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As filed with the Securities and Exchange Commission on March 20,
2023
UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
--12-31
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
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
☐ 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
________________
For the transition period from ___________ to
___________
Commission file number
001-34985
Globus Maritime
Limited
(Exact
name of Registrant as Specified in its Charter)
Not Applicable
(Translation of Registrant’s name into English)
Republic of the Marshall Islands
(Jurisdiction of Incorporation or Organization)
128 Vouliagmenis Ave., 3rd Floor,
166 74
Glyfada, Attica,
Greece
(Address of Principal Executive Offices)
Athanasios Feidakis
128 Vouliagmenis Avenue, 3rd Floor
166 74 Glyfada, Attica, Greece
Tel:
+30
210 960 8300
Facsimile: +30 210 960 8359
(Name, Telephone, E-mail and/or Facsimile Number and Address of
Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b)
of the Act.
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
|
|
|
Common Shares, par value $0.004 per share |
GLBS |
Nasdaq Capital Market |
Securities registered or to be registered pursuant to Section 12(g)
of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act.
None
(Title of Class)
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, there were
20,582,301of the registrant’s common shares
outstanding and 10,300 Series B preferred shares
outstanding.
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
¨ Yes x 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.
¨ Yes x No
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.
x Yes ¨ No
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 (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
x Yes ¨ No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of “accelerated filer and large accelerated
filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated
filer ¨ |
Accelerated
filer ¨ |
Non-accelerated filer x |
|
|
|
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. x
If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an
error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are
restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to §240.10D-1(b).
¨
Indicate by check mark which basis of accounting the registrant has
used to prepare the financial statements included in this
filling:
U.S. GAAP ¨ |
International Financial Reporting Standards as issued
by the
International Accounting Standards Board x |
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. N/A
¨ 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). ¨ Yes x No
(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. N/A
¨ Yes ¨ No
TABLE OF
CONTENTS
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This annual report on Form 20-F contains forward-looking statements
and information within the meaning of U.S. securities laws and
Globus Maritime Limited desires to take advantage of, among other
things, the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and is including this cautionary
statement in connection with this safe harbor legislation.
Forward-looking statements provide our current expectations or
forecasts of future events. Forward-looking statements include
statements about our expectations, beliefs, plans, objectives,
intentions, assumptions and other statements that are not
historical facts or that are not present facts or conditions.
Forward-looking statements and information can generally be
identified by the use of forward-looking terminology or words, such
as “anticipate,” “approximately,” “believe,” “continue,”
“estimate,” “expect,” “forecast,” “intend,” “may,” “ongoing,”
“pending,” “perceive,” “plan,” “potential,” “predict,” “project,”
“seeks,” “should,” “views” or similar words or phrases or
variations thereon, or the negatives of those words or phrases, or
statements that events, conditions or results “can,” “will,” “may,”
“must,” “would,” “could” or “should” occur or be achieved and
similar expressions in connection with any discussion, expectation
or projection of future operating or financial performance, costs,
regulations, events or trends. The absence of these words does not
necessarily mean that a statement is not forward-looking.
Forward-looking statements and information are based on
management’s current expectations and assumptions, which are
inherently subject to uncertainties, risks and changes in
circumstances that are difficult to predict.
Without limiting the generality of the foregoing, all statements in
this annual report on Form 20-F concerning or relating to estimated
and projected earnings, margins, costs, expenses, expenditures,
cash flows, growth rates, future financial results and liquidity
are forward-looking statements. In addition, we, through our senior
management, from time to time may make forward-looking public
statements concerning our expected future operations and
performance and other developments. Such forward-looking statements
are necessarily estimates reflecting our best judgment based upon
current information and involve a number of risks and
uncertainties. Other factors may affect the accuracy of these
forward-looking statements and our actual results may differ
materially from the results anticipated in these forward-looking
statements. While it is impossible to identify all such factors,
factors that could cause actual results to differ materially from
those estimated by us may include, but are not limited to, those
factors and conditions described under “Item 3.D. Risk Factors” as
well as general conditions in the economy, dry bulk industry and
capital markets and effects of COVID-19 and world conflicts. We
undertake no obligation to revise any forward-looking statement to
reflect circumstances or events after the date of this annual
report on Form 20-F or to reflect the occurrence of unanticipated
events or new information, other than any obligation to disclose
material information under applicable securities laws.
Forward-looking statements appear in a number of places in this
annual report on Form 20-F including, without limitation, in the
sections entitled “Item 5. Operating and Financial Review and
Prospects,” “Item 4.A. History and Development of the Company” and
“Item 8.A. Consolidated Statements and Other Financial
Information—Our Dividend Policy and Restrictions on Dividends.”
Terms Used in this Annual Report on Form 20-F
The “Company,” “Globus,” “Globus Maritime,” “we,” “our” and “us”
refer to Globus Maritime Limited and its subsidiaries, unless the
context otherwise requires.
References to our common shares are references to Globus Maritime
Limited’s registered common shares, par value $0.004 per share, or,
as applicable, the ordinary shares of Globus Maritime Limited prior
to our redomiciliation into the Marshall Islands on November 24,
2010.
References to our Class B shares are references to Globus Maritime
Limited’s registered Class B shares, par value $0.001 per share,
none of which are currently outstanding. We refer to both our
common shares and Class B shares as our shares. References to our
shareholders are references to the holders of our common shares and
Class B shares. References to our Series A Preferred Shares are
references to our shares of Series A preferred stock, par value
$0.001 per share, none of which were outstanding on December 31,
2021 and 2022 as well as on the date of this annual report on Form
20-F. References to our Series B Preferred Shares are references to
our shares of Series B preferred stock, par value $0.001 per
share.
On July 29, 2010, we effected a 1-4 reverse split of our common
shares. On October 20, 2016, we effected a 1-4 reverse stock split
which reduced the number of outstanding common shares from
10,510,741 to 2,627,674 shares (adjustments were made based on
fractional shares). On October 15, 2018, the Company effected a
1-10 reverse stock split which reduced the number of outstanding
common shares from 32,065,077 to 3,206,495 shares (adjustments were
made based on fractional shares). On October 21, 2020, the Company
effected a 1-100 reverse stock split which reduced number of
outstanding common shares from 175,675,651 to 1,756,720 shares
(adjustments were made based on fractional shares). Unless
otherwise noted, all historical share numbers and per share amounts
in this annual report on Form 20-F have been adjusted to give
effect to these reverse splits.
Unless otherwise indicated, all references to “dollars” and “$” in
this annual report on Form 20-F are to, and amounts are presented
in, U.S. dollars. References to our ships, our vessels or out fleet
relates to the ships that we own, unless context otherwise
requires.
Rounding
Certain financial information has been rounded, and, as a result,
certain totals shown in this annual report on Form 20-F may not
equal the arithmetic sum of the figures that should otherwise
aggregate to those totals.
PART I
Item
1. Identity of Directors, Senior Management and
Advisers
Not Applicable.
Item 2. Offer
Statistics and Expected Timetable
Not Applicable.
Item 3. Key
Information
A. [Reserved]
B. Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of
Proceeds
Not Applicable.
D. Risk Factors
This annual report on Form 20-F contains forward-looking
statements and information within the meaning of U.S. securities
laws that involve risks and uncertainties. Our actual results may
differ materially from the results discussed in the forward-looking
statements and information. Factors that may cause such a
difference include those discussed below and elsewhere in this
annual report on Form 20-F.
Some of the following risks relate principally to the industry
in which we operate and our business in general. Other risks relate
principally to the securities market and ownership of our common
shares. The occurrence of any of the events described in this
section could significantly and negatively affect our business,
financial condition, operating results, and ability to pay
dividends or the trading price of our common shares, and you may
lose all or part of your investment.
Summary of Risk
Factors
Below is a summary of the principal factors that make an
investment in our common stock speculative or risky. This summary
does not address all of the risks that we face. Additional
discussion of the risks summarized in this risk factor summary, and
other risks that we face, can be found below under the headings
“Risks relating to Our Industry,” “Company Specific Risk Factors”
and “Risks Relating to our Common Shares” and should be carefully
considered, together with other information in this Annual Report
on Form 20-F and our other filings with the Securities and Exchange
Commission (the “SEC”), before making an investment decision
regarding our common shares.
Risks relating to Our
Industry
|
· |
The international dry bulk shipping industry
is cyclical and volatile. |
|
· |
The dry bulk vessel charter
market remains significantly below its high in 2008. |
|
· |
The international shipping
industry and dry bulk market are highly competitive. |
|
· |
Disruptions in global financial
markets from terrorist attacks, regional armed conflicts, general
political unrest, the emergence of a pandemic or epidemic crisis
and the resulting governmental action could have a material adverse
impact on our results of operations, financial condition and cash
flows. |
|
· |
The current state of the global
financial markets and current economic conditions may adversely
impact the dry bulk shipping industry. |
|
· |
An over-supply of dry bulk
carrier capacity may depress charter rates. |
|
· |
Our industry is subject to
complex laws and regulations. |
|
· |
Climate change and greenhouse gas
restrictions may be imposed. |
|
· |
Pending and future tax law changes may
result in significant additional taxes to us. |
|
· |
We
are dependent on our charterers and other counterparties fulfilling
their obligations under agreements with us, and their inability or
unwillingness to honor these obligations could significantly reduce
our revenues and cash flow. |
|
· |
Capital expenditures and other
costs necessary to operate and maintain our vessels may
increase. |
|
· |
Seasonal fluctuations in
industry demand could affect us. |
|
· |
Our insurance may not be
adequate to cover our losses that may result from our
operations. |
|
· |
Our vessels are exposed to
operational risks. |
|
· |
We may be subject to funding
calls by our protection and indemnity clubs, and our clubs may not
have enough resources to cover claims made against them. |
|
· |
We may be subject to increased
inspection procedures, tighter import and export controls and new
security regulations. |
|
· |
Rising fuel prices may adversely
affect our profits. |
|
· |
Increases in crew costs may
adversely affect our profits. |
|
· |
Maritime claimants could arrest
our vessels. |
|
· |
Governments could requisition
our vessels during a period of war or emergency. |
|
· |
Compliance with safety and other
vessel requirements imposed by classification societies may be
costly. |
|
· |
A further economic slowdown or
changes in the economic, regulatory and political environment in
the Asia Pacific region could reduce dry bulk trade
demand. |
|
· |
Pandemics such as the coronavirus (COVID-19)
make it very difficult for us to operate in the short-term and have
unpredictable long-term consequences, all of which could decrease
the supply of and demand for the raw materials we transport, the
rates that we are paid to carry our cargo, and our financial
outlook. |
|
· |
Sulphur regulations to reduce
air pollution from ships may require retrofitting of vessels and
may cause us to incur significant costs. |
|
· |
A downturn in the worldwide
economy may harm our business. |
|
· |
Worldwide inflationary pressures
could negatively impact our results of operations and cash
flows. |
|
· |
Environmental, social and
governance matters may impact our business and reputation. |
|
· |
The smuggling of drugs or other
contraband onto our vessels may lead to governmental claims against
us. |
|
· |
Labor interruptions could
disrupt our business. |
Company Specific Risk
Factors
|
· |
The market values of our vessels
have fluctuated and have from time to time triggered certain
financial covenants under our existing and potentially future loan
and credit facilities. |
|
· |
We
may not be able to attract and retain key management personnel and
other employees in the shipping industry. |
|
· |
Our loan agreement contains, and
we expect that future loan agreements and financing arrangements
will contain, restrictive covenants that may limit our liquidity
and corporate activities, which could limit our operational
flexibility and have an adverse effect on our financial condition
and results of operations. In addition, because of the presence of
cross-default provisions in our loan agreement and the expectation
that such will exist in any future loan agreements and financing
arrangements, a default by us under one loan could lead to defaults
under multiple loans. |
|
· |
We cannot assure you that we
will be able to refinance our existing indebtedness or obtain
additional financing. |
|
· |
We depend on short-term or spot
charters in volatile shipping markets. |
|
· |
We may be unable to successfully
employ our vessels on long-term time charters or take advantage of
favorable opportunities involving short-term or spot market charter
rates. |
|
· |
We conduct a substantial amount
of business in China. |
|
· |
As we expand our business, we
may have difficulty improving our operating and financial systems
and recruiting suitable employees and crew for our
vessels. |
|
· |
Our charterers may renegotiate
or default on their charters. |
|
· |
Contracts for newbuilding
vessels present certain economic and other risks. |
|
· |
The aging of our fleet may
result in increased operating costs in the future. |
|
· |
We may have difficulty managing
our planned growth properly. |
|
· |
Legislative or regulatory
changes in Greece may adversely affect our results from
operations. |
|
· |
We rely on our information
systems to conduct our business. |
|
· |
A cyber-attack could materially
disrupt our business. |
|
· |
We expect that a limited number
of financial institutions will hold our cash including financial
institutions that may be located in Greece or the United
States. |
|
· |
Purchasing and operating
secondhand vessels may result in increased operating costs and
reduced fleet utilization. |
|
· |
Management may be unable to
provide reports as to the effectiveness of our internal control
over financial reporting or when applicable, our independent
registered public accounting firm may be unable to provide us with
unqualified attestation reports as to the effectiveness of our
internal control over financial reporting when required. |
|
· |
Unless we set aside reserves or
are able to raise or borrow funds for vessel replacement, at the
end of a vessel’s useful life our revenues will decline. |
|
· |
We depend upon a few significant
customers for a large part of our revenues. |
|
· |
We generate revenues from the
trading of our vessels in U.S. dollars but incur a portion of our
expenses in other currencies. |
|
· |
If volatility in the Secured
Overnight Financing Rate, or SOFR, occurs, it could affect our
profitability, earnings and cash flow. |
|
· |
We may have to pay tax on U.S.
source shipping income. |
|
· |
U.S. tax authorities could treat
us as a “passive foreign investment company,” which could result in
adverse U.S. federal income tax consequences to U.S.
shareholders. |
|
· |
We could face penalties under
European Union, United States or other economic sanctions. |
|
· |
Our vessels may call on ports
subject to economic sanctions or embargoes. |
|
· |
As
a Marshall Islands corporation with principal executive offices in
Greece, and also having subsidiaries in the Marshall Islands and
other offshore jurisdictions such as Malta, our operations may be
subject to economic substance requirements. |
|
· |
It may be difficult to serve us
with legal process or enforce judgments against us, our directors
or our management. |
|
· |
The international nature of our
operations may make the outcome of any bankruptcy proceedings
difficult to predict. |
Risks Relating to our
Common Shares
|
· |
Our stock price has been
volatile and no assurance can be made that it will not
substantially depreciate. |
|
· |
We may issue additional common
shares or other equity securities without shareholder approval,
which would dilute our existing shareholders’ ownership interests
and may depress the market price of our common shares. |
|
· |
Future issuances or sales, or
the potential for future issuances or sales, of our common shares
may cause the trading price of our securities to decline and could
impair our ability to raise capital through subsequent equity
offerings. |
|
· |
The market price of our common shares may be
volatile, which could result in substantial losses for investors
who purchase our shares; and the volatility in the stock prices of
other companies may contribute to volatility in our stock
price. |
|
· |
A
possible “short squeeze” due to a sudden increase in demand of our
common shares that largely exceeds supply may lead to further price
volatility in our common shares. |
|
· |
Our common shares could be delisted from
Nasdaq, which could affect their market price and
liquidity. |
|
· |
Our ability to declare and pay
dividends to holders of our common shares will depend on a number
of factors and will always be subject to the discretion of our
board of directors. |
|
· |
We are a holding company, and we
will depend on the ability of our subsidiaries to distribute funds
to us in order to satisfy our financial obligations or to make
dividend payments. |
|
· |
Provisions of our articles of incorporation
and bylaws may have anti-takeover effects, which could depress the trading price
of our common shares. |
|
· |
We are subject to Marshall
Islands corporate law, which is not well-developed. |
|
· |
Increases in interest rates may
cause the market price of our shares to decline. |
|
· |
The public market may not
continue to be active and liquid enough for our shareholders to
resell our common shares in the future. |
Risks relating to Our
Industry
The international dry bulk shipping industry is cyclical and
volatile.
The international seaborne transportation industry is cyclical and
has high volatility in charter rates, vessel values and
profitability. Fluctuations in charter rates result from changes in
the supply and demand for vessel capacity and changes in the supply
and demand for energy resources, commodities, semi-finished and
finished consumer and industrial products internationally carried
at sea. Since the early part of 2009, rates have been volatile and
low, relative to previous years. In the beginning of 2020, the
rates continued to drop and came close to the all-time low, but
substantially rebounded in 2020 and continued to increase in 2021,
reaching in October 2021 the highest point since 2008. In 2022 the
rates remained volatile reaching a peak during the second quarter,
followed by a decreasing trend the next two quarters and remain at
fairly depressed levels in the beginning of 2023. Currently eight
of our vessels are chartered on short-term time charters or on the
spot market, and we are exposed, therefore, to changes in spot
market and short-term charter rates for dry bulk vessels and such
changes affect our earnings and the value of our dry bulk vessels
at any given time. The supply of and demand for shipping capacity
strongly influences freight rates. The factors affecting the supply
and demand for vessels are outside of our control, and the nature,
timing and degree of changes in industry conditions are
unpredictable.
Factors that influence demand for vessel capacity include:
|
• |
port and canal congestion
charges; |
|
• |
general dry bulk shipping market
conditions, including fluctuations in charter hire rates and vessel
values and demand for and production of dry bulk products; |
|
• |
global and regional economic and
political conditions, including exchange rates, trade deals,
conflicts and wars (including the Ukraine conflict), and the rate
and geographic distributions of economic growth; |
|
• |
environmental and other regulatory
developments; |
|
• |
the distance dry bulk cargoes are
to be moved by sea; |
|
• |
changes in seaborne and other
transportation patterns; and |
|
• |
natural disasters and/or world
pandemics such as COVID-19. |
Factors that influence the supply of vessel capacity include:
|
• |
the size of the newbuilding
orderbook; |
|
• |
the price of steel and vessel
equipment; |
|
• |
technological advances in vessel
design and capacity; |
|
• |
the number of newbuild deliveries,
which among other factors relates to the ability of shipyards to
deliver newbuilds by contracted delivery dates and the ability of
purchasers to finance such newbuilds; |
|
• |
the scrapping rate of older
vessels; |
|
• |
port and canal congestion; |
|
• |
the number of vessels that are in
or out of service, including due to vessel casualties; and |
|
• |
changes in environmental and other
regulations that may limit the useful lives of vessels. |
In addition to the prevailing and anticipated freight rates,
factors that affect the rate of newbuilding, scrapping and
laying-up include newbuilding prices, secondhand vessel values in
relation to scrap prices, costs of bunkers and other operating
costs, costs associated with classification society surveys, normal
maintenance costs, insurance coverage costs, the efficiency and age
profile of the existing dry bulk fleet in the market, and
government and industry regulation of maritime transportation
practices, particularly environmental protection laws and
regulations. These factors influencing the supply of and demand for
shipping capacity are outside of our control, and we may not be
able to correctly assess the nature, timing and degree of changes
in industry conditions.
We anticipate that the future demand for our dry bulk vessels and
charter rates will be dependent upon continued economic growth in
the world’s economies, seasonal and regional changes in demand and
changes to the capacity of the global dry bulk vessel fleet and the
sources and supply of dry bulk cargo to be transported by sea.
Adverse economic, political, social or other developments could
negatively impact charter rates and therefore have a material
adverse effect on our business, results of operations and ability
to pay dividends. We may also decide that it makes economic sense
to lay up one or more vessels. While our vessels are laid up, we
will pay lay-up costs, but those vessels will not be able to earn
any hire.
The dry bulk vessel charter market remains significantly
below its high in 2008.
The revenues, earnings and
profitability of companies in our industry are affected by the
charter rates that can be obtained in the market, which is volatile
and has experienced significant declines since its highs in 2008.
The Baltic Dry Index, or the BDI, which is published daily by the
Baltic Exchange Limited, or the Baltic Exchange, a London-based
membership organization that provides daily shipping market
information to the global investing community, is an average of
selected ship brokers’ assessments of time charter rates paid by a
customer to hire a dry bulk vessel to transport dry bulk cargoes by
sea. The BDI has long been viewed as the main benchmark to monitor
the movements of the dry bulk vessel charter market and the
performance of the entire dry bulk shipping market. The BDI
declined from an all-time high of 11,793 in May 2008 to a low of
663 in December 2008, which represents a decline of 94% within a
single calendar year. Since 2009, the BDI has remained fairly
depressed compared to historical numbers. The BDI reached a new
all-time low of 290 on February 10, 2016. The BDI remained
significantly depressed from 2008-2019. In 2021, the BDI rose to a
high of 5,650 on October 7, 2021 and had a low of 1,303 on February
10, 2021. In 2022, the BDI ranged from a low of 965 on August 31,
2022 to a high of 3,369 on May 23, 2022. During calendar year 2023
to March 14, 2023, the BDI has ranged from a high of 1,587 (on
March 14, 2023) to a low of 601 (on February 7, 2023).
The decline and volatility in charter rates in the dry bulk market
also affects the value of our dry bulk vessels, which generally
follows the trends of dry bulk charter rates, and earnings on our
charters, and similarly affects our cash flows, liquidity and
compliance with the covenants contained in our loan
arrangements.
The international shipping industry and dry bulk market are
highly competitive.
The shipping industry and dry bulk market are capital intensive and
highly fragmented with many charterers, owners and operators of
vessels and are characterized by intense competition. Competition
arises primarily from other vessel owners, some of whom have
substantially greater resources than we do. The trend towards
consolidation in the industry is creating an increasing number of
global enterprises capable of competing in multiple markets, which
may result in a greater competitive threat to us. Our competitors
may be better positioned to devote greater resources to the
development, promotion and employment of their businesses than we
are. Competition for the transportation of cargo by sea is intense
and depends on customer relationships, operating expertise,
professional reputation, price, location, size, age, environmental,
social, and governance criteria, condition and the acceptability of
the vessel and its operators to the charterers. Competition may
increase in some or all of our principal markets, including with
the entry of new competitors, who may operate larger fleets through
consolidations or acquisitions and may be able to sustain lower
charter rates and offer higher quality vessels than we are able to
offer. We may not be able to continue to compete successfully or
effectively with our competitors and our competitive position may
be eroded in the future, which could have an adverse effect on our
fleet utilization and, accordingly, business, financial condition,
results of operations and ability to pay dividends.
Disruptions in global financial markets from terrorist
attacks, regional armed conflicts, general political unrest, the
emergence of a pandemic or epidemic crisis and the resulting
governmental action could have a material adverse impact on our
results of operations, financial condition and cash
flows.
Continuing war and recent developments in Ukraine, the Middle East,
including tensions between the U.S. and Iran, as well as other
geographic countries and areas, terrorist or other attacks, and war
(or threatened war) or international hostilities, such as the ones
currently in progress between Russia and Ukraine, China and Taiwan,
or the U.S. and North Korea, have recently and may in the future
lead to armed conflict or acts of terrorism around the world
continue to cause uncertainty and volatility in the world financial
markets and may affect our business, results of operations and
financial condition. Additionally, continuing concerns relating
geopolitical events such as
the previous withdrawal of the U.K. from the European Union,
or Brexit and concerns regarding any lingering effects of
the COVID-19 pandemic or the emergence of other viral outbreaks
have led to increased volatility in global credit and equity
markets. These uncertainties could also adversely affect our
ability to obtain additional financing on terms acceptable to us or
at all. In the past, political conflicts have also resulted in
attacks on vessels, mining of waterways and other efforts to
disrupt international shipping, particularly in the Arabian Gulf
region. These types of attacks have also affected vessels trading
in regions such as the Black Sea, South China Sea and the Gulf of
Aden off the coast of Somalia. The IMO’s extraordinary council
session held on March 10-11, 2022 addressed the impacts on shipping
and seafarers, as a result of the war in Ukraine. The IMO called
for the need to preserve the integrity of maritime supply chains
and the safety and welfare of seafarers and any spillover effects
of the military action on global shipping, logistics and supply
chains, in particular the impacts on the delivery of commodities
and food to developing nations and the impacts on energy supplies.
Any of these occurrences could have a material adverse impact on
our operating results, revenues and costs.
The conflict between Russia and Ukraine, which commenced in
February 2022, has disrupted supply chains and caused instability
and significant volatility in the global economy. Much uncertainty
remains regarding the global impact of the conflict in Ukraine, and
it is possible that such instability, uncertainty and resulting
volatility could significantly increase our costs and adversely
affect our business, including our ability to secure charters and
financing on attractive terms, and as a result, adversely affect
our business, financial condition, results of operation and cash
flows.
As a result of the conflict between Russia and Ukraine,
Switzerland, the United States, the European Union, the United
Kingdom and others have announced unprecedented levels of sanctions
and other measures against Russia and certain Russian entities and
nationals. Such sanctions against Russia may adversely affect our
business, financial condition, results of operation and cash flows.
For example, apart from the immediate commercial disruptions caused
in the conflict zone, escalating tensions and fears of potential
shortages in the supply of Russian crude have caused the price of
oil to trade above historical pricing. The ongoing conflict could
result in the imposition of further economic sanctions against
Russia, with uncertain impacts on the dry bulk market and the world
economy. While we do not have any Ukrainian or Russian crew and our
vessels currently do not sail in the Black Sea, it is possible that
the conflict in Ukraine, including any increased shipping costs,
disruptions of global shipping routes, any impact on the global
supply chain and any impact on current or potential customers
caused by the events in Russia and Ukraine, could adversely affect
our operations or financial performance. Due to the recent nature
of these activities, the full impact on our business is not yet
known.
Brexit further increases the risk of additional trade
protectionism. Brexit, or similar events in other jurisdictions,
could continue to impact global markets, including foreign exchange
and securities markets; any resulting changes in currency exchange
rates, tariffs, treaties and other regulatory matters could in turn
adversely impact our business, cash flows and operations.
Further, as a result of the economic situation in Greece,
which has been slowly recovering from the sovereign crisis and the
related austerity measures implemented by the Greek government and
the influx of refugees from Syria and other areas, the operations
of our Manager located in Greece may be subjected to new
regulations and potential shift in government policies that may
require us to incur new or additional compliance or other
administrative costs and may require the payment of new taxes or
other fees. We also face the risk that strikes, work stoppages,
civil unrest and violence within Greece could disrupt the shoreside
operations of our Manager located in Greece.
In addition, global financial markets and economic conditions have
been severely disrupted and volatile in recent years and remain
subject to significant vulnerabilities, such as the deterioration
of fiscal balances and the rapid accumulation of public debt,
continued deleveraging in the banking sector and a limited supply
of credit. Credit markets as well as the debt and equity capital
markets were exceedingly distressed during 2008 and 2009 and have
been volatile since that time. The resulting uncertainty and
volatility in the global financial markets may accordingly affect
our business, results of operations and financial condition. These
uncertainties, as well as future hostilities or other political
instability in regions where our vessels trade, could also affect
trade volumes and patterns and adversely affect our operations, and
otherwise have a material adverse effect on our business, results
of operations and financial condition, as well as our cash flows
and cash available for distributions to our shareholders.
Specifically, these issues, along with the re-pricing of credit
risk and the difficulties currently experienced by financial
institutions, have made, and will likely continue to make it
difficult to obtain financing. As a result of the disruptions in
the credit markets and higher capital requirements, many lenders
have increased margins on lending rates, enacted tighter lending
standards, required more restrictive terms (including higher
collateral ratios for advances, shorter maturities and smaller loan
amounts), or have refused to refinance existing debt at all.
Furthermore, certain banks that have historically been significant
lenders to the shipping industry have reduced or ceased lending
activities in the shipping industry. Additional tightening of
capital requirements and the resulting policies adopted by lenders
could further reduce lending activities. We may experience
difficulties obtaining financing commitments or be unable to fully
draw on the capacity under our committed term loans in the future
if our lenders are unwilling to extend financing to us or unable to
meet their funding obligations due to their own liquidity, capital
or solvency issues. We cannot be certain that financing will be
available on acceptable terms or at all. If financing is not
available when needed, or is available only on unfavorable terms,
we may be unable to meet our future obligations as they come due.
Our failure to obtain such funds could have a material adverse
effect on our business, results of operations and financial
condition, as well as our cash flows, including cash available for
distributions to our shareholders. In the absence of available
financing, we also may be unable to take advantage of business
opportunities or respond to competitive pressures.
An over-supply of dry bulk carrier capacity may depress
charter rates.
An oversupply of dry bulk vessel capacity, particularly during a
period of economic recession, may result in a reduction of charter
hire rates. If we cannot enter into charters on acceptable terms,
we may have to secure charters on the short-term or spot market,
where charter rates are more volatile and revenues are, therefore,
less predictable, or we may not be able to charter our vessels at
all. In addition, a material increase in the net supply of dry bulk
vessel capacity without corresponding growth in dry bulk vessel
demand could have a material adverse effect on our fleet
utilization (including ballast days) and our charter rates
generally, and could, accordingly, materially adversely affect our
business, financial condition, results of operations and ability to
pay dividends. An uptick in charter rates generally discourages
scrapping older vessels, but recent regulatory actions have
increased the economic incentive to scrap certain older vessels.
Accordingly, it remains to be seen in 2023 whether the number of
worldwide dry bulk carrying capacity, net of scrapped vessels, will
increase.
We may also decide that it makes economic sense to lay up one or
more vessels. While our vessels are laid up, we will pay lay-up
costs, but those vessels will not be able to earn any
hire.
Our industry is subject to complex laws and
regulations.
Our operations are subject to numerous laws and regulations in the
form of international conventions and treaties, national, state and
local laws and national and international regulations in force in
the jurisdictions in which our vessels operate or are registered,
which can significantly affect the ownership and operation of our
vessels. These requirements include but are not limited to: U.S.
Oil Pollution Act 1990, as amended, which we refer to as OPA;
International Convention for the Safety of Life at Sea, 1974, as
amended, which we refer to as SOLAS; International Convention on
Load Lines, 1966; International Convention for the Prevention of
Pollution from Ships, 1973, as amended by the 1978 Protocol, which
we refer to as MARPOL; International Convention on Civil Liability
for Bunker Oil Pollution Damage, 2001, which we refer to as the
Bunker Convention; International Convention on Liability and
Compensation for Damage in Connection with the Carriage of
Hazardous and Noxious Substances by Sea, 1996, as superseded by the
2010 Protocol, which we refer to as the HNS Convention;
International Convention on Civil Liability for Oil Pollution
Damage of 1969, as amended by the 1992 Protocol and further amended
in 2000, which we refer to as the CLC; International Convention on
the Establishment of an International Fund for Compensation for Oil
Pollution Damage, 1971, as amended, which we refer to as the Fund
Convention; and Marine Transportation Security Act of 2002, which
we refer to as the MTSA.
Government regulation of vessels, particularly in the area of
environmental requirements, can be expected to become more
stringent in the future and could require us to incur significant
capital expenditures on our vessels to keep them in compliance, or
even to scrap or sell certain vessels altogether. Compliance with
such laws, regulations and standards, where applicable, may require
installation of costly equipment or operational changes and
increased management costs and may affect the resale value or
useful lives of our vessels. We may also incur additional costs in
order to comply with other existing and future regulatory
obligations, including, but not limited to, costs relating to air
emissions, the management of ballast water, recycling of vessels,
maintenance and inspection, elimination of tin-based paint,
development and implementation of safety and emergency procedures
and insurance coverage or other financial assurance of our ability
to address pollution incidents. For instance, the International
Maritime Organization (“IMO”) global 0.5% sulphur cap on marine
fuels came into force on January 1, 2020, as stipulated in 2008
amendments to Annex VI to the International Convention for the
Prevention of Pollution from ships (“MARPOL”). Our vessels require
pricier low-sulphur fuel, which may reduce the amount charterers
are willing to pay to charter our vessels. In addition, on January
1, 2023, regulations came into force that aim to reduce carbon
emissions from both new and existing ships as measured by two main
energy efficiency indicators. Ships that fail to comply with the
these 2023 regulations may be subject to penalties and require
modifications to the ship to ensure compliance. It is difficult to
determine the cost, if any, until our ships’ performance is
measured in accordance with these new regulations. If our ships
fail to comply with the IMO 2023 regulations or otherwise do not
have good performance, this can result in penalties and require
modifications to the ship to ensure compliance. Any such
modifications may be costly and those ships will be offhire during
any period of modification. These and other costs could have a
material adverse effect on our business, results of operations,
cash flows and financial condition and our ability to pay
dividends.
These requirements can also affect the resale prices or useful
lives of our vessels or require reductions in capacity, vessel
modifications or operational changes or restrictions. Failure to
comply with these requirements could lead to decreased availability
of or more costly insurance coverage for environmental matters or
result in the denial of access to certain jurisdictional waters or
ports, or detention in certain ports. Under local, national and
foreign laws, as well as international treaties and conventions, we
could incur material liabilities, including cleanup obligations and
claims for impairment of the environment, personal injury and
property damages in the event that there is a release of petroleum
or other hazardous materials from our vessels or otherwise in
connection with our operations. Violations of, or liabilities
under, environmental regulations can result in substantial
penalties, fines and other sanctions, including, in certain
instances, seizure or detention of our vessels. Events of this
nature would have a material adverse effect on our business,
financial condition and results of operations.
The operation of our vessels is affected by the requirements set
forth in the International Management Code for the Safe Operation
of Ships and for Pollution Prevention, or ISM Code. The ISM Code
requires the party with operational control of the vessel to
develop, implement and maintain an extensive “Safety Management
System” that includes, among other things, the adoption of a safety
and environmental protection policy setting forth instructions and
procedures for safe vessel operation and protection of the
environment and describing procedures for dealing with emergencies.
Further details in relation to the ISM Code are set out below in
the section headed “Environmental and Other Regulations.” The
failure of a shipowner or bareboat charterer to comply with the ISM
Code may subject it to increased liability, and, if the
implementing legislation so provides, to criminal sanctions, may
invalidate or result in the loss of existing insurance or decrease
available insurance coverage for the affected vessels and may
result in a denial of access to, or detention in, certain ports. In
addition, if we fail to maintain ISM Code certification for our
vessels, we may also breach covenants in our CIT Loan Facility that
require that our vessels be ISM-Code certified. If we breach such
covenants due to failure to maintain ISM Code certification and are
unable to remedy the relevant breach, our lender could accelerate
our indebtedness and foreclose on the vessels in our fleet securing
the CIT Loan Facility. As of the date of this annual report on Form
20-F, each of our vessels is ISM Code-certified.
Climate change and greenhouse gas restrictions.
Due to concern over the risk of climate change, a number of
countries and the IMO have adopted, or are considering the adoption
of, regulatory frameworks to reduce greenhouse gas emissions. These
regulatory measures may include, among others, adoption of cap and
trade regimes, carbon taxes, increased efficiency standards and
incentives or mandates for renewable energy. For instance, the IMO
imposed a global 0.5% sulphur cap on marine fuels which came into
force on January 1, 2020. Our vessels do not have scrubbers and use
low-sulphur fuel instead, and now may require pricier low-sulphur
fuel, which may reduce the amount charterers are willing to pay to
charter our vessels. In addition, charterers may focus on how
environmentally friendly our vessels are, generally, and our rates
may be adjusted downwards accordingly.
We discuss this further in this annual report on Form 20-F. See
“Item 4.B. Business Overview—Environmental and Other
Regulations—Regulations to Prevent Pollution from Ships” and “Item
3.D. Risk Factors—Risks Relating to our Industry—Our industry is
subject to complex laws and regulations.”
In addition, although the emissions of greenhouse gases from
international shipping currently are not subject to the Kyoto
Protocol to the United Nations Framework Convention on Climate
Change (this task was delegated under the Kyoto Protocol to the IMO
for action), which required adopting countries to implement
national programs to reduce emissions of certain gases, a new
treaty may be adopted in the future that includes restrictions on
shipping emissions. Compliance with changes in laws, regulations
and obligations relating to climate change could increase our costs
related to operating and maintaining our vessels and require us to
install new emission controls, acquire allowances or pay taxes
related to our greenhouse gas emissions, or administer and manage a
greenhouse gas emissions program. Revenue generation and strategic
growth opportunities may also be adversely affected, which could
have a material adverse effect on our business, results of
operations, cash flows and financial condition and our ability to
pay dividends.
Pending and future tax law changes may result in significant
additional taxes to us.
Pending and future tax law changes may result in significant
additional taxes to us. For example, the Organization for Economic
Cooperation and Development published a “Programme of Work,” which
was divided into two pillars. Pillar One focused on the allocation
of group profits among taxing jurisdictions based on a market-based
concept rather than the historical “permanent establishment”
concept. Pillar Two, among other things, introduced a global
minimum tax. The foregoing proposals (in the event international
consensus is achieved and implementing laws are adopted) and other
possible future tax changes may have an adverse impact on us. Any
requirement or legislation that requires us to pay more tax could
have a material adverse effect on our business, results of
operations, cash flows and financial condition and our ability to
pay dividends.
We are dependent on our charterers and other counterparties
fulfilling their obligations under agreements with us, and their
inability or unwillingness to honor these obligations could
significantly reduce our revenues and cash flow.
Payments to us by our charterers under time charters are and will
be our sole source of operating cash flow. Weaknesses in demand for
shipping services, increased operating costs due to changes in
environmental or other regulations and the oversupply of large
vessels as well as the oversupply of smaller size vessels due to a
cascading effect would place certain of our customers under
financial pressure. Any declines in demand could result in
worsening financial challenges to our customers and may increase
the likelihood of one or more of our customers being unable or
unwilling to pay us contracted charter rates or going bankrupt.
If we lose a time charter because the charterer is unable to pay us
or for any other reason, we may be unable to re-deploy the related
vessel on similarly favorable terms or at all. Also, we will not
receive any revenues from such a vessel while it is un-chartered,
but we will be required to pay expenses necessary to maintain and
insure the vessel and service any indebtedness on it. The
combination of any surplus of dry bulk vessel capacity, the
expected entry into service of new technologically advanced ships,
and the expected increase in the size of the world dry bulk fleet
over the next few years may make it difficult to secure substitute
employment for any of our vessels if our counterparties fail to
perform their obligations under the currently arranged time
charters, and any new charter arrangements we are able to secure
may be at lower rates. Furthermore, the surplus of dry bulk vessels
available at lower charter rates could negatively affect our
charterers’ willingness to perform their obligations under our time
charters, particularly if the charter rates in such time charters
are significantly above the prevailing market rates. Accordingly,
we may have to grant concessions to our charterers in the form of
lower charter rates for the remaining duration of the relevant
charter or part thereof, or to agree to re-charter vessels coming
off charter at reduced rates compared to the charter then ended.
Because we enter into short-term and medium-term time charters from
time-to-time, we may need to re-charter vessels coming off charter
more frequently than some of our competitors, which may have a
material adverse effect on business, results of operations and
financial condition, as well as our cash flows, including cash
available for distributions to our shareholders.
The loss of any of our charterers, time charters or vessels, or a
decline in payments under our time charters, could have a material
adverse effect on our business, results of operations and financial
condition, as well as our cash flows, including cash available for
distributions to our shareholders.
In addition to charter parties, we may, among other things, enter
into contracts for the sale or purchase of secondhand dry bulk
vessels or shipbuilding contracts for newbuildings, provide
performance guarantees relating to shipbuilding contracts to sale
and purchase contracts or to charters, enter into credit facilities
or other financing arrangements, accept commitment letters from
banks, or enter into insurance contracts and interest or exchange
rate swaps or enter into joint ventures. Such agreements expose us
to counterparty credit risk. The ability and willingness of each of
our counterparties to perform its obligations under a contract with
us will depend upon a number of factors that are beyond our control
and may include, among other things, general economic conditions,
the state of the capital markets, the condition of the ocean-going
dry bulk shipping industry and charter hire rates. Should a
counterparty fail to honor its obligations under agreements with
us, we could sustain significant losses, which in turn could have a
material adverse effect on our business, results of operations and
financial condition, as well as our cash flows, including cash
available for distributions to our shareholders.
Capital expenditures and other costs necessary to operate and
maintain our vessels may increase.
Changes in safety or other equipment standards, as well as
compliance with standards imposed by maritime self-regulatory
organizations and customer requirements or competition, may require
us to make additional expenditures. In order to satisfy these
requirements, we may, from time to time, be required to take our
vessels out of service for extended periods of time, with
corresponding losses of revenues. In the future, market conditions
may not justify these expenditures or enable us to operate some or
all of our vessels profitably during the remainder of their
economic lives.
Seasonal fluctuations in industry demand could affect
us.
We operate our vessels in markets that have historically exhibited
seasonal variations in demand and, as a result, in charter rates.
This seasonality may result in quarter-to-quarter volatility in our
results of operations, which could affect the amount of dividends,
if any, that we pay to our shareholders. The market for marine dry
bulk transportation services is typically stronger in the fall and
winter months in anticipation of increased consumption of coal and
other raw materials in the northern hemisphere during the winter
months. In addition, unpredictable weather patterns in these months
tend to disrupt vessel scheduling and supplies of certain
commodities. This seasonality could have a material adverse effect
on our business, financial condition and results of operations.
We may also decide that it makes economic sense to lay up one or
more vessels. While our vessels are laid up, we will pay lay-up
costs, but those vessels will not be able to earn any
hire.
Our insurance may not be adequate to cover our losses that
may result from our operations.
We carry insurance to protect us against most of the
accident-related risks involved in the conduct of our business,
including marine hull and machinery insurance, war risk insurance,
protection and indemnity insurance, which includes pollution risks,
crew insurance and war risk insurance. However, we may not be
adequately insured to cover losses from our operational risks,
which could have a material adverse effect on us. Additionally, our
insurers may refuse to pay particular claims and our insurance may
be voidable by the insurers if we take, or fail to take, certain
action, such as failing to maintain certification of our vessels
with applicable maritime regulatory organizations. Any significant
uninsured or underinsured loss or liability could have a material
adverse effect on our business, results of operations, cash flows
and financial condition and our ability to pay dividends. It may
also result in protracted legal litigation. In addition, we may not
be able to obtain adequate insurance coverage at reasonable rates
in the future during adverse insurance market conditions. We
maintain, for each of our vessels, pollution liability coverage
insurance for $1.0 billion per event. If damages from a
catastrophic spill exceed our insurance coverage, it would have a
materially adverse effect on our business, results of operations
and financial condition and our ability to pay dividends to our
shareholders.
Moreover, insurers have over the last few years increased premiums
and reduced or restricted coverage for losses caused by terrorist
acts generally.
In addition, we do not currently carry and may not carry
loss-of-hire insurance, which covers the loss of revenue during
extended vessel off-hire periods, such as those that occur during
an unscheduled drydocking due to damage to the vessel from
accidents. Accordingly, any loss of a vessel or extended vessel
off-hire, due to an accident or otherwise, could have a material
adverse effect on our business, results of operations, financial
condition and our ability to pay dividends.
Our vessels are exposed to operational risks.
The operation of any vessel includes risks such as weather
conditions, mechanical failure, collision, fire, contact with
floating objects, cargo or property loss or damage and business
interruption due to political circumstances in countries, piracy,
terrorist attacks, armed hostilities and labor strikes. Such
occurrences could result in death or injury to persons, loss,
damage or destruction of property or environmental damage, delays
in the delivery of cargo, loss of revenues from or termination of
charter contracts, governmental fines, penalties or restrictions on
conducting business, higher insurance rates and damage to our
reputation and customer relationships generally.
In the past, political conflicts have also resulted in attacks on
vessels, mining of waterways and other efforts to disrupt
international shipping, particularly in the Arabian Gulf region.
Acts of terrorism and piracy have also affected vessels trading in
regions such as the South China Sea, the Gulf of Aden and parts of
the Indian Ocean and West Africa. Continuing conflicts and recent
developments in the Middle East and North Africa, including Egypt,
Syria, Iran, Iraq and Libya, the recent conflict in Ukraine, and
the presence of United States and other armed forces in the Middle
East and Asia could produce armed conflict or be the target of
terrorist attacks, and lead to civil disturbance and uncertainty in
financial markets. If these attacks and other disruptions result in
areas where our vessels are deployed being characterized by
insurers as “war risk” zones or Joint War Committee “war, strikes,
terrorism and related perils” listed areas, premiums payable for
such coverage could increase significantly and such insurance
coverage may be more difficult or impossible to obtain. In
addition, we face the risk of a marine disaster, which could
include an oil spill and other environmental damage. Although our
vessels carry a relatively small amount of oil used for fuel
(“bunkers”), a spill of oil from one of our vessels or losses as a
result of fire or explosion could be catastrophic under certain
circumstances.
The operation of certain vessel types, such as dry bulk vessels,
also carry certain unique risks. With a dry bulk vessel, the cargo
itself and its interaction with the vessel can be a risk factor. By
their nature, dry bulk cargoes are often heavy, dense, easily
shifted and react badly to water exposure. In addition, dry bulk
vessels are often subjected to battering during unloading
operations with grabs, jackhammers (to pry encrusted cargoes out of
the hold) and small bulldozers. This may cause damage to the
vessel. Vessels damaged due to treatment during unloading
procedures may be more susceptible to breach while at sea. Hull
breaches in dry bulk vessels may lead to the flooding of the
vessels holds. If a dry bulk vessel suffers flooding in its forward
holds, the bulk cargo may become so dense and waterlogged that its
pressure may buckle the vessels bulkheads leading to the loss of a
vessel. If we are unable to adequately maintain our vessels, we may
be unable to prevent these events. Any of these circumstances or
events could negatively impact our business, financial condition,
results of operations and ability to pay dividends. In addition,
the loss of any of our vessels could harm our reputation as a safe
and reliable vessel owner and operator.
