares by value for the 2021 taxable year, and accordingly, the Company didn’t satisfy the 50% Ownership Test for the 2021 taxable year and consequently the Company didn’t qualify for exemption from tax under Section 883 for the 2021 taxable year.
The Company for the 2021 taxable year was subject to an effective 2% United States federal tax on the U.S. source shipping income that is attributable to the transport of cargoes to or from the United States which is not considered an income tax. The amount of this tax for the year ended December 31, 2021 was $152 and it was recorded within “Vessel operating expenses” in the consolidated statements of comprehensive (loss)/income. For 2020 and for 2022 the Company qualified for the exemption from tax under Section 883.
14.
Financial Instruments:
The principal financial assets of the Company consist of cash on hand and at banks, restricted cash, prepaid expenses and other receivables and long term deposits. The principal financial liabilities of the Company consist of long-term loans, accounts payable due to suppliers, amounts due to related parties and accrued liabilities.
a)
Interest rate risk: The Company as of December 31, 2022is subject to market risks relating to changes in interest rates, since all of its debt except the Cargill Facility is subject to floating interest rates.
b)
Credit risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions with which it places its temporary cash investments.
c)
Fair value:
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short term maturities. The Company considers its creditworthiness when determining the fair value of its liquid assets.
The fair value of interest rate swaps was determined using a discounted cash flow method taking into account current and future interest rates and the creditworthiness of both the financial instrument counterparty the Company and hence are considered Level 2 items in accordance with the fair value hierarchy. The Company paid a fixed rate and received a floating rate for these interest rate swaps. The fair values of these derivatives were derived principally from, or corroborated by, observable market data inputs included quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allowed values to be determined.
The fair value of warrants was determined using the Black Scholes methodology and hence are considered Level 3 items in accordance with the fair value hierarchy.
The Company follows the accounting guidance for Fair Value Measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities;
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data;
Level 3: Unobservable inputs that are not corroborated by market data.
The Company had entered into interest rate swap transactions to manage interest costs and the risk associated with changing interest rates with respect to its variable interest rate credit facilities. These interest rate swaps were pay-fixed, receive-variable interest rate swaps based on the USD LIBOR swap rate.
On January 16 and January 21, 2020, as part of the prepayment of the ABN Facility, the Company unwound its two remaining interest rate swaps with ABN Amro bank and realized a loss of $405. On February 21, 2020, as part of the prepayment of the Alpha Bank Facility, the Company unwound its interest rate swap with Alpha bank and realized a loss of $927, being the last interest rate swap of the Company. In both cases the resulting losses included losses resulting from the discontinuation of hedge accounting applied that were transferred from Other comprehensive income to (Loss)/Gain on Derivative financial instruments in the consolidated statements of comprehensive (loss)/income.
The following table sets forth a summary of changes in fair value of the Company’s level 3 fair value measurements classified as liability for the year ended December 31, 2021. There were noinstruments classified as liability subject to level 3 fair value measurements in the year ended December 31, 2022.
Closing balance – December 31, 2020
Change in fair value of Class B Warrants, included in (Loss)/Gain on derivative financial instruments in the consolidated statements of comprehensive (loss)/income
Closing balance – December 31, 2021
Information on the location and amounts of derivative financial instruments fair values in the balance sheet and derivative financial instrument losses in the statement of comprehensive (loss)/income are presented below:
Amount of (loss)/gain recognized in Statement of comprehensive loss / (income) located in (Loss)/Gain on derivative financial instruments
Interest rate swaps- change in fair value
Interest rate swaps– realized gain/(loss)
Class B Warrants- change in fair value
15.
Other operating loss
On January 15, January 21, March 9 and October 20, 2020 the Company terminated the time charters of M/T Eco Fleet, M/T Stenaweco Elegance, M/T Eco Palm Desert and M/T Eco California and incurred time charter termination fees amounting to $500, $1,850, $1,700 and $750 respectively.
16.
