TOP SHIPS INC.
	(registrant)
Dated: August 2, 2017	By:	/s/ Evangelos J. Pistiolis
		Evangelos J. Pistiolis Chief Executive Officer

		Six months ended June 30,
(Expressed in thousands of U.S. Dollars)		2016				2017
Net income/(loss) and comprehensive income/(loss)			290				(5,838	)
Add: Bareboat charter hire expenses			3,132				3,115
Add: Amortization of prepaid bareboat charter hire			789				829
Add: Vessel depreciation			1,228				2,790
Add: Interest and finance costs			774				7,457
Add: (Gain) on financial instruments			(1,220	)			(1,057	)
Adjusted EBITDA			4,993				7,296

		Six Month Period Ended June 30,								Change
		2016				2017				June 30, 2016 vs June 30, 2017
		($ in thousands)												$	%
Voyage Revenues			11,627				18,982				7,355				63.3	%
Voyage expenses			301				496				195				64.8	%
Bareboat charterhire expenses			3,132				3,115				(17	)			-0.5	%
Amortization of prepaid bareboat charter hire			789				829				40				5.1	%
Other vessel operating expenses			4,445				6,596				2,151				48.4	%
Vessel depreciation			1,228				2,790				1,562				127.2	%
Management fees-related parties			764				3,126				2,362				309.2	%
Other operating gain, net			-				(914	)			(914	)			100	%
General and administrative expenses			1,117				3,502				2,385				213.5	%
Expenses			11,776				19,540				7,764				65.9	%
Operating loss			(149	)			(558	)			(409	)			274.5	%
Interest and finance costs			(774	)			(7,457	)			(6,683	)			863.4	%
Gain on financial instruments			1,220				1,057				(163	)			-13.4	%
Debt forgiveness			-				1,118				1,118				100	%
Other, net			(7	)			2				9				-128.6	%
Total other expenses, net			439				(5,280	)			(5,719	)			-1,302.7	%
Net income/(loss)			290				(5,838	)			(6,128	)			-2,113.1	%

		Six months ended June 30,								Change
		2016				2017				June 30, 2016 vs June 30, 2017
		($ in thousands)												$	%
Voyage revenues			11,627				18,982				7,355				63	%

		Six months ended June 30,								Change
		2016				2017				June 30, 2016 vs June 30, 2017
		($ in thousands)												$	%
Other vessel operating expenses			4,445				6,596				2,151				48	%

		Six months ended June 30,								Change
		2016				2017				June 30, 2016 vs June 30, 2017
		($ in thousands)												$	%
Vessel depreciation			1,228				2,790				1,562				127	%

		Six months ended June 30,								Change
		2016				2017				June 30, 2016 vs June 30, 2017
		($ in thousands)												$	%
Management fees—related parties			764				3,126				2,362				309	%

		Six months ended June 30,								Change
		2016				2017				June 30, 2016 vs June 30, 2017
		($ in thousands)												$	%
General and administrative expenses			1,117				3,502				2,385				214	%

		Six months ended June 30,								Change
		2016				2017				June 30, 2016 vs June 30, 2017
		($ in thousands)												$	%
Interest and finance costs			(774	)			(7,457	)			(6,683	)			863	%

		Six months ended June 30,								Change
		2016				2017				June 30, 2016 vs June 30, 2017
		($ in thousands)												$	%
Gain on derivative financial instruments			1,220				1,057				(163	)			-13	%

 

 

 

 

TOP SHIPS INC.