We may not be adequately insured against all risks, and our
insurers may not pay particular claims. With respect to war risks
insurance, which we usually obtain for certain of our vessels
making port calls in designated war zone areas, such insurance may
not be obtained prior to one of our vessels entering into an actual
war zone, which could result in that vessel not being insured. Even
if our insurance coverage is adequate to cover our losses, we may
not be able to timely obtain a replacement vessel in the event of a
loss. Under the terms of the CIT Loan Facility, we will be subject
to restrictions on the use of any proceeds we may receive from
claims under our insurance policies. Furthermore, in the future, we
may not be able to maintain or obtain adequate insurance coverage
at reasonable rates for our fleet. We may also be subject to calls,
or premiums, in amounts based not only on our own claim records but
also the claim records of all other members of the protection and
indemnity associations through which we receive indemnity insurance
coverage for tort liability. Our insurance policies also contain
deductibles, limitations and exclusions which may increase our
costs in the event of a claim or decrease any recovery in the event
of a loss. If the damages from a catastrophic oil spill or other
marine disaster exceeded our insurance coverage, the payment of
those damages could have a material adverse effect on our business
and could possibly result in our insolvency.
In general, we do not carry loss of hire insurance. Occasionally,
we may decide to carry loss of hire insurance when our vessels are
trading in areas where a history of piracy has been reported. Loss
of hire insurance covers the loss of revenue during extended vessel
off-hire periods, such as those that could occur during an
unscheduled drydocking, unscheduled repairs due to damage to the
vessel, or as a result of acts of piracy. Accordingly, any loss of
a vessel or any extended period of vessel off- hire, due to an
incident, accident or otherwise, could have a material adverse
effect on our business, financial condition and results of
operations.
We may also decide that it makes economic sense to lay up one or
more vessels. While our vessels are laid up, we will pay lay-up
costs, but those vessels will not be able to earn any hire.
We may be subject to funding calls by our protection and
indemnity clubs, and our clubs may not have enough resources to
cover claims made against them.
We are indemnified for legal liabilities incurred while operating
our vessels through membership of protection and indemnity, or
P&I, associations, otherwise known as P&I clubs. P&I
clubs are mutual insurance clubs whose members must contribute to
cover losses sustained by other club members. The objective of a
P&I club is to provide mutual insurance based on the aggregate
tonnage of a member’s vessels entered into the club. Claims are
paid through the aggregate premiums of all members of the club,
although members remain subject to calls for additional funds if
the aggregate premiums are insufficient to cover claims submitted
to the club. Claims submitted to the club may include those
incurred by members of the club, as well as claims submitted by
other P&I clubs with which our club has entered into interclub
agreements. We cannot assure you that the P&I club to which we
belong will remain viable or that we will not become subject to
additional funding calls, which could adversely affect
us.
We may be subject to increased inspection procedures, tighter
import and export controls and new security
regulations.
International shipping is subject to various security and customs
inspection and related procedures in countries of origin and
destination and trans-shipment points. Inspection procedures can
result in the seizure of the cargo and contents of our vessels,
delays in the loading, offloading or delivery and the levying of
customs duties, fines or other penalties against us. It is possible
that changes to inspection procedures could impose additional
financial and legal obligations on us. Furthermore, changes to
inspection procedures could also impose additional costs and
obligations on our customers and may, in certain cases, render the
shipment of certain types of cargo impractical. Any such changes or
developments may have a material adverse effect on our business,
financial condition, results of operations and our ability to pay
dividends.
Rising fuel prices may adversely affect our
profits.
Fuel is a significant, if not the largest, expense if vessels are
under voyage charter or if consumed during ballast days. Moreover,
the cost of fuel will affect the profit we can earn on the
short-term or spot market. Upon redelivery of vessels at the end of
a time charter, we may be obliged to repurchase the fuel on board
at prevailing market prices, which could be materially higher than
fuel prices at the inception of the time charter period. As a
result, an increase in the price of fuel may adversely affect our
profitability. The price and supply of fuel is unpredictable and
fluctuates based on events outside our control, including
geopolitical events, supply and demand for oil and gas, actions by
the Organization of the Petroleum Exporting Countries and other oil
and gas producers, war and unrest in oil producing countries and
regions, regional production patterns and environmental concerns.
Further, fuel has or may become much more expensive in the future,
including as a result of the developments in Ukraine and the
sanctions against Russia, the imposition of sulfur oxide emissions
limits in January 2020 and reductions of carbon emissions from
January 2023 under new regulations adopted by the International
Maritime Organization, or the IMO, which may reduce the
profitability and competitiveness of our business versus other
forms of transportation, such as truck or rail.
As a result of the sulfur oxide emissions limits, because we do not
have scrubbers on our vessels, our vessels require pricier
low-sulfur fuel, which may reduce the amount charterers are willing
to pay to charter our vessels. This could have a material adverse
effect on our business, results of operations, cash flows and
financial condition and our ability to pay dividends.
Increases in crew costs may adversely affect our
profits.
Crew costs are a significant expense for us under our charters.
There is a limited supply of well-qualified crew. We generally bear
crewing costs under our charters. Increases in crew costs may
adversely affect our profitability. In addition, labor disputes or
unrest, including work stoppages, strikes and/or work disruptions
or increases imposed by collective bargaining agreements covering
the majority of our officers on board our vessels could result in
higher personnel costs and significantly affect our financial
performance. Furthermore, while we do not have any Ukrainian or
Russian crew and the Company's vessels currently do not sail in the
Black Sea, the extent to which this will impact the Company’s
future results of operations and financial condition will depend on
future developments, which are highly uncertain and cannot be
predicted. Changes in labor laws and regulations, collective
bargaining negotiations and labor disputes, and potential shortage
of crew due to the conflict between Russia and Ukraine, could
increase our crew costs and have a material adverse effect on our
business, results of operations, cash flows, financial condition
and ability to pay dividends.
Maritime claimants could arrest our vessels.
Crew members, suppliers of goods and services to a vessel, shippers
of cargo and other parties may be entitled to a maritime lien
against a vessel, or other assets of the relevant vessel-owning
company, for unsatisfied debts, claims or damages even if we are
not at fault, for example, if we pay a supplier for bunkers who
subcontracts the supply and does not pay such subcontractor. In
many jurisdictions, a claimant may seek to obtain security for its
claim by arresting a vessel through foreclosure proceedings. The
arrest or attachment of one or more of our vessels, could cause us
to default on a charter, breach covenants in the CIT Loan Facility,
interrupt our cash flow and require us to pay large sums of money
to have the arrest or attachment lifted. Please see “Item 5.B.
Liquidity and Capital Resources—Indebtedness” for further
information.
In addition, in some jurisdictions, such as South Africa, under the
“sister ship” theory of liability, a claimant may arrest both the
vessel which is subject to the claimant’s maritime lien and any
“associated” vessel, which is any vessel owned or controlled by the
same owner. Claimants could attempt to assert “sister ship”
liability against one vessel in our fleet for claims relating to
another of our vessels.
Governments could requisition our vessels during a period of
war or emergency.
A government could requisition one or more of our vessels for title
or for hire. Requisition for title occurs when a government takes
control of a vessel and becomes the owner. Requisition for hire
occurs when a government takes control of a vessel and effectively
becomes the charterer at dictated charter rates. Generally,
requisitions occur during a period of war or emergency, although
governments may elect to requisition vessels in other
circumstances. Even if we would be entitled to compensation in the
event of a requisition of one or more of our vessels, the amount
and timing of payment would be uncertain. Government requisition of
one or more of our vessels may negatively impact our business,
financial condition, results of operations and ability to pay
dividends.
Compliance with safety and other vessel requirements imposed
by classification societies may be costly.
The hull and machinery of every commercial vessel must be certified
as safe and seaworthy in accordance with applicable rules and
regulations, and accordingly vessels must undergo regular surveys.
All of the vessels that we operate or manage are classed by one of
the major classification societies, including Nippon Kaiji Kyokai
(Class NK), DNV GL, Lloyds and ABS. Vessels must undergo annual
surveys, immediate surveys and special surveys. In lieu of a
special survey, a vessel’s machinery may be on a continuous survey
cycle, under which the machinery would be surveyed over a five-year
period. Our vessels are on special survey cycles for hull
inspection and continuous survey cycles for machinery inspection.
Every vessel is also required to be drydocked every two to three
years for inspection of its underwater parts. If any vessel does
not maintain its class and/or fails any annual, intermediate or
special survey, certain covenants in the CIT Loan Facility or
future credit arrangements may be triggered, including as a result
of the vessel being unable to trade between ports and being
unemployable. Such an occurrence could have a material adverse
impact on our business, financial condition, results of operations
and ability to pay dividends. Please see “Item 5.B. Liquidity and
Capital Resources—Indebtedness” for further information.
A further economic slowdown or changes in the economic,
regulatory and political environment in the Asia Pacific region
could reduce dry bulk trade demand.
A significant number of the port calls made by our vessels involve
the transportation of dry bulk products to ports in the Asia
Pacific region. As a result, continued economic slowdown in the
region or changes in the regulatory environment, and particularly
in China or Japan, could have an adverse effect on our business,
results of operations, cash flows and financial condition. Before
the global economic financial crisis that began in 2008, China had
one of the world’s fastest growing economies as measured by gross
domestic product, or GDP, which had a significant impact on
shipping demand. China's GDP growth rate for the year ended
December 31, 2022 was approximately 3.0%, one of its lowest rates
in 50 years, thought to be mainly caused by the country’s
zero-COVID policy and strict lockdowns, which was a marked decline
from 8.1% for the year ended December 31, 2021. In addition, China
previously imposed measures to restrain lending, which may further
contribute to a slowdown in its economic growth. China and other
countries in the Asia Pacific region may continue to experience
slowed or even negative economic growth in the future.
Many of the economic and political reforms adopted by the Chinese
government are unprecedented or experimental and may be subject to
revision, change or abolition based upon the outcome of such
experiments. If the Chinese government does not continue to pursue
a policy of economic reform, the level of imports of exports of dry
bulk products to and from China could be adversely affected by
changes to these economic reforms by the Chinese government, as
well as by changes in political, economic and social conditions or
other relevant policies of the Chinese government, such as changes
in laws, regulations or restrictions on importing commodities into
the country. Notwithstanding economic reform, the Chinese
government may adopt policies that favor domestic shipping
companies and may hinder our ability to compete with them
effectively. Moreover, a significant or protracted slowdown in the
economies of the United States, the European Union or various Asian
countries or changes in the regulatory environment may adversely
affect economic growth in China and elsewhere. Our business,
results of operations, cash flows and financial condition could be
materially and adversely affected by an economic downturn or
changes in the regulatory environment in any of these
countries.
Pandemics such as the coronavirus (COVID-19) make it very
difficult for us to operate in the short-term and have
unpredictable long-term consequences, all of which could decrease
the supply of and demand for the raw materials we transport, the
rates that we are paid to carry our cargo, and our financial
outlook.
Our business may be adversely affected by the lingering effects of
COVID-19 and the reimposition of governmental responses to the
virus, which has introduced uncertainty into our operational and
financial activities and has negatively impacted, and may continue
to impact negatively, global economic activity. Although the
incidence and severity of COVID-19 and its variants have diminished
over time, periodic spikes in incidence occur. Many nations
worldwide have significantly eased or eliminated restrictions that
were enacted at the outset of the outbreak of COVID-19. The United
States has announced that it will terminate the COVID-19 national
emergency and public health emergency that was put in place in
2020. Notably, the Chinese government removed its zero-COVID policy
in December 2022, although China is now facing a sudden surge in
COVID cases after easing the lockdown restrictions nationwide. WHO
officials had expressed hope that COVID-19 might be entering an
endemic phase by early 2023, but the continued uncertainties
associated with the COVID-19 pandemic worldwide may cause an
adverse impact on the global economy and the rate environment for
tanker and other cargo vessels may deteriorate and our operations
and cash flows may be negatively impacted.
Average charter rates for dry bulk vessels, as measured by the
Baltic Dry Index, improved significantly in 2021 and part of 2022
since the second quarter of 2020, but has reduced in the beginning
of 2023; the underlying reasons for this improvement, such as tight
supply lines, increased demand for bulk commodities on the back of
firmly rebounding industrial activity, increased demand for
containerized cargo due to increased consumption mainly from
developed countries, and newbuild construction being put on hold
due to the pandemic, has somewhat reversed, which could negatively
impact our business. Over time, the incidence of COVID-19 and its
variants has diminished although periodic spikes in incidence
occur. Consequently, restrictions imposed by various governmental
health organizations may change over time. Several countries have
lifted restrictions only to reimpose such restrictions as the
number of cases rise and new variants emerge. Negative impacts
could occur, even after the pandemic itself diminishes or ends. It
is difficult to predict what impact a resurgence of COVID-19 or the
occurrence of another pandemic and resultant government measures
may have on our business. The duration of scheduled repairs could
exceed our estimates, causing our vessels to remain off-hire for
longer periods than planned or to miss scheduled employment. We may
face increased costs operating our vessels due to travel
restrictions and quarantine requirements. Possible delays due to
quarantine of our vessels caused by viral infections of our crew or
other related disruptions may lead to the termination of charters
leaving our vessels without employment. It is also possible that
the companies that charter our vessels may be materially impacted
by the effects of the COVID-19 or another virus outbreak and
therefore may default on their charters or seek to restructure the
terms of their charters (which are legally binding).
We expect that pandemics generally, including the current novel
coronavirus pandemic, could affect our business in the following
ways, among others:
|
(1) |
Pandemics generally reduce the demand
for goods worldwide without a commensurate corresponding change in
the number of vessels worldwide, thereby increasing competition for
cargo and decreasing the market price for transporting dry bulk
products. |
|
(2) |
Countries could impose quarantine
checks and hygiene measures on arriving vessels, which functionally
reduce the amount of cargo that we and our competitors are able to
move by causing delays in loading and delivery of
cargo. |
|
(3) |
The process of buying, selling, and
maintaining vessels is made more onerous and time-intensive. For
instance, delays may be caused at shipyards for newbuildings,
drydocks and other works, in vessel inspections and related
certifications by class societies, customers or government
agencies, as well as delays and shortages or a lack of access to
required spare parts and lack of berths or shortages in labor,
which may in turn delay any repairs to, scheduled or unscheduled
maintenance or modifications, or drydocking of, our
vessels. |
|
(4) |
We have seen a decrease in
productivity, generally, as people—including our office employees
and crews, as well as our counterparties—get sick and take time off
from work. We are particularly vulnerable to our crew members
getting sick, as if even one of our crew members gets sick, local
authorities could require us to detain and quarantine the ship and
its crew for an unspecified amount of time, disinfect and fumigate
the vessels, or take similar precautions, which would add costs,
decrease our utilization, and substantially disrupt our cargo
operations. If a vessel’s entire crew fell seriously ill, we may
have substantial difficulty operating its vessel and may
necessitate extraordinary external aid. |
|
(5) |
International transportation of
personnel could be limited or otherwise disrupted. In particular,
our crews generally work on a rotation basis, relying largely on
international air transport for crew changes plan fulfillment. Any
such disruptions could impact the cost of rotating our crew, and
possibly impact our ability to maintain a full crew synthesis
onboard all our vessels at any given time. It may also be difficult
for our in-house technical teams to travel to shipyards to observe
vessel maintenance, and we may need to hire local experts, which
local experts may vary in skill and are difficult to supervise
remotely, to conduct work we ordinarily address
in-house. |
|
(6) |
Governments impose new regulations,
directives or practices, which we may be obligated to implement at
our own expense. |
|
(7) |
Any or all of the foregoing could
lead our charterers to try to invoke force majeure clauses. As of
the date hereof, however, none of our charterers have invoked a
force majeure clause citing the pandemic. |
|
(8) |
Credit tightening or declines in
global financial markets, including to the prices of our publicly
traded securities and the securities of our peers, could make it
more difficult for us to access capital, including to finance our
existing debt obligations. |
Any of these public health threats and related consequences could
adversely affect our financial results.
Sulphur regulations to reduce air pollution from ships may
require retrofitting of vessels and may cause us to incur
significant costs.
Since January 1, 2020 the IMO regulations have required vessels to
comply with a global cap on the sulphur in fuel oil used on board
of 0.5%, down from the previous 3.5%. The interpretation of “fuel
oil used on board” includes use in main engine, auxiliary engines
and boilers. Shipowners may comply with this regulation by (i)
using 0.5% sulphur fuels on board, which costs more than higher
sulphur fuel; (ii) installing scrubbers for cleaning of the exhaust
gas (which we have not done to any of our vessels); or (iii) by
retrofitting vessels to be powered by liquefied natural gas (which
we have not done to any of our vessels), which may not be a viable
option due to the lack of supply network and high costs involved in
this process. Costs of compliance with these regulatory changes may
be significant and may have a material adverse effect on our future
performance, results of operations, cash flows and financial
position. It is unclear how the new emissions standard will
affect the employment of our vessels, given that the cost of fuel
is borne by our charterers when our vessels are on time charter
employment. Over time, however, it is possible that ships not
retrofitted to comply with the new emissions standard may become
less competitive (compared with ships equipped with exhaust gas
scrubbers that can utilize less expensive high sulphur fuel), may
have difficulty finding employment, may command lower charter hire
and/or may need to be scrapped.
A downturn in the worldwide economy may harm our
business.
Downturns in the worldwide economy, due to inflation, geopolitics,
major central bank policy actions including interest rate
increases, public health crises, or other factors, have harmed our
business in the past and future downturns could also adversely
affect our business. Adverse economic conditions affect demand for
goods and oil. Reduced demand for these or other products could
result in significant decreases in rates we obtain for chartering
our ships. In addition, the cost for crew members, oils and
bunkers, and other supplies may increase. A deterioration of
conditions in worldwide credit markets could limit our ability to
obtain external financing to fund our operations and capital
expenditures. In addition, we may experience losses on our holdings
of cash and investments due to failures of financial institutions
and other parties. Difficult economic conditions may also result in
a higher rate of losses on our accounts receivable due to credit
defaults. During an inflationary period, such as one we are
currently experiencing, the SOFR or similar reference rate will
generally be increased, thus costing us more money to service our
debt obligations and reducing our net revenues. As a result,
downturns in the worldwide economy could have a material adverse
effect on our business, results of operations, or financial
condition.
Worldwide inflationary pressures could negatively impact our
results of operations and cash flows.
It has been recently observed that worldwide economies have
experienced inflationary pressures, with price increases seen
across many sectors globally. For example, the U.S. consumer price
index, an inflation gauge that measures costs across dozens of
items, rose 6.5% in December 2022 compared to the prior year,
driven in large part by increases in energy costs. It remains to be
seen whether inflationary pressures will continue, and to what
degree, as central banks begin to respond to price increases. In
the event that inflation becomes a significant factor in the global
economy generally and in the shipping industry more specifically,
inflationary pressures would result in increased operating, voyage
and administrative costs. Furthermore, the effects of inflation on
the supply and demand of the products we transport could alter
demand for our services. Interventions in the economy by central
banks in response to inflationary pressures may slow down economic
activity, including by altering consumer purchasing habits and
reducing demand for the commodities and products we carry, and
cause a reduction in trade. As a result, the volumes of goods we
deliver and/or charter rates for our vessels may be affected. Any
of these factors could have an adverse effect on our business,
financial condition, cash flows and operating results.
Environmental, social and governance matters may impact our
business and reputation.
In addition to the importance of their financial performance,
companies are increasingly being judged by their performance on a
variety of environmental, social and governance matters, or ESG,
which are considered to contribute to the long-term sustainability
of companies’ performance.
A variety of organizations measure the performance of companies on
such ESG topics, and the results of these assessments are widely
publicized. In addition, investment in funds that specialize in
companies that perform well in such assessments are increasingly
popular, and major institutional investors have publicly emphasized
the importance of such ESG measures to their investment decisions.
Topics taken into account in such assessments include, among
others, the company’s efforts and impacts on climate change and
human rights, ethics and compliance with law, and the role of the
company’s board of directors in supervising various sustainability
issues.
We actively manage a broad range of such ESG matters, taking into
consideration their expected impact on the sustainability of our
business over time, and the potential impact of our business on
society and the environment. However, in light of investors’
increased focus on ESG matters, there can be no certainty that we
will manage such issues successfully, or that we will successfully
meet society’s expectations as to our proper role. Any failure or
perceived failure by us in this regard could have a material
adverse effect on our reputation and on our business, share price,
financial condition, or results of operations, including the
sustainability of our business over time.
On December 31, 2018, EU-flagged vessels became subject to
Regulation (EU) No. 1257/2013 of the European Parliament and of the
Council of 20 November 2013 on ship recycling (the “EU Ship
Recycling Regulation” or “ESRR”) and exempt from the Regulation
(EC) No. 1013/2006 of the European Parliament and of the Council of
14 June 2006 on shipments of waste (the “European Waste Shipment
Regulation” or “EWSR”), which had previously governed their
disposal and recycling. The EWSR continues to be applicable to
Non-European Union Member State-flagged (“non-EU-flagged”)
vessels.
Under the ESRR, commercial EU-flagged vessels of 500 gross tonnage
and above may be recycled only at shipyards included on the
European List of Authorised Ship Recycling Facilities (the
“European List”). The European List presently includes eight
facilities in Turkey, but no facilities in the major ship recycling
countries in Asia. The combined capacity of the European List
facilities may prove insufficient to absorb the total recycling
volume of EU-flagged vessels. This circumstance, taken in tandem
with the possible decrease in cash sales, may result in longer wait
times for divestment of recyclable vessels as well as downward
pressure on the purchase prices offered by European List shipyards.
We currently have one vessel flagged in Malta and in the future may
have additional vessels flagged in EU jurisdictions.
In addition, the EWSR requires that non-EU-flagged ships departing
from European Union ports be recycled only in Organisation for
Economic Cooperation and Development (OECD) member countries. In
March 2018, the Rotterdam District Court ruled that the sale of
four recyclable vessels by third-party Dutch ship owner Seatrade to
cash buyers, who then reflagged and resold the vessels to non-OECD
country recycling yards, were effectively indirect sales to
non-OECD country yards, in violation of the EWSR. If European Union
Member State courts widely adopt this analysis, it may negatively
impact revenue from the residual values of our vessels and we may
be subject to a heightened risk of non-compliance, due diligence
obligations and costs in instances where we sell older ships to
cash buyers.
The smuggling of drugs or other contraband onto our vessels
may lead to governmental claims against us.
We expect that our vessels will call at ports where smugglers may
attempt to hide drugs and other contraband on vessels, with or
without the knowledge of crew members. To the extent that our
vessels are found with contraband, whether inside or attached to
the hull of our vessel, and whether with or without the knowledge
of any of our crew, we may face governmental or other regulatory
claims that could have an adverse effect on our business, results
of operations, cash flows, financial condition and ability to pay
dividends.
Labor interruptions could disrupt our business.
Our vessels are manned by masters, officers and crews (totaling 192
as of December 31, 2022). Seafarers manning the vessels in our
fleet are covered by industry-wide collective bargaining agreements
that set basic standards. Any labor interruptions or employment
disagreements with our crew members could disrupt our operations
and could have a material adverse effect on our business, results
of operations, cash flows, financial condition and ability to pay
dividends. We cannot assure you that collective bargaining
agreements will prevent labor interruptions.
Company-Specific Risk
Factors
The market values of our vessels have fluctuated and have
from time to time triggered certain financial covenants under our
existing and potentially future loan and credit
facilities.
The market value of dry bulk vessels has generally experienced high
volatility. The market prices for secondhand and newbuilding dry
bulk vessels in the recent past have declined from historically
high levels to low levels within a short period of time. In
particular, as of March 31, 2020, the Company concluded that the
recoverable amounts of the vessels were lower than their carrying
amounts and recognized an impairment loss of $4.6 million. However,
the market value of our vessels increased the subsequent years and
we did not recognize any impairment loss on our vessels in 2021 and
2022.
The market value of our vessels may increase and decrease depending
on a number of factors including:
|
Ø |
prevailing level of charter rates;
|
|
Ø |
the environmental friendliness of our
vessels; |
|
Ø |
general economic and market
conditions affecting the shipping industry, including relating to
COVID-19 and the Ukraine conflict and related
sanctions; |
|
Ø |
competition from other shipping
companies; |
|
Ø |
configurations, sizes and ages of
vessels; |
|
Ø |
supply and demand for
vessels; |
|
Ø |
other modes of
transportation; |
|
Ø |
governmental or other regulations;
and |
|
Ø |
technological advances. |
Our loan agreement with First Citizens Bank & Trust Company
(formerly known as CIT Bank N.A.), which we refer to as our CIT
Loan Facility, is secured by mortgages on seven of our vessels, and
requires us to maintain specified collateral coverage ratios and to
satisfy financial covenants, including requirements based on the
market value of our vessels and our liquidity. Our previous loan
facilities had similar requirements, and we expect any future loan
agreements to have similar collateral requirements and provisions.
Since the middle of 2008
through part of 2021, the prevailing conditions in the dry bulk
charter market coupled with the general difficulty in obtaining
financing for vessel purchases led to a decline in the market
values of our vessels, which have increased since that time.
However, we cannot predict when and if vessel values will again
start to decline.
As of December 31, 2022, we satisfied the covenants included in our
CIT Loan Facility. For a more detailed discussion see “Item 5.B
Liquidity and Capital Resources—Indebtedness” and Note 11 in the
Consolidated Financial Statements included herewith.
Further declines of market values of our vessels may affect our
ability to comply with various covenants and could also limit the
amount of funds we are permitted to borrow under our current or
future loan arrangements. If we breach the financial and other
covenants under the CIT Loan Facility, our lenders could accelerate
our indebtedness and foreclose on vessels in our fleet, which would
significantly impair our ability to continue to conduct our
business. If our indebtedness were accelerated in full or in part,
it would be very difficult in the current financing environment for
us to refinance our debt or obtain additional financing and we
could lose our vessels if our lenders foreclose upon their liens,
which would adversely affect our business, financial condition,
ability to continue our business and for Globus Maritime to pay
dividends.
For a more detailed discussion on our loan covenants and
cross-default provisions, see “Item 5.B Liquidity and Capital
Resources—Indebtedness.”
If we sell any vessel at a time when vessel prices have fallen and
before we have recorded an impairment adjustment to our
consolidated financial statements, the sale price may be agreed at
a value lower than the vessel’s depreciated book value as in our
consolidated financial statements at that time, resulting in a loss
and a respective reduction in earnings. If the market values of our
vessels decrease, such decrease and its effects could have a
material adverse effect on our business, financial condition,
results of operations and ability for Globus Maritime to pay
dividends.
If a determination is made that a vessel’s future useful life is
limited or its future earnings capacity is reduced, it could result
in an impairment of its value on our consolidated financial
statements that would result in a charge against our earnings and
the reduction of our stockholders’ equity. These impairment costs
could be very substantial.
We may not be able to attract and retain key management
personnel and other employees in the shipping industry.
Our success will depend to a significant extent upon the abilities
and efforts of our management team consisting of our Chief
Executive Officer, including our ability to retain our management
team and the ability of our management to recruit and hire suitable
employees. The loss of our Chief Executive Officer or other key
employees could adversely affect our business prospects and
financial condition. Difficulty in hiring and retaining personnel
could adversely affect our results of operations.
Our loan agreement contains, and we expect that future loan
agreements and financing arrangements will contain, restrictive
covenants that may limit our liquidity and corporate activities,
which could limit our operational flexibility and have an adverse
effect on our financial condition and results of operations. In
addition, because of the presence of cross-default provisions in
our loan agreement and the expectation that such will exist in any
future loan agreements and financing arrangements, a default by us
under one loan could lead to defaults under multiple
loans.
Our CIT Loan Facility contains, and we expect that future loan
agreements and financing arrangements will contain, customary
covenants and event of default clauses, financial covenants,
restrictive covenants and performance requirements, which may
affect operational and financial flexibility. Such restrictions
could affect, and in many respects limit or prohibit, among other
things, our ability to pay dividends, incur additional
indebtedness, create liens, sell assets, change our chief executive
officer or chairman or ship manager, or engage in mergers or
acquisitions. These restrictions could limit our ability to plan
for or react to market conditions or meet extraordinary capital
needs or otherwise restrict corporate activities. There can be no
assurance that such restrictions will not adversely affect our
ability to finance our future operations or capital needs.
As a result of these restrictions, we may need to seek permission
from our lenders and other financing counterparties in order to
engage in some corporate actions. Our lenders’ and other financing
counterparties’ interests may be different from ours and we may not
be able to obtain their permission when needed. This may prevent us
from taking actions that we believe are in our best interests,
which may adversely impact our revenues, results of operations and
financial condition.
If we fail to meet our payment and other obligations, including our
financial covenants and any security coverage requirements, could
lead to defaults under our financing arrangements. Likewise, a
decrease in vessel values or adverse market conditions could cause
us to breach our financial covenants or security requirements (the
market values of dry bulk vessels have generally experienced high
volatility). In the event of a default that we cannot remedy, our
lenders and other financing counterparties could then accelerate
their indebtedness and foreclose on the respective vessels in our
fleet. The loss of any of our vessels could have a material adverse
effect on our business, results of operations and financial
condition.
There can be no assurance that we will obtain waivers and deferrals
from our lenders in the future, if needed, as we have obtained in
the past. We are currently in compliance with all applicable
financial covenants under our CIT Loan Facility. For more
information regarding our current loan facilities, see please see
“Item 5.B. Liquidity and Capital Resources.”
Because of the presence of cross-default provisions in our CIT Loan
Facility and, we expect, any future loan agreements, a default by
us under a loan and the refusal of any one lender to grant or
extend a waiver could result in the acceleration of our
indebtedness under our other loans. A cross-default provision means
that if we default on one loan, we would then default on our other
loans containing a cross-default provision.
We cannot assure you that we will be able to refinance our
existing indebtedness or obtain additional financing.
We may finance future fleet expansion with additional secured
indebtedness. In May 2021, we reached an agreement with First
Citizens Bank & Trust Company (formerly known as CIT Bank N.A.)
for a loan facility of up to $34.25 million bearing interest at
LIBOR plus a margin of 3.75% per annum. The proceeds of this
financing were used to repay the outstanding balance of a loan
agreement with EnTrust, which we refer to as the EnTrust Loan
Facility. In August 2022, we reached an agreement with First
Citizens Bank & Trust Company (formerly known as CIT Bank N.A.)
for a deed of accession, amendment and restatement of the CIT loan
facility by the accession of an additional borrower in order to
increase the loan facility from a total of $34.25 million to $52.25
million, by a top up loan amount of $18 million for the purpose of
financing our vessel Orion Globe and for general corporate and
general working capital purposes. The CIT Loan Facility (including
the new top up loan amount) is now further secured by a first
preferred mortgage over the vessel Orion Globe. Furthermore, the
CIT Loan Facility now bears interest at Term SOFR plus a margin of
3.35%.
Our ability to obtain bank financing or to access the capital
markets for future offerings may be limited by our financial
condition at the time of any such financing or offering, including
the actual or perceived credit quality of our charterers and the
market value of our fleet, as well as by adverse market conditions
resulting from, among other things, general economic conditions,
weakness in the financial markets and contingencies and
uncertainties that are beyond our control. Significant contraction,
de-leveraging and reduced liquidity in credit markets worldwide is
reducing the availability and increasing the cost of credit.
If we are not able to obtain new debt financing on terms acceptable
to us or refinance our existing debt, we will have to dedicate a
portion of our cash flow from operations to pay the principal and
interest of this indebtedness. If we are not able to satisfy these
obligations, we may have to undertake alternative financing plans.
In addition, debt service payments under the CIT Loan Facility or
alternative financing may limit funds otherwise available for
working capital, capital expenditures, the payment of dividends and
other purposes. Our inability to obtain additional or replacement
financing at anticipated costs or at all may materially affect our
results of operation, our ability to implement our business
strategy, our payment of dividends and our ability to continue as a
going concern.
We depend on short-term or spot charters in volatile shipping
markets.
We currently charter most of the vessels we own on the short-term
charter market. The short-term or spot charter market is highly
competitive and short-term or spot charter rates may fluctuate
significantly based upon available charters and the supply of and
demand for seaborne shipping capacity. While our focus on the
short-term or spot market may enable us to benefit if industry
conditions strengthen, we must consistently procure short-term or
spot charter business. Conversely, such dependence makes us
vulnerable to declining market rates for short-term or spot
charters and to the off-hire periods including ballast passages.
Rates within the short-term or spot charter market are subject to
volatile fluctuations while longer-term time charters provide
income at pre-determined rates over more extended periods of time.
There can be no assurance that we will be successful in keeping our
vessels fully employed in these short-term markets or that future
short-term or spot rates will be sufficient to enable the vessels
to be operated profitably. A significant decrease in charter rates
would affect value and further adversely affect our profitability,
cash flows and ability to pay dividends. Furthermore, we have in
the past, and may in the future, employ our vessels on index-linked
time charters, which may have similar fluctuations in hire as
short-term or spot charters. We cannot give assurances that future
available short-term. spot charters or index-linked charters will
enable us to operate our vessels profitably.
We may also decide that it makes economic sense to lay up one or
more vessels. While our vessels are laid up, we will pay lay-up
costs, but those vessels will not be able to earn any hire.
We may be unable to successfully employ our vessels on
long-term time charters or take advantage of favorable
opportunities involving short-term or spot market charter
rates.
Our long-term strategy to maximize the value of our fleet is to
employ our vessels on a mix of all types of charter contracts,
including in the short-term or spot market and on bareboat charters
and long-term or fixed-hire or index-linked hire time charters. We
believe this strategy provides the cash flow stability, reduced
exposure to market downturns and high utilization rates of the
charter market, while at the same time enabling us to benefit from
periods of increasing short-term or spot market rates. But our
short-term strategy at any given point in time is dictated by a
multitude of factors and the chartering opportunities before us. We
may, for example, seek to employ a greater portion of our fleet on
the short-term, spot market or index-linked time charters or on
fixed-hire time charters with longer durations, should we believe
it to be in our best interests. We generally prefer spot or
short-term contracts in order to be versatile, to be able to move
quickly to capture a market upswing, and to be more selective with
the cargos we carry. Long-term charters, however, provide desirable
cash flow stability, albeit at the cost of missing upswings in
cargo rates. Accordingly, our mix between short-term or spot
charters,longer-term charters and index-linked charters changes
from time-to-time. When our ships are not all on the short-term or
spot market, we generally seek to stagger the expiration dates of
our charters to reduce exposure to volatility in the shipping cycle
when our vessels come off of charter. We also continually monitor
developments in the dry bulk shipping industry and, subject to
market demand, will adjust the number of vessels on charters and
the charter periods for our vessels according to market
conditions.
We and our Manager have developed relationships with a number of
international charterers, vessel brokers, financial institutions,
insurers and shipbuilders. We have also developed a network of
relationships with vessel brokers who help facilitate vessel
charters and acquisitions.
Although time charters with durations of one to five years may
provide relatively steady streams of revenue, if our vessels were
committed to such charters they may not be available for
re-chartering or for short-term or spot market voyages when such
employment would allow us to realize the benefits of comparably
more favorable charter rates. In addition, in the future, we may
not be able to enter into new time charters on favorable terms. The
dry bulk market is volatile. While charter rates are presently
generally above our operating expenses, in the past charter rates
have declined below operating costs of vessels. If we are required
to enter into a charter when charter rates are low, employ our
vessels on the short-term or spot market during periods when
charter rates have fallen, have index linked charters when rates
are low, or we are unable to take advantage of short-term
opportunities on the spot or charter market, our earnings and
profitability could be adversely affected. We cannot assure you
that future charter rates will enable us to cover our costs,
operate our vessels profitably or to pay dividends, or all of
them.
We may also decide that it makes economic sense to lay up one or
more vessels. While our vessels are laid up, we will pay lay-up
costs, but those vessels will not be able to earn any
hire.
We conduct a substantial amount of business in
China.
The Chinese legal system is based on written statutes and their
legal interpretation by the Standing Committee of the National
People’s Congress. Prior court decisions may be cited for reference
but have limited precedential value. Since 1979, the Chinese
government has been developing a comprehensive system of commercial
laws, and considerable progress has been made in introducing laws
and regulations dealing with economic matters such as foreign
investment, corporate organization and governance, commerce,
taxation and trade. However, because these laws and regulations are
relatively new, there is a general lack of internal guidelines or
authoritative interpretive guidance and because of the limited
number of published cases and their non-binding nature
interpretation and enforcement of these laws and regulations
involve uncertainties. We conduct a substantial portion of our
business in China or with Chinese counterparties. For example, we
enter into charters with Chinese customers, which charters may be
subject to new regulations in China. We may, therefore, be required
to incur new or additional compliance or other administrative
costs, and pay new taxes or other fees to the Chinese government.
Although the charters we enter into with Chinese counterparties are
not governed by Chinese law, we may have difficulties enforcing a
judgment rendered by an arbitration tribunal or by an English or
U.S. court (or other non-Chinese court) in China.
In addition, China enacted a tax for non-resident international
transportation enterprises engaged in the provision of services to
passengers or cargo, among other items, in and out of China using
their own, chartered or leased vessels, including any stevedore,
warehousing and other services connected with the transportation.
The law and relevant regulations broaden the range of international
transportation companies which may find themselves liable for
Chinese enterprise income tax on profits generated from
international transportation services passing through Chinese
ports. This tax or similar regulations by China may reduce our
operating results and may also result in an increase in the cost of
goods exported from China and the risks associated with exporting
goods from China, as well as a decrease in the quantity of goods to
be shipped from or through China, which would have an adverse
impact on our charterers’ business, operating results and financial
condition and could thereby affect their ability to make timely
charter hire payments to us and to renew and increase the number of
their time charters with us. Changes in laws and regulations,
including with regards to tax matters, and their implementation by
local authorities could affect our vessels that are either
chartered to Chinese customers or that call to Chinese ports and
could have a material adverse effect on our business, results of
operations and financial condition and our ability to pay
dividends.
The Chinese economy differs from the economies of western countries
in such respects as structure, government involvement, level of
development, growth rate, capital reinvestment, allocation of
resources, bank regulation, currency and monetary policy, rate of
inflation and balance of payments position. Although state-owned
enterprises still account for a substantial portion of the Chinese
industrial output, in general, the Chinese government is reducing
the level of direct control that it exercises over the economy.
There is an increasing level of freedom and autonomy in areas such
as allocation of resources, production, pricing and management and
a gradual shift in emphasis to a “market economy” and enterprise
reform, although it still acts with greater control than a truly
free-market economy. Many of the Chinese government’s reforms are
unprecedented or experimental and may be subject to revision,
change or abolition based upon the outcome of such experiments. The
level of imports to and exports from China could be adversely
affected by the failure to continue market reforms or changes to
existing pro-export economic policies. The level of imports to and
exports from China may also be adversely affected by changes in
political, economic and social conditions (including a slowing of
economic growth), the coronavirus, or other relevant policies of
the Chinese government, such as changes in laws, regulations or
export and import restrictions, internal political instability,
changes in currency policies, changes in trade policies and
territorial or trade disputes. A decrease in the level of imports
to and exports from China could adversely affect our business,
operating results and financial condition.
As we expand our business, we may have difficulty improving
our operating and financial systems and recruiting suitable
employees and crew for our vessels.
Our current operating and financial systems may not be adequate if
we expand the size of our fleet, and our attempts to improve those
systems may be ineffective. In addition, as we seek to expand our
internal technical management capabilities and our fleet, we or our
crewing agents may need to recruit suitable additional seafarers
and shore based administrative and management personnel. We cannot
guarantee that we or our crewing agents will be able to hire
suitable employees or a sufficient number of employees if and as we
expand our fleet. If we or our crewing agent encounter business or
financial difficulties, we may not be able to adequately staff our
vessels. If we are unable to develop and maintain effective
financial and operating systems or to recruit suitable employees as
we expand our fleet, our financial performance may be adversely
affected and, among other things, the amount of cash available for
distribution as dividends to our shareholders may be reduced or
eliminated.
Recently, the limited supply of and increased demand for
well-qualified crew, due to the increase in the size of the global
shipping fleet, has created upward pressure on crewing costs, which
we generally bear under our time and spot charters. Increases in
crew costs may adversely affect our profitability, results of
operations, cash flows, financial condition and ability to pay
dividends.
Our charterers may renegotiate or default on their
charters.
Our charters provide the charterer the right to terminate the
charter on the occurrence of stated events or the existence of
specified conditions. In addition, the ability and willingness of
each of our charterers to perform its obligations under its charter
with us will depend on a number of factors that are beyond our
control. These factors may include general economic conditions, the
condition of the dry bulk shipping industry and the overall
financial condition of the counterparties. The costs and delays
associated with the default of a charterer of a vessel may be
considerable and may adversely affect our business, results of
operations, cash flows, financial condition and ability to pay
dividends.
In the recent depressed dry bulk market conditions, there have been
numerous reports of charterers renegotiating their charters or
defaulting on their obligations under their charters. If a current
or future charterer defaults on a charter, we will seek the
remedies available to us, which may include arbitration or
litigation to enforce the contract, although such efforts may not
be successful and for short-term charters may cost more to enforce
than the potential recovery. We cannot predict whether our
charterers will, upon the expiration of their charters, re-charter
our vessels on favorable terms or at all. If our charterers decide
not to re-charter our vessels, we may not be able to re-charter
them on terms similar to the terms of our current charters or at
all. If we receive lower charter rates under replacement charters
or are unable to re-charter all of our vessels, this may adversely
affect our business, results of operations, cash flows, financial
condition and ability to pay dividends.
Contracts for newbuilding vessels present certain economic
and other risks.
Three of our subsidiaries have contracts for the construction of
three Ultramax for anticipated delivery in 2024. We may also order
additional newbuildings. During the course of construction of a
vessel, we are typically required to make progress payments. While
two of those three contracts have refund guarantees from banks to
cover defaults by the shipyards and our construction contracts
would be saleable in the event of our payment default, we can still
incur economic losses in the event that we or the shipyards are
unable to perform our respective obligations. Shipyards may
periodically experience financial difficulties.
Delays in the delivery of these vessels, or any newbuilding or
secondhand vessels our subsidiaries may agree to acquire, could
delay our receipt of revenues generated by these vessels and, to
the extent we have arranged charter employment for these vessels,
could possibly result in the cancellation of those charters, and
therefore adversely affect our anticipated results of operations.
The delivery of newbuilding vessels could be delayed because of,
among other things: work stoppages or other labor disturbances;
bankruptcy or other financial crisis of the shipyard building the
vessel; hostilities or political or economic disturbances in the
countries where the vessels are being built, including any
escalation of tensions involving countries in east Asia; weather
interference or catastrophic events, such as a major earthquake,
tsunami or fire; our requests for changes to the original vessel
specifications; requests from our customers, with whom our
commercial managers arrange charters for such vessels, to delay
construction and delivery of such vessels due to weak economic
conditions and shipping demand or a dispute with the shipyard
building the vessel.
The aging of our fleet may result in increased operating
costs in the future.
In general, the cost of maintaining a vessel in good operating
condition increases with the age of the vessel. As of December 31,
2022 and 2021, the weighted average age of the vessels in our fleet
was 11.2 and 10.2 years, respectively. Our oldest vessel was built
in 2005, and our youngest vessel was built in 2018. As our fleet
ages, we will incur increased costs to operate and maintain the
vessels. Older vessels are typically less fuel efficient and cost
more to maintain than more recently constructed vessels due to
improvements in engine technology. Cargo insurance rates, paid by
charterers, increase with the age of a vessel, making older vessels
less desirable to charterers. Governmental regulations, safety or
other equipment standards related to the age of vessels may require
expenditures for alterations or the addition of new equipment, to
our vessels and may restrict the type of activities in which our
vessels may engage. We cannot assure you that, as our vessels age,
further market conditions will justify those expenditures or enable
us to operate our vessels profitably during the remainder of their
useful lives. We may also decide that it makes economic sense to
lay up one or more vessels. While our vessels are laid up, we will
pay lay-up costs, but those vessels will not be able to earn any
hire.
We may have difficulty managing our planned growth
properly.
Our recent vessel acquisitions have imposed additional
responsibilities on our management and staff, as will any further
acquisition of vessels, which may require us to add more personnel
and find new customers. Attracting qualified staff and customers
are difficult tasks, and we might struggle to do so on attractive
terms.
We intend to continue to stabilize and then to try to grow our
business through disciplined acquisitions of vessels that meet our
selection criteria and newly built vessels if we can negotiate
attractive purchase prices. Our future growth will primarily depend
on:
|
Ø |
locating and acquiring suitable
vessels; |
|
Ø |
identifying and consummating
acquisitions; |
|
Ø |
enhancing our customer
base; |
|
Ø |
managing our expansion;
and |
|
Ø |
obtaining required financing on
acceptable terms. |
A delay in the delivery to us of any such vessel, or the failure of
the shipyard to deliver a vessel at all, could cause us to breach
our obligations under a related charter and could adversely affect
our earnings. In addition, the delivery of any of these vessels
with substantial defects could have similar consequences. A
shipyard could fail to deliver a newbuilding on time or at all
because of:
|
Ø |
work stoppages or other hostilities
or political or economic disturbances that disrupt the operations
of the shipyard; |
|
Ø |
quality or engineering
problems; |
|
Ø |
bankruptcy or other financial crisis
of the shipyard; |
|
Ø |
a backlog of orders at the
shipyard; |
|
Ø |
weather interference or catastrophic
events, such as major earthquakes or fires; |
|
Ø |
our requests for changes to the
original vessel specifications or disputes with the
shipyard; |
|
Ø |
shortages of or delays in the receipt
of necessary construction materials, such as steel; or |
|
Ø |
shortages of or delays in the receipt
of necessary equipment, such as main engines, electricity
generators and propellers. |
In addition, if we enter a newbuilding or secondhand purchase
contract, we may seek to terminate the contract due to market
conditions, financing limitations or other reasons. The outcome of
contract termination negotiations may require us to forego deposits
on construction or purchase and pay additional cancellation fees.
In addition, where we have already arranged a future charter with
respect to the terminated newbuilding contract, we would need to
provide an acceptable substitute vessel to the charterer to avoid
breaching our charter agreement.
