As filed with the U.S. Securities and Exchange Commission on December 22, 2022
Registration No.333-264167​
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​
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
​
AMENDMENT NO. 6
to
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933​
OCEANPAL INC.
(Exact name of Registrant as specified in its charter)
​
Republic of The Marshall Islands
(State or other jurisdiction of
incorporation or organization)
​ ​
4412
(Primary Standard Industrial
Classification Code Number)
​ ​
N/A
(I.R.S. Employer
Identification No.)
​
​
OceanPal Inc.
c/o Steamship Shipbroking
Enterprises Inc.
Pendelis 26, 175 64 Palaio
Faliro, Athens, Greece
+ 30-210-9485-360
(Address and telephone number of
Registrant’s principal executive offices)
​ ​ ​ ​ ​
 
Seward & Kissel LLP
Attention: Edward S. Horton, Esq.
One Battery Park Plaza
New York, New York 10004
(212) 574-1265
(Name, address and telephone
number of agent for service)
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​
Copies to:
​
 
 
Edward S. Horton, Esq.
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
(212) 574-1265 (telephone number)
(212) 480-8421 (facsimile number)
​ ​
Barry I. Grossman, Esq.
Sarah Williams, Esq.
Matthew Bernstein, Esq.
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, New York 10105
(212) 370-1300 (telephone number)
(212) 370-7889 (facsimile number)
​
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
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 7(a)(2)(B) of the Securities Act. ☒
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†
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
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION DATED DECEMBER 22, 2022
Preliminary Prospectus
[MISSING IMAGE: lg_oceanpal-4clr.jpg]
OceanPal Inc.
Up to 17,006,803 Units consisting of Common Stock or Pre-Funded Warrants
to Purchase Common Stock and
Class B Warrants to Purchase Common Stock
We are offering up to 17,006,803 Units consisting of one share of common stock and one Class B Warrant to purchase one share of common stock on a best efforts basis. Each Class B Warrant will be immediately exercisable for one share of common stock at an exercise price of $1.47 per share (not less than 100% of the public offering price of each unit sold in this offering) and expire five years after the issuance date. We are also offering to each purchaser of Units that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of our outstanding common stock immediately following the consummation of this offering, the opportunity to purchase Units consisting of one pre-funded warrant (in lieu of one share of common stock) and one Class B Warrant. Subject to limited exceptions, a holder of pre-funded warrants will not have the right to exercise any portion of its pre-funded warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit may be increased to up to 9.99%) of the number of common stock outstanding immediately after giving effect to such exercise. Each pre-funded warrant will be exercisable for one share of common stock. The purchase price of each Unit including a pre-funded warrant will be equal to the price per Unit including one share of common stock, minus $0.01, and the remaining exercise price of each pre-funded warrant will equal $0.01 per share. The pre-funded warrants will be immediately exercisable (subject to the beneficial ownership cap) and may be exercised at any time until all of the pre-funded warrants are exercised in full. For each Unit including a pre-funded warrant we sell (without regard to any limitation on exercise set forth therein), the number of Units including a share of common stock we are offering will be decreased on a one-for-one basis. The common stock and pre-funded warrants, if any, can each be purchased in this offering only with the accompanying Class B Warrant as part of a Unit, but the components of the Units will immediately separate upon issuance. See “Description of Capital Stock — Securities We Are Offering” in this prospectus for more information.
Our common stock is listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “OP”. On December 20, 2022, the sale price of our common stock was $1.47 per share, as reported by Nasdaq, as adjusted for the reverse stock split effective on December 22, 2022 described herein. The actual public offering price per Unit will be determined between us, the Placement Agent and the investors in the offering, and may be at a discount to the current market price of our common stock. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final offering price.
There is no established trading market for the pre-funded warrants, or the Class B Warrants, and we do not expect an active trading market to develop. We do not intend to list the pre-funded warrants or the Class B Warrants on any securities exchange or other trading market. Without an active trading market, the liquidity of these securities will be limited.
There is no minimum number of Units or minimum aggregate amount of proceeds for this offering to close. We expect this offering to be completed not later than two business days following the commencement of this offering and we will deliver all securities to be issued in connection with this offering delivery versus payment (“DVP”)/receipt versus payment (“RVP”) upon receipt of investor funds received by the Company. Accordingly, neither we nor the Placement Agent have made any arrangements to place investor funds in an escrow account or trust account since the placement agent will not receive investor funds in connection with the sale of the securities offered hereunder.
We are an “emerging growth company,” as defined under the U.S. federal securities laws and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.
Investing in our securities is speculative and involves a high degree of risk. You should carefully consider the risk factors beginning on page 9 of this prospectus before investing in our securities.
​ ​ ​
Per Unit(1)
​ ​
Total
​
Assumed Public Offering Price(2)
​ ​ ​ $        ​ ​ ​ ​ $        ​ ​
Placement Agent fees(3)(4)
​ ​ ​ $ ​ ​ ​ ​ $ ​ ​
Proceeds, before expenses, to us
​ ​ ​ $ ​ ​ ​ ​ $ ​ ​ ​
​
(1)
Units consist of one share of common stock and one Class B Warrant.
​
(2)
Calculated based on an assumed offering price of $1.47, which represents the closing sales price on the Nasdaq Capital Market of the registrant’s common stock on December 20, 2022, as adjusted for the reverse stock split effective on December 22, 2022 described herein.
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(3)
The placement agent fees shall equal 7.5% of the gross proceeds of the securities sold by us in this offering.
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(4)
The Placement Agent will receive compensation in addition to the placement agent fees described above. See “Plan of Distribution” for a description of compensation payable to the Placement Agent.
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We have engaged Maxim Group LLC as our exclusive placement agent (“Maxim” or the “Placement Agent”) to use its reasonable best efforts to solicit offers to purchase our securities in this offering. The Placement Agent has no obligation to purchase any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. Because there is no minimum offering amount required as a condition to closing in this offering the actual public amount, placement agent’s fee, and proceeds to us, if any, are not presently determinable and may be substantially less than the total maximum offering amounts set forth above and throughout this prospectus. We have agreed to pay the Placement Agent the placement agent fees set forth in the table above and to provide certain other compensation to the Placement Agent. See “Plan of Distribution” beginning on page 96 of this prospectus for more information regarding these arrangements.
We expect to deliver the shares of common stock and Class B Warrants, or pre-funded warrants and Class B Warrants, constituting the Units against payment in New York, New York on or about,         .
Neither the Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Maxim Group LLC
The date of this prospectus is December 22, 2022
 
TABLE OF CONTENTS
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form F-1 that we filed with the SEC for the offering by us of Units consisting of common stock and Class B Warrants or pre-funded warrants and Class B Warrants to purchase common stock.
You should not assume that the information contained in this prospectus is accurate on any date subsequent to the date set forth on the front cover of this, even though this prospectus is delivered or Units, Class B Warrants and common stock are sold or otherwise disposed of on a later date. It is important for you to read and consider all information contained in this prospectus in making your investment decision. You should also read and consider the information in the documents to which we have referred you under the captions “Where You Can Find Additional Information” in this prospectus.
Neither we nor the Placement Agent has authorized anyone to provide any information or to make any representation other than those contained in this prospectus. You must not rely upon any information or representation not contained in this prospectus. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any of our securities other than the Units and the common stock underlying the Class B Warrants and pre-funded warrants covered hereby, nor does this prospectus constitute an offer to sell or the solicitation of an offer to buy any securities of the Company in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.
This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. Please read “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”
 
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PROSPECTUS SUMMARY
This section summarizes certain of the information that is contained in this prospectus or the documents herein, and this summary is qualified in its entirety by that more detailed information. This summary may not contain all of the information that may be important to you. We urge you to carefully read this entire prospectus, including our financial statements and the related notes. As an investor or prospective investor, you should review carefully the more detailed information that appears later in this prospectus.
Unless the context otherwise requires, as used in this prospectus, the terms “OceanPal,” “Company,” “we,” “us,” and “our” refer to OceanPal Inc. and its consolidated subsidiaries.
We use the term deadweight tons, or dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, in describing the size of our vessels.
All references in this prospectus to “$,” “US$,” “U.S.$,” “U.S. dollars,” “dollars” and “USD” are to the lawful currency of the United States.
Our Company
We are a global provider of shipping transportation services. We specialize in the ownership of vessels. Each of our vessels is owned through a separate wholly-owned subsidiary.
We were incorporated by Diana Shipping Inc. (NYSE:DSX) (“Diana Shipping”), under the laws of the Republic of the Marshall Islands on April 15, 2021, to serve as the holding company of the three vessel-owning subsidiaries that were contributed to us by Diana Shipping (the “OceanPal Inc. Predecessors”), together with $1.0 million in working capital, in connection with the distribution of all of our issued and outstanding common stock to Diana Shipping’s shareholders on November 29, 2021 (the “Spin-Off”). In connection with the Spin-Off, Diana Shipping received 500,000 shares of our Series B Preferred Stock (“Series B Preferred Stock”) and 10,000 shares of our 8.0% Series C Cumulative Convertible Perpetual Preferred Stock (“Series C Preferred Stock”). We and Diana Shipping are independent publicly traded companies with separate independent boards of directors. All references in this registration statement to us for periods prior to the Spin-Off refer to the OceanPal Inc. Predecessors. The unaudited interim consolidated financial statements of the Company for the six month period ended June 30, 2022 and for the period from inception (April 15, 2021) through June 30, 2021 and the consolidated financial statements for the period from inception (April 15, 2021) through December 31, 2021, are included in this registration statement. The Report on Form 6-K, which was furnished to the Commission on November 29, 2022 and which contains our interim unaudited consolidated statement of operations and condensed consolidated balance sheet as of and for the nine months ended September 30, 2022, is incorporated by reference to this registration statement. The operations of the Company’s vessels started effective November 30, 2021 upon Spin-Off consummation. The Company’s interim consolidated financial statements referring to periods prior to November 30, 2021 consisted principally of organizational expenses. Effective December 22, 2022, we effected a 1-for-10 reverse stock split on our common stock. Unless otherwise indicated, the Company’s financial statements have not been retroactively adjusted to reflect the reverse stock split.
On November 30, 2021, our common stock began trading on the Nasdaq Capital Market under the ticker symbol “OP”.
On September 20, 2022, we took delivery of the 2005-built Capesize vessel, m/v Baltimore, pursuant to a memorandum of agreement with Diana Shipping that we had previously entered into on June 13, 2022 for a total consideration of $22.0 million. Of the purchase price, 20%, or $4.4 million, was paid in cash upon signing of the memorandum of agreement, and the remaining amount of $17.6 million was paid upon delivery of the vessel to us in the form of 25,000 shares of Series D Preferred Stock. Please see “Directors, Senior Management and Employees — Related Party Transactions — Diana Shipping Right of First Refusal” for additional information.
As of the date of this prospectus, our operating fleet consists of four dry bulk carriers, of which two are Panamaxes and two are Capesize vessels, having a combined carrying capacity of 496,374 dwt and a weighted average age of 17.7 years. For the period from November 30, 2021 to December 31, 2021, we had fleet utilization of 100%, achieved daily time charter equivalent rates of $13,333 and generated revenues of
 
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$1.33 million, and for the first nine months of 2022, we had fleet utilization of 92.6%, achieved daily time charter equivalent rates of $15,995 and generated revenues of $13.4 million.
Our Current Fleet
The following table presents certain information concerning the dry bulk carriers in our fleet, as of December 21, 2022:
Vessel
BUILT / DWT 		​ ​
Sister
Ships*
​ ​
Gross Rate
(USD Per
Day)
​ ​
Com**
​ ​
Charterers
​ ​
Delivery Date
to
Charterers***
​ ​
Redelivery Date to
Owners****
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Notes
​
Protefs
​ ​ ​ ​ A ​ ​ ​ ​ $ 16,250 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Louis Dreyfus
Company Suisse S.A.
​ ​
23-Sep-22
​ ​
24-Nov-22
​ ​ ​ ​ 1 ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 12,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Ssangyong C&E Co., Ltd
​ ​
25-Nov-22
​ ​
18-Dec-22
​ ​ ​ ​ ​ ​ ​
2004 / 73,630 dwt ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 7,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
GUO LONG
XIANG LIMITED
​ ​
18-Dec-22
​ ​
07-Jan-23 –
12-Jan-23
​ ​ ​ ​ 2 ​ ​
Calipso 2005 / ​ ​ ​ ​ A ​ ​ ​ ​ $ 19,600 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
ETG Commodities Ltd.
​ ​
2-Jul-22
​ ​
03-Nov-22
​ ​ ​ ​ ​ ​ ​
73,691 dwt ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 15,250 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Al Ghurair Resources
International LLC
​ ​
03-Nov-22
​ ​
22-Jan-23
​ ​ ​ ​ 3 ​ ​
Salt Lake City
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 29,750 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Koch Shipping Pte. Ltd
​ ​
9-Jun-22
​ ​
14-Oct-22
​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 13,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Hyundai Glovis Co., Ltd
​ ​
14-Oct-22
​ ​
20-Nov-22
​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 8,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​ ​ ​ ​
20-Nov-22
​ ​
20-Dec-22
​ ​ ​ ​ ​ ​ ​
2005 / 171,810 dwt ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 10,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Oldendorff
GmbH & Co. KG
​ ​
20-Dec-22
​ ​
13-Feb-23 –
18-Feb-23
​ ​ ​ ​ 4 ​ ​
Baltimore ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 15,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Hyundai Glovis Co.,
Ltd
​ ​
21-Sep-22
​ ​
03-Nov-22
​ ​ ​ ​ 5 ​ ​
2005 / 177,243 ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 12,900 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Enesel Bulk Logistics
DMCC
​ ​
03-Nov-22
​ ​
22-Jan-23
​ ​ ​ ​ 6 ​ ​
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*
Each dry bulk carrier is a “sister ship”, or closely similar, to other dry bulk carriers that have the same letter.
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**
Total commission percentage paid to third parties.
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***
In case of newly acquired vessel with time charter attached, this date refers to the expected/actual date of delivery of the vessel to the Company.
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****
Range of redelivery dates, with the actual date of redelivery being at the Charterers’ option, but subject to the terms, conditions, and exceptions of the particular charterparty.
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1
Charterer paid an additional one time ballast bonus payment of $625,000.
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2
Redelivery date based on an estimated time charter trip duration of about 23 days.
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3
Redelivery date based on an estimated time charter trip duration of about 60 days.
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4
Redelivery date based on an estimated time charter trip duration of about 55 – 60 days.
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5
For the last three (3) days of the time charter duration, the gross charter rate was US$18,000 per day, minus a 5% commission paid to third parties, as per the agreed charterparty, which states that for each additional day exceeding the first forty (40) days of the time charter trip, the gross charter hire will be US$18,000 per day.
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Redelivery date based on an estimated time charter trip duration of about 80 days. In the event that the trip duration exceeds one hundred ten (110) days, the gross charter rate will be $15,000 per day, minus a 5% commission paid to third parties, for each additional day.
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Recent and Other Developments
First six months of 2022
For the six months ended June 30, 2022, we reported net income of $1.1 million and net loss attributed to common stockholders of $0.28 million. For the six months ended June 30, 2022, we also reported time
 
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charter revenues of $8.3 million. Time-charter equivalent rate (TCE) achieved during the first semester of 2022 was $14,824. During the six months period ended June 30, 2022, net cash provided by operating and financing activities was $2.37 million and $11.72 million, respectively, whereas net cash used in investing activities amounted to $4.78 million. As at June 30, 2022, working capital, which is current assets minus current liabilities, amounted to $11.63 million.
Three and Nine Months ended September 30, 2022
For the three months ended September 30, 2022, we reported net income of $1.1 million and net income attributed to common stockholders of $0.4 million. For the three months ended September 30, 2022, we also reported time charter revenues of $5.12 million. Time-charter equivalent rate (TCE) achieved during the three months period ended September 30, 2022 was $18,233. During the three months period ended September 30, 2022, net cash provided by operating activities was $0.45 million, whereas net cash used in financing and in investing activities amounted to $0.22 million and $0.95 million, respectively.
For the nine months ended September 30, 2022, we reported net income of $2.16 million and net income attributed to common stockholders of $0.22 million. For the nine months ended September 30, 2022, we also reported time charter revenues of $13.36 million. Time-charter equivalent rate (TCE) achieved during the nine months period ended September 30, 2022 was $15,995. During the nine months period ended September 30, 2022, net cash provided by operating and financing activities was $2.82 million and $10.77 million, respectively, whereas net cash used in investing activities amounted to $5 million. As at September 30, 2022, working capital, which is current assets minus current liabilities, amounted to $12.79 million.
Nasdaq Deficiency
On March 8, 2022, we received a written notification from Nasdaq indicating that because the closing bid price of our common shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement under Nasdaq rules. Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance is 180 days, or until September 5, 2022. On September 6, 2022, we were granted an additional 180-day period from the NASDAQ Stock Market, through March 6, 2023, to regain compliance with the $1.00 minimum bid price requirement for continued listing on the Nasdaq Capital Market. On December 22, 2022, we effected a 1-for-10 reverse split of our common stock. The reverse stock split became effective and our common stock began trading on a split-adjusted basis on the NASDAQ Capital Market at the opening of trading on December 22, 2022. Provided that the closing bid price of our common stock remains at $1.00 per share or higher for at least ten consecutive business days during, we expect to regain compliance with the Nasdaq Capital Market minimum bid price requirement.
The reverse stock split was approved by our shareholders at our 2022 Annual Meeting of Shareholders held on April 5, 2022. The one-for ten ratio was approved by our Board on December 19, 2022. Our Board has the autority to effect one or more additional reverse stock splits on our issued shares of common stock, pursuant to the shareholder approval granted on April 5, 2022, each at a ratio of not less than one-for-two and not more than one-for-10 that, together with the reverse stock split effective December 22, 2022, result in the aggregate at a ratio of not more than one-for-40.
As a result of this reverse stock split, there was no change in the number of authorized shares or the par value of our common stock. All share and per share amounts disclosed herein, unless indicated otherwise, give effect to this reverse stock split retroactively, for all periods presented.
Underwritten Public Offering
On January 25, 2022, we closed an underwritten public offering of 15,571,429 units at a price of $0.77 per unit, each unit consisting of one share of our common stock (or one pre-funded warrant in lieu of one share of our common stock) and one Class A warrant to purchase one tenth shares of our common stock, as adjusted for the reverse stock split effected on December 22, 2022. In addition, certain selling stockholders affiliated with us (the “Selling Stockholders”) sold an aggregate of 62,857 shares of common stock in the offering, as adjusted for the reverse stock split effected on December 22, 2022. Each of the 62,875 shares of common stock sold by the Selling Shareholders on the primary offering, as adjusted for the
 
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reverse stock split effected on December 22, 2022, was delivered to the underwriters with one additional Class A warrant to purchase one share of common stock (sold by the Company), on a firm commitment basis. In addition, the underwriter for the offering fully-exercised its option to purchase an additional 114,857 common shares from the Selling Stockholders, as adjusted for the reverse stock split effected on December 22, 2022 and 128,142 common shares, as adjusted for the reverse stock split effected on December 22, 2022, along with 2,430,000 Class A warrants from us to purchase 243,000 shares of common stock , as adjusted for the reverse stock split effected on December 22, 2022. Each of the 114,857 shares of common stock sold by the Selling Shareholders upon exercise of the underwriters’ over-allotment option, as adjusted for the reverse stock split effected on December 22, 2022, was sold with one Class A warrant (sold by the Company) to purchase one share of common stock, on a firm commitment basis. As of December 22, 2022, all prefunded warrants have been exercised and Class A warrants to purchase 1,447,400 common shares remains available for exercise at an exercise price of $7.7 per share, as adjusted for the reverse stock split effected on December 22, 2022, for up to an aggregate of the same number of shares of common stock. The gross proceeds of the offering to us, before underwriting discounts and commissions and estimated offering expenses, were approximately $16.19 million (including the exercise of the overallotment option, the exercise of 4,156,000 Class A warrants to purchase 415,600 shares of common stock, as adjusted for the reverse stock split effected on December 22, 2022 and the exercise of all pre-funded warrants. We did not receive any of the proceeds from the sale of common shares by the Selling Shareholders and only received the proceeds for the class A warrants sold together with the Selling Shareholders’ shares of common stock. We refer to this offering as the “January 2022 Offering.”
2021 Equity Incentive Plan Awards
On April 15, 2022, our Board of Directors approved the award of 1,982 shares of Series C Preferred Stock to executive management and non-executive directors, pursuant to our 2021 Equity Incentive Plan, as amended and restated (or “2021 Equity Incentive Plan”), as an annual bonus.
Dividend Declaration
On January 17, 2022, we paid a dividend on our then outstanding Series C Preferred Stock (i.e. 10,000 shares) in the aggregate amount of $0.1 million.
On March 18, 2022, our Board of Directors declared a cash dividend on our common stock of $0.5 per share for the fourth quarter ended December 31, 2021, as adjusted for the reverse stock split effected on December 22, 2022. We had 2.98 million shares of common stock issued and outstanding on the record date (April 1, 2022), as adjusted for the reverse stock split effected on December 22, 2022. Holders of our Class A Warrants as of April 1, 2022 received a cash payment in the amount of $0.5 for each common share, as adjusted for the reverse stock split effected on December 22, 2022, that such holder would be entitled to receive upon exercise of their Class A Warrants. As of record date April 1, 2022, there were Class A Warrants exercisable for an aggregate of approximately 1.45 million common shares, as adjusted for the reverse stock split effected on December 22, 2022. On April 11 and 13, 2022, we paid a dividend of $1.49 million on common stock and of $0.73 million on Class A warrants holders of record April 1, 2022, amounting to $2.22 million in aggregate.
On April 14, 2022, we paid a dividend on our then outstanding Series C Preferred Stock (i.e. 10,000 shares) in the aggregate amount of $0.2 million.
On May 30, 2022 our Board of Directors declared a cash dividend on our common stock of $0.1 per share for the first quarter ended March 31, 2022, as adjusted for the reverse stock split effected on December 22, 2022. The cash dividend was paid to all common shareholders of record as of June 14, 2022. Holders of our Class A Warrants as of June 14, 2022 also received a cash payment in the amount of $0.1 for each common share that such holder would be entitled to receive upon exercise of their Class A Warrants, as adjusted for the reverse stock split effected on December 22, 2022. On June 21, 2022, we paid a dividend of $0.3 million on common stock and of $0.14 million on Class A warrants holders of record June 14, 2022, amounting to $0.44 million in aggregate.
On July 14, 2022, we paid a dividend on our then outstanding Series C Preferred Stock (i.e. 10,000 shares) and on 1,982 shares of Series C Preferred Stock awarded to executive management and non-executive directors on April 15, 2022, in the aggregate amount of $0.24 million.
 