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

	Page
Unaudited Interim Condensed Consolidated Balance Sheets as of December 31, 2016 and June 30, 2017	F-2
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income/(Loss) for the six months ended June 30, 2016 and 2017	F-4
Unaudited Interim Condensed Consolidated Statements of Stockholders' Equity for the six months ended June 30, 2016 and 2017	F-5
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2017	F-6
Notes to Unaudited Interim Condensed Consolidated Financial Statements	F-7

 

 

 

TOP SHIPS INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2016 AND JUNE 30, 2017

(Expressed in thousands of U.S. Dollars - except share and per share data)

		December 31,				June 30,
		2016				2017
CURRENT ASSETS:
Cash and cash equivalents			127				1,589
Trade accounts receivable			19				20
Prepayments and other			864				364
Due from related parties			34				-
Inventories			583				658
Prepaid bareboat charter hire			1,657				1,656
Restricted cash			1,257				1,270
Total current assets			4,541				5,557
FIXED ASSETS:
Vessels, net and advances for vessels under construction (Note 4)			126,170				158,007
Other fixed assets, net			1,161				1,101
Total fixed assets			127,331				159,108
OTHER NON CURRENT ASSETS:
Prepaid bareboat charter hire			6,935				6,107
Investments in unconsolidated joint ventures (Note 13)			-				11,200
Restricted cash			4,210				5,092
Derivative financial instruments (Note 11)			300				202
Total non-current assets			11,445				22,601
Total assets			143,317				187,266
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 7)			7,995				9,648
Short-term debt (Note 7)			-				3,776
Debt from related parties (Note 7)			4,085				-
Due to related parties (Note 5)			1,108				611
Accounts payable			1,902				2,088
Accrued liabilities			2,965				2,584
Unearned revenue			1,978				852
Total current liabilities			20,033				19,559
NON-CURRENT LIABILITIES:
Derivative financial instruments (Note 11)			3,563				2,028
Non-current portion of long term debt (Note 7)			72,459				89,321
Non-current portion of debt from related parties (Note 7)			-				2,447
Total non-current liabilities			76,022				93,796

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 11)
Total liabilities			96,055				113,355
MEZZANINE EQUITY:
Preferred stock; 2,106 and 446 Series B shares issued and outstanding at December 31, 2016 and June 30, 2017 with $0.01 par value (Note 12)			1,741				369
EQUITY:
Preferred stock, $0.01 par value; 20,000,000 shares authorized; 0 and 100,000 Series D shares authorized, issued and outstanding at December 31, 2016 and June 30, 2017			-				-
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 18,964 and 8,640,174 shares issued and outstanding at December 31, 2016 and June 30, 2017 (Note 9)			-				86
Additional paid-in capital (Note 9)			328,762				361,411
Accumulated deficit			(283,241	)			(289,088	)
Total stockholders' equity			45,521				72,409
Non-controlling Interests			-				1,133
Total  equity			45,521				73,542
Total liabilities and equity			143,317				187,266

 

 

TOP SHIPS INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME / (LOSS) FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2017
(Expressed in thousands of U.S. Dollars - except share and per share data)

		Six Months Ended
		June 30,				June 30,
		2016				2017
REVENUES:
Revenues		$	11,627			$	18,982
EXPENSES:
Voyage expenses			301				496
Bareboat charter hire expenses			3,132				3,115
Amortization of prepaid bareboat charter hire			789				829
Other vessel operating expenses			4,445				6,596
Vessel depreciation (Note 4)			1,228				2,790
Management fees-related parties (Note 5)			764				3,126
Other operating gain, net			-				(914	)
General and administrative expenses			1,117				3,502
Operating loss			(149	)			(558	)
OTHER INCOME (EXPENSES):
Interest and finance costs (including $143 and $1,225, respectively to related party) (Note 7)			(774	)			(7,457	)
Gain on financial instruments, net (Note 11)			1,220				1,057
Debt forgiveness (Note 7)			-				1,118
Other, net			(7	)			2
Total other income/(loss), net			439				(5,280	)
Net income/(loss) and comprehensive income/(loss)			290				(5,838	)
Attributable to:
Common stock holders			290				(5,847	)
Non-controlling interests			-				9
Earnings/(loss) per common share, basic and diluted (Note 10)			25.39				(17.32	)
Weighted average common shares outstanding, basic and diluted			11,422				337,138