During periods in which charter rates are high, vessel values
generally are high as well, and it may be difficult to consummate
vessel acquisitions or enter into newbuilding contracts at
favorable prices. During periods when charter rates are low, we may
be unable to fund the acquisition of newbuildings, whether through
lending or cash on hand. For these reasons, we may be unable to
execute our growth plans or avoid significant expenses and losses
in connection with our future growth efforts.
Growing any business by acquisition presents numerous risks, such
as undisclosed liabilities and obligations, the possibility that
indemnification agreements will be unenforceable or insufficient to
cover potential losses and difficulties associated with imposing
common standards, controls, procedures and policies, obtaining
additional qualified personnel, managing relationships with
customers and integrating newly acquired assets and operations into
existing infrastructure. We cannot give any assurance that we will
be successful in executing our growth plans or that we will not
incur significant expenses and losses in connection with our future
growth.
To the extent we scrap or sell vessels, we may decide to terminate
the employment of some of our staff.
Legislative or regulatory changes in Greece may adversely
affect our results from operations.
Globus Shipmanagement Corp., our ship management subsidiary, who we
refer to as our Manager, is regulated under Greek Law 89/67, and
conducts its operations and those on our behalf primarily in
Greece. Greece has been implementing new legislative measures to
address financial difficulties, several of which as a response from
oversight by the International Monetary Fund and by European
regulatory bodies such as the European Central Bank. Such
legislative actions may impose new regulations on our operations in
Greece that will require us to incur new or additional compliance
or other administrative costs and may require that our Manager or
we pay to the Greek government new taxes or other fees. Any such
taxes, fees or costs we incur could be in amounts that are
significantly greater than those in the past and could adversely
affect our results from operations.
For example, in 2013, tax law 4110/2013 amended the long-standing
provisions of art. 26 of law 27/1975 by imposing a fixed annual
tonnage tax on vessels flying a foreign (i.e., non-Greek) flag
which are managed by a Law 89 company, establishing an identical
tonnage tax regime as the one already in force for vessels flying
the Greek flag. This tax varies depending on the size of the
vessel, calculated in gross registered tonnage, as well as on the
age of each vessel. Payment of this tonnage tax completely
satisfies all income tax obligations of both the shipowning company
and of all its shareholders up to the ultimate beneficial owners.
Any tax payable to the state of the flag of each vessel as a result
of its registration with a foreign flag registry (including the
Marshall Islands) is subtracted from the amount of tonnage tax due
to the Greek tax authorities.
The tax residents of Greece who receive dividends from such
shipowning or their holding companies are taxed at 5% on the
dividends which they receive and which they import into Greece, not
being liable to any other taxation for these, which include those
dividends which either remain with the holding company or are paid
to the individual Greek tax resident
abroad.
We rely on our information systems to conduct our
business.
The efficient operation of our business is dependent on computer
hardware and software systems. Information systems are vulnerable
to security breaches by computer hackers, cyber terrorists, and
garden variety computer viruses. We rely on what we believe to be
industry accepted security measures and technology to securely
maintain confidential and proprietary information maintained on our
information systems. However, these measures and technology may not
adequately prevent security breaches.
In addition, the unavailability of the information systems or the
failure of these systems to perform as anticipated for any reason
could disrupt our business and could result in decreased
performance and increased operating costs, causing our business and
results of operations to suffer. Any significant interruption or
failure of our information systems or any significant breach of
security could adversely affect our business and results of
operations.
A cyber-attack could materially disrupt our
business.
We rely on information technology systems and networks in our
operations and administration of our business. Our business
operations could be targeted by individuals or groups seeking to
sabotage or disrupt our information technology systems and
networks, or to steal data. A successful cyber-attack could
materially disrupt our operations, including the safety of our
operations, or lead to unauthorized release of information or
alteration of information in our systems. Any such attack or other
breach of our information technology systems could have a material
adverse effect on our business and results of operations. In
addition, the unavailability of the information systems or the
failure of these systems to perform as anticipated for any reason
could disrupt our business and could result in decreased
performance and increased operating costs, causing our business and
results of operations to suffer. Any significant interruption or
failure of our information systems or any significant breach of
security could adversely affect our business and results of
operations. Most recently, the escalation in conflict between
Russia and Ukraine has been accompanied by cyber-attacks against
the Ukrainian government and other countries in the region. It is
possible that these attacks could have collateral effects on
additional critical infrastructure and financial institutions
globally, which could adversely affect our operations. It is
difficult to assess the likelihood of such threat and any potential
impact at this time.
We expect that a limited number of financial institutions
will hold our cash including financial institutions that may be
located in Greece and the United States.
We expect that a limited number of financial institutions will hold
all of our cash, including some institutions located in Greece and
the U.S. Our bank accounts are with banks in Switzerland, the U.S.
and Greece. Of the financial institutions located in Greece, none
are subsidiaries of international banks. Depending on our cash
balance in any our accounts at any given point in time, our
balances may not be covered by government-backed deposit insurance
programs in the event of default by these financial
institutions.
For example, a substantial amount of cash is currently held in U.S.
banking institutions. While the U.S. Federal Deposit Insurance
Corporation provides deposit insurance of $250,000 per depositor,
per insured bank, the amounts that we have in U.S. banks far
exceeds that insurance amount, and therefore if the U.S. government
does not impose measures to protect depositors, in the event the
bank in which our funds are located fails, we may lose all or a
substantial portion of our deposits. In addition, our bank accounts
held in Swiss banking institutions are used for daily commercial
transactions. Esisuisse, a self-regulatory organisation for banks
in Switzerland, guarantees that it will cover protected deposits as
part of the self-regulation of Swiss banks and securities firms
which provides deposit insurance against loss up to the amount of
CHF 100,000. The deposits we have in Swiss banks exceeds that
insurance amount and therefore if the Swiss government does not
impose measures to protect depositors, in the event the bank in
which our funds are located fails, we may lose all or a substantial
portion of our deposits. In addition, in the event any of our banks
do not allow us to withdraw funds in the time and amounts that we
want, we may not timely comply with contractual provisions in any
of our contracts or our salary obligations, among other things.
The occurrence of any default of any of our banks could have a
material adverse effect on our business, financial condition,
results of operations and cash flows, and we may lose part or all
of our cash that we deposit with such banks.
Purchasing and operating secondhand vessels may result in
increased operating costs and reduced fleet
utilization.
While we have the right to inspect previously owned vessels prior
to our purchase of them, such an inspection does not provide us
with the same knowledge about their condition that we would have if
these vessels had been built for and operated exclusively by us. A
secondhand vessel may have conditions or defects that we are not
aware of when we buy the vessel and which may require us to incur
costly repairs to the vessel. These repairs may require us to put a
vessel into drydocking, which would increase cash outflows and
related expenses, while reducing our fleet utilization.
Furthermore, we usually do not receive the benefit of warranties on
secondhand vessels.
Management may be unable to provide reports as to the
effectiveness of our internal control over financial reporting or,
when applicable, our independent registered public accounting firm
may be unable to provide us with unqualified attestation reports as
to the effectiveness of our internal control over financial
reporting when required.
Under Section 404 of the Sarbanes-Oxley Act of 2002, which we refer
to as Sarbanes-Oxley, we are required to include in each of our
annual reports on Form 20-F a report containing our management’s
assessment of the effectiveness of our internal control over
financial reporting. In addition, management may not conclude that
our internal control over financial reporting is effective if a
material weakness exists in our internal control over financial
reporting. If in such annual reports on Form 20-F our management
cannot provide a report as to the effectiveness of our internal
control over financial reporting or, when applicable, our
independent registered public accounting firm is unable to provide
us with an unqualified attestation report as to the effectiveness
of our internal control over financial reporting as required by
Section 404, investors could lose confidence in the reliability of
our consolidated financial statements, which could result in a
decrease in the value of our common shares.
Unless we set aside reserves or are able to raise or borrow
funds for vessel replacement, at the end of a vessel’s useful life
our revenues will decline.
As of December 31, 2022 and December 31, 2021, the vessels in our
current fleet had a weighted average age of 11.2 and 10.2 years,
respectively. Our oldest vessel was built in 2005, and our youngest
vessel was built in 2018. Unless we maintain reserves or are able
to raise or borrow or raise funds for vessel replacement, we will
be unable to replace the vessels in our fleet upon the expiration
of their remaining useful lives, which we expect to be 25 years
from the date of their construction. Our cash flows and income are
dependent on the revenues earned by the chartering of our vessels
to customers. If we are unable to replace the vessels in our fleet
upon the expiration of their useful lives, our business, results of
operations, financial condition and ability to pay dividends will
be materially adversely affected. Any reserves set aside for vessel
replacement may not be available for dividends.
We depend upon a few significant customers for a large part
of our revenues.
We may derive a significant part of our revenue from a small number
of customers. During the years ended December 31, 2022, 2021 and
2020, we derived substantially all of our revenues from
approximately 37, 23 and 29 customers, respectively, and
approximately 39%, 47% and 31%, respectively, of our revenues
during those years were derived from four customers. If one or more
of our major customers defaults under a charter with us and we are
not able to find a replacement charter, or if such a customer
exercises certain rights to terminate the charter, we could suffer
a loss of revenues that could materially adversely affect our
business, financial condition, results of operations and cash
available for distribution as dividends to our shareholders.
We could lose a customer or the benefits of a time charter if,
among other things:
|
Ø |
the customer fails to make charter
payments because of its financial inability, disagreements with us
or otherwise; |
|
Ø |
the customer terminates the charter because of
our non-performance, including failure to deliver the vessel within
a fixed period of time, the vessel is lost or damaged beyond
repair, serious deficiencies in the vessel, prolonged periods of
off-hire or our default under the charter; or |
|
Ø |
the customer terminates the charter because the
vessel has been subject to seizure for more than 30
days. |
If we lose a key customer, we may be unable to obtain charters on
comparable terms with charterers of comparable standing or we may
have increased exposure to the volatile short-term or spot market,
which is highly competitive and subject to significant price
fluctuations. We would not receive any revenues from such a vessel
while it remained unchartered, but we may be required to pay
expenses necessary to maintain the vessel in proper operating
condition, insure it and service any indebtedness secured by such
vessel. The loss of any of our customers, time charters or vessels
or a decline in payments under our charters could have a material
adverse effect on our business, results of operations and financial
condition and our ability to pay dividends.
We generate revenues from the trading of our vessels in U.S.
dollars but incur a portion of our expenses in other
currencies.
We generate substantially all of our revenues from the trading of
our vessels in U.S. dollars, but during the years ended December
31, 2022, 2021 and 2020 we incurred approximately 30%, 31% and 25%,
respectively, of our vessel operating expenses, and certain
administrative expenses, in currencies other than the U.S. dollar.
This difference could lead to fluctuations in net profit due to
changes in the value of the U.S. dollar relative to the other
currencies. Expenses incurred in foreign currencies against which
the U.S. dollar falls in value can increase, decreasing our results
from operations. We have not hedged our currency exposure, and, as
a result, our results of operations and financial condition,
denominated in U.S. dollars, and our ability to pay dividends could
suffer.
If volatility in the Secured Overnight Financing Rate, or
SOFR, occurs, it could affect our profitability, earnings and cash
flow.
The interest rates borne by the CIT Loan Facility fluctuates with
changes in SOFR (which replaced the previously used LIBOR), which
fluctuations would affect the amount of interest payable on those
debts, which, in turn, could have an adverse effect on our
profitability, earnings and cash flow. CIT Loan Facility now bears
interest at Term SOFR, which is a forward looking term SOFR, plus a
margin of 3.35%.
In order to manage our exposure to interest rate fluctuations under
SOFR, or any other alternative rate, we have and may from time to
time use interest rate derivatives to effectively fix some of our
floating rate debt obligations. No assurance can however be given
that the use of these derivative instruments, if any, may
effectively protect us from adverse interest rate movements. The
use of interest rate derivatives may affect our results through
mark to market valuation of these derivatives. Also, adverse
movements in interest rate derivatives may require us to post cash
as collateral, which may impact our free cash position.
We may have to pay tax on U.S. source shipping
income.
Under the U.S. Internal Revenue Code of 1986, as amended, or the
Code, 50% of the gross shipping income of a vessel-owning or
chartering corporation that is attributable to transportation that
begins or ends, but that does not both begin and end, in the United
States is characterized as U.S. source shipping income and such
income is subject to a 4% U.S. federal income tax without allowance
for deductions, unless that corporation qualifies for exemption
from tax under section 883 of the Code and the U.S. Treasury
regulations promulgated thereunder, which we refer to as the
Section 883 Exemption, or through the application of a
comprehensive income tax treaty between the United States and the
corporation’s country of residence. The eligibility of Globus
Maritime and our subsidiaries to qualify for the Section 883
Exemption is determined each taxable year and is dependent on
certain circumstances related to the ownership of our shares and on
interpretations of existing U.S. Treasury regulations, each of
which could change. We can therefore give no assurance that we will
in fact be eligible to qualify for the Section 883 Exemption for
all taxable years. In addition, changes to the Code, the U.S.
Treasury regulations or the interpretation thereof by the U.S.
Internal Revenue Service, or IRS, or the courts could adversely
affect the ability of Globus Maritime and our subsidiaries to take
advantage of the Section 883 Exemption.
If we are not entitled to the Section 883 Exemption or an exemption
under a tax treaty for any taxable year in which any company in the
group earns U.S. source shipping income, any company earning such
U.S. source shipping income, would be subject to a 4% U.S. federal
income tax on the gross amount of the U.S. source shipping income
for the year (or an effective rate of 2% on shipping income
attributable to the transportation of freight to or from the United
States). The imposition of this taxation could have a negative
effect on our business and revenues and would result in decreased
earnings available for distribution to our shareholders.
For a more complete discussion, please read the section entitled
“Item 10.E. Taxation— United States Tax Considerations— United
States Federal Income Taxation of the Company.”
U.S. tax authorities could treat us as a “passive foreign
investment company,” which could result in adverse U.S. federal
income tax consequences to U.S. shareholders.
A foreign corporation will be treated as a “passive foreign
investment company,” or PFIC, for U.S. federal income tax purposes
if either at least 75% of its gross income for any taxable year
consists of certain types of “passive income” or at least 50% of
the average value of the corporation’s assets produce or are held
for the production of those types of “passive income.” For purposes
of these tests, “passive income” includes dividends, interest and
gains from the sale or exchange of investment property, and rents
and royalties other than rents and royalties that are received from
unrelated parties in connection with the active conduct of a trade
or business. For purposes of these tests, income derived from the
performance of services does not constitute “passive income.”
U.S. shareholders of a PFIC are subject to a disadvantageous U.S.
federal income tax regime with respect to the income derived by the
PFIC, the distributions they receive from the PFIC, and the gain,
if any, they derive from the sale or other disposition of their
shares in the PFIC, unless those shareholders make an election
available under the Code (which election could itself have adverse
consequences for such shareholders).
In particular, U.S. shareholders who are individuals would not be
eligible for the preferential tax rate on qualified dividends.
Please read “Item 10.E. Taxation—United States Tax
Considerations—United States Federal Income Taxation of United
States Holders” for a more comprehensive discussion of the U.S.
federal income tax consequences to U.S. shareholders if we are
treated as a PFIC.
Based on our current operations and anticipated future operations,
we believe we should not be treated as a PFIC. In this regard, we
intend to treat gross income we derive or are deemed to derive from
our time chartering activities as services income, rather than
rental income. Accordingly, we believe that our income from our
time chartering activities should not constitute “passive income,”
and that the assets we own and operate in connection with the
production of that income do not constitute assets that produce or
are held for the production of “passive income.”
There are legal uncertainties involved in this determination
because there is no direct legal authority under the PFIC rules
addressing our current and projected future operations. Moreover, a
case decided in 2009 by the U.S. Court of Appeals for the Fifth
Circuit held that, contrary to the position of the IRS in that
case, and for purposes of a different set of rules under the Code,
income received under a time charter of vessels should be treated
as rental income rather than services income. If the reasoning of
this case were extended to the PFIC context, the gross income we
derive or are deemed to derive from our time chartering activities
would be treated as rental income, and we would be a PFIC unless an
active leasing exception applies. Although the IRS has announced
that it will not follow the reasoning of this case, and that it
intends to treat the income from standard industry time charters as
services income, no assurance can be given that a U.S. court will
not follow the aforementioned case. Moreover, no assurance can be
given that we would not constitute a PFIC for any future taxable
year if there were to be changes in our assets, income or
operations.
If the IRS were to find that we are or have been a PFIC for any
taxable year, our U.S. shareholders will face adverse U.S. tax
consequences and information reporting obligations, as more fully
described under “Item 10.E. Taxation—United States Tax
Considerations—United States Federal Income Taxation of United
States Holders.”
We could face penalties under
European Union, United States or other economic
sanctions.
Our business could be adversely impacted if we are found to have
violated economic sanctions under the applicable laws of the
European Union, the United States or another applicable
jurisdiction against countries such as Iran, Syria, North Korea,
Russia, and Cuba. U.S. economic sanctions, for example, prohibit a
wide scope of conduct, target numerous countries and individuals,
are frequently updated or changed and have vague application in
many situations.
Many economic sanctions relate to our business, including
prohibitions on certain kinds of trade with countries, such as
exportation or re-exportation of commodities, or prohibitions
against certain transactions with designated nationals who may be
operating under aliases or through non-designated companies. The
imposition of economic sanctions on Russian persons, first imposed
in March 2014 and further in 2022, is an example of economic
sanctions with a potentially widespread and unpredictable impact on
shipping. Certain of our charterers or other parties with whom
we have entered into contracts regarding our vessels may be
affiliated with persons or entities that are the subject of
sanctions imposed by the U.S. government, the European Union and/or
other international bodies relating to the annexation of Crimea by
Russia in 2014 and the current conflict in Ukraine. If we determine
that such sanctions require us to terminate existing contracts or
if we are found to be in violation of such applicable sanctions,
our results of operations may be adversely affected or we may
suffer reputational harm.
Additionally, the U.S. Iran Threat Reduction Act (which was signed
into law in 2012) amended the Exchange Act to require issuers that
file annual or quarterly reports under Section 13(a) of the
Exchange Act to include disclosure in their annual and quarterly
reports as to whether the issuer or its affiliates have knowingly
engaged in certain activities prohibited by sanctions against Iran
or transactions or dealings with certain identified persons. We are
subject to this disclosure requirement.
There can be no assurance that we will be in compliance with all
applicable sanctions and embargo laws and regulations in the
future, particularly as the scope of certain laws may be unclear
and may be subject to changing interpretations. Any such violation
could result in fines or other penalties and could severely impact
our ability to access U.S. capital markets and conduct our
business, and could result in some investors deciding, or being
required, to divest their interest, or not to invest, in us. Even
inadvertent violations of economic sanctions can result in the
imposition of material fines and restrictions and could adversely
affect our business, financial condition and results of operations,
our reputation, and the market price of our common shares.
Our vessels may call on ports subject to economic sanctions
or embargoes.
From time to time on charterers’ instructions, our vessels may call
on ports located in countries subject to sanctions and embargoes
imposed by the United States government and countries identified by
the U.S. government as state sponsors of terrorism, such as Iran,
Cuba, North Korea, and Syria. It is also possible for us to call on
a port in Russia. The U.S. sanctions and embargo laws and
regulations vary in their application, as they do not all apply to
the same covered persons or proscribe the same activities, and such
sanctions and embargo laws and regulations may be amended or
strengthened over time.
Although we believe that we have been in compliance with all
applicable sanctions and embargo laws and regulations, and intend
to maintain such compliance, there can be no assurance that we will
be in compliance in the future as such regulations and sanctions
may be amended over time. Any such violation could result in fines,
penalties or other sanctions that could severely impact our ability
to access U.S. capital markets and conduct our business, and could
result in some investors deciding, or being required, to divest
their interest, or not to invest, in us. In addition, certain
institutional investors may have investment policies or
restrictions that prevent them from holding securities of companies
that have contracts with countries identified by the U.S.
government as state sponsors of terrorism. The determination by
these investors not to invest in, or to divest from, our common
shares may adversely affect the price at which our common shares
trade. Moreover, our charterers may violate applicable sanctions
and embargo laws and regulations as a result of actions that do not
involve us or our vessels, and those violations could in turn
negatively affect our reputation. In addition, our reputation and
the market for our securities may be adversely affected if we
engage in certain other activities, such as entering into charters
with individuals or entities in countries subject to U.S. sanctions
and embargo laws that are not controlled by the governments of
those countries, or engaging in operations associated with those
countries pursuant to contracts with third parties that are
unrelated to those countries or entities controlled by their
governments. Investor perception of the value of our common shares
may be adversely affected by the consequences of war, the effects
of terrorism, civil unrest and governmental actions in these and
surrounding countries.
As a Marshall Islands corporation with principal executive
offices in Greece, and also having subsidiaries in the Marshall
Islands and other offshore jurisdictions such as Malta, our
operations may be subject to economic substance
requirements.
On March 12, 2019, the Council of the European Union published a
list of “non-cooperative jurisdictions” for tax purposes in which
the Republic of the Marshall Islands, among others, was placed by
the E.U. on this list for failing to implement certain commitments
previously made to the E.U. by the agreed deadline. However, it was
announced by the Council of the European Union on October 10, 2019
that the Marshall Islands had been removed from that list, but was
put back on the list in February 2023. E.U. member states have
agreed upon a set of measures, which they can choose to apply
against the listed countries, including increased monitoring and
audits, withholding taxes and non-deductibility of costs. The
European Commission has stated it will continue to support member
states' efforts to develop a more coordinated approach to sanctions
for the listed countries in 2019. E.U. legislation prohibits
certain E.U. funds from being channeled or transited through
entities in non-cooperative jurisdictions.
We are a Marshall Islands corporation with principal executive
offices in Greece. Our management company is also a Marshall
Islands entity and one of our subsidiaries is organized in Malta.
The Marshall Islands has enacted economic substance regulations
with which we may be obligated to comply. Those regulations require
certain entities that carry out particular activities to comply
with an economic substance test whereby the entity must show that
it (i) is directed and managed in the Marshall Islands in relation
to that relevant activity, (ii) carries out core income-generating
activity in relation to that relevant activity in the Marshall
Islands (although it is being understood and acknowledged by the
regulators that income-generated activities for shipping companies
will generally occur in international waters) and (iii) having
regard to the level of relevant activity carried out in the
Marshall Islands has (a) an adequate amount of expenditures in the
Marshall Islands, (b) adequate physical presence in the Marshall
Islands and (c) an adequate number of qualified employees in the
Marshall Islands.
If we fail to comply with our obligations under this legislation or
any similar law applicable to us in any other jurisdictions, we
could be subject to financial penalties and spontaneous disclosure
of information to foreign tax officials, or could be struck from
the register of companies, in related jurisdictions. Any of the
foregoing could be disruptive to our business and could have a
material adverse effect on our business, financial conditions and
operating results.
We do not know: if the E.U. will remove the Marshall Islands from
the list of non-cooperative jurisdictions, or add Malta to that
list; how quickly the E.U. would react to any changes in
legislation of the Marshall Islands or Malta; or how E.U. banks or
other counterparties will react while we or any of our subsidiaries
remain as entities organized and existing under the laws of listed
countries. The effect of the E.U. list of non-cooperative
jurisdictions, and any noncompliance by us with any legislation
adopted by applicable countries to achieve removal from the list,
including economic substance regulations, could have a material
adverse effect on our business, financial conditions and operating
results.
It may be difficult to serve us with legal process or enforce
judgments against us, our directors or our management.
Our business is operated primarily from our offices in Greece. In
addition, a majority of our directors and officers are
non-residents of the United States, and all of our assets and a
substantial portion of the assets of these non-residents are
located outside the United States. As a result, it may be difficult
or impossible for you to bring an action against us or against
these individuals in the United States if you believe that your
rights have been infringed under securities laws or otherwise. You
may also have difficulty enforcing, both within and outside of the
United States, judgments you may obtain in the United States courts
against us or these persons in any action, including actions based
upon the civil liability provisions of United States federal or
state securities laws. There is also substantial doubt that the
courts of the Marshall Islands or Greece would enter judgments in
original actions brought in those courts predicated on United
States federal or state securities laws.
The international nature of our operations may make the
outcome of any bankruptcy proceedings difficult to
predict.
We redomiciled into the Marshall Islands and our subsidiaries are
incorporated under the laws of the Marshall Islands or Malta, we
have limited operations in the United States, and we maintain
limited assets, if any, in the United States. Consequently, in the
event of any bankruptcy, insolvency, liquidation, dissolution,
reorganization or similar proceeding involving us or any of our
subsidiaries, bankruptcy laws other than those of the United States
could apply. The Marshall Islands does not have a bankruptcy
statute or general statutory mechanism for insolvency proceedings.
If we become a debtor under U.S. bankruptcy law, bankruptcy
courts in the United States may seek to assert jurisdiction over
all of our assets, wherever located, including property situated in
other countries. There can be no assurance, however, that we would
become a debtor in the United States, or that a
U.S. bankruptcy court would accept, or be entitled to accept,
jurisdiction over such a bankruptcy case, or that courts in other
countries that have jurisdiction over us and our operations would
recognize a U.S. bankruptcy court’s jurisdiction if any other
bankruptcy court would determine it had jurisdiction. These factors
may delay or prevent us from entering bankruptcy in the United
States and may affect the ability of our shareholders to receive
any recovery following our bankruptcy.
Risks Relating to our
Common Shares
Our stock price has been volatile and no assurance can be
made that it will not substantially depreciate.
Our stock price has been volatile recently. The closing price of
our common shares within 2022 has ranged from a peak of $2.57 on
April 20, 2022 to a low of $1.05 on December 30, 2022, representing
a decrease of 59%. We can offer no comfort or assurance that our
stock price will stop being volatile or not substantially
depreciate. Our stock price was $1.10 on March 15, 2023.
We may continue to incur rapid and substantial increases or
decreases in our stock price in the foreseeable future that may not
coincide in timing with the disclosure of news or developments by
or affecting us. Accordingly, the market price of our common shares
may decline or fluctuate rapidly, regardless of any developments in
our business. Overall, there are various factors, many of which are
beyond our control, that could negatively affect the market price
of our common shares or result in fluctuations in the price or
trading volume of our common shares, which include but are not
limited to:
• investor reaction to our business strategy;
• the sentiment of the significant number of retail investors whom
we believe to hold our common shares, in part due to direct access
by retail investors to broadly available trading platforms, and
whose investment thesis may be influenced by views expressed on
financial trading and other social media sites and online
forums;
• the amount and status of short interest in our common shares,
access to margin debt, trading in options and other derivatives on
our common shares and any related hedging and other trading
factors;
• our continued compliance with the listing standards of the Nasdaq
Capital Market;
• regulatory or legal developments in the United States and other
countries, especially changes in laws or regulations applicable to
our industry;
• variations in our financial results or those of companies that
are perceived to be similar to us;
• our ability or inability to raise additional capital and the
terms on which we raise it;
• our dividend strategy;
• our continued compliance with our debt covenants;
• variations in the value of our fleet;
• declines in the market prices of stocks generally;
• trading volume of our common shares;
• sales of our common shares by us or our shareholders;
• speculation in the press or investment community about our
Company or industry;
• general economic, industry and market conditions; and
• other events or factors, including those resulting from such
events, or the prospect of such events, including war, terrorism
and other international conflicts, public health issues including
health epidemics or pandemics, including worldwide pandemics
similar to the COVID-19 pandemic, and natural disasters such as
fire, hurricanes, earthquakes, tornados or other adverse weather
and climate conditions, whether occurring in the United States or
elsewhere, could disrupt our operations or result in political or
economic instability.
In addition, some companies that have experienced volatility in the
market price of their common shares have been subject to securities
class-action litigation. If instituted against us, such litigation
could result in substantial costs and diversion of management’s
attention and resources, which could materially and adversely
affect our business, financial condition, operating results and
growth prospects. There can be no guarantee that the price of our
common shares will remain at its current level or that future sales
of our common shares will not be at prices lower than those sold to
investors.
We may issue additional common shares or other equity
securities without shareholder approval, which would dilute our
existing shareholders’ ownership interests and may depress the
market price of our common shares.
We may issue additional common shares or other equity securities of
equal or senior rank in the future without shareholder approval for
cash or in connection with, among other things, future vessel
acquisitions, the repayment of outstanding indebtedness, and the
conversion of convertible financial instruments.
Our issuance of additional common shares or other equity securities
of equal or senior rank in these situations would have the
following effects:
· our existing shareholders’ proportionate ownership interest in us
would decrease;
· the proportionate amount of cash available for dividends payable
on our common shares could decrease;
· the relative voting strength of each previously outstanding
common share could be diminished; and
· the market price of our common shares could decline.
In addition, we may be obligated to issue, upon exercise or
conversion of outstanding agreements and warrants pursuant to the
terms thereof:
· |
388,700 common shares issuable upon
the exercise of outstanding Class A Warrants (at an exercise price
of $35.00 per share) which expire in June 2025; |
· |
458,500 common shares issuable upon
exercise of outstanding June PP Warrants (at an exercise price of
$18.00 per share) issued in a private placement that closed on June
30, 2020 and expire in December 2025; |
· |
833,333 common shares issuable upon
exercise of outstanding July PP Warrants (at an exercise price of
at $18.00 per share) issued in a private placement that closed on
July 21, 2020 and expire in January 2026; |
· |
1,270,587 common shares issuable
upon exercise of the December 2020 Warrants (at an exercise price
of $6.25 per share) which expire in June 2026; |
· |
1,950,000 common shares issuable
upon the exercise of the January 2021 Warrants (at an exercise
price of $6.25 per share) which expire in July 2026; and |
· |
4,800,000 common shares issuable
upon the exercise of the February 2021 Warrants (at an exercise
price of $6.25 per share) which expire in August 2026. |
· |
10,000,000 common shares issuable
upon the exercise of the June 2021 Warrants (at an exercise price
of $5.00 per share) which expire in December 2026. |
In addition:
|
· |
We historically issued, on a
quarterly basis, common shares to certain of our directors,
although we have changed our compensation arrangements with
directors to pay only cash. |
|
· |
We have issued an aggregate of
10,300 of our Series B preferred shares, par value $0.001 per
share, to Goldenmare Limited, which shares have 25,000 votes per
share, subject to maximum voting rights of 49.99%. |
Our issuance of additional common shares upon the exercise of such
warrants and agreements would cause the proportionate ownership
interest in us of our existing shareholders, other than the
exercising warrant or agreement holder, to decrease; the relative
voting strength of each previously outstanding common share held by
our existing shareholders to decrease; and, depending on our share
price when and if these warrants are exercised, may result in
dilution to our shareholders. Because we are a foreign private
issuer, we are not bound by Nasdaq rules that require shareholder
approval for issuances of our securities. We therefore can issue
securities in such amounts and at such times as we feel
appropriate, all without shareholder approval. See “Item 16G.
Corporate Governance.”
Future issuances or sales, or the potential for future
issuances or sales, of our common shares may cause the trading
price of our securities to decline and could impair our ability to
raise capital through subsequent equity offerings.
We have issued a significant number of our common shares and may do
so in the future. Shares to be issued pursuant to the exercise of
our outstanding warrants could cause the market price of our common
shares to decline and could have an adverse effect on our earnings
per share. In addition, future sales of our common shares or other
securities in the public or private markets, or the perception that
these sales may occur, could cause the market price of our common
shares to decline, and could materially impair our ability to raise
capital through the sale of additional securities.
The market price of our common shares could decline due to sales,
or the announcements of proposed sales, of a large number of common
shares in the market, including sales of common shares by our large
shareholders, or the perception that these sales could occur. These
sales or the perception that these sales could occur could also
depress the market price of our common shares and impair our
ability to raise capital through the sale of additional equity
securities or make it more difficult or impossible for us to sell
equity securities in the future at a time and price that we deem
appropriate. We cannot predict the effect that future sales of
common shares or other equity-related securities would have on the
market price of our common shares.
The market price of our common shares may be volatile, which
could result in substantial losses for investors who purchase our
shares; and the volatility in the stock prices of other companies
may contribute to volatility in our stock price.
Our common shares have experienced price and volume fluctuations
and may continue to experience volatility in the future. The
closing price of our common shares within 2022 has ranged from a
peak of $2.57 on April 20, 2022 to a low of $1.05 on December 30,
2022, representing a decrease of 59%. You may not be able to sell
your shares quickly or at the latest market price if trading in our
stock is not active or the volume is low. Some of the factors that
may cause the market price of our common shares to fluctuate
include:
● the trading of our
ships, and whether one or more ships are not trading or otherwise
offhire;
● regulatory or legal
developments in the United States and other countries;
● the recruitment or
departure of key personnel;
● the level of expenses
related to our business or to comply with changing laws, including
in relation to environmental laws;
● actual or anticipated
changes in estimates as to financial results or recommendations by
securities analysts;
● announcement or
expectation of additional financing efforts;
● sales of our securities
by us, our insiders, or other shareholders, and the exercise of our
warrants and other convertible securities and instruments;
● variations in our
financial results or those of companies that are perceived to be
similar to us;
● changes in estimates or
recommendations by securities analysts, if any, that cover our
stock;
● market conditions in the
shipping industry and dry bulk sector; and
● general economic,
industry, and market conditions.
On December 30, 2022, the closing
price of our common shares on the Nasdaq Capital Market was $1.05
per share, as compared to $1.10, which was the closing price on
March 15, 2023 .
In addition, there has been volatility for our intra-day common
share price. For example, the high and low intra-day prices on
March 7, 2022 were $2.59 and $2.02, respectively, and the high and
low intra-day prices on October 5, 2022 were $1.74 and $1.30,
respectively. As a result, there is a potential for rapid and
substantial decreases in the price of our common shares, including
decreases unrelated to our operating performance or
prospects.
In recent years, the stock market in general, Nasdaq, and the
markets for shipping companies, has experienced significant price
and volume fluctuations and depressions that have often been
unrelated or disproportionate to changes in the operating
performance of the companies whose stock is experiencing those
price and volume fluctuations. Broad market and industry factors
may seriously affect the market price of our common shares,
regardless of our actual operating performance. Following periods
of such volatility in the market price of a company’s securities,
securities class action litigation has often been brought against
that company. Because of the potential volatility of our stock
price, we may become the target of securities litigation in the
future. Securities litigation could result in substantial costs and
divert management’s attention and resources from our
business.
A possible “short squeeze” due to a sudden increase in demand
of our common shares that largely exceeds supply may lead to
further price volatility in our common shares.
Investors may purchase our common shares to hedge existing exposure
in our common shares or to speculate on the price of our common
shares. Speculation on the price of our common shares may involve
long and short exposures. To the extent aggregate short exposure
exceeds the number of common shares available for purchase in the
open market, investors with short exposure may have to pay a
premium to repurchase our common shares for delivery to lenders of
our common shares. Those repurchases may in turn, dramatically
increase the price of our common shares until investors with short
exposure are able to purchase additional common shares to cover
their short position. This is often referred to as a “short
squeeze.” A short squeeze could lead to volatile price movements in
common shares that are not directly correlated to the performance
or prospects of our company and once investors purchase the common
shares necessary to cover their short position the price of our
common shares may decline.
Our common shares could be delisted from Nasdaq, which could
affect their market price and liquidity.
We are required to meet certain qualitative and financial tests
(including a minimum bid price for our common shares of $1.00 per
share, at least 500,000 publicly held shares, at least 300 public
holders, a market value of publicly held securities of $1 million
and net income from continuing operations of $500,000), as well as
other corporate governance standards, to maintain the listing of
our common shares on the Nasdaq Capital Market, or Nasdaq. It is
possible that we could fail to satisfy one or more of these
requirements. There can be no assurance that we will be able to
maintain compliance with the minimum bid price, shareholders’
equity, number of publicly held shares, net income requirements or
other listing standards in the future. We may receive notices from
Nasdaq that we have failed to meet its requirements, and
proceedings to delist our stock could be commenced. We have
received in the past, and most recently on March 6, 2020, received
a written notification from Nasdaq, indicating that because the
closing bid price of our common stock for the last 30 consecutive
business days was below $1.00 per share, we no longer meet the
minimum bid price continued listing requirement for Nasdaq, as set
forth in Nasdaq Listing Rule 5450(a)(1). We were able to regain
compliance within the grace period prescribed pursuant to a reverse
stock split effective October 21, 2020. We discuss this reverse
stock split and others further in this annual report on Form 20-F.
See “Item 4.A. History and Development of the Company— History
relating to our shares.” In such event, Nasdaq rules permit us to
appeal any delisting determination to a Nasdaq Hearings Panel. If
we are unable to maintain or regain compliance in a timely manner
and our common shares are delisted, it could be more difficult to
buy or sell our common shares and obtain accurate quotations, and
the price of our shares could suffer a material decline. Delisting
may also impair our ability to raise capital. Delisting of our
shares may breach our CIT Loan Facility, which contains cross
default provisions, and the purchase agreement pursuant to which we
sold some of our outstanding warrants. There could also be adverse
tax consequences—please read “Item 10.E Taxation – United States
Tax Considerations - United States Federal Income Taxation of
United States Holders – Distributions” for further information.
There can be no assurance that we will be able to maintain
compliance with the minimum bid price, shareholders’ equity, number
of publicly held shares or other listing standards in the future.
We may receive notices from Nasdaq that we have failed to meet its
requirements, and proceedings to delist our stock could be
commenced. If we are unable to maintain or regain compliance in a
timely manner and our common shares are delisted, it could be more
difficult to buy or sell our common shares and obtain accurate
quotations, and the price of our shares could suffer a material
decline. The Company agreed, in its securities purchase agreements
relating to share and warrant issuances in 2020 and 2021, to use
commercially reasonable efforts to maintain the listing or
quotation of the common shares on Nasdaq, and to take all action
reasonably necessary to continue the listing and trading of our
common shares on Nasdaq.
Our ability to declare and pay dividends to holders of our
common shares will depend on a number of factors and will always be
subject to the discretion of our board of directors.
If we are not in compliance with our loan covenants and received a
notice of default and were unable to cure it under the terms of our
loan covenants, we may be forbidden from issuing dividends. There
can be no assurance that dividends will be paid to holders of our
shares in any anticipated amounts and frequency at all. We may
incur other expenses or liabilities that would reduce or eliminate
the cash available for distribution as dividends, including as a
result of the risks described in this section of this annual report
on Form 20-F.
For instance, the CIT Loan Facility presently prohibits our
declaration and payment of dividends under some circumstances.
Under the CIT Loan Facility Globus Maritime Limited is prohibited
from making dividends (other than up to $500,000 annually on or in
respect of its preferred shares) in cash or redeem or repurchase
its shares unless there is no event of default under the CIT Loan
Facility, the net loan to value ratio is less than 60% before the
making of the dividend and Globus Maritime Limited is in compliance
with the debt service coverage ratio, and Globus Maritime Limited
must prepay the CIT Loan Facility in an equal amount of the
dividend. Please read “Item 5.B. Liquidity and Capital
Resources—Indebtedness” for further information.
We may also enter into new financing or other agreements that may
restrict our ability to pay dividends even without an event of
default or make it less desirable for us to do so. In addition, we
may pay dividends to the holders of our preferred shares prior to
the holders of our common shares, depending on the terms of the
preferred shares.
If we pay a dividend, the terms of our outstanding warrants provide
that the exercise price shall be decreased by the amount of cash
and/or the fair market value of any securities or other assets paid
on each common share in respect of such dividend in order that
subsequent thereto upon exercise of the warrants the holder of the
warrants may obtain the equivalent benefit of such dividend.
The declaration and payment of dividends to holders of our shares
will be subject at all times to the discretion of our board of
directors, and will be paid equally on a per-share basis between
our common shares and our Class B shares, to the extent any are
issued and outstanding. We can provide no assurance that dividends
will be paid in the future.
There may be a high degree of variability from period to period in
the amount of cash, if any, that is available for the payment of
dividends based upon, among other things:
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the rates we obtain from our charters
as well as the rates obtained upon the expiration of our existing
charters; |
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the level of our operating
costs; |
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the number of unscheduled off-hire
days and the timing of, and number of days required for, scheduled
drydocking of our vessels; |
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vessel acquisitions and related
financings; |
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restrictions in our current and
future debt arrangements; |
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our ability to obtain debt and equity
financing on acceptable terms as contemplated by our growth
strategy; |
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prevailing global and regional
economic and political conditions; |
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the effect of governmental
regulations and maritime self-regulatory organization standards on
the conduct of our business; |
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our overall financial
condition; |
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our cash requirements and
availability; |
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the amount of cash reserves
established by our board of directors; and |
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restrictions under Marshall Islands
law. |
Marshall Islands law generally prohibits the payment of dividends
other than from surplus or certain net profits, or while a company
is insolvent or would be rendered insolvent by the payment of such
a dividend. We may not have sufficient funds, surplus, or net
profits to make distributions.
We may incur expenses or liabilities or be subject to other
circumstances in the future that reduce or eliminate the amount of
cash that we have available for distribution as dividends, if any.
Our growth strategy contemplates that we will finance the
acquisition of our newbuildings or selective acquisitions of
vessels through a combination of our operating cash flow and debt
financing through our subsidiaries or equity financing. If
financing is not available to us on acceptable terms, our board of
directors may decide to finance or refinance acquisitions with a
greater percentage of cash from operations to the extent available,
which would reduce or even eliminate the amount of cash available
for the payment of dividends. We may also enter into other
agreements that will restrict our ability to pay dividends or make
it less desirable for us to do so.
The amount of cash we generate from our operations may differ
materially from our net income or loss for the period, which will
be affected by non-cash items. We may incur other expenses or
liabilities that could reduce or eliminate the cash available for
distribution as dividends. As a result of these and the other
factors mentioned above, we may pay dividends during periods when
we record losses and may not pay dividends during periods when we
record net income, if we pay dividends at all.
We are a holding company, and we will depend on the ability
of our subsidiaries to distribute funds to us in order to satisfy
our financial obligations or to make dividend payments.
We are a holding company and our subsidiaries, which are all
directly and wholly owned by us, will conduct all of our operations
and own all of our operating assets. We have no significant assets
other than the equity interests in our wholly owned subsidiaries.
As a result, our ability to make dividend payments depends on our
subsidiaries and their ability to distribute funds to us. If we are
unable to obtain funds from our subsidiaries, our board of
directors may exercise its discretion not to declare or pay
dividends. In addition, our subsidiaries are subject to limitations
on the payment of dividends under Marshall Islands or Maltese
law.
Provisions of our articles of incorporation and bylaws may
have anti-takeover effects,
which could depress the trading price of our common
shares.
Several provisions of our articles of incorporation and bylaws,
which are summarized below, may have anti-takeover effects. These
provisions are intended to avoid costly takeover battles, lessen
our vulnerability to a hostile change of control and enhance the
ability of our board of directors to maximize shareholder value in
connection with any unsolicited offer to acquire our company.
However, these anti-takeover provisions could also discourage,
delay or prevent the merger or acquisition of our company by means
of a tender offer, a proxy contest or otherwise that a shareholder
may consider in its best interest and the removal of incumbent
officers and directors, which could affect the desirability of our
shares and, consequently, our share price.
Multi Class Stock.
Our multi-class stock structure, which consists of common shares,
Class B common shares, and preferred shares, can provide holders of
our Class B common shares or preferred shares a significant degree
of control over all matters requiring shareholder approval,
including the election of directors and significant corporate
transactions, such as a merger or other sale of our company or its
assets, because our different classes of shares can have different
numbers of votes.
For instance, while our common shares have one vote on matters
before the shareholders, each of our 10,300 outstanding Series B
preferred shares has 25,000 votes on matters before the
shareholders; provided however, that no holder of
Series B preferred shares may exercise voting rights pursuant to
any Series B preferred shares that would result in the total number
of votes a holder is entitled to vote on any matter submitted to a
vote of shareholders of the Company to exceed 49.99% of the total
number of votes eligible to be cast on such matter. No Class B
common shares are presently outstanding, but if and when we issue
any, each Class B common share will have 20 votes on matters before
the shareholders.
At present, and until a substantial number of additional securities
are issued, our holder of Series B preferred shares exerts
substantial control of the Company’s votes and is able to exert
substantial control over our management and all matters requiring
shareholder approval, including electing directors and significant
corporate transactions, such as a merger. Such holder’s interest
could differ from other shareholders’ interests.
Blank Check Preferred Shares.
Under the terms of our articles of incorporation, our board of
directors has authority, without any further vote or action by our
shareholders, to issue up to 100 million “blank check” preferred
shares, almost all of which currently remain available for
issuance. Our board could authorize the issuance of preferred
shares with voting or conversion rights that could dilute the
voting power or rights of the holders of common shares, in addition
to preferred shares that are already outstanding. The issuance of
preferred shares, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among
other things, have the effect of delaying, deferring or preventing
a change in control of us or the removal of our management and may
harm the market price of our common shares.
Classified Board of Directors.
Our articles of incorporation provide for the division of our board
of directors into three classes of directors, with each class as
nearly equal in number as possible, serving staggered, three-year
terms beginning upon the expiration of the initial term for each
class. Approximately one-third of our board of directors is elected
each year. This classified board provision could discourage a third
party from making a tender offer for our shares or attempting to
obtain control of us. It could also delay shareholders who do not
agree with the policies of our board of directors from removing a
majority of our board of directors for up to two years.
Election of Directors.
Our articles of incorporation do not provide for cumulative voting
in the election of directors. Our bylaws require parties, other
than the chairman of the board of directors, board of directors and
shareholders holding 30% or more of the voting power of the
aggregate number of our shares issued and outstanding and entitled
to vote, to provide advance written notice of nominations for the
election of directors. These provisions may discourage, delay or
prevent the removal of incumbent officers and directors.
Advance Notice Requirements for Shareholder Proposals and
Director Nominations.