Mezzanine Equity
On March 29, 2019, the Company entered into a Stock Purchase Agreement with Family Trading for the sale of 27,129 newly issued perpetual convertible preferred shares (the “Series E Shares”) at a price of one thousand dollars ($1,000) per share. The proceeds of the sale were used for the full and final settlement of all amounts due under the Further Amended Family Trading Credit Facility. The issuance of the Series E Shares was approved by a committee of the Company’s board of directors, of which all of the directors were independent.
Each holder of Series E Shares, at any time, has the right, subject to certain conditions, to convert all or any portion of the Series E Shares then held by such holder into the Company’s common shares at the conversion rate then in effect. Each Series E Share is convertible into the number of the Company’s common shares equal to the quotient of one thousand dollars ($1,000) plus any accrued and unpaid dividends divided by the lesser of the following four prices (the “Series E Conversion Price”): (i) $10,000, (ii) 80% of the lowest daily VWAP of the Company’s common shares over the twenty consecutive trading days expiring on the trading day immediately prior to the date of delivery of a conversion notice, (iii) the conversion price or exercise price per share of any of the Company’s then outstanding convertible shares or warrants, (iv) the lowest issuance price of the Company’s common shares in any transaction from the date of the issuance the Series E Shares onwards, but in no event will the Series E Conversion Price be less than the floor price (currently at $0.60). The floor price is adjusted (decreased) in case of splits or subdivisions of the Company’s outstanding shares and is not adjusted in case of reverse stock splits or combinations of the Company’s outstanding shares. The holders of each Series E Share are entitled to the voting power of one thousand (1,000) common shares of the Company. Upon any liquidation, dissolution or winding up of the Company, the holders of Series E Shares shall be entitled to receive the net assets of the Company pari-passu with the common shareholders. Furthermore the Company at its option shall have the right to redeem a portion or all of the outstanding Series E Shares. The Company shall pay an amount equal to one thousand dollars ($1,000) per each Series E Share (the “Liquidation Amount”), plus a redemption premium equal to fifteen percent (15%) of the Liquidation Amount being redeemed if that redemption takes place up to and including March 29, 2020 and twenty percent (20%) of the Liquidation Amount being redeemed if that redemption takes place after March 29, 2020, plus an amount equal to any accrued and unpaid dividends on such Series E Shares (collectively referred to as the “Redemption Amount”).
The Series E Shares shall not be subject to redemption in cash at the option of the holders thereof under any circumstance. Finally, the holders of outstanding Series E Shares shall be entitled to receive, semi-annual dividends payable in cash on the last day of June and December in each year (each such date being referred to herein as a “Semi Annual Dividend Payment Date”), commencing on the first Semi Annual Dividend Payment Date, being June 30, 2019 in an amount per share (rounded to the nearest cent) equal to fifteen percent (15%) per year of the liquidation amount of the then outstanding Series E Shares computed on the basis of a 365-day year and the actual days elapsed. Accrued but unpaid dividends shall bear interest at fifteen percent (15%). Dividends will not be payable in cash, if such payment violates any provision of any senior secured facility that the Company has entered or (as the case may be) will enter into, or any senior secured facility for which the Company has provided or (as the case may be) will provide a guarantee, for as long as such provisions, if any, remain in effect.
The Company determined that the Series E shares were more akin to equity than debt and that the above identified conversion feature, subject to adjustments, was clearly and closely related to the host instrument, and accordingly bifurcation and classification of the conversion feature as a derivative liability was not required. Given that the Series D and Series E preferred stock’s holder (Lax Trust) controls a majority of the Company votes, the preferred equity is in essence redeemable at the option of the holder and hence has been classified in Mezzanine equity as per ASC 480-10-S99 “Distinguishing liabilities from Equity – SEC Materials”.
On February 17, 2020, the Company issued 16,004 Series E Shares to Family Trading, as settlement of $14,350 of consideration then outstanding for the purchase of the M/T Eco City of Angels and M/T Eco Los Angeles from Mr. Evangelos J. Pistiolis, $1,621 of Series E Share dividends of the second half of 2019 and $32 of accrued interest on unpaid dividends from 2019. On September 8, 2021 the Company issued 2,188Series E Shares to Family Trading, as partial settlement for $2,188 of the consideration payable for the VLCC Transaction (see Note 1).