 

 

TOP SHIPS INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2017

(Expressed in thousands of U.S. Dollars – except number of shares and per share data)

										Additional
		Common Stock								Paid-in				Accumulated
		# of Shares				Par Value*				Capital*				Deficit				Total
BALANCE, December 31, 2015			6,926				-				318,446				(284,293	)			34,153
Net income							-				-				290				290
Stock-based compensation			229								209				-				209
Common shares issued in exchange of assumption of Delos Termination Fee			4,519				-				3,796				-				3,796
Issuance of common stock due to exercise of warrants			167				-				140				-				140
BALANCE, June 30, 2016			11,841				-				322,591				(284,003	)			38,588

		Preferred Stock								Common Stock
		# of Shares				Par Value				# of Shares				Par Value*				AdditionalPaid –in Capital*				Accumulated Deficit attributable to common stockholders				Non-controlling interest				Total
BALANCE, December 31, 2016			-				-				18,964				-				328,762				(283,241	)			-				45,521
Net (loss)/income															-				-				(5,847	)			9				(5,838	)
Issuance of common stock pursuant to convertible related party loans (Note 7)											2,590				-				2,040				-				-				2,040
Issuance of common stock pursuant to the Common Stock Purchase Agreement (Note 9)											2,090,961				21				28,602				-				-				28,623
Issuance of common stock pursuant to Series C convertible preferred shares conversions  (Note 9)											6,502,903				65				3,088				-				-				3,153
Series C convertible preferred stock's beneficial conversion feature (Note 7)											-				-				7,500												7,500
Issuance of common stock due to exercise of warrants (Note 9)											1,429				-				487				-				-				487
Stock-based compensation											-				-				(8	)											(8	)
Excess of consideration over acquired assets											-				-				(9,309	)			-				-				(9,309	)
Cancellation of fractional shares due to reverse stock splits											(4	)			-				-				-				-				-
Issuance of common stock pursuant to Series B convertible preferred stock conversions reflected in Mezzanine equity (Note 12)											23,331				-				1,372				-				-				1,372
Issuance of Series D convertible preferred stock (Note 9)			100,000				-				-				-				1				-				-				1
Additional paid-in capital  attributed to non-controlling interests											-				-				(1,124	)			-				- 1,124				-
BALANCE, June 30, 2017			100,000				-				8,640,174				86				361,411				(289,088	)			1,133				73,542

 

*Adjusted to reflect the reverse stock splits effected in May and June (see Note 9)

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

TOP SHIPS INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2017
(Expressed in thousands of U.S. Dollars)
		Six months ended June 30,
		2016				2017
Cash Flows from Operating Activities:
Net Cash provided by/(used in) Operating Activities			1,938				(1,206	)
Cash Flows from Investing Activities:
Advances for vessels under construction			(48,753	)			-
Vessel acquisitions (Note 1 and 4)			-				(43,755	)
Investments in unconsolidated joint ventures (Note 13)			-				(11,200	)
Increase in restricted cash			(2,490	)			(895	)
Sale of other fixed assets, net			29				-
Net Cash used in Investing Activities			(51,214	)			(55,850	)
Cash Flows from Financing Activities:
Proceeds from debt (Note 7)			45,385				23,350
Proceeds from short-term Notes (Note 7)			-				34,200
Proceeds from related party debt (Note 7)			3,200				2,958
Principal payments of debt (Note 7)			(1,500	)			(4,560	)
Prepayment of related party debt (Note 7)			-				(4,085	)
Proceeds from issuance of Series C convertible preferred stock (Note 9)			-				7,500
Proceeds from warrant exercises (Note 9)			140				513
Equity offerings costs			-				(409	)
Payment of financing costs			(63	)			(949	)
Net Cash provided by Financing Activities			47,162				58,518
Net (decrease)/increase in cash and cash equivalents			(2,114	)			1,462
Cash and cash equivalents at beginning of year			2,668				127
Cash and cash equivalents at end of the period			554				1,589
SUPPLEMENTAL CASH FLOW INFORMATION
Capital expenditures included in Accounts payable/Accrued liabilities			787				367
Interest paid net of capitalized interest			286				2,303
Finance fees included in Accounts payable/Accrued liabilities			78				3
Offering expenses included in liabilities			515				719
Shares issued as consideration for the assumption of liabilities			3,796				-
Shares issued in exchange for converting debt,  interest & finance fees			-				4,238
Settlement of Notes with common stock issued (Note 7 and 9)			-				29,306