Our bylaws provide that shareholders, other than shareholders
holding 30% or more of the voting power of the aggregate number of
our shares issued and outstanding and entitled to vote, seeking to
nominate candidates for election as directors or to bring business
before an annual meeting of shareholders must provide timely notice
of their proposal in writing to the corporate secretary.
Generally, to be timely, a shareholder’s notice must be received at
our principal executive offices not less than 150 days or more than
180 days prior to the first anniversary date of the immediately
preceding annual meeting of shareholders. Our bylaws also specify
requirements as to the form and content of a shareholder’s notice.
These provisions may impede a shareholder’s ability to bring
matters before an annual meeting of shareholders or make
nominations for directors at an annual meeting of shareholders.
Calling of Special Meetings of Shareholders
Our bylaws provide that special meetings of our shareholders may be
called only by the chairman of our board of directors, by
resolution of our board of directors or by holders of 30% or more
of the voting power of the aggregate number of our shares issued
and outstanding and entitled to vote at such meeting.
Action by Written Consent in Lieu of a Meeting
Our articles permit any action which may or is required by the BCA
to be taken at a meeting of the shareholders to be authorized by
consents in writing signed by the holders of outstanding shares
having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
Presently and until and unless we issue a significant number of
securities, Goldenmare Limited, a company affiliated with our Chief
Executive Officer, holds Series B preferred shares controlling a
significant portion of the voting power of our outstanding capital
stock. Goldenmare could, together with shareholders possessing a
relatively small number of shares, act by written consent in lieu
of a meeting and authorize major transactions on behalf of the
Company, all without calling a meeting of shareholders.
Business Combinations
Our articles prohibit us from engaging in a business combination
with an interested shareholder for a period of three years
following the date of the transaction in which the person became an
interested shareholder, subject to certain exceptions. Please see
“Item 10B.—Memorandum and Articles of Association—Anti-Takeover
Effects of Certain Provisions of our Articles of Incorporation and
Bylaws—Business Combinations.”
We are subject to Marshall Islands corporate law, which is
not well-developed.
Our corporate affairs are governed by our articles of
incorporation, our bylaws and by the Marshall Islands Business
Corporations Act, or the BCA. The provisions of the BCA resemble
provisions of the corporation laws of a number of states in the
United States. However, there have been few judicial cases in the
Marshall Islands interpreting the BCA. The rights and fiduciary
responsibilities of directors under the laws of the Marshall
Islands are not as clearly established as the rights and fiduciary
responsibilities of directors under statutes or judicial precedent
in existence in certain United States jurisdictions. The rights of
shareholders of corporations incorporated in or redomiciled into
the Marshall Islands may differ from the rights of shareholders of
corporations incorporated in the United States. While the BCA
provides that it is to be applied and construed to make the laws of
the Marshall Islands, for non-resident entities such as us, with
respect of the subject matter of the BCA, uniform with the laws of
the State of Delaware and other states with substantially similar
legislative provisions (and adopts their case law to the extent it
does not conflict with the BCA), there have been few court cases
interpreting the BCA in the Marshall Islands and we cannot predict
whether Marshall Islands courts would reach the same conclusions as
United States courts. Thus, you may have more difficulty in
protecting your interests in the face of actions by our management,
directors or controlling shareholders than would shareholders of a
corporation incorporated in a United States jurisdiction that has
developed a more substantial body of case law in the corporate law
area.
Increases in interest rates may cause the market price of our
shares to decline.
An increase in interest rates may cause a corresponding decline in
demand for equity investments in general. Any such increase in
interest rates or reduction in demand for our shares resulting from
other relatively more attractive investment opportunities may cause
the trading price of our shares to decline. If the relevant SOFR
increases, then our payments pursuant to certain existing loan will
increase. See “Item 11. Quantitative and Qualitative Disclosures
About Market Risk.”
The public market may not continue to be active and liquid
enough for our shareholders to resell our common shares in the
future.
The price of our common shares may be volatile and may fluctuate
due to factors such as:
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actual or anticipated fluctuations in our
quarterly and annual results and those of other public companies in
our industry; |
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mergers and strategic alliances in the dry bulk
shipping industry; |
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market conditions in the dry bulk shipping
industry; |
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changes in government regulation; |
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shortfalls in our operating results from levels
forecast by securities analysts; |
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announcements concerning us or our competitors;
and |
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the general state of the securities
market. |
The dry bulk shipping industry has been highly unpredictable and
volatile. The market for our common shares may be equally
volatile.
Item
4. Information on the Company
A. History and Development of the
Company
History relating to our shares and certain financings
We originally incorporated as Globus Maritime Limited on July 26,
2006 pursuant to the Companies (Jersey) Law 1991 (as amended) and
began operations in September 2006. Following the conclusion of our
initial public offering on June 1, 2007, our common shares were
listed on the London Stock Exchange’s Alternative Investment
Market, or AIM, under the ticker “GLBS.L.” On July 29, 2010, we
effected a 1-4 reverse stock split, with our issued share capital
resulting in 7,240,852 common shares of $0.004 each. (These figures
do not reflect the 1-4 reverse stock split which occurred in
October 2016, the 1-10 reverse stock split which occurred in
October 2018 or the 1-100 reverse stock split which occurred in
October 2020.)
On November 24, 2010, we redomiciled into the Marshall Islands
pursuant to the BCA and a resale registration statement for our
common shares was declared effective by the SEC. Once the resale
registration statement was declared effective by the SEC, our
common shares began trading on the Nasdaq Global Market under the
ticker “GLBS.” Our common shares were suspended from trading on the
AIM on November 24, 2010 and were delisted from the AIM on November
26, 2010.
On April 11, 2016, our common shares began trading on the Nasdaq
Capital Market and ceased trading on the Nasdaq Global Market.
On October 20, 2016, we effected a 1-4 reverse stock split which
reduced the number of outstanding common shares from 10,510,741 to
2,627,674 shares (adjustments were made based on fractional
shares). (These figures do not reflect the 1-10 reverse stock split
which occurred in October 2018 or the 1-100 reverse stock split
which occurred in October 2020.)
On October 15, 2018, we effected a 1-10 reverse stock split which
reduced the number of outstanding common shares from 32,065,077 to
3,206,495 shares (adjustments were made based on fractional
shares). (These figures do not reflect the 1-100 reverse stock
split which occurred in October 2020.)
In November 2018, we entered into a credit facility for up to $15
million with Firment Shipping Inc., a related party to us, for the
purpose of financing our general working capital needs, which
facility was amended and restated on May 8, 2020. The Firment
Shipping Credit Facility was unsecured and remained available until
its final maturity date at October 31, 2021, as amended. We had the
right to drawdown any amount up to $15 million or prepay any amount
in multiples of $100,000. Any prepaid amount could have been
re-borrowed.
Interest on drawn and outstanding amounts was charged at 3.5% per
annum until December 31, 2020, and thereafter at 7% per annum. No
commitment fee was charged on the amounts remaining available and
undrawn. Interest was payable the last day of a period of three
months after the drawdown date, after this period in case of
failure to pay any sum due a default interest of 2% per annum above
the regular interest was charged. We had also the right, in our
sole option, to convert in whole or in part the outstanding unpaid
principal amount and accrued but unpaid interest under this
Agreement into common shares. The conversion price would have
equaled the higher of (i) the average of the daily dollar
volume-weighted average sale price for the common stock on the
Principal Market on any trading day during the period beginning at
9.30 a.m. New York City time and ending at 4.00 p.m. over the
Pricing Period multiplied by 80%, where the “Pricing Period” equals
the ten consecutive trading days immediately preceding the date on
which the conversion notice was executed or (ii) $280.00. On July
27, 2020, the Company repaid the total outstanding principal and
interest of the Firment Shipping Credit Facility of approximately
$863,000. This facility expired by its terms on October 31,
2021.
On March 13, 2019, the Company signed a securities purchase
agreement with a private investor and on March 13, 2019 issued, for
gross proceeds of $5 million, a senior convertible note (the
“Convertible Note”) that was convertible into shares of the
Company’s common stock, par value $0.004 per share. If not
converted or redeemed beforehand pursuant to the terms of the
Convertible Note, the Convertible Note was scheduled to mature on
March 13, 2020, the first anniversary of its issue, but its holder
waived the Convertible Note’s maturity until March 13, 2021. The
Convertible Note was issued in a transaction exempt from
registration under the Securities Act. The Convertible Note
provided for interest to accrue at 10% annually, to be paid at
maturity unless the Convertible Note was converted or redeemed
pursuant to its terms beforehand. The interest could have been paid
in common shares of the Company, if certain conditions described
within the Convertible Note were met. The outstanding balance of
the Convertible Note not previously converted into shares was fully
repaid in June 2020.
On June 22, 2020, we completed a public offering of 342,857 units
of the Company. Each unit consisted of one common share and one
Class A Warrant to purchase one common share (a “Class A Warrant”),
for $35 per unit. At the time of the closing, the underwriters
exercised and closed a part of their over-allotment option, and
purchased an additional 51,393 common shares and Class A Warrants
to purchase 51,393 common shares.
The exercise price of the Class A Warrants is $35 per whole share
at any time after their original issuance up to the date that is
five years after their original issuance. If a registration
statement registering the issuance of the common shares underlying
the warrants under the Securities Act is not effective or
available, the holder may, in its sole discretion, elect to
exercise the warrant through a cashless exercise, in which case the
holder would receive upon such exercise the net number of common
shares determined according to the formula set forth in the
warrant. We may be required to pay certain amounts as liquidated
damages as specified in the warrants in the event we do not deliver
common shares upon exercise of the warrants within the time periods
specified in the warrants.
On June 30, 2020, we issued 458,500 of our common shares in a
registered direct offering and 458,500 of June Private Placement
(“PP”) Warrants in a concurrent private placement for a purchase
price of $27 per common share and June PP Warrant. The exercise
price of each June PP Warrant was initially $30 per share but in
July 2020 was reduced to $18 per share.
On July 21, 2020, we issued 833,333 of our common shares in a
registered direct offering and 833,333 of July PP Warrants to
purchase common shares in a concurrent private placement for a
purchase price of $18 per common share and July PP Warrant. The
exercise price of each July PP Warrant is $18 per share.
On December 9, 2020, we issued (a) 1,256,765 common shares, (b)
pre-funded warrants to purchase 155,000 common shares, and (c)
warrants (the “December 2020 Warrants”) to purchase 1,270,587
common shares. The pre-funded warrants have all been exercised. No
December 2020 Warrants have been exercised as of the date hereof,
and may be exercised at any time prior to 5:00 PM New York time on
June 9, 2026. The exercise price of the December 2020 Warrants was
reduced from $8.50 per share to $6.25 per share on January 29,
2021.
On January 29, 2021, we issued (a) 2,155,000 common shares, (b)
pre-funded warrants to purchase 445,000 common shares, and (c)
warrants (the “January 2021 Warrants”) to purchase 1,950,000 common
shares at an exercise price of $6.25 per share, which may be
exercised at any time prior to 5:00 PM New York time on July 29,
2026. The pre-funded warrants were all exercised prior to the date
of this annual report. No January 2021 Warrants have been exercised
as of the date hereof.
On February 17, 2021, we issued (a) 3,850,000 common shares, (b)
pre-funded warrants to purchase 950,000 common shares, and (c)
warrants (the “February 2021 Warrants”) to purchase 4,800,000
common shares at an exercise price of $6.25 per share, which may be
exercised at any time prior to 5:00 PM New York time on August 17,
2026. The pre-funded warrants have all been exercised. No February
2021 Warrants have been exercised as of the date hereof.
On June 29, 2021, we issued (a) 8,900,000 common shares, (b)
pre-funded warrants to purchase 1,100,000 common shares, and (c)
warrants (the “June 2021 Warrants”) to purchase 10,000,000 common
shares at an exercise price of $5.00 per share, which may be
exercised at any time prior to 5:00 PM New York time on December
29, 2026. The pre-funded warrants have all been exercised. No June
2021 Warrants have been exercised as the date hereof.
Each of the June PP Warrants, July PP Warrants, December 2020
Warrants, January 2021 Warrants, February 2021 Warrants and June
2021 Warrants is exercisable for a period of five and one-half
years commencing on the date of issuance. The warrants are
exercisable at the option of each holder, in whole or in part by
delivering to us a duly executed exercise notice with payment in
full in immediately available funds for the number of common shares
purchased upon such exercise. If a registration statement
registering the resale of the common shares underlying the private
placement warrants under the Securities Act is not effective or
available at any time after the six month anniversary of the date
of issuance of the private placement warrants, the holder may, in
its sole discretion, elect to exercise the private placement
warrant through a cashless exercise, in which case the holder would
receive upon such exercise the net number of common shares
determined according to the formula set forth in the warrant. If a
registration statement covering the issuance of the shares under
the Securities Act is not effective or available at any time after
the issuance of the December 2020 Warrants, January 2021 Warrants,
February 2021 Warrants and June 2021 Warrants, the holder may, in
its sole discretion, elect to exercise the such warrants through a
cashless exercise, in which case the holder would receive upon such
exercise the net number of common shares determined according to
the formula set forth in the warrant. If we do not issue the shares
in a timely fashion, each warrant contains certain liquidated
damages provisions.
Each of the warrants described above, other than the Class A
Warrants, were issued pursuant to a securities purchase agreement
and a placement agency agreement.
From June 22, 2020 to date hereof, we have issued 5,550 common
shares pursuant to exercises of outstanding Class A Warrants. As of
the date of this annual report, no June PP Warrants, July PP
Warrants, December 2020 Warrants, January 2021 Warrants, February
2021 Warrants or June 2021 Warrants have been exercised.
On October 21, 2020, we effected a 1-100 reverse stock split which
reduced the number of shares outstanding from 175,675,651 to
1,756,720 (adjustments were made based on fractional shares).
Unless otherwise noted, all historical share numbers, per share
amounts, including common share, preferred shares and warrants,
have been adjusted to give effect to this reverse split.
On June 12, 2020, we entered into a stock purchase agreement and
issued 50 of our newly designated Series B preferred shares, par
value $0.001 per share, to Goldenmare Limited, a company controlled
by our Chief Executive Officer, Athanasios Feidakis, in return for
$150,000, which amount was settled by reducing, on a dollar for
dollar basis, the amount payable by the Company to Goldenmare
Limited pursuant to a consultancy agreement.
In July 2020, we issued an additional 250 of our Series B preferred
shares to Goldenmare Limited in return for $150,000. The $150,000
was paid by reducing, on a dollar-for-dollar basis, the amount
payable by the Company to Goldenmare Limited pursuant to a
consultancy agreement. In addition, we increased the maximum voting
rights under the Series B preferred shares from 49.0% to
49.99%.
In March 2021, we issued an additional 10,000 of our Series B
preferred shares to Goldenmare Limited in return for $130,000,
which was settled by reducing, on a dollar-for-dollar basis, the
amount payable by the Company to Goldenmare Limited pursuant to a
consultancy agreement.
Each Series B preferred share entitles the holder thereof to 25,000
votes per share on all matters submitted to a vote of the
shareholders of the Company, provided however, that no holder of
Series B preferred shares may exercise voting rights pursuant to
Series B preferred shares that would result in the aggregate voting
power of any beneficial owner of such shares and its affiliates
(whether pursuant to ownership of Series B preferred shares, common
shares or otherwise) to exceed 49.99% of the total number of votes
eligible to be cast on any matter submitted to a vote of
shareholders of the Company. To the fullest extent permitted by
law, the holders of Series B preferred shares shall have no special
voting or consent rights and shall vote together as one class with
the holders of the common shares on all matters put before the
shareholders. The Series B preferred shares are not convertible
into common shares or any other security. They are not redeemable
and have no dividend rights. Upon any liquidation, dissolution or
winding up of the Company, the Series B preferred shares are
entitled to receive a payment with priority over the common
shareholders equal to the par value of $0.001 per share.
The Series B preferred shareholder has no other rights to
distributions upon any liquidation, dissolution or winding up of
the Company. All issued and outstanding Series B preferred shares
must be held of record by one holder, and the Series B preferred
shares shall not be transferred without the prior approval of our
Board of Directors. Finally, in the event the Company (i) declares
any dividend on its common shares, payable in common shares, (ii)
subdivides the outstanding common shares or (iii) combines the
outstanding common shares into a smaller number of shares, there
shall be a proportional adjustment to the number of outstanding
Series B preferred shares.
Each issuance of Series B preferred shares to Goldenmare Limited
was approved by an independent committee of the Board of Directors
of the Company, which (in each instance) received a fairness
opinion from an independent financial advisor that the transaction
was for a fair value.
In March 2021, the Company prepaid $6.0 million of the Entrust
loan facility, which represented all amounts that would otherwise
come due during calendar year 2021. As a result, after this
pre-payment we had an aggregate debt outstanding of $31 million,
gross of unamortized debt costs, from the Entrust Loan
Facility.
On May 10, 2021, we reached an agreement with First Citizens
Bank & Trust Company (formerly known as CIT Bank N.A.) for a
loan facility of $34.25 million bearing interest at LIBOR plus a
margin of 3.75% per annum. This loan facility is referred to as the
CIT loan facility. The proceeds of this financing were used to
repay the outstanding balance of the EnTrust Loan Facility. In
August 2022, we reached an agreement with First Citizens Bank &
Trust Company (formerly known as CIT Bank N.A.) for a deed of
accession, amendment and restatement of the CIT loan facility by
the accession of an additional borrower in order to increase the
loan facility from a total of $34.25 million to $52.25 million, by
a top up loan amount of $18 million for the purpose of financing
vessel Orion Globe and for general corporate and working capital
purposes of all the borrowers and Globus. Following the agreement
reached in August 2022 the benchmark rate was amended from LIBOR to
Term SOFR and the applicable margin was decreased from 3.75% to
3.35%.
As of December 31, 2022, our issued and outstanding capital stock
consisted of 20,582,301 common shares and 10,300 Series B preferred
shares.
Recent history relating to our ships
In October 2020, we purchased a 2015-built Kamsarmax dry bulk
carrier for $18.4 million. The vessel was delivered on October 29,
2020 and was named Galaxy Globe. Galaxy Globe was built at
the Hudong-Zhonghua Shipyard in China and has a carrying capacity
of 81,167 dwt.
On June 9, 2021, we took delivery of the m/v “Diamond Globe”, a
2018-built Kamsarmax dry bulk carrier, through its subsidiary, Argo
Maritime Limited, for a purchase price of $27 million financed with
available cash. The m/v “Diamond Globe” was built at Jiangsu New
Yangzi Shipbuilding Co., Ltd and has a carrying capacity of 82,027
dwt.
On July 20, 2021, we took delivery of the m/v “Power Globe”, a
2011-built Kamsarmax dry bulk carrier, through its subsidiary,
Talisman Maritime Limited, for a purchase price of $16.2 million
financed with available cash. The m/v “Power Globe” was built at
Universal Shipbuilding Corporation in Japan and has a carrying
capacity of 80,655 dwt.
On November 29, 2021, we took delivery of the m/v “Orion Globe”, a
2015-built Kamsarmax dry bulk carrier, through its subsidiary,
Salaminia Maritime Limited, for a purchase price of $28.4 million
financed with available cash. The m/v “Orion Globe” was built at
Tsuneishi Zosen in Japan and has a carrying capacity of 81,837
dwt.
On April 29, 2022, we entered into a contract, through our
subsidiary Calypso Shipholding S.A., for the construction and
purchase of one fuel efficient dry bulk carrier with a carrying
capacity of about 64,000 dwt. The vessel will be built at Nihon
Shipyard Co. in Japan and is scheduled to be delivered during the
first half of 2024. The total consideration for the construction of
the vessel is approximately $37.5 million, which we intend to
finance with a combination of debt and equity. In May 2022 we paid
the first installment of $7.4 million and in March 2023 we paid the
second installment of $3.7 million.
On May 13, 2022, we signed two contracts, through our subsidiaries
Daxos Maritime Limited and Paralus Shipholding S.A., for the
construction and purchase of two fuel efficient bulk carriers of
about 64,000 dwt each. The sister vessels will be built at Nantong
COSCO KHI Ship Engineering Co. in China with the first one
scheduled to be delivered during the third quarter of 2024 and the
second one scheduled during the fourth quarter of 2024. The total
consideration for the construction of both vessels is approximately
$70.3 million, which we intend to finance with a combination of
debt and equity. In May 2022 we paid the first installment of $13.8
million and in November 2022 paid the second installment of $6.9
million for both vessels under construction.
Our fleet is currently comprised of a total of nine dry bulk
vessels consisting of four Kamsarmaxes, one Panamax and four
Supramaxes, and we have contracted for the construction of three
additional Ultramaxes. The weighted average age of the vessels we
owned as of December 31, 2022 was 11.2 years, and their carrying
capacity was 626,257 dwt.
On March 6, 2023, we, through a wholly owned subsidiary, entered
into an agreement to sell the 2007-built Sun Globe for a gross
price of $14.1 million, before commissions, to an unaffiliated
third party, which sale is subject to standard closing conditions.
We expect the sale to occur in the second quarter of 2023.
General
Our executive office is located at the office of Globus
Shipmanagement Corp., which we refer to as our Manager, at 128
Vouliagmenis Avenue, 3rd Floor, 166 74 Glyfada, Attica, Greece. Our
telephone number is +30 210 960 8300. Our registered agent in the
Marshall Islands is The Trust Company of the Marshall Islands, Inc.
and our registered address in the Marshall Islands is Trust Company
Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands
MH96960. We maintain our website at www.globusmaritime.gr.
Information that is available on or accessed through our website
does not constitute part of, and is not incorporated by reference
into, this annual report on Form 20-F. The SEC maintains an
internet site that contains reports, proxy and information
statements, and other information regarding us and other issuers
that file electronically with the SEC at http://www.sec.gov.
B. Business Overview
We are an integrated dry bulk shipping company, providing marine
transportation services on a worldwide basis. We own, operate and
manage a fleet of dry bulk vessels that transport iron ore, coal,
grain, steel products, cement, alumina and other dry bulk cargoes
internationally. We intend to grow our fleet through timely and
selective acquisitions of modern vessels or acquisition through
construction of new vessels in a manner that we believe will
provide an attractive return on equity and will be accretive to our
earnings and cash flow based on anticipated market rates at the
time of purchase. There is no guarantee however, that we will be
able to find suitable vessels to purchase or that such vessels will
provide an attractive return on equity or be accretive to our
earnings and cash flow.
Our operations are managed by our Glyfada, Greece-based wholly
owned subsidiary, Globus Shipmanagement Corp., which we refer to as
our Manager, which provides in-house commercial and technical
management for our vessels and provided consulting services for an
affiliated ship-management company. Our Manager has entered into a
ship management agreement with each of our wholly owned
vessel-owning subsidiaries to provide services that include
managing day-to-day vessel operations, such as supervising the
crewing, supplying, maintaining of vessels and other services.
The
following table presents information concerning the vessels we
own:
Vessel |
|
Year Built
|
|
Flag |
|
Direct Owner
|
|
Shipyard |
|
Vessel Type |
|
Delivery Date
|
|
Carrying Capacity (dwt)
|
m/v
River Globe |
|
2007 |
|
Marshall Islands |
|
Devocean Maritime Ltd. |
|
Yangzhou Dayang |
|
Supramax |
|
December 2007 |
|
53,627 |
m/v
Sky Globe |
|
2009 |
|
Marshall Islands |
|
Domina
Maritime Ltd. |
|
Taizhou Kouan |
|
Supramax |
|
May
2010 |
|
56,855 |
m/v
Star Globe |
|
2010 |
|
Marshall Islands |
|
Dulac
Maritime S.A. |
|
Taizhou Kouan |
|
Supramax |
|
May
2010 |
|
56,867 |
m/v
Moon Globe |
|
2005 |
|
Marshall Islands |
|
Artful
Shipholding S.A. |
|
Hudong-Zhonghua |
|
Panamax |
|
June
2011 |
|
74,432 |
m/v Sun Globe |
|
2007 |
|
Malta |
|
Longevity Maritime Limited |
|
Tsuneishi Cebu |
|
Supramax |
|
September 2011 |
|
58,790 |
m/v
Galaxy Globe |
|
2015 |
|
Marshall Islands |
|
Serena
Maritime Limited |
|
Hudong-Zhonghua |
|
Kamsarmax |
|
October 2020 |
|
81,167 |
m/v Diamond Globe |
|
2018 |
|
Marshall Islands |
|
Argo
Maritime Limited |
|
Jiangsu New Yangzi Shipbuilding
Co. |
|
Kamsarmax |
|
June 2021 |
|
82,027 |
m/v
Power Globe |
|
2011 |
|
Marshall Islands |
|
Talisman Maritime Limited |
|
Universal Shipbuilding
Corporation |
|
Kamsarmax |
|
July 2021 |
|
80,655 |
m/v Orion Globe |
|
2015 |
|
Marshall Islands |
|
Salaminia Maritime Limited |
|
Tsuneishi Zosen |
|
Kamsarmax |
|
November 2021 |
|
81,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
626,257 |
We own each of our vessels through separate, wholly owned
subsidiaries, eight of which are incorporated in the Marshall
Islands, and one of which is incorporated in Malta. All of our
Supramax vessels are geared. Geared vessels can operate in ports
with minimal shore-side infrastructure. Due to the ability to
switch between various dry bulk cargo types and to service a wider
variety of ports, the day rates for geared vessels tend to have a
premium.
In addition to the above vessels, we have contracted for the
construction of three additional Ultramaxes. See “Item 4.A. History
and Development of the Company.”
On March 6, 2023, we, through a wholly owned subsidiary, entered
into an agreement to sell the 2007-built Sun Globe for a gross
price of $14.1 million, before commissions, to an unaffiliated
third party, which sale is subject to standard closing conditions.
We expect the sale to occur in the second quarter of 2023.
Employment of our Vessels
Our long-term strategy to maximize the value of our fleet is to
employ our vessels on a mix of all types of charter contracts,
including in the short-term or spot market and on long-term
charters and index-linked charters. We believe this strategy
provides the cash flow stability, reduced exposure to market
downturns and high utilization rates of the charter market, while
at the same time enabling us to benefit from periods of increasing
short-term or spot market rates. But our short-term strategy at any
given point in time is dictated by a multitude of factors and the
chartering opportunities before us. We may, for example, seek to
employ a greater portion of our fleet on the short-term or spot
market or on time charters with longer durations, should we believe
it to be in our best interests. We generally prefer spot or
short-term contracts in order to be versatile, to be able to move
quickly to capture a market upswing, and to be more selective with
the cargos we carry. Long-term charters, however, provide desirable
cash flow stability, albeit at the cost of missing upswings in
cargo rates. Finally, the index-linked charters reflect similar
rate volatility as spot/voyage rates, although the index-linked
hire rate may enable us to capture increased profit margins during
periods of improvements in vessel charter rates. Accordingly, our
mix between short-term or spot charters, longer-term charters and
index-linked charters changes from time-to-time. When our ships are
not all on the short-term or spot market, we generally seek to
stagger the expiration dates of our charters to reduce exposure to
volatility in the shipping cycle when our vessels come off of
charter. We also continually monitor developments in the dry bulk
shipping industry and, subject to market demand, will adjust the
number of vessels on charters and the charter periods for our
vessels according to market conditions.
We and our Manager have developed relationships with a number of
international charterers, vessel brokers, financial institutions,
insurers and shipbuilders. We have also developed a network of
relationships with vessel brokers who help facilitate vessel
charters and acquisitions.
On the date of the filing of this annual report on 20-F, eight of
our vessels were employed on short-term time charters, of which two
are index-linked.
Each of our vessels travels across the world and not on any
particular route. The charterers of our vessels, whether time,
bareboat or on the spot market, select the locations to which our
vessels travel, subject to any restrictions under terms of
employment.
Time Charter
A time charter is a contract for the use of a vessel for a fixed
period of time at a specified daily rate. Under a time charter, the
vessel owner provides crewing, insuring, repairing and maintenance
and other services related to the vessel’s operation, the cost of
which is included in the daily rate, and the customer is
responsible for substantially all of the vessel voyage costs,
including the cost of bunkers (fuel oil) and canal and port
charges. The owner also pays commissions typically ranging from 0%
to 6.25% of the total daily charter hire rate of each charter to
unaffiliated ship brokers and to in-house brokers associated with
the charterer, depending on the number of brokers involved with
arranging the charter.
Basic Hire Rate and Term
“Basic hire rate” refers to the basic payment from the customer for
the use of the vessel. The hire rate is generally payable
semi-monthly or 15 days, in advance, in U.S. dollars as specified
in the charter. A hire rate can be fixed or index-linked, with the
latter reflecting similar rate volatility as spot/voyage rates,
although the index-linked hire rate may enable us to capture
increased profit margins during periods of improvements in vessel
charter rates.
Off-hire
When the vessel is “off-hire,” the charterer generally is not
required to pay the basic hire rate, and we are responsible for all
costs. Prolonged off-hire may lead to vessel substitution or
termination of the time charter. A vessel generally will be deemed
off-hire if there is a loss of time due to, among other things,
operational deficiencies; drydocking for examination or painting
the bottom; equipment breakdowns; damages to the hull; or similar
problems.
Ship Management and Maintenance
We are responsible for the technical management of the vessel and
for maintaining the vessel, periodic drydocking, cleaning and
painting and performing work required by regulations. Globus
Shipmanagement provides the technical, commercial and day-to-day
operational management of our vessels. Technical management
includes crewing, maintenance, repair and drydockings. During the
2022 year, we paid Globus Shipmanagement $700 per vessel per day.
All fees payable to Globus Shipmanagement for vessels that we own
are eliminated upon consolidation of our accounts.
Termination
We are generally entitled to suspend performance under the time
charter if the customer defaults in its payment obligations. Either
party may terminate the charter in the event of war in specified
countries.
Commissions
During the year ended December 31, 2022, we paid commissions
ranging from 5% to 6.25% relevant to each time charter agreement
then in effect.
Bareboat Charter
A bareboat charter is a contract pursuant to which the vessel owner
provides the vessel to the charterer for a fixed period of time at
a specified daily rate, and the charterer provides for all of the
vessel’s operating expenses. The charterer undertakes to maintain
the vessel in a good state of repair and efficient operating
condition and drydock the vessel during this period as per the
classification society requirements.
Redelivery
Upon the expiration of a bareboat charter, typically the charterer
must redeliver the vessel in as good structure, state, condition
and class as that in which the vessel was delivered.
Ship Management and Maintenance
Under a bareboat charter, the charterer is responsible for all of
the vessel’s operating expenses, including crewing, insuring,
maintaining and repairing the vessel, any drydocking costs, and the
stores, lube oils and communication expenses. Under a bareboat
charter, the charterer is also responsible for the voyage costs,
and generally assumes all risk of operation. The charterer covers
the costs associated with the vessel’s special surveys and related
drydocking falling within the charter period.
Commissions
Commissions on bareboat charters typically range from 0% to
3.75%.
Our Customers
We seek to charter our vessels to customers who we perceive as
creditworthy thereby minimizing the risk of default by our
charterers. We also try to select charterers depending on the type
of product they want to carry and the geographical areas in which
they tend to trade.
Our assessment of a charterer’s financial condition and reliability
is an important factor in negotiating employment for our vessels.
We generally charter our vessels to operators, trading houses
(including commodities traders), shipping companies and producers
and government-owned entities and generally avoid chartering our
vessels to companies we believe to be speculative or
undercapitalized entities. Since our operations began in September
2006, our customers have included Hyundai Glovis Co. Ltd.,
Dampskibsselskabet NORDEN A/S, NYK Bulk & Projects Carriers
Ltd. and Olam Global Agri Pte Ltd. In addition, during the periods
when some of our vessels were trading on the spot market, they have
been chartered to charterers such as Cargill International SA,
Oldendorff GmbH & Co KG, Western Bulk Pte. Ltd., Ausca Shipping
HK Limited and others, thus expanding our customer base.
Competition
Our business fluctuates in line with the main patterns of trade of
the major dry bulk cargoes and varies according to changes in the
supply and demand for these items. We operate in markets that are
highly competitive and based primarily on supply and demand. We
compete for charters on the basis of price, vessel location, size,
age and condition of the vessel, as well as on our reputation as an
owner and operator. We compete with other owners of dry bulk
vessels in the Panamax, Supramax and Kamsarmax dry bulk vessels,
but we also compete with owners for the purchase and sale of
vessels of all sizes. Those competitors may be better capitalized
or have more liquidity than we do. In this period of significantly
depressed pricing and over capacity, better liquidity may be a
major competitive advantage, and we believe that some of our
competitors may be better capitalized than we are.
Ownership of dry bulk vessels is highly fragmented. It is likely
that we will face substantial competition for long-term charter
business from a number of experienced companies. Many of these
competitors will have larger dry bulk vessel fleets and greater
financial resources than us, which may make them more competitive.
It is also likely that we will face increased numbers of
competitors entering into our transportation sectors, including in
the dry bulk sector. Many of these competitors have strong
reputations and extensive resources and experience. Increased
competition may cause greater price competition, especially for
long-term charters. We believe that no single competitor has a
dominant position in the markets in which we compete.
The process for obtaining longer term time charters generally
involves a lengthy and intensive screening and vetting process and
the submission of competitive bids. In addition to the quality and
suitability of the vessel, longer term shipping contracts may be
awarded based upon a variety of other factors relating to the
vessel operator, including:
|
Ø |
environmental, health and safety
record; |
|
Ø |
compliance with regulatory industry
standards; |
|
Ø |
reputation for customer service,
technical and operating expertise; |
|
Ø |
shipping experience and quality of
vessel operations, including cost-effectiveness; |
|
Ø |
quality, experience and technical
capability of crews; |
|
Ø |
the ability to finance vessels at
competitive rates and overall financial stability; |
|
Ø |
environmental, social, and governance
criteria; |
|
Ø |
relationships with shipyards and the
ability to obtain suitable berths; |
|
Ø |
construction management experience,
including the ability to procure on-time delivery of new vessels
according to customer specifications; |
|
Ø |
willingness to accept operational
risks pursuant to the charter, such as allowing termination of the
charter for force majeure events; and |
|
Ø |
competitiveness of the bid in terms
of overall price. |
As a result of these factors, we may be unable to expand our
relationships with existing customers or obtain new customers for
long-term time charters on a profitable basis, if at all. However,
even if we are successful in employing our vessels under longer
term charters, our vessels will not be available for trading on the
short-term or spot market during an upturn in the market cycle,
when short-term or spot trading may be more profitable. If we
cannot successfully employ our vessels in profitable charters, our
results of operations and operating cash flow could be materially
adversely affected.
The Dry Bulk Shipping Industry
The world dry bulk fleet is generally divided into six major
categories, based on a vessel’s cargo carrying capacity. These
categories consist of: Handysize, Handymax/Supramax, Panamax,
Kamsarmax, Capesize and Very Large Ore Carrier.
Ø
Handysize. Handysize
vessels have a carrying capacity of up to 39,999 dwt. These vessels
are primarily involved in carrying minor bulk cargoes.
Increasingly, vessels of this type operate on regional trading
routes, and may serve as trans-shipment feeders for larger vessels.
Handysize vessels are well suited for small ports with length and
draft restrictions. Their cargo gear enables them to service ports
lacking the infrastructure for cargo loading and unloading.
Ø
Handymax/Supramax. Handymax vessels
have a carrying capacity of between 40,000 and 59,999 dwt. These
vessels operate on a large number of geographically dispersed
global trade routes, carrying primarily iron ore, coal, grains and
minor bulks. Within the Handymax category there is also a
sub-sector known as Supramax. Supramax bulk vessels are
vessels between 50,000 to 59,999 dwt, normally offering cargo
loading and unloading flexibility with on-board cranes, while at
the same time possessing the cargo carrying capability approaching
conventional Panamax bulk vessels. Hence, the earnings potential of
a Supramax dry bulk vessel, when compared to a conventional
Handymax vessel of 45,000 dwt, is greater.
Ø
Ultramax. Ultramax vessels are
medium-sized vessels. Larger than Supramax vessels, they have a
carrying capacity generally between 60,000 to 65,000 dwt.
Ø
Panamax. Panamax vessels have a
carrying capacity of between 60,000 and 79,999 dwt. These vessels
carry coal, grains, and, to a lesser extent, minor bulks, including
steel products, forest products and fertilizers. The term “Panamax”
refers to vessels that were able to pass through the Panama Canal
before the Panama Canal was expanded in June 2016 (to allow vessels
of up to 120,000 dwt, a size sometimes referred to as New Panamax).
Panamax vessels are more versatile than larger vessels.
Ø
Kamsarmax. Kamsarmax vessels
typically have a carrying capacity of between 80,000 and 109,999
dwt. These vessels tend to be shallower and have a larger beam than
a standard Panamax vessel with a higher cubic capacity. They have
been designed specifically for loading high cubic cargoes from
draught restricted ports. The term Kamsarmax stems from Port Kamsar
in Guinea, where large quantities of bauxite are exported from a
port with only 13.5 meter draught and a 229 meter length overall
restriction, but no beam restriction.
Ø
Capesize. Capesize vessels have
carrying capacities of between 110,000 and 199,999 dwt. Only the
largest ports around the world possess the infrastructure to
accommodate vessels of this size. Capesize vessels are mainly used
to transport iron ore or coal and, to a lesser extent, grains,
primarily on long-haul routes.
Ø
VLOC. Very large ore carriers are
in excess of 200,000 dwt. VLOCs are built to exploit economies of
scale on long-haul iron ore routes.
The supply of dry bulk shipping capacity, measured by the amount of
suitable vessel tonnage available to carry cargo, is determined by
the size of the existing worldwide dry bulk fleet, the number of
new vessels on order, the scrapping of older vessels and the number
of vessels out of active service (i.e., laid up or otherwise not
available for hire). In addition to prevailing and anticipated
freight rates, factors that affect the rate of newbuilding,
scrapping and laying-up include newbuilding prices, secondhand
vessel values in relation to scrap prices, costs of bunkers and
other voyage expenses, costs associated with classification society
surveys, normal maintenance and insurance coverage, the efficiency
and age profile of the existing fleets in the market and government
and industry regulation of marine transportation practices. The
supply of dry bulk vessels is not only a result of the number of
vessels in service, but also the operating efficiency of the fleet.
Dry bulk trade is influenced by the underlying demand for the dry
bulk commodities which, in turn, is influenced by the level of
worldwide economic activity. Generally, growth in gross domestic
product and industrial production correlate with peaks in demand
for marine dry bulk transportation services.
Dry bulk vessels are one of the most versatile elements of the
global shipping fleet in terms of employment alternatives. They
seldom operate on round trip voyages with high ballasting times.
Rather, they often participate in triangular or multi-leg
voyages.
Charter Rates
In the time charter market, rates vary depending on the length of
the charter period and vessel specific factors such as age, speed,
size and fuel consumption. In the voyage charter market, rates are
influenced by cargo size, commodity, port dues and canal transit
fees, as well as delivery and redelivery regions. In general, a
larger cargo size is quoted at a lower rate per ton than a smaller
cargo size. Routes with costly ports or canals generally command
higher rates. Voyages loading from a port where vessels usually
discharge cargo, or discharging from a port where vessels usually
load cargo, are generally quoted at lower rates. This is because
such voyages generally increase vessel efficiency by reducing the
unloaded portion (or ballast leg) that is included in the
calculation of the return charter to a loading area.
Within the dry bulk shipping industry, the freight rate indices
issued by the Baltic Exchange in London are the references most
likely to be monitored. These references are based on actual
charter hire rates under charters entered into by market
participants as well as daily assessments provided to the Baltic
Exchange by a panel of major shipbrokers. The Baltic Exchange, an
independent organization comprised of shipbrokers, shipping
companies and other shipping players, provides daily independent
shipping market information and has created freight rate indices
reflecting the average freight rates (that incorporate actual
business concluded as well as daily assessments provided to the
exchange by a panel of independent shipbrokers) for the major bulk
vessel trading routes. These indices include the Baltic Panamax
Index, the index with the longest history and, more recently, the
Baltic Capesize Index.
Charter (or hire) rates paid for dry
bulk vessels are generally a function of the underlying balance
between vessel supply and demand. Over the past 25 years, dry bulk
cargo charter rates have passed through cyclical phases and changes
in vessel supply and demand have created a pattern of rate “peaks”
and “troughs.” Generally, spot/voyage charter rates will be more
volatile than time charter rates, as they reflect short-term
movements in demand and market sentiment. The BDI remained
significantly depressed from 2008-2020. In 2021, the BDI rose to a
high of 5,650 on October 7, 2021 and had a low of 1,303 on February
10, 2021. In 2022, the BDI ranged from a low of 965 on August 31,
2022 to a high of 3,369 on May 23, 2022.
During calendar year 2023 to date,
the BDI has ranged from a high of 1,587 (on March 14, 2023) to a
low of 601 (on February 7, 2023).
Vessel Prices
Newbuilding vessel prices generally fell as part of the sudden and
steep decline in freight rates after August 2008, and continued to
gradually decline, but started to increase in 2021 (although not at
the 2008 levels) although have fallen in the latter half of 2022
and in the beginning of 2023.
In broad terms, the secondhand market is affected by both the
newbuilding prices as well as the overall freight expectations and
sentiment observed at any given time. As with newbuild prices,
secondhand vessel values have continued to gradually decline since
August 2008 until 2021, when they started to increase, although
have fallen in the latter half of 2022 and in the beginning of
2023.
Seasonality
Our fleet consists of dry bulk vessels that operate in markets that
have historically exhibited seasonal variations in demand and, as a
result, in charter rates. The dry bulk sector is typically stronger
in the fall and winter months in anticipation of increased
consumption of coal and other raw materials in the northern
hemisphere during the winter months. Such seasonality will affect
the rates we obtain on the vessels in our fleet that operate on the
short-term or spot market.
Permits and Authorizations
We are required by various governmental and quasi-governmental
agencies to obtain certain permits, licenses and certificates with
respect to our vessels. The kinds of permits, licenses and
certificates required depend upon several factors, including the
commodity transported, the waters in which the vessel operates, the
nationality of the vessel’s crew and the age of a vessel. We have
been able to obtain all permits, licenses and certificates
currently required to permit our vessels to operate. Additional
laws and regulations, environmental or otherwise, may be adopted
which could limit our ability to do business or increase our cost
of doing business.
Disclosure of Activities pursuant to Section 13(r) of the
U.S. Securities Exchange Act of 1934
Section 219 of the Iran Threat Reduction and Syria Human
Rights Act of 2012 added Section 13(r) to the Exchange Act.
Section 13(r), as amended, requires an issuer to disclose
whether it or any of its affiliates knowingly engaged in certain
activities, transactions or dealings relating to Iran or certain
other sanctioned parties. Disclosure is required even where the
activities, transactions or dealings are conducted in compliance
with applicable law. Provided in this section is information
concerning the activities of us and our affiliates that occurred in
2022 and which we believe may be required to be disclosed pursuant
to Section 13(r) of the Exchange Act. Because the term
“affiliate” is broadly interpreted pursuant to Exchange Act Rule
12b-2, certain activities that occurred during the fiscal year
ended December 31, 2022 may be deemed to have been conducted by one
of our affiliates.
In 2022, our vessels did not call on any port call in Iran.
However, in 2022, the vessels Eolos Angel and Eolos G each a vessel
that is owned by an entity that may be affiliated with our
chairman, Mr. George Feidakis, and therefore each vessel may be an
affiliate of ours, made calls to Iran. Based on information
provided to us, the Eolos Angel made calls to (1) the port of
Bandar Imam Khomeini on February, 2022, discharging corn, and
remained in that port during 2022 for 31.5 days, pursuant to a time
charter with an unaffiliated third party charterer at a gross rate
of $24,750 per day, (2) the port of Bandar Imam Khomeini on June,
2022, discharging soya beans, and remained in that port during 2022
for 20 days, pursuant to a time charter with an unaffiliated third
party charterer at a gross rate of $24,750 per day, and (3) the
port of Bandar Imam Khomeini on October, 2022, discharging corn,
and remained in that port during 2022 for 8.6 days. The Eolos G
made calls to (1) the port of Bandar Imam Khomeini on February,
2022, discharging soya beans, and remained in that port during 2022
for 27.5 days, pursuant to a time charter with an unaffiliated
third party charterer at a gross rate of $35,000 per day, and (2)
the port of Bandar Imam Khomeini on June, 2022, discharging corn,
and remained in that port during 2022 for 18 days, pursuant to a
time charter with an unaffiliated third party charterer at a gross
rate of $35,000 per day. The United States maintains broad
authorizations and exceptions that allow for the sale of
agricultural commodities and food to Iran. The position is similar
under the relevant EU Regulations. As part of the charter
arrangements between the vessel owner and third-party charterers or
sub-charterers, the vessel owner or its manager may pay fees and
expenses related to the port calls made in Iran through a private
third-party agent in Iran appointed by the third-party charterer or
sub-charterer. Globus Maritime Limited and its subsidiaries did not
earn any income from this activity and did not control this
activity.
Our charter party agreements for our vessels restrict the
charterers from calling in Iran in violation of U.S. sanctions, or
carrying any cargo to Iran which is subject to U.S. sanctions.
However, there can be no assurance that our vessels will not, from
time to time in the future on charterer's instructions, perform
voyages which would require disclosure pursuant to Exchange Act
Section 13(r).
We currently have no intention to charter our vessels to charterers
and sub-charterers, including, as the case may be, Iran-related
parties, who may make, or may sub-let the vessels to sub-charterers
who may make, port calls to Iran. In addition, our affiliate has
informed us that it currently has no intention to continue to
charter its vessels to charterers and sub-charterers, including, as
the case may be, Iran-related parties, who may make, or may sub-let
the vessels to sub-charterers who may make, port calls to Iran.
Inspection by Classification Societies
Every oceangoing vessel must be “classed” by a classification
society. The classification society certifies that the vessel is
“in class,” signifying that the vessel has been built and
maintained in accordance with the rules of the classification
society and complies with applicable rules and regulations of the
vessel’s country of registry and the international conventions of
which that country is a member. In addition, where surveys are
required by international conventions and corresponding laws and
ordinances of a flag state, the classification society will
undertake them on application or by official order, acting on
behalf of the authorities concerned.