At each issuance of Series E Shares, the Company recognizes the beneficial conversion feature by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of the Company’s common stock per share on the commitment date, to additional paid-in capital. As the Company is in an accumulated deficit position, the offsetting amount is amortized as a deemed dividend recorded against additional paid-in-capital. During the years ended December 31, 2020 and 2021, pursuant to issuances of Series E Shares, the Company recognized the beneficial conversion feature to additional paid-in capital, resulting in a discount of $1,067 and $900 respectively on the Series E Shares which has been recognized as a deemed dividend.
During the year ended December 31, 2020, but before March 29, 2020, the Company redeemed 21,364 Series E Shares and paid a total of $24,569 to Family Trading, $3,204 of which refers to the 15% redemption premium. During the years ended December 31, 2021 and 2022 the Company didn’t redeem any Series E Shares.
As of December 31, 2022, upon conversion at the Series E Shares Conversion Price ($0.88) of 13,452 Series E Shares outstanding, Family Trading would receive 15,286,364common shares.
After March 29, 2020 as per the original Series E Shares Statement of Designations all redemptions of Series E Shares will incur a redemption premium equal to twenty percent (20%) of the Liquidation Amount being redeemed instead of fifteen percent (15%). As of December 31, 2020 and 2021, the Company adjusted the carrying value of the Series E Shares to the maximum redemption amount, resulting in an increase of $2,253 and $437 respectively, which have been accounted as deemed dividend. No such adjustment took place in the year ended December 31, 2022 as no Series E Shares were issued during 2022.
During the years ended December 31, 2020, 2021 and 2022 the Company declared $1,796, $1,883 and $2,046 of dividends to the Series E Shares holder.
SERIES F PREFERRED SHARESOn January 17, 2022, the Company entered into a stock purchase agreement with Africanus Inc., an affiliate of Evangelos J. Pistiolis for the sale of up to 7,560,759newly-issued Series F Non-Convertible Perpetual Preferred Shares (“Series F Shares”), in exchange for (i) the assumption by Africanus Inc. of an amount of $47,630 of shipbuilding costs for its newbuilding vessels M/T Eco Oceano Ca (Hull No. 871), M/T Julius Caesar (Hull No. 3213) and M/T Legio X Equestris (Hull No. 3214), and (ii) settlement of the Company’s remaining payment obligations relating to the VLCC Transaction, in an amount of up to $27,978. From January 17 to March 16, 2022 we issued a total of 7,200,000 Series F Shares have been issued, to cover $47,630 of shipbuilding costs in connection with the deliveries of M/T Julius Caesar, M/T Legio X Equestris and M/T Eco Oceano Ca and as a consideration for the settlement of $24,370 of Due to related parties. From July 5 to December 31, 2022 the Company redeemed a total of 1,349,252 Series F Shares for $16,191.
17.
Investments in unconsolidated joint ventures
2017 Joint Venture
During the year ended December 31, 2019 the Company recorded its proportionate share of City of Athens and Eco Nine’s other comprehensive losses of $391as a decrease to the Company’s Investments in unconsolidated joint ventures, with a corresponding increase in other comprehensive loss, in accordance with ASC 323-10-35-18. In December 2019, the Company wrote down its Investments in the 2017 Joint Venture to their fair value less costs to sell, resulting in an impairment charge of $3,144, pursuant to the Joint Ventures’ plan to sell the vessels. Their fair value was based on a market approach, which was determined using the purchase consideration in the sale agreements with buyers for the vessels of the joint venture companies.
The Joint Venture’s vessels, the M/T Holmby Hills and the M/T Palm Springs were sold on March 26 and April 17, 2020 respectively. During the year ended December 31, 2020, the Company recognized a loss on the sale of its Investments in unconsolidated joint ventures amounting to $64, which is included in Equity gains in unconsolidated joint ventures (attributed to the 2017 Joint Venture) in the Company’s consolidated statements of comprehensive (loss)/income. Net proceeds from the sale of the 2017 Joint Venture amounted to $19,555. The two companies that owned the vessels (City of Athens Pte. Ltd. and Eco Nine Pte. Ltd.) were dissolved in 2022.