 

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

 

1.

Basis of Presentation and General Information:

The accompanying unaudited interim condensed consolidated financial statements include the accounts of Top Ships Inc. and its wholly owned subsidiaries (collectively the "Company"). Ocean Holdings Inc. was formed on January 10, 2000, under the laws of Marshall Islands and was renamed to Top Tankers Inc. and Top Ships Inc. in May 2004 and December 2007, respectively. The Company is an international provider of worldwide oil, petroleum products and bulk liquid chemicals transportation services.

As of June 30, 2017, the Company was the sole owner of all outstanding shares of the following subsidiary companies. The following list is not exhaustive as the Company has other subsidiaries relating to vessels that have been sold and that remain dormant for the periods presented in these consolidated financial statements.

	Companies	Date of Incorporation	Country of Incorporation	Activity
	Top Tanker Management Inc.	May 2004	Marshall Islands	Management company

	Shipowning Companies with vessels in operation during six months ended June 30, 2017		Date of Incorporation	Country of Incorporation	Vessel
1	Monte Carlo 71 Shipping Company Limited		June 2014	Marshall Islands	M/T Stenaweco Energy (acquired June 2014), sold January 2015
2	Monte Carlo One Shipping Company Ltd		June 2012	Marshall Islands	M/T Stenaweco Evolution (acquired March 2014), sold March 2015
3	Monte Carlo Seven Shipping Company Limited		April  2013	Marshall Islands	M/T Stenaweco Excellence (acquired March 2014)
4	Monte Carlo Lax Shipping Company Limited		May  2013	Marshall Islands	M/T Nord Valiant (acquired March 2014)
5	Monte Carlo 37 Shipping Company Limited		September 2013	Marshall Islands	M/T Eco Fleet (acquired March 2014)
6	Monte Carlo 39 Shipping Company Limited		December 2013	Marshall Islands	M/T Eco Revolution (acquired March 2014 )
7	Astarte International Inc		April 2017	Marshall Islands	Hull No 2648

As of June 30, 2017, the Company was the owner of 90% of outstanding shares of the following company.

	Shipowning Company	Date of Incorporation	Country of Incorporation	Vessel
1	Eco Seven Inc.	February 2017	Marshall Islands	M/T Stenaweco Elegance (acquired February 20, 2017)

As of June 30, 2017, the Company was the owner of 50% of outstanding shares of the following companies.

	Shipowning Companies	Date of Incorporation	Country of Incorporation	Vessel
1	City of Athens Inc.	November 2016	Marshall Islands	Hull No S-443
2	Eco Nine Inc.	March 2015	Marshall Islands	Hull No S-444

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information. Accordingly, they do not include all the information and notes required by U.S. GAAP for complete financial statements. These statements and the accompanying notes should be read in conjunction with the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2016, filed with the U.S. Securities and Exchange Commission (the "SEC") on March 14, 2017.

 

These unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation of the Company's  financial position, results of operations and cash flows for the periods presented. Operating results for the six month period ended June 30, 2017 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2017.

 

On April 26, 2017, the Company acquired a 100% ownership interest in Astarte International Inc. ("Astarte") from Indigo Maritime Ltd, a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $6,000. Astarte is party to a newbuilding contract for the construction of Hull No 2648, a 50,000 dwt newbuilding product/chemical scheduled for delivery from Hyundai in July 2018.