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On July 27, 2022 our Board of Directors declared a cash dividend on our common stock of $0.1 per share for the second quarter ended June 30, 2022, as adjusted for the reverse stock split effected on December 22, 2022. The cash dividend was paid to all common shareholders of record as of August 12, 2022. Holders of our Class A Warrants as of August 12, 2022 also received a cash payment in the amount of $0.1 for each common share that such holder would be entitled to receive upon exercise of their Class A Warrants, as adjusted for the reverse stock split effected on December 22, 2022. On August 31, 2022, we paid a dividend of $0.3 million on common stock and of $0.14 million on Class A warrants holders of record June 14, 2022, amounting to $0.44 million in aggregate.
On September 19, 2022, our Board of Directors declared a cash dividend of $0.24 million on our outstanding Series C Preferred Stock (i.e. 10,000 shares) and on 1,982 shares of Series C Preferred Stock awarded to executive management and non-executive directors on April 15, 2022, for the period from July 15, 2022 to October 14, 2022, which is payable on October 17, 2022.
On October 17, 2022, we paid a dividend on our then outstanding Series C Preferred Stock (i.e. 10,000 shares) and on 1,982 shares of Series C Preferred Stock awarded to executive management and non-executive directors on April 15, 2022, in the aggregate amount of $0.24 million.
On October 17, 2022, we paid a dividend on our then outstanding Series D Preferred Stock (i.e. 25,000 shares), in the aggregate amount of $0.12 million.
Acquisition of the m/v Baltimore
On June 13, 2022, we entered into a memorandum of agreement with Diana Shipping to acquire a 2005-built Capesize vessel, the m/v Baltimore, having a carrying capacity of 177,243 dwt and an age of 17.3 years, as of that date, for a total consideration of $22.0 million. Of the purchase price, 20%, or $4.4 million, was paid in cash upon signing of the memorandum of agreement, and the remaining amount was paid upon delivery of the vessel to us in 25,000 shares of our newly established Series D Preferred Stock, the material terms of which are described herein under the section “Description of Capital Stock — Series D Preferred Stock.” Our purchase of this vessel was made pursuant to our exercise of a right of first refusal granted to us by Diana Shipping on six identified vessels based on an agreement dated November 8, 2021. The vessel was delivered to the Company on September 20, 2022. The acquisition of the vessel was approved by a committee of independent members of our Board of Directors. For additional information, please see “Directors, Senior Management and Employees — Related Party Transactions — Diana Shipping Right of First Refusal.”
Diana Shipping Stock Distribution
Diana Shipping declared a special stock dividend to all of its shareholders of record as of November 28, 2022 of all of our shares of Series D Preferred Stock held by Diana Shipping. The dividend was paid on December 15, 2022 (the “Stock Dividend”). Because no public market exists or is expected to develop for our Series D Preferred Stock, as an accommodation to its common shareholders, Diana Shipping converted the shares of our Series D Preferred Stock into our Common Shares on the Stock Dividend payment date and distributed our Common Shares to each of its common shareholders. Diana Shipping common shareholders, in their sole discretion, were given the opportunity to opt out, in whole but not in part, of the conversion of the shares of Series D Preferred Stock into our Common Shares and instead receive shares of Series D Preferred Stock in connection with the Stock Dividend.
Diana Shipping's shareholders electing to receive shares of our Series D Preferred Stock by opting out of the automatic conversion received a number of shares of Series D Preferred Stock equal to such common shareholder’s pro-rata portion of all the shares of our Series D Preferred Stock, rounded down to the nearest whole number. Any fractional shares of the Series D Preferred Stock that would otherwise be distributed were converted into our Common Shares at the applicable conversion rate and sold, and the net proceeds therefrom were delivered to such common shareholder. Diana Shipping common shareholders receiving our Common Shares received the pro-rata number of Common Shares to which they are entitled following conversion, rounded down to the nearest whole number, and any fractional shares were aggregated
 
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and sold and the net proceeds thereof were delivered to Diana Shipping's common shareholders. All of our fractional share calculations and the payment of cash in lieu thereof were determined at the shareholder nominee level.
As a result of the Diana Shipping Stock Distribution, 7,201,145 of our Common Shares, as adjusted for the reverse stock split effected on December 22, 2022 were issued and distributed, and 9,172 shares of our Series D preferred Stock were distributed to Diana Shipping stockholders.
Implications of Being an Emerging Growth Company
We had less than $1.07 billion in revenue during our last fiscal year, which means that we qualify as an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage or specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
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exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal controls over financial reporting under Section 404(b) of Sarbanes-Oxley;
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exemption from new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies; and
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exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and financial statements
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We may take advantage of these provisions until the end of the fiscal year following the fifth anniversary of the date we first sell our common equity securities pursuant to an effective registration statement under the Securities Act or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if, among other things, we have more than $1.07 billion in “total annual gross revenues” during the most recently completed fiscal year. We may choose to take advantage of some, but not all, of these reduced burdens. For as long as we take advantage of the reduced reporting obligations, the information that we provide shareholders may be different from information provided by other public companies. We are choosing to “opt out” of the extended transition period relating to the exemption from new or revised financial accounting standards and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth public companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
Corporate Information
OceanPal Inc. is a holding company existing under the laws of the Marshall Islands. We maintain our principal executive offices at Pendelis 26, 175 64 Palaio Faliro, Athens, Greece. Our telephone number at that address is +30-210-9485-360. Our website address is http://www.oceanpal.com. The information on our website is not a part of this prospectus.
 
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THE OFFERING
Issuer
OceanPal Inc., a Marshall Islands corporation.
Securities offered by us
Up to 17,006,803 Units on a best efforts basis. Each Unit consists of one share of common stock and one Class B Warrant (together with the common stock underlying the Class B Warrants).
We are also offering to each purchaser, with respect to the purchase of Units that would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of our outstanding common stock immediately following the consummation of this offering, the opportunity to purchase one pre-funded warrant in lieu of one share of common stock. Subject to limited exceptions, a holder of pre-funded warrants will not have the right to exercise any portion of its pre-funded warrant if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit may be increased to up to 9.99%) of the number of common stock outstanding immediately after giving effect to such exercise. Each pre-funded warrant will be exercisable for one common stock. The purchase price per pre-funded warrant will be equal to the price per common stock, minus $0.01, and the exercise price of each pre-funded warrant will equal $0.01 per share. The pre-funded warrants will be immediately exercisable (subject to the beneficial ownership cap) and may be exercised at any time in perpetuity until all of the pre-funded warrants are exercised in full.
The Units will not be certificated or issued in stand-alone form. The common stock and/or pre-funded warrants and the Class B Warrants comprising the Units are immediately separable upon issuance and will be issued separately in this offering.
Description of the Class B Warrants
Each Class B Warrant will have an exercise price of $     per share (not less than 100% of the public offering price of each unit sold in this offering), will be exercisable upon issuance and will expire five years from issuance. Each Class B Warrant is exercisable for one share of common stock, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common stock as described herein. The terms of the Class B Warrants will be governed by a Warrant Agency Agreement, dated as of the closing date of this offering, that we expect to be entered into between us and Computershare Trust Company, N.A., or its affiliate (the “Warrant Agent”). This prospectus also relates to the offering of the common stock issuable upon exercise of the Class B Warrants. For more information regarding the Class B Warrants, you should carefully read the section titled “Description of Capital Stock Securities Offered in this Offering” in this prospectus.
Common stock outstanding prior to this offering(1)
10,184,054 shares.
Common stock to be outstanding after this offering(1)
Up to 27,190,857 shares.
Use of proceeds
Net proceeds from this offering will be used for general corporate purposes, including for the potential future acquisition of vessels.
 
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Listing
Our common stock currently trades on the Nasdaq Capital Market symbol “OP.” We do not intend to list the Class B Warrants or pre-funded warrants offered hereunder on any stock exchange.
Risk factors
See “Risk Factors” and the other information included in this prospectus for a discussion of the factors you should consider carefully before deciding to invest in shares of our securities.
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(1)
Based on 10,184,054 shares outstanding on December 22, 2022, after giving effect to the reverse stock split effected on December 22, 2022. Except as otherwise noted, all information in this prospectus reflects and assumes (i) no sale of pre-funded warrants in this offering, which, if sold, would reduce the number of common stock that we are offering on a one-for-one basis, and (ii) no exercise of the Class B Warrants issued in this offering. The number of our shares of common stock outstanding prior to this offering and that will be outstanding immediately after this offering as shown above excludes, as of December 22, 2022, 1,447,400 shares of common stock issuable upon the exercise of outstanding Class A Warrants at an exercise price of $7.7 per share, as adjusted for the reverse stock split effected on December 22, 2022 described above, which warrants expire five years after the issuance date, or January 2027.
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RISK FACTORS
Summary of Risk Factors
The below bullets summarize the principal risk factors related to an investment in our Company.
Industry Specific Risk Factors
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Charter hire rates for dry bulk carriers are volatile, which may adversely affect our earnings, revenue and profitability and ability to comply with loan covenants in any future borrowing facilities we may enter into.
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The current state of the global financial markets and current economic conditions may adversely impact our results of operation, financial condition, cash flows, and ability to obtain additional financing or refinance any future credit facilities on acceptable terms which may negatively impact our business.
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Regulations relating to ballast water discharge may adversely affect our revenues and profitability.
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Outbreaks of epidemic and pandemic diseases, including COVID-19, and governmental responses thereto could adversely affect our business.
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Our operating results are subject to seasonal fluctuations, which could affect our operating results.
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An increase in the price of fuel may adversely affect our profits.
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We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business.
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The operation of dry bulk carriers has certain unique operational risks which could affect our earnings and cash flow.
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If our vessels call on ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S. government, the European Union, the United Nations, or other governmental authorities, it could lead to monetary fines or penalties and may adversely affect our reputation and the market for our securities.
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We conduct business in China, where the legal system is not fully developed and has inherent uncertainties that could limit the legal protections available to us.
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Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties and an adverse effect on our business.
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Changing laws and evolving reporting requirements could have an adverse effect on our business.
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Company Specific Risk Factors
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We have a limited operating history upon which investors can evaluate our future prospects.
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Although the market value of our vessels have increased during the past quarters, the market values have declined in recent years and may further decline in the future, which could limit the amount of funds that we can borrow in the future, trigger breaches of certain financial covenants contained in any future borrowing facilities we may enter into, and adversely affect our operating results, and we may incur a loss if we sell vessels following a decline in their market values.
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We charter some of our vessels on short-term time charters in a volatile shipping industry and a decline in charter hire rates could affect our results of operations and our ability to pay dividends.
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A cyber-attack could materially disrupt our business.
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Climate change and greenhouse gas restrictions may adversely impact our operations and markets.
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Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.
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•
Our earnings may be adversely affected if we are not able to take advantage of favorable charter rates.
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We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our business.
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In the highly competitive international shipping industry, we may not be able to compete for charters with new entrants or established companies with greater resources, and as a result, we may be unable to employ our vessels profitably.
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We may be unable to retain and recruit qualified key executives, key employees or key consultants, may delay our development efforts or otherwise harm our business.
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Technological innovation and quality and efficiency requirements from our customers could reduce our charterhire income and the value of our vessels.
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We may not have adequate insurance to compensate us if we lose our vessels or to compensate third parties.
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Our vessels may suffer damage and we may face unexpected drydocking costs, which could adversely affect our cash flow and financial condition.
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We are exposed to U.S. dollar and foreign currency fluctuations and devaluations that could harm our reported revenue and results of operations.
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We are exposed to volatility in the USD London Interbank Offered Rate, or LIBOR, and the potential discontinuance of LIBOR beyond 2023, which could, while limited, affect our profitability, earnings and cash flow.
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We depend upon a few significant customers for a large part of our revenues and the loss of one or more of these customers could adversely affect our financial performance.
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Because we are organized under the laws of the Marshall Islands, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.
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We may be subject to United States federal income tax on United States source income, which may reduce the Company’s earnings.
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United States tax authorities could treat us as a “passive foreign investment company,” which could have adverse United States federal income tax consequences to United States holders.
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Risks Relating to our Common Stock
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We cannot assure you that our board of directors will pay dividends in the future.
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The market price of our common stock may fluctuate widely and there is no guarantee that an active and liquid public market for you to resell our common stock in the future will continue.
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Since we are incorporated in the Marshall Islands, which does not have a well-developed body of corporate law, you may have more difficulty protecting your interests than shareholders of a U.S. corporation.
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Future sales of our common stock could cause the market price of our common stock to decline.
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Anti-takeover provisions in our organizational documents could make it difficult for our shareholders to replace or remove our current board of directors or have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of our common stock.
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Risks Relating to this Offering
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Since we have broad discretion in how we use the proceeds from this offering, we may use the proceeds in ways with which you disagree.
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Our share price may be volatile.
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We may not be able to maintain compliance with The NASDAQ Capital Market’s continued listing requirements.
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The United States federal income taxation of the pre-funded warrants is uncertain.
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Risk Factors
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 securities. The occurrence of any of the events described in this section could significantly and negatively affect our business, financial condition, operating results, cash available for the payment of dividends on our shares, or the trading price of our securities.
Industry Specific Risk Factors
Charter hire rates for dry bulk carriers are volatile, which may adversely affect our earnings, revenue and profitability.
The dry bulk shipping industry is cyclical with attendant volatility in charter hire rates and profitability. The degree of charter hire rate volatility among different types of dry bulk carriers has varied widely. When we charter our vessels pursuant to spot or short-term time charters, we are exposed to changes in spot market and short-term charter rates for dry bulk carriers and such changes may affect our earnings and the value of our dry bulk carriers at any given time. We cannot assure you that we will be able to successfully charter our vessels in the future or renew existing charters at rates sufficient to allow us to meet our obligations or pay any dividends in the future. Fluctuations in charter rates result from changes in the supply of and demand for vessel capacity and changes in the supply of and demand for the major commodities carried by water internationally. Because the factors affecting the supply of and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in industry conditions are also unpredictable. A significant decrease in charter rates would adversely affect our profitability, cash flows and may cause vessel values to decline, and, as a result, we may have to record an impairment charge in our consolidated financial statements which could adversely affect our financial results.
Factors that influence demand for dry bulk vessel capacity include:
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supply of and demand for energy resources, commodities, semi-finished and finished consumer and industrial products;
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changes in the exploration or production of energy resources, commodities, semi-finished and finished consumer and industrial products;
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the location of regional and global exploration, production and manufacturing facilities;
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the location of consuming regions for energy resources, commodities, semi-finished and finished consumer and industrial products;
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the globalization of production and manufacturing;
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global and regional economic and political conditions, including armed conflicts, terrorist activities, embargoes, strikes, tariffs and “trade wars,” including the impact of conflict in Ukraine;
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economic slowdowns caused by public health events such as the recent COVID-19 outbreak;
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natural disasters and other disruptions in international trade;
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disruptions and developments in international trade;
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changes in seaborne and other transportation patterns, including the distance cargo is transported by sea and trade patterns;
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international sanctions, embargoes, import and export restrictions, nationalizations, piracy, terrorist attacks and armed conflicts;
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legal and regulatory changes including regulations adopted by supranational authorities and/or industry bodies, such as safety and environmental regulations and requirements;
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•
weather and acts of God and natural disasters;
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environmental and other regulatory developments;
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currency exchange rates; and
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weather.
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Factors that influence the supply of dry bulk vessel capacity include:
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the number of newbuilding orders and deliveries, including slippage in deliveries;
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the number of shipyards and ability of shipyards to deliver vessels;
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port and canal congestion;
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the scrapping rate of older vessels;
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speed of vessel operation;
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vessel casualties;
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the number of vessels that are out of service, namely those that are laid-up, dry-docked, awaiting repairs or otherwise not available for hire; and
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sanctions (in particular, sanctions on Iran and Venezuela, amongst others).
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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 and 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 carriers will be dependent upon economic growth in the world’s economies, including China and India, seasonal and regional changes in demand, changes in the capacity of the global dry bulk carrier fleet and the sources and supply of dry bulk cargo transported by sea. While there has been a general decrease in new dry bulk carrier ordering since 2014, the capacity of the global dry bulk carrier fleet could increase and economic growth may not resume in areas that have experienced a recession or continue in other areas. Adverse economic, political, social or other developments could have a material adverse effect on our business and operating results.
The dry bulk carrier charter market remains significantly below its historic high and may have an adverse effect on our revenues, earnings and profitability.
The Baltic Dry Index, or the BDI, a daily average of charter rates for key dry bulk routes published by the Baltic Exchange Limited, 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 and has been very volatile. The BDI declined 94% in 2008 from a peak of 11,793 in May 2008 to a low of 663 in December 2008 and has remained volatile since then, reaching a record low of 290 in February 2016. In 2020, the BDI ranged from a low of 393 in May to a high of 2,097 in October, increased to a high of 5,650 on October 7, 2021, and dropped to 2,217 on December 24, 2021. The BDI further dropped to 1,296 on January 26, 2022, increased to a high of 3,369 on May 23, 2022, further dropped to 965 on August 31, 2022 and as of December 20, 2022 was 1,596. There can be no assurance that the dry bulk charter market will continue to improve in the future. The volatility in charter rates in the dry bulk market affects our earnings and results of operations and also affects the value of our dry bulk vessels, which follows the trends of dry bulk charter rates.
Volatility in the dry bulk carrier charter market has had and may continue to have additional adverse consequences for our industry, including an absence of financing for vessels, no active secondhand market for the sale of vessels, charterers seeking to renegotiate the rates for existing time charters, and widespread
 
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loan covenant defaults in the dry bulk shipping industry. Accordingly, the value of our common shares could be substantially reduced or eliminated.
The current state of the global financial markets and current economic conditions may adversely impact our results of operation, financial condition, cash flows, and ability to obtain additional financing or refinance any future credit facilities on acceptable terms which may negatively impact our business.
Global financial markets and economic conditions have been, and continue to be, volatile. Beginning in February 2020, due in part to fears associated with the spread of COVID-19 (as more fully described below), global financial markets, and starting in late February, financial markets in the U.S., experienced even greater relative volatility and may continue as COVID-19 pandemic and governmental responses continues to develop. Credit markets and the debt and equity capital markets have been distressed and the uncertainty surrounding the future of the global credit markets has resulted in reduced access to credit worldwide, particularly for the shipping industry. These issues, along with significant write-offs in the financial services sector, the repricing of credit risk and the current economic conditions, may make it difficult to obtain financing in the future. The current state of global financial markets and current economic conditions might adversely impact our ability to issue additional equity at prices that will not be dilutive to our shareholders or preclude us from issuing equity at all. Economic conditions may also adversely affect the market price of our common shares.
Also, as a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the availability and cost of obtaining money from the public and private equity and debt markets has become more difficult. Many lenders have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at all or on terms similar to current debt and reduced, and in some cases ceased, to provide funding to borrowers and other market participants, including equity and debt investors, and some have been unwilling to invest on attractive terms or even at all. Due to these factors, we cannot be certain that additional financing will be available if needed and to the extent required, on acceptable terms or at all. If financing or refinancing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they come due or we may be unable to meet our obligations as they come due or we may be unable to enhance our existing business, complete additional vessel acquisitions or otherwise take advantage of business opportunities as they arise.
Credit markets in the United States and Europe have in the past experienced significant contraction, deleveraging and reduced liquidity, and there is a risk that the U.S. federal government and state governments and European authorities continue to implement a broad variety of governmental action and/or new regulation of the financial markets. Global financial markets and economic conditions have been, and continue to be, disrupted and volatile. We face risks attendant to changes in economic environments, changes in interest rates, and instability in the banking and securities markets around the world, among other factors which may have a material adverse effect on our results of operations and financial condition and may cause the price of our common shares to decline.
Regulations relating to ballast water discharge may adversely affect our revenues and profitability.
The IMO has imposed updated guidelines for ballast water management systems specifying the maximum amount of viable organisms allowed to be discharged from a vessel’s ballast water. Depending on the date of the International Oil Pollution Prevention (‘IOPP’) renewal survey, existing vessels constructed before September 8, 2017 must comply with the updated D-2 Discharge Performance Standard (‘D-2 standard’) on or after September 8, 2019. For most vessels, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms. Ships constructed on or after September 8, 2017 are to comply with the D-2 standards on or after September 8, 2017.
Furthermore, United States regulations are currently changing. Although the 2013 Vessel General Permit (“VGP”) program and U.S. National Invasive Species Act (“NISA”) are currently in effect to regulate ballast discharge, exchange and installation, the Vessel Incidental Discharge Act (“VIDA”), which was signed into law on December 4, 2018, requires that the EPA develop national standards of performance for approximately 30 discharges, similar to those found in the VGP within two years. By approximately December 2022, the U.S. Coast Guard must develop corresponding implementation, compliance, and
 
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enforcement regulations regarding ballast water. The new regulations, which are not yet finalized, could require the installation of new equipment, which may cause us to incur substantial costs.
An over-supply of dry bulk carrier capacity may lead to reductions in current charter rates, vessel values and profitability.
The market supply of dry bulk carriers has increased materially since 2009 due to a high level of new deliveries in the last few years. Although dry bulk newbuilding deliveries have tapered off since 2014, newbuildings continued to be delivered through the end of 2018. While vessel supply will continue to be affected by the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or accidental losses, an over-supply of dry bulk carrier capacity could prolong the period during which low charter rates prevail.
Risks associated with operating ocean-going vessels could affect our business and reputation, which could adversely affect our revenues and stock price.
The operation of ocean-going vessels carries inherent risks. These risks include the possibility of:
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marine disaster;
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acts of God;
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terrorism;
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environmental accidents;
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cargo and property losses or damage;
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business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy and other circumstances or events. In addition, changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes or adverse weather conditions; and
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Piracy or robbery.
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These hazards may result in death or injury to persons, loss of revenues or property, the payment of ransoms, environmental damage, higher insurance rates, damage to our customer relationships,and market disruptions, delay or rerouting, which may also subject us to litigation. If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs and maintenance are unpredictable and may be substantial. We may have to pay drydocking costs that our insurance does not cover in full. The loss of revenues while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, may adversely affect our business and financial condition. In addition, space at drydocking facilities is sometimes limited and not all drydocking facilities are conveniently located. We may be unable to find space at a suitable drydocking facility or our vessels may be forced to travel to a drydocking facility that is not conveniently located to our vessels’ positions. The loss of earnings while these vessels are forced to wait for space or to travel to more distant drydocking facilities may adversely affect our business and financial condition. Further, the total loss of any of our vessels in an environmental disaster may also harm our reputation as a safe and reliable vessel owner and operator. If we are unable to adequately maintain or safeguard our vessels, we may be unable to prevent any such damage, costs, or loss which could negatively impact our business, financial condition, results of operations and available cash.
In addition, 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/or 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 uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, results of operations, cash flows, financial condition and available cash.
 
