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ITEM 1.
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1
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ITEM 2.
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1
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ITEM 3.
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1
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ITEM 4.
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36
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ITEM 4A.
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55
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ITEM 5.
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55
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ITEM 6.
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79
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ITEM 7.
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81
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ITEM 8.
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86
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ITEM 9.
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87
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ITEM 10.
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87
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ITEM 11.
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99
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ITEM 12.
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100
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101
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ITEM 13.
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101
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ITEM 14.
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101
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ITEM 15.
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101
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ITEM 16.
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102
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ITEM 16A.
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102
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ITEM 16B.
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102
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ITEM 16C.
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103
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ITEM 16D.
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103
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ITEM 16E.
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103
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ITEM 16F.
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104
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ITEM 16G.
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104
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ITEM 16H.
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104
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ITEM 16I.
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104
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ITEM 16J.
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INSIDER TRADING POLICIES
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105
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ITEM 17.
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105
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ITEM 18.
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105
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ITEM 19.
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105
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this annual report may constitute forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking
statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include all matters that are
not historical facts or matters of fact at the date of this document.
We are including this cautionary statement in connection with this safe harbor legislation. This annual report and any other written or oral statements made by us or on our behalf may include
forward-looking statements, which reflect our current views with respect to future events and financial performance. These forward-looking statements may generally, but not always, be identified by the use of works such as “anticipate,” “believe,”
“targets,” “likely,” “will,” “would,” “could,” “should,” “seeks,” “continue,” “contemplate,” “possible,” “might,” “expect,” “intend,” “estimate,” “forecast,” “project,” “plan,” “objective,” “potential,” “may,” “anticipates” or similar expressions
or phrases.
The forward-looking statements in this annual report 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 our 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 our control, we cannot assure you that we will achieve or accomplish these forward-looking statements, including these expectations, beliefs or
projections.
In addition to these assumptions, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include generally:
| • |
the effects of the spin-off of our tanker business;
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our business strategy, expected capital spending and other plans and objectives for future operations;
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dry bulk and containership market conditions and trends, including volatility in charter rates (particularly for vessels employed in the spot voyage market or pools), factors affecting supply and demand, fluctuating vessel values,
opportunities for the profitable operations of dry bulk and tanker carriers and the strength of world economies;
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the rapid growth of our fleet, our ability to realize the expected benefits from our past or future vessel acquisitions, and the effects of our fleet’s growth on our future financial condition, operating results, future revenues and
expenses, future liquidity, and the adequacy of cash flows from our operations;
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our relationships with our current and future service providers and customers, including the ongoing performance of their obligations, dependence on their expertise, compliance with applicable laws, and any impacts on our reputation due
to our association with them;
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our ability to borrow under existing or future debt agreements or to refinance our debt on favorable terms and our ability to comply with the covenants contained therein, in particular due to economic, financial or operational reasons;
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our continued ability to enter into time or voyage charters with existing and new customers, and to re-charter our vessels upon the expiry of the existing charters;
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changes in our operating and capitalized expenses, including bunker prices, dry-docking, insurance costs, costs associated with regulatory compliance, and costs associated with climate change;
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our ability to fund future capital expenditures and investments in the acquisition and refurbishment of our vessels (including the amount and nature thereof and the timing of completion thereof, the delivery and commencement of
operations dates, expected downtime and lost revenue);
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instances of off-hire, including due to limitations imposed by COVID-19 and/or due to vessel upgrades and repairs;
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future sales of our securities in the public market and our ability to maintain compliance with applicable listing standards;
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volatility in our share price, including due to high volume transactions in our shares by retail investors;
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potential conflicts of interest involving affiliated entities and/or members of our Board of Directors, senior management and certain of our service providers that are related parties;
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general domestic and international political conditions or events, including “trade wars”, global public health threats and major outbreaks of disease;
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changes in seaborne and other transportation, including due to fluctuating demand for dry bulk and tanker vessels and/or disruption of shipping routes due to accidents, political events, international sanctions, international hostilities
and instability, piracy or acts of terrorism;
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changes in governmental rules and regulations or actions taken by regulatory authorities, including changes to environmental regulations applicable to the shipping industry;
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the impact of adverse weather and natural disasters; and
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any other factor described in this annual report and from time to time in our reports.
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Any forward-looking statements contained herein are made only as of the date of this annual report, and except to the extent required by applicable law, we undertake no obligation to update any
forward-looking statement or statements, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for us to predict all or any of these factors. Further, we cannot assess the
impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. See “Item 3. Key Information—D. Risk Factors” for a more complete discussion of these risks and uncertainties and for other risks and uncertainties. These factors and the other risk factors described in this annual report are not
necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Given these uncertainties, prospective investors are cautioned not to place
undue reliance on such forward-looking statements.
| ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
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Not applicable.
| ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE
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Not applicable.
Unless the context otherwise requires, as of the date of and as used in this annual report, the terms “Company”, “we”, “us”, and “our” refer to Castor Maritime Inc. and all of its subsidiaries, and
“Castor Maritime Inc.” refers only to Castor Maritime Inc. and not to its subsidiaries. “Toro” refers to Toro Corp., our wholly owned subsidiary to which we contributed our tanker business in connection with the proposed Spin-Off (as defined
below).
We use the term “deadweight ton”, or “dwt”, in describing the size of vessels. Dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, refers to the maximum weight of cargo
and supplies that a vessel can carry. A “ton mile” is a standardized shipping metric and refers to the volume of cargo being carried (a “ton”) and the distance sailed for the shipment in nautical miles.
The descriptions of agreements contained herein are summaries that set forth certain material provisions. Such descriptions do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, the applicable provisions of each agreement, each of which is an exhibit to this annual report on Form 20-F or included as an exhibit to certain other reports and other information filed with the Securities and
Exchange Commission (the “SEC”). We encourage you to refer to each agreement for additional information.
On May 28, 2021, we effected a one-for-ten reverse stock split on our common shares. All share and per share amounts have been retroactively adjusted to reflect the reverse stock split. The par
value of the common shares remained unchanged at $0.001 per share.
On November 15, 2022 and December 30, 2022, the disinterested and independent members of the board of directors of the Company, based on the recommendation of a special committee of disinterested
and independent directors, approved and authorized, subject to the fulfillment of certain conditions, the spin-off of our Aframax/LR2 tanker segment and Handysize tanker segment, whereby our tanker-owning subsidiaries and the holding company of the
now sold tanker vessel M/T Wonder Arcturus would be contributed to the Company’s wholly owned subsidiary, Toro, in exchange for (i) the issuance to the Company of 9,461,009
common shares of Toro, (ii) the issuance to the Company of 140,000 1.00% Series A Fixed Rate Cumulative Perpetual Convertible Preferred Shares of Toro having a stated amount of $1,000 per share and (iii) the issuance to Pelagos Holdings
Corp., a controlled affiliate of Mr. Petros Panagiotidis, of 40,000 Series B Preferred Shares of Toro, par value $0.001 per share against payment of the par value of such shares (such transactions, collectively, the “Contribution”). On March 7, 2023, we effected the Contribution and distributed on a pro rata basis all common shares of Toro received in the Contribution to our holders of common stock of record at the close of business on February
22, 2023 (the “Distribution”, and together with the Contribution and related transactions, the “Spin-Off”). As of the date of this annual report, we and Toro operate as independent publicly traded companies each listed on the Nasdaq
Capital Market. Pursuant to a Contribution and Spin-Off Distribution Agreement entered into with Toro, Toro replaced us as guarantor under the $18.0 Million Term Loan Facility (as defined herein) with effect from March 7, 2023. The Contribution and
Spin-Off Distribution Agreement also provided for the settlement or extinguishment of certain liabilities and other obligations between us and Toro.
Further, on November 15, 2022, our independent, disinterested directors, on the recommendation of a special committee comprised of our independent,
disinterested directors, resolved, among other things, to focus our efforts on dry bulk shipping services. This does not, however, preclude us from pursuing other opportunities and we entered the containership shipping industry in the
fourth quarter of 2022 with the purchase of two containership vessels. As of March 7, 2023, our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis, also serves as
Chairman and Chief Executive Officer of Toro.
For further information regarding the Spin-Off, refer to “Item 4. Information on the Company¾A. History of the Company” and “Item 7. Major Shareholders and Related Party Transactions¾B. Related Party Transactions” and Note 18 to our consolidated financial statements included elsewhere in this annual report.
Not applicable.
| B. |
CAPITALIZATION AND INDEBTEDNESS
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Not applicable.
| C. |
REASONS FOR THE OFFER AND USE OF PROCEEDS
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Not applicable.
Some of the following risks relate principally to the industry in which we operate. Other risks relate principally to the ownership of our common shares. The occurrence of any of the events
described in this section could significantly and negatively affect our business, financial condition, operating results, cash available for dividends, as and if declared, or the trading price of our common shares.
Summary of Risk Factors
| • |
Charter hire rates in the shipping industry are volatile. A decrease in charter rates may adversely affect our business, financial condition and operating results.
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An oversupply of vessel capacity in the segments we operate may prolong or further depress low charter rates when they occur, which may limit our ability to operate our vessels profitably.
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Global economic and financial conditions may negatively impact the sectors of the shipping industry in which we operate, including the extension of credit.
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Risks involved in operating ocean-going vessels could affect our business and reputation.
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A decline in the market values of our vessels could limit the amount of funds that we can borrow, cause us to breach certain financial covenants in our current or future credit facilities and/or
result in impairment charges or losses on sale.
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Political instability, terrorist attacks, international hostilities and global public health threats, including major outbreaks of diseases, could adversely affect our business.
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Compliance with safety and other vessel requirements imposed by classification societies may be costly and could reduce our net cash flows and negatively impact our results of operations.
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We are subject to laws, regulations and standards (including environmental standards such as IMO 2020, standards regulating ballast water discharge, etc.), which could adversely affect our business, results of operations, cash flows, and
financial condition. In particular, climate change and greenhouse gas restrictions may adversely impact our operations and markets.
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Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.
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We have grown our fleet exponentially and we may have difficulty managing our growth properly which may adversely affect our operations and profitability.
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We may not be able to execute our growth strategy and we may not realize the benefits we expect from past acquisitions or future acquisitions or other strategic transactions.
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We operate secondhand vessels with an age above the industry average which may lead to increased technical problems for our vessels, higher operating expenses, affect our ability to profitably charter and finance our vessels and to
comply with environmental standards and future maritime regulations and result in a more rapid depreciation in our vessels’ market and book values.
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We have limited the fields in which we focus our operations and this may have an adverse effect on our business, financial condition and/or operating results.
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We are dependent upon Castor Ships and Pavimar, which are related party managers of our dry bulk fleet and other third-party sub-managers for the management of our fleet and business, and failure of such counterparties to meet their
obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.
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Our credit facilities contain, and we expect that any new or amended credit facility we enter into will contain, restrictive financial covenants that we may not be able to comply with due to economic, financial or operational reasons and
may limit our business and financing activities.
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We may be unable to achieve some or all of the benefits that we expect to achieve from the spin-off of our tanker business.
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Our Board may never declare dividends.
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Our share price has been highly volatile and may continue to be volatile in the future, and as a result, investors in our common shares could incur substantial losses.
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Nasdaq may delist our common shares from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.
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Recent share issuances and future issuances, or the potential of such issuances, may impact the price of our common shares and could impair our ability to raise capital through subsequent equity offerings. Shareholders may experience
significant dilution as a result of any such issuances.
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We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate and case law.
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Our Chairman, Chief Executive Officer and Chief Financial Officer, who may be deemed to beneficially own, directly or indirectly, 100% of our Series B Preferred Shares, has control over us.
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Risks Relating to Our Industry
Charter hire rates in the shipping industry are volatile. A decrease in charter rates may adversely affect our business, financial condition and operating results.
We are exposed to changes in charter rates in the dry bulk and containership markets in which our vessels operate. Fluctuations in charter rates in these markets may impact our operations and
result from changes in the supply and demand for vessel capacity and changes in the supply and demand for the major commodities carried by water internationally.
The shipping industry in general is cyclical with attendant volatility in charter hire rates and profitability, and in the past, there have been instances where time charter and spot market rates
for vessels in the segments we operate have declined below operating costs of vessels. The degree of charter hire rate volatility among different types of vessels has varied widely. Fluctuations in charter rates result from changes in the supply
and demand for vessel capacity and changes in the supply and demand for energy resources, commodities and products.
Deterioration of charter rates resulting from various factors relating to the cyclicality and volatility of our business may adversely affect our ability to profitably charter or re-charter our
vessels or to sell our vessels on a profitable basis. This could negatively impact our operating results, liquidity and financial condition.
As a result of the COVID-19 pandemic, it is likely that our dry bulk and containership charter rates will continue to be exposed to volatility in the near to medium term. Such exposure could have a
material adverse effect on our business, financial condition and operating results. Furthermore, the conflict in Ukraine combined with inflationary pressures and/or supply chain disruptions across most major economies have negatively impacted
certain of the countries in which we operate in and may lead to a global economic slowdown, which might in turn adversely affect demand for our vessels. In particular, the conflict in Ukraine and related sanctions measures imposed against Russia
has and is disrupting energy production and trade patterns, including shipping in the Black Sea and elsewhere, and has impacted the price of certain dry bulk goods, such as grain, as well as energy and fuel prices. Notably, various jurisdictions
have imposed sanctions against Russia directly targeting the maritime transport of goods originating from Russia, such as of oil products and agricultural commodities such as potash. Such measures, and the response of targeted jurisdictions to
them, have disrupted trade patterns of certain of the goods which we transport and have correspondingly impacted charter rates for the transport of such goods. As the number of jurisdictions imposing sanctions upon Russia grows and/or the nature of
sanctions being imposed evolves, the charter rates we are able to obtain could begin to weaken. For further details, see “—Our charterers calling on ports located in countries or territories that are the subject
of sanctions or embargoes imposed by the U.S. government (including OFAC) or other authorities or failure to comply with the U.S. Foreign Corrupt Practices Act (the “FCPA”) or similar laws could lead to monetary fines or penalties and adversely
affect our reputation. Such failures and other events could adversely affect the market for our common shares”.
Demand for dry bulk capacity is affected by supply of and demand for, and changes in the production or manufacturing, of commodities, semi-finished and finished consumer and industrial products,
while demand for containership capacity is affected by a range of factors, including demand and supply chain for containerized goods and major products carried by container vessels internationally.
Factors that influence demand for vessel capacity in the segments in which we operate include:
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global and regional economic and political conditions and developments, including armed conflicts and terrorist activities, international trade sanctions, embargoes and strikes;
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developments in international trade;
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the distance over which products are to be moved by sea;
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changes in seaborne and other transportation and distribution patterns, typically influenced by the relative advantage of the various sources of production, locations of consumption, pricing differentials and seasonality;
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changes in the production of energy products, commodities, semi-finished and finished consumer and industrial products;
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epidemics and pandemics, such as the COVID-19 pandemic;
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environmental and other regulatory developments;
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currency exchange rates; and
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For a discussion of factors affecting the supply of the dry bulk and containership vessel capacity, see “—An oversupply of vessel capacity in the segments in which
we operate may prolong or further depress low charter rates when they occur, which may limit our ability to operate our vessels profitably.” These factors are outside of our control and are unpredictable, and accordingly we may not be
able to correctly assess the nature, timing and degree of changes in charter rates. Any of these factors could have a material adverse effect on our business, financial condition and operating results. In particular, a significant decrease in
charter rates would cause asset values to decline. See “—A decline in the market values of our vessels could limit the amount of funds that we can borrow, cause us to breach certain financial covenants in our
current or future credit facilities and/or result in impairment charges or losses on sale.”
The Company is exposed to fluctuating demand and supply for maritime transportation services, as well as fluctuating prices of commodities (such as iron ore, coal, grain,
soybeans and aggregates) and consumer and industrial products, and may be affected by a decrease in the demand for such commodities and/or products and the volatility in their prices.
Our growth significantly depends on continued growth in worldwide and regional demand for the products we transport, such as dry bulk commodities (such as iron ore, coal, soybeans, etc.) and
consumer and industrial products, which could be negatively affected by several factors, including declines in prices for such commodities and/or products, or general political, regulatory and economic conditions.
In past years, China and India have had two of the world’s fastest growing economies in terms of gross domestic product and have been the main driving forces behind increases in shipping trade and
the demand for marine transportation. While China in particular has enjoyed rates of economic growth significantly above the world average, slowing economic growth rates may reduce the country’s contribution to world trade growth. If economic
growth declines in China, India and other countries in the Asia Pacific region, we may face decreases in shipping trade and demand. The level of imports to and exports from China may also be adversely affected by changes in political, economic and
social conditions (including a slowing of economic growth) or other relevant policies of the Chinese government, such as changes in laws, regulations or export and import restrictions, internal political instability, changes in currency policies,
changes in trade policies and territorial or trade disputes. Furthermore, a slowdown in the economies of the United States or the European Union, or certain other Asian countries may also have adverse impacts on economic growth in the Asia Pacific
region. Therefore, a negative change in the economic conditions (including any negative changes resulting from any pandemic) of any of these countries or elsewhere may reduce demand for dry bulk and/or containership vessels and their associated
charter rates, which could have a material adverse effect on our business, financial condition and operating results, as well as our prospects.
More generally, various economies around the globe were impacted by inflationary pressures and/or supply chain disruptions in 2022, in part stemming from the conflict in Ukraine and related sanctions against Russia and Belarus, the withdrawal of the U.K. from the European Union (“Brexit”) and the COVID-19 pandemic and related containment efforts throughout
the world. For example, demand for and the price of coal, a product which we transport from time to time, rose more than 250% in March 2022 as compared to the same period in the previous year. This was due to, among other factors, disruptions in
natural gas supplies to the European Union as a result of tensions with Russia and the loosening of COVID-19 restrictions in various jurisdictions, which was accompanied by a surge in energy demand and, in some jurisdictions, a temporary shortage
in available electrical capacity. The price of coal has since declined amid recessionary concerns regarding the global economy. The global economy currently remains and is expected to continue to remain subject to substantial uncertainty, which
may impact demand for the products which we transport. Periods of low demand can cause excess vessel supply and intensify the competition in the industry, which often results in vessels being idle for long periods of time, which could
reduce our revenues and materially harm the profitability of our segments, our business, results of operations and available cash.
An oversupply of vessel capacity in the segments in which we operate may prolong or further depress low charter rates when they occur, which may limit our ability to operate our
vessels profitably.
Factors that influence the supply of vessel capacity in the segments in which we operate include:
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the number of newbuilding orders and 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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scrapping of older vessels;
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the speed of vessels being operated;
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the number of vessels that are out of service or laid up.
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In addition to the prevailing and anticipated charter rates, factors that affect the rate of newbuilding, scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to
scrap prices, the availability of financing for new vessels and shipping activity, drydock and special survey expenditures, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance costs,
insurance coverage costs, the efficiency and age profile of the existing fleet in the market, and government and industry regulations of maritime transportation practices, particularly environmental protection laws and regulations.
The global fleet of dry bulk vessels has increased as a result of the delivery of numerous newbuilding orders over the past few years. During 2022, the global dry bulk fleet has grown by 2.8%, and
as of February 1, 2023, newbuilding orders had been placed for an aggregate of about 7.2% of the existing global dry bulk fleet, with deliveries expected predominantly during the next two years.
There has been increased activity in the container newbuilding market during 2022 and as a result new contracting has reached high levels vis-à-vis the active fleet. As of February 1, 2023, the
total orderbook of container vessels amounted to 28.8% of the current active fleet, with deliveries equally spread over the next three years. During 2022, the total container fleet grew by 4%.
Vessel supply will continue to be affected by the delivery of new vessels and potential orders of more vessels than vessels removed from the global fleet, either through scrapping or accidental
losses. An oversupply of vessel capacity could exacerbate decreases in charter rates or prolong the period during which low charter rates prevail which may have a material adverse effect on the profitability of our segments, our business, cash
flows, financial condition, and operating results.
Global economic and financial conditions may negatively impact the sectors of the shipping industry in which we operate, including the extension of credit.
As the shipping industry is highly dependent on economic growth and the availability of credit to finance and expand operations, it may be negatively affected by a decline in economic activity or a
deterioration of economic growth and financial conditions. This may have a number of adverse consequences for the shipping sectors in which we operate, including, among other things:
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low charter rates, particularly for vessels employed on short-term time charters;
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decreases in the market value of vessels and limited second-hand market for the sale of vessels;
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limited financing for vessels;
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widespread loan covenant defaults; and
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declaration of bankruptcy by certain vessel operators, vessel managers, vessel owners, shipyards and charterers.
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The occurrence of one or more of these events could have a material adverse effect on our business, cash flows, compliance with debt covenants, financial condition, and operating results.
Increases in bunker prices could affect our operating results and cash flows.
Fuel is a significant, if not the largest, expense in our shipping operations when vessels are off-hire and/or idling and is an important factor in negotiating charter
rates. Bunker prices have increased significantly during 2021 and have continued rising during 2022. Prices for VLSFO in Singapore started at around $415 per metric ton in January 2021 and reached $620 per metric ton by the end of December 2021, an
increase of about 50%. During 2022, our bunker costs rose as a result of the eruption of the armed conflict in Ukraine. The price of VLSFO has increased significantly as a result of the conflict in Ukraine and, indicatively, the price for VLSFO in
Singapore reached approximately $1,100 per metric ton in July 2022, but has since decreased. As of February 9, 2023, the price of VLSFO in Singapore was approximately $656 per metric ton but uncertainty regarding its future direction remains. As a
result, our bunker costs for our vessels when off-hire and/or idling have, from an overall perspective, increased since 2021 and may continue to increase, which could have an adverse impact on our operating results and cash flows.
Risks involved in operating ocean-going vessels could affect our business and reputation.
The operation of an ocean-going vessel carries inherent risks. These risks include the possibility of:
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environmental and other accidents;
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cargo and property losses and damage; and
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business interruptions caused by mechanical failure, human error, war, terrorism, piracy, political action in various countries, labor strikes, or adverse weather conditions.
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Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were
negligent or at fault. A spill, such as of bunker oil of our vessels, or an accidental release of other hazardous substances from our vessels, could result in significant liability, including fines, penalties and criminal liability and remediation
costs for natural resource damages, as well as third-party damages.
Any of these circumstances or events could increase our costs or lower our revenues. The involvement of our vessels in an oil spill or other environmental incident may harm our reputation as a safe
and reliable operator, which could have a material adverse effect on our business, cash flows, financial condition, and operating results.
We are new entrants to certain of the segments in which we operate and may face difficulties in establishing our business .