 

The above transactions were approved by a special committee of the Company's board of directors, or the Transaction Committee, of which the majority of the directors were independent. In the course of its deliberations, the Transaction Committee hired and obtained a fairness opinions from an independent financial advisor.

The Company accounted for the abovementioned acquisitions as a transfer of assets between entities under common control and has recognized the vessels at their historical carrying amounts at the date of transfer.

The amount of the consideration given in excess of the net assets acquired is recognized as a reduction to the Company's capital and presented as Excess of consideration over acquired assets in the Company's consolidated statement of stockholders' equity for the six months ended June 30, 2017. An analysis of the consideration paid is presented in the table below:

Consideration in cash			20,500
Less: Net assets of companies acquired			11,191
Excess of consideration over acquired assets			9,309

2.

Significant Accounting Policies:

A discussion of the Company's significant accounting policies can be found in the Company's annual financial statements for the fiscal year ended December 31, 2016 which have been filed with the US Securities and Exchange Commission on Form 20-F on March 14, 2017. There have been no changes to these policies in the six-month period ended June 30, 2017, except for:

Debt Discount: The conversions of Series C convertible preferred stock as well as drawdowns and repayments of interest, fees and principal under the Amended Family Trading Facility (see Note 7) generate beneficial conversion features, which arise when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor/lender or in the money at inception, because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date. These are accounted for as a debt discount contra to debt and amortized over the life of the instrument in question.

Investments in unconsolidated joint ventures: The Company's investments in unconsolidated joint ventures are accounted for using the equity method of accounting. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and the Company's proportionate share of earnings or losses and distributions. The Company evaluates its investments in unconsolidated joint ventures for impairment when events or circumstances indicate that the carrying value of such investments may have experienced other than temporary decline in value below their carrying value. If the estimated fair value is less than the carrying value and is considered other than a temporary decline, the carrying value is written down to its estimated fair value and the resulting impairment is recorded in the Consolidated Statements of comprehensive income.

 

Recent Accounting Pronouncements:

In January 2017, the Financial Accounting Standards Board ("FASB") issued the ASU 2017-01 Business Combinations to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. Under current implementation guidance the existence of an integrated set of acquired activities (inputs and processes that generate outputs) constitutes an acquisition of business. This ASU provides a screen to determine when a set of assets and activities does not constitute a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This update is effective for public entities with reporting periods beginning after December 15, 2017, including interim periods within those years. The amendments of this ASU should be applied prospectively on or after the effective date. Early adoption is permitted, including adoption in an interim period 1) for transactions for which the acquisition date occurs before the issuance date or effective date of the ASU, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and 2) for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. The Company early adopted this new standard for the new acquisitions of Eco Seven and Hull No 2648.

 

3.

Going Concern:

As at June 30, 2017, the Company has a working capital deficit of $14,002, commitments under operating leases of $6,282 and its capital commitments for the acquisition of its fleet for the following twelve months amount to $11,975 (see Note 8). The Company's options to fund its short term capital commitments, its commitments under operating leases and its working capital requirements over the twelve months following the date that the financial statements are issued include:

a) a $8,993 expected drawdown under senior secured credit facility for which the Company has signed a commitment letter with Amsterdam Trade Bank of Holland ("AT Bank" - see Note 14),

b) drawdowns under its unsecured credit line with Family Trading Inc ("Family Trading") (see Note 7), which as of June 30, 2017 had an undrawn balance of $12,042,

c) proceeds from share issuances from the Company's Stock purchase agreement with Kalani Investments Inc. ("Kalani"), an unaffiliated company, which as of June 30, 2017 had an undrawn balance of $10,739,

d) cash from operations

e) other sources such as funds from the Company's major shareholder if required.

Therefore, the unaudited interim condensed consolidated financial statements have been prepared on a going concern basis.

4.