The classification society also undertakes on request other surveys
and checks that are required by regulations and requirements of the
flag state. These surveys are subject to agreements made in each
individual case and/or to the regulations of the country concerned.
For maintenance of the class certification, regular and
extraordinary surveys of hull, machinery, including the electrical
plant, and any special equipment classed are required to be
performed as follows:
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Annual Surveys. For seagoing
vessels, annual surveys are conducted for the hull and the
machinery, including the electrical plant and where applicable for
special equipment classed, at intervals of 12 months from the date
of commencement of the class period indicated in the
certificate. |
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Intermediate Surveys. Extended
annual surveys are referred to as intermediate surveys and
typically are conducted two and one-half years after commissioning
and each class renewal. Intermediate surveys may be carried out on
the occasion of the second or third annual survey. |
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Class Renewal Surveys. Class
renewal surveys, also known as special surveys, are carried out for
the vessel’s hull, machinery, including the electrical plant, and
for any special equipment classed, at the intervals indicated by
the character of classification for the hull. At the special survey
the vessel is thoroughly examined, including audio-gauging to
determine the thickness of the steel structures. Should the
thickness be found to be less than class requirements, the
classification society would prescribe steel renewals. The
classification society may grant a one-year grace period for
completion of the special survey. Substantial amounts of money may
have to be spent for steel renewals to pass a special survey if the
vessel experiences excessive wear and tear. In lieu of the special
survey every four or five years, depending on whether a grace
period was granted, a shipowner has the option of arranging with
the classification society for the vessel’s hull or machinery to be
on a continuous survey cycle, in which every part of the vessel
would be surveyed within a five-year cycle. At an owner’s
application, the surveys required for class renewal may be split
according to an agreed schedule to extend over the entire period of
class. This process is referred to as continuous class
renewal. |
All areas subject to survey as defined by the classification
society are required to be surveyed at least once per class period,
unless shorter intervals between surveys are prescribed elsewhere.
The period between two subsequent surveys of each area must not
exceed five years.
Most insurance underwriters make it a condition for insurance
coverage that a vessel be certified as “in class” by a
classification society that is a member of the International
Association of Classification Societies. All the vessels that we
own and operate are certified as being “in class” by Nippon Kaiji
Kyokai (Class NK), DNV GL, Lloyds or ABS. Typically, all new and
secondhand vessels that we purchase must be certified “in class”
prior to their delivery under our standard purchase contracts and
memoranda of agreement. Under our standard purchase contracts,
unless negotiated otherwise, if the vessel is not certified on the
date of closing, we would have no obligation to take delivery of
the vessel. Although we may not have an obligation to accept any
vessel that is not certified on the date of closing, we may
determine nonetheless to purchase the vessel, should we determine
it to be in our best interests. If we do so, we may be unable to
charter such vessel after we purchase it until it obtains such
certification, which could increase our costs and affect the
earnings we anticipate from the employment of the vessel.
Vessels are drydocked during intermediate and special surveys for
repairs of their underwater parts. If “in water survey” notation is
assigned, the vessel owner has the option of carrying out an
underwater inspection of the vessel in lieu of drydocking, subject
to certain conditions. In the event that an “in water survey”
notation is assigned and other requirements as stipulated by class
rules permit, dry docking required as part of an Intermediate
Survey may be carried out “in lieu” thereby achieving a higher
utilization for the relevant vessel. As per rules each vessel must
dry dock twice within a five year cycle.
One drydock must coincide with the special survey while the time
distance between two dry docks must not exceed 36 months. We budget
40 days per drydocking per vessel. Actual length will vary based on
the condition of each vessel, shipyard schedules and other
factors.
The following table lists the dates by which we expect to carry out
the next drydockings and special surveys for the vessels in our
fleet:
Vessel Name |
Drydocking |
Special Survey |
Classification
Society |
m/v River Globe |
August 2025 |
August 2027 |
Class NK |
m/v Sky Globe |
November 2024 |
November 2024 |
Class NK |
m/v Star Globe |
May 2025 |
May 2025 |
DNV GL |
m/v Moon Globe |
November 2025 |
November 2025 |
Class NK |
m/v Sun Globe |
November 2025 |
August 2027 |
ABS |
m/v Galaxy Globe |
October 2023 |
October 2025 |
Class NK |
m/v Power Globe |
October 2024 |
June 2026 |
Class NK |
m/v Orion Globe |
April 2023 |
March 2025 |
Class NK |
m/v Diamond Globe |
May 2023 |
May 2023 |
Lloyds |
Following an incident or a scheduled survey, if any defects are
found, the classification surveyor will issue a “recommendation” or
“condition of class” which must be rectified by the vessel owner
within the prescribed time limits.
Risk Management and Insurance
General
The operation of any cargo vessel embraces a wide variety of risks,
including the following:
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mechanical failure or damage, for
example by reason of the seizure of a main engine
crankshaft; |
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cargo loss, for example arising from
hull damage; |
|
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personal injury, for example arising
from collision or piracy; |
|
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losses due to piracy, terrorist or
war-like action between countries; |
|
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environmental damage, for example
arising from marine disasters such as oil spills and other
environmental mishaps; |
|
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physical damage to the vessel, for
example by reason of collision; |
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damage to other property, for example
by reason of cargo damage or oil pollution; and |
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business interruption, for example
arising from strikes and political or regulatory
change. |
The value of such losses or damages may vary from modest sums, for
example for a small cargo shortage damage claim, to catastrophic
liabilities, for example arising out of a marine disaster, such as
a serious oil or chemical spill, which may be virtually unlimited.
While we maintain the traditional range of marine and liability
insurance coverage for our fleet (hull and machinery insurance, war
risks insurance and protection and indemnity coverage) in amounts
and to extents that we believe are prudent to cover normal risks in
our operations, we cannot insure against all risks, and we cannot
be assured that all covered risks are adequately insured against.
Furthermore, there can be no guarantee that any specific claim will
be paid by the insurer or that it will always be possible to obtain
insurance coverage at reasonable rates. Any uninsured or
under-insured loss could harm our business and financial
condition.
Hull and Machinery and War Risks
The principal coverages for marine
risks (covering loss or damage to the vessels, rather than
liabilities to third parties) are hull and machinery insurance and
war risk insurance. These address the risks of the actual or
constructive total loss of a vessel and accidental damage to a
vessel’s hull and machinery, for example from running aground or
colliding with another ship. These insurances provide coverage
which is limited to an agreed “insured value” which, as a matter of
policy, is never less than the particular vessel’s fair market
value. Reimbursement of loss under such coverage is subject to
policy deductibles that vary according to the vessel and the nature
of the coverage. Hull and machinery deductibles may, for example,
be between $75,000 and $150,000 per incident whereas the war risks
insurance has a more modest incident deductible of, for example,
$30,000.
Protection and Indemnity Insurance
Protection and indemnity insurance is a form of mutual indemnity
insurance provided by mutual marine protection and indemnity
associations, or “P&I Clubs,” formed by vessel owners to
provide protection from large financial loss to one club member by
contribution towards that loss by all members.
Each of the vessels that we operate is entered in the Gard P&I
(Bermuda) Ltd. which we refer to as the Club, for third party
liability marine insurance coverage. The Club is a mutual
insurance vehicle. As a member of the Club, we are insured,
subject to agreed deductibles and our terms of entry, for our legal
liabilities and expenses arising out of our interest in an entered
ship, out of events occurring during the period of entry of the
ship in the Club and in connection with the operation of the ship,
against specified risks. These risks include liabilities
arising from death of crew and passengers, loss or damage to cargo,
collisions, property damage, oil pollution and wreck removal.
The Club benefits from its membership in the International Group of
P&I Clubs, or the International Group, for its main reinsurance
program, and maintains a separate complementary insurance program
for additional risks.
The Club’s policy year commences each February. The mutual
calls are levied by way of Estimated Total Premiums, or ETP, and
the amount of the final installment of the ETP varies in accordance
with the actual total premium ultimately required by the Club for a
particular policy year. Members have a liability to pay
supplementary calls which may be levied by the Club if the ETP is
insufficient to cover the Club’s outgoings in a policy year.
Cover per claim is generally limited to an unspecified sum, being
the amount available from reinsurance plus the maximum amount
collectable from members of the International Group by way of
overspill calls. Certain exceptions apply, including a $1.0
billion limit on claims in respect of oil pollution, a $3.0 billion
limit on cover for passenger and crew claims and a sub-limit of
$2.0 billion for passenger claims.
To the extent that we experience either a supplementary or an
overspill call, our policy is to expense such amounts. To the
extent that the Club depends on funds paid in calls from other
members in our industry, if there were an industry-wide slow-down,
other members might not be able to meet the call and we might not
receive a payout in the event we made a claim on a policy.
Uninsured Risks
Not all risks are insured and not all risks are insurable. The
principal insurable risks which nevertheless remain uninsured
across our fleet are “loss of hire” and “strikes.” We generally do
not insure these risks because we regard the costs as
disproportionate. These insurances provide, subject to a
deductible, a limited indemnity for hire that is not receivable by
the shipowner for reasons set forth in the policy. For example,
loss of hire risk may be covered on a 14/90/90 basis, with a 14
days deductible, 90 days cover per incident and a 90-day overall
limit per vessel per year. Should a vessel on time charter, where
the vessel is paid a fixed hire day by day, suffer a serious
mechanical breakdown, the daily hire will no longer be payable by
the charterer. The purpose of the loss of hire insurance is to
secure the loss of hire during such periods.
Environmental and Other
Regulations
Sources of Applicable Rules and Standards
Shipping is one of the world’s most heavily regulated industries,
and it is subject to many industry standards. Government regulation
significantly affects the ownership and operation of vessels. These
regulations consist mainly of rules and standards established by
international conventions, but they also include national, state
and local laws and regulations in force in jurisdictions where
vessels may operate or are registered, and which may be more
stringent than international rules and standards. This is the case
particularly in the United States and, increasingly, in Europe.
A variety of governmental and private entities subject vessels to
both scheduled and unscheduled inspections. These entities include
local port authorities (the U.S. Coast Guard, harbor masters or
equivalent entities), classification societies, flag state
administration (country vessel of registry), port state control,
charterers and particularly terminal operators. Certain of these
entities require vessel owners to obtain permits, licenses and
certificates for the operation of their vessels. Failure to
maintain necessary permits or approvals could require a vessel
owner to incur substantial costs or temporarily suspend operation
of one or more of its vessels.
Heightened levels of environmental and quality concerns among
insurance underwriters, regulators and charterers continue to lead
to greater inspection and safety requirements on all vessels and
may accelerate the scrapping of older vessels throughout the
industry. Increasing environmental concerns have created a demand
for vessels that conform to stricter environmental standards.
Vessel owners are required to maintain operating standards for all
vessels that will emphasize operational safety, quality
maintenance, continuous training of officers and crews and
compliance with U.S. and international regulations. Because laws
and regulations are frequently changed and may impose increasingly
stricter requirements, we cannot predict the ultimate cost of
complying with these requirements, or the impact of these
requirements on the resale value or useful lives of our vessels. In
addition, a future serious marine incident that causes significant
adverse environmental impact could result in additional legislation
or regulation that could negatively affect our profitability.
The following is a non-exhaustive overview of certain material
conventions, laws and regulations that affect our business and the
operation of our vessels. It is not a comprehensive summary of all
the conventions, laws and regulations to which we are subject.
The IMO is a United Nations agency setting standards and creating a
regulatory framework for the shipping industry and has negotiated
and adopted a number of international conventions. These fall into
two main categories, consisting firstly of those concerned
generally with vessel safety and security standards, and secondly
of those specifically concerned with measures to prevent pollution
from vessels.
Ship Safety Regulation
A primary international safety convention is the Safety of Life at
Sea Convention of 1974, as amended, or SOLAS, including the
regulations and codes of practice that form part of its regime.
Much of SOLAS is not directly concerned with preventing pollution,
but some of its safety provisions are intended to prevent pollution
as well as promote safety of life and preservation of property.
These regulations have been and continue to be regularly amended as
new and higher safety standards are introduced with which we are
required to comply.
Under Chapter IX of the SOLAS Convention, or the International
Safety Management Code for the Safe Operation of Ships and for
Pollution Prevention, or the ISM Code, our operations are also
subject to environmental standards and requirements. The purpose of
the ISM Code is to provide an international standard for the safe
management and operation of vessels and for pollution prevention.
Under the ISM Code, the party with operational control of a vessel
is required to develop, implement and maintain an extensive safety
management system that includes, among other things, the adoption
of a safety and environmental protection policy setting forth
instructions and procedures for operating its vessels safely and
protecting the environment and describing procedures for responding
to emergencies. The ISM Code requires that vessel operators obtain
a Safety Management Certificate for each vessel they operate. This
certificate issued after verification that the vessel’s operator
and its shipboard management operate in accordance with the
approved safety management system and evidence that the vessel
complies with the requirements of the ISM Code. No vessel can
obtain a Safety Management Certificate unless its operator has been
awarded a document of compliance, issued by the respective flag
state for the vessel, under the ISM Code.
Another amendment of SOLAS, made after the terrorist attacks in the
United States on September 11, 2001, introduced special measures to
enhance maritime security, including the International Ship and
Port Facility Security Code, or ISPS Code, which sets out measures
for the enhancement of security of vessels and port facilities. To
trade internationally, a vessel must attain an International Ship
Security Certificate, or ISSC, from a recognized security
organization approved by the vessel's flag state.
The vessels that we operate maintain ISM and ISPS certifications
for safety and security of operations.
Regulations to Prevent Pollution from Ships
In the second main category of international regulation which deals
with prevention of pollution, the primary convention is the
International Convention for the Prevention of Pollution from Ships
1973 as amended by the 1978 Protocol, or MARPOL, which imposes
environmental standards on the shipping industry set out in its
Annexes I-VI. These contain regulations for the prevention of
pollution by oil (Annex I), by noxious liquid substances in bulk
(Annex II), by harmful substances in packaged forms within the
scope of the International Maritime Dangerous Goods Code (Annex
III), by sewage (Annex IV), by garbage (Annex V) and by air
emissions (Annex VI).
These regulations have been and continue to be regularly amended
and supplemented as new and higher standards of pollution
prevention are introduced with which we are required to comply.
For example, MARPOL Annex VI sets limits on Sulphur Oxides (SOx)
and Nitrogen Oxides (NOx) and particulate matter emissions from
vessel exhausts and prohibits deliberate emissions of ozone
depleting substances. It also regulates the emission of volatile
organic compounds (VOC) from cargo tankers and certain gas
carriers, as well as shipboard incineration of specific substances.
Annex VI also includes a global cap on the sulphur content of fuel
oil with a lower cap on the sulphur content applicable inside
special areas, the “Emission Control Areas” or ECAs. Already
established ECAs include the Baltic Sea, the North Sea, including
the English Channel, the North American area and the US Caribbean
Sea area. Recently the IMO approved a proposal for a new ECA in the
Mediterranean to apply from 1 July 2025 such that the sulphur
content of marine fuels does not exceed 0.1%. The global cap on the
sulphur content of fuel oil was reduced to 0.5% as of January 1,
2020, regardless of whether a ship is operating outside a
designated ECA. From January 1, 2015 the cap on the sulphur content
of fuel oil for vessels operating in ECAs has been 0.1%. Additional
amendments to Annex VI revising, among other terms, the definition
of “Sulphur content of fuel oil” and “low-flashpoint fuel”, and
pertaining to the sampling and testing of onboard fuel oil, which
became effective in 2022. These regulations subject ocean-going
vessels to stringent emissions controls and may cause us to incur
substantial costs.
Annex VI also provides for progressive reductions in NOx emissions
from marine diesel engines installed in vessels. Limiting NOx
emissions is set on a three tier reduction, the final tier (“Tier
III”) applying to engines installed on vessels constructed on or
after January 1, 2016 and which operate in the North American ECA
or the US Caribbean Sea ECA, and to engines installed on vessels
constructed on or after January 1, 2021 and which operate in the
Baltic Sea ECA or the North Sea ECA. The Tier III requirements
would also apply to engines of vessels operating in other ECAs as
may be designated in the future by the IMO’s Marine Environment
Protection Committee (or MEPC) for Tier III NOx control. The Tier
III requirements do not apply to engines installed on vessels
constructed prior to January 1, 2021, if they are of less than 500
gross tons, of 24 meters or over in length, and have been designed
and used solely for recreational purposes. We anticipate incurring
costs at each stage of implementation on all these areas. Currently
we are compliant in all our vessels. Additionally, amendments to
Annex II, which strengthen discharge requirements for cargo
residues and tank washings in specified sea areas (including North
West European waters, Baltic Sea area, Western European waters and
Norwegian Sea), came into effect in January 2021.
Greenhouse Gas Emissions
In February 2005, the Kyoto Protocol to the United Nations
Framework Convention on Climate Change entered into force. Pursuant
to the Kyoto Protocol, adopting countries are required to implement
national programs to reduce emissions of certain gases, generally
referred to as greenhouse gases, which are suspected of
contributing to global warming. Currently, the greenhouse gas
emissions from international shipping do not come under the Kyoto
Protocol (this task having been delegated to the IMO). In December
2009, more than 27 nations, including the United States, entered
into the Copenhagen Accord. The Copenhagen Accord is non-binding,
but is intended to pave the way for a comprehensive, international
treaty on climate change. On December 12, 2015 the Paris Agreement
was adopted by 195 countries. The Paris Agreement deals with
greenhouse gas emission reduction measures and targets from 2020 in
order to limit the global temperature increases above
pre-industrial levels to well below 2˚ Celsius. Although shipping
was ultimately not included in the Paris Agreement, it is expected
that the adoption of the Paris Agreement may lead to regulatory
changes in relation to curbing greenhouse gas emissions from
shipping. The Paris Agreement has been ratified by a large number
of countries and entered into force on November 4, 2016. The United
States rejoined the Paris Agreement in February 2021.
In July 2011 the IMO adopted regulations imposing technical and
operational measures for the reduction of greenhouse gas emissions.
These new regulations formed a new chapter in Annex VI of MARPOL
and became effective on January 1, 2013. The new technical and
operational measures include the “Energy Efficiency Design Index,”
which is mandatory for newbuilding vessels, and the “Ship Energy
Efficiency Management Plan,” which is mandatory for all vessels. In
October 2016 the MEPC adopted updated guidelines for the
calculation of the Energy-Efficiency Design Index. In addition, the
IMO is evaluating various mandatory measures to reduce greenhouse
gas emissions from international shipping, which may include
market-based instruments or a carbon tax. In October 2016, the IMO
adopted a mandatory data collection system under which vessels of
5,000 gross tonnage and above are to collect fuel consumption data
and to report the aggregated data to their flag state at the end of
each calendar year. The new requirements entered into force on
March 1, 2018. In April 2018, the MEPC adopted an initial strategy
on the reduction of greenhouse gas emissions from ships, which
envisages a reduction in total greenhouse gas emissions from
international shipping by at least 50% by 2050 compared to
2008.
IMO’s MEPC 76 adopted amendments to Annex VI that will require
ships to reduce their greenhouse gas emissions; effective January
2023, the Revised MARPOL Annex VI includes requirements for ships
to calculate their Energy Efficiency Existing Ship Index, or
“EEXI,” following technical means to improve their energy
efficiency and to establish their annual operational carbon
intensity indicator and rating, or “CII.” MEPC 76 also adopted
guidelines to support implementation of the amendments. The EEXI
measures apply to newbuild ships and all existing ships above 400
GT and CII requirements apply to all ships of 5000 GT or above.
This means that the first annual reporting will be completed in
2023, with the first rating awarded in 2024. The CII regulations
state that a ship rated D for three consecutive years, or E for one
year, will be required to submit a corrective action plan showing
how C or above will be achieved.
The EU adopted Regulation (EU) 2015/757 on the monitoring,
reporting and verification of carbon dioxide emissions from vessels
(or the MRV Regulation), which was published in the Official
Journal on May 19, 2015 and entered into force on July 1, 2015 (as
amended by Regulation (EU) 2016/2071). The MRV Regulation applies
to all vessels over 5,000 gross tonnage (except for a few types,
such as, amongst others, warships and fish catching or fish
processing vessels), irrespective of flag, in respect of carbon
dioxide emissions released during intra-EU voyages and EU incoming
and outgoing voyages. The first reporting period commenced on
January 1, 2018. The monitoring, reporting and verification system
adopted by the MRV Regulation was the precursor to a market-based
mechanism to be adopted in the future (see below).
Furthermore, the 70th MEPC meeting in October 2016 adopted a
mandatory data collection system (DCS) which requires ships above 5
000 gross tonnes to report consumption data for fuel oil, hours
under way and distance travelled. Unlike the EU MRV (see below),
the IMO DCS covers any maritime activity carried out by ships,
including dredging, pipeline laying, ice-breaking, fish-catching
and off-shore installations. The system, adopted by resolution
MEPC.278(70), entered into force on 1 March 2018. Reporting
commenced with the year 2019. The Ship Energy Efficiency Management
Plans of all ships covered by the IMO DCS must include a
description of the methodology for data collection and reporting.
After each calendar year, the aggregated data are reported to the
flag state. If the data have been reported in accordance with the
requirements, the flag state issues a statement of compliance to
the ship. Flag states subsequently transfer this data to an IMO
ship fuel oil consumption database, which is part of the Global
Integrated Shipping Information System (GISIS) platform. IMO will
then produce annual reports, summarising the data collected. Thus,
currently, data related to the GHG emissions of ships above 5 000
gross tonnes calling at ports in the European Economic Area (EEA)
must be reported in two separate, but largely overlapping, systems:
the EU MRV – which applies since 2018 – and the IMO DCS – which
applies since 2019. The proposed revision of Regulation (EU)
2015/757 adopted on 4 February 2019 aims to align and facilitate
the simultaneous implementation of the two systems however it is
still not clear when the proposal will be adopted.
In the United States, the U.S. Environmental Protection Agency, or
EPA, issued an “endangerment finding” regarding greenhouse gases
under the Clean Air Act. While this finding in itself does not
impose any requirements on our industry, it authorizes the EPA to
regulate directly greenhouse gas emissions through a rule-making
process. Any passage of new climate control legislation or other
regulatory initiatives by the IMO, EU, the United States or other
countries or states where we operate that restrict emissions of
greenhouse gases could have a significant financial and operational
impact on our business through increased compliance costs or
additional operational restrictions that we cannot predict with
certainty at this time.
Anti-Fouling Requirements
In 2001, the IMO adopted the International Convention on the
Control of Harmful Anti-fouling Systems on Ships, or the
Anti-fouling Convention. The Anti-fouling Convention, which entered
into force in September 2008, prohibits and/or restricts the use of
organotin compound coatings to prevent the attachment of mollusks
and other sea life to the hulls of vessels. Vessels of over 400
gross tons engaged in international voyages must obtain an
International Anti-Fouling System Certificate and undergo a survey
before the vessel is put into service or before the Anti-fouling
System Certificate is issued for the first time and when the
anti-fouling systems are altered or replaced.
In 2023, amendments to the Anti-fouling Convention will come into
effect and will include controls on the biocide cybutryne; ships
shall not apply or re-apply anti-fouling systems containing this
substance from January 1, 2023. MEPC 76 adopted amendments to the
Anti-fouling Convention to include controls on the biocide
cybutryne; ships shall not apply or re-apply anti-fouling systems
containing that substance starting January 1, 2023. The amendments
require ships to remove this substance, or apply a coating to
anti-fouling systems with this substance, at the next scheduled
renewal of the anti-fouling system after January 1, 2023.
Other International Regulations to Prevent Pollution
In addition to MARPOL, other more specialized international
instruments have been adopted to prevent different types of
pollution or environmental harm from vessels.
In February 2004, the IMO adopted an International Convention for
the Control and Management of Ships’ Ballast Water and Sediments,
or the BWM Convention. The BWM Convention, which entered into force
on September 8, 2017, aims to prevent the spread of harmful aquatic
organisms from one region to another, by establishing standards and
procedures for the management and control of vessels’ ballast water
and sediments. The BWM Convention’s implementing regulations
require vessels to conduct ballast water management in accordance
with the standards set out in the convention, which include
performance of ballast water exchange in accordance with the
requirements set out in the relevant regulation and the gradual
phasing in of a ballast water performance standard which requires
ballast water treatment and the installation of ballast water
treatment systems on board the vessels. Under the BWM Convention,
vessels are required to implement a Ballast Water and Sediments
Management Plan, carry a Ballast Water Record Book and an
International Ballast Water Management Certificate. Pursuant to the
BWM Convention amendments that entered into force in October 2019,
ballast water management systems (“BWMSs”) installed on or after
October 28, 2020 shall be approved in accordance with BWMS Code,
while BWMSs installed before October 23, 2020 must be approved
taking into account guidelines developed by the IMO or the BWMS
Code. Additionally, many countries already regulate the discharge
of ballast water carried by vessels from country to country to
prevent the introduction of invasive and harmful species via such
discharges. The U.S., for example, requires vessels entering its
waters from another country to conduct mid-ocean ballast exchange,
or undertake some alternate measure, and to comply with certain
reporting requirements. Ships sailing in U.S. waters are required
to employ a type-approved BWMS which is compliant with USCG
regulations. The U.S. Coast Guard has approved a number of BWMS.
Amendments to the BWM Convention concerning commissioning testing
of BWMS became effective in June 2022.
The Hong Kong International Convention for the Safe and
Environmentally Sound Recycling of Ships adopted by the IMO in
2009, or the Recycling Convention, deals with issues relating to
ship recycling and aims to address the occupational health and
safety, as well as environmental risks relating to ship recycling.
It contains regulations regarding the design, construction,
operation, maintenance and recycling of vessels, as well as
regarding their survey and certification to verify compliance with
the requirements of the Recycling Convention. The Recycling
Convention, amongst other things, prohibits and/or restricts the
installation or use of hazardous materials on vessels and requires
vessels to have on board an inventory of hazardous materials
specific to each vessel. It also requires ship recycling facilities
to develop a ship-recycling plan for each vessel prior to its
recycling. Parties to the Recycling Convention are to ensure that
ship-recycling facilities are designed, constructed and operated in
a safe and environmentally sound manner and that they are
authorized by competent authorities after verification of
compliance with the requirements of the Recycling Convention. The
Recycling Convention (which is not effective yet) is to enter into
force 24 months after a specified minimum number of states with a
combined gross tonnage and maximum annual recycling volume during
the preceding 10 years have ratified it.
A MARPOL regulation and the International Convention on Oil
Pollution Preparedness, Response and Co-operation, 1990 also
require owners and operators of vessels to adopt Shipboard Oil
Pollution Emergency Plans. Another MARPOL regulation sets out
similar requirements for the adoption of shipboard marine pollution
emergency plans for noxious liquid substances with respect to
vessels carrying such substances in bulk. Periodic training and
drills for response personnel and for vessels and their crews are
required.
European Union Regulations
European regulations in the maritime sector are in general based on
international law most of which were promulgated by the IMO and
then adopted by the Member States. However, since the Erika
incident in 1999, when the Erika broke in two off the coast
of France while carrying heavy fuel oil, the European Union (or EU)
has become increasingly active in the field of regulation of
maritime safety and protection of the environment. It has been the
driving force behind a number of amendments of MARPOL (including,
for example, changes to accelerate the timetable for the phase-out
of single hull tankers, and prohibiting the carriage in such
tankers of heavy grades of oil), and if dissatisfied either with
the extent of such amendments or with the timetable for their
introduction it has been prepared to legislate on a unilateral
basis. In some instances where it has done so, international
regulations have subsequently been amended to the same level of
stringency as that introduced in the EU, but the risk is well
established that EU regulations (and other jurisdictions) may from
time to time impose burdens and costs on shipowners and operators
which are additional to those involved in complying with
international rules and standards.
In some areas of regulation the EU has introduced new laws without
attempting to procure a corresponding amendment of international
law. Notably, it adopted in 2005 a directive on ship-source
pollution (which was amended in 2009), imposing criminal sanctions
for discharges of oil and other noxious substances from vessels
sailing in its waters, irrespective of their flag not only where
such pollution is caused by intent or recklessness (which would be
an offense under MARPOL), but also where it is caused by “serious
negligence.” The directive could therefore result in criminal
liability being incurred in circumstances where it would not be
incurred under international law. Experience has shown that in the
emotive atmosphere often associated with pollution incidents,
retributive attitudes towards vessel interests have found
expression in negligence being alleged by prosecutors and found by
courts on grounds which the international maritime community has
found hard to understand. Moreover, there is skepticism that the
notion of “serious negligence” is likely to prove any narrower in
practice than ordinary negligence. Criminal liability for a
pollution incident could not only result in us incurring
substantial penalties or fines but may also, in some jurisdictions,
facilitate civil liability claims for greater compensation than
would otherwise have been payable.
The EU has also adopted legislation (Directive 2009/16/EC on Port
State Control, as subsequently amended) which requires the Member
States to refuse access to their ports to certain sub-standard
vessels according to various factors, such as the vessel’s
condition, flag and number of previous detentions within certain
preceding periods; creates obligations on the part of EU member
port states to inspect minimum percentages of vessels using their
ports annually; and provides for increased surveillance of vessels
posing a high risk to maritime safety or the marine environment. If
deficiencies are found that are clearly hazardous to safety, health
or the environment, the state is required to detain the vessel or
stop loading or unloading until the deficiencies are addressed.
Member states are also required to implement their own separate
systems of proportionate penalties for breaches of these
standards.
Commission Regulation (EU) No 802/2010, which was adopted by the
European Commission in September 2010, as part of the
implementation of the Port State Control Directive and came into
force on January 1, 2011, as subsequently amended by
Regulation 1205/2012 of December 14, 2012, introduced a ranking
system (published on a public website and updated daily) displaying
shipping companies operating in the EU with the worst safety
records. The ranking is judged upon the results of the technical
inspections carried out on the vessels owned by a particular
shipping company. Those shipping companies that have the most
positive safety records are rewarded by being subjected to fewer
inspections, whilst those with the most safety shortcomings or
technical failings recorded upon inspection are to be subjected to
a greater frequency of official inspections of their vessels.
By Directive 2009/15/EC of April 23, 2009 (on common rules and
standards for ship inspection and survey organizations and for the
relevant activities of maritime administrations) as amended by
Directive 2014/111/EU of December 17, 2014, the European Union has
established measures to be followed by the Member States for the
exercise of authority and control over classification societies,
including the ability to seek to suspend or revoke the authority of
classification societies that are negligent in their duties.
The EU has also adopted legislation requiring the use of low
sulphur fuel. Under Council Directive 1999/32/EC as subsequently
amended, from January 1, 2015, vessels have been required to burn
fuel with a sulphur content not exceeding 0.1% while within EU
member states’ territorial seas, exclusive economic zones and
pollution control zones falling within sulphur oxide (SOx) Emission
Control Areas (or SECAs), such as the Baltic Sea and the North Sea,
including the English Channel. Further sea areas may be designated
as SECAs in the future by the IMO in accordance with MARPOL Annex
VI. Directive 1999/32/EC was repealed and codified by 2016/802/EU
to align with the revised Annex VI.
Regulation (EU) 2015/757 of the European Parliament and of the
Council of 29 April 2015 ( amended by Regulation (EU) 2016/2071
with respect to methods of calculating, inter alia, emission and
consumption) governs the monitoring, reporting and verification of
carbon dioxide emissions from maritime transport, and, subject to
some exclusions, requires companies with ships over 5,000 gross
tonnage to monitor and report carbon dioxide emissions annually,
which may cause us to incur additional expenses. As of January
2019, large ships calling at EU ports have been required to collect
and publish data on carbon dioxide emissions and other information.
The system entered into force on 1 March 2018.
July 2020 saw the European Parliament’s Committee on Environment,
Public Health and Food Safety vote in favor of the inclusion of
vessels of 5000 gross tons and above in the EU Emissions Trading
System (in addition to voting for a revision to the monitoring,
reporting and verification of CO2 emissions). In September 2020,
the European Parliament adopted the proposal from the European
Commission to amend the regulation on monitoring carbon dioxide
emissions from maritime transport.
On July 14, 2021, the European Commission published a package of
draft proposals as part of its ‘Fit for 55’ environmental
legislative agenda and as part of the wider EU Green Deal growth
strategy. The Proposals are not yet in final form and may be
subject to amendment. There are two key initiatives relevant to
maritime arising from the Proposals: (a) a bespoke emissions
trading scheme for maritime (Maritime ETS) which is due to commence
in 2024 and which is to apply to all ships above a gross tonnage of
5000; and (b) a FuelEU draft regulation which seeks to require all
ships above a gross tonnage of 5000 to carry on board a ‘FuelEU
certificate of compliance’ from 30 June 2025 as evidence of
compliance with the limits on the greenhouse gas intensity of the
energy used on-board by a ship and with the requirements on the use
of on-shore power supply (OPS) at berth. More specifically,
Maritime ETS is to apply gradually over the period from 2024-2026.
The cap under the ETS would be set by taking into account EU MRV
system emissions data for the years 2018 and 2019, adjusted, from
year 2021 and is to capture 100% of the emissions from intra-EU
maritime voyages; 100% of emissions from ships at berth in EU
ports; and 50% of emissions from voyages which start or end at EU
ports (but the other destination is outside the EU). More recent
proposed amendments signal that 100% of non-EU emissions may be
caught if the IMO does not introduce a global market-based measure
by 2028. Furthermore, the proposals envisage that all maritime
allowances would be auctioned and there will be no free allocation.
Whilst the FuelEU Maritime Regulation is still being negotiated,
Maritime ETS deal was reached in December 2022 and the final legal
text is expected to be published in the coming months.
Concerned at the lack of progress in satisfying the conditions
needed to bring the Hong Kong Convention into force, the EU
published its own Ship Recycling Regulation 1257/2013 (SRR) in
2013, with a view to facilitating early ratification of the Hong
Kong Convention both within the EU and in other countries outside
the EU. As the Hong Kong Convention has yet to come into force, the
2013 regulations are vital to responsible ship recycling in the EU.
The SRR Regulation applies to vessels flying the flag of a Member
State and certain of its provisions apply to vessels flying the
flag of a third country calling at a port or anchorage of a Member
State. For example, when calling at a port or anchorage of a Member
State, the vessels flying the flag of a third country will be
required, amongst other things, to have on board an inventory of
hazardous materials which complies with the requirements of the
Regulation and to be able to submit to the relevant authorities of
that Member State a copy of a statement of compliance issued by the
relevant authorities of the country of their flag and verifying the
inventory. Pursuant to the Regulation, the EU Commission publishes
from time to time a European List of approved ship recycling
facilities meeting the requirements of the Regulation. On November
11, 2020 the EU Commission published an implementing decision which
included an updated version of the European List. Furthermore, the
SRR requires that, from 31 December 2020, all existing ships
sailing under the flag of EU member states and non-EU flagged ships
calling at an EU port or anchorage must carry on-board an Inventory
of Hazardous Materials (IHM) with a certificate or statement of
compliance, as appropriate. For EU-flagged vessels, a certificate
(either an Inventory Certificate or Ready for Recycling
Certificate) will be necessary, while non-EU flagged vessels will
need a Statement of Compliance.
Compliance Enforcement
The flag state, as defined by the United Nations Convention on the
Law of the Sea, has overall responsibility for the implementation
and enforcement of international maritime regulations for all
vessels granted the right to fly its flag. The “Shipping Industry
Guidelines on Flag State Performance” issued by the International
Chamber of Shipping in cooperation with other international
shipping associations evaluates flag states based on factors such
as port state control record, ratification of major international
maritime treaties, use of recognized organizations conducting
survey work on their behalf which comply with the IMO guidelines,
age of fleet, compliance with reporting requirements and
participation at IMO meetings. The vessels that we operate are
flagged in the Marshall Islands and Malta. Marshall Islands- and
Malta-flagged vessels have historically received a good assessment
in the shipping industry.
Noncompliance with the ISM Code or other IMO regulations may
subject the shipowner or bareboat charterer to increased liability
and, if the implementing legislation so provides, to criminal
sanctions, may lead to decreases in available insurance coverage
for affected vessels or may invalidate or result in the loss of
existing insurance cover and may result in the denial of access to,
or detention in, some ports. The U.S. Coast Guard and European
Union authorities have, for example, indicated that vessels not in
compliance with the ISM Code will be prohibited from trading in
U.S. and European Union ports, respectively. As of the date of this
annual report on Form 20-F, each of our vessels is ISM Code
certified. However, there can be no assurance that such certificate
will be maintained.
The IMO, the EU and other regulatory authorities continue to review
and introduce new regulations. It is impossible to predict what
additional regulations, if any, may be passed by the IMO, the EU
and/or other regulatory authorities and what effect, if any, such
regulations may have on our operations.
United States Environmental Regulations and Laws Governing Civil
Liability for Pollution
Environmental legislation in the United States merits particular
mention as it is in many respects more onerous than international
laws, representing a high-water mark of regulation with which
shipowners and operators must comply, and of liability likely to be
incurred in the event of non-compliance or an incident causing
pollution.
U.S. federal legislation, including notably the OPA, establishes an
extensive regulatory and liability regime for the protection and
cleanup of the environment from oil spills, including bunker oil
spills from dry bulk vessels as well as cargo or bunker oil spills
from tankers. The OPA affects all owners and operators whose
vessels trade in the United States, its territories and possessions
or whose vessels operate in United States waters, which includes
the United States’ territorial sea and its 200 nautical mile
exclusive economic zone. Under OPA, vessel owners, operators and
bareboat charterers are “responsible parties” and are jointly,
severally and strictly liable without regard to fault (unless the
spill results solely from the act or omission of a third party, an
act of God or an act of war) for all containment and clean-up costs
and other damages arising from discharges or substantial threats of
discharges of oil from their vessels. The OPA expressly allows the
individual states of the United States to impose their own
liability regimes for the discharge of petroleum products. In
addition to potential liability under the OPA as the relevant
federal legislation, vessel owners may in some instances incur
liability on an even more stringent basis under state law in the
particular state where the spillage occurred.
The OPA requires the owner or operator of any non-tank vessel of
400 gross tons or more that carries oil of any kind as a fuel for
main propulsion, including bunkers, to prepare and submit a
response plan for each vessel. The vessel response plans must
include detailed information on actions to be taken by vessel
personnel to prevent or mitigate any discharge or substantial
threat of such a discharge of oil from the vessel.
The OPA contains statutory caps on liability and damages; such caps
do not apply to direct clean-up costs. On December 23, 2022, the
USCG adjusted the limits of OPA liability for a non-tank vessel, to
the greater of $1,300 per gross ton or $1,076,000 (subject to
periodic adjustment for inflation). However, these limits of
liability do not apply if an incident was proximately caused by
violation of applicable United States federal safety, construction
or operating regulations or by a responsible party’s gross
negligence or willful misconduct, or if the responsible party fails
or refuses to report the incident or to cooperate and assist in
connection with oil removal activities.
In addition, the Comprehensive Environmental Response,
Compensation, and Liability Act, or CERCLA, which applies to the
discharge of hazardous substances (other than oil) whether on land
or at sea, contains a similar liability regime and provides for
cleanup, removal and natural resource damages. Liability under
CERCLA is limited to the greater of $300 per gross ton or $0.5
million for vessels not carrying hazardous substances as cargo or
residue (or the greater of $300 per gross ton or $5.0 million for
vessels carrying hazardous substances) unless the incident is
caused by gross negligence, willful misconduct or a violation of
certain regulations, in which case liability is unlimited.
We maintain, for each of our vessels, protection and indemnity
coverage against pollution liability risks in the amount of $1.0
billion per event. This insurance coverage is subject to
exclusions, deductibles and other terms and conditions. If any
liabilities or expenses fall within an exclusion from coverage, or
if damages from a catastrophic incident exceed the $1.0 billion
limitation of coverage per event, our cash flow, profitability and
financial position could be adversely impacted.
We believe our insurance and protection and indemnity coverage as
described above meets the requirements of the OPA.
The OPA requires owners and operators of all vessels over 300 gross
tons, even those that do not carry petroleum or hazardous
substances as cargo, to establish and maintain with the U.S. Coast
Guard evidence of financial responsibility sufficient to meet their
potential liabilities under the OPA. Under the regulations, vessel
owners and operators may evidence their financial responsibility by
showing proof of insurance, surety bond, self-insurance or
guaranty.
Under the OPA, an owner or operator of a fleet of vessels is
required only to demonstrate evidence of financial responsibility
in an amount sufficient to cover the vessel in the fleet having the
greatest limited liability under the OPA.
The U.S. Coast Guard’s regulations concerning certificates of
financial responsibility provide, in accordance with the OPA, that
claimants may bring suit directly against an insurer or guarantor
that furnishes the guaranty that supports the certificates of
financial responsibility. In the event that such insurer or
guarantor is sued directly, it is prohibited from asserting any
contractual defense that it may have had against the responsible
party and is limited to asserting those defenses available to the
responsible party and the defense that the incident was caused by
the willful misconduct of the responsible party.
The OPA specifically permits individual states to impose their own
liability regimes with regard to oil pollution incidents occurring
within their boundaries, and some states have enacted legislation
providing for unlimited liability for oil spills. In some cases,
states that have enacted such legislation have not yet issued
implementing regulations defining vessels owners’ responsibilities
under these laws. We intend to comply with all applicable state
regulations in the ports where our vessels call.
The United States Clean Water Act, or CWA, prohibits the discharge
of oil or hazardous substances in U.S. navigable waters and imposes
strict liability in the form of penalties for unauthorized
discharges. The CWA also imposes substantial liability for the
costs of removal, remediation and damages and complements the
remedies available under CERCLA. In 2015, the EPA expanded the
definition of “waters of the United States,” or WOTUS, thereby
expanding federal authority under the CWA. On December 30, 2022,
the EPA and U.S. Army Corps of Engineers announced the final
revised WOTUS rule, which was published on January 18, 2023, and
will become effective on March 20, 2023. The revised WOTUS rule
replaces the 2020 Navigable Waters protection Rule and generally
reflects an expansion of the CWA jurisdiction.
The EPA enacted rules governing the regulation of ballast water
discharges and other discharges incidental to the normal operation
of vessels within U.S. waters. Under the rules, commercial vessels
79 feet in length or longer (other than commercial fishing
vessels), or Regulated Vessels, are required to obtain a CWA permit
regulating and authorizing such normal discharges. This permit,
which the EPA had designated as the Vessel General Permit for
Discharges Incidental to the Normal Operation of Vessels, or VGP,
incorporated the then current U.S. Coast Guard requirements for
ballast water management as well as supplemental ballast water
requirements, including limits applicable to specific discharge
streams, such as deck runoff, bilge water and gray water. The
Vessel Incidental Discharge Act (or VIDA) was signed into law on
December 4, 2018, and establishes a new framework for the
regulation of vessel incidental discharges under the CWA. On
October 26, 2020, the EPA published a Notice of Proposed Rulemaking
for Vessel Incidental Discharge National Standards of Performance
under VIDA, and in November 2020, held virtual public meetings, but
a final rule has not been promulgated. The new regulations could
require the installation of new equipment. Under VIDA, all
provisions of the 2013 Vessel General Permit remain in force and
effect as currently written until the EPA publishes standards and
the corresponding U.S. Coast Guard regulations are published.
Vessels that are constructed after December 1, 2013, are subject to
the ballast water numeric effluent limitations. Several U.S.
states, including California, have added specific requirements to
the VGP and, in some cases, may require vessels to install ballast
water treatment technology to meet biological performance
standards.
Security Regulations
Since the terrorist attacks of September 11, 2001, there have been
a variety of initiatives intended to enhance vessel security. In
November 2002, the MTSA came into effect. To implement certain
portions of the MTSA, in July 2003, the U.S. Coast Guard issued
regulations requiring the implementation of certain security
requirements aboard vessels operating in waters subject to the
jurisdiction of the United States. Similarly, in December 2002,
amendments to SOLAS created a new chapter of the convention dealing
specifically with maritime security. The chapter imposes various
detailed security obligations on vessels and port authorities, most
of which are contained in the newly created ISPS Code. Among the
various requirements are:
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on-board installation of automatic
information systems to enhance vessel-to-vessel and vessel-to-shore
communications; |
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on-board installation of ship
security alert systems; |
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the development of vessel security
plans; and |
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compliance with flag state security
certification requirements. |
The U.S. Coast Guard regulations, intended to be aligned with
international maritime security standards, exempt non-U.S. vessels
from MTSA vessel security measures, provided such vessels have on
board a valid International Ship Security Certificate that attests
to the vessel’s compliance with SOLAS security requirements and the
ISPS Code. The vessels in our fleet that we operate have on board
valid International Ship Security Certificates and, therefore, will
comply with the requirements of the MTSA.
International Laws Governing Civil Liability to Pay Compensation
or Damages
Although the United States is not a party to the International
Convention on Civil Liability for Oil Pollution Damage of 1969, as
amended by the 1992 Protocol and further amended in 2000, or the
CLC (which has been adopted by the IMO and sets out a liability
regime in relation to oil pollution damage), many countries are
parties and have ratified either the original CLC or its 1992
Protocol. Under the CLC, a vessel’s registered owner is strictly
liable for pollution damage caused in the territorial waters or,
under the 1992 Protocol, in the exclusive economic zone or
equivalent area, of a contracting state by discharge of persistent
oil, subject to certain defenses and subject to the right to limit
liability. The original CLC applies to vessels carrying oil as
cargo and not in ballast, whereas the CLC as amended by the 1992
Protocol applies to tanker vessels and combination carriers (i.e.,
vessels which sometimes carry oil in bulk and sometimes other
cargoes) but only when the latter carry oil in bulk as cargo and
during any voyage following such carriage (to the extent they have
oil residues on board). Vessels trading with states that are
parties to these conventions must provide evidence of insurance
covering the liability of the owner. In jurisdictions where the CLC
has not been adopted, various legislative schemes or common law
govern, and liability is imposed either on the basis of fault or in
a manner similar to that of the convention. We believe that our
protection and indemnity insurance will cover the liability under
the regime adopted by the IMO.