New 2020 Joint Venture
On April 24, 2020 the Company acquired from a company affiliated with Mr. Evangelos J. Pistiolis, or the MR Seller, a 50% interest in two vessel owning companies (California 19 Inc. and California 20 Inc.) that owned two scrubber-fitted 50,000 dwt eco MR product tankers, M/T Eco Yosemite Park and M/T Eco Joshua Park respectively for $27,000, representing the Company’s share of interest in the fair value of the net assets acquired. Both vessels were delivered in March 2020 to the MR Seller from Hyundai Mipo shipyard of South Korea. The MR Seller had already entered into twojoint venture agreements, for the two vessels, each with an equal ownership interest of 50%, with Just-C Limited, a wholly owned subsidiary of Gunvor Group Ltd (the other 50% owner). The abovementioned acquisition was approved by a special committee of the Company’s board of directors (the “JV Special Committee”), of which all of the directors were independent and for which the JV Special Committee obtained a fairness opinion relating to the consideration of the transaction from an independent financial advisor. Sale and purchase commissions due to CSI related to these investments amounting to $454 were accounted for as part of the investment.
Out of the purchase price of $27,000, $1,646and $1,654 were recognized as excess of the purchase price over the underlying net book value (“Basis Differences”) for California 19 Inc. and California 20 Inc. respectively, attributed to the value assigned to the attached time charter. These Basis Differences are amortized over the duration of the firm period of the charter (5 years) and their amortization is included as a reduction in Gains in unconsolidated joint ventures. Furthermore $1,963 and $1,963 were also recognized as Basis Differences for California 19 Inc. and California 20 Inc. respectively, attributed to the fair market value over the carrying value of the vessels. These Basis Differences are amortized over the useful life of the vessels (25 years) and their amortization is also included as a reduction in Gains in unconsolidated joint ventures.
On March 12, 2020, California 19 Inc. together with California 20 Inc. entered into a loan agreement with Alpha Bank for a senior debt facility of $37,660($18,830 for each vessel). The loan has a term of five years and is payable on maturity via a balloon payment of $18,830 per vessel. The credit facility bears interest at LIBOR plus a margin of 3.00%. The facility carries customary covenants and restrictions, including the covenant that during the life of the facility, the market value of the vessels should be at least 200% of the facility outstanding and any shortfall should be covered by partial prepayments. Vessels are to be valued three times per year, every March, July and December. Provided that there is no breach of the above-mentioned covenant and no event of default has occurred and is continuing or would occur if such dividend distribution would take place, California 19 Inc. and California 20 Inc. may distribute dividends, without any consent from Alpha Bank. The loans are guaranteed by the Company in their entirety and this guarantee is not limited to the Company’s share of the net assets of California 19 Inc. and California 20 Inc (see Note 8). On April 22, 2021 California 19 Inc. and California 20 Inc. prepaid $330 each to reduce each of the outstanding loans to $18,500.
Each of the two product tankers are on time charters that commenced in March 2020 with Clearlake Shipping Pte Ltd, a subsidiary of Gunvor Group Ltd for a firm term of five years plus two additional optional years.
The Company’s exposure is limited to its share of the net assets of California 19 Inc. and California 20 Inc., proportionate to its 50% equity interest in these companies. Generally, the Company will share the profits and losses, cash flows and other matters relating to its investments in California 19 Inc. and California 20 Inc. in accordance with its ownership percentage. The vessels are managed by CSI, pursuant to management agreements. The Company accounts for investments in joint ventures using the equity method since it has joint control over the investment.
California 19 Inc. and California 20 Inc. made the following disbursements to the Company in 2020, 2021 and 2022:
December 31, 2020
December 31, 2021
California 19
Inc.
California
20 Inc.
Total disbursements
Recognition of Gains in unconsolidated joint ventures for the 2020 Joint Venture for the years ended December 31, 2020, 2021 and 2022 are summarized below:
California 20
Net profit attributable to the Company
Amortization of Basis Differences
Equity gains in unconsolidated joint ventures (attributed to the 2020 Joint Venture)
18.