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World events could affect our results of operations and financial condition.
Continuing conflicts and recent developments in the Middle East, including increased tensions between the U.S. and Iran, as well as other geographic countries and areas, geopolitical events such as Brexit, terrorist or other attacks, and war (or threatened war) or international hostilities, such as those between the United States and North Korea may lead to armed conflict or acts of terrorism around the world, which may contribute to further economic instability in the global financial markets, and international commerce. 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. Any of these occurrences could have a material adverse impact on our operating results. Furthermore, the continuing hostilities between Russia and Ukraine, in addition to sanctions announced on February 22, 2022 by President Biden and several European leaders against Russia and any forthcoming sanctions, may also adversely impact our business, and the conflicts between Russia and Ukraine may lead to further regional and international conflicts or armed action. It is possible that such conflict could disrupt supply chains and cause instability in the global economy. Additionally, Brexit, or similar events in other jurisdictions, could 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 and operations.
Outbreaks of epidemic and pandemic diseases, including COVID-19, and governmental responses thereto could adversely affect our business.
Global public health threats, such as COVID-19 (as described more fully below), influenza and other highly communicable diseases or viruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate, including China, could adversely impact our operations, as well as the operations of our customers. The ongoing COVID-19 pandemic has, among other things, caused delays and uncertainties relating to newbuildings, drydockings and other functions of shipyards.
The ongoing outbreak of the novel coronavirus (COVID-19) has already caused severe global disruptions and may continue to negatively economic conditions regionally as well as globally and otherwise impact our operations and the operations of our customers and suppliers. Governments in affected countries continue to impose travel bans, quarantines and other emergency public health measures. Companies are also taking precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses. These restrictions, and future prevention and mitigation measures, are likely to continue to have an adverse impact on global economic conditions, which could materially and adversely affect our future operations. Uncertainties regarding the economic impact of the COVID-19 outbreak is likely to result in sustained market turmoil, which could also negatively impact our business, financial condition and cash flows. As a result of these measures, our vessels may not be able to call on ports, or may be restricted from disembarking from ports, located in regions affected by the outbreak. In addition we may experience severe operational disruptions and delays, unavailability of normal port infrastructure and services including limited access to equipment, critical goods and personnel, disruptions to crew change, quarantine of ships and/or crew, counterparty solidity, closure of ports and custom offices, as well as disruptions in the supply chain and industrial production, which may lead to reduced cargo demand, amongst other potential consequences attendant to epidemic and pandemic diseases.
The COVID-19 pandemic and measures to contain its spread have negatively impacted 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 negative impacts could continue or worsen, even after the pandemic itself diminishes or ends. Companies, including us, have also taken precautions, such as requiring employees to work remotely and imposing travel restrictions, while some other businesses have been required to close entirely. Moreover, we face significant risks to our personnel and operations due to the COVID-19 pandemic. Our crews face risk of exposure to COVID-19 as a result of travel to ports in which cases of COVID-19 have been reported. Our shore-based personnel likewise face risk of such exposure, as we maintain offices in areas that have been impacted by the spread of COVID-19.
Measures against COVID-19 in a number of countries have restricted crew rotations on our vessels, which may continue or become more severe. As a result, in 2020, vessel operators experienced and may
 
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continue to experience disruptions to normal vessel operations caused by increased deviation time associated with positioning vessels to countries in which they can undertake a crew rotation in compliance with such measures. Delays in crew rotations have led to issues with crew fatigue and may continue to do so, which may result in delays or other operational issues. We expect to incur increased expenses due to incremental fuel consumption and days in which our vessels are unable to earn revenue in order to deviate to certain ports on which we would ordinarily not call during a typical voyage. We may also incur additional expenses associated with testing, personal protective equipment, quarantines, and travel expenses such as airfare costs in order to perform crew rotations in the current environment.
The COVID-19 pandemic and measures in place against the spread of the virus have led to a highly difficult environment in which to dispose of vessels given difficulty to physically inspect vessels. The impact of COVID-19 has also resulted in reduced industrial activity in China with temporary closures of factories and other facilities, labor shortages and restrictions on travel. We believe these disruptions along with other seasonal factors, including lower demand for some of the cargoes we carry such as iron ore and coal, contributed to lower drybulk rates in 2020.
Epidemics may also affect personnel operating payment systems through which we receive revenues from the chartering of our vessels or pay for our expenses, resulting in delays in payments. Organizations across industries, including ours, are rightly focusing on their employees’ well-being, while making sure that their operations continue undisrupted and at the same time, adapting to the new ways of operating. As such employees are encouraged or even required to operate remotely which significantly increases the risk of cyber security attacks.
At present, it is not possible to ascertain the overall impact of COVID-19 on our business. However, the continuing occurrence of any of the foregoing events or other epidemics or an increase in the severity or duration of the COVID-19 or other epidemics could have a material adverse effect on our business, results of operations, cash flows, financial condition, value of our vessels, and ability to pay dividends.
The extent of the COVID-19 outbreak’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, any resurgence or mutation of the virus, the continued availability of vaccines and their global deployment, the development of effective treatments, the imposition of effective public safety and other protective measures and the public’s response to such measures. There continues to be a high level of uncertainty relating to how the pandemic will evolve, how governments and consumers will react and progress on the approval and distribution of vaccines, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, the ultimate severity of the COVID-19 outbreak is uncertain at this time and therefore we cannot predict the impact it may have on our future operations, which impact could be material and adverse, particularly if the pandemic continues to evolve into a severe worldwide health crisis.
Acts of piracy on ocean-going vessels could adversely affect our business.
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Indian Ocean and in the Gulf of Aden off the coast of Somalia, Sulu Sea and Celebes Sea and in particular the Gulf of Guinea region off Nigeria, which experienced increased incidents of piracy in 2019. Although the frequency of sea piracy worldwide has generally decreased since 2013, sea piracy incidents continue to occur. Acts of piracy could result in harm or danger to the crews that man our vessels. In addition, if these piracy attacks occur in regions in which our vessels are deployed that insurers characterized as “war risk” zones or Joint War Committee “war and strikes” listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain. In addition, crew costs, including due to employing onboard security guards, could increase in such circumstances. Furthermore, while we believe the charterer remains liable for charter payments when a vessel is seized by pirates, the charterer may dispute this and withhold charterhire until the vessel is released. A charterer may also claim that a vessel seized by pirates was not “on-hire” for a certain number of days and is therefore entitled to cancel the charter party, a claim that we would dispute. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, any detention hijacking as a result of an act of piracy against our vessels, or an increase in cost, or unavailability, of insurance for our vessels, could have a material adverse impact on our business, financial condition and earnings.
 
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Our operating results are subject to seasonal fluctuations, which could affect our operating results.
We operate our vessels in markets that have historically exhibited seasonal variations in demand and, as a result, in charter hire rates. This seasonality may result in quarter-to-quarter volatility in our operating results. The dry bulk carrier market 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. As a result, our revenues may be weaker during the fiscal quarters ended June 30 and September 30, and, conversely, our revenues may be stronger in fiscal quarters ended December 31 and March 31. While this seasonality will not directly affect our operating results, it could materially affect our operating results to the extent our vessels are employed in the spot market in the future.
An increase in the price of fuel may adversely affect our profits.
While we generally will not bear the cost of fuel or bunkers for vessels operating on time charters, fuel is a significant factor in negotiating charter rates. As a result, an increase in the price of fuel beyond our expectations may adversely affect our profitability at the time of charter negotiation. Fuel is also a significant, if not the largest, expense in shipping when vessels are under voyage charter. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, supply of and demand for oil and gas, actions by the Organization of Petroleum Exporting Countries, or OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns and regulations. In March 2020 the price of oil decreased significantly due to economic conditions and an increase in oil production. However, fuel prices have increased since then and may continue to increase in the future, including as a result of the continuing impact new regulations mandating a reduction in sulfur emissions to 0.5% as of January 2020. The current conflict in Ukraine and the response of the international community to such conflict is also having a significant impact on the price of oil and, as result, is resulting in significant increases in the cost of fuel for bunkers for the shipping industry as a whole.  Further increases in fuel prices in the future may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail. Other future regulations may have a similar impact.
We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business.
Our business and the operations of our vessels are materially affected by environmental regulation in the form of international conventions, national, state and local laws and regulations in force in the jurisdictions in which our vessels operate, as well as in the country or countries of their registration, including those governing the management and disposal of hazardous substances and wastes, the cleanup of oil spills and other contamination, air emissions (including greenhouse gases), water discharges and ballast water management. These regulations include, but are not limited to, European Union regulations, the U.S. Oil Pollution Act of 1990, requirements of the U.S. Coast Guard, or USCG and the U.S. Environmental Protection Agency, the U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) , the U.S. Clean Water Act, and the U.S. Maritime Transportation Security Act of 2002, and regulations of the IMO, including the International Convention on Civil Liability for Oil Pollution Damage of 1969, the International Convention for the Prevention of Pollution from Ships of 1973, as modified by the Protocol of 1978, collectively referred to as MARPOL 73/78 or MARPOL, including designations of Emission Control Areas, thereunder, SOLAS, the International Convention on Load Lines of 1966, the International Convention of Civil Liability for Bunker Oil Pollution Damage, and the ISM Code. Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with such requirements or the impact thereof on the re-sale price or useful life of any vessel that we own or will acquire. Additional conventions, laws and regulations may be adopted that could limit our ability to do business or increase the cost of our doing business and which may materially adversely affect our operations. Government regulation of vessels, particularly in the areas of safety and environmental requirements, continue to change, requiring us to incur significant capital expenditures on our vessels to keep them in compliance, or even to scrap or sell certain vessels altogether. In addition, we may incur significant costs in meeting new maintenance and inspection requirements, in developing contingency arrangements for potential environmental violations and in obtaining insurance coverage.
 
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In addition, we are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, certificates, approvals and financial assurances with respect to our operations. Our failure to maintain necessary permits, licenses, certificates, approvals or financial assurances could require us to incur substantial costs or temporarily suspend operation of one or more of the vessels in our fleet, or lead to the invalidation or reduction of our insurance coverage.
Environmental requirements can also affect the resale value or useful lives of our vessels, require a reduction in cargo capacity, ship modifications or operational changes or restrictions, lead to decreased availability of 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 for cleanup obligations and natural resource damages, in the event that there is a release of petroleum or hazardous substances from our vessels or otherwise in connection with our operations. We could also become associated with our existing or historic operations. Violations of, or liabilities under, environmental requirements can result in substantial penalties, fines and other sanctions, including in certain instances, seizure or detention of our vessels.
Increased inspection procedures, tighter import and export controls and new security regulations could increase costs and disrupt our business.
International shipping is subject to various security and customs inspection and related procedures in countries of origin, destination and trans-shipment points. These security procedures may result in cargo seizure, delays in the loading, offloading, trans-shipment 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. 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 uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, financial condition and earnings.
The operation of dry bulk carriers has certain unique operational risks which could affect our earnings and cash flow.
The international shipping industry is an inherently risky business involving global operations. Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather, mechanical failures, human error, environmental accidents, war, terrorism, piracy and other circumstances or events. In addition, transporting cargoes across a wide variety of international jurisdictions creates a risk of business interruptions due to political circumstances in foreign countries, hostilities, labor strikes and boycotts, the potential for changes in tax rates or policies, and the potential for government expropriation of our vessels. Any of these events may result in loss of revenues, increased costs and decreased cash flows to our customers, which could impair their ability to make payments to us under our charters.
Furthermore, the operation of vessels, such as dry bulk carriers, has certain unique risks. With a dry bulk carrier, the cargo itself and its interaction with the vessel can be an operational risk. By their nature, dry bulk cargoes are often heavy, dense, easily shifted, and react badly to water exposure. In addition, dry bulk carriers are often subjected to battering treatment during unloading operations with grabs, jackhammers (to pry encrusted cargoes out of the hold) and small bulldozers. This treatment may cause damage to the vessel. Vessels damaged due to treatment during unloading procedures may be more susceptible to breach to the sea. Hull breaches in dry bulk carriers may lead to the flooding of the vessels’ holds. If a dry bulk carrier suffers flooding in its forward holds, the bulk cargo may become so dense and waterlogged that its pressure may buckle the vessel’s bulkheads leading to the loss of a vessel. If we are unable to adequately repair our vessels after such damages, we may be unable to prevent these events. Any of these circumstances or events could negatively impact our business, financial condition, earnings, and ability to pay dividends, if any, in the future. In addition, the loss of any of our vessels could harm our reputation as a safe and reliable vessel owner and operator.
 
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We cannot assure you that we will be adequately insured against all risks or that we will be able to obtain adequate insurance coverage at reasonable rates for our vessels in the future. For example, in the past more stringent environmental regulations have led to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. Additionally, our insurers may refuse to pay particular claims. Any significant loss or liability for which we are not insured could have a material adverse effect on our financial condition.
If our vessels call on ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S. government, the European Union, the United Nations, or other governmental authorities, it could lead to monetary fines or penalties and may adversely affect our reputation and the market for our securities.
If our vessels call on ports or operate in countries subject to sanctions and embargoes imposed by the U.S. government or other governmental authorities (“Sanctioned Jurisdictions”) in violation of sanctions or embargoes laws, such activities may result in a sanctions violation and we could be subject to monetary fines, penalties, or other sanctions, and our reputation and the market for our ordinary shares could adversely affected. Although we endeavor to take precautions reasonably designed to mitigate such risks, it is possible that, in the future, our vessels may call on ports located in Sanctioned Jurisdictions on charterer’s instructions and/or without our consent. If such activities result in a violation of sanctions or embargo laws, we could be subject to monetary fines, penalties, or other sanctions, and our reputation and the market for our securities could be adversely affected.
The U.S. and other 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 expanded over time. Current or future counterparties of ours may be affiliated with persons or entities that are or may be in the future the subject of sanctions or embargoes imposed by the governments of the U.S., the EU, and/or other international bodies. If we determine that such sanctions require us to terminate existing or future contracts to which we, or our subsidiaries, are party 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.
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, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations. Any such violation could result in fines, penalties or other sanctions that could negatively 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 stock may adversely affect the price at which our common stock trades. 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 that are not controlled by the governments of countries or territories that are the subject of certain U.S. sanctions or embargo laws, or engaging in operations associated with those countries or territories pursuant to contracts with third parties that are unrelated to those countries or territories or entities controlled by their governments. Investor perception of the value of our common stock may be adversely affected by the consequences of war, the effects of terrorism, civil unrest and governmental actions in the countries or territories that we operate in.
The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.
We expect that our vessels will call in ports in areas where smugglers attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent 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 which could have an adverse effect on our business, results of operations, cash flows and financial condition.
 
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Maritime claimants could arrest or attach our vessels, which would interrupt our business or have a negative effect on our cash flows.
Crew members, suppliers of goods and services to a vessel, shippers of cargo, lenders, and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting or attaching a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our business or require us to pay large sums of funds to have the arrest or attachment lifted, which would have a negative effect on our cash flows.
In addition, in some jurisdictions, such as South Africa, under the “sister-ship” theory of liability, a claimant may arrest both the vessel that 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 try to assert “sister-ship” liability against one vessel in our fleet for claims relating to another of our ships.
We conduct business in China, where the legal system is not fully developed and has inherent uncertainties that could limit the legal protections available to us.
Some of our vessels may be chartered to Chinese customers and from time to time on our charterers’ instructions, our vessels may call on Chinese ports. Such charters and voyages may be subject to regulations in China that may require us to incur new or additional compliance or other administrative costs and may require that we pay to the Chinese government new taxes or other fees. Applicable laws and regulations in China may not be well publicized and may not be known to us or to our charterers in advance of us or our charterers becoming subject to them, and the implementation of such laws and regulations may be inconsistent. Changes in Chinese laws and regulations, including with regards to tax matters, or changes in their implementation by local authorities could affect our vessels if chartered to Chinese customers as well as our vessels calling to Chinese ports and could have a material adverse impact on our business, financial condition and results of operations.
Governments could requisition our vessels during a period of war or emergency, resulting in a loss of earnings.
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 her owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes her charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. Although 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 revenues and reduce the amount of cash we may have available for distribution as dividends to our shareholders, if any such dividends are declared.
Failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties and an adverse effect on our business.
We may operate in a number of countries throughout the world, including countries suspected to have a risk of corruption. We are committed to doing business in accordance with applicable anti-corruption laws and have adopted measures designed to ensure compliance with the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”). We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the FCPA. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might adversely affect our business, earnings or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.
 
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Changing laws and evolving reporting requirements could have an adverse effect on our business.
Changing laws, regulations and standards relating to reporting requirements, including the European Union General Data Protection Regulation, or GDPR, may create additional compliance requirements for us.
GDPR broadens the scope of personal privacy laws to protect the rights of European Union citizens and requires organizations to report on data breaches within 72 hours and be bound by more stringent rules for obtaining the consent of individuals on how their data can be used. GDPR has become enforceable on May 25, 2018 and non-compliance may expose entities to significant fines or other regulatory claims which could have an adverse effect on our business, financial condition, and operations.
Company Specific Risk Factors
We have a limited operating history upon which investors can evaluate our future prospects.
We have a limited operating history upon which an evaluation of our business plan or performance and prospects can be made. Our business and prospects must be considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a newly established business. The risks include, but are not limited to, the possibility that we will not successfully manage our fleet; or that we are not able to upgrade and enhance our vessels to accommodate new features or regulations and expanded services. There are no assurances that we can successfully address these challenges and if unsuccessful, we and our business, financial condition and operating results could be materially and adversely affected.
The market values of our vessels have declined in recent years and may further decline, which could limit the amount of funds that we can borrow in the future, trigger breaches of certain financial covenants contained in any future borrowing facilities we may enter into, and adversely affect our operating results, and we may incur a loss if we sell vessels following a decline in their market values.
The market values of our vessels, which are related to prevailing freight charter rates, have fluctuated significantly in recent years. While the market values of vessels and the freight charter market have a very close relationship as the charter market moves from trough to peak, the time lag between the effect of charter rates on market values of ships can vary.
The market values of our vessels have generally experienced high volatility, and you should expect the market values of our vessels to fluctuate depending on a number of factors including:
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the prevailing level of charter hire rates;
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general economic and market conditions affecting the shipping industry;
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competition from other shipping companies and other modes of transportation;
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the types, sizes and ages of vessels;
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the supply of and demand for vessels;
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applicable governmental or other regulations;
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technological advances;
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the need to upgrade vessels as a result of charterer requirements, technological advances in vessel design or equipment or otherwise; and
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the cost of newbuildings.
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The market values of our vessels are at low levels compared to historical averages and if the market values of our vessels were to decline further, we may not be able to comply with certain covenants contained in any future loan facilities we enter into and we may not be able to incur debt on terms that are acceptable to us or at all or to refinance any debt we may have in the future.
 
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Furthermore, if we sell any of our owned vessels at a time when prices are depressed, our business, results of operations, cash flow and financial condition could be adversely affected. Moreover, if we sell a vessel at a time when vessel prices have fallen and before we have recorded an impairment adjustment to our financial statements, the sale may be at less than the vessel’s carrying amount in our financial statements, resulting in a loss and a reduction in earnings. In addition, if vessel values persist or decline further, we may have to record an impairment adjustment in our financial statements which could adversely affect our financial results.
We charter our vessels on short-term time charters in a volatile shipping industry and a decline in charter hire rates could affect our results of operations and our ability to pay dividends.
Although significant exposure to short-term time charters is not unusual in the dry bulk shipping industry, the short-term time charter market is highly competitive and spot market charter hire rates (which affect time charter rates) may fluctuate significantly based upon available charters and the supply of, and demand for, seaborne shipping capacity. While the short-term time charter market may enable us to benefit in periods of increasing charter hire rates, we must consistently renew our charters and this dependence makes us vulnerable to declining charter rates. As a result of the volatility in the dry bulk carrier charter market, we may not be able to employ our vessels upon the termination of their existing charters at their current charter hire rates or at all. The dry bulk carrier charter market is volatile, and in the recent past, short-term time charter and spot market charter rates for some dry bulk carriers declined below the operating costs of those vessels before rising. We cannot assure you that future charter hire rates will enable us to operate our vessels profitably, or to pay dividends.
We and our principal officers and directors have affiliations with Diana Shipping, Steamship Shipbroking Enterprises Inc. (“Steamship”) and Diana Wilhelmsen Management Limited (“DWM”) that could create conflicts of interest detrimental to us.
Our principal officers and directors are also principals, officers and employees of Diana Shipping, Steamship and DWM. These responsibilities and relationships could create conflicts of interest between us and Diana Shipping, Steamship or DWM. Conflicts may also arise in connection with the chartering, purchase, sale and operations of the vessels in our fleet versus other vessels that are or may be managed in the future by Steamship or DWM and that are owned by Diana Shipping. While we have entered into a non-competition agreement with Diana Shipping, we cannot assure you that such agreement will successfully address all potential conflicts of interest that arise or that all conflicts will be resolved in our favor. Circumstances in any of these instances may make one decision advantageous to us but detrimental to Diana Shipping, Steamship or DWM, and vice versa.
Companies affiliated with Diana Shipping or Steamship or with our officers and directors, may acquire vessels that compete with our fleet.
Diana Shipping and other entities affiliated with Diana Shipping, or with our officers and directors, own dry bulk vessels and may acquire additional dry bulk vessels in the future. These vessels could be in competition with our fleet, and other companies affiliated with Diana Shipping or Steamship might be faced with conflicts of interest with respect to their own interests and their obligations to us. We cannot assure you that such conflicts will be resolved in our favor.
Certain of our officers and directors participate in business activities not associated with us, and do not devote all of their time to our business, which may create conflicts of interest and hinder our ability to operate successfully.
Our officers and directors have fiduciary duties to manage our business in a manner beneficial to us and our shareholders. However, our Chairperson and Director, Mrs. Semiramis Paliou, also serves as Chief Executive Officer and a Director of Diana Shipping; our Chief Executive Officer and Director, Mr. Eleftherios A. Paratrifon, also serves as Chief Operating Officer of Diana Shipping; and our Director, President, Interim Chief Financial Officer and Secretary, Mr. Ioannis Zafirakis, also serves as Chief Strategy Officer, Chief Financial Officer, Treasurer and a Director of Diana Shipping. Mrs. Paliou, Mr. Papatrifon and Mr. Zafirakis also serve on our Executive Committee. As a result, Mrs. Paliou, Mr. Papatrifon and
 
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Mr. Zafirakis have fiduciary duties to manage the business of Diana Shipping and its affiliates in a manner beneficial to such entities and their shareholders. Consequently, they may encounter situations in which their fiduciary obligations to Diana Shipping and us are in conflict. We use our best efforts to cause compliance with all applicable laws and regulations in addressing such conflicts of interest. Our executive officers participate in business activities not associated with us and are not required to work full-time on our affairs. Our executive officers may devote less time to us than if they were not engaged in other business activities and may owe fiduciary duties to the shareholders of other companies with which they may be affiliated, including Diana Shipping. Their other business activities may create conflicts of interest in matters involving or affecting us and our customers and it is not certain that any of these conflicts of interest will be resolved in our favor. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We depend entirely on DWM and Steamship to provide the management of our fleet. The termination of our arrangements with DWM or Steamship, or DWM’s or Steamship’s failure to perform their obligations under our management agreements with them, may temporarily adversely affect our operations.
DWM or Steamship may fail to perform their obligations to us or may terminate their management agreement with us other than in accordance with the terms of our management agreements with them, either of which could adversely affect our operations during the process of identifying a replacement for DWM or Steamship (as applicable) and have a material adverse effect on our financial condition and results of our operations.
Rising crew costs could adversely affect our results of operations.
Due to an increase in the size of the global shipping fleet, the limited supply of and increased demand for crew has created upward pressure on crew costs. Continued higher crew costs or further increases in crew costs could adversely affect our 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. Information systems are vulnerable to security breaches by computer hackers and cyber terrorists. We rely on 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. 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.
Additionally, due to Russia’s invasion of the Ukraine, we may be subject to elevated cybersecurity risk. Moreover, cyberattacks against the Ukrainian government and other countries in the region have been reported in connection with the aforementioned invasion. To the extent such attacks have collateral effects on global critical infrastructure or financial institutions, such developments could adversely affect our business, operating results and financial condition. At this time, it is difficult to assess the likelihood of such threat and any potential impact.
Climate change and greenhouse gas restrictions may adversely impact our operations and markets.
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. More specifically, on October 27, 2016, the
 
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International Maritime Organization’s Marine Environment Protection Committee (“MEPC”) announced its decision concerning the implementation of regulations mandating a reduction in sulfur emissions from 3.5% currently to 0.5% as of the beginning of January 1, 2020. Additionally, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships. The initial strategy identifies levels of ambition to reducing greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of further phases of the EEDI for new ships; (2) reducing carbon dioxide emissions per transport work, as an average across international shipping, by at least 40% by 2030, pursuing efforts towards 70% by 2050, compared to 2008 emission levels; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008 while pursuing efforts towards phasing them out entirely.
Since January 1, 2020, ships have to either remove sulfur from emissions or buy fuel with low sulfur content, which may lead to increased costs and supplementary investments for ship owners. 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% sulfur fuels on board, which are available around the world but at a higher cost; (ii) installing scrubbers for cleaning of the exhaust gas; or (iii) by retrofitting vessels to be powered by liquefied natural gas, 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.
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, which required adopting countries to implement national programs to reduce emissions of certain gases, or the Paris Agreement (discussed further below), 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.
Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.
Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain institutional investors, investment funds, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. Companies which do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.
We may face increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain invested in us and make further investments in us. If we do not meet these standards, our business and/or our ability to access capital could be harmed.
Additionally, certain investors and lenders may exclude companies, such as us, from their investing portfolios altogether due to environmental, social and governance factors. These limitations in both the debt and equity capital markets may affect our ability to grow as our plans for growth may include accessing the equity and debt capital markets. If those markets are unavailable, or if we are unable to access alternative
 
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means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to service our then indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and comply with wide ranging ESG requirements. The occurrence of any of the foregoing could have a material adverse effect on our business and financial condition.
The Public Company Accounting Oversight Board inspection of our independent accounting firm could lead to findings in our auditors’ reports and challenge the accuracy of our published audited consolidated financial statements.
Auditors of U.S. public companies are required by law to undergo periodic Public Company Accounting Oversight Board, or PCAOB, inspections that assess their compliance with U.S. law and professional standards in connection with performance of audits of financial statements filed with the SEC. For several years certain European Union countries, including Greece, did not permit the PCAOB to conduct inspections of accounting firms established and operating in such European Union countries, even if they were part of major international firms. Accordingly, unlike for most U.S. public companies, the PCAOB was prevented from evaluating our auditor’s performance of audits and its quality control procedures, and, unlike stockholders of most U.S. public companies, we and our stockholders were deprived of the possible benefits of such inspections. Since 2015, Greece has agreed to allow the PCAOB to conduct inspections of accounting firms operating in Greece. In the future, such PCAOB inspections could result in findings in our auditors’ quality control procedures, question the validity of the auditor’s reports on our published consolidated financial statements and the effectiveness of our internal control over financial reporting, and cast doubt upon the accuracy of our published audited financial statements.
Investment in derivative instruments such as forward freight agreements could result in losses.
From time to time, we may take positions in derivative instruments including forward freight agreements, or FFAs. FFAs and other derivative instruments may be used to hedge a vessel owner’s exposure to the charter market by providing for the sale of a contracted charter rate along a specified route and period of time. Upon settlement, if the contracted charter rate is less than the average of the rates, as reported by an identified index, for the specified route and period, the seller of the FFA is required to pay the buyer an amount equal to the difference between the contracted rate and the settlement rate, multiplied by the number of days in the specified period. Conversely, if the contracted rate is greater than the settlement rate, the buyer is required to pay the seller the settlement sum. If we take positions in FFAs or other derivative instruments and do not correctly anticipate charter rate movements over the specified route and time period, we could suffer losses in the settling or termination of the FFA. This could adversely affect our results of operations and cash flows.
We may have difficulty effectively managing any growth, which may adversely affect our earnings.
The growth of our fleet in the future may impose significant additional responsibilities on our management and staff. We expect to grow our fleet further in the future and this may require us to increase the number of our personnel. We may also have to increase our customer base to provide continued employment for the new vessels.
Any future growth will primarily depend on our ability to:
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locate and acquire suitable vessels;
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identify and consummate acquisitions or joint ventures;
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enhance our customer base;
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manage our expansion; and
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obtain required financing on acceptable terms.
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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,
 