Our vessel owning subsidiaries which comprise our containership segment entered the containership shipping business in late 2022. As new entrants in
such industry, we may struggle to establish market share and broaden our customer base for our operations due to our lesser-known reputation for containershipping, while incurring high operating costs associated with the operation and upkeep of our
vessels. Competitors with greater resources could enter and operate larger and more modern containership fleets through consolidations or acquisitions, and many larger fleets that compete with us in each of
these sectors may be able to offer more competitive prices and fleets while also achieving scale economies in their fleet operating costs. Further, we likely possess less operational expertise relative to more experienced competitors and
may be more heavily reliant on the knowledge and services of third-party providers for our operations, such as Castor Ships S.A. (“Castor Ships”), a company controlled by Petros Panagiotidis, which manages our containerships and co-manages our dry
bulk vessels with Pavimar S.A. (“Pavimar”), also a related party controlled by the sister of Petros Panagiotidis, Ismini Panagiotidis. Failure to partner with these management companies to
effectively deliver our services could tarnish our reputation as efficient and reliable operators and impact the growth of our segments’ operations, our financial condition and operating profits.
A decline in the market values of our vessels could limit the amount of funds that we can borrow, cause us to breach certain financial covenants in our
current or future credit facilities and/or result in impairment charges or losses on sale.
The fair market values of our vessels have generally experienced high volatility. The fair market values of our vessels depend on a number of factors, including:
| • |
prevailing level of charter rates;
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general economic and market conditions affecting the shipping industry;
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the types, sizes and ages of the vessels, including as compared to other vessels in the market;
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supply of and demand for vessels;
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the availability and cost of other modes of transportation;
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distressed asset sales, including newbuilding contract sales below acquisition costs due to lack of financing;
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governmental or other regulations, including those that may limit the useful life of vessels; and
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the need to upgrade vessels as a result of environmental, safety, regulatory or charterer requirements, technological advances in vessel design or equipment or otherwise.
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In addition, the average age of our containerships is older than the industry average for such vessels and may therefore be viewed as providing insufficient or only short-term collateral in
connection with future financing. This could restrict our access to or terms of any financing. Further, if the fair market values of our vessels decline, we might not be in compliance with various covenants in our credit facilities or credit
facilities we enter into in the future, some of which require the maintenance of a certain percentage of the fair market values of the vessels securing the facility to the principal outstanding amount of the respective facility or a maximum ratio
of total net debt to the market value adjusted total assets. See “—Our credit facilities contain, and we expect that any new or amended credit facility we enter into will contain, restrictive covenants that we may
not be able to comply with due to economic, financial or operational reasons and may limit our business and financing activities.”
In addition, if the fair market values of our vessels decline, our access to additional funds may be affected and/or we may need to record impairment charges in our consolidated financial
statements or incur loss on sale of vessels which can adversely affect our financial results. Because the market values of our vessels may fluctuate significantly, we may also incur losses when we sell vessels, which may adversely affect our
earnings. Conversely, if vessel values are elevated at a time when we wish to acquire additional vessels, the cost of such acquisitions may increase and this could adversely affect our business, cash flows, financial condition and operating
results.
Acts of piracy or other attacks 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 particular, the Gulf of Aden off the coast of
Somalia and the Gulf of Guinea region off Nigeria, which experienced increased incidents of piracy in recent years. Sea piracy incidents continue to occur, with dry bulk vessels and containerships particularly vulnerable to such attacks. Political
conflicts have also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping. An attack on one of our vessels or merely the perception that our vessels are a potential piracy or terrorist target could
have a material adverse effect on our business, financial condition and operating results.
Further, if these piracy attacks occur in regions in which our vessels are deployed that insurers characterize as “war risk” zones or by the Joint War Committee as “war and strikes” listed areas,
premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain, if available at all. In addition, crew costs, including costs that may be incurred to the extent we employ on-board
security guards, could increase in such circumstances. We may not be adequately insured to cover losses from these incidents. This 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, which could have a material adverse impact on our business, cash flows, financial condition and operating results.
Political instability, terrorist attacks, international hostilities and global public health threats can affect the seaborne transportation industry, which could adversely
affect our business.
We conduct most of our operations outside of the United States and our business, results of operations, cash flows, financial condition and ability to pay dividends, if any, in the future may be
adversely affected by changing economic, political and government conditions in the countries and regions where our vessels are employed or registered. Moreover, we operate in a sector of the economy that is likely to be adversely impacted by the
effects of political conflicts.
Currently, the world economy faces a number of challenges, including public health concerns stemming from the COVID-19 pandemic, trade tensions between the United States and China and between the
United States and the European Union, continuing turmoil and hostilities in the Middle East, the Korean Peninsula, North Africa, Venezuela, Iran and other geographic areas and countries, continuing economic weakness in the European Union,
geopolitical events such as Brexit, the continuing threat of terrorist attacks around the world, and slowing growth in China.
In particular, the armed conflict between Russia and Ukraine and a severe worsening of Russia’s relations with Western economies has created significant uncertainty in
global markets, including increased volatility in the prices of certain products and shifts in trading patterns for such products that may continue into the future. These changes are due in part to the imposition of sanctions against Russia and
Belarus during 2022, which have contributed to increased volatility in the price of energy and other products. See ‘‘—Our charterers calling on ports located in countries or territories that are the subject of
sanctions or embargoes imposed by the U.S. government (including OFAC) or other authorities or failure to comply with the U.S. Foreign Corrupt Practices Act (the ‘‘FCPA’’) or similar laws could lead to monetary fines or penalties and adversely
affect our reputation. Such failures and other events could adversely affect the market for our common shares’’ and ‘‘Worldwide inflationary pressures could negatively impact our results of operations
and cash flows.’’ The shipping industry may be negatively affected by resulting rising costs and changing patterns of supply and demand caused by any of the foregoing factors.
Additionally, in Europe, large sovereign debts and fiscal deficits, low growth prospects and high unemployment rates in a number of countries have contributed to the rise of Eurosceptic parties,
which would like their countries to leave the European Union. Brexit has increased the risk of additional trade protectionism and has created supply chain disruptions. 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, results of operations, financial condition and
cash flows.
The threat of future terrorist attacks around the world also continues to cause uncertainty in the world’s financial markets and international commerce and may affect our business, operating
results and financial condition. Continuing conflicts and recent developments in the Middle East, including continuing unrest in Syria and Iran and the overthrow of Afghanistan’s democratic government by the Taliban, may lead to additional acts of
terrorism and armed conflict around the world. This may contribute to further economic instability in the global financial markets and international commerce. Additionally, any escalations between the United States and Iran could result in
retaliation from Iran that could potentially affect the shipping industry, through increased attacks on vessels in the Strait of Hormuz (which already experienced an increased number of attacks on and seizures of vessels in recent years, including
the seizure of two Greek-flagged vessels in 2022). Any of these occurrences could have a material adverse impact on our operating results, revenues and costs. See also “—Acts of piracy on ocean-going vessels could
adversely affect our business.”
Also, China and the United States have implemented certain increasingly protective trade measures with continuing trade tensions, including significant tariff increases, between these countries.
These trade barriers to protect domestic industries against foreign imports depress shipping demand. Protectionist developments, such as the imposition of trade tariffs or the perception they may occur, may have a material adverse effect on global
economic conditions, and may significantly reduce global trade. Moreover, increasing trade protectionism may cause an increase in (a) the cost of goods exported from regions globally, (b) the length of time required to transport goods and (c) the
risks associated with exporting goods. Such increases may significantly affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs, which could have an adverse impact on our charterers’ business,
operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us. This could have a material adverse effect on our
business, financial condition and operating results.
In addition, public health threats such as 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, Japan and South Korea, which may even become pandemics, could lead to a significant decrease of demand for the transportation of the goods which our vessels transport. Such events have and may also in the future adversely
impact our operations, including timely rotation of our crews, the timing of completion of any outstanding or future newbuilding projects or repair works in drydock as well as the operations of our customers. Delayed rotation of crew may adversely
affect the mental and physical health of our crew and the safe operation of our vessels as a consequence.
A cyber-attack could materially disrupt our business and may result in a significant financial cost to us.
We rely on information technology systems and networks in our operations, our vessels 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, to steal data, or to ask for ransom. As a result of the COVID-19 pandemic,
governmental actions have occasionally urged organizations across industries to have their employees operate on a rotational basis remotely, which significantly increases the risk of cybersecurity attacks. A successful cyber‐attack could materially
disrupt our operations, including the safety of our operations, or lead to unauthorized release, alteration or unavailability 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 operating results. In addition, the unavailability of our 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 operating results to suffer.
In 2017, the International Maritime Organization IMO adopted Resolution MSC.428(98) on Maritime Cyber Risk Management, which encourages administrations to ensure that cyber risks are appropriately
addressed in SMS no later than the first annual verification of the Company’s Document of Compliance DOC after January 1, 2021. While we are currently in compliance with the requirements of Resolution MSC.428(98), the cybersecurity measures we
maintain may not be sufficient to prevent the occurrence of a cybersecurity attack and/or incident. Any inability to prevent security breaches (including the inability of our third-party vendors, suppliers or counterparties to prevent security
breaches) could also cause existing clients to lose confidence in our IT systems and could adversely affect our reputation, cause losses to us or our customers and/or damage our brand. This might require us to create additional procedures for our
managing the risk of cybersecurity, which could require additional expenses and/or capital expenditures. The impact of such regulations is difficult to predict at this time.
Additionally, recent sanctions and decisions by third parties to divest from or curtail doing business with Russian interests have created a heightened risk for cyber-attacks. See “¾Our charterers calling on ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S. government
(including OFAC) or other authorities or failure to comply with the U.S. Foreign Corrupt Practices Act (the “FCPA”) or similar laws could lead to monetary fines or penalties and adversely affect our reputation. Such failures and other events
could adversely affect the market for our Common Shares” for further information on these sanctions. Russia has taken and may continue to take retaliatory actions and enact countermeasures, including cyber-attacks and espionage against
other countries and companies in the world, which may negatively impact such countries in which we operate and/or companies to whom we provide services or receive services from. Any such attacks, whether widespread or targeted, could create
significant disruptions in our business and adversely impact our financial condition, cash flows and operating results.
Our charterers calling on ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S. government (including OFAC) or other
authorities or failure to comply with the U.S. Foreign Corrupt Practices Act (the “FCPA”) or similar laws could lead to monetary fines or penalties and adversely affect our reputation. Such failures and other events could adversely affect the
market for our common shares.
Certain countries (including certain regions of Ukraine, Russia, Belarus, Cuba, Iran, North Korea and Syria), entities and persons are targeted by economic sanctions and embargoes imposed by the
United States, the European Union and other jurisdictions, and a number of those countries have been identified as state sponsors of terrorism by the U.S. Department of State. In particular, sanctions recently imposed in relation to the Russian
invasion of Ukraine have created significant disruptions in the global economy and in the shipping industry.
While it is difficult to estimate the impact of the war and current or future sanctions on the Company’s business and financial position, these events and related sanctions could adversely impact
the Company’s operations. During 2022, economic sanctions were imposed by the United States, the European Union, the United Kingdom and a number of other countries on Russian financial institutions, businesses and individuals, as well as certain
regions within the Donbas region of Ukraine. Certain of these sanctions have targeted Russia’s usage of and participation in maritime shipping. For example, the United Kingdom and European Union have also introduced export restrictions, which
capture the provision of maritime vessels and supplies to or for use in Russia. They have also imposed additional restrictions on providing financing, financial assistance, technical assistance and brokering or other services that would further the
provision of vessels to or for use in Russia, including the provision of maritime navigation goods. Import bans of Russian energy products, such as coal, crude oil and refined petroleum products, and commodities, such as coal, iron, steel,
plastics, cement and agricultural products including potash and fertilizer, have also been introduced by a number of jurisdictions. In addition, certain jurisdictions, such as Greece and the United States, have temporarily detained vessels
suspected of violating sanctions. Countries, such as Canada, the United Kingdom and the EU, have also broadly prohibited Russian-affiliated vessels from entering their waters and/or ports. In light of the current regulatory and economic environment
in the region, certain vessel operators have temporarily suspended shipping routes to and from Russia or have declined to engage in business with Russian-affiliated entities.
These bans and related trade sanctions have started to change trade patterns across the shipping industry and existing or future restrictions may affect our current or future charters. In the near
term, we have seen, and expect to continue to see, increased volatility in the region due to these geopolitical events. The Black Sea region is a major export market for grains with Ukraine and Russia exporting a combined 15% of the global seaborne
grain trade. In addition, the volatility of market prices for fuel and energy products have increased as a result of related supply disruptions from the conflict in Ukraine. While uncertainty remains with respect to the ultimate impact of the
conflict, we have seen, and anticipate continuing to see, significant changes in trade flows. A reduction or stoppage of grain out of the Black Sea or cargoes from Russia has, and will continue to, negatively impact the markets in those areas. In
addition, increased volatility in the price of fuel or energy commodities may increase or decrease the price of fuel used by our vessels and/or demand for certain of the commodities we transport, each of which could affect the Company’s operations
and liquidity. While we have seen an increase in ton miles as end users find alternative sources for cargo and other capacity, it is uncertain what the ultimate result will be on our segments’ financial positions. However, due to their effect on
the global market for certain of the goods that we transport, current or additional sanctions could have a material adverse impact on our segments’ cash flows, financial condition and operating results.
Economic sanctions and embargo laws and regulations vary in their application with regards to countries, entities or persons and the scope of activities they subject to sanctions. These sanctions
and embargo laws and regulations may be strengthened, relaxed or otherwise modified over time. Any violation of sanctions or embargoes could result in the Company incurring monetary fines, penalties or other sanctions. In addition, certain
institutional investors may have investment policies or restrictions that prevent them from holding securities of companies that have contacts with countries or entities or persons within these countries that are identified by the U.S. government
as state sponsors of terrorism. We are required to comply with such policies in order to maintain access to charterers and capital.
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 imposed by the governments of the United States, the
European Union, and/or other international bodies. Further, it is possible that, in the future, our vessels may call on ports located in sanctioned jurisdictions on charterers’ instructions, without our consent and in violation of their charter
party. 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. As a result, we may be required to terminate existing or future contracts to which we,
or our subsidiaries, are party.
We operate in a number of countries throughout the world, including countries known to have a reputation for corruption. We are committed to doing business in accordance with applicable
anti-corruption laws, and have adopted a code of business conduct and ethics. However, we are subject to the risk that we, or our affiliated entities, or our or our affiliated entities’ respective officers, directors, employees or agents actions
may be deemed 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 and curtailment of operations in certain jurisdictions.
If the Company, our affiliated entities, or our or their respective officers, directors, employees and agents, or any of our charterers are deemed to have violated economic sanctions and embargo
laws, or any applicable anti-corruption laws, our results of operations may be adversely affected due to the resultant monetary fines, penalties or other sanctions. In addition, we may suffer reputational harm as a result of any actual or alleged
violations. This may affect 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. The determination by these investors
not to invest in, or to divest from, our common shares may adversely affect the price at which our common shares trade. Investor perception of the value of our common shares may also be adversely affected by the consequences of war, the effects of
terrorism, civil unrest and governmental actions in the countries or territories in which we operate. Any of these factors could adversely affect our business, financial condition, and operating results.
Furthermore, detecting, investigating and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management and adversely affect our
business, results of operations or financial condition as a result.
Major outbreaks of diseases (such as COVID-19) and governmental responses thereto, have affected our crews and operations, and could adversely affect our business and financial
condition.
Since the beginning of 2020, the outbreak of the COVID-19 pandemic around the world has negatively affected economic conditions, the supply chain, the labor market and the demand for certain
shipping sectors both regionally and globally. The COVID-19 pandemic has resulted in numerous actions taken by governments and governmental agencies in an attempt to mitigate the spread of the virus, including travel bans, quarantines and other
emergency public health measures, and a number of countries implemented lockdown measures. These measures have resulted in a significant reduction in global economic activity and extreme volatility in the global financial markets. In the past, the
pandemic has caused delays and uncertainties relating to the operation of our vessels and has affected our ability to timely rotate the crews of our vessels. It has also caused delays and uncertainties in the shipping industry generally relating to
newbuilding projects and operators’ ability to timely dry-dock their vessels.
We expect that the COVID-19 pandemic will continue to impact our operations and the operations of our customers and suppliers and increase our operating costs. The magnitude of COVID-19’s long-term
impact on our financial and operating results, which has not been material to date but could be material in the future, will depend on the length of time that the pandemic continues, the ability to effectively vaccinate a large percentage of the
population and whether subsequent waves of the virus happen globally or in certain geographic regions. Uncertainties regarding the economic impact of the COVID-19 pandemic are likely to result in sustained market volatility, which could impact our
business, financial condition and cash flows to a greater extent. Governments have been approving large stimulus packages to mitigate the effects of the sudden decline in economic activity caused by the pandemic; however, we cannot predict the
extent to which these measures will continue or will be sufficient to restore or sustain the business and financial condition of companies in the shipping industry.
It remains difficult to determine the full impact of COVID-19 on our business in the long run. Effects of the ongoing pandemic have included or may include, among others:
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deterioration of economic conditions and activity and of demand for shipping;
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operational disruptions to us or our customers due to worker health risks and the effects of new regulations, directives or practices implemented in response to the pandemic (such as travel restrictions for individuals, delays in
replacing crews and vessels, and quarantining and physical distancing);
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delays in the loading and discharging of cargo on or from our vessels, vessel inspections and related certifications by class societies, customers or government agencies and maintenance, modifications or repairs to, or dry-docking of,
our existing vessels due to worker health or other business disruptions;
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reduced cash flow as a result of the above and worsened financial condition, including potential liquidity constraints;
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potential non-performance by counterparties relying on force majeure clauses and potential deterioration in the financial condition and prospects of our customers or other business partners;
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credit tightening or declines in global financial markets, including to the prices of our publicly traded securities and the securities of our peers, could make it more difficult for us to access capital; and
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potential disruptions, delays or cancellations in the construction of new vessels, which could reduce our future growth opportunities.
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The occurrence or continued occurrence of any of the foregoing events or other epidemics or an increase in the severity or duration of the COVID-19 pandemic could have a material adverse effect on
our business, cash flows, financial condition and operating results.
In particular, we face significant risks to our onshore or offshore personnel and operations due to the COVID-19 pandemic, which resulted in increased operational costs mainly associated with crew
embarkation, rotation and related logistical complications, which have not been material to date but could be material in the future. Our crews generally work on a rotation basis, relying
largely on international air transport for crew changes plan fulfillment. Quarantine restrictions placed on persons and limitations on commercial aviation and other forms of public transportation have at times delayed our crew in embarking or
disembarking on our ships and resulted in additional operating complexities. While such delays have not functionally affected our ability to sufficiently crew our vessels, such disruptions have affected the cost of rotating our crew. Any of the
foregoing factors could impact our ability to maintain a full crew synthesis on-board all our vessels at any given time.
In 2021 and during the first quarter of 2022, most of the countries around the globe maintained their strict COVID-19 health protocols, including the periodic imposition of
strict lockdowns. In certain jurisdictions, shipowners experienced significant disruptions to their normal vessel operations, in part due to additional time expended to deviate from shipping routes to positioning vessels in countries in which crew
changes could be undertaken in compliance with applicable measures against COVID-19. Since the beginning of the second quarter of 2022, many countries began to downgrade their health quarantine measures for fully vaccinated seafarers and also
started to re-establish air carrier connections between international destinations. As a result, crew change operations have become less expensive than before and the need to deviate from vessels’ normal trajectories to dock in ‘‘open’’ countries
has been reduced.
Although public health and quarantine conditions appear to have improved in the majority of countries globally, uncertainty remains regarding the emergence of additional
strains of COVID-19 and whether governments and health authorities around the globe will be forced to implement the same or similar quarantine measures as utilized previously. The reimplementation of quarantine, lockdowns, or other measures in
response to COVID-19 could significantly increase the expenses we incur for precautionary protective measures (such as hotel isolation, PCR tests, etc.), as well as the costs we incur due to operational disruptions. For example, we may experience
renewed difficulty in rotating our crews and may incur increased fuel costs based on an increase in vessel deviations, repositioning and/or delays. Any of the foregoing factors could have an adverse effect on our business, financial condition and
operating results.
Compliance with safety and other vessel requirements imposed by classification societies may be costly and could reduce our net cash flows and negatively impact our results of
operations.
The hull and machinery of every commercial vessel must be certified as being “in class” by a classification society recognized by the administrative body responsible for regulating vessels in the
jurisdiction in which the vessel is registered (or “flagged”). The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety
of Life at Sea Convention.
A vessel must undergo annual surveys, intermediate surveys and special surveys. In lieu of a special survey, a vessel’s machinery may be placed on a continuous survey cycle, under which the
machinery would be surveyed periodically over a five-year period. We expect our vessels to be on special survey cycles for hull inspection and continuous survey cycles for machinery inspection. Most vessels are also required to be dry-docked, or
inspected by divers, every two to three years for inspection of underwater parts.
While the Company believes that it has adequately budgeted for compliance with all currently applicable safety and other vessel operating requirements, newly enacted regulations applicable to the
Company and its vessels may result in significant and unanticipated future expense. If any vessel does not maintain its class or fails any annual, intermediate, or special survey, the vessel will be unable to trade between ports and will be
unemployable, which could have a material adverse effect on our business, cash flows, financial condition and operating results.
We are subject to laws, regulations and standards (including environmental standards such as IMO 2020, standards regulating ballast water discharge, etc.),
which can adversely affect our business, results of operations, cash flows and financial condition. In particular, climate change and greenhouse gas (“GHG”) restrictions may adversely impact our operations and markets.
Our operations are subject to numerous international, national, state and local laws, regulations, treaties and conventions in force in international waters and the jurisdictions in which our
vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. See “Item 4. Information on the Company—B. Business Overview—Environmental and Other Regulations in the
Shipping Industry” for a discussion of certain of these laws, regulations and standards. Compliance with such laws, regulations and standards, where applicable, may require installation of costly equipment or implementation of operational
changes and may affect the resale value or useful lives of our vessels. These costs could have a material adverse effect on our business, cash flows financial condition, and operating results. A failure to comply with applicable laws and
regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations.
Environmental laws often impose strict liability for emergency response and remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to
whether we were negligent or at fault. See “—Risks involved in operating ocean-going vessels could affect our business and reputation.”
As of the date of this annual report, in connection with IMO 2020 regulations and requirements relating fuel sulfur levels, our vessels have transitioned to burning IMO compliant fuels. As a
result, such vessels currently utilize VLSFO containing up to 0.5% sulfur content. Notably, low sulfur fuel is more expensive than standard high fuel oil and may become more expensive or difficult to obtain as a result of increased demand. The
price of VLSFO has increased as a result of the ongoing conflict between Russia and Ukraine, and, indicatively, the price for VLSFO in Singapore reached approximately $1,100 per metric ton in July 2022. Thereafter, a downward trend prevailed and,
at the end of December 2022, the price of VLSFO closed at approximately $620 per metric ton. As of February 9, 2023, the price of VLSFO in Singapore was around $656 per metric ton, but uncertainty regarding its future direction and the availability
of VLSFO remains. For further information, see “—Increases in bunker prices could affect our operating results and cash flows.”
The IMO has also 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 standard on or after September 8, 2019. For most vessels, compliance with the
D-2 standard involves installing on-board systems to treat ballast water and eliminate unwanted organisms. All 22 vessels in our fleet are currently in compliance with this regulation.
Due to concern over climate change, a number of countries and the IMO and European Union have adopted 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. In addition, although the emissions of GHG from international shipping currently are not
subject to the Paris Agreement or 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, a new treaty may be adopted in
the future that includes restrictions on shipping emissions.