Revenues
Revenues are comprised of the following:
Time charter revenues
Time charter revenues from related parties (Note 5)
The Company typically enters into time charters for periods ranging between three to fifteen years and includes a charterer’s option to renew for a further twoone-year periods at predetermined daily rates. Due to the volatility of the charter rates, the Company only accounts for the options when the charterer gives notice that the option will be exercised. In a time charter contract, the vessel is hired by the charterer for a specified period of time in exchange for consideration which is based on a daily hire rate. The charterer has the full discretion over the ports visited, shipping routes and vessel speed. The contract/charter party generally provides typical warranties regarding the speed and performance of the vessel. The charter party generally has some owner protective restrictions such that the vessel is sent only to safe ports by the charterer, subject always to compliance with applicable sanction laws, and carry only lawful or non-hazardous cargo. In a time charter contract, the Company is responsible for all the costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubes. The charterer bears the voyage related costs such as bunker expenses, port charges and canal tolls during the hire period. The charterer generally pays the charter hire in advance of the upcoming contract period.
As of December 31, 2022, all of the Company’s vessels are employed under time charters.
19.
Loss on sale of vessels:
During 2020 the Company sold the following vessels to unaffiliated third parties and collected the following gross proceeds:
Date Sold
Selling Price (Gross)
M/T Stenaweco Energy
29-Oct-20
M/T Stenaweco Evolution
03-Nov-20
M/T Ecofleet
21-Jan-20
M/T Eco Revolution
14-Jan-20
M/T SW Excellence
14-Oct-20
M/T Stenaweco Elegance
21-Feb-20
M/T Eco Palm Desert
19-Mar-20
M/T Eco California
09-Nov-20
M/T Eco Bel Air
10-Dec-20
M/T Eco Beverly Hills
01-Dec-20
The net proceeds from the abovementioned sales amounted to $310,016, after deducting $10,852 of expenses and $2,000 of maintenance deposits (please see below). As a result of the abovementioned sales the Company recognized a loss from the disposal of vessels amounting to $12,355, which is separately presented in the Company’s consolidated statements of comprehensive (loss)/income. For each of the vessels M/T Eco Bel Air and M/T Eco Beverly Hills that were sold and leased back (see Note 6) the buyer withheld $1,000 as a maintenance deposit, accounted for as a deposit asset, to be released at the end of the lease term, in accordance with ASC 840-10-25-39B. The Company evaluated these maintenance deposits and has not assigned any probability of them not being returned.
On September 1, 2021 the Company sold M/T Nord Valliant, its last non-scrubber fitted tanker, to an unaffiliated third party for net proceeds of $25,887. During the six months ended June 30, 2021, in accordance with the provisions of relevant guidance, the Company recognized the vessel, the carrying amount of which as of June 30, 2021 amounted to $27,047, as held for sale and wrote it down to its fair value of $25,887, resulting in an impairment charge of $1,160, which is included in the consolidated statements of comprehensive (loss) / income for the year ended December 31, 2021. Since the value of the held for sale vessel (after it was written down to its fair value less costs to sell) was the same with the net proceeds from the sale, the Company didn’t recognize any losses from the sale of the M/T Nord Valiant.
On February 28 and March 15, 2022, the Company sold the M/T Eco Los Angeles and M/T Eco City of Angels respectively to unaffiliated third parties for net proceeds after debt repayment of $18,640. The net proceeds after senior debt repayment relating to the vessels were used to fund the Company’s newbuilding program and to repay the outstanding Central Mare Bridge Loan facility, which was subsequently terminated. As of December 31, 2021, the two vessels were classified as assets held for sale in accordance with the provisions of relevant guidance with each of the vessel’s having a carrying amount of $35,818. Since their fair value less costs to sell were higher than their carrying amount the Company did not incur any impairment charges in the year ended December 31, 2021 while in the year ended December 31, 2022 the company recognized $78 of gains resulting from the two vessel’s sale.
20.
Subsequent Events