The CLC is supplemented by the International Convention on the
Establishment of an International Fund for Compensation for Oil
Pollution Damage 1971, as amended (or the Fund Convention). The
purpose of the Fund Convention was the creation of a supplementary
compensation fund (the International Oil Pollution Compensation
Fund, or IOPC Fund) which provides additional compensation to
victims of a pollution incident who are unable to obtain adequate
or any compensation under the CLC.
In 2001, the IMO adopted the International Convention on Civil
Liability for Bunker Oil Pollution Damage, or the Bunker
Convention, which covers liability and compensation for pollution
damage caused in the territorial waters or the exclusive economic
zone or equivalent area of ratifying states by discharges of
“bunker oil.” The Bunker Convention defines “bunker oil” as “any
hydrocarbon mineral oil, including lubricating oil, used or
intended to be used for the operation or propulsion of the ship,
and any residues of such oil.” The Bunker Convention imposes strict
liability (subject to certain defenses) on the shipowner (which
term includes the registered owner, bareboat charterer, manager and
operator of the vessel). It also requires registered owners of
vessels over a certain size to maintain insurance for pollution
damage in an amount equal to the limits of liability under the
applicable national or international limitation regime (but not
exceeding the amount calculated in accordance with the Convention
on Limitation of Liability for Maritime Claims of 1976, as amended
by the 1996 Protocol to it, or the 1976 Convention). The Bunker
Convention entered into force in November 2008. In other
jurisdictions, liability for spills or releases of oil from
vessels’ bunkers continues to be determined by the national or
other domestic laws in the jurisdiction where the events or damages
occur.
The IMO’s International Convention on Liability and Compensation
for Damage in Connection with the Carriage of Hazardous and Noxious
Substances by Sea 1996, as superseded by the 2010 Protocol, or the
HNS Convention, sets out a liability regime for loss or damage
caused by hazardous or noxious substances carried on board a
vessel. These substances are listed in the convention itself or
defined by reference to lists of substances included in various IMO
conventions and codes. The HNS Convention covers loss or damage by
contamination to the environment, costs of preventive measures and
further damage caused by such measures, loss or damage to property
outside the ship and loss of life or personal injury caused by such
substances on board or outside the ship. It imposes strict
liability (subject to certain defenses) on the registered owner of
the vessel and provides for limitation of liability and compulsory
insurance. The owner’s right to limit liability is lost if it is
proved that the damage resulted from the owner’s personal act or
omission, committed with the intent to cause such damage, or
recklessly and with knowledge that such damage would probably
result. The HNS Convention has not entered into force yet.
Outside the United States, national laws generally provide for the
owner to bear strict liability for pollution, subject to a right to
limit liability under applicable national or international regimes
for limitation of liability. The most widely applicable
international regime limiting maritime pollution liability is the
1976 Convention. However, claims for oil pollution damage within
the meaning of the CLC or any Protocol or amendment to it are
expressly excepted from the limitation regime set out in the 1976
Convention. Rights to limit liability under the 1976 Convention are
forfeited where it is proved that the loss resulted from the
shipowner’s personal act or omissions, committed with the intent to
cause such loss, or recklessly and with knowledge that such loss
would probably result. Some states have ratified the 1996 Protocol
to the 1976 Convention, which provides for liability limits
substantially higher than those set forth in the original 1976
Convention to apply in such states. Finally, some jurisdictions are
not a party to either the 1976 Convention or the 1996 Protocol, and
some are parties to other earlier limitation of liability
conventions and, therefore, shipowners’ rights to limit liability
for maritime pollution in such jurisdictions may be different or
uncertain.
The Maritime Labour Convention
The International Labour Organization’s Maritime Labour Convention
was adopted in 2006 (“MLC 2006”). The basic aims of the MLC 2006
are to ensure comprehensive worldwide protection of the rights of
seafarers and to establish a level playing field for countries and
ship owners committed to providing decent working and living
conditions for seafarers, protecting them from unfair competition
on the part of substandard ships. The Convention was ratified on
August 20, 2012, and all our vessels have been certified, as
required. The MLC 2006 requirements have not had a material effect
on our operations.
C. Organizational Structure
Globus Maritime Limited is a holding company. As of the date of
this annual report, Globus wholly owns ten operational
subsidiaries, nine of which are Marshall Islands corporations and
one of which is incorporated in Malta. Nine of our operational
subsidiaries each own one vessel, and one of our operational
subsidiaries is our Manager and does not own any vessels. Our
Manager provides the technical and day-to-day commercial management
of our fleet and our financial reporting. Our Manager provides
consultancy services to an affiliated ship management company. Our
Manager maintains ship management agreements with each of our
vessel-owning subsidiaries. In addition, three additional Marshall
Islands subsidiaries have each entered into a shipbuilding contract
for the construction of a new vessel. See “Item 4.A. History and
Development of the Company.”
D. Property, Plants and Equipment
In 2016 our Manager entered into a rental agreement for 350 square
meters of office space for our operations within a building owned
by Cyberonica S.A., a related party to us at a monthly rate of
€10,360 with a lease period ending January 2, 2025. However, in
August 2021, our Manager entered into a new rental agreement for
902 square metres of office space for its operations within a
building owned by Cyberonica S.A. (a company controlled by our
chairman of the board) at a monthly rate of €26,000 with a lease
period ending August 2024, and the 2016 rental agreement was
terminated. In June 2022, we entered into a new rental agreement
with F.G. Europe (an affiliate of our chairman) for the same office
space, at the same rate of Euro 26,000 (absolute amount) and with
the same lease period ending of August 4, 2024. The previous rental
agreement with Cyberonica was terminated. We do not presently own
any real estate. As of December 31, 2022, we did not owe to F.G.
Europe any amount of back rent.
As of December 31, 2022 and 2021 we owned and operated a fleet
of nine vessels with an aggregate carrying value of $129.5 and
$130.7 million, respectively.
A vessel-by-vessel carrying value summary as of December 31,
2022 and 2021 follows:
Dry bulk Vessels |
Dwt |
Year Built |
Month and Year of
Acquisition |
Purchase Price (in millions of U.S.
Dollars) |
Carrying Value
as of December 31, 2022 (in millions of U.S. Dollars) |
Carrying Value
as of December 31, 2021 (in millions of U.S. Dollars) |
m/v River Globe |
53,627 |
2007 |
December 2007 |
57.5 |
7.6 |
7.4 |
m/v Sky Globe |
56,855 |
2009 |
May 2010 |
32.8 |
8.2 |
7.0 |
m/v Star Globe |
56,867 |
2010 |
May 2010 |
32.8 |
9.8 |
8.9 |
m/v Sun Globe |
58,790 |
2007 |
September 2011 |
30.3 |
9.3 |
8.3 |
m/v Moon Globe |
74,432 |
2005 |
June 2011 |
31.4 |
10.2 |
9.9 |
m/v Galaxy Globe |
81,167 |
2015 |
October 2020 |
18.4 |
16.7 |
17.4 |
m/v Diamond Globe |
82,027 |
2018 |
June 2021 |
27.0 |
25.0 |
26.3 |
m/v Power Globe |
80,655 |
2011 |
July 2021 |
16.2 |
16.0 |
17.2 |
m/v Orion Globe |
81,837 |
2015 |
November 2021 |
28.4 |
26.7 |
28.3 |
|
|
|
|
|
129.5 |
130.7 |
Other than our vessels and contracts to construct vessels, we do
not have any material property. Seven of our vessels are subject to
priority mortgages, which secure our obligations under the First
Citizens Bank & Trust Company (“CIT Loan Facility”) (formerly
known as CIT Bank N.A.). For more information on our vessels,
please see “Item 4.B. Business Overview.” For more
information on the shipbuilding contracts, see “Item 4.A.—History
and Development of the Company.”
On March 6, 2023, we, through a
wholly owned subsidiary, entered into an agreement to sell the
2007-built Sun Globe for a gross price of $14.1 million, before
commissions, to an unaffiliated third party, which sale is subject
to standard closing conditions. We expect the sale to occur in the
second quarter of 2023.
For further details regarding our
credit facilities, please see “Item 5.B. Liquidity and Capital
Resources — Indebtedness.”
We have no manufacturing capacity,
nor do we produce any products.
We believe that our existing credit
facility is adequate to meet our needs for the foreseeable
future.
Item 4A. Unresolved
Staff Comments
None.
Item
5. Operating and Financial Review and Prospects
The following discussion should be read in conjunction with our
consolidated financial statements and the accompanying notes
thereto included elsewhere in this annual report on Form 20-F. We
believe that the following discussion contains forward-looking
statements that involve risks and uncertainties. Actual results or
plan of operations could differ materially from those anticipated
by forward-looking information due to factors discussed under “Item
3.D. Risk Factors” and elsewhere in this annual report
on Form 20-F. Please see the section “Cautionary Note Regarding
Forward-Looking Statements” at the beginning of this annual report
on Form 20-F.
The following Management’s Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) is intended to help
the reader understand our results of operations and financial
condition. The MD&A is provided as a supplement to, and should
be read in conjunction with, our consolidated financial statements
and notes thereto included in “Item 18 – Financial
Statements.”
The MD&A generally discusses 2022 and 2021 items and
year-to-year comparisons between 2022 and 2021. Discussions of 2020
items and year-to-year comparisons between 2021 and 2020 that are
not included in this Form 20-F can be found in “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” in the Company’s Annual Report on Form 20-F for the
fiscal year ended December 31, 2021 filed with the SEC.
A. Operating Results
Overview and History
We are an integrated dry bulk shipping company, which began
operations in September 2006, providing marine transportation
services on a worldwide basis. We own, operate and manage a fleet
of dry bulk vessels that transport iron ore, coal, grain, steel
products, cement, alumina and other dry bulk cargoes
internationally. Following the conclusion of our initial public
offering on June 1, 2007, our common shares were listed on the AIM
under the ticker “GLBS.L.” On November 24, 2010, we redomiciled
into the Marshall Islands pursuant to the BCA and a resale
registration statement for our common shares was declared effective
by the SEC. Once the resale registration statement was declared
effective by the SEC, our common shares began trading on the Nasdaq
Global Market under the ticker “GLBS.” We delisted our common
shares from the AIM on November 26, 2010.
On April 11, 2016 our common shares began trading on the Nasdaq
Capital Market and ceased trading on the Nasdaq Global Market,
without a change in our ticker.
On July 29, 2010, we effected a 1-4 reverse stock split, with our
issued share capital resulting in 7,240,852 common shares of $0.004
each. On October 20, 2016, we effected a 1-4 reverse stock split
which reduced the number of outstanding common shares from
10,510,741 to 2,627,674 shares (adjustments were made based on
fractional shares). (These figures do not reflect the 1-10 reverse
stock split which occurred in October 2018 or the 1-100 reverse
stock split occurred in October 2020.) On October 15, 2018, we
effected a 1-10 reverse stock split which reduced the number of
outstanding common shares from 32,065,077 to 3,206,495 shares
(adjustments were made based on fractional shares). (These figures
do not reflect the 1-100 reverse stock split occurred in October
2020.)
In November 2018, we entered into a credit facility for up to $15
million with Firment Shipping Inc., a related party to us, for the
purpose of financing our general working capital needs, which
facility was amended and restated on May 8, 2020. The Firment
Shipping Credit Facility was unsecured and remained available until
its final maturity date at October 31, 2021, as amended. We have
the right to drawdown any amount up to $15 million or prepay any
amount in multiples of $100,000.
Any prepaid amount cannot be re-borrowed. Interest on drawn and
outstanding amounts is charged at 3.5% per annum until December 31,
2020, and thereafter at 7% per annum. No commitment fee is charged
on the amounts remaining available and undrawn. Interest is payable
the last day of a period of three months after the drawdown date,
after this period in case of failure to pay any sum due a default
interest of 2% per annum above the regular interest is charged. We
have also the right, in our sole option, to convert in whole or in
part the outstanding unpaid principal amount and accrued but unpaid
interest under this Agreement into common shares. The conversion
price shall equal the higher of (i) the average of the daily dollar
volume-weighted average sale price for the common stock on the
Principal Market on any trading day during the period beginning at
9.30 a.m. New York City time and ending at 4.00 p.m. over the
Pricing Period multiplied by 80%, where the “Pricing Period” equals
the ten consecutive trading days immediately preceding the date on
which the conversion notice was executed or (ii) $280.00. The
outstanding amount under the Firment Shipping Credit Facility was
fully repaid on July 27, 2020. This facility expired on its terms
on October 31, 2021.
On April 23, 2019, the Company converted the outstanding principal
amount of $3.1 million plus the accrued interest of $0.1 million
with a conversion price of $2.80 per share and issued 1,132,191 new
common shares on behalf of Firment Shipping Inc. in accordance with
the provisions of the Firment Shipping Credit Facility. This
conversion resulted in a gain of $0.1 million. As of December 31,
2020, $14.2 million was available to be drawn under the Firment
Shipping Credit Facility. (These figures do not reflect the 1-100
reverse stock split occurred in October 2020.)
On June 22, 2020, we completed a public offering of 342,857 units
of the Company. Each unit consisted of one common share and one
Class A Warrant to purchase one common share (a “Class A Warrant”),
for $35 per unit. At the time of the closing, the underwriters
exercised and closed a part of their over-allotment option, and
purchased an additional 51,393 common shares and Class A Warrants
to purchase 51,393 common shares.
The exercise price of the Class A Warrants is $35 per whole share
at any time after their original issuance up to the date that is
five years after their original issuance. If a registration
statement registering the issuance of the common shares underlying
the warrants under the Securities Act is not effective or
available, the holder may, in its sole discretion, elect to
exercise the warrant through a cashless exercise, in which case the
holder would receive upon such exercise the net number of common
shares determined according to the formula set forth in the
warrant. We may be required to pay certain amounts as liquidated
damages as specified in the warrants in the event it does not
deliver common shares upon exercise of the warrants within the time
periods specified in the warrants.
On June 30, 2020, we issued 458,500 of our common shares in a
registered direct offering and 458,500 of our June PP Warrants in a
concurrent private placement for a purchase price of $27 per common
share and June PP Warrant. No June PP Warrants have been exercised
as of the date hereof, and may be exercised at any time prior to
5:00 PM New York time on December 30, 2025. The exercise price of
each June PP Warrant was originally $30 per share, but in July 2020
was reduced to $18 per share.
On July 21, 2020, we issued 833,333 of our common shares in a
registered direct offering and 833,333 of our July PP Warrants to
purchase common shares in a concurrent private placement for a
purchase price of $18 per common share and July PP Warrant. No July
PP Warrants have been exercised as of the date hereof, and may be
exercised at any time prior to 5:00 PM New York time on January 21,
2026. The exercise price of each July PP Warrant is $18 per
share.
On December 9, 2020, we issued (a) 1,256,765 common shares, (b)
pre-funded warrants to purchase 155,000 common shares, and (c)
warrants (the “December 2020 Warrants”) to purchase 1,270,587
common shares. The pre-funded warrants have all been exercised. No
December 2020 Warrants have been exercised as of the date hereof,
and may be exercised at any time prior to 5:00 PM New York time on
June 9, 2026. The exercise price of the December 2020 Warrants was
reduced from $8.50 per share to $6.25 per share on January 29,
2021.
On January 29, 2021, we issued (a) 2,155,000 common shares, (b)
pre-funded warrants to purchase 445,000 common shares, and (c)
warrants (the “January 2021 Warrants”) to purchase 1,950,000 common
shares at an exercise price of $6.25 per share, which may be
exercised at any time prior to 5:00 PM New York time on July 29,
2026. The pre-funded warrants were all exercised. No January 2021
Warrants have been exercised as of the date hereof.
On February 17, 2021, we issued (a) 3,850,000 common shares, (b)
pre-funded warrants to purchase 950,000 common shares, and (c)
warrants (the “February 2021 Warrants”) to purchase 4,800,000
common shares at an exercise price of $6.25 per share, which may be
exercised at any time prior to 5:00 PM New York time on August 17,
2026. The pre-funded warrants have all been exercised. No February
2021 Warrants have been exercised as of the date hereof.
On June 29, 2021, we issued (a) 8,900,000 common shares, (b)
pre-funded warrants to purchase 1,100,000 common shares, and (c)
warrants (the “June 2021 Warrants”) to purchase 10,000,000 common
shares at an exercise price of $5.00 per share, which may be
exercised at any time prior to 5:00 PM New York time on December
29, 2026. The pre-funded warrants have all been exercised. No June
2021 Warrants have been exercised as the date hereof.
Each of the June PP Warrants, July PP Warrants, December 2020
Warrants, January 2021 Warrants, February 2021 Warrants and June
2021 Warrants is exercisable for a period of five and one-half
years commencing on the date of issuance. The warrants are
exercisable at the option of each holder, in whole or in part by
delivering to us a duly executed exercise notice with payment in
full in immediately available funds for the number of common shares
purchased upon such exercise. If a registration statement
registering the resale of the common shares underlying the private
placement warrants under the Securities Act is not effective or
available at any time after the six month anniversary of the date
of issuance of the private placement warrants, the holder may, in
its sole discretion, elect to exercise the private placement
warrant through a cashless exercise, in which case the holder would
receive upon such exercise the net number of common shares
determined according to the formula set forth in the warrant. If a
registration statement covering the issuance of the shares under
the Securities Act is not effective or available at any time after
the issuance of the December 2020 Warrants, January 2021 Warrants,
February 2021 Warrants and June 2021 Warrants, the holder may, in
its sole discretion, elect to exercise the such warrants through a
cashless exercise, in which case the holder would receive upon such
exercise the net number of common shares determined according to
the formula set forth in the warrant. If we do not issue the shares
in a timely fashion, each warrant contains certain liquidated
damages provisions.
From June 22, 2020 through the date hereof, we have issued 5,550
common shares pursuant to exercises of outstanding Class A
Warrants. As of the date of this annual report, no June PP
Warrants, July PP Warrants, December 2020 Warrants, January 2021
Warrants, February 2021 Warrants or June 2021 Warrants have been
exercised.
On October 21, 2020, we effected a 1-100 reverse stock split which
reduced the number of shares outstanding from 175,675,651 to
1,756,720 (adjustments were made based on fractional shares).
Unless otherwise noted, all historical share numbers, per share
amounts, including common share, preferred shares and warrants,
have been adjusted to give effect to this reverse split.
As of December 31, 2022, our issued and outstanding capital stock
consisted of 20,582,301 common shares and 10,300 Series Preferred
Shares.
On June 12, 2020, we entered into a stock purchase agreement and
issued 50 of our newly-designated Series B preferred shares, par
value $0.001 per share, to Goldenmare Limited, a company controlled
by our Chief Executive Officer, Athanasios Feidakis, in return for
$150,000, which amount was settled by reducing, on a
dollar-for-dollar basis, the amount payable by the Company to
Goldenmare Limited pursuant to the consultancy agreement.
In July 2020, we issued an additional 250 of our Series B preferred
shares to Goldenmare Limited in return for $150,000. The $150,000
was paid by reducing, on a dollar-for-dollar basis, the amount
payable by the Company to Goldenmare Limited pursuant to a
consultancy agreement. In addition, we increased the maximum voting
rights under the Series B preferred shares from 49.0% to
49.99%.
In March 2021, we issued an additional 10,000 of our Series B
preferred shares to Goldenmare Limited in return for $130,000,
which was settled by reducing, on a dollar-for-dollar basis, the
amount payable by the Company to Goldenmare Limited pursuant to a
consultancy agreement.
Each Series B preferred share entitles the holder thereof to 25,000
votes per share on all matters submitted to a vote of the
shareholders of the Company, provided however, that no holder of
Series B preferred shares may exercise voting rights pursuant to
Series B preferred shares that would result in the aggregate voting
power of any beneficial owner of such shares and its affiliates
(whether pursuant to ownership of Series B preferred shares, common
shares or otherwise) to exceed 49.99% of the total number of votes
eligible to be cast on any matter submitted to a vote of
shareholders of the Company. To the fullest extent permitted by
law, the holders of Series B preferred shares shall have no special
voting or consent rights and shall vote together as one class with
the holders of the common shares on all matters put before the
shareholders. The Series B preferred shares are not convertible
into common shares or any other security. They are not redeemable
and have no dividend rights. Upon any liquidation, dissolution or
winding up of the Company, the Series B preferred shares are
entitled to receive a payment with priority over the common
shareholders equal to the par value of $0.001 per share.
The Series B preferred shareholder has no other rights to
distributions upon any liquidation, dissolution or winding up of
the Company. All issued and outstanding Series B preferred shares
must be held of record by one holder, and the Series B preferred
shares shall not be transferred without the prior approval of our
Board of Directors. Finally, in the event the Company (i) declares
any dividend on its common shares, payable in common shares, (ii)
subdivides the outstanding common shares or (iii) combines the
outstanding common shares into a smaller number of shares, there
shall be a proportional adjustment to the number of outstanding
Series B preferred shares.
Each issuance of the Series B preferred shares to Goldenmare
Limited was approved by an independent committee of the Board of
Directors of the Company, which (in each instance) received a
fairness opinion from an independent financial advisor that the
transaction was for a fair value.
In May 2021, we entered into an agreement with First Citizens Bank
& Trust Company (formerly known as CIT Bank N.A.) for a loan
facility of $34.25 million bearing interest at LIBOR plus a margin
of 3.75% per annum. The proceeds of this financing were used to
repay the outstanding balance of the EnTrust Loan Facility.
In August 2022, we reached an agreement with First Citizens Bank
& Trust Company (formerly known as CIT Bank N.A.) for a deed of
accession, amendment and restatement of the CIT loan facility by
the accession of an additional borrower that increased the loan
facility from $34.25 million to $52.25 million, for the purpose of
financing vessel Orion Globe and for general corporate and working
capital purposes. The CIT Loan Facility (including the new top up
loan amount) is now further secured by a first preferred mortgage
over the vessel Orion Globe. The CIT Loan Facility bears interest
at Term SOFR plus a margin of 3.35%.
On April 29, 2022, we entered into a contract, through our
subsidiary Calypso Shipholding S.A., for the construction and
purchase of one fuel efficient bulk carrier with a carrying
capacity of about 64,000 dwt. The vessel will be built at Nihon
Shipyard Co. in Japan and is scheduled to be delivered during the
first half of 2024. The total consideration for the construction of
the vessel is approximately $37.5 million, which we intend to
finance with a combination of debt and equity. In May 2022 we paid
the first installment of $7.4 million and in March 2023 we paid the
second installment of $3.7 million.
On May 13, 2022, we entered into two contracts, through our
subsidiaries Daxos Maritime Limited and Paralus Shipholding S.A.,
for the construction and purchase of two fuel efficient bulk
carriers with a carrying capacity of about 64,000 dwt each. The
sister vessels will be built at Nantong COSCO KHI Ship Engineering
Co. in China with the first one scheduled to be delivered during
the third quarter of 2024 and the second one scheduled during the
fourth quarter of 2024. The total consideration for the
construction of both vessels is approximately $70.3 million, which
we intend to finance with a combination of debt and equity. In May
2022 we paid the first installment of $13.8 million and in November
2022 we paid the second installment of $6.9 million for both
vessels under construction.
On March 6, 2023, we, through a wholly owned subsidiary, entered
into an agreement to sell the 2007-built Sun Globe for a gross
price of $14.1 million, before commissions, to an unaffiliated
third party, which sale is subject to standard closing conditions.
We expect the sale to occur in the second quarter of 2023.
We intend to grow our fleet through timely and selective
acquisitions of modern vessels or acquisition through construction
of new vessels in a manner that we believe will provide an
attractive return on equity and will be accretive to our earnings
and cash flow based on anticipated market rates at the time of
purchase. There is no guarantee however, that we will be able to
find suitable vessels to purchase or that such vessels will provide
an attractive return on equity or be accretive to our earnings and
cash flow.
Our strategy is to generally employ our vessels on a mix of all
types of charter contracts, including bareboat charters, time
charters and spot charters. We may, from time to time, enter into
charters with longer durations depending on our assessment of
market conditions.
We seek to manage our fleet in a manner that allows us to maintain
profitability across the shipping cycle and thus maximize returns
for our shareholders. To accomplish this objective we have
historically deployed our vessels primarily on a mix of bareboat
and time charters (with terms of between one month and five years).
According to our assessment of market conditions, we have
historically adjusted the mix of these charters to take advantage
of the relatively stable cash flow and high utilization rates
associated with time charters or to profit from attractive spot
charter rates during periods of strong charter market
conditions.
The average number of vessels in our fleet for the year ended
December 31, 2022 was 9.0 for the year ended December 31, 2021
was 7.1, and for the year ended December 31, 2020 was 5.2.
Our operations are managed by our Glyfada, Greece-based wholly
owned subsidiary, Globus Shipmanagement Corp., our Manager, who
provides in-house commercial and technical management services to
our vessels and consultancy services to an affiliated
ship-management company. Our Manager enters into a ship management
agreement with each of our wholly owned vessel-owning subsidiaries
to provide such services and also entered into a consultancy
agreement with an affiliated ship-management company.
COVID-19
In March 2020, the World Health Organization (the “WHO”) declared
the outbreak of a novel coronavirus strain, or COVID-19, to be a
pandemic. The COVID-19 pandemic is having widespread, rapidly
evolving, and unpredictable impacts on global society, economies,
financial markets, and business practices. Over the course of the
pandemic, governments have implemented measures in an effort to
contain the virus, including social distancing, travel
restrictions, border closures, limitations on public gatherings,
working from home, supply chain logistical changes, and closure of
non-essential businesses. This led to a significant slowdown in
overall economic activity levels globally and a decline in demand
for certain of the raw materials that our vessels transport.
Dry bulk shipping rates, and therefore our voyage revenues, depend
to a significant degree on global economic activity levels and
specifically, economic activity in China. As the world’s second
largest economy, China is the largest importer of dry bulk
commodities globally, which drives demand for iron ore, coal and
other cargoes we carry. In particular, starting in the first
quarter of 2020, the COVID-19 pandemic resulted in reduced
industrial activity in China on which our business is substantially
dependent, with temporary closures of factories and other
facilities. The pandemic resulted in a contraction in China’s GDP
during the first quarter of 2020, with the most significant impact
occurring in January and February. Since March 2020, China’s
economy has substantially improved, as various economic indicators
such as fixed asset investment and industrial production rose as
compared to the previous months of the year, which led to a return
to GDP growth for the balance of 2020 and into 2021 and 2022.
Demand for the commodities that we carry continued to increase
through 2021, which positively impacted the rate our vessels earned
during that year. Economic activity levels in regions outside of
China declined significantly beginning in the first quarter of 2020
and continued into the second quarter of the year due to various
forms of nationwide shutdowns being imposed to prevent the spread
of COVID-19. Over time, several economies around the world
gradually eased measures taken earlier in 2020 resulting in
improved activity levels from earlier year lows and leading to a
demand rebound for 2021 and 2022. Although rebounding economies
around the world have had a positive impact on our revenues in
2021, our vessel operating expenses continued to be affected by
higher than anticipated costs related to COVID-19 disruptions. The
impact of COVID-19 on both our revenues and operating expenses
remains highly dependent on the trajectory of COVID-19, potential
variants, as well as vaccine distribution and efficacy, which
remains uncertain.
While China-led global economic activity levels have improved, the
outlook for China and the rest of the world remains uncertain and
is highly dependent on the path of COVID-19 and measures taken by
governments around the world in response to it. Dry bulk
commodities that are closely tied to global GDP growth and energy
demand, experienced reduced trade flows in 2020 due to lower end
user demand resulting from a decline in global economic activity.
As countries worldwide gradually reopened their respective
economies in mid-2020, trade flows and demand for raw materials
increased. Dry bulk spot freight rates rebounded from the 2020 lows
towards the end of the second quarter and remained firm in the
second half of 2020. In 2021, spot rates for Kamsarmax, Panamax,
and Supramax vessels reached levels not seen since 2010. In 2022
spot freight rates remained relatively high for the first half of
the year and then started falling. While vaccinations are rising in
developed countries, developing countries vaccination rates have
lagged. Global vaccination rates, vaccine effectiveness together
with the onset of variants, could impact the sustainability of this
recovery in addition to dry bulk specific seasonality described in
further detail below.
As our vessels trade commodities globally, we have taken measures
to safeguard our crew and work toward preventing the spread of
COVID-19. Crew members have received gloves, face masks, hand
sanitizer, goggles and handheld thermometers. Genco requires its
vessel crews to wear masks when in contact with other individuals
who board the vessel. We continue to monitor the Centers for
Disease Control and Prevention (the “CDC”) and the WHO guidelines
and are also limiting access of shore personnel boarding our
vessels. Specifically, no shore personnel with fever or respiratory
symptoms are allowed on board, and those that are allowed on board
are restricted to designated areas that are thoroughly cleaned
after their use. Face masks are also provided to shore personnel
prior to boarding a vessel. Precautionary materials are posted in
common areas to supplement safety training while personal hygiene
best practices are strongly encouraged on board.
We have implemented protocols with regard to crew rotations to keep
our crew members safe and healthy which includes polymerase chain
reaction (PCR) antibody testing as well as a 10-day quarantine
period prior to boarding a vessel.
Genco is enacting crew changes where permitted by regulations of
the ports and of the country of origin of the mariners, in addition
to strict protocols that safeguard our crews against COVID-19
exposure. Crew rotations have been challenging due to port and
travel restrictions globally, as well as promoting the health and
safety of both on and off signing crew members.
The COVID-19 pandemic and measures to contain its spread thus have
negatively impacted and could continue to impact regional and
global economies and trade patterns in markets in which we operate,
the way we operate our business, and the businesses of our
charterers and suppliers. These impacts may continue or become more
severe. Although we have successfully completed many crew changes
over the course of the pandemic to date, additional crew changes
could remain challenging due to COVID-19 related factors. The
extent to which the COVID-19 pandemic impacts our business going
forward will depend on numerous evolving factors we cannot reliably
predict, including the duration and scope of the pandemic;
governmental, business, and individuals’ actions in response to the
pandemic; and the impact on economic activity, including the
possibility of recession or financial market instability.
Conflicts
The conflict between Russia and Ukraine, which commenced in
February 2022, has disrupted supply chains and caused instability
and significant volatility in the global economy. Much uncertainty
remains regarding the global impact of the conflict in Ukraine, and
it is possible that such instability, uncertainty and resulting
volatility could significantly increase our costs and adversely
affect our business, including our ability to secure charters and
financing on attractive terms, and as a result, adversely affect
our business, financial condition, results of operation and cash
flows.
As a result of the conflict between Russia and Ukraine,
Switzerland, the United States, the European Union, the United
Kingdom and others have announced unprecedented levels of sanctions
and other measures against Russia and certain Russian entities and
nationals. Such sanctions against Russia may adversely affect our
business, financial condition, results of operation and cash flows.
For example, apart from the immediate commercial disruptions caused
in the conflict zone, escalating tensions and fears of potential
shortages in the supply of Russian crude caused the price of oil to
trade above $100 per barrel in March 2022. The ongoing conflict
could result in the imposition of further economic sanctions
against Russia, with uncertain impacts on the dry bulk market and
the world economy. While we do not have any Ukrainian or Russian
crew and our vessels currently do not sail in the Black Sea, it is
possible that the conflict in Ukraine, including any increased
shipping costs, disruptions of global shipping routes, any impact
on the global supply chain and any impact on current or potential
customers caused by the events in Russia and Ukraine, could
adversely affect our operations or financial performance. Due to
the recent nature of these activities, the full impact on our
business is not yet known.
IMO 2020 Compliance
On October 27, 2016, the Marine Environment Protection
Committee (“MEPC”) of the International Maritime Organization
(“IMO”) announced the ratification of regulations mandating
reduction in sulfur emissions from 3.5% currently to 0.5% as of the
beginning of 2020 rather than pushing the deadline back to 2025.
Accordingly, ships now have to reduce sulfur emissions, for which
the principal solutions are the use of exhaust gas cleaning systems
(“scrubbers”) or buying fuel with low sulfur content. If a vessel
is not retrofitted with a scrubber, it will need to use low sulfur
fuel, which is currently more expensive than standard marine fuel
containing 3.5% sulfur content. This increased demand for low
sulfur fuel resulted in an increase in prices for such fuel during
the beginning of 2020. Until the middle of 2022 bunker prices
increased until the middle of the year and then started decreasing
again..
None of our vessels currently have scrubbers. We will continue to
evaluate all options to comply with IMO regulations. Our fuel
costs and fuel inventories may increase as a result of these sulfur
emission regulations. Low sulfur fuel is more expensive than
standard marine fuel containing 3.5% sulfur content and
may become more expensive or difficult to obtain as a result of
increased demand. If the cost differential between low sulfur
fuel and high sulfur fuel is significantly higher than anticipated,
or if low sulfur fuel is not available at ports on certain trading
routes, it may not be feasible or competitive to operate vessels on
certain trading routes without installing scrubbers or without
incurring deviation time to obtain compliant fuel.
Lack of Historical Operating Data for Vessels Before their
Acquisition
Consistent with shipping industry practice, we were not and have
not been able obtain the historical operating data for the
secondhand vessels we purchase, in part because that information is
not material to our decision to acquire such vessels, nor do we
believe such information would be helpful to potential investors in
our common shares in assessing our business or profitability. We
generally purchase our vessels under a standardized agreement
commonly used in shipping practice, which, among other things,
provides us with the right to inspect the vessel and the vessel’s
classification society records. The standard agreement does not
provide us the right to inspect, or receive copies of, the
historical operating data of the vessel. Accordingly, such
information was not available to us. Prior to the delivery of a
purchased vessel, the seller typically removes from the vessel all
records, including past financial records and accounts related to
the vessel. Typically, the technical management agreement between a
seller’s technical manager and the seller is automatically
terminated and the vessel’s trading certificates are revoked by its
flag state following a change in ownership.
In addition, and consistent with shipping industry practice, we
treat the acquisition of vessels from unaffiliated third parties as
the acquisition of an asset rather than a business. We believe
that, under the applicable provisions of Rule 11-01(d) of
Regulation S-X under the Securities Act, the acquisition of our
vessels does not constitute the acquisition of a “business” for
which historical or pro forma financial information would be
provided pursuant to Rules 3-05 and 11-01 of Regulation S-X.
Although vessels are generally acquired free of charter, we may in
the future acquire some vessels with charters. Where a vessel has
been under a voyage charter, the vessel is usually delivered to the
buyer free of charter. It is rare in the shipping industry for the
last charterer of the vessel in the hands of the seller to continue
as the first charterer of the vessel in the hands of the buyer. In
most cases, when a vessel is under time charter and the buyer
wishes to assume that charter, the vessel cannot be acquired
without the charterer’s consent and the buyer entering into a
separate direct agreement, called a novation agreement, with the
charterer to assume the charter. The purchase of a vessel itself
does not transfer the charter because it is a separate service
agreement between the vessel owner and the charterer.
If the Company acquires a vessel subject to a time charter, it
amortizes the amount of the component that is attributable to
favorable or unfavorable terms relative to market terms and is
included in the cost of that vessel, over the remaining term of the
lease. The amortization is included in line “amortization of fair
value of time charter attached to vessels” in the income statement
component of the consolidated statement of comprehensive
income/(loss).
If we purchase a vessel and assume or renegotiate a related time
charter, we must take the following steps before the vessel will be
ready to commence operations:
|
Ø |
obtain the charterer’s consent to us as the new
owner; |
|
Ø |
obtain the charterer’s consent to a new technical
manager; |
|
Ø |
in some cases, obtain the charterer’s
consent to a new flag for the vessel; |
|
Ø |
arrange for a new crew for the vessel, and where
the vessel is on charter, in some cases, the crew must be approved
by the charterer; |
|
Ø |
replace all hired equipment on board, such as gas
cylinders and communication equipment; |
|
Ø |
negotiate and enter into new insurance contracts
for the vessel through our own insurance brokers; |
|
Ø |
register the vessel under a flag
state and perform the related inspections in order to obtain new
trading certificates from the flag state; |
|
Ø |
implement a new planned maintenance program for
the vessel; and |
|
Ø |
ensure that the new technical manager obtains new
certificates for compliance with the safety and vessel security
regulations of the flag state. |
The following discussion is intended to help you understand how
acquisitions of vessels affect our business and results of
operations.
Our business is comprised of the following main elements:
|
Ø |
employment and operation of our dry bulk vessels and management of
a vessel owned by a third party; and
|
|
Ø |
management of the financial, general and
administrative elements involved in the conduct of our business and
ownership of our dry bulk vessels. |
The employment and operation of our vessels and the vessel we
manage require the following main components:
|
Ø |
vessel maintenance and repair; |
|
Ø |
crew selection and training; |
|
Ø |
vessel spares and stores supply; |
|
Ø |
contingency response planning; |
|
Ø |
onboard safety procedures auditing; |
|
Ø |
vessel insurance arrangement; |
|
Ø |
vessel security training and security response
plans (ISPS); |
|
Ø |
obtaining ISM certification and audit for each
vessel within the six months of taking over a vessel; |
|
Ø |
vessel hire management; |
|
Ø |
vessel performance monitoring. |
The management of financial, general and administrative elements
involved in the conduct of our business and ownership of our
vessels requires the following main components:
|
Ø |
management of our financial resources, including
banking relationships, i.e., administration of bank loans and bank
accounts; |
|
Ø |
management of our accounting system and records
and financial reporting; |
|
Ø |
administration of the legal and regulatory
requirements affecting our business and assets; and |
|
Ø |
management of the relationships with our service
providers and customers. |
The principal factors that affect our profitability, cash flows and
shareholders’ return on investment include:
|
Ø |
rates and periods of hire; |
|
Ø |
levels of vessel operating expenses, including
repairs and drydocking; |
|
Ø |
purchase and sale of vessels; |
|
Ø |
management
fees for any third party ships that we manage; |
|
Ø |
fluctuations in foreign exchange
rates. |
Revenue
Overview
We generate revenues by charging our customers for the use of our
vessels to transport their dry bulk commodities. Under a time
charter, the charterer pays us a fixed daily charter hire rate and
bears all voyage expenses, including the cost of bunkers (fuel oil)
and port and canal charges. We remain responsible for paying the
chartered vessel’s operating expenses, including the cost of
crewing, insuring, repairing and maintaining the vessel, the costs
of spares and consumable stores, tonnage taxes and other
miscellaneous expenses. Under a bareboat charter, the charterer
pays us a fixed daily charter hire rate and bears all voyage
expenses, as well as the vessel’s operating expenses.
Spot charters can be spot voyage charters or spot time charters.
Spot voyage charters involve the carriage of a specific amount and
type of cargo on a load-port to discharge-port basis, subject to
various cargo handling terms, and the vessel owner is paid on a
per-ton basis. Under a spot voyage charter, the vessel owner is
responsible for the payment of all expenses including capital
costs, voyage expenses, such as port, canal and bunker costs. A
spot time charter is a contract to charter a vessel for an agreed
period of time at a set daily rate. Under spot time charters, the
charterer pays the voyage expenses.
Voyage revenues and management & consulting fee
income
Our voyage revenues are driven primarily by the number of vessels
in our fleet, the number of days during which our vessels operate
and the amount of daily hire rates that our vessels earn under
charters or on the spot market, which, in turn, are affected by a
number of factors, including:
|
Ø |
the duration of our charters; |
|
Ø |
the number of days our vessels are hired to
operate on the short-term or spot market; |
|
Ø |
our decisions relating to vessel acquisitions and
disposals; |
|
Ø |
the amount of time that we spend positioning our
vessels for employment; |
|
Ø |
the amount of time that our vessels spend in
drydocking undergoing repairs; |
|
Ø |
maintenance and upgrade work; |
|
Ø |
the age, condition and specifications of our
vessels; |
|
Ø |
levels of supply and demand in the dry bulk
shipping industry; and |
|
Ø |
other factors affecting short-term or spot market
charter rates for dry bulk vessels. |
In 2022, our voyage revenues increased when compared to 2021,
mainly due to the increase of our fleet from an average of 7.1
vessels in 2021 to 9.0 vessels in 2022. In 2021, our voyage
revenues increased when compared to 2020, mainly due to higher
daily time charter and spot rates earned on average from our
vessels on a year over year basis.
Employment of our Vessels
As of the date of this annual report on Form 20-F, we employed our
vessels as follows:
|
Ø |
m/v River Globe – on a time charter that
began in January 2023 and is expected to expire in April 2023, at a
gross rate of $10,500 per day. |
|
Ø |
m/v Sky Globe – on a time charter that
began in March 2023 and is expected to expire in the end of March
2023, at a gross rate of $24,000 per day. |
|
Ø |
m/v Star Globe – on a time charter that
began in March 2023 and is expected to expire in May 2023, at a
gross rate of $18,000 per day. |
|
Ø |
m/v Moon Globe – on a time charter that
began in March 2023 and is expected to expire in May 2023, at a
gross rate of $15,000 per day, and we were paid a bonus of $500,000
upon commencement of the charter. |
|
Ø |
m/v Sun Globe – on a time charter that
began in February 2023 and is expected to expire in April 2023, at
a gross rate of $6,650 per day for the first 65 days and at a gross
rate of $10,000 per day after April 20, 2023 and until the end of
the time charter. |
|
Ø |
m/v Galaxy Globe – on a time charter that
began in December 2022 and is expected to expire between September
to December 2023, at a gross rate of $ 104.5% of the average BPI-82
5TC INDEX as quoted by the Baltic Exchange per day. |
|
Ø |
m/v Diamond Globe – on a time charter that
began in October 2022 and is expected to expire in June 2024, at a
gross rate of 104% of the average BPI-82 5TC INDEX as quoted by the
Baltic Exchange per day. |
|
Ø |
m/v Power Globe – on a time charter that
began in March 2023 and is expected to expire in May 2023, at a
gross rate of $12,600 per day. |
|
Ø |
m/v Orion Globe – on a time charter that
began in January 2023 and is expected to expire in April 2023, at a
gross rate of $ 16,500 per day. |
Our charter agreements subject us to counterparty risk. In
depressed market conditions, charterers may seek to renegotiate the
terms of their existing charter parties or avoid their obligations
under those contracts. Should counterparties to one or more of our
charters fail to honor their obligations under their agreements
with us, we could sustain significant losses which could have a
material adverse effect on our business, financial condition,
results of operations, cash flows and ability to pay dividends.
Voyage Expenses
We charter our vessels primarily through time charters under which
the charterer is responsible for most voyage expenses, such as the
cost of bunkers (fuel oil), port expenses, agents’ fees, canal
dues, extra war risks insurance and any other expenses related to
the cargo.
Whenever we employ our vessels on a voyage basis (such as trips for
the purpose of geographically repositioning a vessel or trip(s)
after the end of one-time charter and up to the beginning of the
next charter), we incur voyage expenses that include port expenses
and canal charges and bunker (fuel oil) expenses.
If we charter our vessels on bareboat charters, the charterer will
pay for most of the voyage expenses and operating expenses.
As is common in the shipping industry, we have historically paid
commissions ranging from 1.25% to 2.50% of the total daily charter
hire rate of each charter to unaffiliated ship brokers and in-house
brokers associated with the charterers, depending on the number of
brokers involved with arranging the charter.
For the year ended December 31, 2022, commissions amounted to $0.9
million. For the year ended December 31, 2021, commissions amounted
to $0.6 million. For the year ended December 31, 2020, commissions
amounted to $0.2 million.
We believe that the amounts and the structures of our commissions
are consistent with industry practices.
These commissions are directly related to our revenues. We
therefore expect that the amount of total commissions will increase
if the size of our fleet grows as a result of additional vessel
acquisitions and employment of those vessels or if charter rates
increase.
Vessel Operating Expenses
Vessel operating expenses include costs for crewing, insurance,
repairs and maintenance, lubricants, spare parts and consumable
stores, statutory and classification tonnage taxes and other
miscellaneous expenses. We calculate daily vessel operating
expenses by dividing vessel operating expenses by ownership days
for the relevant time period excluding bareboat charter days.
Our vessel operating expenses have historically fluctuated as a
result of changes in the size of our fleet. In addition, a portion
of our vessel operating expenses is in currencies other than the
U.S. dollar, such as costs related to repairs, spare parts and
consumables. These expenses may increase or decrease as a result of
fluctuation of the U.S. dollar against these currencies.
We expect that crewing costs will increase in the future due to the
shortage in the supply of qualified sea-going personnel. In
addition, we expect that maintenance costs will increase as our
vessels age. Other factors that may affect the shipping industry in
general, such as the cost of insurance, may also cause our expenses
to increase. To the extent that we purchase additional vessels, we
expect our vessel operating expenses to increase accordingly.
Other factors beyond our
control, some of which may affect the shipping industry in general,
including, for instance, developments relating to market prices for
crewing, lubes, and insurance, may also cause these expenses to
increase. The impact of COVID-19 could result in potential
shortages or a lack of access to required spare parts for the
operation of our vessels, potential delays in any unscheduled
repairs, deviations for crew changes or increased costs to
successfully execute a crew change, which could lead to business
disruptions and delays. We expect that crew costs for the crew that
we utilize on our vessels will increase going forward due to
expected higher wages, as well as the impact of COVID-19
restrictions. In 2022 operating expenses were higher due to
industry-wide inflationary pressures and if these pressures
continue to exist during 2023 combined with higher
regulatory-related costs we expect higher costs in relation to
crew, spares and parts.
Depreciation
The cost of each of the Company’s vessels is depreciated on a
straight-line basis over each vessel’s remaining useful economic
life, after considering the estimated residual value of each
vessel, beginning when the vessel is ready for its intended use.