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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 any future growth plans or that we will not incur significant expenses and losses in connection with our future growth.
Purchasing and operating secondhand vessels may result in increased operating costs and reduced operating days, which may adversely affect our earnings.
While we have the right to inspect previously owned vessels prior to our purchase of them and we expect to inspect secondhand vessels that we acquire, such inspections do 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 were not aware of when we bought the vessel, and which may require us to incur costly repairs to the vessel. These repairs may require us to put a vessel into drydock, which would reduce our operating days. Furthermore, we usually do not receive the benefit of warranties on secondhand vessels.
We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our business.
We enter into, among other things, charter parties with our customers. Such agreements subject us to counterparty risks. The ability and willingness of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime and offshore industries, the overall financial condition of the counterparty, charter rates received for specific types of vessels, and various expenses. Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, in depressed market conditions, our charterers may no longer need a vessel that is currently under charter or may be able to obtain a comparable vessel at lower rates. As a result, charterers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. If our charterers fail to meet their obligations to us or attempt to renegotiate our charter agreements, it may be difficult to secure substitute employment for such vessels, and any new charter arrangements we secure may be at lower rates. As a result, we could sustain significant losses, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In the highly competitive international shipping industry, we may not be able to compete for charters with new entrants or established companies with greater resources, and as a result, we may be unable to employ our vessels profitably.
We employ our vessels in a highly competitive market that is capital intensive and highly fragmented. Competition arises primarily from other vessel owners, some of whom have substantially greater resources than we do. Competition for the transportation of dry bulk cargo by sea is intense and depends on price, location, size, age, condition and the acceptability of the vessel and its operators to the charterers. Due in part to the highly fragmented market, competitors with greater resources than us could enter the dry bulk shipping industry and operate larger fleets through consolidations or acquisitions and may be able to offer lower charter rates and higher quality vessels than we are able to offer. If we are unable to successfully compete with other dry bulk shipping companies, our results of operations may be adversely impacted.
We may be unable to retain and recruit qualified key executives, key employees or key consultants, may delay our development efforts or otherwise harm our business.
Our future development and prospects depend to a large degree on the experience, performance and continued service of our senior management team. Retention of these services or the identification of suitable replacements in case of future vacancies cannot be guaranteed. There can be no guarantee that the services of the current directors and senior management team will be retained, or that suitably skilled and qualified individuals can be identified and employed, which may adversely impact our ability to commercial and financial performance. The loss of the services of any of the directors or other members of the senior
 
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management team and the costs of recruiting replacements may have a material adverse effect on our commercial and financial performance as well. If we are unable to hire, train and retain such personnel in a timely manner, our operations could be delayed and our ability to grow our business will be impaired and the delay and inability may have a detrimental effect upon our performance.
We may be unable to attract and retain key management personnel and other employees in the shipping industry, which may negatively impact the effectiveness of our management and results of operations.
Our success depends to a significant extent upon the abilities and efforts of our management team, our ability to retain key members of our management team and to hire new members as may be necessary. The loss of any of these individuals could adversely affect our business prospects and financial condition. Difficulty in hiring and retaining replacement personnel could have a similar effect. We do not currently, nor do we intend to, maintain “key man” life insurance on any of our officers or other members of our management team.
Technological innovation and quality and efficiency requirements from our customers could reduce our charterhire income and the value of our vessels.
Our customers, have a high and increasing focus on quality and compliance standards with their suppliers across the entire supply chain, including the shipping and transportation segment. Our continued compliance with these standards and quality requirements is vital for our operations. The charterhire rates and the value and operational life of a vessel are determined by a number of factors including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes speed, fuel economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to enter harbors, utilize related docking facilities and pass through canals and straits. The length of a vessel’s physical life is related to its original design and construction, its maintenance and the impact of the stress of operations. If new vessels are built that are more efficient or more flexible or have longer physical lives than our vessels, competition from these more technologically advanced vessels could adversely affect the amount of charterhire payments we receive for our vessels and the resale value of our vessels could significantly decrease. This could have an adverse effect on our results of operations, cash flows, financial condition and ability to pay dividends.
We may not have adequate insurance to compensate us if we lose our vessels or to compensate third parties.
We procure insurance for our fleet against risks commonly insured against by vessel owners and operators. Our current insurance includes hull and machinery insurance, war risks insurance and protection and indemnity insurance (which includes environmental damage and pollution insurance). We can give no assurance that we are adequately insured against all risks or that our insurers will pay a particular claim. 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. Furthermore, in the future, we may not be able to 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, although we believe are standard in the shipping industry, may nevertheless increase our costs.
Our vessels may suffer damage and we may face unexpected drydocking costs, which could adversely affect our cash flow and financial condition.
If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and can be substantial. The loss of earnings while a vessel is being repaired and repositioned, as well as the actual cost of these repairs not covered by our insurance, would decrease our earnings and available cash. We may not have insurance that is sufficient to cover all or any of the costs or losses for damages to our vessels and may have to pay drydocking costs not covered by our insurance.
The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings.
In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. Currently, our fleet consists of four vessels in operation, having a combined carrying capacity of
 
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496,374 dwt, and a weighted average age of 17.7 years as of December 22, 2022. As our fleet ages, we will incur increased costs. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of vessels may also 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, market conditions will justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives.
We may be exposed to U.S. dollar and foreign currency fluctuations and devaluations that could harm our reported revenue and results of operations.
We generate all of our revenues in U.S. dollars and most of our expenses are in U.S. dollars. Although our expenses are not significantly affected by fluctuations in exchange rates, they may be affected in the future and this could affect the amount of net income that we report in future periods. While we historically have not mitigated the risk associated with exchange rate fluctuations through the use of financial derivatives, we may employ such instruments from time to time in the future in order to minimize any such risk. Our use of financial derivatives would involve certain risks, including the risk that losses on a hedged position could exceed the nominal amount invested in the instrument and the risk that the counterparty to the derivative transaction may be unable or unwilling to satisfy its contractual obligations, which could have an adverse effect on our results.
Volatility of LIBOR and potential changes of the use of LIBOR as a benchmark could affect our profitability, earnings and cash flow.
The London Interbank Offered Rate (“LIBOR”) is the subject of recent national, international and other regulatory guidance and proposals for reform. The publication of U.S. Dollar LIBOR for the one-week and two-month U.S. Dollar LIBOR tenors ceased on December 31, 2021, and the ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced the publication of all other U.S. Dollar LIBOR tenors will cease on June 30, 2023. The United States Federal Reserve concurrently issued a statement advising banks to cease issuing U.S. Dollar LIBOR instruments after 2021. As such, any new loan agreements we enter into will not use LIBOR as an interest rate.
The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of variable rate indebtedness and obligations. LIBOR has been volatile in the past, with the spread between LIBOR and the prime lending rate widening significantly at times. Because the interest rates fluctuate with changes in LIBOR, significant changes in LIBOR could have a material effect on the amount of interest payable on any debt we may have in the future, which in turn, could have an adverse effect on our financial condition.
Furthermore, the calculation of interest in most financing agreements in our industry has been based on published LIBOR rates. Due in part to uncertainty relating to the LIBOR calculation process, in recent years, lenders have insisted on provisions that entitle the lenders, in their discretion, to replace published LIBOR as the base for the interest calculation with their cost-of-funds rate. If we are required to agree to such a provision in future financing agreements, our lending costs could increase significantly, which would have an adverse effect on our profitability, earnings and cash flow. In addition, the banks currently reporting information used to set LIBOR have stopped such reporting after 2021, when their commitment to reporting information ends. The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate, or “SOFR.” The impact of such a transition from LIBOR to SOFR could be significant for us.
In order to manage our exposure to interest rate fluctuations, we may use interest rate derivatives to effectively fix an amount of any floating rate debt obligations we may have in the future. 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
 
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as collateral, which may impact our free cash position. Interest rate derivatives may also be impacted by the transition from LIBOR to SOFR or other alternative rates.
We depend upon a few significant customers for a large part of our revenues and the loss of one or more of these customers could adversely affect our financial performance.
We derive a significant part of our revenues from a small number of charterers. If one or more of our charterers chooses not to charter our vessels or is unable to perform under one or more charters with us and we are not able to find a replacement charter, we could suffer a loss of revenues that could adversely affect our financial condition and results of operations.
We are an “emerging growth company” and we cannot be certain that the reduced disclosure and other requirements applicable to emerging growth companies will not make our common shares less attractive to investors.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.
In addition, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) for so long as we are an emerging growth company.
For as long as we take advantage of the reduced reporting obligations, the information that we provide our shareholders may be different from information provided by other public companies.
We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations.
We are a holding company and our subsidiaries conduct all of our operations and own all of our operating assets. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to satisfy our financial obligations depends on our subsidiaries and their ability to distribute funds to us. If we are unable to obtain funds from our subsidiaries, we may not be able to satisfy our financial obligations.
Because we are organized under the laws of the Marshall Islands, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.
We are organized under the laws of the Marshall Islands, and substantially all of our assets are located outside of the United States. In addition, the majority of our directors and officers are non-residents of the United States, and all or 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 someone to bring an action against us or against these individuals in the United States if they believe that their rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands and of other jurisdictions may prevent or restrict them from enforcing a judgment against our assets or the assets of our directors or officers.
The international nature of our operations may make the outcome of any bankruptcy proceedings difficult to predict.
We are incorporated under the laws of the Republic of the Marshall Islands and we conduct operations in countries around the world. 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. 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,
 
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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 be entitled to, or 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.
If we expand our business further, we may need to improve our operating and financial systems and will need to recruit suitable employees and crew for our vessels.
Our current operating and financial systems may not be adequate if we further expand the size of our fleet and our attempts to improve those systems may be ineffective. In addition, if we expand our fleet further, we will need to recruit suitable additional seafarers and management personnel. While we have not experienced any difficulty in recruiting to date, we cannot guarantee that we will be able to continue to hire suitable employees if we expand our fleet. If we or our crewing agents encounter business or financial difficulties, we may not be able to adequately staff our vessels. If we are unable to grow our financial and operating systems or to recruit suitable employees should we determine to expand our fleet, our financial performance may be adversely affected, among other things.
We may be subject to United States federal income tax on United States source income, which may reduce our earnings.
Under the United States Internal Revenue Code of 1986, as amended, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as ourselves and our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States may be subject to a 4% United States federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the regulations promulgated thereunder.
It is expected that the Company qualified for this statutory tax exemption for the prior taxable year and we will take this position for United States federal income tax return reporting purposes. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption in the current or future taxable year and thereby become subject to United States federal income tax on our United States source income. For example, if shareholders with a five percent or greater interest in the Company’s stock were, in the aggregate, to own 50% or more of our outstanding common shares on more than half the days during the taxable year, we may not be able to qualify for exemption under Section 883. Due to the factual nature of the issues involved, we can give no assurances on our tax-exempt status or that of any of our subsidiaries.
If the Company is not entitled to exemption under Section 883 for any taxable year, the Company, as applicable, could be subject for those years to an effective 2% United States federal income tax on the shipping income such company derives during the year that is attributable to the transport or cargoes to or from the United States. The imposition of this taxation might have a negative effect on our business and would result in decreased earnings available for distribution to our shareholders. See the “Taxation” section of this prospectus for a more comprehensive discussion of U.S. federal income tax considerations.
United States tax authorities could treat the Company as a “passive foreign investment company,” which could have adverse United States federal income tax consequences to United States holders.
A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for United States federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of “passive income” or (2) 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 which 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.” United States shareholders of a PFIC are subject to a disadvantageous United States 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
 
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other disposition of their shares in the PFIC. In addition, United States shareholders of a PFIC are required to file annual information returns with the United States Internal Revenue Service, or IRS.
Based on our method of operations, it is not expected that we will be a PFIC with respect to any taxable year. In this regard, it is expected that gross income derived or are deemed to have been derived from time chartering activities will be treated as services income, rather than rental income. Accordingly, it is expected that income from time chartering activities should not constitute “passive income,” and the assets that we own and operate in connection with the production of that income should not constitute passive assets.
There is substantial legal authority supporting this position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, it should be noted that there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, in the absence of legal authority directly relating to PFIC rules, no assurance can be given that the IRS or a court of law will accept this position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if the nature and extent of our operations changed.
If the IRS were to find that we are or have been a PFIC for any taxable year, our United States shareholders will face adverse United States federal income tax consequences. Under the PFIC rules, unless those shareholders make an election available under the Code (which election could itself have adverse consequences for such shareholders, as discussed in the section of this registration statement entitled “Taxation — U.S. Holders”), such shareholders would be subject to U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our common shares, as if the excess distribution or gain had been recognized ratably over the United States shareholder’s holding period of our common shares, as applicable.
Based on our current and expected composition and our respective subsidiaries’ assets and income, it is not anticipated that we will be treated as a PFIC. Actual PFIC status for any taxable year, however, will not be determinable until after the end of such taxable year. Accordingly, there can be no assurances regarding our status as a PFIC for the current taxable year or any future taxable year. See the discussion in the section of this registration statement entitled “Taxation- U.S. Holders — Consequences of Owning Shares in a passive foreign investment company, or “PFIC”.” U.S. Holders are urged to consult with their own tax advisors regarding the possible application of the PFIC rules.
Our corporate governance practices are in compliance with, and are not prohibited by, the laws of the Republic of the Marshall Islands, and as such we are entitled to exemption from certain Nasdaq corporate governance standards. As a result, you may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
Our corporate governance practices are in compliance with, and are not prohibited by, the laws of the Republic of the Marshall Islands. Therefore, we are exempt from many of Nasdaq’s corporate governance practices other than the requirements regarding the disclosure of a going concern audit opinion, submission of a listing agreement, notification of material non-compliance with Nasdaq corporate governance practices, and the establishment and composition of an audit committee and a formal written audit committee charter.
Risks Relating to our Common Stock
We cannot assure you that our board of directors will declare dividend payments in the future.
The declaration and payment of dividends, if any, will always be subject to the discretion of our board of directors. The timing and amount of any dividends declared will depend on, among other things, our earnings, financial condition and cash requirements and availability, our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth strategy and provisions of Marshall Islands law affecting the payment of dividends. In addition, other external factors, such as our lenders imposing restrictions on our ability to pay dividends under the terms of future loan facilities we may enter into, may limit our ability to pay dividends.
 
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Our growth strategy contemplates that we will finance the acquisition of additional vessels through a combination of debt and equity financing on terms acceptable to us. If financing is not available to us on acceptable terms, our board of directors may determine to finance or refinance acquisitions with cash from operations, which could also reduce or even eliminate the amount of cash available for the payment of dividends.
Marshall Islands law generally prohibits the payment of dividends other than from surplus (retained earnings and the excess of consideration received for the sale of shares above the par value of the shares) or while a company is insolvent or would be rendered insolvent by the payment of such a dividend. We may not have sufficient surplus in the future to pay dividends. We can give no assurance that we will reinstate our dividends in the future or when such reinstatement might occur.
In addition, our ability to pay dividends to holders of our common shares will be subject to the rights of holders of our Series C Preferred Stock and our Series D Preferred Stock (and other preferred stock we have issued, or will issue in the future, with dividend rights), which in each case do or will rank prior to our common shares with respect to dividends, distributions and payments upon liquidation. No cash dividend may be paid on our common stock unless full cumulative dividends have been or contemporaneously are being paid or provided for on all outstanding shares of Series C Preferred Stock and Series D Preferred Stock (and other preferred stock we have issued, or will issue in the future, with dividend rights) for all prior and the then-ending dividend periods. Cumulative dividends on our shares of Series C Preferred Stock and Series D Preferred Stock will accrue at a rate of 8.0% and 7.0% per annum, respectively, per $1,000 stated liquidation preference per Series C and Series D Preferred Share and are payable in cash or, at our election, in kind, quarterly on January 15, April 15, July 15 and October 15 of each year, or, if any such dividend payment date otherwise would fall on a date that is not a business day, the immediately succeeding business day.
If we do not have sufficient cash to pay dividends on our Series C Preferred Stock and Series D Preferred Stock when due, we may suffer adverse consequences.
Dividends to holders of our shares of Series C Preferred Stock and Series D Preferred Stock will be paid in cash or, at our election, in kind. If we do not have sufficient cash to pay dividends to holders of shares of Series C Preferred Stock and/or Series D Preferred Stock or otherwise elect to pay dividends on our Series C Preferred Stock and/or Series D Preferred Stock in kind, in the form of additional shares, then such issuance of additional shares will result in additional dividend payment obligations of the Company going forward. In addition, a failure to pay dividends on our Series C Preferred Stock and/or Series D Preferred Stock when due will adversely affect our ability to utilize shelf registration statements to sell our securities, which may be an important fund-raising avenue for us in the future.
The market price and trading volume of our common stock may fluctuate widely in the future, and there is no guarantee that an active and liquid public market for you to resell our common stock in the future will continue.
The market price of our common stock on the Nasdaq Capital Market may be volatile 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.
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The dry bulk shipping industry has been highly unpredictable and volatile. The market for common stock in this industry may be equally volatile. Additionally, our trading volume has been and may continue
 
32
 
to be volatile. With respect to certain such instances of trading volatility, we are not aware of any material changes in our financial condition or results of operations that would explain such price volatility or trading volume, which we believe reflect market and trading dynamics unrelated to our operating business or prospects and outside of our control. We are thus unable to predict when such instances of trading volatility will occur or how long such dynamics may last. Therefore, we cannot assure you that you will be able to sell any of our common stock you may have purchased at a price greater than or equal to its original purchase price, or that you will be able to sell our common stock at all.
Since we are incorporated in the Marshall Islands, which does not have a well-developed body of corporate law, you may have more difficulty protecting your interests than shareholders of a U.S. corporation.
Our corporate affairs are governed by our amended and restated articles of incorporation and 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 the United States. The rights of shareholders of the Marshall Islands may differ from the rights of shareholders of companies incorporated in the United States. While the BCA provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we cannot predict whether Marshall Islands courts would reach the same conclusions as U.S. courts. Thus, you may have more difficulty in protecting your interests in the face of actions by the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction which has developed a relatively more substantial body of case law.
Diana Shipping, as the holder of certain of our preferred shares, will be able to exert considerable influence over matters on which our shareholders are entitled to vote.
In connection with the contribution of the OceanPal Inc. Predecessors to us by Diana Shipping, we issued 500,000 shares of Series B Preferred Stock to Diana Shipping. These shares of Series B Preferred Stock vote with our common shares and each share of Series B Preferred Stock entitles the holder thereof to the right to cast a number of votes for all matters on which our shareholders are entitled to vote of up to 34% of the total number of votes entitled to vote on all matters submitted to a vote of our common shareholders, subject to certain limitations that prevent Diana Shipping from exercising more than 49% of the aggregate voting authority derived from any voting security then held by Diana Shipping on any matter put to shareholders. Through its beneficial ownership of the shares of Series B Preferred Stock, Diana Shipping is able to establish a quorum at any shareholder meeting. In addition, Diana Shipping received 10,000 shares of our Series C Preferred Stock, which are convertible into common shares at Diana Shipping’s option commencing upon the first anniversary of the original issue date (i.e. November 29, 2022), at a conversion price equal to the lesser of $65.00 and the 10-trading day trailing VWAP of our common shares, subject to certain adjustments. While Diana Shipping has no agreement, arrangement or understanding relating to the voting of its shares of Series B Preferred Stock, it is able to influence the outcome of matters on which our shareholders are entitled to vote, including the election of directors and other significant corporate actions. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, merger, consolidation, takeover or other business combination. This concentration of ownership could also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could in turn have an adverse effect on the market price of our shares. So long as Diana Shipping continues to own a significant amount of our equity, even though the amount is less than 50% of our voting power, it will continue to be able to exercise considerable influence over our decisions. The interests of Diana Shipping may be different from your interests.
Future issuances or sales of our common stock could cause the market price of our common stock to decline.
Issuances or sales of a substantial number of shares of our common stock in the public market, or the perception that these sales could occur, may depress the market price for our common stock. These issuances and sales could also impair our ability to raise additional capital through the sale of our equity securities in the future.
 
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As of December 22, 2022, we have outstanding Class A warrants that may obligate us to issue up to an additional 1,447,400 common shares, in aggregate, upon the exercise of these warrants in full, as adjusted for the reverse stock split effected on December 22, 2022.
Further, we may issue additional securities in the future for any purpose and for such consideration and on such terms and conditions as we may determine appropriate or necessary, including in connection with equity awards, financings or other strategic transactions. In addition, our stockholders may elect to sell large numbers of shares held by them from time to time. Our amended and restated articles of incorporation authorize us to issue up to 1,000,000,000 shares of common stock, of which 10,184,054 shares are issued and outstanding as of December 22, 2022, following the reverse stock split effected on December 22, 2022. The number of shares of common stock available for sale in the public market will be limited by restrictions applicable under securities laws.
Sales or issuances of a substantial number of any of the common shares mentioned above may cause the market price of our common shares to decline.
Anti-takeover provisions in our organizational documents could make it difficult for our shareholders to replace or remove our current board of directors or have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of our common stock.
Several provisions of our amended and restated articles of incorporation and bylaws could make it difficult for our shareholders to change the composition of our board of directors in any one year, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable.
These provisions include:
•
authorizing our board of directors to issue “blank check” preferred stock without shareholder approval;
​
•
providing for a classified board of directors with staggered, three-year terms;
​
•
prohibiting cumulative voting in the election of directors;
​
•
authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote for the directors;
​
•
prohibiting shareholder action by written consent;
​
•
limiting the persons who may call special meetings of shareholders; and
​
•
establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by shareholders at shareholder meetings.
​
In addition, we have adopted a Stockholders Rights Agreement, pursuant to which our board of directors may cause the substantial dilution of any person that attempts to acquire us without the approval of our board of directors.
These anti-takeover provisions, including provisions of our Stockholders Rights Agreement, could substantially impede the ability of public shareholders to benefit from a change in control and, as a result, may adversely affect the market price of our common stock and your ability to realize any potential change of control premium.
Risks Relating to this Offering
Since we have broad discretion in how we use the proceeds from this offering, we may use the proceeds in ways with which you disagree.
Our management will have significant flexibility in applying the net proceeds of this offering. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable,
 
34
 
or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, prospects, financial condition, operating results and cash flow.
Our share price and trading volume may be volatile.
The market price and trading volume of our common stock has fluctuated in the past. Consequently, the current market price of our common stock may not be indicative of future market prices and the current liquidity of our common stock may not be indicative of future liquidity, and we may be unable to sustain or increase the value of an investment in our common stock. Under these circumstances, we would caution you against investing in our common stock unless you are prepared to incur the risk of incurring substantial losses.
We may not be able to maintain compliance with Nasdaq’s continued listing requirements.
Our common stock is listed on Nasdaq. On March 8, 2022 we received written notification from Nasdaq that because the closing bid price of our common stock for 30 consecutive business days was below the minimum $1.00 per share bid price requirement for continued listing on Nasdaq, we were not in compliance with Nasdaq Listing Rule 5550(a)(2). Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance was 180 days, or until September 5, 2022. On September 6, 2022, we were granted an additional 180-day period from the NASDAQ Stock Market, through March 6, 2023, to regain compliance with the $1.00 minimum bid price requirement for continued listing on the Nasdaq Capital Market. Our shareholders have approved, subject to implementation of our board of directors, a reverse stock split of our common shares that we believe will allow us to regain compliance with the Nasdaq’s continued listing requirements if our stock price does not exceed $1.00 for the minimum period of time prior to March 6, 2023. Pursuant to this authority the Company conducted a reverse stock split at a ratio of 1-for-10 effective as of December 22, 2022. The reverse stock split became effective and our common stock began trading on a split-adjusted basis on the NASDAQ Capital Market at the opening of trading on December 22, 2022. As a result of this reverse stock split, there was no change in the number of authorized shares or the par value of our common stock. We cannot provide any assurances that the reverse stock split completed on December 22, 2022 will result in the Company regaining compliance with the Nasdaq minimum bid price deficiency described above. There are a number of other continued listing requirements that we must satisfy in order to maintain our listing on Nasdaq. If we fail to maintain compliance with all applicable continued listing requirements for Nasdaq and Nasdaq determines to delist our common stock, the delisting could adversely affect the market liquidity of our common stock, our ability to obtain financing to repay any debt and fund our operations.
The United States federal income taxation of the pre-funded warrants is uncertain.
We and holders of our pre-funded warrants may have to take positions that are not yet settled under current U.S. federal income tax law with respect to the pre-funded warrants. In particular, the precise application of the Code section 883 exemption and the PFIC rules to the pre-funded warrants is unclear. The IRS may disagree with the positions taken by the Company, which could result in adverse U.S. federal income tax consequences for us and our shareholders, including holders of the pre-funded warrants. Prospective investors are urged to consult their personal income tax advisers in this regard.
The Class B Warrants and pre-funded warrants are speculative in nature.
The Class B Warrants and pre-funded warrants offered hereby do not confer any rights of common share ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire common shares at a fixed price. Specifically, commencing on the date of issuance, holders of the pre-funded warrants may acquire the common shares issuable upon exercise of such warrants at an exercise price of $0.01 per common share and holders of the Class B Warrants may acquire the common shares issuable upon the exercise of such warrants at an assumed exercise price of $1.47 per common share. Moreover, following this offering, the market value of the Class B Warrants and pre-funded warrants is uncertain and there can be no assurance that the market value of the Class B Warrants and pre-funded warrants will equal or exceed their public offering price.
 