In addition, in March 2022 the SEC announced proposed rules with respect to climate-related disclosures, including with respect to greenhouse gas emissions and certain climate- related financial
statement metrics, which would apply to foreign private issuers listed on US national securities exchanges such as us. Compliance with such reporting requirements (if they are adopted) or any similar requirements may impose substantial obligations
and costs on the Company. If the Company is unable to accurately measure and disclose required climate-related data in a timely manner, it could be subject to penalties or civil actions in certain jurisdictions.
In June 2021, IMO’s Marine Environment Protection Committee (“MEPC”) adopted amendments to the International Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI that will
require ships to reduce their CO2 and GHG emissions. These new requirements combine technical and operational approaches to improve the energy efficiency of ships, also providing important building blocks for future GHG reduction measures.
Beginning January 1, 2023, each vessel is required to comply with the new Energy Efficiency Existing Ship Index (“EEXI”). Furthermore, from 2023 to 2026, each vessel must initiate the collection of data for the reporting of its annual operational
Carbon Intensity Indicator (“CII”) and CII rating. The IMO is required to review the effectiveness of the implementation of the CII and EEXI requirements by January 1, 2026, at the latest.
The EEXI and CII regulations require reductions in the CO2 emissions of vessels. Based on the
pertinent official calculations and estimations, merchant vessels built before 2013, including certain of our older vessels, do not satisfy the upcoming EEXI requirements which will come into force on January 1, 2023. To ensure compliance with EEXI
requirements most owners/operators, including us, may choose to limit engine power, a solution less costly than applying energy saving devices and/ or effecting certain alterations on existing propeller designs. The engine power limitation is
predicted to lead to reduced ballast and laden speeds (at scantling draft,) in the non-compliant vessels which will affect their commercial utilization but also decrease the global availability of vessel capacity. Furthermore, required software and
hardware alterations as well as documentation and recordkeeping requirements will increase a vessel’s capital and operating expenditures.
On November 13, 2021, the Glasgow Climate Pact was announced following discussions at the 2021 United Nations Climate Change Conference (“COP26”). The Glasgow Climate Pact calls for signatory
states to voluntarily phase out unabated coal usage and fossil fuels subsidies. A shift away from these products could potentially affect the demand for our dry bulk, crude and product tankers and negatively impact our future business, operating
results, cash flows and financial position. COP26 also produced the Clydebank Declaration, in which 22 signatory states (including the United States and United Kingdom) announced their intention to voluntarily support the establishment of
zero-emission shipping routes. Governmental and investor pressure to voluntarily participate in these green shipping routes could cause us to incur significant additional expenses to “green” our vessels.
Developments in safety and environmental requirements relating to the recycling and demolition of vessels may result in escalated and unexpected costs.
The 2009 Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, or the Hong Kong Convention, aims to ensure ships being recycled once they reach the end of
their operational lives do not pose any unnecessary risks to the environment, human health and safety. On November 28, 2019, the Hong Kong Convention was ratified by the required number of countries but as of March 7, 2023, was not yet in force as
the ratifying states do not represent 40% of world merchant shipping by gross tonnage. Upon the Hong Kong Convention’s entry into force, each ship sent for recycling will have to carry an inventory of its hazardous materials. The hazardous
materials, the use or installation of which are prohibited in certain circumstances, are listed in an appendix to the Hong Kong Convention. Ships will be required to have surveys to verify their inventory of hazardous materials initially,
throughout their lives and prior to the ship being recycled. When implemented, the foregoing requirement may lead to cost escalation by shipyards, repair yards and recycling yards. This may then result in a decrease in the residual scrap value of a
vessel, and a vessel could potentially not cover the cost to comply with the latest requirements, which may have an adverse effect on our future performance, cash flows, financial position and operating results.
Further, on November 20, 2013, the European Parliament and the Council of the EU adopted the Ship Recycling Regulation, which, among other things, requires any non-EU flagged vessels calling at a
port or anchorage of an EU member state, including ours, to set up and maintain an Inventory of Hazardous Materials from December 31, 2020. Such a system includes information on the hazardous materials with a quantity above the threshold values
specified in relevant EU Resolution and are identified in the ship’s structure and equipment. This inventory must be properly maintained and updated, especially after repairs, conversions or unscheduled maintenance on board the ship.
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.
We are subject to international safety standards and the failure to comply with these regulations may subject us to increased liability, may adversely affect our insurance
coverage and may result in a denial of access to, or detention in, certain ports.
The operation of our vessels is affected by the requirements set forth in the International Safety Management Code, or the ISM Code, promulgated by the IMO under the SOLAS Convention. The ISM Code
requires ship owners, ship managers and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for
safe operation of vessels and describing procedures for dealing with emergencies. In addition, vessel classification societies impose significant safety and other requirements on our vessels. Failure to comply with these regulations may subject us
to increased liability, may adversely affect our insurance coverage and may result in a denial of access to, or detention in, certain ports, and have a material adverse effect on our business, financial condition and operating results.
Furthermore, sanctions imposed by the European Union and U.K. against Russia and certain disputed regions of Ukraine may invalidate our insurance coverage for certain voyages to or from such
regions. This is due to the inclusion of a standard exclusion for liability for liabilities, costs or expenses in our protection and indemnity insurance where payment by our insurer or the provision of cover may expose the insurer to the risk of
being subject to a sanction, prohibition or any adverse action. We could incur significant expenses in the event of any such invalidation, which could have an adverse effect on our business, financial condition and operating results. See “—Our charterers calling on ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S. government (including OFAC) or other authorities or failure to comply with the
U.S. Foreign Corrupt Practices Act (the “FCPA”) or similar laws could lead to monetary fines or penalties and adversely affect our reputation. Such failures and other events could adversely affect the market for our common shares”.
Maritime claimants could arrest our vessels, which could interrupt our cash flow and business.
Crew members, suppliers of goods and services to a vessel, shippers and receivers of cargo and other parties may be entitled to a maritime lien against a 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 judicial proceedings. The arrest or attachment of our vessels could have significant ramifications for the Company, including
off-hire periods and/or potential cancellations of charters, high costs incurred in discharging the maritime lien, other expenses to the extent such arrest or attachment is not covered under our insurance coverage, breach of covenants in certain of
our credit facilities and reputational damage. This in turn could negatively affect the market for our shares and adversely affect our business, financial condition, results of operations, cash flows and ability to service or refinance our debt. In
addition, in jurisdictions where the “sister ship” theory of liability applies, such as South Africa, a claimant may arrest 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. In countries with “sister ship” liability laws, claims might be asserted against us or any of our vessels for liabilities of other vessels that we then own, compounding the negative effects of an arrest or attachment
on the Company.
Governments could requisition our vessels during a period of war or emergency resulting in a loss of earnings.
A government of a vessel’s registry could requisition for title or seize a vessel. Requisition for title occurs when a government takes control of a vessel and becomes the owner. A government could
also requisition a vessel for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency.
Government requisition of our vessels could have a material adverse effect on our business, cash flows, financial condition and operating results.
Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.
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 may
result in the seizure of contents of our vessels, 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
operating results.
Our business has inherent operational risks, which may not be adequately covered by insurance.
Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, adverse weather conditions, 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 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.
We procure insurance for our vessels against those risks that we believe the shipping industry commonly insures against. This insurance includes marine hull and machinery insurance, protection and
indemnity insurance, which include environmental damage, pollution insurance coverage, crew insurance, and, in certain circumstances, war risk insurance. Currently, the amount of coverage for liability for pollution, spillage and leakage available
to us on commercially reasonable terms through protection and indemnity associations and providers of excess coverage is $1 billion per occurrence.
Despite the above policies, we may not be insured in amounts sufficient to address all risks and we or an intermediary may not be able to obtain adequate insurance coverage for our vessels in the
future or may not be able to obtain certain coverage at reasonable rates. 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.
Further, insurers may not pay particular claims. Our insurance policies contain deductibles for which we will be responsible and limitations and exclusions which may increase our costs or lower our
revenues. Moreover, insurers may default on claims they are required to pay. Any of these factors could have a material adverse effect on our financial condition.
Risks Relating To Our Company
We have grown our fleet exponentially and we may have difficulty managing our growth properly which may adversely affect our operations and profitability.
We are a company formed for the purpose of acquiring, owning, chartering, and operating oceangoing cargo vessels. Since our inception, we have grown our fleet from one vessel to 22 vessels as of
March 7, 2023 following the contribution of our eight former tanker vessels to Toro.
Growing any business presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel and managing relationships with customers and
suppliers and integrating newly acquired operations into existing infrastructures. The significant expansion of our fleet may impose significant additional responsibilities on our management and the management and staff of our commercial and
technical managers, and may necessitate that we, and/or they, increase the number of our and/or their personnel.
Our or our managers’ current operating and financial systems may not be adequate as we continue to implement our plan to expand the size of our fleet and our attempts to improve those systems may
be ineffective. In addition, if we further expand our fleet, we will need to recruit suitable additional seafarers and shore-side administrative and management personnel. We cannot guarantee that we will be able to hire suitable employees as we
expand our fleet. If we encounter business or financial difficulties, we may not be able to adequately staff our vessels or our shore-side personnel. If we are unable to grow our financial and operating systems or to recruit suitable employees as
we expand our fleet, our financial performance may be adversely affected and, among other things, the amount of our available free cash may be reduced.
We may be dependent on a small number of charterers for the majority of our business.
Historically, a small number of charterers have accounted for a significant part of our revenues. Indicatively, for both the years ended December 31, 2022 and 2021, we derived 43% of our
consolidated operating revenues from three charterers. In particular, for the years ended December 31, 2022 and 2021, we derived 75% and 55%, respectively, of our dry bulk segment operating revenues from three charterers. Further, for the year
ended December 31, 2022, we derived 100% of our containership segment operating revenues from one charterer. Our charters may be terminated early due to certain events, such as a client’s failure to make payments to us because of financial
inability, disagreements with us or otherwise. The ability of each of our counterparties to perform their obligations under a charter with us depends on a number of factors that are beyond our control and may include, among other things, general
economic conditions, the condition of the shipping industry, prevailing prices for the commodities and products which we transport and the overall financial condition of the counterparty. Should a counterparty fail to honor its obligations under an
agreement with us, we may be unable to realize revenue under that charter and could sustain losses. In addition, if we lose an existing client, it may be difficult for us to promptly replace the revenue we derived from that counterparty. Any of
these factors could have a material adverse effect on our business, financial condition, cash flows and operating results. For further information, see Note 2 to our consolidated financial statements included elsewhere in this annual report.
We may not be able to execute our growth strategy and we may not realize the benefits we expect from past acquisitions or future acquisitions or other strategic transactions.
As our business grows, we intend to acquire additional vessels, including to replace existing vessels and, where appropriate, renew the vessels of our fleet, and to expand our activities subject to
the resolution of our Board to focus on certain areas of the shipping industry. See “¾We have limited the fields in which we focus our operations and this may have an
adverse effect on our business, financial condition and operating results.” The renewal of our fleet, including to, where applicable, reduce the average age of our fleet, has implications for various operating costs, the perceived
desirability of our vessels to charterers and the ability to attract financing for our business on favorable terms or at all. Our future growth will primarily depend upon a number of factors, some of which may not be within our control. These
factors include our ability to:
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identify suitable vessels, including newbuilding slots at reputable shipyards and/or shipping companies for acquisitions at attractive prices;
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realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements from past acquisitions;
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obtain required financing for our existing and new operations;
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integrate any acquired vessels, assets or businesses successfully with our existing operations, including obtaining any approvals and qualifications necessary to operate vessels that we acquire;
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ensure, either directly or through our manager and sub-managers, that an adequate supply of qualified personnel and crew are available to manage and operate our growing business and fleet;
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improve our operating, financial and accounting systems and controls; and
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cope with competition from other companies, many of which have significantly greater financial resources than we do, and may reduce our acquisition opportunities or cause us to pay higher prices.
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Our failure to effectively identify, acquire, develop and integrate any vessels could adversely affect our business, financial condition, investor sentiment and operating results. Finally,
acquisitions may require additional equity issuances, which may dilute our common shareholders if issued at lower prices than the price they acquired their shares, or debt issuances (with amortization payments), both of which could lower our
available cash. See “—Recent share issuances and future issuances of additional shares, or the potential for such issuances, may impact the price of our common shares and could impair our ability to raise capital
through subsequent equity offerings. Shareholders may experience significant dilution as a result of any such issuances.” If any such events occur, our financial condition may be adversely affected.
We operate secondhand vessels with an age above the industry average which may lead to increased technical problems for our vessels, higher operating expenses, affect our
ability to finance and profitably charter our vessels, to comply with environmental standards and future maritime regulations and result in a more rapid deterioration in our vessels’ market and book values.
Our current fleet consists only of secondhand vessels. While we have inspected our vessels and we intend to inspect any potential future vessel acquisition, this does not provide us with the same
knowledge about its condition that we would have had if the vessel had been built for and operated exclusively by us. Generally, purchasers of secondhand vessels do not receive the benefit of warranties from the builders for the secondhand vessels
that they acquire.
The average age of our current fleet is 13.7 years. The average age of our dry bulk vessels is 13.3 years, compared to an industry average of 13.0 years and the average age of our containerships is
17.5 years, compared to an industry average of 13.6 years. In general, the cost of maintaining a vessel in good operating condition and operating it increases with the age of the vessel, because, amongst other things:
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as our vessels age, typically, they become less fuel-efficient and more costly to maintain than more recently constructed vessels due to improvements in design, engineering, technology and due to increased maintenance requirements;
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cargo insurance rates increase with the age of a vessel, making our vessels more expensive to operate;
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governmental regulations, environmental 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.
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Charterers also have age restrictions on the vessels they charter and in the past, have actively discriminated against chartering older vessels, which may result in a lower utilization of our
vessels resulting to lower revenues. Our charterers 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 charter hire 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, operate in extreme climates, 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.
Due to the age of our fleet, we may not be able to obtain external financing at all or at reasonable terms as our vessels may be seen as less valuable collateral. For further information on the factors which could affect our ability to obtain financing, including the age of our fleet, see ‘‘The
age of our fleet may impact our ability to obtain financing and a decline in the market values of our vessels could limit the amount of funds that we can borrow, cause us to breach
certain financial covenants in our current or future credit facilities and/or result in impairment charges or losses on sale’’.
We face competition from companies with more modern vessels with more fuel-efficient designs than our vessels (‘‘eco-vessels’’). If new vessels are built that are more
efficient or more flexible or have longer physical lives than even the current eco-vessels, competition from the current eco-vessels and any more technologically advanced vessels could adversely affect the
amount of charter hire payments we receive for our vessels once their charters expire and the resale value of our vessels could significantly decrease.
We cannot assure you that, as our vessels age, market conditions will justify expenditures to maintain or update our vessels or enable us to operate our vessels
profitably during the remainder of their useful lives or that we will be able to finance the acquisition of new vessels at the time that we retire or sell our aging vessels. This could have a material adverse effect on our business, financial
condition and operating results.
We have limited the fields in which we focus our operations and this may have an adverse effect on our business, financial condition and operating results.
In connection with the Spin-Off, the independent, disinterested directors of our Board, on the recommendation of a special committee comprised of our independent,
disinterested directors, resolved, among other things, to focus our efforts on dry bulk shipping services, that we have no interest or expectancy to participate or pursue any opportunity in areas of business outside of the dry bulk shipping
business nor that Petros Panagiotidis, our director, Chairman, Chief Executive Officer and controlling shareholder and his affiliates, such as Castor Ships, offer or inform us of any such opportunity. This does not, however, preclude us from
pursuing opportunities outside of the dry bulk shipping business if in the future our Board determines to do so, including in the tanker shipping business. For example, we entered the containership shipping industry in the fourth quarter of 2022
with the purchase of two containership vessels. Nonetheless, focusing our efforts on the dry bulk shipping business may reduce the scope of opportunities we may exploit and have an adverse effect on our business, financial condition and operating
results.
Similarly, Toro’s board has resolved, among other things, to focus its efforts on its current business of tanker shipping services, that Toro has no
interest or expectancy to participate or pursue any opportunity in areas of business outside of the tanker shipping business nor that Petros Panagiotidis, its director, Chairman, Chief Executive Officer and controlling shareholder and his
affiliates will offer or inform it of any such opportunity. This does not preclude Toro, however, from pursuing opportunities outside of the tanker shipping business if in the future Toro’s board determines to do so, including in the dry bulk and
container shipping business. Our failure to obtain an opportunity that our Board deems in the interest of our shareholders may have an adverse effect on our business, financial condition and operating results. For further information on the
foregoing resolutions, see also “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—The Spin-Off Resolutions.”
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
negatively impact our results of operations and cash flows.
We have entered into, and may enter into in the future, various contracts, including charter agreements, pool agreements, management agreements, shipbuilding contracts and credit facilities. Such
agreements subject us to counterparty risks. The ability 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. For example, the combination of a reduction
of cash flow resulting from a decline in world trade and the lack of availability of debt or equity financing may result in a significant reduction in the ability of our charterers to make payments to us. In addition, in depressed market
conditions, our charterers and customers may no longer need a vessel that is then under charter or contract or may be able to obtain a comparable vessel at lower rates. As a result, charterers and customers may seek to renegotiate the terms of
their existing charter agreements or avoid their obligations under those contracts. This may have a significant impact on our revenues due to our concentrated customer base. For further details, see ‘‘We may be dependent on a small number of charterers for the majority of our business’’. We may also face these counterparty risks due to assignments.
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, cash flows, financial condition, and operating results.
We are dependent upon Castor Ships and Pavimar, which are related party managers of our dry bulk fleet and other third-party sub-managers for the management of our fleet and
business, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows
The management of our business, including, but not limited, the commercial and technical management of our fleet as well as administrative, financial and other business functions, is carried out by
our head manager Castor Ships, which is a company controlled by our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis. Castor Ships has entered into arrangements with Pavimar relating to the technical co-management
our dry bulk vessels. As of March 6, 2023, Castor Ships had subcontracted, with our consent, the technical management of all our containership vessels to a third-party ship management company. See “Item 7. Major
Shareholders and Related Party Transactions¾B. Related Party Transactions¾ Management, Commercial and Administrative Services” for further information on our management arrangements. We are reliant on Castor Ship’s continued and satisfactory provision of its
services and its subcontracting arrangements may expose us to risks such as low customer satisfaction with the service provided by these subcontractors, increased operating costs compared to those we would achieve for our vessels, and an inability
to maintain our vessels according to our standards or our current or potential customers’ standards.
Our ability to enter into new charters and expand our customer relationships depends largely on our ability to leverage our relationship with our head manager, Castor Ships, Pavimar, and
subcontractors of such entities, as well as these parties’ reputations and relationships in the shipping industry. If any of these counterparties suffer material damage to their reputations or relationships, it may also harm our ability to renew
existing charters upon their expiration, obtain new charters or maintain satisfactory relationships with suppliers and other third parties. In addition, the inability of our head manager to fix our vessels at competitive charter rates either due to
prevailing market conditions at the time or due to their inability to provide the requisite quality of services, could adversely affect our revenues and profitability and we may have difficulty meeting our working capital and debt obligations.
Our operational success and ability to execute our growth strategy will depend significantly upon the satisfactory and continued performance of these services by our managers and/or sub-managers,
as well as their reputations. Any of the foregoing factors could have an adverse effect on our and their reputations and on our business, financial condition and operating results. Although we may have rights against our managers and/or
sub-managers if they default on their obligations to us, our shareholders will share that recourse only indirectly to the extent that we recover funds.
We periodically employ vessels in the spot market and exposing us to risk of losses based on short-term decreases in shipping rates.
We periodically employ some of our vessels in the spot charter market. The spot charter market is highly competitive and rates within this market are highly volatile, fluctuating significantly
based upon supply of and demand of vessels and cargoes. Conversely, longer-term charter contracts have pre-determined rates over more extended periods of time providing, a fixed source of revenue to us. The successful operation of our vessels in
the competitive spot charter market depends upon, among other things, our head manager obtaining profitable spot charters and minimizing, to the extent possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. We
cannot assure you that we will be successful in keeping our vessels fully employed in these short-term markets, or that future spot rates will be sufficient to enable such vessels to operate profitably. In the past, there have been periods when
trip charter rates have declined below the operating cost of vessels. A significant decrease in spot market rates or our inability to fully employ our vessels by taking advantage of the spot market would result in a reduction of the revenues
received from spot chartering and adversely affect operating results, including our profitability and cash flows, with the result that our ability to serve our working capital and debt service needs could be impaired.
Additionally, if spot market rates or short-term time charter rates become significantly lower than the time charter equivalent rates that some of our charterers are obligated to pay us under our
existing charters, the charterers may have incentive to default under that charter or attempt to renegotiate the charter. If our charterers fail to pay their obligations, we might have to attempt to re-charter our vessels at lower charter rates,
which could affect our ability to comply with our loan covenants and operate our vessels profitably.
Our credit facilities contain, and we expect that any new or amended credit facility we enter into will contain, restrictive covenants that we may not be able to comply with due
to economic, financial or operational reasons and may limit our business and financing activities.
The operating and financial restrictions and covenants in our current credit agreements, and any new or amended credit facility we may enter into in the future, could adversely affect our ability
to finance future operations or capital needs or to engage, expand or pursue our business activities.
For example, our current credit facilities require the consent of our lenders for Castor Maritime Inc., as guarantor, or our subsidiaries that act as borrowers in our facilities to, among other things:
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incur or guarantee additional indebtedness outside of our ordinary course of business;
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charge, pledge or encumber our vessels;
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change the flag, class, management or ownership of our vessels;
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change the management of our vessels;
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declare or pay any dividends or other distributions at a time when the Company has an event of default or the payment of such distribution would cause an event of default;
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form or acquire any subsidiaries;
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make any investments in any person, asset, firm, corporation, joint venture or other entity;
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merge or consolidate with any other person;
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sell or change the beneficial ownership or control of our vessels if there has been a change of control directly or indirectly in our subsidiaries or us; and
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enter into time charter contracts above a certain duration or bareboat charters.
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Our facilities also require us to comply with certain financial covenants, in each case subject to certain exceptions, including:
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maintaining a certain minimum level of cash on pledged deposit accounts with the borrowers;
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maintaining a certain minimum value ratio at the borrowers’ level, which is the ratio of the aggregate market value of the mortgaged vessels plus the value of any additional security and value of the pledged deposit and/or the value of
dry dock reserve accounts to the aggregate principal amounts due under the facilities;
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maintaining a dry dock reserve at the borrowers’ level;
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not having a ratio of net debt to assets adjusted for the market value of the vessels above a certain level;
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maintaining a certain level of minimum free cash at Castor Maritime; and
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maintaining a trailing 12 months EBITDA to net interest expense ratio at and above a certain level.