Vessels, net and advances for vessels under construction:

The balances in the accompanying unaudited interim condensed consolidated balance sheets are analyzed as follows:

 

		Vessel Cost and advances for vessel under construction.				Accumulated Depreciation				Net Book Value
Balance, December 31, 2016			130,185				(4,015	)			126,170
— Acquisitions			34,508				(420	)			34,088
— Advances for vessels under construction			119				-				119
— Depreciation charge for the  period			-				(2,370	)			(2,370	)
Balance, June 30, 2017			164,812				(6,805	)			158,007

 

On February 28, 2017, Eco Seven Inc. that was later consolidated by the Company, took delivery of the M/T Stenaweco Elegance, a 50,118 dwt product/chemical tanker and on March 5, 2017 the vessel commenced its time charter employment with Stena Weco A/S. The final acquisition cost of the vessel amounted to $34,508 and comprised of $33,935 of yard installments and $573 of capitalized expenses. Advances for the construction of newbuilding vessel Hull 2648 a 50,000 dwt product/chemical that the Company acquired on April 26, 2017 (see Note 1) amounted to $119 and is scheduled for delivery from Hyundai in July 2018.

All of the Company's  vessels, except for Hull No S443, Hull No S444 and Hull No 2648, have been mortgaged as security under its loan facilities (see Note 7).

 

 

 

5.

Transactions with Related Parties:

(a)  Central Mare– Executive Officers and Other Personnel Agreements: On September 1, 2010, the Company entered into separate agreements with Central Mare, a related party affiliated with the family of Evangelos J. Pistiolis, pursuant to which Central Mare provides the Company with its executive officers and other administrative employees (Chief Executive Officer, Chief Financial Officer, Chief Technical Officer and Executive Vice President).

The fees charged by Central Mare for the six month periods ended June 30, 2016 and 2017 are as follows:

 

	Six Month Period Ended June 30,
	2016	2017	Presented in:
Executive officers and other personnel expenses	330	1,200	General and administrative expenses - Statement of comprehensive income/(loss)
Amortization of awarded shares	16	-	Management fees - related parties - Statement of comprehensive income/(loss)
Bonus	-	1,500	General and administrative expenses - Statement of comprehensive income/(loss)
Total	346	2,700

(b)  Central Shipping Monaco SAM ("CSM") – Letter Agreement and Management Agreements: On March 10, 2014, the Company entered into a new letter agreement, or the New Letter Agreement, with CSM, a related party affiliated with the family of Evangelos J. Pistiolis, and on March 10, 2014, June 18, 2014, January 1, 2017 and April 24, 2017 the Company entered into management agreements, or Management Agreements, between CSM and the Company's vessel-owning subsidiaries respectively.

The fees charged by and expenses relating to CSM for the periods ended June 30, 2016 and 2017 are as follows:

 

	Six Months Ended June 30,
	2016	2017	Presented in:
Management fees	95	34	Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet
	658	1,081	Management fees - related parties -Statement of comprehensive income/(loss)
Supervision services fees	34	8	Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet
Superintendent fees	40	43	Vessel operating expenses -Statement of comprehensive income/(loss)
	45	15	Capitalized in Vessels, net / Advances for vessels acquisitions / under construction –Balance sheet
Accounting and reporting cost	90	87	Management fees - related parties -Statement of comprehensive income/(loss)
Financing fees	91	-	Current and non-current portion of long-term debt – Balance sheet
Commission for sale and purchase of vessels	-	707	Management fees - related parties -Statement of comprehensive income/(loss)
Commission on charter hire agreements	146	236	Voyage expenses - Statement of comprehensive income/(loss)
Performance incentive fee	-	1,250	Management fees - related parties -Statement of comprehensive income/(loss)
Total	1,199	3,461

  

For periods ended June 30, 2016 and 2017, CSM charged the Company newbuilding supervision related pass-through costs amounting to $491 and $109 respectively, that are not included in the table above.