35
 
There is no public market for the Class B Warrants or pre-funded warrants being offered in this offering and we do not expect one to develop.
There is presently no established public trading market for the Class B Warrants or pre-funded warrants being offered in this offering and we do not expect a market to develop. In addition, we do not intend to apply to list the Class B Warrants or pre-funded warrants on any securities exchange or nationally recognized trading system, including Nasdaq. Without an active market, the liquidity of the Class B Warrants and pre-funded warrants will be limited.
Purchasers of our Class B Warrants or pre-funded warrants will not have any rights of common shareholders until such Class B Warrants or pre-funded warrants are exercised.
The Class B Warrants and pre-funded warrants being offered do not confer any rights of common share ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire common shares at a fixed price.
This is a best efforts offering, no minimum amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business plans.
The Placement Agent has agreed to use its reasonable best efforts to solicit offers to purchase the securities being offered in this offering. The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is no required minimum number of securities or amount of proceeds that must be sold as a condition to completion of this offering. Because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, Placement Agent fees and proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth above. We may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us, and investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to fund for our operations as described in the “Use of Proceeds” section herein. Thus, we may not raise the amount of capital we believe is required for our operations in the short-term and may need to raise additional funds, which may not be available or available on terms acceptable to us.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include, but are not limited to, statements concerning plans, objectives, goals, strategies, future events or performance, underlying assumptions and other statements, which are other than statements of historical facts. We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this cautionary statement in connection therewith.
This document and any other written or oral statements made by the Company or on its behalf may include forward-looking statements, which reflect its current views with respect to future events and financial performance, and are not intended to give any assurance as to future results. When used in this document, the words “believe”, “anticipate,” “intends,” “estimate,” “forecast,” “project,” “plan,” “potential,” “will,” “may,” “should,” “expect,” “targets,” “likely,” “would,” “could,” “seeks,” “continue,” “possible,” “might,” “pending,” and similar expressions, terms or phrases may identify forward-looking statements.
The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in its records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, we cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.
Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. We are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated.
In addition to these important factors and matters discussed elsewhere herein, including under the section of this prospectus entitled “Risk Factors,” important factors that, in its view, could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to:
•
the strength of world economies;
​
•
fluctuations in currencies and interest rates, and the impact of the discontinuance of the London Interbank Offered Rate for US Dollars, or LIBOR, after June 30, 2023 on any of our debt referencing LIBOR in the interest rate;
​
•
general market conditions, including fluctuations in charter hire rates and vessel values;
​
•
changes in demand in the dry-bulk shipping industry;
​
•
changes in the supply of vessels, including when caused by new newbuilding vessel orders or changes to or terminations of existing orders, and vessel scrapping levels;
​
•
changes in our operating expenses, including bunker prices, crew costs, drydocking and insurance costs;
​
•
our future operating or financial results;
​
•
availability of financing and refinancing and changes to our financial condition and liquidity, including our ability to pay amounts that it owes and obtain additional financing to fund capital expenditures, acquisitions and other general corporate activities and our ability to obtain financing and comply with the restrictions and other covenants in our financing arrangements;
​
•
changes in governmental rules and regulations or actions taken by regulatory authorities;
​
•
potential liability from pending or future litigation;
​
 
37
 
•
compliance with governmental, tax, environmental and safety regulation, any non-compliance with the U.S. Foreign Corrupt Practices Act of 1977 (FCPA) or other applicable regulations relating to bribery;
​
•
the failure of counter parties to fully perform their contracts with us;
​
•
our dependence on key personnel;
​
•
adequacy of insurance coverage;
​
•
the volatility of the price and trading volume of our common shares;
​
•
our incorporation under the laws of the Marshall Islands and the different rights to relief that may be available compared to other countries, including the United States;
​
•
general domestic and international political conditions or labor disruptions;
​
•
the impact of port or canal congestion or disruptions;
​
•
the length and severity of the continuing novel coronavirus (COVID-19) outbreak and its impact in the dry-bulk shipping industry;
​
•
potential disruption of shipping routes due to accidents, climate-related reasons, political events, public health threats, international hostilities and instability, piracy or acts by terrorists; and
​
•
other important factors described from time to time in the reports we file with the SEC.
​
This prospectus may contain assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as forward-looking statements. We may also from time to time make forward-looking statements in other documents and reports that are filed with or submitted to the SEC, in other information sent to our security holders, and in other written materials. We also caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material. We undertake no obligation to publicly update or revise any forward-looking statement contained in this prospectus, whether as a result of new information, future events or otherwise, except as required by law.
 
38
 
USE OF PROCEEDS
Assuming we sell all Units offered pursuant to this prospectus, we estimate that our net proceeds from the sale of Units, consisting of shares of our common stock or pre-funded warrants and Class B Warrants by us in this offering will be approximately $22.85 million, based on an assumed offering price of $1.47, after deducting placement agent fees and estimated offering expenses payable by us. However, because this is a best efforts offering and there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, Placement Agent’s fees and net proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth on the cover page of this prospectus.
We expect to use the proceeds that we receive from this offering for general corporate purposes, including for the potential future acquisition of vessels. Accordingly, our management will have discretion and flexibility in applying the net proceeds of this offering.
 
39
 
DIVIDEND POLICY
The declaration and payment of dividends, if any, are subject to the discretion of our board of directors. Our board of directors will review and amend our dividend policy from time to time in light of our business plans and other factors.
Marshall Islands law generally prohibits the payment of dividends other than from surplus or when a company is insolvent or if the payment of the dividend would render the company insolvent.
We believe that, under current law, any dividends that we may pay in the future from earnings and profits constitute “qualified dividend income” and as such are generally subject to a 20% United States federal income tax rate with respect to non-corporate United States shareholders. Distributions in excess of our earnings and profits will be treated first as a non-taxable return of capital to the extent of a United States shareholder’s tax basis in its common stock on a dollar-for-dollar basis and thereafter as capital gain. Please see the section of this registration statement entitled “Taxation” for additional information relating to the tax treatment of our dividend payments.
Cumulative dividends on shares of our Series C Preferred Stock and our Series D Preferred Stock are payable in cash or, at our election, in kind, quarterly on each January 15, April 15, July 15 and October 15, or, if any such dividend payment date otherwise would fall on a date that is not a business day, the immediately succeeding business day. The dividend rate on shares of our Series C Preferred Stock is 8.0% per annum per $1,000 of liquidation preference per share (equal to $80 per annum per share) and is not subject to adjustment. The dividend rate on shares of our Series D Preferred Stock is 7.0% per annum per $1,000 of liquidation preference per share (equal to $70 per annum per share) and is not subject to adjustment.
Marshall Islands law provides that we may pay dividends only to the extent that assets are legally available for such purposes. Legally available assets generally are limited to our surplus, which essentially represents our retained earnings and the excess of consideration received by us for the sale of shares above the par value of the shares. In addition, under Marshall Islands law we may not pay dividends if we are insolvent or would be rendered insolvent by the payment of such a dividend or the making of such redemption.
 
40
 
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our common stock is presently quoted on Nasdaq, under the symbol “OP”. On December 20, 2022, the closing price of our common shares on Nasdaq was $1.47, as adjusted to give effect to the reverse stock split completed on December 22, 2022.
 
41
 
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2022:
•
on an actual basis;
​
•
on an adjusted basis to give effect to the issuance of 7,201,145 common shares, as adjusted to reflect the reverse stock split effected on December 22, 2022 upon the conversion of 15,828 of our Series D Preferred Shares, as part of Diana Shipping Inc. Stock Dividend distribution; and
​
•
on an as further adjusted basis to give effect to the anticipated issuance and sale by us of units comprising of up to 17,006,803 shares of common stock or pre-funded warrants to purchase common stock, and up to 17,006,803 Class B Warrants to purchase common stock in this offering at an assumed public offering price of $1.47 per unit, in exchange for gross proceeds of $25 million, or net proceeds of $22.85 million after deducting an amount of $2.15 million concerning placement agent fees and estimated offering expenses payable by us. The final public offering price will be determined through negotiation between us, the Placement Agent and the purchasers in the offering and may be at a discount to the current market price. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final offering price.
​
This table should be read in conjunction with information contained in “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus, in addition to the Company’s consolidated financial statements and related notes for the period from inception (April 15,2021) through December 31, 2021 which are included in this registration statement and to the Company’s unaudited interim consolidated financial statements as of and for the six months ended June 30, 2022 and for the period from inception (April 15, 2021) through June 30, 2021 which are included in this registration statement, and our Report on Form 6-K, which contains our interim unaudited consolidated statement of operations and condensed balance sheet as of and for the nine months ended September 30, 2022 was furnished to the Commission on November 29, 2022 and is incorporated by reference herein, and other information provided in this registration statement. Effective December 22, 2022, the Company effected a 1-for-10 reverse stock split on our common stock. Unless otherwise indicated, the Company’s financial statements have not been retroactively adjusted to reflect the reverse stock split.
There have been no other material adjustments to our capitalization since September 30, 2022.
 
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(All figures in thousands U.S. dollars, except per share amounts)
​ ​
Actual
​ ​
As Adjusted
​ ​
As further
adjusted
​
​ ​ ​
(unaudited)
​ ​
(unaudited)
​ ​
(unaudited)
​
Stockholders’ Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Preferred stock, $0.01 par value; 100,000,000 shares authorized, 535,000
issued and outstanding as at September 30, 2022, 519,172 shares
issued and outstanding as adjusted, 519,172 shares issued and
outstanding as further adjusted
​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 5 ​ ​
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 2,982,909 issued and outstanding as at September 30, 2022, 1,000,000,000 authorized shares and 10,184,054 shares issued and outstanding as adjusted, 1,000,000,000 authorized shares and up to 27,190,857 shares issued and outstanding as further adjusted
​ ​ ​ ​ 30 ​ ​ ​ ​ ​ 102 ​ ​ ​ ​ ​ 272 ​ ​
Additional paid-in capital
​ ​ ​ ​ 78,692 ​ ​ ​ ​ ​ 78,620 ​ ​ ​ ​ ​ 101,300 ​ ​
Retained Earnings
​ ​ ​ ​ 300 ​ ​ ​ ​ ​ 300 ​ ​ ​ ​ ​ 300 ​ ​
Total Capitalization
​ ​ ​ $ 79,027 ​ ​ ​ ​ ​ 79,027 ​ ​ ​ ​ $ 101,877 ​ ​
Actual and as adjusted capitalization reflect the reverse stock split effected on December 22, 2022.
The capitalization as adjusted and as further adjusted does not depict the recognition of compensation cost on the 1,982 shares of Series C Preferred Stock awarded to executive management and non-executive directors, for the period from October 1, 2022 to the date of this prospectus.
The capitalization on an actual basis takes into consideration the issuance on September 21, 2022 of 25,000 shares of Series D Preferred Stock as partial consideration for the remaining purchase price of $17.6 million for the acquisition of the Capesize m/v Baltimore.
The capitalization as further adjusted does not assume proceeds from the exercise of the Class B warrants issued in this offering. Furthermore, the accounting treatment of Class B warrants has not been finalized as of the date hereof.
The capitalization assumes no sale of pre-funded warrants in this offering, which, if sold, would reduce the number of common stock that we are offering on a one-for-one basis.
 
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DILUTION
If you invest in our common stock or pre-funded warrants and Class B Warrants in this offering, your interest will be diluted to the extent of the difference between the public offering price per common stock in this offering and our proforma net book value per common share immediately after this offering.
On September 30, 2022, our equity was $79.03 million and the book value per share of common stock was $26.49, as adjusted to reflect the reverse stock split effected on December 22, 2022. Our book value per common stock represents our total book value (total equity) divided by the total number of our outstanding shares.
After giving effect to the issuance and sale of common stock in this offering at an assumed public offering price of $1.47 per share, after deducting estimated placement agent fees and estimated offering expenses payable by us, our pro forma net book value as of September 30, 2022 would have been approximately $101.88 million, or $5.10 per common share. This represents an immediate decrease in pro forma net book value of $21.39 per share to our existing shareholders and an immediate increase of $3.63 per share to new investors purchasing shares of common stock in this offering.*
The assumed offering price per share of common stock underlying the Units and Class B Warrants is $1.47 which is less than our pro forma net book value per common stock on September 30, 2022 of $5.10, hence our new investors will not be diluted. The final public offering price will be determined through negotiation between us, the Placement Agent and purchasers in the offering and may be at a discount to the current market price. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final offering price.
The following table illustrates this dilution on a per share basis:
In U.S. dollars, except percentages
​ ​
Assumed offering price per common stock
​ ​ ​ $ 1.47 ​ ​
Book value per common stock as of September 30, 2022
​ ​ ​ $ 26.49 ​ ​
Dilution to existing shareholders(1)
​ ​ ​ $ 25.02 ​ ​
% Dilution to existing shareholders(1)
​ ​ ​ ​ 94% ​ ​
Pro forma net book value per common stock after this offering
​ ​ ​ $ 5.10 ​ ​
Decrease in book value per common stock after this offering(2)
​ ​ ​ $ 21.39 ​ ​
Percentage of decrease in book value per common stock after this offering(2)
​ ​ ​ ​ 80.76% ​ ​
Dilution for new investors after the offering(3)
​ ​ ​ ​ — ​ ​
Percentage of dilution for new investors after the offering(3)
​ ​ ​ ​ — ​ ​
​
(1)
Dilution to existing shareholders is computed as the difference between the offering price per share and the net book value per common stock, as of the latest balance sheet date. The percentage of dilution for existing shareholders is computed by dividing the dilution to existing shareholders by the book value per common stock as of the latest balance sheet date.
​
(2)
Decrease in book value per common stock after this offering is computed as the difference between the net book value per common stock, as of the latest balance sheet date and pro forma net book value per common stock after this offering. Percentage of decrease in book value per common stock after this offering is calculated by dividing the difference between the net book value per common stock, as of the latest balance sheet date and pro forma net book value per common stock after this offering, by the net book value per common stock, as of the latest balance sheet date.
​
(3)
Dilution in book value per share for new investors represents the difference between the amount per share paid by purchasers of our common stock, in this offering, and the pro forma net book value per common stock after this offering.
​
​
*
Amounts do not include exercise of Class B warrants in this offering and no sale of pre-funded warrants in this offering, which, if sold, would reduce the number of common stock that we are offering on a one-for-one basis.
​
 
44
 
The percentage of dilution for new investors after the offering is calculated by dividing the percentage of dilution for new investors after the offering by the offering price per common stock.
Each $1.00 increase (decrease) in the assumed initial offering price of $1.47 per share would increase (decrease) total consideration paid by new investors and average price per share paid by new investors by $15.7 million, and $0.93 per share, respectively, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting placement agent fees and estimated offering expenses payable by us. Each increase (decrease) of 1.0 million shares in the number of shares sold in this offering, as set forth on the cover page of this prospectus, would increase (decrease) total consideration paid by new investors and average price per share paid by new investors by $1.36 million, and $0.08 per share, respectively, assuming the assumed public offering price remains the same, and after deducting placement agent fees and estimated offering expenses payable by us.
The information above reflects and assumes (i) no sale of pre-funded warrants in this offering, which, if sold, would reduce the number of common stock that we are offering on a one-for-one basis, and (ii) no exercise of the Class B Warrants issued in this offering.
The information above also does not give effect to the Diana Shipping Stock Dividend, following which 7,201,145 new common shares were issued, as adjusted to reflect the reverse stock split effected on December 22, 2022. As adjusted for the Diana Stock Dividend, proforma book value per common stock as of September 30, 2022 after giving effect to the conversion would be $7.76 and dilution to existing shareholders would be approximately $6.29.
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following management’s discussion and analysis should be read in conjunction with i) our unaudited interim consolidated financial statements for the six month period ended June 30, 2022 and for the period from April 15, 2021 through June 30,2021 and their notes included elsewhere in this prospectus, ii) our consolidated financial statements for the period from inception (April 15, 2021) through December 31, 2021 and their notes included elsewhere in this prospectus, iii) the unaudited interim combined carve-out financial statements of the OceanPal Inc. Predecessors for the six month period ended June 30, 2021 and 2020 and their notes included elsewhere in this prospectus, iv) the audited combined carve-out financial statements of the OceanPal Inc. Predecessors for the period from January 1, 2021 through November 29, 2021 and for the years ended December 31,2020 and 2019 and their notes included elsewhere in this prospectus, as well as the unaudited proforma condensed combined statement of comprehensive income/(loss) for the year ended December 31, 2021 reflecting the Spin-Off as if it had occurred at the beginning of 2021, included as Exhibit 99.1 to the registration statement of which this prospectus forms a part. Our comparative unaudited interim consolidated financial statements have been presented for the period from inception (April 15, 2021) through June 30, 2021. They include only the accounts of OceanPal Inc. from inception date April 15, 2021 through June 30, 2021, as the accounts of the Company’s wholly-owned subsidiaries have been consolidated from November 30, 2021 (i.e. upon the Spin-Off consummation and the acquisition of the three ship-owning subsidiaries by us) when the operation our vessels started. Operations prior to the November 30, 2021 consisted principally of organizational expenses. This discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth in the section entitled “Risk Factors” and elsewhere in this prospectus.
The following management’s discussion and analysis is not adjusted to reflect the Company’s reverse stock split effected on December 22, 2022. Further, the Company’s financial statements included in this prospectus, on which this management’s discussion is developed, have not been retroactively adjusted to reflect the reverse stock split.
Lack of Historical Operating Data for Vessels before Their Acquisition
Vessels are generally acquired free of charter. 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.
Where we identify any intangible assets or liabilities associated with the acquisition of a vessel, we record all identified assets or liabilities at fair value. Fair value is determined by reference to market data. We value any asset or liability arising from the market value of the time charters assumed when a vessel is acquired. The amount to be recorded as an asset or liability at the date of vessel delivery is based on the difference between the current fair market value of the charter and the net present value of future contractual cash flows. When the present value of the time charter assumed is greater than the current fair market value of such charter, the difference is recorded as prepaid charter revenue. When the opposite situation occurs, any difference, capped to the vessel’s fair value on a charter-free basis, is recorded as deferred revenue. Such assets and liabilities, respectively, are amortized as a reduction of, or an increase in, revenue over the period of the time charter assumed.
To the extent that we purchase a vessel and assume or renegotiate a related time charter, among others, we will be required to take the following steps before the vessel will be ready to commence operations:
•
obtain the charterer’s consent to us as the new owner;
​
•
obtain the charterer’s consent to a new technical manager;
​
•
in some cases, obtain the charterer’s consent to a new flag for the vessel;
​
 
46
 
•
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;
​
•
replace all hired equipment on board, such as gas cylinders and communication equipment;
​
•
negotiate and enter into new insurance contracts for the vessel through our own insurance brokers;
​
•
register the vessel under a flag state and perform the related inspections in order to obtain new trading certificates from the flag state;
​
•
implement a new planned maintenance program for the vessel; and
​
•
ensure that the new technical manager obtains new certificates for compliance with the safety and vessel security regulations of the flag state.
​
When we charter a vessel pursuant to a long-term time charter agreement with varying rates, we recognize revenue on a straight line basis, equal to the average revenue during the term of the charter.
The following discussion is intended to help you understand how acquisitions of vessels affect our business and results of operations.
Our business is mainly comprised of the following elements:
•
employment and operation of our vessels; and
​
•
management of the financial, general and administrative elements involved in the conduct of our business and ownership of our vessels.
​
The employment and operation of our vessels mainly require the following components:
•
vessel maintenance and repair;
​
•
crew selection and training;
​
•
vessel spares and stores supply;
​
•
contingency response planning;
​
•
onboard safety procedures auditing;
​
•
accounting;
​
•
vessel insurance arrangement;
​
•
vessel chartering;
​
•
vessel security training and security response plans (ISPS);
​
•
obtaining of ISM certification and audit for each vessel within the six months of taking over a vessel;
​
•
vessel hiring management;
​
•
vessel surveying; and
​
•
vessel performance monitoring.
​
The management of financial, general and administrative elements involved in the conduct of our business and ownership of our vessels mainly requires the following components:
•
management of our financial resources, including banking relationships, i.e., administration of bank loans that we may enter into in the future and bank accounts;
​
•
management of our accounting system and records and financial reporting;
​
•
administration of the legal and regulatory requirements affecting our business and assets; and
​
•
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:
 
47
 
•
rates and periods of charter hire;
​
•
levels of vessel operating expenses;
​
•
depreciation expenses;
​
•
financing costs; and
​
•
fluctuations in foreign exchange rates.
​
Operating results
We charter our vessels to customers pursuant to short- to medium-term time charters, although we may also charter our vessels in the spot market and on longer-term time charters.
Factors Affecting Our Results of Operations
Time Charter Revenues
Under our time charters, the charterer typically 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. However, our voyage results may be affected by differences in bunker prices. Our 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 charter hire rates that our vessels earn under charters, which, in turn, are affected by a number of factors, including:
•
the duration of our charters;
​
•
our decisions relating to vessel acquisitions and disposals;
​
•
the amount of time that we spend positioning our vessels;
​
•
the amount of time that our vessels spend in drydock undergoing repairs;
​
•
maintenance and upgrade work;
​
•
the age, condition and specifications of our vessels;
​
•
levels of supply and demand in the dry bulk shipping industry; and
​
•
other factors affecting spot market charter rates for dry bulk carriers.
​
Vessels operating on time charters for a certain period of time provide more predictable cash flows over that period of time, but can yield lower profit margins than vessels operating in the spot charter market during periods characterized by favorable market conditions. Vessels operating in the spot charter market generate revenues that are less predictable but may enable their owners to capture increased profit margins during periods of improvements in charter rates although their owners would be exposed to the risk of declining charter rates, which may have a materially adverse impact on financial performance. As we employ vessels on period charters, future spot charter rates may be higher or lower than the rates at which we have employed our vessels on period charters. Our time 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 a counterparty fail to honor their obligations under agreements with us, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows. For 2022, we expect our revenues to increase compared to the period from commencement of operations (November 30, 2021) to December 31, 2021 due to increase in vessel operating days, and fleet expansion.
Voyage Expenses
We incur voyage expenses that mainly include commissions because all of our vessels are employed under time charters that require the charterer to bear voyage expenses such as bunkers (fuel oil), port and canal charges. Although the charterer bears the cost of bunkers, our voyage results may be affected by differences in bunker prices, and we may record a gain or a loss deriving from such price differences. When a vessel is delivered to a charterer, bunkers are purchased by the charterer and sold back to us on the redelivery
 