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Our ability to comply with the covenants and restrictions contained in our current or future credit facilities may be affected by events beyond our control, including prevailing economic, financial
and industry conditions, interest rate developments, changes in the funding costs of our banks and changes in vessel earnings and asset valuations. If market or other economic conditions deteriorate, our ability to comply with these covenants may
be impaired. We may be obligated to prepay part of our outstanding debt in order to remain in compliance with the relevant covenants in our current or future credit facilities. If we are in breach of any of the restrictions, covenants, ratios or
tests in our current or future credit facilities, or if we trigger a cross-default contained in our current or future credit facilities, a significant portion of our obligations may become immediately due and payable. We may not have, or be able to
obtain, sufficient funds to make these accelerated payments. In addition, obligations under our current and/or future credit facilities are and are expected to be secured by our vessels, and if we are unable to repay debt under our current or
future credit facilities, the lenders could seek to foreclose on those assets. Any of these factors could have a material adverse effect on our business, financial condition and operating results.
Furthermore, any contemplated expenditures for vessel acquisitions will have to be at levels that do not breach the covenants of our loan facilities. If the estimated asset values of the vessels in
our fleet decrease, such decreases may limit the amounts we can draw down under our future credit facilities to purchase additional vessels, limit our ability to raise equity capital and our ability to expand our fleet. If funds under our current
or future credit facilities become unavailable or we need to repay them as a result of a breach of our covenants or otherwise, we may not be able to perform our business strategy which could have a material adverse effect on our business, financial
condition and operating results.
All of our outstanding debt is exposed to Interbank Offered Rate (“LIBOR”) or Secured Overnight Financing Rate (‘‘SOFR’’) Risk. If
volatility in LIBOR and/or SOFR occurs, the interest on our indebtedness could be higher than prevailing market interest rates and our profitability, earnings and cash flows may be materially and adversely affected.
We are exposed to the risk of interest rate variations, principally in relation to the U.S. dollar LIBOR and SOFR. Our outstanding indebtedness is exposed to LIBOR and SOFR risk at annual rates
ranging from 3.10% to 4.50% over LIBOR or SOFR. We have also entered into two credit facilities which are based on SOFR or adjusted SOFR, an adjusted new index that measures the cost of borrowing cash overnight, backed by U.S. Treasury securities
and may enter our convert our existing LIBOR based loans into additional SOFR-based loans in the future.
On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”) announced that it expected, by no later than the end of 2021, to cease taking steps aimed at ensuring the continuing
availability of LIBOR in its current form. Pursuant to international, federal, and other regulatory guidance and reform proposals regarding LIBOR, certain LIBOR tenors were discontinued or otherwise became unavailable as benchmark rates at the end
of 2021 and LIBOR is expected to be fully discontinued or become unavailable as a benchmark rate by June 2023. In accordance with recommendations from the committee appointed by the U.S. Federal Reserve Board to manage the transition away from
LIBOR, U.S. dollar LIBOR is expected to be replaced with SOFR.
Given that SOFR is a secured rate backed by government securities (and therefore does not take into account bank credit risk), it may be lower than other reference rates, including LIBOR. However,
SOFR may rise following interest rate increases effected by the United States Federal Reserve (the “U.S. Federal Reserve”) and the U.S. Federal Reserve has recently raised U.S. interest rates in response to rising inflation. Further, as a secured
rate backed by government securities, SOFR may be less likely to correlate with the funding costs of financial institutions. As a result, parties may seek to adjust spreads relative to SOFR in underlying contractual arrangements. Therefore, the use
of SOFR-based rates may result in interest rates and/or payments that are higher or lower than the rates and payments that we experienced under our credit facilities when interest was based on LIBOR. Alternative reference rates may behave in a
similar manner or have other disadvantages or advantages in relation to our indebtedness. The consequences of developments with respect to LIBOR cannot be entirely predicted but may result in financial market disruptions and may impact the level of
interest payments on the portion of our indebtedness that bears interest at variable rates. This may increase the amount of our interest payments under such debt.
The majority of our senior secured credit facilities described in “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Our
Borrowing Activities” provide that interest may be based on LIBOR and for the use of an alternate rate to LIBOR in the event LIBOR is phased-out. We and the lenders under our LIBOR-based senior secured credit facilities may seek to amend
such agreements to replace LIBOR with a different benchmark index that is expected to mirror developments in the rest of the debt markets at the time and make certain other conforming changes to the agreements. However, the new rate may not be as
favorable as those in effect prior to any LIBOR phase-out. In some cases, our lenders have insisted on provisions that entitle the lenders, following consultation with the borrowers and in the absence of agreement, in their discretion, and under
certain market disruption events, to replace published LIBOR as the base for the interest calculation with another benchmark or with their cost-of-funds rate. As a result, our lending costs under our LIBOR-based credit facilities could increase
significantly.
LIBOR, SOFR or any other replacement rate may be volatile. LIBOR has historically exhibited volatility. For example, the spread between LIBOR and the prime lending rate widened significantly at
times due to disruptions in the international credit markets. SOFR or any other replacement reference rate may behave similarly. Because the interest rates borne by our outstanding indebtedness fluctuate with changes in LIBOR and SOFR, if this
volatility were to occur, it would affect the amount of interest payable on our debt.
In order to manage our exposure to interest rate fluctuations, we may from time to time use interest rate derivatives to effectively fix some of our floating rate debt obligations. We currently do
not have any derivative instruments in place. LIBOR and SOFR have increased from their low levels and may rise further in the future as the current low interest rate environment comes to an end. Our financial condition could be materially adversely
affected at any time that we have not entered into interest rate hedging arrangements to hedge our exposure to the interest rates applicable to our credit facilities and any other financing arrangements we may enter into in the future. Conversely,
the use of derivative instruments, if any, may not effectively protect us from adverse interest rate movements. The use of interest rate derivatives may result in substantial losses and may affect our results through mark to market valuation of
these derivatives. Also, adverse movements in interest rate derivatives may require us to post cash as collateral, which may impact our free cash position. Interest rate derivatives may also be impacted by the transition from LIBOR to SOFR or other
alternative rates. Entering into swaps and derivatives transactions is inherently risky and presents various possibilities for incurring significant expenses.
Any of the foregoing factors, including any combination of them, could have an adverse effect on our business, financial condition, cash flow and operating results.
We may not be able to obtain debt or equity financing on acceptable terms which may negatively impact our planned growth. In particular, in the past we have relied on financial
support from our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis, but cannot guarantee availability of such funding in the future.
As a result of concerns about the stability of financial markets generally and the solvency of counterparties, among other factors, the ability to obtain money from the credit markets has become
more difficult as 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.
Due to these factors, we cannot be certain that financing or refinancing will be available if needed and to the extent required, on acceptable terms. The age of our fleet may also impact our ability to obtain
new financing on favorable terms or at all and may hinder our plans to reduce the average age of our fleet through vessel acquisitions and/or replacements. See ‘‘The age of our
fleet may impact our ability to obtain financing and a decline in the market values of our vessels could limit the amount of funds that we can borrow, cause us to breach certain financial covenants in our current or future credit facilities
and/or result in impairment charges or losses on sale’’. If financing is not available when needed, or is available only on unfavorable terms, we may be unable to enhance our existing business,
complete additional vessel acquisitions or otherwise take advantage of business opportunities as they arise.
Our Chairman and Chief Executive Officer, Petros Panagiotidis, may provide loans to us. However, we cannot guarantee that such loans will be available to the Company or
that they will be available to us on favorable terms. Even if we are able to borrow money from Mr. Panagiotidis, such borrowing could create a conflict of interest of management. See also ‘‘—Our Chairman and Chief
Executive Officer, who may be deemed to own, directly or indirectly, 100% of our Series B Preferred Shares, has control over us.’’ Any of these factors could have a material adverse effect on our business, financial condition and operating
results.
We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us to satisfy our financial and other obligations.
We are a holding company and have no significant assets other than the equity interests in our subsidiaries. Our subsidiaries own all of our existing vessels, and subsidiaries we form or acquire
will own any other vessels we may acquire in the future. All payments under our charters are made to our subsidiaries. As a result, our ability to meet our financial and other obligations, and to pay dividends in the future, as and if declared,
will depend on the performance of our subsidiaries and their ability to distribute funds to us. The ability of a subsidiary to make these distributions could be affected by a claim or other action by a third party, including a creditor, by the
terms of our financing arrangements, or by the applicable law regulating the payment of dividends in the jurisdictions in which our subsidiaries are organized.
In particular, the applicable loan agreements entered into by certain of our subsidiaries, prohibit such subsidiaries from paying any dividends to us if we or such subsidiary breach a covenant in a
loan agreement or any financing agreement we may enter into. See “—Our credit facilities contain, and we expect that any new or amended credit facility we enter into will contain, restrictive covenants that we may
not be able to comply with due to economic, financial or operational reasons and may limit our business and financing activities.” If we are unable to obtain funds from our subsidiaries, we will not be able to meet our liquidity needs
unless we obtain funds from other sources, which we may not be able to do.
We may be unable to achieve some or all of the benefits that we expect to achieve from our spin-off of our tanker business.
On November 15, 2022 and December 30, 2022, the disinterested and independent members of the board of directors of the Company approved the spin-off of our tanker segments, which occurred on March 7, 2023. Although we believe that the Spin-Off will enable our tanker business, on the one hand, and our dry bulk and containerships businesses, on the other, to each increase its focus on its distinct line of
business, which is expected to enhance operational efficiencies, attract new investors and facilitate efficient strategic expansion, we may not be able to achieve some or all of the anticipated benefits from the separation of our businesses and
the Spin-Off may adversely affect our business. Separating such businesses will create two independent, publicly traded companies, each of which will initially be smaller, less diversified and more narrowly focused than before the Spin-Off, which
could make such businesses more vulnerable to changing market and economic conditions. Operating as a relatively smaller independent entity may reduce or eliminate some of the benefits and synergies which previously existed across our business
platforms before the Spin-Off, including our operating diversity, borrowing leverage, available capital for investments, partnerships and relationships and opportunities to pursue integrated strategies with the businesses within our former
combined company and the ability to attract, retain and motivate key employees. In addition, as a smaller company, our ability to absorb costs may be negatively impacted, including the significant cost of the spin-off transaction, and we may be
unable to obtain financing or refinance our existing indebtedness. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows, business prospects and the trading price of our
common stock. As a result of having spun off our tanker business, we also may be more susceptible to market fluctuations and other adverse events than we would be if we did not spin off such business. If we fail to achieve some or all of the
benefits that we expect to achieve as a result of the Spin-Off, or do not achieve them in the time we expect, our results of operations and financial condition could be materially adversely affected.
Our Board may never declare dividends.
The declaration and payment of dividends, if any, will always be subject to the discretion of our Board, restrictions contained in our current or future debt agreements and the requirements of
Marshall Islands law. If the Board determines to declare dividends, 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, our compliance with the terms of our outstanding indebtedness and the ability of our subsidiaries to distribute funds to us. The shipping industry is generally
volatile, and we cannot predict with certainty the amount of cash, if any, that will be available for distribution as dividends in any period. Also, there may be a high degree of variability from period to period in the amount of cash that is
available for the payment of dividends.
We may incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, including
as a result of the risks described herein. Our growth strategy contemplates that we will finance our acquisitions of additional vessels using cash from operations, through debt financings and/or from the net proceeds of future equity issuances on
terms acceptable to us. If financing is not available to us on acceptable terms or at all, our Board may determine to finance or refinance acquisitions with cash from operations, which would reduce the amount of any cash available for the payment
of dividends, if any.
The Republic of Marshall Islands laws 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 and our subsidiaries may not have sufficient funds or
surplus to make distributions to us. We currently pay no cash dividends and we may never pay dividends.
Worldwide inflationary pressures could negatively impact our results of operations and cash flows.
It has been recently observed that worldwide economies have experienced inflationary pressures, with price increases seen across many sectors globally. For
example, the U.S. consumer price index, an inflation gauge that measures costs across dozens of items, rose 6.5% in December 2022 compared to the prior year, driven in large part by increases in energy
costs. It remains to be seen whether inflationary pressures will continue, and to what degree, as central banks begin to respond to price increases. In
the event that inflation becomes a significant factor in the global economy generally and in the shipping industry more specifically, inflationary pressures would result in increased operating, voyage and administrative costs. Furthermore, the effects of inflation on the supply and demand of the products we transport could alter demand for our services. Interventions in the economy by central banks in response to inflationary pressures
may slow down economic activity, including by altering consumer purchasing habits and reducing demand for the commodities and products we carry, and cause a reduction in trade. As a result, the volumes of goods we deliver and/or charter rates for
our vessels may be affected. Any of these factors could have an adverse effect on our business, financial condition, cash flows and operating results. For additional information, see ‘‘—The Company is exposed to fluctuating demand and supply for maritime transportation services, as well as fluctuating prices of commodities (such as iron ore, coal, soybeans and aggregates) and
consumer and industrial products and may be affected by a decrease in the demand for such commodities and/or products and the volatility in their prices.’’
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 practices and policies. This is in part due to a developing regulatory environment relating to climate change
and sustainability. For further details on environmental laws and regulations affecting the shipping industry and our operations, see “¾Compliance with safety and
other vessel requirements imposed by classification societies may be costly and could reduce our net cash flows and negatively impact our results of operations.” Further, 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, especially
given the highly focused and specific trade and transport of dry bulk and containerized products in which we are engaged. If we do not meet these standards, our business and/or our ability to access capital could be harmed.
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 means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which could impair our ability to service our indebtedness. Further, it is likely that we
will incur additional costs and require additional resources to monitor, report, comply with and implement wide ranging ESG requirements. Any of the foregoing factors could have a material adverse effect on our business, financial condition and
operating results.
We are a relatively new company, and our anti-fraud and corporate governance procedures might not be as advanced as those implemented by our listed peer competitors having a
longer presence in the shipping industry.
As a publicly traded company, the SEC, Nasdaq Capital Market, and other regulatory bodies subject us to increased scrutiny on the way we manage and operate our business by urging us to utilize or
mandating certain corporate governance actions. Corporate governance of listed companies has increasingly become an area of focus among policymakers and investors. Listed companies are generally encouraged to follow best practices and often must
comply with these rules and/or practices addressing a variety of corporate governance and anti-fraud matters such as director independence, board committees, corporate transparency, ethical behavior, sustainability and prevention of and controls
relating to corruption and fraud. While we believe we follow all requirements that regulatory bodies may from time to time impose on us, our internal processes and procedures might not be as advanced or mature as those implemented by other listed
shipping companies with a longer experience and presence in the U.S. capital markets, with could be an area of concern to our investors and expose us to greater operational risks. In addition, as a foreign private issuer, we are also entitled to
rely on exceptions from certain corporate governance requirements of the Nasdaq Capital Market. Refer to “Item 16.G¾Corporate Governance” for further details on such exceptions.
We are a foreign private issuer and, as a result, are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more
lenient and less frequent than those of a U.S. domestic public company.
We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain
provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the
Exchange Act, (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (iii) the rules under
the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition,
foreign private issuers are not required to file their annual report on Form 20-F until four months after the end of each financial year, while U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form
10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the
same protections afforded to shareholders of companies that are not foreign private issuers or controlled companies.
We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on us.
We may, from time to time, be involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings,
asbestos and other toxic tort claims, employment matters, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. We cannot predict with certainty the outcome or effect of any claim or other
litigation matter, and the ultimate outcome of any litigation or the potential costs to resolve it may have a material adverse effect on our business. Insurance may not be applicable or sufficient in all cases and/or insurers may not remain
solvent, which could have a material adverse effect on our financial condition.
A change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate could result in a higher tax rate on our worldwide earnings, which
could result in a significant negative impact on our earnings and cash flows from operations.
We conduct our operations through subsidiaries which can trade worldwide. Tax laws and regulations are highly complex and subject to interpretation. Consequently, we are subject to changing tax
laws, treaties and regulations in and between countries in which we operate. Our income tax expense, if any, is based upon our interpretation of tax laws in effect in various countries at the time that the expense was incurred. A change in these
tax laws, treaties or regulations, or in the interpretation thereof, could result in a materially higher tax expense or a higher effective tax rate on our worldwide earnings, and such change could be significant to our financial results. If any tax
authority successfully challenges our operational structure, or the taxable presence of our operating subsidiaries in certain countries, or if the terms of certain income tax treaties are interpreted in a manner that is adverse to our structure, or
if we lose a material tax dispute in any country, our effective tax rate on our worldwide earnings could increase substantially. An increase in our taxes could have a material adverse effect on our earnings and cash flows from these operations.
Moreover, in February 2023, the Marshall Islands was added to a list of non-cooperative jurisdictions for tax purposes, commonly referred to as the “EU blacklist”. The effect of the EU blacklist, including whether and when the European Union will
remove the Marshall Islands from the EU blacklist, any legislation that the Marshall Islands may enact with a view toward being removed from the EU blacklist, how the European Union may react to such legislation, and how counterparties will react
to the EU blacklist, is unclear and could potentially have a material adverse effect on our business, financial condition and operating results.
Our subsidiaries may be subject to taxation in the jurisdictions in which its activities are conducted. The amount of any such taxation may be material and would reduce the amounts available for
distribution to us.
We are dependent on our management and their ability to hire and retain key personnel and their ability to devote sufficient time attention to their respective roles. In
particular, we are dependent on the retention and performance of our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis.
Our success depends upon our and our management’s ability to hire and retain key members of our management team and the ability of our management team to devote sufficient time and attention to
their respective roles in light of outside business interests. In particular, we are dependent upon the performance of our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis, who has outside business interests in
Castor Ships and other ventures. Mr. Panagiotidis will devote such portion of his business time and attention to our business as is appropriate and will also devote substantial time to Toro’s business and other business and/or investment activities
that Mr. Panagiotidis maintains now or in the future. Mr. Panagiotidis’ intention to provide adequate time and attention to other ventures will preclude him from devoting substantially all his time to our business. Further, the loss of Mr.
Panagiotidis, either to outside business interests or for unrelated reasons, or resignation of Mr. Panagiotidis from any of his current managerial roles could adversely affect our business prospects and financial condition. Any difficulty in hiring
and retaining key personnel generally could also adversely affect our results of operations. We do not maintain “key man” life insurance on any of our officers.
Risks Relating To Our Common Shares
Our share price has recently been highly volatile and may continue to be volatile in the future, and as a result, investors in our common shares could incur substantial losses.
The stock market in general, and the market for shipping companies in particular, have experienced extreme volatility that has often been unrelated or disproportionate to the operating performance
of particular companies. As a result of this volatility, investors may experience rapid and substantial losses on their investment in our common shares that are unrelated to our operating performance. Our stock price has recently been volatile and
may continue be volatile, which may cause our common shares to trade above or below what we believe to be their fundamental value. During 2021, the market price of our common shares on the Nasdaq Capital Market has fluctuated from an intra-day low
of $1.36 per share on December 30, 2021 to an intra-day high of $19.50 per share on February 11, 2021. Further, during 2022, the market price of our common shares on the Nasdaq Capital Market has fluctuated from an intra-day low of $1.08 per share
on January 27, 2022 to an intra-day high of $2.4 per share on April 19, 2022. On December 30, 2022, the closing price of our common shares was $1.12 per share. Significant historical fluctuations in the market price of our common shares have been
accompanied by reports of strong and atypical retail investor interest, including on social media and online forums.
The market volatility and trading patterns we have experienced may create several risks for investors, including but not limited to the following:
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the market price of our common shares may experience rapid and substantial increases or decreases unrelated to our operating performance or prospects, or macro or industry fundamentals;
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to the extent volatility in our common shares is caused by a “short squeeze” in which coordinated trading activity causes a spike in the market price of our common shares as traders with a short position make market purchases to avoid or
to mitigate potential losses, investors may purchase at inflated prices unrelated to our financial performance or prospects, and may thereafter suffer substantial losses as prices decline once the level of short-covering purchases has
abated;
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if the market price of our common shares declines, you may be unable to resell your shares at or above the price at which you acquired them. We cannot assure you that the equity issuance of our common shares will not fluctuate, increase
or decline significantly in the future, in which case you could incur substantial losses.
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We may continue to incur rapid and substantial increases or decreases in our stock price in the foreseeable future that may not coincide in timing with the disclosure of news or developments by or
affecting us. Accordingly, the market price of our common shares may decline or fluctuate rapidly, regardless of any developments in our business. Overall, there are various factors, many of which are beyond our control, that could negatively
affect the market price of our common shares or result in fluctuations in the price or trading volume of our common shares, which include but are not limited to:
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investor reaction to our business strategy;
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the sentiment of the significant number of retail investors whom we believe to hold our common shares, in part due to direct access by retail investors to broadly available trading platforms, and whose investment thesis may be influenced
by views expressed on financial trading and other social media sites and online forums;
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the amount and status of short interest in our common shares, access to margin debt, trading in options and other derivatives on our common shares and any related hedging and other trading factors;
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our continued compliance with the listing standards of the Nasdaq Capital Market;
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regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our industry;
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variations in our financial results or those of companies that are perceived to be similar to us;
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our ability or inability to raise additional capital and the terms on which we raise it;
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our continued compliance with our debt covenants;
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variations in the value of our fleet;
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declines in the market prices of stocks generally;
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trading volume of our common shares;
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sales of our common shares by us or our shareholders;
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speculation in the press or investment community about our Company or industry;
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general economic, industry and market conditions; and
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other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, including the
COVID-19 pandemic, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations or result in
political or economic instability.
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In addition, the Spin-Off could temporarily increase the volatility of our share price for a variety of reasons. For example, it is possible that some of our shareholders will sell our common
shares as a result of the Spin-Off, for reasons such as our business profile or market capitalization as a stand-alone company no longer fitting their investment objectives. Volatility in our share price may also increase as the market evaluates
our and Toro’s prospects as independent publicly traded companies. There can be no assurance that the effects of any such volatility in share price would be borne equally among us and Toro. The sale of significant volumes of our common shares, or
the perception in the market that this will occur, may decrease their market price and have an adverse impact on our business, including due to Nasdaq minimum bid price requirements.
Some companies that have experienced volatility in the market price of their common shares have been subject to securities class-action litigation. If instituted against us, such litigation could
result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, operating results and growth prospects. There
can be no guarantee that the price of our common shares will remain at its current level or that future sales of our common shares will not be at prices lower than those sold to investors.
The combined post-Distribution value of our and Toro’s common shares may not equal or exceed the pre-Distribution value of our common shares.
Our common shares are listed and traded on the Nasdaq Capital Market and Toro common shares have also been approved for listing on the Nasdaq Capital Market. We
cannot assure you that the combined trading prices of our common shares and Toro common shares after the Distribution, as adjusted for any changes in the combined capitalization of these companies, will
be equal to or greater than the trading price of our common shares prior to the Distribution. Until the market has fully evaluated the business of Toro, the price at which shares of Toro common shares trade may fluctuate significantly. Similarly,
until the market has fully evaluated our business without the business of Toro, the price at which our common shares trades may fluctuate significantly and we could experience significant fluctuations in the trading price of our common shares.
See also “¾Our share price has
recently been highly volatile and may continue to be volatile in the future, and as a result, investors in our common shares could incur substantial losses.”
Nasdaq may delist our common shares from its exchange which could limit your ability to make transactions in our securities and subject us to additional trading restrictions.