Management estimates that the useful life of new vessels is 25
years, which is consistent with industry practice. The residual
value of a vessel is the product of its lightweight tonnage and
estimated scrap value per lightweight ton. The residual values and
useful lives are reviewed at each reporting date and adjusted
prospectively, if appropriate. For the year 2020 we maintained the
scrap rate at the same level of $300/ton. During the fourth quarter
of 2021, we adjusted the scrap rate from $300/ton to $380/ton due
to the increased scrap rates worldwide. This resulted to a decrease
of approximately $145,000 of the depreciation charge included in
the consolidated statement of comprehensive income/(loss) for 2021.
During the fourth quarter of 2022, we adjusted the scrap rate from
$380/ton to $440/ton due to the increased scrap rates worldwide.
This resulted to a decrease of approximately $118,000 to the
depreciation charge included in the consolidated statement of
comprehensive income/(loss) for 2022.
We do not expect these assumptions to change significantly in the
near future. We expect that these depreciation charges will
increase if we acquire additional vessels.
Depreciation of Drydocking Costs
Approximately every 2.5 years, our vessels are required to be taken
out of service and removed from water (known as “drydocking”) for
major repairs and maintenance that cannot be performed while the
vessels are operating. The costs associated with the drydockings
are capitalized and depreciated on a straight-line basis over the
period between drydockings, to a maximum of 2.5 years. At the date
of acquisition of a vessel, we estimate the component of the cost
that corresponds to the economic benefit to be derived until the
first scheduled drydocking of the vessel under our ownership and
this component is depreciated on a straight-line basis over the
remaining period through the estimated drydocking date. We expect
that drydocking costs will increase as our vessels age and if we
acquire additional vessels.
Administrative Expenses
Our administrative expenses include payroll expenses, traveling,
promotional and other expenses associated with us being a public
company, which include the preparation of disclosure documents,
legal and accounting costs, director and officer liability
insurance costs and costs related to compliance. We expect that our
administrative expenses will increase as we enlarge our fleet.
Administrative Expenses Payable to Related Parties
Our administrative expenses payable to related parties include cash
remuneration of our executive officers and directors.
Share Based Payments
We operated until 2021 an equity-settled, share based compensation
plan. The value of the service received in exchange of the grant of
shares is recognized as an expense. The total amount to be expensed
over the vesting period, if any, was determined by reference to the
fair value of the share awards at the grant date. The relevant
expense was recognized in the income statement component of the
consolidated statement of comprehensive income/(loss), with a
corresponding impact in equity.
Impairment Loss and Reversal of Previously Recognized Impairment
Losses
We assess at each reporting date whether there is an indication
that a vessel that we own may be impaired. Such indicators are:
|
· |
Observable indications that the
vessel’s value has declined/ increased significantly |
|
· |
Significant adverse / favorable
changes in the technological, economic or legal environment
incurred or are expected to be incurred and negatively / positively
affect vessel’s value or decrease / increase its revenue generating
ability |
|
· |
Market interest rates of return on
investments have increased / decreased during the period, which
will result in increase /decrease of the discount rate. |
The vessel’s recoverable amount is estimated when events or changes
in circumstances indicate the carrying value may not be
recoverable. If such indication exists and where the carrying value
exceeds the estimated recoverable amounts, the vessel is written
down to its recoverable amount. The recoverable amount is the
greater of fair value less costs to sell and value-in-use. In
assessing value-in-use, the estimated future cash flows are
discounted to their present value using a discount rate that
reflects current market assessments of the time value of money and
the risks specific to the vessel. Impairment losses are recognized
in the consolidated statement of comprehensive income/(loss). A
previously recognized impairment loss is reversed only if there has
been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognized.
If that is the case, the carrying amount of the asset is increased
to its recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognized for the asset
in prior years. Such reversal is recognized in the consolidated
statement of comprehensive income/(loss). After such a reversal,
the depreciation charge is adjusted in future periods to allocate
the asset’s revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life. As of December 31,
2022 and 2021, no impairment indicators were identified for the
Company’s vessels as the vessels’ recoverable amounts exceeded
their carrying amounts.
We also assess at each reporting date whether there is any
indication that an impairment loss recognized in prior periods for
a vessel may no longer exist or may have decreased. As of December
31, 2022 and 2021, no indicators for reversal of impairment were
present and no reversal of previously recognized impairment losses
is required for the financial years ended December 31, 2022 and
2021.
Gain/(Loss) on Sale of Vessels
Gain or loss on the sale of vessels is the residual value remaining
after deducting from the vessels’ sale proceeds, the carrying value
of the vessels at the respective date of delivery to their new
owners and the total expenses associated with the sale.
Other (Expenses)/Income, Net
We include other operating expenses or income that is not
classified otherwise. It mainly consists of provisions for
insurance claims deductibles and refunds from insurance claims.
Interest Income from Bank Balances & Bank Deposits
We earn interest on the funds we have deposited with certain banks
as well as from short-term certificates of deposit.
Interest Expense and Finance Costs
We incur interest expense and financing costs in connection with
the indebtedness under our credit arrangements. We also incurred
financing costs in connection with establishing those arrangements,
which is included in our finance costs and amortization and
write-off of deferred finance charges. As of December 31, 2022 and
2021, we had $44.4 million and $31.8 million of indebtedness
outstanding under our then existing credit arrangements,
respectively. We incurred interest expense and financing costs
relating to our outstanding debt. We will incur additional interest
expense in the future on our outstanding borrowings and under
future borrowings to finance future acquisitions. Please see “Item
5.B. Liquidity and Capital Resources—Indebtedness” for further
information.
Gain/ (Loss) on Derivative Financial Instruments
Derivative financial instruments, including embedded derivative
financial instruments, are initially recognized at fair value on
the date a derivative contract is entered into and are subsequently
remeasured at fair value. Changes in the fair value of these
derivative instruments are recognized immediately in the income
statement component of the consolidated statement of comprehensive
income/(loss). These instruments are not designated for hedge
accounting.
Foreign Exchange Gains/ (Losses), Net
We generate substantially all of our revenues from the trading of
our vessels in U.S. dollars but incur a portion of our expenses in
currencies other than the U.S. dollar. We convert U.S. dollars into
foreign currencies to pay for our non-U.S. dollar expenses, which
we then hold on deposit until the date of each transaction.
Fluctuations in foreign exchange rates create foreign exchange
gains or losses when we mark-to-market these non-U.S. dollar
deposits. Because a portion of our expenses is payable in
currencies other than the U.S. dollar, our expenses may from time
to time increase relative to our revenues as a result of
fluctuations in exchange rates, which could affect the amount of
net income that we report in future periods.
Factors Affecting Our Results of Operations
We believe that the important measures for analyzing trends in our
results of operations consist of the following:
|
Ø |
Ownership days. We define
ownership days as the aggregate number of days in a period during
which each vessel in our fleet has been owned by us. Ownership days
are an indicator of the size of our fleet over a period and affect
both the amount of revenues and the amount of expenses that we
record during a period. |
|
Ø |
Available days. We define
available days as the number of our ownership days less the
aggregate number of days that our vessels are off-hire due to
scheduled repairs or repairs under guarantee, vessel upgrades or
special surveys. The shipping industry uses available days to
measure the number of days in a period during which vessels should
be capable of generating revenues. |
|
Ø |
Operating days. Operating days
are the number of available days in a period less the aggregate
number of days that the vessels are off-hire due to any reason,
including unforeseen circumstances but excluding days during which
vessels are seeking employment. The shipping industry uses
operating days to measure the aggregate number of days in a period
during which vessels generate revenues. |
|
Ø |
Fleet utilization. We
calculate fleet utilization by dividing the number of our operating
days during a period by the number of our available days during the
period. The shipping industry uses fleet utilization to measure a
company’s efficiency in finding suitable employment for its vessels
and minimizing the amount of days that its vessels are off-hire for
reasons other than scheduled repairs or repairs under guarantee,
vessel upgrades and special surveys. |
|
Ø |
Average number of vessels. We
measure average number of vessels by the sum of the number of days
each vessel was part of our fleet during a relevant period divided
by the number of calendar days in such period. |
|
Ø |
TCE rates. We define TCE rates
as our revenue less net revenue from our bareboat charters less
voyage expenses during a period divided by the number of our
available days during the period excluding bareboat charter days,
which is consistent with industry standards. TCE is a non-GAAP
measure. TCE rate is a standard shipping industry performance
measure used primarily to compare daily earnings generated by
vessels on time charters with daily earnings generated by vessels
on voyage charters, because charter hire rates for vessels on
voyage charters are generally not expressed in per day amounts
while charter hire rates for vessels on time charters generally are
expressed in such amounts. |
The following table reflects our ownership days, available days,
operating days, average number of vessels and fleet utilization for
the periods indicated.
|
|
Year Ended December 31, |
|
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
Ownership days |
|
3,285 |
|
|
2,594 |
|
|
1,894 |
|
|
1,825 |
|
|
1,825 |
Available days |
|
3,073 |
|
|
2,531 |
|
|
1,778 |
|
|
1,788 |
|
|
1,755 |
Operating days |
|
3,029 |
|
|
2,477 |
|
|
1,733 |
|
|
1,756 |
|
|
1,723 |
Fleet utilization |
|
98.5% |
|
|
97.9% |
|
|
97.5% |
|
|
98.2% |
|
|
98.2% |
Average number of vessels |
|
9 |
|
|
7.1 |
|
|
5.2 |
|
|
5.0 |
|
|
5.0 |
Daily time charter equivalent (TCE)
rate* |
$ |
18,227 |
|
$ |
16,627 |
|
$ |
5,210 |
|
$ |
7,564 |
|
$ |
9,213 |
*Amounts subject to rounding.
We utilize TCE because we believe it is a meaningful measure to
compare period-to-period changes in our performance despite changes
in the mix of charter types (i.e., voyage charters, spot charters
and time charters) under which our vessels may be employed between
the periods. Our management also utilizes TCE to assist them in
making decisions regarding employment of our vessels. We believe
that our method of calculating TCE is consistent with industry
standards and is determined by dividing revenue after deducting
voyage expenses, and net revenue from our bareboat charters, by
available days for the relevant period excluding bareboat charter
days. Voyage expenses primarily consist of brokerage commissions
and port, canal and fuel costs that are unique to a particular
voyage, which would otherwise be paid by the charter under a time
charter contract.
The following table reflects the Voyage Revenues to Daily Time
Charter Equivalent (“TCE”) Reconciliation for the periods
presented.
|
Year Ended December 31, |
|
(Expressed in Thousands of U.S. Dollars,
except number of days and daily
TCE rates) |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
Voyage revenues |
61,390 |
|
43,211 |
|
11,753 |
|
15,623 |
|
17,354 |
Less: Voyage expenses |
5,373 |
|
1,128 |
|
2,490 |
|
2,098 |
|
1,188 |
Net revenue |
56,017 |
|
42,083 |
|
9,263 |
|
13,525 |
|
16,166 |
Available days net of bareboat
charter days |
3,073 |
|
2,531 |
|
1,778 |
|
1,788 |
|
1,755 |
Daily TCE rate* |
18,227 |
|
16,627 |
|
5,210 |
|
7,564 |
|
9,213 |
*Amounts subject to rounding.
Results of Operations
The following is a discussion of our operating results for the year
ended December 31, 2022 compared to the year ended December 31,
2021. Variances are calculated on the numbers presented in the
discussion over operating results.
Year ended December 31, 2022 compared to the year ended
December 31, 2021
As of December 31, 2022 and 2021, our fleet consisted of nine (four
Supramaxes, four Kamsarmaxes and one Panamax) with an aggregate
carrying capacity of 626,257 dwt. During the years ended December
31, 2022 and 2021 we had an average of 9 and 7.1 dry bulk vessels
in our fleet, respectively.
For the year ended December 31, 2022, we had an operating income of
$23.6 million, while for the year ended December 31, 2021, we had
an operating income of $17.9 million.
Voyage revenues. Voyage revenues increased by $18.2 million,
or 42%, to $61.4 million in 2022, compared to $43.2 million in
2021. The increase is attributable to the increase of the average
number of vessels from 7.1 in 2021 to 9 in 2022 and the increase of
TCE from $16,627 in 2021 to $18,227 in 2022. In 2022, we had total
operating days of 3,029 and fleet utilization of 98.5%, compared to
2,477 operating days and a fleet utilization of 97.9% in 2021. The
foregoing fleet utilization percentage are based upon the available
days of each vessel, being the number of our ownership days less
the aggregate number of days that our vessels are off-hire due to
scheduled repairs or repairs under guarantee, vessel upgrades or
special surveys. We also had 3,285 and 2,594 ownership days in 2022
and 2021, respectively, which increase is primarily due to our
acquisition of additional vessels.
Voyage expenses. Voyage expenses increased by $4.3 million,
or 391%, to $5.4 million in 2022, compared to $1.1 million in 2021.
This increase is attributed to the longer periods travelling
seeking employment of the vessels in 2022 compared to 2021 and the
substantially more days of dry-docking repairs in 2022 compared to
2021. These two factors led to a higher bunker expense in 2022
compared to 2021.
Vessel operating expenses. Vessel operating expenses
increased by $4.2 million, or 30%, to $18 million in 2022, compared
to $13.8 million in 2021. The breakdown of our operating expenses
for the year 2022 was as follows:
Crew expenses |
50% |
Repairs and spares |
22% |
Insurance |
7% |
Stores |
13% |
Lubricants |
5% |
Other |
3% |
The increase is mainly attributed to the increase of the fleet from
7.1 vessels on average for 2021 to 9.0 vessels on average for 2022.
The increase is also partly attributed to the increase of the daily
operating expenses of the vessels. Daily vessel operating expenses
were $5,483 in 2022 compared to $5,325 in 2021, representing an
increase of 3%, mainly due to
industry-wide inflationary pressures.
Depreciation. Depreciation charge during the year ended
December 31, 2022 reached $5.6 million compared to $3.9 million
during 2021. This is mainly attributed to the increase of the fleet
from 7.1 vessels on average for 2021 to 9 vessels on average for
2022. During the fourth quarter of 2022, we adjusted the scrap rate
from $380/ton to $440/ton due to the increased scrap rates
worldwide. This resulted to a decrease of $118,000 to the
depreciation charge included in the consolidated statement of
comprehensive income/(loss) for 2022.
Depreciation of dry-docking costs. Depreciation of
dry-docking costs increased by $1.8 million, or 64%, to $4.6
million in 2022, compared to $2.8 million in 2021. This is due to
the increase of the fleet and because five of our vessels underwent
in 2022 dry dockings.
Administrative expenses. Administrative expenses increased
by $0.3 million or 11% to $2.9 million in 2022 from $2.6 million in
2021, this is mainly attributed to the increased Greek taxes paid
in 2022 amounting to $292 thousand compared to $45 thousand in
2021.
Administrative expenses payable to related parties.
Administrative expenses payable to related parties amounted to $1.4
million in 2022 and 2021.
Share-based payments. Share-based payments for 2021 amounted
to $40,000. On February 14, 2022 we changed the compensation of the
non-executive directors and in the aggregate, the annual service
fee for each of the directors (based on their current roles and
committee seats) would be $80,000 based on the annual service fees,
committee fees, and other similar fees. Following this change there
were no share-based payments for 2022.
Interest expense and finance costs. Interest expense and
finance costs decreased by $1 million, or 30%, to $2.3 million in
2022, compared to $3.3 million in 2021. This decrease is because
during the second quarter of 2021 other finance expenses include
approximately $0.6 million that were the loan prepayment fee and
expenses relating to the prepayment of EnTrust Loan Facility. Our
weighted average interest rate for 2022 was 5.58% compared to 5.69%
during 2021. Total borrowings outstanding as of December 31, 2022
amounted to $44.38 million compared to $31.75 million as of
December 31, 2021. Our sole current credit facility is denominated
in U.S. dollars.
Gain / (Loss) on derivative financial instruments.
Following the new loan facility with First Citizens Bank &
Trust Company (formerly known as CIT Bank N.A.), we entered into an
Interest Rate Swap agreement on May 10, 2021.
Following the deed of accession, amendment and restatement of the
CIT loan facility by the accession of an additional borrower in
order to increase the loan facility from a total of $34.25 million
to $52.25 million in August 2022, we also entered into a new swap
agreement in order for the additional borrower to enter into
hedging transactions (separately from those entered by the other
borrowers) with First Citizens Bank & Trust Company (formerly
known as CIT Bank N.A.).
For the year ended December 31, 2022, the Company recognized a
total gain of $2.5 million. The $2 million gain was in relation
with the initial swap agreement entered in 2021, approximately $1.6
million gain is according to the Interest Rate Swap valuation minus
approximately $0.4 million was the interest for the Interest Rate
Swap during the year ended December 31, 2022, and is included in
the consolidated statement of comprehensive income/(loss).
For the year ended December 31, 2022, the Company recognized a gain
of approximately $514,000 in relation with the new swap agreement
entered in 2022, approximately $493,000 of the gain is according to
the Interest Rate Swap valuation and approximately $21,000 was the
interest for the Interest Rate Swap during the year ended December
31, 2022, and is included in the consolidated statement of
comprehensive income/(loss).
For the year ended December 31, 2021, the Company recognized a gain
of approximately $181,000, approximately $325,000 gain is according
to the Interest Rate Swap valuation minus approximately $144,000
was the interest for the Interest Rate Swap during the year ended
December 31, 2021, and is included in the consolidated statement of
comprehensive income/(loss).
Inflation
Although inflation has had a moderate impact on our vessel
operating expenses and corporate overheads, management does not
consider inflation to be a significant risk to direct costs in the
current and foreseeable economic environment. It is anticipated
that insurance costs, which have risen over the last three years,
may well continue to rise over the next few years. Maritime
transportation is a specialized area and the number of vessels is
increasing. There will therefore be an increased demand for
qualified crew and this has and will continue to put inflationary
pressure on crew costs. However, in a shipping downturn, costs
subject to inflation can usually be controlled because shipping
companies typically monitor costs to preserve liquidity and
encourage suppliers and service providers to lower rates and prices
in the event of a downturn.
B. Liquidity and Capital Resources
Our primary sources of liquidity are cash flow from operations,
cash on hand, equity offerings and credit facility borrowings. We
currently use our funds primarily for the acquisition of vessels
generally, fleet renewal and repairs, drydocking for our vessels,
payment of dividends (if any), debt repayments and satisfying
working capital requirements as may be needed to support our
business. Our ability to continue to meet our liquidity needs is
subject to and will be affected by cash generated from operations,
the economic or business environment in which we operate, shipping
industry conditions, the financial condition of our customers,
vendors and service providers, our ability to comply with the
financial and other covenants of our indebtedness, and other
factors.
We believe, given our current cash holdings, if dry bulk shipping
rates do not decline significantly from current levels, our capital
resources, including cash anticipated to be generated within the
year, are sufficient to fund our operations for at least the next
twelve months. Such resources include unrestricted cash and cash
equivalents of $52.8 million as of December 31, 2022, which
compares to a minimum liquidity requirement under our CIT Loan
Facility of $6 million as of December 31, 2022. Given the
anticipated capital expenditures related to commitments under
shipbuilding contracts and drydockings during 2023 and 2024,
respectively, we anticipate continuing to have significant cash
expenditures. Refer to “—Capital Expenditures” below for further
details. However, if market conditions were to worsen significantly
due to the current COVID-19 pandemic or other causes, then our cash
resources may decline to a level that may put at risk our ability
to pay our lender and other creditors. In May 2021, we entered into
an agreement with First Citizens Bank & Trust Company (formerly
known as CIT Bank N.A.) for a loan facility of up to $34.25 million
bearing interest at LIBOR plus a margin of 3.75% per annum. The
proceeds of this financing were used to repay the outstanding
balance of the EnTrust Loan Facility.
In August 2022, we reached an agreement with First Citizens Bank
& Trust Company (formerly known as CIT Bank N.A.) for a deed of
accession, amendment and restatement of the CIT loan facility by
the accession of an additional borrower in order to increase the
loan facility from a total of $34.25 million to $52.25 million, by
a top up loan amount of $18 million for the purpose of financing
vessel Orion Globe and for general corporate and working capital
purposes of all the borrowers and Globus. The CIT loan facility
(including the new top up loan amount) is now further secured by a
first preferred mortgage over the vessel Orion Globe. Furthermore,
the loan facility bears interest at Term SOFR plus a margin 3.35%
for the whole CIT loan facility.
The mandatory debt repayments in 2023 under the CIT Loan Facility
are $6.5 million, and we have already paid $1.6 million of such
amount.
As of December 31, 2022, our CIT Loan Facility contained covenants
that require (1) a minimum loan to value ratio of 75% for the first
18 months of the CIT Loan Facility and thereafter 70% and (2) a
maximum leverage ratio of 0.75:1.00. If the values of our vessels
were to decline as a result of COVID-19 or otherwise, we may not
satisfy these requirements. If we do not satisfy these requirement,
we will need to post additional collateral or prepay outstanding
loans to bring us back into compliance, or we will need to seek
waivers, which may not be available or may be subject to
conditions.
In the future, we may require capital to fund acquisitions or to
improve or support our ongoing operations and debt structure,
particularly in light of economic conditions resulting from the
ongoing COVID-19 pandemic, the Russian/Ukraine conflict, and
general conditions in the dry bulk market. We may from time to time
seek to raise additional capital through equity or debt offerings,
selling vessels or other assets, pursuing strategic opportunities,
or otherwise. We may also from time to time seek to incur
additional debt financing from private or public sector sources,
refinance our indebtedness or obtain waivers or modifications to
our credit agreements to obtain more favorable terms, enhance
flexibility in conducting our business, or otherwise. We may also
seek to manage our interest rate exposure through hedging
transactions. We may seek to accomplish any of these independently
or in conjunction with one or more of these actions. However, if
market conditions are unfavorable, we may be unable to accomplish
any of the foregoing on acceptable terms or at all.
As of December 31, 2022, we were in compliance with all financial
covenants under the CIT Loan Facility.
As of December 31, 2022, we had approximately $6 million in
“restricted cash.” As of December 31, 2022, we had an aggregate
debt outstanding of $44.4 million, from the CIT Loan Facility.
Please see “–Cash Flows” below to see our cash position at December
31, 2022.
Please see “Item 5.B. Liquidity and Capital Resources—Indebtedness”
for further information about our loan agreements and credit
facilities.
Our primary uses of funds have been vessel operating expenses,
general and administrative expenses, expenditures incurred in
connection with ensuring that our vessels comply with international
and regulatory standards, financing expenses, installments under
construction contracts and repayments of bank loans.
Working capital, which is current assets, minus current
liabilities, amounted to approximately $45 million as of December
31, 2022 and to $37.8 million as of December 31, 2021. If we are
unable to satisfy our liquidity requirements, we may not be able to
continue as a going concern. Seven of our vessels are pledged as
collateral to the banks, and therefore if we were to sell one or
more of those vessels, the net proceeds of such sale would be used
first to repay the outstanding debt to which the vessel
collateralized, and the remainder, if any, would be for our use,
subject to the terms of our remaining loan and credit
arrangements.
Cash Flows
Cash and cash equivalents were $52.8 million in unrestricted bank
deposits as of December 31, 2022, and $45.2 million in unrestricted
bank deposits as of December 31, 2021.
Restricted cash that consist of cash pledged as collateral was $6
million at the end of 2022, and $5.2 million at the end of 2021. We
consider highly liquid investments such as bank time deposits with
an original maturity of three months or less to be cash
equivalents.
Net Cash Generated From / (Used In) Operating Activities
Net cash generated from operating activities in 2022 amounted to
$26.9 million compared to $20.8 million in 2021. The increase is
primarily attributable to an increase in the average number of
vessels of our fleet and the average TCE rates achieved by the
vessels in our fleet in 2022.
Net Cash Used In Investing Activities
Net cash used in investing activities was $29 million during the
year ended December 31, 2022, which was mainly attributable to the
advances paid for the three newbuildings during 2022.
Net cash used in investing activities was $72 million during the
year ended December 31, 2021, which was mainly attributable to the
purchase of Power Globe, Diamond Globe and Orion Globe in 2021.
Net Cash Generated From Financing Activities
Net cash generated from financing activities during the year ended
December 31, 2022 amounted to $9.7 million and consisted of $18
million proceeds from our new deed of accession, amendment and
restatement of the CIT loan facility reduced by $0.3 million
payment of financing costs, $1.6 million of interest paid, $5.4
million of indebtedness that we repaid, a $0.7 million increase of
pledged bank deposits and a $0.3 million repayment of lease
liability.
Net cash generated from financing activities during the year ended
December 31, 2021 amounted to $77.4 million and consisted of $89.6
million proceeds drawn from the issuance of share capital plus
$34.3 million proceeds from our new loan agreement reduced by $0.6
million payment of financing costs for CIT Loan Facility, $0.4
million of transaction costs that we paid for the issuance of new
common shares,, $2.6 million of interest paid, $39.5 million of
indebtedness that we prepaid under our former loan facility, a $3.1
million increase of pledged bank deposits and a $0.2 million
repayment of lease liability.
Please see Item 5.A. of our Form 20-F filed with the SEC on April
11, 2022 for a discussion of the year-to-year comparison between
2021 and 2020. Please see Item 5.B. of our Form 20-F filed with the
SEC on April 11, 2022 for a discussion of the liquidity and capital
resources that we had in 2021.
Indebtedness
We operate in a capital-intensive industry which requires
significant amounts of investment, and we fund a portion of this
investment through long-term bank debt.
As of December 31, 2022 and 2021, we and our vessel-owning
subsidiaries had outstanding borrowings under the CIT Loan Facility
of an aggregate of $44.4 million and $31.75 million,
respectively.
Firment Shipping Credit Facility
In November 2018, we entered into a credit facility for up to $15
million with Firment Shipping Inc., a related party to us, for the
purpose of financing our general working capital needs, which
facility was amended and restated on May 8, 2020. The Firment
Shipping Credit Facility was unsecured and remained available until
its final maturity date at October 31, 2021, as amended. We had the
right to drawdown any amount up to $15 million or prepay any amount
in multiples of $100,000. Any prepaid amount could have been
re-borrowed. Interest on drawn and outstanding amounts was charged
at 3.5% per annum until December 31, 2020, and thereafter at 7% per
annum. No commitment fee was charged on the amounts remaining
available and undrawn. Interest was payable the last day of a
period of three months after the drawdown date, after this period
in case of failure to pay any sum due a default interest of 2% per
annum above the regular interest was charged. We had also the
right, in our sole option, to convert in whole or in part the
outstanding unpaid principal amount and accrued but unpaid interest
under this Agreement into common shares. The conversion price would
have equaled the higher of (i) the average of the daily dollar
volume-weighted average sale price for the common stock on the
Principal Market on any trading day during the period beginning at
9.30 a.m. New York City time and ending at 4.00 p.m. over the
Pricing Period multiplied by 80%, where the “Pricing Period” equals
the ten consecutive trading days immediately preceding the date on
which the conversion notice was executed or (ii) $280.00.
The Firment Shipping Credit Facility required that Athanasios
Feidakis remain our Chief Executive Officer and that Firment
Shipping Inc. maintain at least a 40% shareholding in us, other
than due to actions taken by Firment Shipping Inc., such as sales
of shares. The Company obtained waivers from Firment Shipping Inc.
waiving this obligation in connection with the public offering on
June 22, 2020, the registered direct offerings on June 30, 2020,
July 21, 2020, December 7, 2020, January 29, 2021, February 17,
2021 and June 29, 2021, and the issuances of the Series B preferred
shares.
On July 27, 2020, the Company repaid the total outstanding
principal and interest of the Firment Shipping Credit Facility
amounting to approximately $863,000. On October 31, 2021, the
Firment Shipping Credit Facility expired in accordance with its
terms.
EnTrust Loan Facility
On June 24, 2019, the Company drew down $37 million and fully
prepaid the existing loan facilities with Hamburg Commercial Bank
AG (formerly known as HSH Nordbank AG) and Macquarie Bank
International Limited. The loan facility was in the names of
Devocean Maritime Ltd., Domina Maritime Ltd, Dulac Maritime S.A.,
Artful Shipholding S.A. and Longevity Maritime Limited as the
borrowers and is guaranteed by Globus. The loan facility bore
interest at LIBOR plus a margin of 8.50% (or 10.5% default
interest) for interest periods of three months. This loan facility
was referred to as EnTrust Loan Facility.
In March 2021, the Company prepaid $6.0 million of the Entrust loan
facility, which represented all amounts that would otherwise come
due during calendar year 2021 and on May 10, 2021, the Company
fully prepaid the balance of the EnTrust Loan facility.
CIT Loan Facility
In May 2021, we entered into a term loan facility with First
Citizens Bank & Trust Company (formerly known as CIT Bank
N.A.), relating to the refinancing of our ships, the River
Globe, Sky Globe, Star Globe, Moon Globe,
Sun Globe, and Galaxy Globe. The borrowers under the
CIT Loan Facility are Devocean Maritime Ltd., Domina Maritime Ltd,
Dulac Maritime S.A., Artful Shipholding S.A., Longevity Maritime
Limited and Serena Maritime Limited and the CIT Loan Facility is
guaranteed by Globus Maritime Limited.
The loan agreement was for the lesser of $34.25 million and 52.5%
of the aggregate market value of our ships. We drew an aggregate of
$34.25 million at closing and used a significant portion of the
proceeds to fully repay the amounts outstanding under our loan
agreement with EnTrust. We also entered into a swap agreement with
respect to LIBOR. We paid First Citizens Bank & Trust Company
(formerly known as CIT Bank N.A.) an upfront fee in the amount of
1.25% of the total commitment of the loan.
In August 2022, we reached an agreement with First Citizens Bank
& Trust Company (formerly known as CIT Bank N.A.) for a deed of
accession, amendment and restatement of the CIT loan facility by
the accession of an additional borrower, Salaminia Maritime
Limited, in order to increase the loan facility from a total of
$34.25 million to $52.25 million, by a top up loan amount of $18
million for the purpose of financing vessel Orion Globe and for
general corporate and working capital purposes. The CIT Loan
Facility (including the new top up loan amount) became further
secured by a first preferred mortgage over the vessel Orion Globe.
Furthermore, the CIT Loan Facility now bears interest at Term SOFR
plus a margin of 3.35% (or 5.35% default interest).
The CIT Loan Facility, as amended, consists of seven tranches,
which shall be repaid in consecutive quarterly installments with
the final installment due in May 2026, with each installment in an
aggregate amount of $1,625,000 as well as a balloon payment in an
aggregate amount of $21,625,000 due together.
The CIT Loan Facility may be prepaid. If the prepayment of any
tranche other than the tranche financing Orion Globe occurs on or
before May 10, 2023, the prepayment fee is 1% of the amount
prepaid, subject to certain exceptions. If the prepayment of the
tranche financing Orion Globe occurs on or before August 10, 2023,
the prepayment fee is 2% of the amount prepaid and thereafter until
August 10, 2024, the prepayment fee is 1% of the amount prepaid,
subject to certain exceptions. We cannot reborrow any amount of the
CIT Loan that is prepaid or repaid.
The CIT Loan Facility is secured by:
• First preferred mortgage over m/v River Globe, m/v Sky
Globe, m/v Star Globe, m/v Moon Globe, m/v Sun
Globe, m/v Galaxy Globe and m/v Orion Globe.
• Guarantee from Globus Maritime Limited and joint liability of the
seven vessel owning companies (each of which is a borrower under
the CIT Loan Facility).
• Shares pledges respecting each borrower.
• Pledges of bank accounts, a pledge of each borrower’s rights
under any interest rate hedging agreement in respect of the CIT
Loan Facility, a general assignment over each ship's earnings,
insurances and any requisition compensation in relation to that
ship, and an assignment of the rights of Globus Maritime with
respect to any indebtedness owed to it by the borrowers.
We are not permitted, without the written consent of CIT, to enter
into a charter the duration of which exceeds or is capable of
exceeding, by virtue of any optional extensions, 12 months.
The CIT Loan Facility contains various covenants requiring the
vessels owning companies and/or Globus Maritime Limited to, among
other things, ensure that:
|
· |
The
borrowers, must maintain a minimum liquidity at all times of not
less than $500,000 for each mortgaged ship. |
|
· |
A
minimum loan (including any exposure under a related hedging
agreement) to value ratio of 70%, except for the tranche financing
Orion Globe, for which for the first 18 months of the utilization
of that tranche including any exposure under a related hedging
agreement), a minimum loan to value ratio of 75% and thereafter
70%. |
|
· |
Each
borrower must maintain in its earnings account $150,000 in respect
of each ship then subject to a mortgage. |
|
· |
Globus Maritime Limited must maintain cash in an
amount of not less than $150,000 for each ship that it owns that is
not subject to a mortgage as part of the CIT Loan. |
|
· |
Globus Maritime Limited must have a maximum
leverage ratio of 0.75:1.00. |
|
· |
If
Globus Maritime Limited pays a dividend, subject to certain
exceptions, then the debt service coverage ratio (i.e., aggregate
EBITDA of Globus Maritime Limited for any period to the debt
service for such period) after such dividend and for the remain of
the CIT Loan Facility shall be at least 1.15:1.00. |
Each borrower must create a reserve fund in the reserve account to
meet the anticipated dry docking and special survey fees and
expenses for the relevant ship owned by it and (for certain ships)
the installation of ballast water treatment system on the ship
owned by it by maintaining in the reserve account a minimum credit
balance that may not be withdrawn (other than for the purpose of
covering the documented and incurred costs and expenses for the
next special survey of that ship). Amounts must be paid into this
reserve account quarterly, such that $1,200,000 is set aside by
each borrower for its ship’s special survey, except for Serena
Maritime Limited and Salaminia Maritime Limited, each of which is
required to set aside quarterly payments that aggregate to
$900,000.
No borrower shall incur or permit to be outstanding any financial
indebtedness except “Permitted Financial Indebtedness.”
“Permitted Financial Indebtedness” means:
(a) any financial
indebtedness incurred under the finance documents;
(b) the indebtedness under
the EnTrust loan, which has been repaid; and
(c) any financial
indebtedness (including permitted inter-company loans) that is
subordinated to all financial indebtedness incurred under the
finance documents pursuant to a subordination agreement or, in the
case of any permitted inter-company loans pursuant to the CIT Loan
Facility or otherwise and which is, in the case of any such
financial indebtedness of a borrower (other than financial
indebtedness arising out of any permitted inter-company loan), the
subject of subordinated debt security;
Globus Maritime Limited is prohibited from making dividends (other
than up to $500,000 annually on or in respect of its preferred
share) in cash or redeem or repurchase its shares unless there is
no event of default under the CIT Loan Facility, the net loan
(including any exposure under a related hedging agreement) to value
ratio is less than 60% before the making of the dividend and Globus
Maritime Limited is in compliance with the debt service coverage
ratio, and Globus Maritime Limited must prepay the CIT Loan
Facility in an equal amount of the dividend.
The CIT Loan Facility also prohibits certain changes of control,
including, among other things, the delisting of Globus from the
Nasdaq or another internationally recognized stock exchange, or the
acquisition by any person or group of persons (acting in concert)
of a majority of the shareholder voting rights or the ability to
appoint a majority of board members or to give directions with
respect to the operating and financial policies of Globus Maritime
Limited with which the directors are obliged to comply, other than
those persons disclosed to First Citizens Bank & Trust Company
(formerly known as CIT Bank N.A.) on or around the date of the CIT
Loan Facility and their affiliates and immediate family
members.
As at December 31, 2022, the Company was in compliance with the
covenants of the CIT Loan Facility. We believe that the CIT Loan
Facility is adequate to meet our needs for the foreseeable future
based on our current vessel ownership.
Financial Instruments
The major trading currency of our business is the U.S. dollar.
Movements in the U.S. dollar relative to other currencies can
potentially impact our operating and administrative expenses and
therefore our operating results.
We believe that we have a low-risk approach to treasury management.
Cash balances are invested in term deposit accounts, with their
maturity dates projected to coincide with our liquidity
requirements. Credit risk is diluted by placing cash on deposit
with a variety of institutions in Europe, including a small number
of banks in Greece, which are selected based on their credit
ratings. We have policies to limit the amount of credit exposure to
any particular financial institution.
As of December 31, 2022 and 2021, we did not use any financial
instruments designated in our consolidated financial statements as
those with hedging purposes.
Capital Expenditures
We make capital expenditures from time to time in connection with
our vessel acquisitions or vessel improvements.
On June 9, 2021, we took delivery of the m/v “Diamond Globe”, a
2018-built Kamsarmax dry bulk carrier, through its subsidiary, Argo
Maritime Limited, for a purchase price of $27 million financed with
available cash. The m/v “Diamond Globe” was built at Jiangsu New
Yangzi Shipbuilding Co., Ltd and has a carrying capacity of 82,027
dwt.
On July 20, 2021, we took delivery of the m/v “Power Globe”, a
2011-built Kamsarmax dry bulk carrier, through its subsidiary,
Talisman Maritime Limited, for a purchase price of $16.2 million
financed with available cash. The m/v “Power Globe” was built at
Universal Shipbuilding Corporation in Japan and has a carrying
capacity of 80,655 dwt.
On November 29, 2021, we took delivery of the m/v “Orion Globe”, a
2015-built Kamsarmax dry bulk carrier, through its subsidiary,
Salaminia Maritime Limited, for a purchase price of $28.4 million
financed with available cash. The m/v “Orion Globe” was built at
Tsuneishi Zosen in Japan and has a carrying capacity of 81,837
dwt.
On April 29, 2022, we entered into a contract, through our
subsidiary Calypso Shipholding S.A., for the construction and
purchase of one fuel efficient bulk carrier with a carrying
capacity of about 64,000 dwt. The vessel will be built at Nihon
Shipyard Co. in Japan and is scheduled to be delivered during the
first half of 2024. The total consideration for the construction of
the vessel is approximately $37.5 million, which we intend to
finance with a combination of debt and equity. In May 2022 we paid
the first installment of $7.4 million.
On May 13, 2022, we signed two contracts, through our subsidiaries
Daxos Maritime Limited and Paralus Shipholding S.A., for the
construction and purchase of two fuel efficient bulk carriers with
a carrying capacity of about 64,000 dwt each. The sister vessels
will be built at Nantong COSCO KHI Ship Engineering Co. in China
with the first one scheduled to be delivered during the third
quarter of 2024 and the second one scheduled during the fourth
quarter of 2024. The total consideration for the construction of
both vessels is approximately $70.3 million, which we intend to
finance with a combination of debt and equity. In May 2022 we paid
the first installment of $13.8 million and in November 2022 we paid
the second installment of $6.9 million for both vessels under
construction.
We have no other binding agreements to purchase any additional
vessels but may do so in the future. We expect that any purchases
of vessels will be paid for with cash from operations, with funds
from new credit facilities from banks with whom we currently
transact business, with loans from banks with whom we do not have a
banking relationship but will provide us funds at terms acceptable
to us, with funds from equity or debt issuances or any combination
thereof.
We incur additional capital expenditures when our vessels undergo
surveys. This process of recertification may require us to
reposition these vessels from a discharge port to shipyard
facilities, which will reduce our operating days during the period.
The loss of earnings associated with the decrease in operating
days, together with the capital needs for repairs and upgrades, is
expected to result in increased cash flow needs. We expect to fund
these expenditures with cash on hand.
C. Research and Development, Patents and Licenses,
etc.
We incur, from time to time, expenditures relating to inspections
for acquiring new vessels that meet our standards. Such
expenditures are insignificant and they are expensed as they
incur.
D. Trend Information
Our results of operations depend primarily on the charter rates
earned by our vessels. Over the course of 2022, the BDI registered
a high of 3,369 on May 23, 2022 and a low of 965 on August 31,
2022.
Since the start of the financial crisis in 2008 the performance of
the BDI has been characterized by high volatility, as the growth in
the size of the dry bulk fleet outpaced growth in vessel demand for
an extended period of time.
Specifically, in the period
from 2010 to 2020, the size of the fleet in terms of deadweight
tons grew by an annual average of about 6.0% while the
corresponding growth in demand for dry bulk carriers grew by 3.1%,
resulting in a drop of about 61% in the value of the BDI over the
period. In 2021, the total size of the dry bulk fleet rose by about
3.6%, compared to demand growth of 4.1%, which resulted in a 176%
increase in the BDI. The global dry cargo fleet deadweight carrying
capacity for 2022 increased by approximately 2.8% which remains
significantly lower from the substantial increases during the early
2000s and mid-2010s. The global dry cargo fleet deadweight carrying
capacity is forecasted to grow 2.7%
in 2023, according to BIMCO, and BIMCO expects demand to grow by
1.5-2.5% in 2023 and by 1-2% in 2024.
Charter (or hire) rates paid for dry bulk vessels are generally a
function of the underlying balance between vessel supply and
demand. Over the past 25 years, dry bulk cargo charter rates have
passed through cyclical phases and changes in vessel supply and
demand have created a pattern of rate “peaks” and “troughs.”
Generally, short-term or spot/voyage charter rates will be more
volatile than time charter rates, as they reflect short-term
movements in demand and market sentiment. The BDI remained
significantly depressed from 2008-2019. In 2021, the BDI rose to a
high of 5,650 on October 7, 2021 and had a low of 1,303 on February
10, 2021. In 2022, the BDI ranged from a low of 965 on August 31,
2022 to a high of 3,369 on May 23, 2022. During calendar year 2023
to date, the BDI has ranged from a high of 1,587 (on March 14,
2023) to a low of 601 (on February 7, 2023).
In the beginning of 2023, the forecast for World GDP was expected
to increase by 2.9% for the year 2023 and 3.1% for the year 2024,
yet many analysts now predict a negative effect on 0.2%-1% due to
the hostilities between Russia and Ukraine.
The Black Sea region is an important area for dry bulk shipping, as
major grain cargoes are loaded and transported in the Black Sea for
worldwide discharging. As hostilities continue, we are aware that
these grain volumes may be sourced elsewhere. This means increased
ton miles for the dry bulk fleets as these commodities will need to
be sourced possibly from the USG or ECSA areas, and travel to the
Far East. As a result, the coal trade flows may be significantly
affected especially in the event that countries and regions decide
to move away from Russian sourced energy commodities; these then
will have to be sourced from elsewhere - potentially through
faraway overseas routes. As hostilities enter their second year,
there continues to be significant volatility and increased
uncertainty with a significant impact on the dry bulk market. If
these conditions are sustained, the longer-term net impact on the
dry bulk shipping market and our business would be difficult to
predict. However, such events may have unpredictable consequences,
and contribute to instability in global economy, a decrease in
supply or cause a decrease in worldwide demand for certain goods
and, thus, shipping.
The dry bulk orderbook stands at 69 million dwt, or 7.1% as
percentage of the world’s total dry bulk fleet. Specifically, it is
5.8% for the Capesize segment, 8.2 for the Panamax (Kamsarmax)
segment and 7.7% for the Handymax segment. The fleet orderbook
comprises deliveries of 31.2 million dwt for 2023 and 26 million
dwt for 2024.
Please read “Item 4. B. Business Overview,” Item 5. A. Operating
Results” and “Item 5. B. Liquidity and Capital Resources.”
E. Critical Accounting Estimates
Because we apply in our primary financial statements IFRS as issued
by the IASB, we are not required to discuss information about our
critical accounting estimates here.
Item
6. Directors, Senior Management and Employees
A. Directors and Senior Management
The following table sets forth information regarding our executive
officers, our directors and our secretary. Our articles of
incorporation provide for a board of directors serving staggered,
three-year terms, other than any members of our board of directors
that may serve at the option of the holders of preferred shares, if
any are issued with relevant appointment powers. The term of our
Class I directors expires at our annual general meeting of
shareholders in 2023, the term of our Class II director expires at
our annual general meeting of shareholders in 2024, and the term of
our Class III director expires at our annual general meeting of
shareholders in 2025. Officers are appointed from time to time by
our board of directors and hold office until a successor is
appointed or their employment is terminated. The business address
of each of the directors and officers is c/o Globus Shipmanagement
Corp., 128 Vouliagmenis Avenue, 3rd Floor, 166 74 Glyfada, Attica,
Greece.
Name |
|
Position |
|
Age |
Georgios Feidakis |
|
Director, Chairman of the Board of
Directors |
|
72 |
Ioannis
Kazantzidis |
|
Director |
|
72 |
Jeffrey
O. Parry |
|
Director |
|
63 |
Athanasios Feidakis |
|
Director, President, Chief Executive Officer,
Chief Financial Officer |
|
36 |
Olga
Lambrianidou |
|
Secretary |
|
67 |
Biographical information with respect to each of our directors and
our officers is set forth below.
Georgios (“George”) Feidakis, a Class III director, is our
founder and has served as our non-executive chairman of our board
of directors since inception. Mr. George Feidakis is also the major
shareholder and Chairman of F.G. Europe S.A., or FG Europe, a
company he has been involved with since 1994 and acts as a director
and executive for several of its subsidiaries. FG Europe has been
our landlord since August 2022. FG Europe is active in four lines
of business and distributes well-known brands of appliances and
electronics in Greece, the Balkans, Turkey, Italy and the U.K. FG
Europe is also active in the air-conditioning, household appliances
and electronics market in Greece and ten other countries in Europe
as well as in the production of renewal energy. Mr. George Feidakis
is also the director and chief executive officer of R.F. Energy
S.A., a company that plans, develops and controls the operation of
energy projects, and acts as a director and executive for several
of its subsidiaries. Since January 31, 2017, Mr. Feidakis has been
the majority shareholder of Eolos Shipmanagement SA. Mr. Feidakis
is also a principal shareholder of Cyberonica S.A., a family-owned
company, which was our landlord until August 2022.
Athanasios (“Thanos”) Feidakis,* a Class I director was
appointed to our board of directors in July 2013. In December 2015,
Mr. Athanasios Feidakis was also appointed our President, CEO and
CFO, and is our sole executive officer. From October 2011 through
June 2013, Mr. Athanasios Feidakis worked for our operations and
chartering department as an operator.