48
 
of the vessel. Bunker gain, or loss, result when a vessel is redelivered by her charterer and delivered to the next charterer at different bunker prices, or quantities. We also pay commissions to one or more unaffiliated ship brokers, to in-house brokers associated with the charterer for the arrangement of the relevant charter. We currently pay commissions of 5.00% of the total daily charter hire rate of each charter to unaffiliated ship brokers, in-house brokers associated with the charterers, depending on the number of brokers involved with arranging the charter. In addition, we pay commissions to DWM and Steamship for the provision of management and brokerage services. For 2022, we expect our voyage expenses to follow the same trend as our revenues, depending also on the gain or loss from bunkers.
Vessel Operating Expenses
We remain responsible for paying the vessels’ operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel, the costs of spares and consumable stores, tonnage taxes, environmental and safety expenses. Our vessel operating expenses are expensed as incurred. Our vessel operating expenses generally represent fixed costs. For 2022, we expect our operating expenses to increase compared to the period from commencement of operations (November 30, 2021) to December 31, 2021 due to increase in vessel ownership days and fleet expansion.
Vessel Depreciation
The cost of our vessels is depreciated on a straight-line basis over the estimated useful life of each vessel. Depreciation is based on the cost of the vessel less its estimated salvage value. We estimate the useful life of our dry bulk vessels to be 25 years from the date of initial delivery from the shipyard, which we believe is common in the dry bulk shipping industry. Furthermore, we estimate the salvage values of our vessels based on historical average prices of the cost of the light-weight ton of vessels being scrapped. For 2022, we expect vessel depreciation expense to increase compared to the period from commencement of operations (November 30, 2021) to December 31, 2021.
General and Administrative Expenses
With regard to OceanPal Inc. Predecessors’ general and administrative expenses consist of allocations made to OceanPal Inc. Predecessors by Diana Shipping for certain corporate functions and shared services. Amounts recognized by OceanPal Inc. Predecessors are not necessarily representative of the amounts that would have been reflected in the financial statements had the Company operated independently of Diana Shipping.
We incur general and administrative expenses which may include compensation of our executive officers, directors and consultants, compensation cost of restricted stock awarded to senior management and non-executive directors, traveling, promotional and other expenses of a listed public company, such as legal and professional expenses and other general expenses. These expenses are relatively fixed and are not widely affected by the size of the fleet. For 2022, we expect our general and administrative expenses to increase.
Results of Operations of OceanPal Inc.
​ ​ ​
OceanPal Inc.
​
​ ​ ​
For the
six-month
period ended
June 30, 2022
​ ​
For the
period from
April 15, 2021
(inception date) to
June 30, 2021
​ ​
For the
period from
April 15, 2021
(inception date) to
December 31, 2021
​
Results of Operations
​ ​
in millions of
U.S. dollars
​ ​
in millions of
U.S. dollars
​ ​
in millions of
U.S. dollars
​
Time charter revenues
​ ​
8.25
​ ​
—
​ ​
1.33
​
Voyage Expenses
​ ​
0.60
​ ​
—
​ ​
0.05
​
Vessel Operating Expenses
​ ​
2.94
​ ​
—
​ ​
0.36
​
Depreciation
​ ​
2.02
​ ​
—
​ ​
0.35
​
General and Administrative expenses
​ ​
1.22
​ ​
—
​ ​
0.36
​
Management fees to related parties
​ ​
0.41
​ ​
—
​ ​
0.07
​
 
49
 
​ ​ ​
OceanPal Inc.
​
​ ​ ​
For the
six-month
period ended
June 30, 2022
​ ​
For the
period from
April 15, 2021
(inception date) to
June 30, 2021
​ ​
For the
period from
April 15, 2021
(inception date) to
December 31, 2021
​
Other operating income
​ ​
(0.01)
​ ​
—
​ ​
—
​
Net income/(loss) and comprehensive income/(loss)
​ ​
1.06
​ ​
—
​ ​
0.13
​
Net income/(loss) attributable to common stockholders
​ ​
(0.28)
​ ​
—
​ ​
0.07
​
Results of Operations of OceanPal Inc. Predecessors
​ ​ ​
OceanPal Inc. Predecessors
​
​ ​ ​
For the period
from January 1, 2021
to November 29,
2021
​ ​
For the year
ended
December 31, 2020
​ ​
For the year
ended
December 31, 2019
​
Results of Operations
​ ​
in millions of
U.S. dollars
​ ​
in millions of
U.S. dollars
​ ​
in millions of
U.S. dollars
​
Time charter revenues
​ ​
11.34
​ ​
9.41
​ ​
12.37
​
Voyage Expenses
​ ​
0.42
​ ​
0.98
​ ​
1.55
​
Vessel Operating Expenses
​ ​
6.2
​ ​
8.5
​ ​
5.58
​
Depreciation and amortization of deferred charges
​ ​
2.19
​ ​
2.15
​ ​
2.48
​
General and Administrative expenses
​ ​
1.1
​ ​
1.27
​ ​
0.81
​
Management fees to related parties
​ ​
0.68
​ ​
0.76
​ ​
0.73
​
Vessel Fair value adjustment
​ ​
 — 
​ ​
0.2
​ ​
 — 
​
Vessel Impairment charges
​ ​
 — 
​ ​
 — 
​ ​
3.05
​
Other loss/(income)
​ ​
—
​ ​
0.24
​ ​
0.04
​
Net income/(loss)
​ ​
0.75
​ ​
(3.8)
​ ​
(1.87)
​
​ ​ ​
OceanPal Inc. Predecessors
​
​ ​ ​
For the
six-month
period ended
June 30, 2021
​ ​
For the
six-month
period ended
June 30, 2020
​
Results of Operations
​ ​
in millions of
U.S. dollars
​ ​
in millions of
U.S. dollars
​
Time charter revenues
​ ​
6.07
​ ​
4.82
​
Voyage Expenses
​ ​
0.09
​ ​
0.55
​
Vessel Operating Expenses
​ ​
3.41
​ ​
3.54
​
Depreciation and amortization of deferred charges
​ ​
1.19
​ ​
0.96
​
General and Administrative expenses
​ ​
0.56
​ ​
0.61
​
Management fees to related parties
​ ​
0.38
​ ​
0.38
​
Vessel fair value adjustment
​ ​
—
​ ​
(0.2)
​
Net income/(loss) and comprehensive income/(loss)
​ ​
0.43
​ ​
(1.02)
​
Six month period ended June 30, 2022 (the “2022 Company Period”), compared to period from inception (April 15, 2021) through June 30, 2021 (the “2021 Company Period”)
General and Administrative Expenses.   General and administrative expenses for the 2022 Company Period amounted to $1.22 million and mainly consist of brokerage services’ fees, legal fees, compensation cost of restricted stock awarded to senior management and non-executive directors, board and audit fees. General and administrative expenses for the 2021 Company Period of $1, represent organizational expenses.
 
50
 
2022 Company Period compared to six month period ended June 30, 2021 (the “2021 Predecessor Period”)
Time Charter Revenues.   Time charter revenues increased by $2.18 million during the 2022 Company Period compared to the 2021 Predecessor Period, mainly due to increase in average time charter rates.
Voyage Expenses.   Voyage expenses increased by $0.5 million, during the 2022 Company Period compared to the 2021 Predecessor Period, mainly due to increase by $0.3 million in commissions as a result of increased time charter revenues and $0.2 million decrease in gain from bunkers.
Vessel Operating Expenses.   Vessel operating expenses decreased by $0.47 million during the 2022 Company Period compared to the 2021 Predecessor Period. The overall decrease in vessel operating expenses was attributable to the decrease of the daily operating expenses of our vessels as the ownership days of our fleet remained stable, mainly due to decreased crew expenses and expenses for spares and repairs, partly offset by increased expenses for stores and insurances.
Depreciation and amortization.   Depreciation and amortization increased by $0.83 million during the 2022 Company Period, compared to the 2021 Predecessor Period mainly due to increase in depreciation expense due to the fact that the three vessels contributed to the Company were stated at fair value upon the spin-off consummation, partially off-set by amortization of deferred cost recorded relating to dry-dockings of vessels Calipso and Salt Lake City in the 2021 Predecessor Period compared to no amortization expense in the 2022 Company Period, as none of the vessels completed a dry-docking survey.
General and Administrative Expenses.   General and administrative expenses increased by $0.66 million during the 2022 Company Period compared to the 2021 Predecessor Period, such increase mainly attributed to additional expenses incurred by the Company since its listing. General and administrative expenses for the 2022 Company Period amounted to $1.22 million and mainly consist of brokerage services’ fees, legal fees, compensation cost of restricted stock awarded to senior management and non-executive directors, board and audit fees. General and administrative expenses for the 2021 Predecessor Period amounted to $0.56 million and represent the allocation of the expenses incurred by Diana Shipping based on the number of ownership days of the fleet vessels.
Management Fees To Related Parties.   Management fees to related parties increased by $0.03 million during the 2022 Company Period compared to the 2021 Predecessor Period. Management fees paid at each period were in accordance with the terms of the management agreements then in place.
Period from January 1, 2021 through November 29, 2021 (2021 Predecessor Period) and Period from November 30, 2021 through December 31, 2021 (2021 Company Period) compared to year ended December 31, 2020 (2020 Predecessor Year)
Time Charter Revenues.   Time charter revenues increased by $3.26 million during 2021 Predecessor Period and 2021 Company Period compared to 2020 Predecessor Year, mainly due to increase in average time charter rates.
Voyage Expenses.   Voyage expenses decreased by $0.51 million, during 2021 Predecessor Period and 2021 Company Period compared to 2020 Predecessor Year, mainly due to gain from bunkers, offset by increase in brokerage commissions as a result of time charter revenues increase, for 2021 Predecessor Period.
Vessel Operating Expenses.   Vessel operating expenses decreased by $1.94 million during 2021 Predecessor Period and 2021 Company Period compared to 2020 Predecessor Year, mainly due to increased expenses for repairs and maintenance and due to an incident of one of the vessels in 2020.
Depreciation and amortization of deferred charges.   Depreciation increased by $0.39 million during the 2021 Predecessor Period and 2021 Company Period compared to 2020 Predecessor Year, mainly due to increased amortization of deferred cost relating to dry-dockings of the vessels.
General and Administrative Expenses.   General and administrative expenses increased by $0.19 million during 2021 Predecessor Period and 2021 Company Period compared to 2020 Predecessor Year, mainly due to increased costs for the Spin-Off transaction.
 
51
 
Management Fees To Related Parties.   Management fees to related parties decreased by $0.01 million during 2021 Predecessor Period and 2021 Company Period compared to 2020 Predecessor Year, mainly due to decrease in ownership days.
Year ended December 31, 2020 compared to the year ended December 31, 2019
Time charter revenues.   Time charter revenues decreased by $3.0 million, or 24%, to $9.4 million in 2020, compared to $12.4 million in 2019. The decrease was mainly due to decreased revenues resulting from the decrease in average time charter rates and increase in off hire days. In 2020, we had total operating days of 971 and fleet utilization of 94.8%, compared to 1,013 total operating days and a fleet utilization of 92.5% in 2019. Additionally, there was a 17% decrease in time charter rates from $9,883 in 2019 to $8,235 in 2020.
Voyage expenses.   Voyage expenses amounted to $1.0 million in 2020 compared to $1.5 million in 2019. Commissions, which is the main part of voyage expenses decreased in 2020 to $0.6 million compared to $0.7 million in 2019 due to the decrease in revenues. Voyage expenses decreased even further in 2020 compared to 2019, because in 2019 Calipso had an additional loss from bunkers amounting to $0.6 million resulting from a claim.
Vessel operating expenses.   Vessel operating expenses increased by $2.9 million, or 52%, to $8.5 million in 2020 compared to $5.6 million in 2019. The increase in operating expenses is mainly due to increases in all operating expenses, but mainly due to expenses relating to an incident of one of the vessels and vessel annual taxes. Daily operating expenses were $7,739 in 2020 compared to $5,098 in 2019, representing a 52% increase.
Depreciation and amortization of deferred charges.   Depreciation and amortization of deferred charges decreased by $0.3 million, or 12%, to $2.2 million in 2020, compared to $2.5 million in 2019. This decrease was due to the impairment loss of the Calipso in 2019, as the vessel’s value decreased to its fair value (sale price) less cost to sell as a result of being held for sale. Additionally, the amortization of deferred cost relating to dry-dockings decreased in 2020 to $0.1 million compared to $0.2 million in 2019.
General and administrative expenses.   General and Administrative Expenses increased by $0.5 million, or 63%, to $1.3 million in 2020 compared to $0.8 million in 2019 and represent the allocation of the expenses incurred by Diana Shipping based on the number of ownership days of the fleet vessels.
Management fees to related party.   Management fees to a related party amounted to $0.8 million in 2020 compared to $0.7 million in 2019. The increase is attributable the change of the manager from DWM to DSS in October 2019 and the increased fees under the new management agreements.
Vessel Impairment charges and Vessel fair value adjustment.   In 2019, an impairment loss amounting to $3.0 million was recorded due to the agreement to sell the Calipso which as of December 31, 2019 was recorded as held for sale and its value decreased to its fair value (sale price) less cost to sell. In March 2020, following the failure to complete the sale of the vessel, the vessel’s withdrawal from the market was decided and the vessel was recorded as held for use at its fair value at that date which resulted to a gain of $0.2 million.
Other loss/(income):   Other loss of $0.4 million in 2019 compared to other income of $0.24 million in 2020 related to resulting gains or losses from conversion of transactions in currencies other than U.S. dollars.
Pro Forma Financial Information
Unaudited pro forma financial information of the Company that summarizes the consolidated results of operations of the Company as though the Spin-Off from Diana Shipping originally consummated on November 29, 2021 had been consummated on January 1, 2021 is included as Exhibit 99.1 to the registration statement of which this prospectus forms a part. The unaudited pro forma financial information is for informational purposes only and does not necessarily represent results that would have occurred if the transaction had taken place on the basis assumed.
 
52
 
Inflation
High inflation in many of the global economies where we operate is beginning to impact vessel operating costs, including crew travel, transportation of equipment and spares, and drydocking costs. Other inflated cost changes may make our vessel daily operating costs higher over the near and medium future. Increases in the cost of fuel consumed on voyages are usually absorbed by cargo market rates passed on to customers or covered by fuel cost pass throughs under the terms of time charter contracts.
Implications of Being an Emerging Growth Company
We had less than $1.07 billion in revenue during our last fiscal year, which means that we qualify as an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage or specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
•
exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal controls over financial reporting under Section 404(b) of Sarbanes-Oxley;
​
•
exemption from new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies; and
​
•
exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and financial statements.
​
We may take advantage of these provisions until the end of the fiscal year following the fifth anniversary of the date we first sell our common equity securities pursuant to an effective registration statement under the Securities Act or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if, among other things, we have more than $1.07 billion in “total annual gross revenues” during the most recently completed fiscal year. We may choose to take advantage of some, but not all, of these reduced burdens. For as long as we take advantage of the reduced reporting obligations, the information that we provide shareholders may be different from information provided by other public companies. We are choosing to “opt out” of the extended transition period relating to the exemption from new or revised financial accounting standards and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth public companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
Liquidity and Capital Resources
As of June 30, 2022 and as of December 31, 2021, we did not have any contractual obligations other than those related to our Series C Preferred Stock and the acquisition of the Capesize M/V Baltimore which was delivered to the Company on September 20, 2022, as applicable. As of the date of this prospectus, we do not have any contracted capital expenditures for vessel acquisitions or debt and we incur capital expenditures when our vessels undergo surveys and for vessel improvements to meet new regulations and comply with international and regulatory standards. We will require capital to fund ongoing operations, vessel improvements to meet requirements under new regulations and the payment of our preferred dividends. We intend to finance our future growth with future debt and equity offerings as deemed appropriate by our management and board of directors.
As at June 30, 2022 and as at December 31, 2021, working capital, which is current assets minus current liabilities, amounted to $11.63 million and $2.27 million, respectively. For 2022 and for the first nine months of 2023, we believe that anticipated revenues will result in internally generated cash flows together with proceeds from the January 2022 Offering.
Cash Flow OceanPal Inc.
Cash and cash equivalents as at June 30, 2022 and December 31, 2021 was $10.99 million and $1.67 million, respectively. We consider highly liquid investments such as time deposits and certificates of
 
53
 
deposit with an original maturity of around three months or less to be cash equivalents. Cash and cash equivalents are held in U.S. dollars.
Net Cash Provided by Operating Activities
Net cash provided by operating activities of the Company in the six month period ended June 30, 2022 amounted to $2.37 million representing a decrease by $0.97 million compared to the 2021 Predecessor Period. The decrease of net cash provided by operating activities was mainly attributable to increase in the working capital outflow, partially counterbalanced by increased revenues, as a result of increased average time charter rates.
Net cash provided by operating activities in the period from inception date (April 15, 2021) to December 31, 2021 amounted to $0.7 million.
Net Cash Used in Investing Activities
Net cash used in investing activities in the six month period ended June 30, 2022 amounted to $4.78 million and represent payment of 20% of the purchase price of M/V Baltimore in accordance with the MoA terms (i.e. $4.4 million) and $0.38 million paid regarding vessel improvements.
Net cash used in investing activities in the period from inception date (April 15, 2021) to December 31, 2021 was $0.04 million and represent amounts paid for improvement costs of M/V Salt Lake City.
Net Cash Provided by Financing Activities
Net cash provided by financing activities in the six month period ended June 30, 2022 amounted to $11.72 million and comprise from proceeds of $14.68 million from the issuance of units (comprising of common or prefunded warrants and Class A warrants), common stock and warrants, and the exercise of warrants, net of underwriters’ fees and commissions under the underwritten public offering completed in January 2022 less $2.96 million of dividends paid to common, Class A warrants and Series C preferred holders during the same period.
Net cash provided by financing activities in the period from inception date (April 15, 2021) to December 31, 2021 was $1.0 million and represents the contribution of working capital by Diana Shipping to us pursuant to the Spin-Off.
Cash Flow OceanPal Inc. Predecessors
Cash and cash equivalents as at December 31, 2020 and 2019 was $0.04 million and $2 thousands, respectively. Cash and cash equivalents as at November 29, 2021 was $0.09 thousands. Cash and cash equivalents as at June 30, 2021 was $1.9 million. Highly liquid investments such as time deposits and certificates of deposit with an original maturity of around three months or less are considered to be cash equivalents. Cash and cash equivalents are held in U.S. dollars.
Net Cash provided by /used in Operating Activities
Net cash from operating activities decreased by $4.2 million to $2.7 million net cash used in operating activities in 2020 compared to $1.4 million net cash provided by operating activities in 2019. This decrease was attributable to decreased revenues, increased dry-docking costs and increased operating expenses.
Net cash provided by operating activities in the period from January 1, 2021 to November 29, 2021 amounted to $3.18 million.
Net cash provided by operating activities for the six month period ended June 30, 2021 amounted to $3.3 million.
Net Cash used in Investing Activities
Net cash used in investing activities was $1.5 million for 2020 and related to vessel improvements due to new regulations. There was no cash from investing activities in 2019.
 
54
 
Net cash used in investing activities was $0.02 million for the period from January 1, 2021 to November 29, 2021 and also related to vessel improvements due to new regulations.
Net cash used in investing activities was $0.03 million for the six month period ended June 30, 2021 and relates to vessel improvements due to new regulations.
Net Cash provided by / used in Financing Activities
Net cash provided by financing activities was $4.2 million for 2020 and related to additional investment by the Parent and Net cash used in financing activities was $1.5 million for 2019 and relates to distributions to Parent.
Net cash used in financing activities was $3.2 million for the period from January 1, 2021 to November 29, 2021 and relates to amounts distributed to the Parent.
Net cash used in financing activities was $3.3 million for the six month period ended June 30, 2021 and relates to amounts distributed to Diana Shipping.
As part of Diana Shipping, OceanPal Inc. Predecessors were dependent upon Diana Shipping for all of its working capital and financing requirements, as Diana Shipping used a centralized approach to cash management and financing of its operations. Financial transactions relating to OceanPal Inc. Predecessors were accounted for through Diana Shipping equity account. Accordingly, none of Diana Shipping’s cash, cash equivalents or debt at the corporate level were assigned to the OceanPal Inc. Predecessors in the combined carve-out financial statements.
C.   Research and development, patents and licenses
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 hire rates that we are able to realize, and the demand for dry bulk vessel services. The Baltic Dry Index, or 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. In 2020, the BDI ranged from a low of 393 in May to a high of 2,097 in October, increased to a high of 5,650 on October 7, 2021 and dropped to 2,217 on December 24, 2021. The BDI further dropped to 1,296 on January 26, 2022, increased to a high of 3,369 on May 23, 2022, further dropped to 965 on August 31, 2022 and as of December 20, 2022 was 1,596.
The decline and volatility in charter rates in the dry bulk market reflects in part the fact that the supply of dry bulk vessels in the market has been increasing, and the number of newbuilding dry bulk vessels on order is high. Demand for dry bulk vessel services is influenced by global financial conditions. Global financial markets and economic conditions have been, and continue to be, volatile. Beginning in February 2020, due in part to fears associated with the spread of COVID-19, global financial markets, and starting in late February, financial markets in the U.S., experienced even greater relative volatility and a steep and abrupt downturn, which volatility and downturn may continue as COVID-19 continues to spread. Credit markets and the debt and equity capital markets have been distressed and the uncertainty surrounding the future of the global credit markets has resulted in reduced access to credit worldwide, particularly for the shipping industry. These issues, along with significant write-offs in the financial services sector, the repricing of credit risk and the current weak economic conditions, have made it difficult to obtain financing.
 