On April 14, 2020, we received written notification from Nasdaq indicating that because the closing bid price of the Company’s common shares for 30 consecutive business days, from February 27, 2020
to April 13, 2020, was below the minimum $1.00 per share bid price requirement for continued listing on the Nasdaq Capital Market, the Company was not in compliance with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). Following
certain extension periods obtained, we had until June 28, 2021, to regain compliance with the minimum bid price requirement. On May 28, 2021, we effected a one-for-ten reverse stock split in order to regain compliance with the minimum bid price
requirement, and, as a result, we regained compliance on June 14, 2021. As the board authorization pursuant to which the May 2021 reverse stock split was effected to authorize multiple reverse stock splits at a ratio within an approved range, we
could pursue additional reverse stock splits in the future.
During the month of February 2023, our closing bid price ranged between $1.18 and $1.32 per share. If a breach of the minimum bid price requirement of Nasdaq were to occur again, we might be unable
to regain compliance, which, in turn could lead to a suspension or delisting of our common shares. If a suspension or delisting of our common shares were to occur, there would be significantly less liquidity in the suspended or delisted common
shares. In addition, our ability to raise additional capital through equity or debt financing would be greatly impaired. A suspension or delisting may also breach the terms of certain of our material contracts. There can be no assurance that we
will maintain compliance with the minimum bid price requirements of Nasdaq in the future.
Past share issuances and future issuances of additional shares, or the potential for such issuances, may impact the price of our common shares and could impair our ability to
raise capital through subsequent equity offerings. Shareholders may experience significant dilution as a result of any such issuances.
Over the past few years, we have issued and sold large quantities of our common shares pursuant to public and private offerings of our equity and equity-linked securities. The Company had
94,610,088 issued and outstanding common shares as of December 31, 2022. Upon the exercise of our outstanding warrants, the Company may issue up to an additional 19,360,978 common shares. Additionally, the Company has an authorized share capital of
1,950,000,000 common shares that it may issue without further shareholder approval. Our growth strategy may require the issuance of a substantial amount of additional shares. We cannot assure you at what price the offering of our shares in the
future, if any, will be made but they may be offered and sold at a price significantly below the current trading price of our common shares or the acquisition price of common shares by shareholders and may be at a discount to the trading price of
our common shares at the time of such sale. Purchasers of the common shares we sell, as well as our existing shareholders, will experience significant dilution if we sell shares at prices significantly below the price at which they invested.
In addition, we may issue additional common shares or other equity securities of equal or senior rank in the future in connection with, among other things, debt prepayments, future vessel
acquisitions, without shareholder approval, in a number of circumstances. To the extent that we issue restricted stock units, stock appreciation rights, options or warrants to purchase our common shares in the future and those stock appreciation
rights, options or warrants are exercised or as the restricted stock units vest, our shareholders may experience further dilution. Holders of shares of our common shares have no preemptive rights that entitle such holders to purchase their pro rata
share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.
Our issuance of additional common shares or other equity securities of equal or senior rank, or the perception that such issuances may occur, could have the following effects:
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our existing shareholders’ proportionate ownership interest in us will decrease;
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the earnings per share and the per share amount of cash available for dividends on our common shares (as and if declared) could decrease;
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the relative voting strength of each previously outstanding common share could be diminished;
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the market price of our common shares could decline; and
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our ability to raise capital through the sale of additional securities at a time and price that we deem appropriate, could be impaired.
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The market price of our common shares could also decline due to sales, or the announcements of proposed sales, of a large number of common shares by our large shareholders, or the perception that
these sales could occur.
We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate and case law.
We are organized in the Republic of the Marshall Islands, which does not have a well-developed body of corporate or case law, and as a result, shareholders may have fewer rights and protections
under Marshall Islands law than under a typical jurisdiction in the United States. Our corporate affairs are governed by our Articles of Incorporation and Bylaws and by the Marshall Islands Business Corporations Act (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 companies incorporated
in 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 difficulty in protecting your interests in the face of actions by our management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction which has developed a relatively more
substantial body of case law.
We are incorporated in the Marshall Islands, and all of our officers and directors are non-U.S. residents. It may be difficult to serve legal process or enforce judgments
against us, our directors or our management.
We are incorporated under the laws of the Republic of the Marshall Islands, and substantially all of our assets are located outside of the United States. Our principal executive office is located
in Cyprus. In addition, all of our directors and officers are non-residents of the United States, and substantially all of their assets are located outside the United States. As a result, it may be difficult or impossible for you to bring an action
against us or against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Republic of the
Marshall Islands and of other jurisdictions may prevent or restrict you from enforcing a judgment against our assets or our directors and officers. Although you may bring an original action against us or our affiliates in the courts of the Marshall
Islands, and the courts of the Marshall Islands may impose civil liability, including monetary damages, against us or our affiliates for a cause of action arising under Marshall Islands law, it may be impracticable for you to do so.
We are subject to certain anti-takeover provisions that could have the effect of discouraging, delaying or preventing a merger or acquisition, or could make it difficult for our
shareholders to replace or remove our current Board, and could adversely affect the market price of our common shares.
Several provisions of our Articles of Incorporation and Bylaws could make it difficult for our shareholders to change the composition of our Board 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:
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authorizing our Board to issue “blank check” preferred shares without shareholder approval;
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providing for a classified Board with staggered, three-year terms;
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establishing certain advance notice requirements for nominations for election to our Board or for proposing matters that can be acted on by shareholders at shareholder meetings;
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prohibiting cumulative voting in the election of directors;
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limiting the persons who may call special meetings of shareholders; and
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establishing supermajority voting provisions with respect to amendments to certain provisions of our Articles of Incorporation and Bylaws.
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On November 21, 2017, our Board declared a dividend of one preferred share purchase right (a “Right”), for each outstanding common share and adopted a shareholder rights plan, as set forth in the
Stockholders Rights Agreement dated as of November 20, 2017 (the “Rights Agreement”), by and between the Company and American Stock Transfer & Trust Company, LLC, as rights agent. Each Right allows its holder to purchase from the Company one
one-thousandth of a share of Series C Participating Preferred Stock, or a Series C Preferred Share, for the Exercise Price of $150.00 once the Rights become exercisable. This portion of a Series C Preferred Share will give the shareholder
approximately the same dividend, voting and liquidation rights as would one common share. The Board adopted the Rights Agreement to protect shareholders from coercive or otherwise unfair takeover tactics. In general terms, it imposes a significant
penalty upon any person or group that acquires 15% or more of our outstanding common shares without the approval of our Board. If a shareholder’s beneficial ownership of our common shares as of the time of the public announcement of the rights plan
and associated dividend declaration is at or above the applicable threshold, that shareholder’s then-existing ownership percentage would be grandfathered, but the rights would become exercisable if at any time after such announcement, the
shareholder increases its ownership percentage by 1% or more. Our Chairman, Chief Executive Officer and Chief Financial Officer, Petros Panagiotidis and Thalassa Investment Co. S.A. (“Thalassa”) are exempt from these provisions. For a full
description of the rights plan, see “Item 10. Additional Information¾ Stockholders Rights Agreement” and
Exhibit 2.2 to this annual report.
The Rights may have anti-takeover effects. The Rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our Board. As a result, the overall
effect of the Rights may be to render more difficult or discourage any attempt to acquire us. Because our Board can approve a redemption of the Rights for a permitted offer, the Rights should not interfere with a merger or other business
combination approved by our Board.
In addition to the Rights above, we have issued 12,000 Series B Preferred Shares (representing all the issued and outstanding Series B Preferred Shares) to a company controlled by Petros
Panagiotidis, Thalassa, each of which has the voting power of 100,000 common shares. The Series B Preferred Shares currently represent 92.7% of the aggregate voting power of our total issued and outstanding share capital and therefore grant Mr.
Panagiotidis a controlling vote in most shareholder matters. See “—Our Chairman, Chief Executive Officer and Chief Financial Officer, who may be deemed to beneficially own, directly or indirectly, 100% of our
Series B Preferred Shares, has control over us” and “Item 10. Additional Information—B. Memorandum and Articles of Association.”
Further, lenders have imposed provisions prohibiting or limiting a change of control, subject to certain exceptions, on all of our credit facilities. See “—Our
credit facilities contain, and we expect that any new or amended credit facility we may enter into will contain, restrictive covenants that we may not be able to comply with due to economic, financial or operational reasons and can limit, or may
limit the future, our business and financing activities.” Our management agreements similarly permit our fleet managers to terminate these agreements in the event of a change of control. For further information on our management
agreements, see “Item 7.B. Major Shareholders and Related Party Transactions — Related Party Transactions” and Note 3 to our consolidated financial statements included elsewhere in this annual report.
The foregoing anti-takeover provisions 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 shares and your ability to realize any potential change of control premium.
Our Chairman, Chief Executive Officer and Chief Financial Officer, who may be deemed to beneficially own, directly or indirectly, 100% of our Series B Preferred Shares, has
control over us.
Our Chairman, Chief Executive Officer and Chief Financial Officer, Mr. Petros Panagiotidis, may be deemed to beneficially own, directly or indirectly, all of the 12,000 outstanding shares of our
Series B Preferred Shares. The shares of Series B Preferred Shares each carry 100,000 votes. The Series B Preferred Shares currently represent 0.01% of our total issued and outstanding share capital and 92.7% of the aggregate voting power of our
total, as of the date of this annual report, issued and outstanding share capital. By his ownership of 100% of our Series B Preferred Shares, Mr. Panagiotidis has control over our actions. The interests of Mr. Panagiotidis may be different from
your interests.
We are an “emerging growth company”, and we cannot be certain if the reduced requirements applicable to emerging growth companies make our securities less attractive to
investors.
We are currently an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We expect that we will cease to be an emerging growth company on
December 31, 2023. Additional compliance costs associated with this cessation could be substantial and we cannot assure you that these costs will not be material to our business.
As an emerging growth company, we are not required to comply with, among other things, the auditor attestation requirements of the Sarbanes-Oxley Act. At such time that we cease to be an emerging
growth company, we will no longer be permitted to benefit from these exemptions and face increased compliance costs. While an emerging growth company, investors may find our securities less attractive because we rely on certain exemptions. If
investors find our securities less attractive as a result, there may be a less active trading market for our securities and prices of the securities may be more volatile or decline.
U.S. tax authorities could treat us as a “passive foreign investment company”, which could have adverse U.S. federal income tax consequences to U.S. shareholders.
A foreign corporation will be treated as a “passive foreign investment company” (a “PFIC”), for U.S. 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,” whereas rental income would generally constitute “passive income” to the extent not attributable to the active conduct of a trade or
business. U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or
other disposition of their shares in the PFIC.
We do not believe that we will be treated as a PFIC for any taxable year. However, our status as a PFIC is determined on an annual basis and will depend upon the operations of our vessels and our
other activities during each taxable year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our spot chartering and time chartering activities as services income, rather than rental income. Accordingly, we
believe that our income from our time chartering activities does not constitute “passive income,” and the assets that we own and operate in connection with the production of that income do not constitute passive assets.
There is, however, no direct legal authority under the PFIC rules addressing our method of operation. Accordingly, no assurance can be given that the U.S. Internal Revenue Service (the “IRS”), or a
court of law will accept our 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 taxable year we become unable to acquire
vessels in a timely fashion or if there were to be changes in the nature and extent of our operations.
If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders would face adverse U.S. federal income tax consequences and information reporting obligations.
Under the PFIC rules, unless those shareholders made an election available under the Internal Revenue Code (which election could itself have adverse consequences for such shareholders, as discussed below under “Taxation—U.S. Federal Income Tax
Considerations—Passive Foreign Investment Company Status and Significant Tax Consequences”), such shareholders would be liable to pay U.S. federal income tax upon excess distributions and upon any gain from the disposition of our common shares at
the then prevailing income tax rates applicable to ordinary income plus interest as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of our common shares. Please see the section of this annual
report entitled “Item 10. Additional Information—E. Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Status and Significant Tax Consequences” for a more comprehensive
discussion of the U.S. federal income tax consequences to U.S. shareholders if we are treated as a PFIC.
We may have to pay tax on United States source income, which would reduce our earnings, cash from operations and cash available for distribution to our shareholders.
Under the United States Internal Revenue Code of 1986 (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% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax
under Section 883 of the Code and the applicable Treasury Regulations promulgated thereunder.
We intend to take the position that we and each of our subsidiaries qualify for this statutory tax exemption for our 2021, 2022 and future taxable years. However, as discussed below under “Taxation—U.S. Federal Income Tax Considerations—U.S. Federal Income Taxation of Our Company”, we do not qualify for this exemption in view of our share structure based on the
current wording of the applicable 883 regulation. We believe our share structure satisfies the intent and purpose of the 883 regulation and have filed a petition with the US Treasury to have the regulations amended to clearly encompass our share
structure. However, there can be no assurance that our petition will be successful and that the exemption from tax under Section 883 of the Code will be available to us.
If we or our subsidiaries are not entitled to this exemption, we would be subject to an effective 2% U.S. federal income tax on the gross shipping income we derive during the year that are
attributable to the transport of cargoes to or from the United States. If this tax were imposed for our 2021 and 2022 taxable year, we anticipate that U.S. source income taxes of approximately $497,339 and $1,348,850 would be recognized for the
years ended December 31, 2021, and 2022, respectively, and we have included a reserve for this amount in our annual consolidated financial statements. However, there can be no assurance that such taxes would not be materially higher or lower in
future taxable years.
The distribution of common shares of Toro in connection with the Spin-Off may result in significant tax liability.
In connection with the spin-off of our tanker business, holders of our common shares will receive one common share of Toro Corp., the holding company for our tanker business, for every ten of our
common shares held at the close of business on February 22, 2023. We do not expect that such distribution of shares or the Spin-Off will qualify for tax-free treatment for U.S. federal income tax purposes.
Therefore, we expect that the receipt by our shareholders of Toro common shares in such circumstances would be a taxable distribution, and each U.S. holder that receives Toro common shares in such distribution would be treated as if the U.S. holder
had received a distribution equal to the fair market value of such stock that was distributed to it, which, in the case of our shareholders, would generally be treated first as a taxable dividend to the extent of such holder’s pro rata share of our
earnings and profits, then as a non-taxable return of capital to the extent of the holder’s tax basis in its Castor common shares, and thereafter as capital gain with respect to any remaining value. The amount of any such taxes to our shareholders
may be substantial.
Although we do not expect that the distribution of Toro common shares in connection with the Spin-Off will qualify for tax-free treatment for U.S. federal income tax purposes, Castor, which is not
a U.S. corporation, will not be subject to U.S. federal income tax as a result of the distribution of Toro common shares.
| ITEM 4. |
INFORMATION ON THE COMPANY
|
| A. |
HISTORY AND DEVELOPMENT OF THE COMPANY
|
We are a growth-oriented global shipping company that was incorporated in the Republic of the Marshall Islands in September 2017 for the purpose of acquiring, owning, chartering and operating
oceangoing cargo vessels. We are a provider of worldwide seaborne transportation services for dry bulk and containership cargoes, as well as, until the completion of the Spin-Off, crude oil and refined petroleum products. During 2021 and up to
March 7, 2023, we grew our dry bulk fleet from six to 20 dry bulk vessels, and we established our tanker operations by acquiring seven Aframax/LR2 tanker vessels (one of which was sold to an unaffiliated third party in May 2022 and delivered to
that party on July 15, 2022) and two Handysize tanker vessels. During the fourth quarter of 2022, we also established our containership operations by acquiring two 2005 German-built 2,700 TEU containership vessels from two separate entities
beneficially owned by family members of our Chairman, Chief Executive Officer and Chief Financial Officer. As a result, as of December 31, 2022, our fleet consisted of 20 dry bulk carriers with an aggregate cargo carrying capacity of 1.7 million
dwt and an average age of 13.1 years, six Aframax/LR2 tankers with an aggregate cargo carrying capacity of 0.7 million dwt and an average age of 17.9 years, two Handysize tankers with an aggregate cargo carrying capacity of 0.1 million dwt and an
average age of 16.9 years, and two containership vessels with an aggregate cargo capacity of 0.1 million dwt and an average age of 17.3 years. On March 7, 2023, our tanker vessels were contributed to Toro as part of the Spin-Off. As a result, the
average age of our entire fleet comprised of dry bulk vessels and containerships as of March 7, 2023 was 14.7 years.
On November 15, 2022 and December 30, 2022, the independent disinterested directors of Castor approved, based on the recommendation of the Special Committee, and
authorized, subject to the fulfillment of certain conditions, the proposed spin-off of the Company’s Aframax/LR2 tanker segment and Handysize tanker segment to our newly formed wholly owned subsidiary, Toro Corp., in order for each of Castor Maritime Inc., holding the dry bulk and containership segments, and Toro, holding the tanker segments, to operate and pursue opportunities as a separate “pure
play” company in the relevant shipping sector, to be evaluated as such by the market and to enhance our and Toro’s financing and growth opportunities. Separating the dry bulk and tanker businesses is intended to enable each of us and Toro to
increase its focus on its distinct line of business, which is expected to enhance operational efficiencies, attract new investors and facilitate efficient strategic expansion. In connection with and as part of the Spin-Off, our independent
disinterested directors approved, based on the recommendation of the aforementioned special committee, among other things:
|
• |
the contribution to Toro of our eight tanker-owning subsidiaries (each owning one tanker vessel) and an additional subsidiary formerly owning the M/T Wonder Arcturus
(which was sold pursuant to a memorandum of agreement entered into on May 9, 2022 and delivered to its new owner on July 15, 2022);
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|
○ |
all issued and outstanding shares of Toro common stock, par value $0.001 per share;
|
|
○ |
140,000 shares of Toro’s 1.00% Series A Fixed Rate Cumulative Perpetual Convertible Preferred Shares of Toro, with a cumulative preferred distribution accruing initially at a rate of 1.00% per annum on the
stated amount of $1,000 per share, all of which would be retained by us after the Spin-Off; and
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|
○ |
the issuance of 40,000 Series B Preferred Shares of Toro, each carrying 100,000 votes on all matters on which our shareholders are entitled to vote but no economic rights, to Pelagos, a company controlled by
our and Toro’s Chairman and Chief Executive Officer, against payment of their nominal value of $0.001 per Series B Preferred Share.
|
On March 7, 2023, we distributed on a pro rata basis all of the common shares of Toro received in connection with the Spin-Off to our holders of common stock of
record at the close of business on February 22, 2023. Our common shareholders received one common share of Toro for every ten of our common shares held at the close of business on February 22, 2023. Further information regarding the details of
the Spin-Off may be found on Registration Statement No. 001-41561 on Form 20-F of Toro Corp., declared effective by the U.S. Securities Exchange Commission (“SEC”) on February 9, 2023. The common shares of Toro have been approved for
listing on the Nasdaq Capital Market. The terms of the Spin-Off were negotiated and approved by a special committee of independent disinterested directors.
Our principal executive office is at 223 Christodoulou Chatzipavlou Street, Hawaii Royal Gardens, 3036 Limassol, Cyprus. Our telephone number at that address is +357 25 357 768. Our website is
www.castormaritime.com. This web address is provided as an inactive textual reference only. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of the SEC’s internet site is www.sec.gov. None of the information contained on, or that can be accessed through, these websites is incorporated into or forms a part of this
annual report.
For an overview of our fleet and information regarding the development of our fleet, including vessel acquisitions, please see “Item 4. Business Overview—B. Our
fleet.”
Equity Transactions
For a description of our recent equity transactions, please see “Item 5. Operating and Financial Review and Prospects— B. Liquidity and Capital Resources—Equity
Transactions.”
Fleet Development and Vessel Capital Expenditures
From the end of 2020 until the date of this annual report, we grew our fleet from six vessels to a high of 30 vessels prior to the Spin-Off through the acquisition of 25 new vessels, one of which
was sold in July 2022 and eight of which were contributed to Toro in connection with the Spin-Off. As of March 7, 2023, two containerships acquired in the fourth quarter of 2022 comprised our newly established containership segment and our dry bulk
segment was comprised of 20 vessels, 14 of which were acquired between 2020 and the date of this annual report. For further information on vessel acquisitions and the series of financing transactions that enabled our vessel acquisitions, see “—B. Business Overview—Fleet Development” below and Notes 6 and 7 to our consolidated financial statements included in this annual report. Following completion of the Spin-Off, our fleet is comprised of 22
vessels consisting of our dry bulk and containership vessels.
During the years ended December 31, 2020, 2021 and 2022, we made capital expenditures of approximately $0.1 million, $1.8 million and $3.0 million, respectively, primarily relating to the
installation of ballast water treatment system (“BWTS”) on our vessels.
Financing Transactions
On January 12, 2022, we entered into a $55.0 million term loan facility with Deutsche Bank AG, through and secured by the five of the Company’s dry bulk vessel ship-owning subsidiaries, those
owning the Magic Starlight, the Magic Mars, the Magic Pluto, the Magic Perseus and the Magic Vela, and guaranteed by the Company (the “$55.0 Million Term Loan Facility”). This facility has a tenor of five years and bears interest at
a 3.15% margin over adjusted SOFR per annum. The loan was drawn down in full in five tranches on January 13, 2022. We intend to use the net proceeds from the facility to support our growth plans and for general corporate purposes.
On November 22, 2022, we entered into a $22.5 million senior term loan facility with Chailease International Financial Services (Singapore) Pte. Ltd., through and secured by our two
containership-owning subsidiaries, those owning the Ariana A and the Gabriela A, and guaranteed by the Company (the “$22.5 Million Term Loan Facility”). The $22.5
Million Term Loan Facility has a tenor of five years and bears interest at SOFR plus a margin of 3.875% per annum. The net proceeds from the $22.5 Million Term Loan Facility were used, along with cash on hand, to fund the acquisition of our
containership vessels, the Ariana A and the Gabriela A, as well as for general corporate purposes.
For more information about our financing agreements which we have entered into in connection with the expansion of our fleet and for other general corporate purposes, please see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Our Borrowing Activities” and Note 7 to the consolidated financial statements included elsewhere in this annual report.
Nasdaq Listing Standards Compliance
On April 14, 2020, we received written notification from the Nasdaq indicating that because the closing bid price of our common shares for 30 consecutive business days, from February 27, 2020, to
April 13, 2020, was below the minimum $1.00 per share bid price requirement for continued listing on the Nasdaq, we were not in compliance with Nasdaq Listing Rule 5550(a)(2). Due to the COVID-19 crisis, we were granted temporary relief and our
compliance period was suspended until June 30, 2020. Following certain extension periods obtained, we had until June 28, 2021 to regain compliance with Nasdaq’s minimum bid price requirement. On May 28, 2021, we effected a one-for-ten reverse stock
split of our common shares, and, as a result, on June 14, 2021, we regained compliance. We remained in compliance with Nasdaq’s minimum bid price requirement over the course of 2022.