Prior to that and from September 2010 to May 2011, Mr. Athanasios
Feidakis worked for ACM, a shipbroking firm, as an S&P broker,
and from October 2007 to April 2008, he worked for Clarksons, a
shipbroking firm, as a chartering trainee on the dry cargo
commodities chartering and on the sale and purchase of vessels.
From April 2011 to April 2016, Mr. Athanasios Feidakis was a
director of F.G. Europe S.A., a company controlled by his family,
specializing in the distribution of well-known brands in Greece,
the Balkans, Turkey, Italy and UK. From December 2008 to December
2015, Mr. Athanasios Feidakis was the President of Cyberonica S.A.,
a family-owned company specializing in real estate development. Mr.
Athanasios Feidakis holds a B.Sc. in Business Studies and a M.Sc.
in Shipping Trade and Finance from Bayes Business School (formerly
known as Cass Business School) of City University in London and an
MBA from London School of Economics. In addition, Mr. Athanasios
Feidakis has professional qualifications in dry cargo chartering
and operations from the Institute of Chartered Shipbrokers.
Jeffrey O. Parry, a Class II director, has served on our
board of directors since July 2010. Mr. Parry is managing partner
of Mystic Marine Advisors LLC, a Connecticut-based firm providing
strategic advice and execution to turnaround and emerging companies
and their stakeholders, which he founded in 1998. Mr. Parry is an
independent board member of Elevai Labs, Inc. a California-based
skin care company since September 2022 and an independent board
director of Digitrax Entertainment, Inc., a Tennessee-based music
technology company, since October 2022. Mr. Parry was chairman of
the board of directors of TBS Shipping Limited from April 2012
until March 2018. From July 2008 to October 2009, he was president
and chief executive officer of Nasdaq-listed Aries Maritime
Transport Limited. Mr. Parry holds a B.A. from Brown University and
an MBA from Columbia University.
Ioannis Kazantzidis, a Class I director, was appointed to
our board in November 2016 to fill a vacancy in our board of
directors. Mr. Kazantzidis has been the principal of Porto Trans
Shipping LLC, a shipping and logistics company based in the United
Arab Emirates, since 2007. Between 1987 to 2007, Mr. Kazantzidis
was with HSBC Group, where he served in managerial positions
participating in the development and implementation of financial
systems in multiple locations. Mr. Kazantzidis has since 2009 been
a Director of Saeed Mohammed Heavy Equipment Trading LLC, a general
trading company, based in Jebel Ali, UAE. Mr. Kazantzidis has
served as the Chairman of Nazaki Corporation, a private investment
company based in the British Virgin Islands, since 1988. Mr.
Kazantzidis has served, from 2015 to 2018, as the Chairman of
W.M.Mendis Hotel Pvt Ltd in the Republic of Sri Lanka. From 1989 to
2015, he was the Chairman of Fishermans Wharf Pvt Ltd, and a
director of Dow Corning Lanka Pvt Ltd from 2000 to 2013 and
Propasax Pvt Ltd from 2010 to 2015. As of December 31, 2020, Mr.
Kazantzidis is a Director of Longdom Place Developer LLC.
Olga Lambrianidou, our secretary, has been a corporate
consultant to the Company since November 2010, and was appointed as
secretary to the Company in December 2012. Prior to joining Globus,
Ms. Lambrianidou was the Corporate Secretary and Investor Relations
Officer of NewLead Holdings Ltd., formerly known as Aries Maritime
Limited from 2008 to 2010, and of DryShips Inc., a publicly traded
dry bulk shipping company from 2006 to 2008. Ms. Lambrianidou was
Corporate Secretary, Investor Relations Officer and Human Resources
Manager with OSG Ship Management (GR) Ltd., formerly known as
Stelmar Shipping Ltd., from 2000 to 2006. Prior to 2000, Ms.
Lambrianidou worked in the banking and insurance fields in the
United States. She holds a BBA Degree in Marketing/English
Literature from Pace University and an MBA Degree in
Banking/Finance from the Lubin School of Business of Pace
University in New York.
*Athanasios Feidakis is the son of our Chairman, George Feidakis.
Other than the aforementioned, there are no other family
relationships between any of our directors and our officers. There
are no arrangements or understandings with major shareholders,
customers, suppliers or others, pursuant to which any person
referred to above was selected as a director or member of senior
management. See, however, the covenants of our CIT Loan
Facility.
The Company is not aware of any agreements or arrangements between
any director and any person or entity other than the Company
relating to the Compensation or other payments in connection with
such director’s candidacy or service as a director of the
Company.
B. Compensation
In August 2016, the Company entered
into a consultancy agreement with Goldenmare Limited, an affiliated
company of our CEO, Mr. Athanasios Feidakis, for the purpose of
providing consulting services to the Company in connection with the
Company’s international shipping and capital raising activities,
including but not limited to assisting and advising the Company’s
CEO. The annual fees for the services provided previously amounted
to €200,000. Goldenmare Limited is eligible to receive bonus
compensation (whether in the form of cash and/or equity and/or
quasi-equity awards) for the services provided and such bonus shall
be determined by the Remuneration Committee or the Board of the
Company. If the Company terminates the agreement without cause, or
either party terminates after a change of control of the Company,
then we will pay the consultant double the annual consulting fees
plus the average annual bonus (including the value of equity
awards) granted to the consultant throughout the term of the
consultancy agreement.
In December 2020, we agreed to
increase the consultancy fees of Goldenmare Limited from €200,000
to €400,000 per annum and additionally pay a one-time cash bonus of
$1.5 million pursuant to the consultancy agreement, all of which
was paid in 2021. In addition, in December 2021, we agreed to pay a
one-time cash bonus of $1.5 million to Goldenmare Limited pursuant
to the consultancy agreement, half of which was to be paid
immediately and the other half during 2022, if at the time of the
payment Mr. Athanasios Feidakis remains our CEO and the Goldenmare
Limited has not terminated its consultancy agreement. At the time
of the filing of the annual report on Form 20-F, no amounts of the
bonus granted in December 2021 has been paid. Each
of our other directors has an appointment letter relating to his
appointment as a director.
In 2022, the aggregate remuneration that should have been paid for
our chief executive officer or a company affiliated with our chief
executive officer amounted to approximately $2.0 million, none of
which was paid as of December 31, 2022. In 2023, we paid
approximately $406,000 of the such amount. In 2021, the aggregate
remuneration that should have been paid for our executive officer
or a consultant affiliated with our chief executive officer
amounted to approximately $1.2 million, but we paid approximately
$231,000 and owed approximately $985,000 as of December 31, 2021.
The aggregate remuneration that should have been paid for our
executive officer or a consultant affiliated with our executive
officer in 2020 was approximately $1.8 million (and we paid
$200,000 in 2020 and $1.6 million in 2021).
The aggregate compensation, including bonuses, actually paid to
members of our senior management (namely, only our Chief Executive
Officer) or a consulting company which is an affiliate of our
executive officer (including amounts that were owed from previous
years) was approximately $57 thousand in 2022, $1.9 million in 2021
and $650,000 in 2020. Our senior management received no common
shares in 2022, 2021 and 2020. In addition, we owed our senior
management or a consultant affiliated with our senior management,
$2.1 million, $985,000 and $1.7 million on December 31, 2022, 2021
and 2020, respectively. We currently owe our senior management or a
consulting company affiliated with our senior management an
aggregate of $1.7 million.
In 2022 we changed how we compensate our non-executive directors.
Our non-executive directors each receive $40,000 annually as
members of our board. In addition, each non-executive and
independent directors who previously received shares receive an
additional $20,000 per year. Non-executive and independent
directors on our remuneration committee and compensation committee
each receive an additional $5,000 annually per committee. The
chairperson of our audit committee receives an additional $10,000
annually, our lead independent director (i.e., Jeffrey O. Parry)
receives an additional $10,000 annually, and the chairperson of our
board receives an additional $40,000 annually. The aggregate
compensation other than share based compensation actually paid to
our non-executive directors in 2022 was $285,000, in 2021 was
$120,000 and in 2020 was approximately $311,250. In addition, in
2021 and 2020, non-executive directors (excluding our non-executive
Chairman, Mr. George Feidakis) received an aggregate of 12,178
common shares and 2,812 common shares, respectively. In 2022 they
received no common shares. As of December 31, 2022, we had not yet
paid our non-executive directors the cash amounts that we agreed to
pay them for their prior service; such amount in the aggregate was
$60,000 for 2022, which amount was paid in 2023.
We are bound by Greek labor law with respect to our Greek
employees, which provides certain payments to these employees upon
their dismissal or retirement. We accrued as of December 31, 2022 a
non-current liability of approximately $148,000 for such
payments.
We do not have a retirement plan for our officers or directors.
C. Board Practices
Our board of directors and executive officer oversee and supervise
our operations.
Each director holds office until his successor is elected or
appointed, unless his office is earlier vacated in accordance with
the articles of incorporation or with the provisions of the BCA. In
addition to cash compensation, we historically paid each of Mr.
Kazantzidis and Mr. Parry $20,000 in common shares annually,
however, in 2022 we changed our policies and each of those
directors receives cash payments as further detailed in “Item 6.B.
Directors, Senior Management and Employees—Compensation.” The
members of our senior management are appointed to serve at the
discretion of our board of directors. Our board of directors and
committees of our board of directors schedule regular meetings over
the course of the year. Under the Nasdaq rules, we believe that Mr.
Ioannis Kazantzidis and Mr. Parry are independent directors.
We have an Audit Committee, a Remuneration Committee and a
Nomination Committee.
The Audit Committee is comprised of Ioannis Kazantzidis and Jeffrey
O. Parry. It is responsible for ensuring that our financial
performance is properly reported on and monitored, for reviewing
internal control systems and the auditors’ reports relating to our
accounts and for reviewing and approving all related party
transactions. Our board of directors has determined that Ioannis
Kazantzidis is our audit committee financial expert, and he is the
chair of the committee. Each Audit Committee member has experience
in reading and understanding financial statements, including
statements of financial position, statements of comprehensive
income and statements of cash flows.
The Remuneration Committee is comprised of Athanasios Feidakis,
Jeffrey O. Parry and Ioannis Kazantzidis. It is responsible for
determining, subject to approval from our board of directors, the
remuneration guidelines to apply to our executive officer,
secretary and other members of the executive management as our
board of directors designates the Remuneration Committee to
consider. It is also responsible for suggesting the total
individual remuneration packages of each director including, where
appropriate, bonuses, incentive payments and share options. The
Remuneration Committee is responsible for declaring dividends on
our Series A Preferred Shares, if any. The Remuneration Committee
will also liaise with the Nomination Committee to ensure that the
remuneration of newly appointed executives falls within our overall
remuneration policies.
The Nomination Committee is comprised of George Feidakis, Ioannis
Kazantzidis and Jeffrey O. Parry. It is responsible for reviewing
the structure, size and composition of our board of directors and
identifying and nominating candidates to fill board positions as
necessary.
For information about the term of each director, see “Item 6.A.
Directors and Senior Management.”
D. Employees
As of December 31, 2022, we had 22 full-time employees and two
consultants that we hired directly. All of our employees are
located in Greece and are engaged in the service and management of
our fleet. None of our employees are covered by collective
bargaining agreements, although certain crew members (which are not
our employees but hired through crewing agents) are parties to
collective bargaining agreements. We do not employ a significant
number of temporary employees.
E. Share Ownership
With respect to the total number of common shares owned by our
executive officer and our directors, individually and as a group,
please read “Item 7. Major Shareholders and Related Party
Transactions.”
Equity Incentive Plan
Our 2012 equity incentive plan expired in 2022. We have no such
plan in effect at this time. No awards were granted pursuant to the
equity incentive plan during the years ended December 31, 2022,
2021 and 2020, but we issued shares directly to our directors,
which was not part of the equity incentive
program.
Item 7. Major
Shareholders and Related Party Transactions
A. Major Shareholders
The following table sets forth information concerning ownership of
our common shares as of March 17, 2023 by persons who beneficially
own more than 5.0% of our outstanding common shares, each person
who is a director of our company, the executive officer named in
this annual report on Form 20-F and our directors and executive
officer as a group.
Beneficial ownership of shares is determined under rules of the SEC
and generally includes any shares over which a person exercises
sole or shared voting or investment power. Except as indicated in
the footnotes to this table and subject to community property laws
where applicable, the persons named in the table have sole voting
and investment power with respect to all shares shown as
beneficially owned by them.
The numbers of shares and percentages of beneficial ownership are
based on 20,582,301 common shares outstanding on March 17, 2023.
All common shares owned by the shareholders listed in the table
below have the same voting rights as the other of our outstanding
common shares.
The address for our directors and executive officer is: c/o Globus
Shipmanagement Corp., 128 Vouliagmenis Avenue, 3rd Floor, 166 74
Glyfada, Attica, Greece.
With respect to the persons who beneficially own more than 5.0% of
our outstanding common shares, we have prepared the following table
based on information filed with the SEC, and we have not sought to
verify such information, and have assumed that such information
remains current. Ownership and percentage ownership are determined
in accordance with the rules and regulations of the SEC regarding
beneficial ownership and include voting or investment power with
respect to common shares. This information does not necessarily
indicate beneficial ownership for any other purpose. In computing
the number of common shares beneficially owned by a beneficial
holder and the percentage ownership of that beneficial holder,
common shares underlying warrants held by that beneficial holder
that are exercisable as of March 17, 2023, or exercisable within 60
days after March 17, 2023, are deemed outstanding. Such common
shares, however, are not deemed outstanding for the purposes of
computing the percentage ownership of any other person. The number
of common shares owned and percentages in the table below do give
effect to any beneficial ownership blockers contained in any
warrants that we have issued.
The beneficial ownership information set forth in the table below
is based on beneficial ownership reports furnished to the SEC or
information regarding the beneficial ownership of our common shares
delivered to us:
Name and address of beneficial
owner |
|
Number of common shares beneficially
owned as of March 17, 2023 |
|
Percentage of common shares
beneficially owned as of March 17, 2023 |
5% Beneficial
Owners |
|
|
|
|
Armistice Capital, LLC (1) |
|
1,200,000 |
|
5.5% |
Intracoastal Capital LLC (2) |
|
1,959,250 |
|
8.7% |
Lind Global Macro Fund, LP (3) |
|
2,093,808 |
|
9.2% |
Hudson Bay Master Fund Ltd. (4) |
|
2,284,381 |
|
9.99% |
Executive Officer and
Directors |
|
|
|
|
George Feidakis (5) |
|
761,530 |
|
3.7% |
Ioannis Kazantzidis |
|
7,639 |
|
*% |
Jeffrey O. Parry |
|
7,619 |
|
*% |
Athanasios Feidakis (6) |
|
79,718 |
|
*% |
Our executive officer and all directors as
a group |
|
856,506 |
|
4.2*%(6) |
*Less than 1.0% of the outstanding shares.
(1) Armistice Capital, LLC is the investment manager of
Armistice Capital Master Fund Ltd. (the “Armistice Master Fund”),
the direct holder of the securities, and pursuant to an Investment
Management Agreement, Armistice Capital, LLC exercises voting and
investment power over the securities of Globus held by the
Armistice Master Fund and thus may be deemed to beneficially own
the securities of Globus held by the Armistice Master Fund. Mr.
Steven Boyd, as the managing member of Armistice Capital, LLC, may
be deemed to beneficially own the securities of Globus held by the
Master Fund. The Master Fund specifically disclaims beneficial
ownership of the securities of Globus directly held by it by virtue
of its inability to vote or dispose of such securities as a result
of its Investment Management Agreement with Armistice Capital, LLC.
The address of the principal business office for Armistice Capital,
LLC and Mr. Boyd is 510 Madison Avenue, 7th Floor, New York, New
York 10022. Based on information held by Globus, we believe that
the common shares beneficially owned by Armistice Capital, LLC are
in the form of warrants that we have issued.
(2) Mitchell P. Kopin and Daniel B. Asher have filed a Schedule
13G with the SEC as beneficial owners of the shares beneficially
held Intracoastal Capital LLC. All of the 1,959,250 beneficially
owned shares held by Intracoastal Capital LLC referenced in the
relevant Schedule 13G are in the form of warrants that we have
issued. The principal business office of Mr. Kopin and Intracoastal
Capital LLC is 245 Palm Trail, Delray Beach, Florida 33483. The
principal business office of Mr. Asher is 111 W. Jackson Boulevard,
Suite 2000, Chicago, Illinois 60604.
(3) The reporting persons’ ownership consists of warrants to
purchase 2,093,808 common shares. Lind Global Partners LLC, the
general partner of Lind Global Macro Fund, LP, may be deemed to
have sole voting and dispositive power with respect to the shares
held by Lind Global Macro Fund, LP. Jeff Easton, the managing
member of Lind Global Partners LLC, may be deemed to have sole
voting and dispositive power with respect to the shares held by
Lind Global Macro Fund, LP. The address of the principal business
office for Lind Global Partners LLC, Lind Global Macro Fund, LP and
Mr. Easton is 444 Madison Ave, Floor 41, New York, NY
10022.
(4) Hudson Bay Capital Management LP, the investment manager of
Hudson Bay Master Fund Ltd., and has voting and investment power
over these securities. Sander Gerber is the managing member of
Hudson Bay Capital GP LLC, which is the general partner of Hudson
Bay Capital Management LP. Sander Gerber disclaims beneficial
ownership over these securities. All of the 2,284,381 beneficially
owned shares held by Hudson Bay Master Fund Ltd referenced in the
relevant Schedule 13G are issuable upon exercise of warrants. The
warrants are subject to a 9.99% beneficial ownership blocker and
the percentage indicates the effect of such blocker. The address of
the business office of each of the such persons is 777 Third
Avenue, 30th Floor, New York, NY 10017.
(5) Mr. George Feidakis beneficially owns 761,530 common shares
through Firment Shipping Inc., a Marshall Islands corporation for
which he exercises sole voting and investment power. Mr. George
Feidakis and Firment Shipping Inc. disclaim beneficial ownership
over such common shares except to the extent of their pecuniary
interests in such shares.
When we filed our annual report for the year ended 2021, 2020,
and 2019, Mr. George Feidakis beneficially owned 3.7%, less than
1%, and 22.1% of our common shares, respectively.
(6) Athanasios Feidakis controls Goldenmare Limited, which owns
10,300 Series B preferred shares. Each Series B preferred share
entitles the holder thereof to 25,000 votes per share on all
matters submitted to a vote of the shareholders of the Company,
provided however, that no holder of Series B preferred shares may
exercise voting rights pursuant to Series B preferred shares that
would result in the aggregate voting power of any beneficial owner
of such shares and its affiliates (whether pursuant to ownership of
Series B preferred shares, common shares or otherwise) to exceed
49.99%. For a further description of the Series B preferred shares,
see “Item 10.B. Memorandum and Articles of Association – Preferred
Shares.”
To the best of our knowledge, except as disclosed in the table
above (including the Series B preferred shares referenced above),
we are not owned or controlled, directly or indirectly, by another
corporation or by any foreign government. To the best of our
knowledge, there are no agreements in place that could result in a
change of control of us.
In the normal course of business, there have been institutional
investors that buy and sell our shares. It is possible that
significant changes in the percentage ownership of these investors
will occur.
B. Related Party Transactions
Lease
On August 5, 2021, the Company entered into a rental agreement for
902 square meters of office space for its operations within a
building leased by Cyberonica S.A. (an affiliate of our chairman)
at a monthly rate of Euro 26,000 with a lease period ending August
4, 2024. The previous rental agreement with Cyberonica was
terminated, which agreement had been in place since 2016 and
provided for a monthly rate of €10,360. In June 2022, we entered
into a new rental agreement with F.G. Europe (an affiliate of
Globus’s chairman) for the same office space, at the same rate of
Euro 26,000 and with the same lease period ending of August 4,
2024. The previous rental agreement with Cyberonica was terminated.
During the years ended December 31, 2022, 2021 and 2020 fiscal
years, the rent charged amounted to $341,000, $242,000 and
$141,000, respectively, to F.G. Europe and Cyberonica S.A for the
rental of office space for our operations. As of December 31, 2022,
we did not owe any amount in back rent to F.G. Europe.
Employment of Relative of Mr. George Feidakis
As of July 1, 2013, Mr. Athanasios Feidakis became a non-executive
director of the Company. Mr. Athanasios Feidakis was previously an
employee of the Company and his employment agreement was terminated
when he became a non-executive director. Mr. Athanasios Feidakis
was appointed as President, Chief Executive Officer and Chief
Financial Officer as of December 28, 2015 and remains in these
positions. He is the son of our chairman of the board of directors,
Mr. George Feidakis.
Registration Rights Agreement
In November 2016, we entered into a registration rights agreement
with Firment Trading Limited, pursuant to which we granted to them
and their affiliates (including Mr. George Feidakis and certain of
their transferees), the right, under certain circumstances and
subject to certain restrictions to require us to register under the
Securities Act our common shares held by them. Under the
registration rights agreement, these persons have the right to
request us to register the sale of shares held by them on their
behalf and may require us to make available shelf registration
statements permitting sales of shares into the market from time to
time over an extended period. In addition, these persons have the
ability to exercise certain piggyback registration rights in
connection with registered offerings requested by shareholders or
initiated by us.
Consultancy Agreements
On August 18, 2016, the Company entered into a consultancy
agreement with Goldenmare Limited, an affiliated company of our
CEO, for the purpose of providing consulting services to the
Company in connection with the Company’s international shipping and
capital raising activities, including but not limited to assisting
and advising the Company’s CEO. The annual fees for the services provided
amounted to €200,000. The consulting company is eligible to receive
bonus compensation (whether in the form of cash and/or equity
and/or quasi-equity awards) for the services provided and such
bonus shall be determined by the Remuneration Committee or the
Board of the Company. If the Company terminates the agreement
without cause, or either party terminates after a change of control
of the Company, then we will pay the consulting company double the
annual consultancy fee plus the average annual bonus (including the
value of equity awards) granted to the consulting company
throughout the term of the consultancy agreement. In
December 2020, we agreed to increase the consultancy fees of
Goldenmare Limited from €200,000 to €400,000 per annum and
additionally pay a one-time cash bonus of $1.5 million pursuant to
the consultancy agreement, which was paid in full in 2021. In
addition, in December 2021, we agreed to pay a one-time cash bonus
of $1.5 million to Goldenmare Limited pursuant to the consultancy
agreement, half of which was to be paid immediately and the other
half during 2022, if at the time of the latter payment Mr.
Athanasios Feidakis remains our CEO and Goldenmare Limited has not
terminated its consultancy agreement. At the time of the filing of
the annual report on Form 20-F, no amounts of the bonus has been
paid. Each of our other directors has a contract relating to his
appointment as a director.
On July 15, 2021 we entered into a consultancy agreement with Eolos
Shipmanagement S.A. for the purpose of providing consultancy
services to Eolos Shipmanagement S.A. For these services our
Manager receives a daily fee of $1,000. Our chairman of the board
is the majority shareholder of Eolos Shipmanagement.
Series B Preferred Shares
In June 2020, we entered into a stock purchase agreement and issued
50 of our newly designated Series B preferred shares, par value
$0.001 per share, to Goldenmare Limited, a company controlled by
our Chief Executive Officer, Athanasios Feidakis, in return for
$150,000, which amount was settled by reducing, on a
dollar-for-dollar basis, the amount payable by the Company to
Goldenmare Limited pursuant to a consultancy agreement. In July
2020, we entered into another stock purchase agreement and issued
an additional 250 of our Series B preferred shares to Goldenmare
Limited in return for $150,000. The $150,000 was paid by reducing,
on a dollar-for-dollar basis, the amount payable by the Company to
Goldenmare Limited pursuant to a consultancy agreement. In
addition, we increased the maximum voting rights under the Series B
preferred shares from 49.0% to 49.99%. In March 2021, we entered
into another stock purchase agreement and issued an additional
10,000 of our Series B preferred shares to Goldenmare Limited in
return for $130,000, which was settled by reducing, on a
dollar-for-dollar basis, the amount payable by the Company to
Goldenmare Limited pursuant to a consultancy agreement. For a
description of the Series B preferred shares, see “Item 10.B.
Memorandum and Articles of Association – Preferred Shares.”
We historically had entered into certain related party
transactions. See “Item 4.A. History and Development of the
Company.”
C. Interests of Experts and Counsel
Not Applicable.
Item
8. Financial Information
A. Consolidated Statements and Other Financial
Information
See Item 18.
Legal Proceedings
We have not been involved in any legal proceedings which may have,
or have had, a significant effect on our business, financial
position, results of operations or liquidity, nor are we aware of
any other proceedings that are pending or threatened which may have
a significant effect on our business, financial position, results
of operations or liquidity. From time to time, we may be subject to
legal proceedings and claims in the ordinary course of business,
principally personal injury and property casualty claims. We expect
that these claims would be covered by insurance, subject to
customary deductibles. Those claims, even if lacking merit, could
result in the expenditure of significant financial and managerial
resources.
Our Dividend Policy and Restrictions on Dividends
The declaration, timing and amount of any dividend is subject to
the discretion of our board of directors and will be dependent upon
our earnings, financial condition, market prospects, capital
expenditure requirements, investment opportunities, restrictions in
our loan agreements, the provisions of the Marshall Islands law
affecting the payment of dividends to shareholders, overall market
conditions, reserves established by our board of directors,
increased or unanticipated expenses, additional borrowings and
future issuances of securities, and other factors deemed relevant
by our board of directors from time-to-time.
We have not paid any dividends on our common shares since 2012. Our
dividend policy was historically, but is no longer, to pay to
holders of our shares a variable quarterly dividend in excess of
50% of the net income of the previous quarter subject to any
reserves our board of directors may from time to time determine are
required.
Our board of directors may review and amend our dividend policy
from time to time in light of our plans for future growth and other
factors.
Our Remuneration Committee will also determine by unanimous
resolution, in its sole discretion, when and to the extent
dividends are paid to the holders of our Series A Preferred Shares,
to the extent any are outstanding.
We are a holding company, with no material assets other than the
shares of our subsidiaries. Therefore, our ability to pay dividends
depends on the earnings and cash flow of those subsidiaries and
their ability to pay dividends to us.
Marshall Islands law generally prohibits the payment of dividends
other than from surplus (retained earnings and the excess of
consideration received from the sale of shares above the par value
of the shares) or while a corporation is insolvent or would be
rendered insolvent by the payment of such dividend.
Historical dividend payments should not provide any promise or
indication of future dividend payments.
If we pay a dividend, the terms of our outstanding warrants provide
that the exercise price shall be decreased by the amount of cash
and/or the fair market value of any securities or other assets paid
on each common share in respect of such dividend in order that
subsequent thereto upon exercise of the warrants the holder of the
warrants may obtain the equivalent benefit of such dividend.
No dividends were declared or paid on our common shares during the
years ended December 31, 2022, 2021, and 2020.
No Series A Preferred Shares were outstanding as of December 31,
2022, 2021, and 2020.
Our CIT Loan Facility imposes certain restrictions to us with
respect to dividend payments. Please see “Item 5.B. Liquidity and
Capital Resources—Indebtedness.”
B. Significant Changes
Not Applicable.
Item 9. The
Offer and Listing
Our common shares trade on the Nasdaq Capital Market under the
ticker “GLBS.”
All of our shares are in registered form. Our articles of
incorporation do not permit the issuance of bearer shares.
Item
10. Additional Information
A. Share Capital
Not Applicable.
B. Memorandum and Articles of Association
Purpose
Our objects and purposes, as provided in Section 1.3 of our
articles of incorporation, are to engage in any lawful act or
activity for which corporations may now or hereafter be organized
under the BCA.
Authorized Capitalization
The authorized number of shares of Globus consists of (1)
500,000,000 common shares, par value $0.004 per share, (2)
100,000,000 Class B common shares, par value $0.001 per share,
which we refer to as the Class B shares, and (3) 100,000,000
preferred shares, par value $0.001 per share, which we refer to as
the preferred shares. No Class B shares have yet been issued. Our
articles of incorporation require us at all times to reserve and
keep available, out of our authorized but unissued common shares,
such number of common shares as would become issuable upon the
conversion of all Class B shares then outstanding.
Two series of preferred shares have been designated. No Series A
preferred shares and 10,300 Series B preferred shares are presently
outstanding. There is no limitation on the right to own securities
or the rights of non-resident shareholders to hold or exercise
voting rights on our securities under Marshall Islands law or our
articles of incorporation or bylaws. All of our shares are in
registered form. Our articles of incorporation do not permit the
issuance of bearer shares. We do not hold any of our shares in
treasury.
We have financed our operations through funds raised in public and
private placements of common shares and through debt. We also
issued shares to our directors, officers and employees.
Common Shares, Class B Shares, and Series B Preferred
Shares
Generally, Marshall Islands law provides that the holders of a
class of stock of a Marshall Islands corporation are entitled to a
separate class vote on any proposed amendment to the relevant
articles of incorporation that would change the aggregate number of
authorized shares or the par value of that class of shares or alter
or change the powers, preferences or special rights of that class
so as to affect the class adversely. Except as described below,
holders of our common shares and Class B shares have equivalent
economic rights. Holders of our common shares are entitled to one
vote per share, holders of our Class B shares are entitled to 20
votes per share, and the holder of our Series B preferred shares is
entitled to 25,000 votes per share (subject to the limitation
described in “Preferred Shares” below). Each holder of Class B
shares (not including the Company and the Company’s subsidiaries)
may convert, at its option, any or all of the Class B shares held
by such holder into an equal number of common shares.
Except as otherwise provided by the BCA, holders of our common
shares, Class B shares, and Series B preferred shares will vote
together as a single class on all matters submitted to a vote of
shareholders, including the election of directors.
The rights, preferences and privileges of holders of our shares are
subject to the rights of the holders of our Series B preferred
shares and any preferred shares which we may issue in the
future.
Holders of our common shares do not have conversion, redemption or
pre-emptive rights to subscribe to any of our securities.
Preferred Shares
Our articles of incorporation authorize our board of directors to
establish and issue up to 100 million preferred shares and to
determine, with respect to any series of preferred shares, the
rights and preferences of that series, including:
|
¨ |
the designation of the series; |
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¨ |
the number of preferred shares in the
series; |
|
¨ |
the preferences and relative participating option
or other special rights, if any, and any qualifications,
limitations or restrictions of such series; and |
|
¨ |
the voting rights, if any, of the holders of the
series. |
As of the date hereof, no Series A Preferred Shares are
outstanding. The holders of our Series A Preferred Shares are
entitled to receive, if funds are legally available, dividends
payable in cash in an amount per share to be determined by
unanimous resolution of our Remuneration Committee, in its sole
discretion. Our board of directors or Remuneration Committee
determines whether funds are legally available under the BCA for
such dividend. Any accrued but unpaid dividends do not bear
interest. Except as may be provided in the BCA, holders of our
Series A Preferred Shares do not have any voting rights. Upon our
liquidation, dissolution or winding up, the holders of our Series A
Preferred Shares are entitled to a preference in the amount of the
declared and unpaid dividends, if any, as of the date of
liquidation, dissolution or winding up. Our Series A Preferred
Shares are not convertible into any of our other capital stock. The
Series A Preferred Shares are redeemable at the written request of
the Remuneration Committee, at par value plus all declared and
unpaid dividends as of the date of redemption plus any additional
consideration determined by a unanimous resolution of the
Remuneration Committee.
In June 2020, we issued 50 newly designated Series B preferred
shares, par value $0.001 per share, to Goldenmare Limited, a
company controlled by our Chief Executive Officer, Athanasios
Feidakis, in return for $150,000. In July 2020, we issued an
additional 250 Series B preferred shares to Goldenmare Limited in
return for another $150,000. In March 2021, we issued an additional
10,000 Series B preferred shares to Goldenmare Limited in return
for $130,000. The purchase price was paid, in each instance, by
reducing, on a dollar-for-dollar basis, the amount payable by the
Company to Goldenmare Limited pursuant to a consultancy agreement.
In addition, in July 2020 we increased the maximum voting rights
under the Series B preferred shares from 49.0% to 49.99%.
The issuances of the Series B preferred shares to Goldenmare
Limited were each approved by an independent committee of the Board
of Directors of the Company, which in each case received a fairness
opinion from an independent financial advisor that the transaction
was for a fair value.
The Series B preferred shares have the following
characteristics:
Voting. To the fullest extent permitted by law, each
Series B preferred share entitles the holder hereof to 25,000 votes
per share on all matters submitted to a vote of the shareholders of
the Company, provided however, that no holder of
Series B preferred shares may exercise voting rights pursuant to
Series B preferred shares that would result in the aggregate voting
power of any beneficial owner of such shares and its affiliates
(whether pursuant to ownership of Series B preferred shares, common
shares or otherwise) to exceed 49.99% of the total number of votes
eligible to be cast on any matter submitted to a vote of
shareholders of the Company. To the fullest extent permitted by
law, the holders of Series B preferred shares shall have no special
voting or consent rights and shall vote together as one class with
the holders of the common shares on all matters put before the
shareholders.
Conversion. The Series B preferred shares are
not convertible into common shares or any other security.
Redemption. The Series B preferred shares are
not redeemable.
Dividends. The Series B preferred shares
have no dividend rights.
Liquidation Preference. Upon any liquidation,
dissolution or winding up of the Company, the Series B preferred
shares are entitled to receive a payment with priority over the
common shareholders equal to the par value of $0.001 per share. The
Series B preferred shareholder has no other rights to distributions
upon any liquidation, dissolution or winding up of the Company.
Transferability. All issued and outstanding
Series B preferred shares must be held of record by one holder, and
the Series B preferred shares shall not be transferred without the
prior approval of our Board of Directors.
Proportional Adjustment. In the event the
Company (i) declares any dividend on its common shares, payable in
common shares, (ii) subdivides the outstanding common shares or
(iii) combines the outstanding common shares into a smaller number
of shares, there shall be a proportional adjustment to the number
of outstanding Series B preferred shares.
Liquidation
In the event of our dissolution, liquidation or winding up, whether
voluntary or involuntary, after payment in full of the amounts, if
any, required to be paid to our creditors, the payment of the par
value of $0.001 per share to the holder of our Series B preferred
shares, and the holders of preferred shares, our remaining assets
and funds shall be distributed pro rata to the holders of our
common shares and Class B shares, and the holders of common shares
and the holders of Class B shares shall be entitled to receive the
same amount per share in respect thereof. Other than their receipt
of the par value of $0.001 per Series B preferred share, the holder
of our Series B preferred shares do not participate in
distributions upon liquidation.
Dividends
Declaration and payment of any dividend is subject to the
discretion of our board of directors. The timing and amount of
dividend payments to holders of our shares will depend on a series
of factors and risks described under “Risk Factors” in our annual
report on Form 20-F and in prospectuses we may file from time to
time, and includes risks relating to earnings, financial condition,
cash requirements and availability, restrictions in our current and
future loan arrangements, the provisions of the Marshall Islands
law affecting the payment of dividends and other factors. The BCA
generally prohibits the payment of dividends other than from
surplus or while we are insolvent or if we would be rendered
insolvent upon paying the dividend.
Subject to preferences that may apply to any shares of preferred
stock outstanding at the time, the holders of our common shares and
Class B shares will be entitled to share equally (pro rata based on
the number of shares held) in any dividends that our board of
directors may declare from time to time out of funds legally
available for dividends. Series B preferred shares do not
participate in dividends.
Conversion
Our common shares are not convertible into any other shares of our
capital stock. Each of our Class B shares is convertible at any
time at the election of the holder thereof into one of our common
shares. We may reissue or resell any Class B shares that shall have
been converted into common shares. Neither the Common Shares nor
the Class B Shares may be reclassified, subdivided or combined
unless such reclassification, subdivision or combination occurs
simultaneously and in the same proportion for each such class of
Common Stock.
Directors
Our directors are elected by the vote of the plurality of the votes
cast by shareholders entitled to vote in the election. Our articles
of incorporation provide that our board of directors must consist
of at least three members. Shareholders may change the number of
directors only by the affirmative vote of holders of a majority of
the total voting power of our outstanding capital stock (subject to
the rights of any holders of preferred shares). The board of
directors may change the number of directors by a majority vote of
the entire board of directors.
No contract or transaction between us and one or more of our
directors or officers will be void or voidable solely for the
following reason, or solely because the director or officer is
present at or participates in the meeting of our board of directors
or committee thereof which authorizes the contract or transaction,
or solely because his or her or their votes are counted for such
purpose, if (1) the material facts as to such director’s interest
in such contract or transaction and as to any such common
directorship, officership or financial interest are disclosed in
good faith or known to the board of directors or committee, and the
board of directors or committee approves such contract or
transaction by a vote sufficient for such purpose without counting
the vote of such interested director, or, if the votes of the
disinterested directors are insufficient to constitute an act of
the board, by unanimous vote of the disinterested directors; or (2)
the material facts as to such director’s interest in such contract
or transaction and as to any such common directorship, officership
or financial interest are disclosed in good faith or known to the
shareholders entitled to vote thereon, and such contract or
transaction is approved by vote of such shareholders.
Our board of directors has the authority to fix the compensation of
directors for their services.
Classified Board of Directors
Our articles of incorporation provide for a board of directors
serving staggered, three-year terms. Approximately one-third of our
board of directors will be elected each year.
Removal of Directors; Vacancies
Our articles of incorporation provide that directors may be removed
with or without cause upon the affirmative vote of holders of a
majority of the total voting power of our outstanding capital stock
cast at a meeting of the shareholders. Our articles of
incorporation also permit the removal of directors for cause upon
the affirmative vote of 66-2/3% of the members of the board of
directors then in office. Our bylaws require parties to provide
advance written notice of nominations for the election of directors
other than the board of directors and shareholders holding 30% or
more of the voting power of the aggregate number of our shares
issued and outstanding and entitled to vote.
No Cumulative Voting
Our articles of incorporation prohibit cumulative voting.
Shareholder Meetings
Under our bylaws, annual shareholder meetings will be held at a
time and place selected by our board of directors. The meetings may
be held in or outside of the Marshall Islands. Special meetings may
be called by the chairman of our board of directors, by resolution
of our board of directors or by holders of 30% or more of the
voting power of the aggregate number of our shares issued and
outstanding and entitled to vote at such meeting. Our board of
directors may set a record date between 15 and 60 days before the
date of any meeting to determine the shareholders that will be
eligible to receive notice and vote at the meeting.
Dissenters’ Right of Appraisal and Payment
Under the BCA, our shareholders may have the right to dissent from
various corporate actions, including certain amendments to our
articles of incorporation and certain mergers or consolidations or
the sale or exchange of all or substantially all of our assets not
made in the usual course of our business, and receive payment of
the fair value of their shares, subject to exceptions. The right of
a dissenting shareholder to receive payment of the fair value of
his shares is not available for the shares of any class or series
of stock, which shares at the record date fixed to determine the
shareholders entitled to receive notice of and vote at the meeting
of shareholders to act upon the agreement of merger or
consolidation or any sale or exchange of all or substantially all
of the property and assets of the corporation not made in the usual
course of its business, were either (1) listed on a securities
exchange or admitted for trading on an interdealer quotation system
or (2) held of record by more than 2,000 holders. In the event of
any further amendment of our articles of incorporation, a
shareholder also has the right to dissent and receive payment for
his or her shares if the amendment alters certain rights in respect
of those shares. The dissenting shareholder must follow the
procedures set forth in the BCA to receive payment. In the event
that we and any dissenting shareholder fail to agree on a price for
the shares, the BCA procedures involve, among other things, the
institution of proceedings in the high court of the Republic of the
Marshall Islands or in any appropriate court in any jurisdiction in
which our shares are primarily traded on a local or national
securities exchange to fix the value of the shares.
Shareholders’ Derivative Actions
Under the BCA, any of our shareholders may bring an action in our
name to procure a judgment in our favor, also known as a derivative
action, provided that the shareholder bringing the action is a
holder of common shares or a beneficial interest therein both at
the time the derivative action is commenced and at the time of the
transaction to which the action relates or that the shares devolved
upon the shareholder by operation of law, among other requirements
set forth in the BCA.
Amendment to our Articles of Incorporation
Except as otherwise provided by law, any provision in our articles
of incorporation requiring a vote of shareholders may only be
amended by such a vote. Further, certain sections may only be
amended by affirmative vote of the holders of at least a majority
of the voting power of the voting shares.
Anti-Takeover Effects of Certain Provisions of our Articles of
Incorporation and Bylaws
Several provisions of our articles of incorporation and bylaws,
which are summarized below, may have anti-takeover effects. These
provisions are intended to avoid costly takeover battles, lessen
our vulnerability to a hostile change of control and enhance the
ability of our board of directors to maximize shareholder value in
connection with any unsolicited offer to acquire our company.
However, these anti-takeover provisions could also discourage,
delay or prevent the merger or acquisition of our company by means
of a tender offer, a proxy contest or otherwise that a shareholder
may consider in its best interest and the removal of incumbent
officers and directors, which could affect the desirability of our
shares and, consequently, our share price.
Multi Class Stock. Our multi-class stock structure, which
consists of common shares, Class B common shares, and preferred
shares, can provide holders of our Class B common shares or
preferred shares a significant degree of control over all matters
requiring shareholder approval, including the election of directors
and significant corporate transactions, such as a merger or other
sale of our company or its assets, because our different classes of
shares can have different numbers of votes.
For instance, while our common shares have one vote on matters
before the shareholders, each of our 10,300 outstanding Series B
preferred shares has 25,000 votes on matters before the
shareholders; provided however, that no holder of
Series B preferred shares may exercise voting rights pursuant to
any Series B preferred shares that would result in the total number
of votes a holder is entitled to vote on any matter submitted to a
vote of shareholders of the Company to exceed 49.99% of the total
number of votes eligible to be cast on such matter. No Class B
common shares are presently outstanding, but if and when we issue
any, each Class B common share will have 20 votes on matters before
the shareholders.
At present, and until a substantial number of additional securities
are issued, our holder of Series B preferred shares exerts
substantial control of the Company’s votes and is able to exert
substantial control over our management and all matters requiring
shareholder approval, including electing directors and significant
corporate transactions, such as a merger. Such holder’s interest
could differ from yours.
Blank Check Preferred Shares. Under the terms of our
articles of incorporation, our board of directors has authority,
without any further vote or action by our shareholders, to issue up
to 100 million “blank check” preferred shares, almost all of which
currently remain available for issuance. Our board could authorize
the issuance of preferred shares with voting or conversion rights
that could dilute the voting power or rights of the holders of
common shares, in addition to preferred shares that are already
outstanding. The issuance of preferred shares, while providing
flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, have the effect of
delaying, deferring or preventing a change in control of us or the
removal of our management and may harm the market price of our
common shares.
Classified Board of Directors. Our articles of incorporation
provide for the division of our board of directors into three
classes of directors, with each class as nearly equal in number as
possible, serving staggered, three-year terms beginning upon the
expiration of the initial term for each class. Approximately
one-third of our board of directors is elected each year. This
classified board provision could discourage a third party from
making a tender offer for our shares or attempting to obtain
control of us. It could also delay shareholders who do not agree
with the policies of our board of directors from removing a
majority of our board of directors for up to two years.
Election of Directors. Our articles of incorporation do not
provide for cumulative voting in the election of directors. Our
bylaws require parties, other than the chairman of the board of
directors, board of directors and shareholders holding 30% or more
of the voting power of the aggregate number of our shares issued
and outstanding and entitled to vote, to provide advance written
notice of nominations for the election of directors. These
provisions may discourage, delay or prevent the removal of
incumbent officers and directors.
Advance Notice Requirements for Shareholder Proposals and
Director Nominations. Our bylaws provide that shareholders,
other than shareholders holding 30% or more of the voting power of
the aggregate number of our shares issued and outstanding and
entitled to vote, seeking to nominate candidates for election as
directors or to bring business before an annual meeting of
shareholders must provide timely notice of their proposal in
writing to the corporate secretary. Generally, to be timely, a
shareholder’s notice must be received at our principal executive
offices not less than 150 days or more than 180 days prior to the
first anniversary date of the immediately preceding annual meeting
of shareholders.
Our bylaws also specify requirements as to the form and content of
a shareholder’s notice. These provisions may impede a shareholder’s
ability to bring matters before an annual meeting of shareholders
or make nominations for directors at an annual meeting of
shareholders.
Calling of Special Meetings of Shareholders. Our bylaws
provide that special meetings of our shareholders may be called
only by the chairman of our board of directors, by resolution of
our board of directors or by holders of 30% or more of the voting
power of the aggregate number of our shares issued and outstanding
and entitled to vote at such meeting.
Action by Written Consent in Lieu of a Meeting. Our articles
permit any action which may or is required by the BCA to be taken
at a meeting of the shareholders to be authorized by consents in
writing signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Presently and
until and unless we issue a significant number of securities,
Goldenmare Limited, a company affiliated with our Chief Executive
Officer, holds Series B preferred shares controlling 49.99% of the
voting power of our outstanding capital stock. Goldenmare could,
together with shareholders possessing a relatively small number of
shares, act by written consent in lieu of a meeting and authorize
major transactions on behalf of the Company, all without calling a
meeting of shareholders.
Business Combinations
Although the BCA does not contain specific provisions regarding
“business combinations” between corporations incorporated under or
redomiciled pursuant to the laws of the Marshall Islands and
“interested shareholders,” our articles of incorporation prohibit
us from engaging in a business combination with an interested
shareholder for a period of three years following the date of the
transaction in which the person became an interested shareholder,
unless, in addition to any other approval that may be required by
applicable law:
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prior to the date of the transaction that
resulted in the shareholder becoming an interested shareholder, our
board of directors approved either the business combination or the
transaction that resulted in the shareholder becoming an interested
shareholder; |
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upon consummation of the transaction that
resulted in the shareholder becoming an interested shareholder, the
interested shareholder owned at least 85.0% of our voting shares
outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those
shares owned by (1) persons who are directors and officers and (2)
employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer;
or |
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at or after the date of the transaction that
resulted in the shareholder becoming an interested shareholder, the
business combination is approved by our board of directors and
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