55
 
We believe that the important measures for analyzing trends in our results of operations consist of the following:
​ ​ ​
OceanPal Inc.
​
​ ​ ​
For the
six-month
period ended
June 30, 2022
​ ​
For the
period from
April 15, 2021
(inception date) to
December 31, 2021
​
Fleet Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Average number of vessels(1)
​ ​ ​ ​ 3.0 ​ ​ ​ ​ ​ 3.0 ​ ​
Number of vessels at year-end/period-end
​ ​ ​ ​ 3.0 ​ ​ ​ ​ ​ 3.0 ​ ​
Weighted average age of vessels at year-end/period-end (in years)
​ ​ ​ ​ 17.2 ​ ​ ​ ​ ​ 16.7 ​ ​
Ownership days(2)
​ ​ ​ ​ 543 ​ ​ ​ ​ ​ 96 ​ ​
Available days(3)
​ ​ ​ ​ 516 ​ ​ ​ ​ ​ 96 ​ ​
Operating days(4)
​ ​ ​ ​ 498 ​ ​ ​ ​ ​ 96 ​ ​
Fleet utilization(5)
​ ​ ​ ​ 96.5% ​ ​ ​ ​ ​ 100.0% ​ ​
​ ​ ​
OceanPal Inc. Predecessors
​
​ ​ ​
For the period
from January 1, 2021
to November 29, 2021
​ ​
For the year
ended
December 31, 2020
​ ​
For the year
ended
December 31, 2019
​
Fleet Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Average number of vessels(1)
​ ​ ​ ​ 3.0 ​ ​ ​ ​ ​ 3.0 ​ ​ ​ ​ ​ 3.0 ​ ​
Number of vessels at period-end
​ ​ ​ ​ 3.0 ​ ​ ​ ​ ​ 3.0 ​ ​ ​ ​ ​ 3.0 ​ ​
Weighted average age of vessels at period-end (in years)
​ ​ ​ ​ 16,6 ​ ​ ​ ​ ​ 15,7 ​ ​ ​ ​ ​ 14,7 ​ ​
Ownership days(2)
​ ​ ​ ​ 999 ​ ​ ​ ​ ​ 1,098 ​ ​ ​ ​ ​ 1,095 ​ ​
Available days(3)
​ ​ ​ ​ 999 ​ ​ ​ ​ ​ 1,024 ​ ​ ​ ​ ​ 1,095 ​ ​
Operating days(4)
​ ​ ​ ​ 996 ​ ​ ​ ​ ​ 971 ​ ​ ​ ​ ​ 1,013 ​ ​
Fleet utilization(5)
​ ​ ​ ​ 99,70% ​ ​ ​ ​ ​ 94,80% ​ ​ ​ ​ ​ 92,50% ​ ​
​ ​ ​
OceanPal Inc. Predecessors
​
​ ​ ​
For the
six-month
period ended
June 30, 2021
​ ​
For the
six-month
period ended
June 30, 2020
​
Fleet Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Average number of vessels(1)
​ ​ ​ ​ 3.0 ​ ​ ​ ​ ​ 3.0 ​ ​
Number of vessels at year-end/period-end
​ ​ ​ ​ 3.0 ​ ​ ​ ​ ​ 3.0 ​ ​
Weighted average age of vessels at period-end (in years)
​ ​ ​ ​ 16.2 ​ ​ ​ ​ ​ 15.7 ​ ​
Ownership days(2)
​ ​ ​ ​ 543 ​ ​ ​ ​ ​ 546 ​ ​
Available days(3)
​ ​ ​ ​ 543 ​ ​ ​ ​ ​ 504 ​ ​
Operating days(4)
​ ​ ​ ​ 540 ​ ​ ​ ​ ​ 469 ​ ​
Fleet utilization(5)
​ ​ ​ ​ 99.4% ​ ​ ​ ​ ​ 93.1% ​ ​
​
(1)
Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in the period.
​
(2)
Ownership days are the aggregate number of days in a period during which each vessel in our fleet has
​
 
56
 
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.
(3)
Available days are 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 and the aggregate amount of time that we spend positioning our vessels for such events. The shipping industry uses available days to measure the number of days in a period during which vessels should be capable of generating revenues.
​
(4)
Operating days are the number of available days in a period less the aggregate number of days that our vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues.
​
(5)
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, special surveys or vessel positioning for such events.
​
​ ​ ​
OceanPal Inc.
​
​ ​ ​
For the
six-month
period ended
June 30, 2022
​ ​
For the
period from
April 15, 2021
(inception date) to
December 31, 2021
​
Average Daily Results ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Time charter equivalent (TCE) rate(6)
​ ​ ​ $ 14,824 ​ ​ ​ ​ $ 13,333 ​ ​
Daily vessel operating expenses(7)
​ ​ ​ ​ 5,407 ​ ​ ​ ​ ​ 3,750 ​ ​
​ ​ ​
OceanPal Inc. Predecessors
​
​ ​ ​
For the period
from January 1, 2021
to November 29, 2021
​ ​
For the year
ended
December 31, 2020
​ ​
For the year
ended
December 31, 2019
​
Average Daily Results: ​ ​ ​ ​
Time charter equivalent (TCE) rate(6)
​ ​ ​ $ 10,935 ​ ​ ​ ​ $ 8,235 ​ ​ ​ ​ $ 9,883 ​ ​
Daily vessel operating expenses(7)
​ ​ ​ ​ 6,206 ​ ​ ​ ​ ​ 7,739 ​ ​ ​ ​ ​ 5,098 ​ ​
​ ​ ​
OceanPal Inc. Predecessors
​
​ ​ ​
For the
six-month
period ended
June 30, 2021
​ ​
For the
six-month
period ended
June 30, 2020
​
Average Daily Results ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Time charter equivalent (TCE) rate(6)
​ ​ ​ $ 10,997 ​ ​ ​ ​ $ 8,466 ​ ​
Daily vessel operating expenses(7)
​ ​ ​ ​ 6,273 ​ ​ ​ ​ ​ 6,476 ​ ​
​
(6)
Time charter equivalent rates, or TCE rates, are defined as our time charter revenues less voyage expenses during a period divided by the number of our available days during the period, which is consistent with industry standards. Voyage expenses include port charges, bunker (fuel) expenses, canal charges and commissions. TCE rate is a non-GAAP measure, and management believes it is useful to investors because it 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 are generally expressed in such amounts. The following table reflects the calculation of our TCE rates for the periods presented.
​
 
57
 
​ ​ ​
OceanPal Inc.
​
Amounts in the tables below are in thousands of U.S.dollars (except for TCE)
​ ​
For the
six-month
period ended
June 30, 2022
​ ​
For the period from
April 15, 2021
(inception date) to
December 31, 2021
​
Time charter revenues
​ ​ ​ $ 8,246 ​ ​ ​ ​ $ 1,334 ​ ​
Less: voyage expenses
​ ​ ​ ​ (597) ​ ​ ​ ​ ​ (54) ​ ​
Time charter equivalent revenues
​ ​ ​ $ 7,649 ​ ​ ​ ​ $ 1,280 ​ ​
Available days
​ ​ ​ ​ 516 ​ ​ ​ ​ ​ 96 ​ ​
Time charter equivalent (TCE) rate
​ ​ ​ $ 14,824 ​ ​ ​ ​ $ 13,333 ​ ​
​ ​ ​
OceanPal Inc. Predecessors
​
Amounts in the tables below are in thousands of U.S.
dollars (except for TCE)
​ ​
For the period
from January 1, 2021
to November 29, 2021
​ ​
For the year
ended
December 31, 2020
​ ​
For the year
ended
December 31, 2019
​
Time charter revenues
​ ​ ​ $ 11,343 ​ ​ ​ ​ $ 9,411 ​ ​ ​ ​ $ 12,370 ​ ​
Less: voyage expenses
​ ​ ​ ​ (418) ​ ​ ​ ​ ​ (978) ​ ​ ​ ​ ​ (1,548) ​ ​
Time charter equivalent revenues
​ ​ ​ $ 10,925 ​ ​ ​ ​ $ 8,433 ​ ​ ​ ​ $ 10,822 ​ ​
Available days
​ ​ ​ ​ 999 ​ ​ ​ ​ ​ 1,024 ​ ​ ​ ​ ​ 1,095 ​ ​
Time charter equivalent (TCE) rate
​ ​ ​ $ 10,935 ​ ​ ​ ​ $ 8,235 ​ ​ ​ ​ $ 9,883 ​ ​
​ ​ ​
OceanPal Inc. Predecessors
​
Amounts in the tables below are in thousands of U.S.dollars (except for TCE)
​ ​
For the
six-month
period ended
June 30, 2021
​ ​
For the
six-month
period ended
June 30, 2020
​
Time charter revenues
​ ​ ​ $ 6,065 ​ ​ ​ ​ $ 4,819 ​ ​
Less: voyage expenses
​ ​ ​ ​ (94) ​ ​ ​ ​ ​ (552) ​ ​
Time charter equivalent revenues
​ ​ ​ $ 5,971 ​ ​ ​ ​ $ 4,267 ​ ​
Available days
​ ​ ​ ​ 543 ​ ​ ​ ​ ​ 504 ​ ​
Time charter equivalent (TCE) rate
​ ​ ​ $ 10,997 ​ ​ ​ ​ $ 8,466 ​ ​
​
(1)
Daily vessel operating expenses, which include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the costs of spares and consumable stores, tonnage taxes and other miscellaneous expenses, are calculated by dividing vessel operating expenses by ownership days for the relevant period.
​
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions.
Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For a description of all significant accounting policies, see Note 2 to our audited consolidated financial statements for the period from our inception (April 15, 2021) through December 31, 2021, Note 2 to our unaudited interim consolidated financial statements as of and for the six months period ended June 30, 2022 and for the period from inception (April 15,2021) through June 30, 2021, Note 2 to the OceanPal Inc. Predecessors’ audited carve-out combined financial statements for the period from January 1, 2021 through November 29,2021 and for the years ended December 31, 2020
 
58
 
and 2019, and Note 2 to the OceanPal Inc. Predecessors’ unaudited interim carve-out combined financial statements for the six month period ended June 30, 2021 and June 30, 2020, included in this prospectus. Effective December 22, 2022, we effected a 1-for-10 reverse stock split on our common stock. Unless otherwise indicated, the Company’s financial statements have not been retroactively adjusted to reflect the reverse stock split.
Accounting for Revenues and Expenses
Revenues are generated from time charter agreements which contain a lease as they meet the criteria of a lease under ASC 842. Agreements with the same charterer are accounted for as separate agreements according to their specific terms and conditions. All agreements contain a minimum non-cancellable period and an extension period at the option of the charterer. Each lease term is assessed at the inception of that lease. Under a time charter agreement, the charterer pays a daily hire for the use of the vessel and reimburses the owner for hold cleanings, extra insurance premiums for navigating in restricted areas and damages caused by the charterers. Additionally, the charterer pays to third parties port, canal and bunkers consumed during the term of the time charter agreement. Such costs are considered direct costs and are not recorded as they are directly paid by charterers, unless they are for the account of the owner, in which case they are included in voyage expenses. Additionally, the owner pays commissions on the hire revenue, to both the charterer and to brokers, which are direct costs and are recorded in voyage expenses. Under a time charter agreement, the owner pays for the operation and the maintenance of the vessel, including crew, insurance, spares and repairs, which are recognized in operating expenses. The Company, as lessor, has elected not to allocate the consideration in the agreement to the separate lease and non-lease components (operation and maintenance of the vessel) as their timing and pattern of transfer to the charterer, as the lessee, are the same and the lease component, if accounted for separately, would be classified as an operating lease. Additionally, the lease component is considered the predominant component as the Company has assessed that more value is ascribed to the vessel rather than to the services provided under the time charter contracts.
Voyage expenses, primarily consisting of commissions, are expensed over the related voyage charter period to the extent revenue has been recognized since commissions are due as the Company’s revenues are earned. All vessel operating expenses are expensed as incurred.
Impairment of Long-lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances (such as market conditions, obsolesce or damage to the asset, potential sales and other business plans) indicate that the carrying amount of an asset may not be recoverable. When the estimate of undiscounted projected net operating cash flows, excluding interest charges, expected to be generated by the use of an asset over its remaining useful life and its eventual disposition is less than its carrying amount, the Company evaluates the asset for impairment loss. Measurement of the impairment loss is based on the fair value of the asset, determined mainly by third party valuations.
The Company calculates undiscounted projected net operating cash flows by considering the historical and estimated vessels’ performance and utilization with the significant assumption being future charter rates for the unfixed days, using the most recent 10 year average of historical 1 year time charter rates available for each type of vessel over the remaining estimated life of each vessel, net of commissions. Other assumptions used in developing estimates of future undiscounted cash flow are charter rates calculated for the fixed days using the fixed charter rate of each vessel from existing time charters; the expected outflows for scheduled vessels’ maintenance; vessel operating expenses; fleet utilization, and the vessels’ residual value if sold for scrap. Assumptions are in line with the Company’s expectations for future fleet utilization under its current fleet deployment strategy. This calculation is then compared with the vessels’ net book value plus unamortized dry-docking costs, if any. The difference between the carrying amount of the vessel plus unamortized dry-docking costs, if any and their fair value is recognized in the Company’s accounts as impairment loss. The Company recognized no impairment loss for the periods ended June 30, 2022 and December 31, 2021. OceanPal Inc. Predecessors recognized no impairment loss for the period from January 1, 2021 through November 29, 2021 and for the period from January 1, 2020 through December 31, 2020.
 
59
 
Historically, the market values of vessels have experienced volatility, which from time to time may be substantial. As a result, the charter-free market value of our vessels may have declined below those vessels’ carrying value, even though we would not impair those vessels’ carrying value under our accounting impairment policy.
Our estimates of charter-free market value assume that our vessels were all in good and seaworthy condition without need for repair and if inspected would be certified in class without notations of any kind. Our estimates are based on information available from various industry sources, including:
•
reports by industry analysts and data providers that focus on our industry and related dynamics affecting vessel values;
​
•
news and industry reports of similar vessel sales;
​
•
offers that we may have received from potential purchasers of our vessels; and
​
•
vessel sale prices and values of which we are aware through both formal and informal communications with shipowners, shipbrokers, industry analysts and various other shipping industry participants and observers.
​
As we obtain information from various industry and other sources, our estimates of charter-free market value are inherently uncertain. In addition, vessel values are highly volatile; as such, our estimates may not be indicative of the current or future charter-free market value of our vessels or prices that we could achieve if we were to sell them. We also refer you to the risk factor in the “Risk Factors” entitled “The market values of our vessels have declined in recent years and may further decline, which could limit the amount of funds that we can borrow, or adversely affect our operating results, and we may incur a loss if we sell vessels following a decline in their market values.”
Non Monetary Transactions — Spin -Off
When we enter into a nonmonetary transaction as defined broadly under ASC 845, we determine whether the transaction is a contribution of an asset or a business by assessing the definition of a business under ASC 805 and whether the transaction is pro-rata. A transaction is considered pro rata if each owner receives an ownership interest in the transferee in proportion to its existing ownership interest in the transferor (even if the transferor retains an ownership interest in the transferee). In accordance with FASB Topic 805 Business Combinations: Clarifying the Definition of a Business, if substantially all of the fair value of the gross assets acquired in an acquisition transaction are concentrated in a single identifiable asset or group of similar identifiable assets, then the set is not a business. To be considered a business, a set must include an input and a substantive process that together significantly contributes to the ability to create an output. All assets contributed under nonmonetary transactions that do not meet the definition of a business and include pro rata distributions, are measured at their fair values on the transaction date in accordance with ASC 845, if the fair value is objectively measurable and clearly realizable in an outright sale at or near the distribution.
 
60
 
BUSINESS
History and development of the Company
OceanPal Inc. was incorporated by Diana Shipping under the laws of the Republic of the Marshall Islands on April 15, 2021 to serve as the holding company of the OceanPal Inc. Predecessors and former vessel owning subsidiaries of Diana Shipping in connection with the Spin-Off. Diana Shipping contributed the OceanPal Inc. Predecessors, together with $1.0 million in working capital, to us on November 29, 2021, in exchange for all of our issued and outstanding common stock. Our common stock commenced trading on the Nasdaq Capital Market under the ticker symbol “OP” on November 30, 2021.
We are an independent provider of worldwide ocean-going transportation services. We own and operate four drybulk carriers that transport major bulks such as iron ore, coal and grains, and minor bulks such as bauxite, phosphate and fertilizers and have a total cargo carrying capacity of approximately 496,374 dwt. We intend to expand our fleet in the future and may acquire additional dry bulk carriers as well as vessels in other sectors based on our assessment of market conditions. We intend to acquire additional vessels principally in the secondhand market, including acquisitions from unrelated third parties, and we may also acquire additional vessels from Diana Shipping or other related parties, provided that such related party acquisitions are negotiated and conducted on an arms-length basis. Diana Shipping has granted us a right of first refusal over six identified drybulk carriers currently owned by Diana Shipping. Pursuant to this right of first refusal, we have the right, but not the obligation, to purchase one or all of the six identified vessels when and if Diana Shipping determines to sell the vessels at fair market value at the time of sale. For additional information, please see the section of this prospectus entitled “Directors, Senior Management and Employees — Related Party Transactions — Diana Shipping Right of First Refusal.” We may also enter into newbuilding contracts to the extent that we believe they present attractive opportunities.
Our executive offices are located at Pendelis 26, 175 64 Palaio Faliro, Athens, Greece. Our telephone number at this address is +30-210-9485-360. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission. The address of the Commission’s Internet site is http://www.sec.gov. The address of the Company’s Internet site is http://www.oceanpal.com. The information on our website is not part of this prospectus.
Business Overview
We are a global provider of shipping transportation services. We specialize in the ownership of vessels. Each of our vessels is owned through a separate wholly-owned subsidiary.
The financial statements included in this registration statement are the Company’s unaudited interim consolidated financial statements as of and for the six month period ended June 30, 2022 and for the period from inception (April 15, 2021) through June 30, 2021, the Company’s consolidated financial statements for the period from inception (April 15, 2021) through December 31, 2021, OceanPal Inc. Predecessors’ unaudited interim combined carve-out financial statements for the six month period ended June 30, 2021 and 2020, and OceanPal Inc. Predecessors’ audited combined carve-out financial statements for the period from January 1, 2021 through November 29, 2021 and for the years ended December 31, 2020 and 2019. Effective December 22, 2022, the Company effected a 1-for-10 reverse stock split on our common stock. Unless otherwise indicated, the Company’s financial statements have not been retroactively adjusted to reflect the reverse stock split.
As of the date of this prospectus, our operating fleet consists of four dry bulk carriers, of which two are Panamaxes and two are Capesize vessels, having a combined carrying capacity of 496,374 dwt and a weighted average age of 17.7 years. For the period from November 30, 2021 to December 31, 2021, we had fleet utilization of 100%, achieved daily time charter equivalent rates of $13,333 and generated revenues of $1.33 million, and for the first nine months of 2022, we had fleet utilization of 92.6%, achieved daily time charter equivalent rates of $15,995 and generated revenues of $13.4 million.
 
61
 
The following table presents certain information concerning the dry bulk carriers in our fleet, as of December 21, 2022:
Vessel BUILT / DWT
​ ​
Sister
Ships*
​ ​
Gross Rate
(USD Per
Day)
​ ​
Com**
​ ​
Charterers
​ ​
Delivery Date
to
Charterers***
​ ​
Redelivery Date to
Owners****
​ ​
Notes
​
Protefs
​ ​ ​ ​ A ​ ​ ​ ​ $ 16,250 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Louis Dreyfus
Company Suisse S.A.
​ ​
23-Sep-22
​ ​
24-Nov-22
​ ​
1
​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 12,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Ssangyong C&E Co., Ltd
​ ​
25-Nov-22
​ ​
18-Dec-22
​ ​ ​ ​
2004 / 73,630 dwt ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 7,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
GUO LONG XIANG LIMITED
​ ​
18-Dec-22
​ ​
07-Jan-23 – 12-Jan-23
​ ​
2
​
Calipso 2005 / ​ ​ ​ ​ A ​ ​ ​ ​ $ 19,600 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
ETG Commodities Ltd.
​ ​
2-Jul-22
​ ​
03-Nov-22
​ ​ ​ ​
73,691 dwt ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 15,250 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Al Ghurair Resources International LLC
​ ​
03-Nov-22
​ ​
22-Jan-23
​ ​
3
​
Salt Lake City ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 29,750 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Koch Shipping Pte. Ltd
​ ​
9-Jun-22
​ ​
14-Oct-22
​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 13,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Hyundai Glovis Co., Ltd
​ ​
14-Oct-22
​ ​
20-Nov-22
​ ​ ​ ​
2005 / 171,810 dwt ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 8,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​ ​ ​ ​
20-Nov-22
​ ​
20-Dec-22
​ ​ ​ ​
2005 / 171,810 dwt ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 10,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Oldendorff GmbH & Co
KG
​ ​
20-Dec-22
​ ​
13-Dec-23 – 18-Dec-23
​ ​
4
​
Baltimore ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 15,000 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Hyundai Glovis Co., Ltd
​ ​
21-Sep-22
​ ​
03-Nov-22
​ ​
5
​
2005 / 177,243 ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 12,900 ​ ​ ​ ​ ​ 5.00% ​ ​ ​
Enesel Bulk Logistics DMCC
​ ​
03-Nov-22
​ ​
22-Jan-23
​ ​
6
​
​
*
Each dry bulk carrier is a “sister ship”, or closely similar, to other dry bulk carriers that have the same letter.
​
**
Total commission percentage paid to third parties.
​
***
In case of newly acquired vessel with time charter attached, this date refers to the expected/actual date of delivery of the vessel to the Company.
​
****
Range of redelivery dates, with the actual date of redelivery being at the Charterers’ option, but subject to the terms, conditions, and exceptions of the particular charterparty.
​
1
Charterer will pay an additional one time ballast bonus payment of $625,000.
​
2
Redelivery date based on an estimated time charter trip duration of about 23 days.
​
3
Redelivery date based on an estimated time charter trip duration of about 60 days.
​
4
Redelivery date based on an estimated time charter trip duration of about 55-60 days.
​
5
For the last three (3) days of the time charter duration, the gross charter rate was US$18,000 per day, minus a 5% commission paid to third parties, as per the agreed charterparty, which states that for each additional day exceeding the first forty (40) days of the time charter trip, the gross charter hire will be US$18,000 per day.
​
6
Redelivery date based on an estimated time charter trip duration of about 80 days. In the event that the trip duration exceeds one hundred ten (110) days, the gross charter rate will be $15,000 per day, minus a 5% commission paid to third parties, for each additional day.
​
Management of Our Fleet
Our business is the ownership of vessels. We are a holding company that wholly owns the subsidiaries which own the vessels that comprise our fleet. The holding company sets general overall direction for the company and interfaces with various financial markets. The commercial and technical management, except for insurance services, of our fleet is carried out by Diana Wilhelmsen Management Limited, which we refer to as DWM, a 50/50 joint venture between Wilhelmsen Ship Management and Diana Shipping Inc. In exchange for providing us with commercial and technical services, we pay DWM a monthly fee per vessel and a percentage of the vessels’ gross revenues. Insurance and handling of claims services and the provision
 
62
 
of certain administrative management services are carried out by Steamship Shipbroking Enterprises Inc., or Steamship, an affiliated company of us and Diana Shipping. Administrative management services may include budgeting, reporting, monitoring of bank accounts, compliance with banks, payroll services, legal and securities compliance services, and any other possible administrative management services that we require to perform our business activities. Steamship also provides brokerage services to us pursuant to a brokerage services agreement. Please see “Directors, Senior Management and Employees — Related Party Transactions.”
Our Customers
Our customers include regional and international companies. During 2019, 2020 and for the period from January 1, 2021 to November 29, 2021, four and three of the charterers of the OceanPal Inc. Predecessors accounted for 97%, 98% and 95%, respectively, of the Predecessors’ revenues. During 2021, for the period from commencement of our vessels’ operations (November 30, 2021), three of our charterers accounted for 93% of our revenues. During the first nine months of 2022, five of our charterers accounted for 87% of our revenues.
Currently, our vessels are employed on short to medium-term time charters. Under our time charters, the charterer typically pays us a fixed daily charter hire rate and bears all voyage expenses, including the cost of bunkers (fuel oil) and canal and port charges. We remain responsible for paying the chartered vessel’s operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel. Our time charters are for fixed terms and will expire in accordance with the scheduled set forth in the table above, and charter-hire is generally paid monthly in arrears. In 2020 and for the period from January 1, 2021 to November 29, 2021, the OceanPal Inc. Predecessors paid commissions that ranged from 4.75% to 5.0% 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. During 2021, for the period from commencement of our operations upon closing of the Spin-Off (November 30, 2021), as well as during the first nine months of 2022 we paid commissions of 5.0% of the total daily charter hire rate of each charter to unaffiliated ship brokers and to in-house brokers associated with the charterer. Our time charters are subject to earlier termination in the event one of our vessels is a total or constructive loss as the result of casualty or is off-hire for more than a specified period.
Following the expiration of our existing time charters, we expect to employ our fleet on the spot market, whereby each vessel is employed on successive charters have a duration of a single voyage, with the exact term depending on the vessel route, although we may employ our vessels on time charters depending on market conditions. Under a spot charter, we are responsible for both the vessel operating expenses and the voyage expenses incurred in performing the charter. We strategically monitor developments in the dry bulk shipping industry on a regular basis and, subject to market demand, seek to adjust the charter hire periods for our vessels according to prevailing market conditions. Currently, our vessels are employed on short to medium-term time charters, which provides us with flexibility in responding to market developments, but in the future we may employ vessels in the spot market or on longer-term time charters. We continuously evaluate the duration of our charters and extend or reduce the charter hire periods of the vessels in our fleet according to the developments in the dry bulk shipping industry.
The Dry Bulk Shipping Industry
The global dry bulk carrier fleet could be divided into the following categories based on a vessel’s carrying capacity. These categories consist of:
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Very Large Ore Carriers.   Very large ore carriers, or VLOCs, have a carrying capacity of more than 200,000 dwt and are a comparatively new sector of the dry bulk carrier fleet. VLOCs are built to exploit economies of scale on long-haul iron ore routes.
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Capesize.   Capesize vessels have a carrying capacity of 110,000-199,999 dwt. Only the largest ports around the world possess the infrastructure to accommodate vessels of this size. Capesize vessels are primarily used to transport iron ore or coal and, to a much lesser extent, grains, primarily on long-haul routes.
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Post-Panamax.   Post-Panamax vessels have a carrying capacity of 80,000-109,999 dwt. These vessels tend to have a shallower draft and larger beam than a standard Panamax vessel with a higher cargo capacity. These vessels have been designed specifically for loading high cubic cargoes from draught restricted ports, although they cannot transit the Panama Canal.
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Panamax.   Panamax vessels have a carrying capacity of 60,000-79,999 dwt. These vessels carry coal, iron ore, grains, and, to a lesser extent, minor bulks, including steel products, cement and fertilizers. Panamax vessels are able to pass through the Panama Canal, making them more versatile than larger vessels with regard to accessing different trade routes. Most Panamax and Post-Panamax vessels are “gearless,” and therefore must be served by shore-based cargo handling equipment. However, there are a small number of geared vessels with onboard cranes, a feature that enhances trading flexibility and enables operation in ports which have poor infrastructure in terms of loading and unloading facilities.
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Handymax/Supramax.   Handymax vessels have a carrying capacity of 40,000-59,999 dwt. These vessels operate in a large number of geographically dispersed global trade routes, carrying primarily grains and minor bulks. Within the Handymax category there is also a sub-sector known as Supramax. Supramax bulk carriers are ships between 50,000 to 59,999 dwt, normally offering cargo loading and unloading flexibility with on-board cranes, or “gear,” while at the same time possessing the cargo carrying capability approaching conventional Panamax bulk carriers.
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Handysize.   Handysize vessels have a carrying capacity of up to 39,999 dwt. These vessels are primarily involved in carrying minor bulk cargoes. Increasingly, ships of this type operate within 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.
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Other size categories occur in regional trade, such as Kamsarmax, with a maximum length of 229 meters, the maximum length that can load in the port of Kamsar in the Republic of Guinea. Other terms such as Seawaymax, Setouchmax, Dunkirkmax, and Newcastlemax also appear in regional trade.
The supply of dry bulk carriers is dependent on the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or loss. The level of scrapping activity is generally a function of scrapping prices in relation to current and prospective charter market conditions, as well as operating, repair and survey costs. The average age at which a vessel is scrapped was 28 years in 2021 and 27 years in 2020.
The demand for dry bulk carrier capacity is determined by the underlying demand for commodities transported in dry bulk carriers, which in turn is influenced by trends in the global economy. Demand for dry bulk carrier capacity is also affected by the operating efficiency of the global fleet, along with port congestion, which has been a feature of the market since 2004, absorbing tonnage and therefore leading to a tighter balance between supply and demand. In evaluating demand factors for dry bulk carrier capacity, the Company believes that dry bulk carriers can be the most versatile element of the global shipping fleets in terms of employment alternatives.
Charter Hire Rates
Charter hire rates fluctuate by varying degrees among dry bulk carrier size categories. The volume and pattern of trade in a small number of commodities (major bulks) affect demand for larger vessels. Therefore, charter rates and vessel values of larger vessels often show greater volatility. Conversely, trade in a greater number of commodities (minor bulks) drives demand for smaller dry bulk carriers. Accordingly, charter rates and vessel values for those vessels are usually subject to less volatility.
Charter hire rates paid for dry bulk carriers are primarily a function of the underlying balance between vessel supply and demand, although at times other factors may play a role. Furthermore, the pattern seen in charter rates is broadly mirrored across the different charter types and the different dry bulk carrier categories. In the time charter market, rates vary depending on the length of the charter period and vessel-specific factors such as age, speed and fuel consumption.
 