We operate dry bulk vessels that engage in the worldwide transportation of commodities such as iron ore, coal, soybeans, etc., containerships that are engaged in the transportation of containerized
cargoes and, until the completion of the Spin-Off, Aframax/LR2 tanker vessels that are engaged in the worldwide transportation of crude oil and Handysize tanker vessels that carry oil and petroleum products. During the year ended December 31, 2022,
our management reviewed and analyzed operating results for our business over four reportable segments, (i) Dry bulk vessels, (ii) Aframax/LR2 tanker vessels, (iii) Handysize tanker vessels, and (iv) Containerships. During the year ended December
31, 2022, our dry bulk vessels and containerships operated exclusively under time charter contracts, our Aframax/ LR2 tanker vessels operated under time charter contracts, voyage charter contracts and pools and our Handysize tanker vessels operated
in a pool. We do not disclose geographic information relating to our segments. When the Company charters a vessel to a charterer, the charterer is free, subject to certain exemptions, to trade the vessel worldwide and, as a result, the disclosure
of geographic information is impracticable. As a result of the completion of the Spin-Off, as of and from March 7, 2023, our business is comprised of two reportable segments, Dry bulk and Containerships.
For further information, see Note 2 to our consolidated financial statements included elsewhere in this annual report.
Our Fleet
The following tables summarize key information about our fleet in each segment as of March 7, 2023:
Dry Bulk Segment
|
Vessel Name
|
Capacity
(dwt)
|
Year
Built
|
Country of
Construction
|
Type of
Employment
|
Gross Charter Rate
($/day
|
Estimated Redelivery
Date
|
|
Earliest
|
Latest
|
|
M/V Magic Orion
|
180,200
|
2006
|
Japan
|
TC (1) period
|
101% of BCI5TC (2)
|
Jan-24
|
Apr-24
|
|
M/V Magic Venus
|
83,416
|
2010
|
Japan
|
TC period
|
$25,000 (3)
|
Apr-24
|
Jul-24
|
|
M/V Magic Thunder
|
83,375
|
2011
|
Japan
|
TC period
|
$14,000 (4)
|
Sep-23
|
Dec-23
|
|
M/V Magic Argo
|
82,338
|
2009
|
Japan
|
TC period
|
103% of BPI5TC
|
Apr-24
|
Jul-24
|
|
M/V Magic Perseus
|
82,158
|
2013
|
Japan
|
TC period
|
100% of BPI5TC
|
Sep-23
|
Dec-23
|
|
M/V Magic Starlight
|
81,048
|
2015
|
China
|
TC period
|
98% of BPI5TC
|
Nov-23
|
Feb-24
|
|
M/V Magic Twilight
|
80,283
|
2010
|
Korea
|
TC trip
|
$4,300 +
$100,000 ballast
bonus
|
Mar-23
|
Mar-23
|
|
M/V Magic Nebula
|
80,281
|
2010
|
Korea
|
TC period
|
93% of BPI5TC
|
May-23
|
Aug -23
|
|
M/V Magic Nova
|
78,833
|
2010
|
Japan
|
TC period
|
101% of BPI4TC (5)
|
Sep-23
|
Dec-23
|
|
M/V Magic Mars
|
76,822
|
2014
|
Korea
|
TC period
|
102% of BPI74
|
Oct-23
|
Jan-24
|
|
M/V Magic Phoenix
|
76,636
|
2008
|
Japan
|
TC period
|
102% BPI4TC
|
Aug-23
|
Nov-23
|
|
M/V Magic Horizon
|
76,619
|
2010
|
Japan
|
TC period
|
$14,000 (6)
|
Jun-23
|
Sep-23
|
|
M/V Magic Moon
|
76,602
|
2005
|
Japan
|
TC period
|
95% of BPI4TC
|
Apr-23
|
Jul-23
|
|
M/V Magic P
|
76,453
|
2004
|
Japan
|
TC period
|
$13,100 (7)
|
Oct-23
|
Jan-24
|
|
M/V Magic Sun
|
75,311
|
2001
|
Korea
|
TC trip
|
$9,000
|
Apr-23
|
Apr-23
|
|
M/V Magic Vela
|
75,003
|
2011
|
China
|
TC period
|
87.5% of BPI5TC (8)
|
Apr-23
|
Jul-23
|
|
M/V Magic Eclipse
|
74,940
|
2011
|
Japan
|
TC period
|
$22,000 (9)
|
Apr-24
|
Jun-24
|
|
M/V Magic Pluto
|
74,940
|
2013
|
Japan
|
TC period
|
100% of BPI4TC
|
Dec-23
|
Mar-24
|
|
M/V Magic Callisto
|
74,930
|
2012
|
Japan
|
TC period
|
$14,000 (10)
|
Jul-23
|
Oct-23
|
|
M/V Magic Rainbow
|
73,593
|
2007
|
China
|
Unfixed
|
N/A
|
N/A
|
N/A
|
| (1) |
TC stands for time charter.
|
| (2) |
The benchmark vessel used in the calculation of the average of the Baltic Capesize Index (“BCI”) 5TC routes (“BCI5TC”) is a non-scrubber fitted 180,000mt dwt vessel (Capesize) with specific age, speed – consumption, and design
characteristics.
|
| (3) |
The vessel’s daily gross charter rate is equal to 100% of the Baltic Panamax Index 5TC routes (“BPI5TC”). In accordance with the prevailing charter party, on April 28, 2022 the owners converted the index-linked rate to fixed from May 1,
2022 until March 31, 2023, at a rate of $25,000 per day. Upon completion of this period, the rate will be converted back to index‑linked. The benchmark vessel used in the calculation of the average of the BPI5TC routes is a non-scrubber
fitted 82,000mt dwt vessel (Kamsarmax) with specific age, speed – consumption, and design characteristics.
|
| (4) |
The vessel’s daily gross charter rate is equal to 97% of BPI5TC. In accordance with the prevailing charter party, on January 1, 2023 the owners converted the index-linked rate to fixed from February 1, 2023 until June 30, 2023, at a rate
of $14,000 per day. Upon completion of this period, the rate will be converted back to index‑linked.
|
| (5) |
The benchmark vessel used in the calculation of the average of the BPI4TC routes is a non-scrubber fitted 74,000mt dwt vessel (Panamax) with specific age, speed – consumption, and design characteristics.
|
|
(6)
|
The vessel’s daily gross charter rate is equal to 103% of BPI4TC. In accordance with the prevailing charter party, on October 18, 2022 the
owners converted the index-linked rate to fixed from November 1, 2022 until March 31, 2023, at a rate of $14,000 per day and, further, on February 27, 2023, converted the index-linked rate to fixed from April 1, 2023 to June 30, 2023
at a rate of $15,300 per day. Upon completion of this period, the rate will be converted back to index‑linked.
|
|
(7)
|
The vessel’s daily gross charter rate is equal to 96% of BPI4TC. In accordance with the prevailing charter party, on January 16, 2023 the owners converted the
index-linked rate to fixed from February 1, 2023 until September 30, 2023, at a rate of $13,100 per day. Upon completion of this period, the rate will be converted back to index‑linked.
|
|
(8)
|
After redelivery from the current charter, estimated to take place between April and July
2023 in accordance with the prevailing charterparty terms, the vessel has been fixed for a period of minimum 12 to maximum 15 months, at a daily gross charter rate equal to 95% of BPI4TC.
|
|
(9)
|
The vessel’s daily gross charter rate is equal to 99% of BPI4TC. In accordance with the prevailing charter party, on June 15, 2022 the owners converted the index-linked
rate to fixed from July 1, 2022 until March 31, 2023, at a rate of $22,000 per day. Upon completion of this period, the rate will be converted back to index‑linked.
|
|
(10)
|
The vessel’s daily gross charter rate is equal to 101% of BPI4TC. In accordance with the prevailing charter party, on October 18, 2022 the owners converted the index-linked rate to fixed from November 1, 2022 until March 31, 2023, at a rate of $14,000 per day and, further, on February 27, 2023, converted the index-linked rate to fixed from April 1,
2023 to June 30, 2023 at a rate of $15,000 per day. Upon completion of this period, the rate will be converted back to index‑linked.
|
Containerships Segment
|
Vessel Name
|
|
Capacity
(dwt)
|
|
|
Year
Built
|
|
Country of
Construction
|
|
Type of employment
|
Gross
Charter
Rate ($/day)
|
|
Estimated
Earliest
Charter
Expiration
|
Estimated
Latest
Charter
Expiration
|
|
Containership Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M/V Ariana A
|
|
|
38,117
|
|
|
|
2005
|
|
Germany
|
|
TC period
|
|
$
|
23,250
|
|
Apr-23
|
Jul-23
|
|
M/V Gabriela A
|
|
|
38,121
|
|
|
|
2005
|
|
Germany
|
|
TC period
|
|
$
|
26,350
|
|
Feb-24
|
May-24
|
Aframax/LR2 Tanker Segment*
|
Vessel Name
|
|
Capacity
(dwt)
|
|
|
Year
Built
|
|
Country of
Construction
|
|
Type of employment
|
|
Gross Charter
Rate ($/day)
|
|
|
Estimated
Earliest Charter
Expiration
|
|
|
Estimated Latest
Charter
Expiration
|
|
|
Aframax/LR2 Segment(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M/T Wonder Polaris
|
|
|
115,351
|
|
|
|
2005
|
|
S. Korea
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
M/T Wonder Sirius
|
|
|
115,341
|
|
|
|
2005
|
|
S. Korea
|
|
|
|
$
|
40,000
|
|
|
November 2023
|
|
|
June 2024
|
|
|
M/T Wonder Bellatrix
|
|
|
115,341
|
|
|
|
2006
|
|
S. Korea
|
|
Tanker Pool(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
M/T Wonder Musica
|
|
|
106,290
|
|
|
|
2004
|
|
S. Korea
|
|
Tanker Pool(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
M/T Wonder Avior
|
|
|
106,162
|
|
|
|
2004
|
|
S. Korea
|
|
Tanker Pool(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
M/T Wonder Vega
|
|
|
106,062
|
|
|
|
2005
|
|
S. Korea
|
|
Tanker Pool(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
(1)
|
On May 9, 2022, we entered into an agreement with an unaffiliated third party for the sale of the M/T Wonder Arcturus for a gross sale price of $13.15 million. The
vessel was delivered to its new owners on July 15, 2022.
|
|
(2)
|
The vessel is currently participating in the V8 Plus Pool, a pool operating Aframax tankers aged fifteen (15) years or more that is managed by V8 Plus Management Pte Ltd., a company in which Petros
Panagiotidis has a minority equity interest.
|
|
(3)
|
In February 2023, the agreement relating to the M/T Wonder Sirius’s participation in the V8
Plus Pool was terminated and the vessel commenced a period time charter.”
|
* On March 7, 2023, our Aframax/LR2 tanker segment was contributed to Toro Corp. in connection with the Spin-Off.
Handysize Tanker Segment*
|
Vessel Name
|
Capacity
(dwt)
|
Year
Built
|
Country of
Construction
|
Type of employment
|
Gross
Charter
Rate ($/day)
|
Estimated
Earliest
Charter
Expiration
|
Estimated
Latest
Charter
Expiration
|
|
Handysize Segment
|
|
|
|
|
|
|
|
|
M/T Wonder Mimosa
|
36,718
|
2006
|
S. Korea
|
Tanker Pool(1)
|
N/A
|
N/A
|
N/A
|
|
M/T Wonder Formosa
|
36,660
|
2006
|
S. Korea
|
Tanker Pool(1)
|
N/A
|
N/A
|
N/A
|
| (1) |
The vessel is currently participating in an unaffiliated tanker pool specializing in the employment of Handysize tanker vessels
|
* On March 7, 2023, our Handysize tanker segment was contributed to Toro Corp. in connection with the Spin-Off.
Fleet Development
During the years ended December 31, 2020, 2021 and 2022, we implemented our strategic fleet growth plan by acquiring the vessels listed below:
|
Dry Bulk Carriers
|
|
Vessel Name
|
Vessel Type
|
|
DWT
|
|
|
Year
Built
|
|
Country of
Construction
|
|
Purchase Price
(in million)
|
|
Delivery Date
|
|
2020 Acquisitions
|
|
Magic Rainbow
|
Panamax
|
|
|
73,593
|
|
|
|
2007
|
|
China
|
|
$
|
7.85
|
|
08/08/2020
|
|
Magic Horizon
|
Panamax
|
|
|
76,619
|
|
|
|
2010
|
|
Japan
|
|
$
|
12.75
|
|
10/09/2020
|
|
Magic Nova
|
Panamax
|
|
|
78,833
|
|
|
|
2010
|
|
Japan
|
|
$
|
13.86
|
|
10/15/2020
|
|
2021 Acquisitions
|
|
Magic Orion
|
Capesize
|
|
|
180,200
|
|
|
|
2006
|
|
Japan
|
|
$
|
17.50
|
|
03/17/2021
|
|
Magic Venus
|
Kamsarmax
|
|
|
83,416
|
|
|
|
2010
|
|
Japan
|
|
$
|
15.85
|
|
03/02/2021
|
|
Magic Argo
|
Kamsarmax
|
|
|
82,338
|
|
|
|
2009
|
|
Japan
|
|
$
|
14.50
|
|
03/18/2021
|
|
Magic Twilight
|
Kamsarmax
|
|
|
80,283
|
|
|
|
2010
|
|
S. Korea
|
|
$
|
14.80
|
|
04/09/2021
|
|
Magic Nebula
|
Kamsarmax
|
|
|
80,281
|
|
|
|
2010
|
|
S. Korea
|
|
$
|
15.45
|
|
05/20/2021
|
|
Magic Thunder
|
Kamsarmax
|
|
|
83,375
|
|
|
|
2011
|
|
Japan
|
|
$
|
16.85
|
|
04/13/2021
|
|
Magic Eclipse
|
Panamax
|
|
|
74,940
|
|
|
|
2011
|
|
Japan
|
|
$
|
18.48
|
|
06/07/2021
|
|
Magic Starlight
|
Kamsarmax
|
|
|
81,048
|
|
|
|
2015
|
|
China
|
|
$
|
23.50
|
|
05/23/2021
|
|
Magic Vela
|
Panamax
|
|
|
75,003
|
|
|
|
2011
|
|
China
|
|
$
|
14.50
|
|
05/12/2021
|
|
Magic Perseus
|
Kamsarmax
|
|
|
82,158
|
|
|
|
2013
|
|
Japan
|
|
$
|
21.00
|
|
08/09/2021
|
|
Magic Pluto
|
Panamax
|
|
|
74,940
|
|
|
|
2013
|
|
Japan
|
|
$
|
19.06
|
|
08/06/2021
|
|
Magic Mars
|
Panamax
|
|
|
76,822
|
|
|
|
2014
|
|
S. Korea
|
|
$
|
20.40
|
|
09/20/2021
|
|
Magic Phoenix
|
Panamax
|
|
|
76,636
|
|
|
|
2008
|
|
Japan
|
|
$
|
18.75
|
|
10/26/2021
|
|
2022 Acquisitions
|
|
Magic Callisto
|
Panamax
|
|
|
74,930
|
|
|
|
2012
|
|
Japan
|
|
$
|
23.55
|
|
01/04/2022
|
|
Containerships
|
|
2022 Acquisitions
|
|
Ariana A
|
2,700 TEU capacity Containership
|
|
|
38,117
|
|
|
|
2005
|
|
Germany
|
|
$
|
25.00
|
|
11/23/22
|
|
Gabriela A
|
2,700 TEU capacity Containership
|
|
|
38,121
|
|
|
|
2005
|
|
Germany
|
|
$
|
25.75
|
|
11/30/22
|
|
Aframax/LR2 Tankers*
|
|
2021 Acquisitions
|
|
Wonder Polaris
|
Aframax LR2
|
|
|
115,351
|
|
|
|
2005
|
|
S. Korea
|
|
$
|
13.60
|
|
03/11/21
|
|
Wonder Sirius
|
Aframax LR2
|
|
|
115,341
|
|
|
|
2005
|
|
S. Korea
|
|
$
|
13.60
|
|
03/22/21
|
|
Wonder Vega
|
Aframax
|
|
|
106,062
|
|
|
|
2005
|
|
S. Korea
|
|
$
|
14.80
|
|
05/21/21
|
|
Wonder Avior
|
Aframax LR2
|
|
|
106,162
|
|
|
|
2004
|
|
S. Korea
|
|
$
|
12.00
|
|
05/27/21
|
|
Wonder Arcturus(1)
|
Aframax LR2
|
|
|
106,149
|
|
|
|
2002
|
|
S. Korea
|
|
$
|
10.00
|
|
05/31/21
|
|
Wonder Musica
|
Aframax LR2
|
|
|
106,290
|
|
|
|
2004
|
|
S. Korea
|
|
$
|
12.00
|
|
06/15/21
|
|
Wonder Bellatrix
|
Aframax LR2
|
|
|
115,341
|
|
|
|
2006
|
|
S. Korea
|
|
$
|
18.15
|
|
12/23/21
|
|
(1) |
The Wonder Arcturus was sold on May 9, 2022, and delivered to an unaffiliated third-party on July 15, 2022.
|
|
Handysize Tankers*
|
|
2021 Acquisitions
|
|
Wonder Mimosa
|
Handysize
|
|
|
36,718
|
|
|
|
2006
|
|
S. Korea
|
|
$
|
7.25
|
|
05/31/21
|
|
Wonder Formosa
|
Handysize
|
|
|
36,660
|
|
|
|
2006
|
|
S. Korea
|
|
$
|
8.00
|
|
06/22/21
|
* On March 7, 2023, our Aframax/LR2 and Handysize tanker segments were contributed to Toro Corp. in connection with the Spin-Off.
All the above-mentioned acquisitions were financed using a mix of cash from operations and the net cash proceeds from our equity and financing transactions, as further discussed under “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.”
Chartering of our Fleet
We actively market our vessels, in the short, medium and long-term charter markets in order to secure optimal employment in the shipping markets in which our vessels actively participate and our
commercial strategy focuses on deploying our fleet in both the spot and period markets according to our assessment of market conditions. We utilize and expect to continue to utilize various types of employment for our vessels and adjust the mix of
charter types to take advantage of the relatively stable cash flows and high utilization rates associated with fixed rate period time charters or to profit from attractive spot trip or index-linked charter rates during periods of strong charter
market conditions.
As of December 31, 2022, two of our dry bulk vessels were chartered in the spot trip time charter market, ten of our dry bulk vessels were fixed on period charter contracts in which the rate of
daily hire is linked to the average of the time charter routes comprising the respective indices for dry bulk vessels of the Baltic Exchange, and our two Handysize tankers and our six Aframax/LR2 tankers were participating in pools, totaling 20
vessels employed in the spot market. Our remaining ten vessels as of December 31, 2022, were employed under fixed rate period contracts, namely eight dry bulk vessels employed under index-linked period charters converted to a fixed rate and two
containerships under fixed rate period charter contracts.
Charter rates in the spot market are volatile and sometimes fluctuate on a seasonal and year-to-year basis. Fluctuations derive from imbalances in the availability of cargoes for shipment and the
number of vessels available at any given time to transport these cargoes. Vessels operating in the spot market generate revenue that is less predictable than those under period time charters but may enable us to capture increased profit margins
during periods of improvements in the dry bulk, tanker and containership markets. Downturns in the shipping markets in which our vessels participate, would result in a reduction in profit margins and could lead to losses.
Voyage charters involve a charterer engaging a vessel for a particular journey. A voyage contract is made for the use of a vessel, for which we are paid freight (a fixed amount per ton of cargo
carried) on the basis of transporting cargo from a loading port to a discharge port. Depending on charterparty terms, freight can be fully prepaid, or be paid upon reaching the discharging destination upon delivery of the cargo, at the discharging
destination but before discharging, or during a ship’s voyage. Revenues from voyage charters are typically tied to prevailing market rates and may therefore be more volatile than rates from other charters, such as time charters.
Time charters involve a charterer engaging a vessel for a set period of time. Time charter agreements may have extension options ranging from months, to sometimes, years and are therefore viewed as
providing more predictable cash flows over the period of the engagement than may otherwise be attainable from other charter arrangements. The time charter party generally provides, among others, typical warranties regarding the speed and the
performance of the vessel as well as owner protective restrictions such that the vessel is sent only to safe ports by the charterer, subject always to compliance with applicable sanction laws and war risks, and carry only lawful and non-hazardous
cargo. We typically enter into time charters ranging from one month to twelve months and in isolated cases on longer terms depending on market conditions. The charterer has the full discretion over the ports visited, shipping routes and vessel
speed, subject to the owner’s protective restrictions. Under our time charter contracts, whereby our vessels are utilized by a charterer for a set duration of time, the charterer pays a fixed or floating daily hire rate and other compensation costs
related to the contracts. The majority of our dry-bulk vessels are currently fixed on period charter contracts, with the rate of daily hire linked to the average of the time charter routes comprising the respective indices for dry bulk vessels of
the Baltic Exchange. Such contracts also carry an option of the owners to convert the index-linked rate to a fixed rate for a minimum period of three months and up to the maximum duration of the charter contract, according to the average of the
Freight Forward Agreement (FFA) forward curve of the respective Baltic index for the desired period, at the time of conversion. The index-linked contracts with conversions clause of our dry bulk fleet provide flexibility and allow us to either
enjoy exposure in the spot market, when the rate is floating, or to secure foreseeable cashflow when the rate has been converted to fixed over a certain period. We also fix, from time to time, a number of our dry bulk vessels on spot time charter
trips. Our two containership vessels are currently employed under period time charter contracts.
A pool consists of a group of vessels of similar types and sizes provided by various owners for the purpose of enabling a centralized pool operator to engage those vessels commercially. Pools
employ experienced commercial charterers and operators who have close working relationships with customers and brokers, while technical management is separate from pool operations. Their main objective is to enter into arrangements for the
employment and operation of the pool vessels, so as to secure for the pool participants the highest commercially available earnings per vessel on the basis of pooling the net revenues of the pool vessels and dividing it between the pool
participants based on the terms of the pool agreement. Pool vessels are marketed as a single group of vessels, primarily in the spot market but also from time to time for time charters, and all revenues earned from the operation of the pool vessels
are aggregated together and, after deduction of all costs involved in the operation of the pool, shared between the pool participants based on an agreed key. The size and scope of pools enable them to achieve larger economies of scale and to have
better negotiating power with all procurement vendors (e.g., bunker suppliers, port agents, towing companies, etc.) and as a result they are able to reduce their costs for such items. They also achieve geographic diversification by deploying their
pool vessels in both Atlantic and Pacific markets while arbitraging from spread opportunities. The diversification in revenue streams due to typically broader shipping capabilities of pool fleet vessels and/or more accessible customer base,
alongside payments to pool participants on a set schedule, can stabilize revenues for pool participants, though this may be offset by volatility in spot rates. Furthermore, due to their large fleets, pools can make vessels available for prompt
cargoes (which are usually priced at higher than market rates) on short notice and thus they are able to capture the premium of such prompt cargoes. Pools also have higher market visibility which provides them with opportunities not available to
smaller tanker market participants. By being able to reduce costs and optimize revenues, pools aim to outperform the industry benchmark indices by utilizing their size and sophistication and improving utilization rates for participating vessels
through various methods, including securing backhaul voyages and contracts of affreightment.
For further information on our charters and charter terms, please refer to “Management’s Discussion and Analysis of Financial Condition and Operating Results¾Hire Rates and the Cyclical Nature of the Industry.”