(c)   Vessel Acquisitions from affiliated entities: From February 20 to June 14, 2017 the Company entered into a series of transactions with a number of entities affiliated with Evangelos J. Pistiolis that led to the purchase of Hull No 2648, 90% interest in M/T Stenaweco Elegance and 50% interests in Hulls No S443 and S444 (see Note 1, Note 4 and Note 13).

 

 

 

 

6.

Leases

 

A. Lease arrangements, under which the Company acts as the lessee

Future minimum lease payments:

The Company's future minimum lease payments required to be made after June 30, 2017, relating to the bareboat chartered-in vessels M/T Stenaweco Energy and M/T Stenaweco Evolution are as follows:

Year ending December 31,	Bareboat Charter Lease Payments
2017 (remainder)	3,167
2018	6,282
2019	6,282
2020	6,299
2021	6,282
2022	1,034
Total	29,346

B. Lease arrangements, under which the Company acts as the lessor

Charter agreements:

In the period ended June 30, 2017, the Company operated four vessels (M/T Stenaweco Energy, M/T Stenaweco Evolution, M/T Stenaweco Excellence and M/T Stenaweco Elegance) under time charters with Stena Weco A/S, two vessels (M/T Eco Fleet and M/T Eco Revolution) under time charters with BP Shipping and one vessel (M/T Nord Valiant) under time charter with Dampskibsselskabet Norden A/S. Future minimum time-charter receipts , based on the vessels commitments to these non-cancellable time charter contracts, as of June 30, 2017, are as follows:

Year ending December 31,		Time Charter receipts
2017 (remainder)			20,074
2018			38,071
2019			26,514
2020			9,699
2021			3,814
Total			98,172

In arriving at the minimum future charter revenues, an estimated 20 days off-hire time to perform scheduled dry-docking on each vessel has been deducted, and it has been assumed that no additional off-hire time is incurred, although there is no assurance that such estimate will be reflective of the actual off-hire in the future

7.

Debt:

On July 9, 2015, the Company entered into a credit facility with ABN Amro Bank of Holland ("the ABN facility") for the financing of the vessels M/T Eco Fleet and M/T Stenaweco Evolution.

The Company drew down $21,000 under the ABN facility on July 13, 2015 to finance the last shipyard installment of M/T Eco Fleet and another $1,200 on September 30, 2015.Furthermore, the Company drew down $22,200 under the ABN facility on January 15, 2016 to finance the last shipyard installment of M/T Eco Revolution. Finally, the Company drew down $20,000 under the ABN facility on August 5, 2016 to finance the last shipyard installment of M/T Nord Valiant ("Tranche C" part of the facility).

On April 21, 2017, the Company was informed by ABN Amro that the Company was in breach of a loan covenant that requires that any member of the family of Mr. Evangelos Pistiolis maintain an ownership interest (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of 30% of the Company's outstanding common shares. ABN Amro requested that either the family of Mr. Evangelos Pistiolis maintain an ownership interest of at least 30% of the outstanding common shares or maintain a voting rights interest of above 50% in the Company. In order to regain compliance with the loan covenant, the Company issued the Series D preferred shares (see Note 9).  On July 28, 2017 ABN Amro by way of a supplemental agreement removed the loan covenant that required that any member of the family of Mr. Evangelos Pistiolis maintains an ownership interest of 30% of the Company's issued and outstanding common shares and replaced it with a covenant that states that no other party other than a member of the family of Mr. Evangelos Pistiolis (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) acquires a voting interest of more than 50% of the Company's share capital, without ABN Amro's prior written approval.

 

 

As at June 30, 2017, the outstanding balance of the ABN facility is $56,700.

The ABN facility bears interest at LIBOR plus a margin of 3.90%, except for the Tranche C part of the facility that bears interest at LIBOR plus a margin of 3.75%. The applicable three-month LIBOR as of June 30, 2017 was 1.30%.

On May 11, 2016, the Company entered into a credit facility with Norddeutsche Landesbank Girozentrale Bank of Germany for $23,185 ("the NORD/LB facility") for the financing of the vessel M/T Stenaweco Excellence.