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In the voyage charter market, rates are, among other things, influenced by cargo size, commodity, port dues and canal transit fees, as well as commencement and termination 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 than routes with low port dues and no canals to transit. Voyages with a load port within a region that includes ports where vessels usually discharge cargo or a discharge port within a region with ports where vessels load cargo also are generally quoted at lower rates, because such voyages generally increase vessel utilization 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 charter hire rate references most likely to be monitored are the freight rate indices issued by the Baltic Exchange. 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 Panamax Index is the index with the longest history. The Baltic Capesize Index and Baltic Handymax Index are of more recent origin.
The Baltic Dry Index, or BDI, a daily average of charter rates in 20 shipping routes measured on a time charter and voyage basis and covering Capesize, Panamax, Supramax, and Handysize dry bulk carriers declined from a high of 11,793 in May 2008 to a low of 663 in December 2008. In 2020, the BDI ranged from a low of 393 in May to a high of 2,097 in October, increased to a high of 5,650 on October 7, 2021, and dropped to 2,217 on December 24, 2021. The BDI further dropped to 1,296 on January 26, 2022, increased to a high of 3,369 on May 23, 2022, further dropped to 965 on August 31, 2022 and as of December 20, 2022 was 1,596.
Vessel Prices
Dry bulk vessel values in the first semester of 2022 and 2021 generally were higher as compared to 2020. Consistent with these trends were the market values of our dry bulk carriers. Since the beginning of 2021, charter rates and vessel values have improved, but there can be no assurance as to how long charter rates and vessel values will remain at their current levels or whether they will decrease or improve to any significant degree in the near future.
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 carriers in the Panamax, Post-Panamax and smaller class sectors and with owners of Capesize and Newcastlemax dry bulk carriers. Ownership of dry bulk carriers is highly fragmented.
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 the cost of us doing business.
Environmental and Other Regulations in the Shipping Industry
Government regulation and laws significantly affect the ownership and operation of our fleet. We are subject to international conventions and treaties, national, state and local laws and regulations in force in the countries in which our vessels may operate or are registered relating to safety and health and environmental protection including the storage, handling, emission, transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to natural resources.
 
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Compliance with such laws, regulations and other requirements entails significant expense, including vessel modifications and implementation of certain operating procedures.
A variety of government and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (applicable national authorities such as the United States Coast Guard (“USCG”), harbor master or equivalent), classification societies, flag state administrations (countries of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or result in the temporary suspension of the operation of one or more of our vessels.
Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. We are required to maintain operating standards for all of our vessels that emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations. However, because such laws and regulations frequently change 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.
International Maritime Organization
The International Maritime Organization, the United Nations agency for maritime safety and the prevention of pollution by vessels (the “IMO”), has adopted the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as “MARPOL,” the International Convention for the Safety of Life at Sea of 1974 (“SOLAS Convention”), and the International Convention on Load Lines of 1966 (the “LL Convention”). MARPOL establishes environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, handling and disposal of noxious liquids and the handling of harmful substances in packaged forms. MARPOL is applicable to drybulk, tanker and LNG carriers, among other vessels, and is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage and spilling; Annexes II and III relate to harmful substances carried in bulk in liquid or in packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was separately adopted by the IMO in September of 1997; new emissions standards, titled IMO-2020, took effect on January 1, 2020.
Air Emissions
In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels. Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial vessel exhausts and prohibits “deliberate emissions” of ozone depleting substances (such as halons and chlorofluorocarbons), emissions from the shipboard incineration of specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions, as explained below. We ensure that all our vessels are currently compliant in all material respects with these regulations.
The Marine Environment Protection Committee, or “MEPC”, adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and ozone depleting substances, which entered into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board ships. On October 27, 2016, at its 70th session, the MEPC agreed to implement a global 0.5% m/m sulfur oxide emissions limit (reduced from 3.5%) starting from January 1, 2020. This limitation can be met by using low-sulfur compliant fuel oil, alternative fuels, or certain exhaust gas cleaning systems. Ships are now required to obtain bunker delivery notes and International Air Pollution Prevention (“IAPP”) Certificates from their flag states that specify sulfur content. Additionally, at MEPC 73, amendments to
 
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Annex VI to prohibit the carriage of bunkers above 0.5% sulfur on ships were adopted and took effect March 1, 2020. These regulations subject ocean-going vessels to stringent emissions controls, and may cause us to incur substantial costs.
Sulfur content standards are even stricter within certain “Emission Control Areas,” or (“ECAs”). As of January 1, 2015, ships operating within an ECA were not permitted to use fuel with sulfur content in excess of 0.1% m/m. Amended Annex VI establishes procedures for designating new ECAs. Currently, the IMO has designated four ECAs, including specified portions of the Baltic Sea area, North Sea area, North American area and United States Caribbean area. Ocean-going vessels in these areas will be subject to stringent emission controls and may cause us to incur additional costs. Other areas in China are subject to local regulations that impose stricter emission controls. In December 2021, the member states of the Convention for the Protection of the Mediterranean Sea Against Pollution (“Barcelona Convention”) agreed to support the designation of a new ECA in the Mediterranean. The group plans to submit a formal proposal to the IMO by the end of 2022 with the goal of having the ECA implemented by 2025. If other ECAs are approved by the IMO, or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the U.S. Environmental Protection Agency (“EPA”) or the states where we operate, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our operations.
Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for marine diesel engines, depending on their date of installation. At the MEPC meeting held from March to April 2014, amendments to Annex VI were adopted which address the date on which Tier III Nitrogen Oxide (NOx) standards in ECAs will go into effect. Under the amendments, Tier III NOx standards apply to ships that operate in the North American and U.S. Caribbean Sea ECAs designed for the control of NOx produced by vessels with a marine diesel engine installed and constructed on or after January 1, 2016. Tier III requirements could apply to areas that will be designated for Tier III NOx in the future. At MEPC 70 and MEPC 71, the MEPC approved the North Sea and Baltic Sea as ECAs for nitrogen oxide for ships built on or after January 1, 2021. For the moment, this regulation relates to new building vessels and has no retroactive application to existing fleet. The EPA promulgated equivalent (and in some senses stricter) emissions standards in 2010. As a result of these designations or similar future designations, we may be required to incur additional operating or other costs.
As determined at the MEPC 70, the new Regulation 22A of MARPOL Annex VI became effective as of March 1, 2018 and requires ships above 5,000 gross tonnage to collect and report annual data on fuel oil consumption to an IMO database, with the first year of data collection having commenced on January 1, 2019. The IMO intends to use such data as the first step in its roadmap (through 2023) for developing its strategy to reduce greenhouse gas emissions from ships, as discussed further below.
As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships. All ships are now required to develop and implement a Ship Energy Efficiency Management Plans (“SEEMPs”), and new ships must be designed in compliance with minimum energy efficiency levels per capacity mile as defined by the Energy Efficiency Design Index (“EEDI”). Under these measures, by 2025, all new ships built will be 30% more energy efficient than those built in 2014. Additionally, MEPC 75 adopted amendments to MARPOL Annex VI which brings forward the effective date of the EEDI’s “phase 3” requirements from January 1, 2025 to April 1, 2022 for several ship types, including gas carriers, general cargo ships, and LNG carriers.
Additionally, MEPC 75 introduced draft amendments to Annex VI which impose new regulations to reduce greenhouse gas emissions from ships. These amendments introduce requirements to assess and measure the energy efficiency of all ships and set the required attainment values, with the goal of reducing the carbon intensity of international shipping. The requirements include (1) a technical requirement to reduce carbon intensity based on a new Energy Efficiency Existing Ship Index (“EEXI”), and (2) operational carbon intensity reduction requirements, based on a new operational carbon intensity indicator (“CII”). The attained EEXI is required to be calculated for ships of 400 gross tonnage and above, in accordance with different values set for ship types and categories. With respect to the CII, the draft amendments would require ships of 5,000 gross tonnage to document and verify their actual annual operational CII achieved against a determined required annual operational CII. Additionally, MEPC 75 proposed draft amendments requiring that, on or before January 1, 2023, all ships above 400 gross tonnage must have an approved
 
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SEEMP on board. For ships above 5,000 gross tonnage, the SEEMP would need to include certain mandatory content. MEPC 75 also approved draft amendments to MARPOL Annex I to prohibit the use and carriage for use as fuel of heavy fuel oil (“HFO”) by ships in Arctic waters on and after July 1, 2024. The draft amendments introduced at MEPC 75 were adopted at the MEPC 76 session held on June 2021 and entered into force on November 1, 2022, with the requirements for EEXI and CII certification coming into effect from January 1, 2023.
We may incur costs to comply with these revised standards. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems and could adversely affect our business, results of operations, cash flows and financial condition.
Safety Management System Requirements
The SOLAS Convention was amended to address the safe manning of vessels and emergency training drills. The Convention of Limitation of Liability for Maritime Claims (the “LLMC”) sets limitations of liability for a loss of life or personal injury claim or a property claim against ship owners. We believe that our vessels are in substantial compliance with SOLAS and LLMC standards.
Under Chapter IX of the SOLAS Convention, or the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (the “ISM Code”), our operations are also subject to environmental standards and requirements. The ISM Code requires the party with operational control of a vessel to develop 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 describing procedures for responding to emergencies. We rely upon the safety management system that we and our technical management team have developed for compliance with the ISM Code. The failure of a vessel owner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in a denial of access to, or detention in, certain ports.
The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel’s management with the ISM Code requirements for a safety management system. No vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by each flag state, under the ISM Code. We have obtained applicable documents of compliance for our offices and safety management certificates for all of our vessels for which the certificates are required by the IMO. The documents of compliance and safety management certificate are renewed as required.
Regulation II-1/3-10 of the SOLAS Convention governs ship construction and stipulates that ships over 150 meters in length must have adequate strength, integrity and stability to minimize risk of loss or pollution. Goal-based standards amendments in SOLAS regulation II-1/3-10 entered into force in 2012, with July 1, 2016 set for application to new oil tankers and bulk carriers. The SOLAS Convention regulation II-1/3-10 on goal-based ship construction standards for bulk carriers and oil tankers, which entered into force on January 1, 2012, requires that all oil tankers and bulk carriers of 150 meters in length and above, for which the building contract is placed on or after July 1, 2016, satisfy applicable structural requirements conforming to the functional requirements of the International Goal-based Ship Construction Standards for Bulk Carriers and Oil Tankers (“GBS Standards”).
Amendments to the SOLAS Convention Chapter VII apply to vessels transporting dangerous goods and require those vessels be in compliance with the International Maritime Dangerous Goods Code (“IMDG Code”). Effective January 1, 2018, the IMDG Code includes (1) updates to the provisions for radioactive material, reflecting the latest provisions from the International Atomic Energy Agency, (2) new marking, packing and classification requirements for dangerous goods, and (3) new mandatory training requirements. Amendments which took effect on January 1, 2020 also reflect the latest material from the UN Recommendations on the Transport of Dangerous Goods, including (1) new provisions regarding IMO type 9 tank, (2) new abbreviations for segregation groups, and (3) special provisions for carriage of lithium batteries and of vehicles powered by flammable liquid or gas. The upcoming amendments, which will come into force on June 1, 2022, include (1) addition of a definition of dosage rate, (2) additions to the list of
 
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high consequence dangerous goods, (3) new provisions for medical/clinical waste, (4) addition of various ISO standards for gas cylinders, (5) a new handling code, and (6) changes to stowage and segregation provisions.
The IMO has also adopted the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (“STCW”). As of February 2017, all seafarers are required to meet the STCW standards and be in possession of a valid STCW certificate. Flag states that have ratified SOLAS and STCW generally employ the classification societies, which have incorporated SOLAS and STCW requirements into their class rules, to undertake surveys to confirm compliance.
The IMO’s Maritime Safety Committee and MEPC, respectively, each adopted relevant parts of the International Code for Ships Operating in Polar Water (the “Polar Code”). The Polar Code, which entered into force on January 1, 2017, covers design, construction, equipment, operational, training, search and rescue as well as environmental protection matters relevant to ships operating in the waters surrounding the two poles. It also includes mandatory measures regarding safety and pollution prevention as well as recommendatory provisions. The Polar Code applies to new ships constructed after January 1, 2017, and after January 1, 2018, ships constructed before January 1, 2017 are required to meet the relevant requirements by the earlier of their first intermediate or renewal survey.
Furthermore, recent action by the IMO’s Maritime Safety Committee and United States agencies indicates that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. For example, cyber-risk management systems must be incorporated by ship-owners and managers by 2021. This might cause companies to create additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. The impact of such regulations is hard to predict at this time.
Pollution Control and Liability Requirements
The IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial waters of the signatories to such conventions. For example, the IMO adopted an International Convention for the Control and Management of Ships’ Ballast Water and Sediments, (the “BWM Convention”), in 2004. The BWM Convention entered into force on September 8, 2017. The BWM Convention requires ships to manage their ballast water to remove, render harmless, or avoid the uptake or discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments. The BWM Convention’s implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits, and require all ships to carry a ballast water record book and an international ballast water management certificate.
On December 4, 2013, the IMO Assembly passed a resolution revising the application dates of the BWM Convention so that the dates are triggered by the entry into force date and not the dates originally in the BWM Convention. This, in effect, makes all vessels delivered before the entry into force date “existing vessels” and allows for the installation of ballast water management systems on such vessels at the first International Oil Pollution Prevention (“IOPP”) renewal survey following entry into force of the convention. The MEPC adopted updated guidelines for approval of ballast water management systems (G8) at MEPC 70. At MEPC 71, the schedule regarding the BWM Convention’s implementation dates was also discussed and amendments were introduced to extend the date existing vessels are subject to certain ballast water standards. Those changes were adopted at MEPC 72. Ships over 400 gross tons generally must comply with a “D-1 standard,” requiring the exchange of ballast water only in open seas and away from coastal waters. The “D-2 standard” specifies the maximum amount of viable organisms allowed to be discharged, and compliance dates vary depending on the IOPP renewal dates. Depending on the date of the IOPP renewal survey, existing vessels must comply with the D-2 standard on or after September 8, 2019. For most ships, compliance with the D-2 standard will involve installing on-board systems to treat ballast water and eliminate unwanted organisms. Ballast water management systems, which include systems that make use of chemical, biocides, organisms or biological mechanisms, or which alter the chemical or physical characteristics of the ballast water, must be approved in accordance with IMO Guidelines (Regulation D-3). As of October 13, 2019, MEPC 72’s amendments to the BWM Convention took effect, making the Code for Approval of Ballast Water Management Systems, which governs assessment of ballast water management systems, mandatory rather than permissive, and formalized an implementation schedule for the D-2 standard. Under these
 
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amendments, all ships must meet the D-2 standard by September 8, 2024. Costs of compliance with these regulations may be substantial. Additionally, in November 2020, MEPC 75 adopted amendments to the BWM Convention which require a commissioning test of the ballast water management system for the initial survey or when performing an additional survey for retrofits. This analysis will not apply to ships that already have an installed BWM system certified under the BWM Convention. These amendments entered into force on June 1, 2022.
Once mid-ocean exchange ballast water treatment requirements become mandatory under the BWM Convention, the cost of compliance could increase for ocean carriers and may have a material effect on our operations. However, 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.
The IMO also adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage (the “Bunker Convention”) to impose strict liability on ship owners (including the registered owner, bareboat charterer, manager or operator) for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons 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 LLMC). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship’s bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.
Ships are required to maintain a certificate attesting that they maintain adequate insurance to cover an incident. In jurisdictions, such as the United States where the Bunker Convention has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or on a strict-liability basis.
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 on September 17, 2008, prohibits 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 will also be required to undergo an initial survey before the vessel is put into service or before an International Anti-fouling System Certificate, or “IAFS Certificate”, is issued for the first time; and subsequent surveys when the anti-fouling systems are altered or replaced.
In November 2020, MEPC 75 approved draft amendments to the Anti-fouling Convention to prohibit anti-fouling systems containing cybutryne, which would apply to ships from January 1, 2023, or, for ships already bearing such an anti-fouling system, at the next scheduled renewal of the system after that date, but no later than 60 months following the last application to the ship of such a system. In addition, the IAFS Certificate has been updated to address compliance options for anti-fouling systems to address cybutryne. Ships which are affected by this ban on cybutryne must receive an updated IAFS Certificate no later than two years after the entry into force of these amendments. Ships which are not affected (i.e., with anti-fouling systems which do not contain cybutryne) must receive an updated IAFS Certificate at the next anti-fouling application to the vessel. These amendments were formally adopted at MEPC 76 in June 2021.
We have obtained Anti-fouling System Certificates for all of our vessels that are subject to the Anti-fouling Convention.
Compliance Enforcement
Noncompliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The USCG and European Union authorities have indicated that vessels not in compliance with the ISM Code by applicable deadlines will be
 
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prohibited from trading in U.S. and European Union ports, respectively. As of the date of this prospectus, each of our vessels is ISM Code certified. However, there can be no assurance that such certificates will be maintained in the future. The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our operations.
U.S. Regulations
The U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation and Liability Act
The U.S. Oil Pollution Act of 1990 (“OPA”) established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all “owners and operators” whose vessels trade or operate within the U.S., its territories and possessions or whose vessels operate in U.S. waters, which includes the U.S.’s territorial sea and its 200 nautical mile exclusive economic zone around the U.S. The U.S. has also enacted the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), which applies to the discharge of hazardous substances other than oil, except in limited circumstances, whether on land or at sea. OPA and CERCLA both define “owner and operator” in the case of a vessel as any person owning, operating or chartering by demise, the vessel. Both OPA and CERCLA impact our operations.
Under OPA, vessel owners and operators are “responsible parties” and are jointly, severally and strictly liable (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 threatened discharges of oil from their vessels, including bunkers (fuel). OPA defines these other damages broadly to include:
(i)
injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;
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(ii)
injury to, or economic losses resulting from, the destruction of real and personal property;
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(iii)
loss of subsistence use of natural resources that are injured, destroyed or lost;
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(iv)
net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;
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(v)
lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
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(vi)
net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.
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OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective November 12, 2019, the USCG adjusted the limits of OPA liability for non-tank vessels, edible oil tank vessels, and any oil spill response vessels, to the greater of $1,200 per gross ton or $997,100 (subject to periodic adjustment for inflation). These limits of liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party’s gross negligence or willful misconduct. The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident as required by law where the responsible party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.
CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damages for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing the same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5.0 million for vessels carrying a hazardous substance as cargo and the greater
 
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of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.
OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law. OPA and CERCLA both require owners and operators of vessels to establish and maintain with the USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We comply and plan to comply going forward with the USCG’s financial responsibility regulations by providing applicable certificates of financial responsibility.
The 2010 Deepwater Horizon oil spill in the Gulf of Mexico resulted in additional regulatory initiatives or statutes, including higher liability caps under OPA, new regulations regarding offshore oil and gas drilling, and a pilot inspection program for offshore facilities. However, several of these initiatives and regulations have been or may be revised. For example, the U.S. Bureau of Safety and Environmental Enforcement’s (“BSEE”) revised Production Safety Systems Rule (“PSSR”), effective December 27, 2018, modified and relaxed certain environmental and safety protections under the 2016 PSSR. Additionally, the BSEE amended the Well Control Rule, effective July 15, 2019, which rolled back certain reforms regarding the safety of drilling operations, and the former U.S. President Trump had proposed leasing new sections of U.S. waters to oil and gas companies for offshore drilling. The effects of these proposals and changes are currently unknown, and recently, current U.S. President Biden signed an executive order temporarily blocking new leases for oil and gas drilling in federal waters. However, attorney generals from 13 states filed suit in March 2021 to lift the executive order, and in June 2021, a federal judge in Louisiana granted a preliminary injunction against the Biden administration, stating that the power to pause offshore oil and gas leases “lies solely with Congress.” With these rapid changes, compliance with any new requirements of OPA and future legislation or regulations applicable to the operation of our vessels could impact the cost of our operations and adversely affect our business.
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA and some states have enacted legislation providing for unlimited liability for oil spills. Many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law. Moreover, some states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters, although in some cases, states which have enacted this type of legislation have not yet issued implementing regulations defining vessel owners’ responsibilities under these laws. The Company intends to comply with all applicable state regulations in the ports where the Company’s vessels call.
We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage, it could have an adverse effect on our business and results of operation.
Other United States Environmental Initiatives
The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) (“CAA”) requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. The CAA requires states to adopt State Implementation Plans, or SIPs, some of which regulate emissions resulting from vessel loading and unloading operations which may affect our vessels.
The U.S. Clean Water Act (“CWA”) prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA. In 2015, the EPA expanded the definition of “waters of the United States” ​(“WOTUS”),
 
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thereby expanding federal authority under the CWA. Following litigation on the revised WOTUS rule, in December 2018, the EPA and Department of the Army proposed a revised, limited definition of WOTUS. In 2019 a