Management of our Business
Our vessels are commercially and technically managed by Castor Ships, a company controlled by our Chairman, Chief Executive Officer, and Chief Financial
Officer. Castor Ships manages our business overall and provides us with crew management, technical management, operational employment management, insurance management, provisioning, bunkering, commercial,
chartering and administrative services, including, but not limited to, securing employment for our fleet, arranging and supervising the vessels’ commercial operations, handling all of our vessel sale and purchase transactions, undertaking related
shipping project, management advisory and support services, accounting and audit support services, as well as other associated services requested from time to time by us and our ship-owning subsidiaries. Castor Ships may choose to subcontract
these services to other parties at its discretion.
In exchange for the above management services, we and our subsidiaries pay Castor Ships (i) a flat quarterly management fee in the amount of $0.75 million for the
management and administration of our business, (ii) a daily fee of $925 per containership and dry bulk vessel and $975 per tanker vessel for the provision of ship management services under separate ship
management agreements entered into by our shipowning subsidiaries, (iii) a commission of 1.25% on all gross income received from the operation of our vessels and (iv) a commission of 1% on each consummated sale and purchase transaction.
As of March 7, 2023, Castor Ships co-managed our dry bulk vessels with Pavimar and had subcontracted the technical management of our two containerships
to a third-party ship-management company. Castor Ships pays, at its own expense, such third-party technical management company a fee for the services it has subcontracted to it, without burdening the Company with any additional cost, while Pavimar
is paid directly from the dry bulk vessel owning subsidiaries its previously agreed proportionate daily management fee of $600 per vessel for its co-management services, with the residual amount of $325 of the agreed daily ship management fee paid
to Castor Ships.
For further information, see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions.”
Environmental and Other Regulations in the Shipping Industry
Government regulations 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. Compliance with such international conventions, laws, regulations, insurance and other requirements entails significant expense, including
for vessel modifications and the 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 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 our vessels that emphasize
operational safety, quality maintenance, continuous training of our officers and crews and compliance with United States, EU, 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 serious marine incident that
causes significant adverse environmental impact could result in additional legislation or regulation that could have a material adverse effect on our business, financial condition, and operating results.
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. 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 dry bulk, tankers, containers, LPGs 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 or 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. Annex VI, which relates to air
emissions, 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 of volatile compounds from cargo tanks, and 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. Emissions of “volatile organic compounds” from shipboard incineration
(from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls, or PCBs) are also prohibited. We believe that our vessels are currently compliant in all material respects with these requirements.
The Marine Environment Protection Committee (“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 3.50%) 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 Certificates from their flag states that specify sulfur content. Additionally, at MEPC 73, amendments to Annex VI to
prohibit the carriage of bunkers above 0.5% sulfur on ships not equipped with exhaust gas cleaning systems were adopted and took effect on March 1, 2020. These regulations subject ocean-going vessels to stringent emissions controls and may cause us
to incur substantial costs. As of the date of this annual report, our vessels are not equipped with scrubbers and have transitioned to burning IMO compliant fuels.
Sulfur content standards are even stricter within certain “Emission Control Areas” (“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 are subject to more 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. 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 other jurisdictions
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. The EPA promulgated equivalent (and in some respects stricter) emissions standards in
2010. As all of our vessels were built prior to 2016, we are not affected by Tier III requirements from an operational perspective. While we are currently in compliance with applicable regulations regarding emissions NOx, we may acquire additional
vessels that are not in compliance with such regulations or become subject to additional trading restrictions applicable to our vessels which are currently in compliance with Tier I or II NOx standards, either of which may cause us to us incur
additional capital expenses and/or other compliance costs.
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. The EPA promulgated equivalent (and in some respects
stricter) emissions standards in 2010. 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 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. This may require us to incur additional operating or other costs for those vessels built after January 1, 2013. Further, MEPC 75 proposed draft amendments requiring that, on or before January 1,
2023, all ships above 400 gross tonnage must have an approved SEEMP on board. For ships above 5,000 gross tonnage, the SEEMP would need to include certain mandatory content.
In addition to the recently implemented emission control regulations, the IMO has been devising strategies to reduce greenhouse gases and carbon emissions from ships. According to its latest
announcement, IMO plans to initiate measures to reduce CO2 emissions by at least 40% by 2030 and 70% by 2050 from the levels in 2008. It also plans to introduce measures to reduce GHG emissions by 50% by 2050 from the 2008 levels. These are likely
to be achieved by setting energy efficiency requirements and encouraging ship owners to use alternative fuels such as biofuels, and electro-/synthetic fuels such as hydrogen or ammonia and may also include limiting the speed of the ships. However,
there is still uncertainty regarding the exact measures that the IMO will undertake to achieve these targets. IMO-related uncertainty is also a factor discouraging ship owners from ordering newbuild vessels, as these vessels may have high future
environmental compliance costs.
In June 2021, IMO’s Marine Environment Protection Committee (“MEPC”) adopted amendments to MARPOL Annex VI that will require ships to reduce their greenhouse gas emissions. These amendments combine
technical and operational approaches to improve the energy efficiency of ships, also providing important building blocks for future GHG reduction measures. The new measures require the IMO to review the effectiveness of the implementation of the
Carbon Intensity Indicator (“CII”) and Energy Efficiency Existing Ship Index (“EEXI”) requirements, by January 1, 2026 at the latest. EEXI is a technical measure and will apply to ships above 400 GT. It indicates the energy efficiency of the ship
compared to a baseline and is based on a required reduction factor (expressed as a percentage relative to the EEDI baseline). On the other hand, CII is an operational measure which specifies carbon intensity reduction requirements for vessels with
5,000 GT and above. The CII determines the annual reduction factor needed to ensure continuous improvement of the ship’s operational carbon intensity within a specific rating level. The operational carbon intensity rating would be given on a scale
of A, B, C, D or E indicating a major superior, minor superior, moderate, minor inferior, or inferior performance level, respectively. The performance level would be recorded in the ship’s SEEMP. A ship rated D or E for three consecutive years
would have to submit a corrective action plan to show how the required index (C or above) would be achieved. Further, the European Union has endorsed a binding target of at least 55% domestic reduction in economy wide GHG reduction by 2030 compared
to 1990. The amendments to MARPOL Annex VI (adopted in a consolidated revised Annex VI) are expected to enter into force on November 1, 2022, with the requirements for EEXI and CII certification coming into effect from January 1, 2023. This means
that the first annual reporting on carbon intensity will be completed in 2023, with the first rating given in 2024. We are also required to comply with requirements relating to new European Union Emissions Trading Scheme (“EU ETS”) regulations for
carbon emissions for voyages of vessels above 5000 GT departing from or arriving to ports in the European Union phased in from the beginning of 2024 with an implementation scheme of 40% of emissions and ending in 2026 with 100% of the emissions
produced by these voyages.
We may incur costs to comply with these revised standards including introduction of new emissions software platform applications which will enable continuous monitoring of CIIs as well as automatic
generation of CII reports, amendment of SEEMP part II plans and adoption and implementation of ISO 500001 procedures. 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, cash flows, financial condition, and operating results.
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, as well as a cybersecurity risk 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, decrease available insurance coverage for the
affected vessels and/or 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 our vessels for which the certificates are required by the IMO. The document of compliance and safety management certificate are renewed as required.
Regulation II-1/3-10 of the SOLAS Convention on goal-based ship construction standards for dry bulk carriers stipulates that ships over 150 meters in length must have adequate strength, integrity
and stability to minimize risk of loss or pollution.
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 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 authorize the classification societies, to undertake surveys to confirm compliance on their behalf.
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 recommended provisions. The Polar Code applies to new ships constructed after January 1, 2017, and from 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. Companies are required from January 2021 to develop additional procedures for monitoring cybersecurity in addition to those required by the IMO, which could require additional expenses
and/or capital expenditures.
Fuel Regulations in Arctic Waters
MEPC 76 adopted amendments to MARPOL Annex I (addition of a new regulation 43A) to introduce a prohibition on 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 prohibition will cover the use and carriage for use as fuel of oils having a density at 15°C higher than 900 kg/m3 or a kinematic viscosity at 50°C higher than 180 mm2/s. Ships engaged in securing the safety of ships,
or in search and rescue operations, and ships dedicated to oil spill preparedness and response would be exempted. Ships which meet certain construction standards with regard to oil fuel tank protection would need to comply on and after July 1,
2029.
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 amendments, all ships must meet the D-2 standard by September 8, 2024. Significant costs may be
incurred to comply with these regulations. Additionally, in November 2020, MEPC 75 adopted amendments to the BWM Convention which would 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. As of December 31, 2022, we had made $5.7
million in capital expenditures relating to the installation of BWTS on our vessels. For further information on these installations, see “A. History and Development of the Company.”
Mandatory mid-ocean exchange ballast water treatment requirements under the BWM Convention may increase 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. Ballast water compliance requirements could adversely affect our
business, results of operations, cash flows and financial condition.
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 ships’ 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, the Oil Pollution Act of 1990 along with various legislative schemes and common law standards of conduct 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 (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 are also required to undergo
an initial survey before the vessel is put into service or before an International Anti‑fouling System Certificate is issued for the first time; and subsequent surveys when the anti‑fouling systems are altered or replaced.
In June 2021, MEPC 76 adopted amendments to the Anti-fouling Convention to prohibit the use of biocide cybutryne contained in anti-fouling systems, 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, as studies have proven that the
substance is harmful to a variety of marine organisms.
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 prohibited from trading in U.S.
and European Union ports, respectively. As of the date of this report, our vessels were ISM Code certified through Pavimar, the technical operator of our vessels. The technical managers have obtained the documents of compliance in order to operate
the vessels in accordance with the ISM Code and all other international and regional requirements that are applicable to our vessels. 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.
United States 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;
(ii) injury to, or economic losses resulting from, the destruction of real and personal property;
(iii) loss of subsistence use of natural resources that are injured, destroyed or lost;
(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;
(v) lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
(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.
OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective December 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 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 be in compliance 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. 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 Trump administration 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, the Biden administration issued an executive order temporarily blocking new leases for oil and gas drilling in federal waters. While a U.S. federal court has since granted an
injunction against this executive order, the sale of a large number of previously auctioned oil and gas leases in the Gulf of Mexico has recently been blocked by another U.S. federal court. The U.S. Department of Justice is currently appealing the
injunction against the executive order. 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 or demand for our vessels 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, including bunker fuel 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. Some of these laws are more stringent than U.S. federal law in some respects. 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
owners’ responsibilities under these laws. The Company intends to be in compliance with all applicable state regulations in the relevant ports where the Company’s vessels call.
We currently maintain pollution liability coverage insurance in the amount of $1.0 billion per incident for 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 operating results.
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 greenhouse gasses, volatile organic compounds
and other air contaminants. The CAA requires states to adopt State Implementation Plans, 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.
The EPA and the USCG have also enacted rules relating to ballast water discharge, compliance with which requires the installation of equipment on our vessels to treat ballast water before it is
discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial costs, and/or otherwise restrict our vessels from entering U.S. waters. The EPA will regulate these ballast water discharges and
other discharges incidental to the normal operation of certain vessels within United States waters pursuant to the Vessel Incidental Discharge Act (“VIDA”), which was signed into law on December 4, 2018 and replaces the 2013 Vessel General Permit
(“VGP”) program (which authorizes discharges incidental to operations of commercial vessels and contains numeric ballast water discharge limits for most vessels to reduce the risk of invasive species in U.S. waters, stringent requirements for
exhaust gas scrubbers, and requirements for the use of environmentally acceptable lubricants) and current Coast Guard ballast water management regulations adopted under the U.S. National Invasive Species Act, such as mid-ocean ballast exchange
programs and installation of approved USCG technology for all vessels equipped with ballast water tanks bound for U.S. ports or entering U.S. waters. VIDA establishes a new framework for the regulation of vessel incidental discharges under the CWA,
requires the EPA to develop performance standards for those discharges within two years of enactment, and requires the U.S. Coast Guard to develop implementation, compliance, and enforcement regulations within two years of the EPA’s promulgation of
standards. Under VIDA, all provisions of the 2013 VGP and USCG regulations regarding ballast water treatment remain in force and effect until the EPA and U.S. Coast Guard regulations are finalized. Non-military, non-recreational vessels greater
than 79 feet in length must continue to comply with the requirements of the VGP, including submission of a Notice of Intent (“NOI”) or retention of a PARI form and submission of annual reports. We have submitted NOIs for our vessels where required.
Compliance with the EPA, U.S. Coast Guard and state regulations could require the installation of ballast water treatment equipment on our vessels which have not already installed this equipment or the implementation of other port facility disposal
procedures as a result of which we may incur additional capital expenditures or may otherwise have to restrict certain of our vessels from entering U.S. waters.
European Union Regulations
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with
intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. The
directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply to warships or where human safety or that of the ship is in danger. Criminal liability for pollution may result in substantial penalties or fines
and increased civil liability claims. Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015 (amending EU Directive 2009/16/EC) governs the monitoring, reporting and verification of carbon dioxide emissions from
maritime transport, and, subject to some exclusions, requires companies with ships over 5,000 gross tonnage to monitor and report carbon dioxide emissions annually, which may cause us to incur additional expenses.
The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships, as determined by type, age, and flag as well as the
number of times the ship has been detained. The European Union also adopted and extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses. The regulation also provided the European Union with
greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply. Furthermore, the EU has implemented
regulations requiring vessels to use reduced sulfur content fuel for their main and auxiliary engines. The EU Directive 2005/33/EC (amending Directive 1999/32/EC) introduced requirements parallel to those in MARPOL Annex VI relating to the sulfur
content of marine fuels. In addition, the EU imposed a 0.1% maximum sulfur requirement for fuel used by ships at berth in the Baltic, the North Sea and the English Channel (the so called “SOx-Emission Control Area”). As of January 2020, EU member
states must also ensure that ships in all EU waters, except the SOx-Emission Control Area, use fuels with a 0.5% maximum sulfur content.
On September 15, 2020, the European Parliament voted to include greenhouse gas emissions from the maritime sector in the European Union’s carbon market. This will require shipowners to buy permits
to cover these emissions. On July 14, 2021, the EU Commission proposed legislation to amend the EU ETS to include shipping emissions which will be phased in beginning in 2023.
International Labour Organization
The International Labour Organization is a specialized agency of the UN that has adopted the Maritime Labor Convention 2006 (“MLC 2006”). A Maritime Labor Certificate and a Declaration of Maritime
Labor Compliance is required to ensure compliance with the MLC 2006 for all ships that are 500 gross tonnage or over and are either engaged in international voyages or flying the flag of a Member and operating from a port, or between ports, in
another country. Our vessels are certified as per MLC 2006 and, we believe, in substantial compliance with the MLC 2006.
Greenhouse Gas Regulation
Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force
in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions with targets extended through 2020. International negotiations are continuing with respect to a successor to the
Kyoto Protocol, and restrictions on shipping emissions may be included in any new treaty. In December 2009, more than 27 nations, including the U.S. and China, signed the Copenhagen Accord, which includes a non-binding commitment to reduce
greenhouse gas emissions. The 2015 United Nations Climate Change Conference in Paris resulted in the Paris Agreement, which entered into force on November 4, 2016 and does not directly limit greenhouse gas emissions from ships. The U.S. initially
entered into the agreement, but on June 1, 2017, the Trump administration announced that the United States intended to withdraw from the Paris Agreement, and the withdrawal became effective on November 4, 2020. On January 20, 2021, U.S. President
Biden signed an executive order to rejoin the Paris Agreement, which took effect on February 19, 2021.
At MEPC 70 and MEPC 71, a draft outline of the structure of the initial strategy for developing a comprehensive IMO strategy on reduction of greenhouse gas emissions from ships was approved. In
accordance with this roadmap, 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. The initial strategy notes that
technological innovation, alternative fuels and/or energy sources for international shipping will be integral to achieving the overall ambition. The MEPC 76 adopted amendments to MARPOL Annex VI that will require ships to reduce their greenhouse
gas emissions. These amendments combine technical and operational approaches to improve the energy efficiency of ships, in line with the targets established in the 2018 Initial IMO Strategy for Reducing GHG Emissions from Ships and provide
important building blocks for future GHG reduction measures. The new measures will require all ships to calculate their EEXI following technical means to improve their energy efficiency and to establish their annual operational carbon intensity
indicator (CII) and CII rating. Carbon intensity links the GHG emissions to the transport work of ships. These regulations could cause us to incur additional substantial expenses.
The EU made a unilateral commitment to reduce overall greenhouse gas emissions from its member states by 20% of 1990 levels by 2020. The EU also committed to reduce its emissions by 20% under the
Kyoto Protocol’s second period from 2013 to 2020. Starting in January 2018, large ships over 5,000 gross tonnage calling at EU ports are required to collect and publish data on carbon dioxide emissions and other information. As previously
discussed, implementation of regulations relating to the inclusion of greenhouse gas emissions from the maritime sector in the European Union’s carbon market is also forthcoming.
In the United States, the EPA issued a finding that greenhouse gases endanger the public health and safety, adopted regulations to limit greenhouse gas emissions from certain mobile sources, and
proposed regulations to limit greenhouse gas emissions from large stationary sources. However, in March 2017, U.S. President Trump signed an executive order to review and possibly eliminate elements of the EPA’s plan to cut greenhouse gas
emissions. Subsequent rules rolled back standards to control methane and volatile organic compound emissions from new oil and gas facilities. However, the Biden administration recently directed the EPA to publish a rules suspending, revising, or
rescinding certain of these regulations. The EPA or individual U.S. states could enact additional environmental regulations that would affect our operations.
Any passage of climate control legislation or other regulatory initiatives by the IMO, the EU, the U.S. or other countries where we operate, or any treaty adopted at the international level to
succeed or further implement the Kyoto Protocol or Paris Agreement which further restricts emissions of greenhouse gases could require us to make significant financial expenditures which we cannot predict with certainty at this time. Even in the
absence of climate control legislation, our business may be indirectly affected to the extent that climate change results in sea level changes or increases in extreme weather events.
Vessel Security Regulations
Since the terrorist attacks of September 11, 2001 in the United States, there have been a variety of initiatives intended to enhance vessel security such as the U.S. Maritime Transportation
Security Act of 2002 (“MTSA”). To implement certain portions of the MTSA, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States
and at certain ports and facilities, some of which are regulated by the EPA.
Similarly, Chapter XI-2 of the SOLAS Convention imposes detailed security obligations on vessels and port authorities and mandates compliance with the International Ship and Port Facility Security
Code (“the ISPS Code”). The ISPS Code is designed to enhance the security of ports and ships against terrorism. To trade internationally, a vessel must attain an International Ship Security Certificate (“ISSC”) from a recognized security
organization approved by the vessel’s flag state. Ships operating without a valid certificate may be detained, expelled from, or refused entry at port until they obtain an ISSC. The various requirements, some of which are found in the SOLAS
Convention, include, for example, on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including
information on a ship’s identity, position, course, speed and navigational status; on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore; the development of vessel security
plans; ship identification number to be permanently marked on a vessel’s hull; a continuous synopsis record kept onboard showing a vessel’s history including the name of the ship, the state whose flag the ship is entitled to fly, the date on which
the ship was registered with that state, the ship’s identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and compliance with flag state security certification
requirements.
The USCG regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from MTSA vessel security measures, provided such vessels have on board a valid ISSC
that attests to the vessel’s compliance with the SOLAS Convention security requirements and the ISPS Code. Future security measures could have a significant financial impact on us. We intend to comply with the various security measures addressed by
MTSA, the SOLAS Convention and the ISPS Code.
The cost of vessel security measures has also been affected by the escalation in the frequency of acts of piracy against ships, notably off the coast of Somalia in the Gulf of Aden and off the
coast of Nigeria in the Gulf of Guinea. Substantial loss of revenue and other costs may be incurred as a result of detention of a vessel or additional security measures, and the risk of uninsured losses could have a material adverse effect on our
business, liquidity and operating results. Costs are incurred in taking additional security measures in accordance with Best Management Practices to Deter Piracy, notably those contained in the BMP5 industry standard.
Inspection by Classification Societies
The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and
seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and SOLAS. Most insurance underwriters make it a condition for insurance coverage and lending that a vessel be certified “in class” by a
classification society which is a member of the International Association of Classification Societies, the IACS. The IACS has adopted harmonized Common Structural Rules, or the Rules, which apply to dry bulk carriers and containerships contracted
for construction on or after July 1, 2015. The Rules attempt to create a level of consistency between IACS Societies. Our vessels are certified as being “in class” by the applicable IACS Classification Societies (e.g., American Bureau of Shipping,
Lloyd’s Register of Shipping, Nippon Kaiji Kyokai, etc.).
A vessel must undergo annual surveys, intermediate surveys, dry-dockings and special surveys. In lieu of a special survey, a vessel’s machinery may be on a continuous survey cycle, under which the
machinery would be surveyed periodically over a five-year period. Every vessel is also required to be dry-docked every 30 to 36 months for inspection of the underwater parts of the vessel. If any vessel does not maintain its class and/or fails any
annual survey, intermediate survey, dry-docking or special survey, the vessel will be unable to carry cargo between ports and will be unemployable and uninsurable which could cause us to be in violation of certain covenants in our loan agreements.
Any such inability to carry cargo or be employed, or any such violation of covenants, could have a material adverse impact on our financial condition and operating results.
Risk of Loss and Liability Insurance
General
The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision, property loss, cargo loss or damage and business interruption due to political circumstances
in foreign countries, piracy incidents, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental events, and the liabilities arising from owning and
operating vessels in international trade. We carry insurance coverage as customary in the shipping industry. However, not all risks can be insured, specific claims may be rejected, and we might not be always able to obtain adequate insurance
coverage at reasonable rates. Any of these occurrences could have a material adverse effect on the business.
Hull and Machinery Insurance
We procure hull and machinery insurance, protection and indemnity insurance, which includes environmental damage and pollution insurance and war risk insurance and freight, demurrage and defense
insurance for our fleet. We generally do not maintain insurance against loss of hire, which covers business interruptions that result in the loss of use of a vessel.
Protection and Indemnity Insurance
Protection and indemnity insurance is provided by mutual protection and indemnity associations, or “P&I Associations” or clubs, and covers our third-party liabilities in connection with our
shipping activities. This includes third-party liability and other related expenses of injury or death of crew, passengers and other third parties, loss or damage to cargo, claims arising from collisions with other vessels, damage to other
third-party property, pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal.
Our current protection and indemnity insurance coverage for pollution is $1 billion per vessel per incident. There are 13 P&I Associations that comprise the “International Group”, a group of
P&I Associations that insure approximately 90% of the world’s commercial tonnage and have entered into a pooling agreement to reinsure each association’s liabilities. The International Group’s website states that the pool provides a mechanism
for sharing all claims in excess of US$ 10 million up to, currently, approximately US$ 3.1 billion. As a member of a P&I Association, which is a member of the International Group, we are subject to calls payable to the associations based on our
claim records as well as the claim records of all other members of the individual associations and members of the shipping pool of P&I Associations comprising the International Group.
Competition
We operate in markets that are highly competitive. The process of obtaining new employment for our fleet generally involves intensive screening, and competitive bidding, and often extends for
several months. 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. Demand for dry bulk and containerships fluctuates in line with the main
patterns of trade of the major dry bulk and containerships cargoes and varies according to supply and demand for such products. Ownership of dry bulk and containership vessels 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 our cost of doing business.
Seasonality
Demand for our dry bulk vessels and containerships vessels has historically exhibited, and is expected to continue to exhibit, seasonal variations and, as a result, fluctuations in charter rates.
These variations may result in quarter-to-quarter volatility in our operating results for the vessels in our business segments when trading in the spot trip or period time charter when a new time charter is being entered into. Seasonality in the
sectors in which we operate could materially affect our operating results and cash flows.
| C. |
ORGANIZATIONAL STRUCTURE
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We were incorporated in the Republic of the Marshall Islands in September 2017, with our principal executive offices located at 223 Christodoulou Chatzipavlou Street, Hawaii Royal Gardens, 3036
Limassol, Cyprus. A list of our subsidiaries is filed as Exhibit 8.1 to this annual report on Form 20-F.
| D. |
PROPERTY, PLANTS AND EQUIPMENT
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We own no properties other than our vessels. For a description of our fleet, please see “Item 4. Information on the Company—B. Business Overview—Our Fleet.”
| ITEM 4A. |
UNRESOLVED STAFF COMMENTS
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None.
| ITEM 5. |
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
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The following discussion provides a review of the performance of our operations and compares our performance with that of the preceding year. All dollar amounts referred to in this discussion and
analysis are expressed in United States dollars except where indicated otherwise.
For a discussion of our results for the year ended December 31, 2021, compared to the year ended December 31, 2020, please see “—A. Operating Results – Year ended
December 31, 2021 as compared to year ended December 31, 2020” contained in our annual report on Form 20-F for the year ended December 31, 2021, filed with the SEC on March 31, 2022.
On March 7, 2023, we distributed on a pro rata basis all common shares of Toro received in connection with the Spin-Off to our holders of common stock of record
at the close of business on February 22, 2023. As a result, as of and from March 7, 2023, our business is comprised of two reportable segments, Dry bulk and Containerships. For more information, please see “Item 3. Key Information”, “Item 4. Information on the Company—A. History and Development of the Company”, “Item 7. Major Shareholders and Related Party Transactions¾B. Related Party Transactions” and Note 18 to our consolidated financial statements included elsewhere in this annual report.
The Company’s business could be materially and adversely affected by the risks, or the public perception of the risks related to the COVID-19 pandemic. The following discussion of the results of
our operations and our financial condition should be read in conjunction with the financial statements and the notes to those statements included in “Item 18. Financial Statements.” This discussion contains
forward-looking statements that involve risks, uncertainties, and assumptions. See “Cautionary Statement Regarding Forward-Looking Statements.” Actual results may differ materially from those anticipated in
these forward-looking statements as a result of many factors, including those set forth in “Item 3. Key Information—D. Risk Factors.”
During the fourth quarter of 2022, we established our containership operations through the acquisition of two containerships. As a result, as of December 31, 2022, we operated in four reportable
segments: (i) dry bulk, (ii) Aframax/LR2 tanker, (ii) Handysize tanker and (iv) containership segments. The reportable segments reflect the internal organization of the Company and the way the chief operating decision maker reviews the operating
results and allocates capital within the Company. In addition, the transport of dry cargo commodities, which are carried by dry bulk vessels, has different characteristics to the transport of crude oil (carried by Aframax/LR2 tankers) and differs
again from the transport of oil products (carried by Handysize tanker vessels) and containerized products (carried by containerships). Further, our dry bulk vessels and containerships trade on different types of charter contracts as compared to our
tanker vessels, which are employed predominantly in pools. The transportation of crude oil also has different characteristics to the transportation of oil products in terms of trading routes and cargo handling. In addition, the transportation of
containerized goods, the nature of trade, as well as the trading routes, charterers and cargo handling, is different from the other three segments.
Principal factors impacting our business, results of operations and financial condition
Our results of operations are affected by numerous factors. The principal factors that have impacted the business during the fiscal periods presented in the following discussion and analysis and
that are likely to continue to impact our business are the following:
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The levels of demand and supply of seaborne cargoes and vessel tonnage in the shipping industry and within our operating segments;
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The cyclical nature of the shipping industry in general and its impact on charter rates and vessel values;
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The successful implementation of the Company’s growth business strategy, including our ability to obtain equity and debt financing at acceptable and attractive terms to fund future capital expenditures and/or to implement our business
strategy;
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The global economic growth outlook and trends, such as price inflation and/or volatility;
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Economic, regulatory, political and governmental conditions that affect the shipping industry and our operating segments, including international conflict or war (or threatened war), such as the
conflict in Ukraine;
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The employment and operation of our fleet including the utilization rates of our vessels;
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The ability to successfully employ our vessels at economically attractive rates and our strategic decisions regarding the employment mix of our fleet in the time, voyage, and pool charter markets, as our charters expire or are otherwise
terminated;
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Management of the operational, financial, general and administrative elements involved in the conduct of our business and ownership of our fleet, including the effective and efficient management of our fleet by our head and sub-managers,
and their suppliers;
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The number of charterers and pool operators who use our services and the performance of their obligations under their agreements, including their ability to make timely payments to us;
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The ability to maintain solid working relationships with our existing charterers and pool operators and our ability to increase the number of our charterers through the development of new working relationships;
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The vetting approvals of our head manager and/or sub-managers for the management of our vessels;
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Dry-docking and special survey costs and duration, both expected and unexpected;
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The level of any distribution on all classes of our shares;
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Our borrowing levels and the finance costs related to our outstanding debt as well as our compliance with our debt covenants; and
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Management of our financial resources, including banking relationships and of the relationships with our various stakeholders;
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Major outbreaks of diseases (such as COVID-19) and governmental responses thereto.
|
These factors are volatile and in certain cases may not be within our control. Accordingly, past performance is not necessarily indicative of future performance, and it
is difficult to predict future performance with any degree of certainty.
Hire Rates and Cyclical Nature of the Industry
One of the factors that impacts our profitability is the hire rates at which we are able to fix our vessels. The shipping industry is cyclical with attendant volatility in charter hire rates and,
as a result, profitability. The dry bulk, tanker and container sectors have both been characterized by long and short periods of imbalances between supply and demand, causing charter rates to be volatile.
The degree of charter rate volatility among different types of dry bulk, tanker and container vessels has varied widely, and charter rates for these vessels have also varied significantly in recent
years. Fluctuations in charter rates result from changes in the supply and demand for vessel capacity and changes in the supply and demand for the major commodities carried by oceangoing vessels internationally. The factors and the nature, timing,
direction and degree of changes in industry conditions affecting the supply and demand for vessels are unpredictable to a great extent and outside our control.
Our vessel deployment strategy seeks to maximize charter revenue throughout industry cycles while maintaining cash flow stability and foreseeability. Our gross revenues for the year ended December
31, 2022, consisted of hire earned under time charter contracts, where charterers pay a fixed or index-linked daily hire, and other compensation costs related to the contracts (such as ballast positioning compensation, holds cleaning compensation,
etc.), revenue under voyage charter contracts, where charterers in most cases pay a fixed amount per ton of cargo carried and in fewer cases a lump sum amount, and pool revenue for certain of our tanker vessels. Pooling arrangements aggregate
vessels of similar types and sizes under a central administration, which are marketed as a single entity and for which revenues are pooled and distributed to owners based on an agreed key. Pools employ experienced commercial charterers and
operators who have close working relationships with customers and brokers, while technical management is separate from pool operations. Pools negotiate charters with customers primarily in the spot market but may also arrange time charter
agreements. The size and scope of these pools enable them to enhance utilization rates for pool vessels by securing backhaul voyages and contract of affreightment, generating higher revenues than otherwise might be obtainable in the spot market. We
believe that pooling arrangements offer our customers greater flexibility and a higher level of service, while achieving scheduling efficiencies. For further details on these arrangements, refer to “Item 4.
Information on the Company¾A. Business Overview¾Chartering of our Fleet.”
Our future gross revenues may be affected by the commercial strategy including the decisions regarding the employment mix of our Fleet, including among the spot
market and time charters and, where applicable, pool arrangements. See Note 17 to our consolidated financial statements included elsewhere in this annual report for further details regarding segment revenues. Year-to-year comparisons of
gross revenues are not necessarily indicative of vessel performance. We believe that the TCE rate provides a more accurate measure for comparison and such measure is one of the metrics used by our management to assess the performance of our
business and segments.
The Dry Bulk Industry
The Baltic Dry Index (BDI) average for the years ended December 31, 2021, and 2022 was 2,943 points and 1,934 points, respectively. During 2022, the dry bulk market was affected by the extended
“zero COVID” policy of China which resulted in reduced demand of raw materials. In addition, port congestion eased at the majority of ports around the world and docking repairs and crew changes resumed to pre-pandemic normal operation mode. There
was significant volatility during the year as the BDI recorded its annual high of 3,369 points on May 23, 2022, but ended the year 55% lower, at 1,515 points. The global dry cargo fleet deadweight carrying capacity for 2022 increased by
approximately 2.8% which remains significantly lower from the substantial increases during the early 2000s and mid-2010s, while demand for dry bulk commodities, decreased by approximately 2.7%. The volatility in charter rates in the dry bulk market
affects the value of dry bulk vessels, which follows the trends of dry bulk charter rates, and similarly affects our earnings, cash flows and liquidity.
The Containership Industry
Container shipping markets declined sharply during the second half of 2022 following exceptional highs in the first half of 2022 and charter rates for containerships have continued to ease into
early 2023. Freight and charter rates remain weak on the back of a severe pressure on global box trade as a result of the weak macroeconomic negative outlook and elevated inflation rates, the easing of port congestion and logistical disruptions.
The global container fleet for 2022 increased by 4% in terms of deadweight carrying capacity, while demand in 2023 for containerized products is expected by market analysts to decrease by 1% compared to 2022 due to the deteriorating economic
outlook.
The Tanker Industry
The spot tanker market performed strongly in 2022, particularly after the first quarter and, overall 2022 was one of the best years for spot crude tanker trades since 2000. Deadweight carrying
capacity of the tanker fleet increased by approximately 3.4% in 2022, as compared to 1.6% in 2021, while demand for crude oil and products is expected to continue at a high pace. During 2022, the spot tanker market improved after an initial period
of increased volatility following the invasion of Ukraine by Russia and subsequent imposition of sanctions against Russia. However, the spot tanker market remains volatile and subject to uncertainty due to such invasion and its ongoing effects on
global demand for and supply of crude oil and refined petroleum products. Volatility in charter rates in the tanker market may affect the value of tanker vessels, which occasionally follow the trends of tanker charter rates, and similarly affects
our earnings, cash flows and liquidity.
Employment and operation of our fleet
Another factor that impacts our profitability is the employment and operation of our fleet. The profitable employment of our fleet is highly dependent on the levels of demand and supply in the
shipping sectors in which we operate, our commercial strategy including the decisions regarding the employment mix of our fleet among time, voyage and pool charters as well as our managers’ and sub-managers’ ability to leverage our relationships
with existing or potential customers. Our customer base in our various segments is currently concentrated to a small number of charterers and pool managers, in part due to the fact that we are a new entrant to the
containership and tanker shipping industries. In particular, for the years ended December 31, 2022 and 2021, we derived 75% and 55%, respectively, of our dry bulk segment operating revenues from three charterers. For the years ended
December 31, 2022 and 2021, we also derived 100% of our Handysize tanker segment operating revenues from the pool in which both our Handysize tankers participate and 43% and 52%, respectively, of our Aframax/LR2 tanker segment revenues from two
pool managers and a charterer and two charterers, respectively. Further, for the year ended December 31, 2022, we derived 100% of our containership segment operating revenues from one charterer.
Further, the effective operation of our fleet mainly requires regular maintenance and repair, effective crew selection and training, ongoing supply of our fleet with the spares and the stores that
it requires, contingency response planning, auditing of our vessels’ onboard safety procedures, arrangements for our vessels’ insurance, chartering of the vessels, training of onboard and onshore personnel with respect to the vessels’ security and
security response plans (ISPS), obtaining of ISM certifications, compliance with environmental regulations and standards, and performing the necessary audit for the vessels within the six months of taking over a vessel and the ongoing performance
monitoring of the vessels.
Financial, general and administrative management
The management of financial, general and administrative elements involved in the conduct of our business and ownership of our vessels requires us to manage our financial resources, which includes
managing banking relationships, administrating our bank accounts, managing our accounting system, records and financial reporting, monitoring and ensuring compliance with the legal and regulatory requirements affecting our business and assets and
managing our relationships with our service providers and customers.
Because many of these factors are beyond our control and certain of these factors have historically been volatile, past performance is not necessarily indicative of future performance and it is
difficult to predict future performance with any degree of certainty.
Important Measures and Definitions for Analyzing Results of Operations
Our management uses the following metrics to evaluate our operating results, including the operating results at the segment level and to allocate capital accordingly:
Total vessel revenues. Total vessel revenues were historically generated from time charters,
voyage charters and pool arrangements, as applicable in each period. Total vessel revenues are affected by the number of vessels in our fleet, hire rates and the number of days a vessel operates which, in turn, are affected by several factors,
including the amount of time that we spend positioning our vessels, the amount of time that our vessels spend in dry dock undergoing repairs, maintenance and upgrade work, the age, condition and specifications of our vessels, and levels of supply
and demand in the seaborne transportation market. Total vessel revenues are also affected by our commercial strategy related to the employment mix of our fleet between vessels on time charters, vessels operating on voyage charters and vessels in
pools.
We measure revenues in the dry bulk, Aframax/LR2 tanker, Handysize tanker and containership segments in which we historically operated for three separate
activities: (i) time charter revenues, (ii) voyage charter revenues, and (iii) pool revenues. For a breakdown of vessel revenues for the year ended December 31, 2022, please refer to Notes 2 and 12 to
our consolidated financial statements included elsewhere in this annual report. For a description of these types of chartering arrangements, refer to ‘‘Item 4. Information on the Company—B. Business Overview—Chartering of Our Fleet’’.
Voyage expenses. Our voyage expenses primarily consist of bunker expenses, port and canal expenses and brokerage commissions paid in
connection with the chartering of our vessels. Under a time charter, the charterer pays substantially all the vessel voyage related expenses. However, we may incur voyage related expenses when positioning or repositioning vessels before or after
the period of a time charter, during periods of commercial waiting time or while off-hire during dry docking or due to other unforeseen circumstances. Under voyage charters, relevant to our tanker segments
that were contributed to Toro in connection with the Spin-Off, the majority of voyage expenses were generally borne by us whereas for vessels in a pool, such expenses were handled by the pool operator. Gain/loss on bunkers may also arise
where the cost of the bunker fuel sold to the new charterer is greater or less than the cost of the bunker fuel acquired.
Operating expenses. We are responsible for vessel operating costs, which include crewing,
expenses for repairs and maintenance, the cost of insurance, tonnage taxes, the cost of spares and consumable stores, lubricating oils costs, communication expenses, and ship management fees. Expenses for repairs and maintenance tend to fluctuate
from period to period because most repairs and maintenance typically occur during periodic drydocking. Our ability to control our vessels’ operating expenses also affects our financial results.
Off-hire. The period our fleet is unable to perform the services for which it is required under a charter for reasons such as scheduled
repairs, vessel upgrades, dry-dockings or special or intermediate surveys or other unforeseen events.
Dry-docking/Special Surveys. We periodically dry-dock and/or perform special surveys on our fleet for inspection, repairs and
maintenance and any modifications to comply with industry certification or governmental requirements. Our ability to control our dry-docking and special survey expenses and our ability to complete our scheduled dry-dockings and/or special surveys
on time also affects our financial results. Dry-docking and special survey costs are accounted under the deferral method whereby the actual costs incurred are deferred and are amortized on a straight-line basis over the period through the date the
next survey is scheduled to become due.
Ownership Days. Ownership Days are the total number of calendar days in a period during which we owned a vessel. Ownership Days are an
indicator of the size of our fleet over a period and determine both the level of revenues and expenses recorded during that specific period.
Available Days. Available Days are the Ownership Days in a period less the aggregate number of days our vessels are off-hire due to
scheduled repairs, dry-dockings or special or intermediate surveys. The shipping industry uses Available days to measure the aggregate number of days in a period during which vessels are available to generate revenues. Our calculation of Available
days may not be comparable to that reported by other companies.
Operating Days. Operating Days are the Available Days in a period after subtracting off-hire and idle days.
Fleet Utilization. Fleet Utilization is calculated by dividing the Operating Days during a period by the number of Available Days during
that period. Fleet Utilization is used to measure a company’s ability to efficiently find suitable employment for its vessels and minimize the number of days that its vessels are off-hire for reasons such as major repairs, vessel upgrades,
dry-dockings or special or intermediate surveys and other unforeseen events.
Daily Time Charter Equivalent (“TCE”) Rate. The Daily Time Charter Equivalent Rate
(“Daily TCE Rate”), is a measure of the average daily revenue performance of a vessel. The Daily TCE Rate is not a measure of financial performance under U.S. GAAP (i.e., it is a non-GAAP measure) and should not be considered as an alternative to
any measure of financial performance presented in accordance with U.S. GAAP. We calculate Daily TCE Rate by dividing total revenues (time charter and/or voyage charter revenues, and/or pool revenues, net of charterers’ commissions), less voyage
expenses, by the number of Available Days during that period. Under a time charter, the charterer pays substantially all the vessel voyage related expenses. However, we may incur voyage related expenses when positioning or repositioning vessels
before or after the period of a time or other charter, during periods of commercial waiting time or while off-hire during dry-docking or due to other unforeseen circumstances. Under voyage charters, the majority of voyage expenses are generally
borne by us whereas for vessels in a pool, such expenses are borne by the pool operator. The Daily TCE Rate is a standard shipping industry performance measure used primarily to compare period-to-period changes in a company’s performance and,
management believes that the Daily TCE Rate provides meaningful information to our investors since it compares daily net earnings generated by our vessels irrespective of the mix of charter types (i.e., time charter, voyage charter or other)
under which our vessels are employed between the periods while it further assists our management in making decisions regarding the deployment and use of our vessels and in evaluating our financial performance. Our calculation of the Daily TCE
Rates may not be comparable to that reported by other companies. See below for a reconciliation of Daily TCE rate to Vessel revenue, net, the most directly comparable U.S. GAAP measure.
Daily vessel operating expenses. Daily vessel operating expenses are a measure of the average daily expenses of a vessel and are
calculated by dividing vessel operating expenses for the relevant period by the Ownership Days for such period.
EBITDA. EBITDA is not a measure of financial performance under U.S. GAAP, does not
represent and should not be considered as an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with U.S. GAAP. We define EBITDA as earnings
before interest and finance costs (if any), net of interest income, taxes (when incurred), depreciation and amortization of deferred dry-docking costs. EBITDA is used as a supplemental financial measure by management and external users of
financial statements to assess our operating performance. We believe that EBITDA assists our management by providing useful information that increases the comparability of our operating performance from period to period and against the operating
performance of other companies in our industry that provide EBITDA information. This increased comparability is achieved by excluding the potentially disparate effects between periods or companies of interest, other financial items, depreciation
and amortization and taxes, which items are affected by various and possibly changing financing methods, capital structure and historical cost basis and which items may significantly affect net income between periods. We believe that including
EBITDA as a measure of operating performance benefits investors in (a) selecting between investing in us and other investment alternatives and (b) monitoring our ongoing financial and operational strength. EBITDA as presented below may not be
comparable to similarly titled measures of other companies. See below for a reconciliation of EBITDA to Net Income/(Loss), the most directly comparable U.S. GAAP measure
The Daily TCE Rate and EBITDA are non-GAAP measures used by management to assess the performance of our business and segments. The following tables reconcile the Daily TCE Rate and operational
metrics of the Company on a consolidated basis and per operating segment for the year ended December 31, 2022, and their comparative information (where applicable) and our consolidated EBITDA to the most directly comparable GAAP measures for the
periods presented (amounts in U.S. dollars, except for share data, utilization and days). We entered the containerships business in the fourth quarter of 2022 and, accordingly, no comparative financial information exists for the year ended December
31, 2021.
Reconciliation of Daily TCE Rate to Total vessel revenues — Consolidated
| |
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Year Ended December 31,
|
|
| |
|
2021
|
|
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2022
|
|
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Total vessel revenues
|
|
$
|
132,049,710
|
|
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$
|
262,101,998
|
|
|
Voyage expenses - including commissions from related party
|
|
|
(12,950,783
|
)
|
|
|
(33,040,690
|
)
|
|
TCE revenues
|
|
$
|
119,098,927
|
|
|
$
|
229,061,308
|
|
|
Available Days
|
|
|
6,657
|
|
|
|
10,212
|
|
|
Daily TCE Rate
|
|
$
|
17,891
|
|
|
$
|
22,431
|
|
Reconciliation of Daily TCE Rate to Total vessel revenues — Dry Bulk Segment
| |
|
Year Ended December 31,
|
|
| |
|
2021
|
|
|
2022
|
|
|
Total vessel revenues
|
|
$
|
102,785,442
|
|
|
$
|
148,930,997
|
|
|
Voyage expenses - including commissions from related party
|
|
|
(1,891,265
|
)
|
|
|
(3,649,943
|
)
|
|
TCE revenues
|
|
$
|
100,894,177
|
|
|
$
|
145,281,054
|
|
|
Available Days
|
|
|
4,843
|
|
|
|
7,105
|
|
|
Daily TCE Rate
|
|
$
|
20,833
|
|
|
$
|
20,448
|
|
Reconciliation of Daily TCE Rate to Total vessel revenues — Aframax/LR2 Tanker Segment
| |
|
Year Ended December 31,
|
|
| |
|
2021
|
|
|
2022
|
|
|
Total vessel revenues
|
|
$
|
26,559,413
|
|
|
$
|
96,248,215
|
|
|
Voyage expenses - including commissions from related party
|
|
|
(11,003,925
|
)
|
|
|
(29,100,348
|
)
|
|
TCE revenues
|
|
$
|
15,555,488
|
|
|
$
|
67,147,867
|
|
|
Available Days
|
|
|
1,446
|
|
|
|
2,307
|
|
|
Daily TCE Rate
|
|
$
|
10,758
|
|
|
$
|
29,106
|
|
Reconciliation of Daily TCE Rate to Total vessel revenues — Handysize Tanker Segment
| |
|
Year Ended December 31,
|
|
| |
|
2021
|
|
|
2022
|
|
|
Total vessel revenues
|
|
$
|
2,704,855
|
|
|
$
|
15,637,653
|
|
|
Voyage expenses - including commissions from related party
|
|
|
(55,593
|
)
|
|
|
(219,066
|
)
|
|
TCE revenues
|
|
$
|
2,649,262
|
|
|
$
|
15,418,587
|
|
|
Available Days
|
|
|
368
|
|
|
|
730
|
|
|
Daily TCE Rate
|
|
$
|