The Company drew down $23,185 under the NORD/LB facility on May 13, 2016 to finance the last shipyard installment of the M/T Stenaweco Excellence.

On May 16, 2017 NORD/LB by way of a supplemental agreement provided a waiver until December 31, 2017 for the breach of the loan covenant that requires that any member of the family of Mr. Evangelos Pistiolis maintains an ownership interest (either directly and/or indirectly through companies beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of 20% of the Company's issued and outstanding common shares. In addition NORD/LB agreed to reduce the abovementioned minimum percentage to 10%.

As at June 30, 2017, the outstanding balance of the NORD/LB facility is $21,139.

The NORD/LB facility bears interest at LIBOR plus a margin of 3.43%. The applicable three-month LIBOR as of June 30, 2017 was 1.30%.

On July 20, 2016, Eco Seven that was later acquired by the Company entered into a credit facility with Alpha Bank of Greece for $23,350 ("the Alpha facility") for the financing of the vessel M/T Stenaweco Elegance. The credit facility is repayable in 12 consecutive quarterly installments of $400 and 20 consecutive quarterly installments of $303, commencing in May 2017, plus a balloon installment of $12,500 payable together with the last installment in February 2025.

The Company drew down $23,350 under the Alpha facility on February 24, 2017 to finance the last shipyard installment of the M/T Stenaweco Elegance.

The facility contains various covenants, including an asset cover ratio of 125% as well as restrictions on the shipowning company incurring further indebtedness or guarantees. It also restricts the shipowning company from paying dividends if such a payment would result in an event of default or in a breach of covenants under the loan agreement.

The facility is secured as follows:

•          First priority mortgage over M/T Stenaweco Elegance;

•          Assignment of insurance and earnings of the mortgaged vessel;

•          Specific assignment of any time charters with duration of more than 12 months;

•          Corporate guarantee of Top Ships Inc.;

•          Pledge of the shares of the shipowning subsidiary;

•          Pledge over the earnings account of the vessel.

 

As at June 30, 2017, the outstanding balance of the Alpha facility is $22,950.

The Alpha facility bears interest at LIBOR plus a margin of 3.50%. The applicable three-month LIBOR as of June 30, 2017 was 1.30%.

On February 17, 2017, the Company completed a private placement of 7,500 Series C convertible preferred shares (the "Series C shares") for an aggregate principal amount of $7,500 with Xanthe Holdings Ltd ("Xanthe") a non-U.S. institutional investor, non-affiliated with the Company but affiliated with Kalani (see Note 9). The Company has accounted for the sale of the Series C shares as a debt issuance since its characteristics are more akin to debt rather than equity and dividends of the Series C shares were accounted as interest. Pursuant to the issuance of the Series C Shares, the Company recognized the beneficial conversion feature ("BCF") by allocating the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by the difference between the effective conversion price per share and the fair value of the Company's common stock per share on the commitment date, to additional paid-in capital. Since the intrinsic value of the BCF at the commitment date was greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the BCF was limited to the amount of the proceeds allocated to the convertible instrument. The Company has initially recognized $7,500 of debt discount and has amortized $2,907 in the six months ended June 30, 2017, included in Interest and finance costs in the accompanying Statement of comprehensive income/(loss). As of June 30, 2017 the remaining debt discount related to the issuance of Series C shares is $4,593.

In the six months ended June 30, 2017 the Company has made the following repayments (conversions of Series C Shares into common stock):

Series C shares conversions into common stock (accounted for as repayments)	Amounts
June 27, 2017	550
June 29, 2017	1,517
June 30, 2017	748
Amount outstanding under the Series C shares	4,685

As of June 30, 2017 the Series C outstanding balance amounts to $4,685, excluding deferred finance fees of $92 and debt discounts of $4,593, and is included in Short-term debt.

From February 6 to June 26, 2017 the Company entered into a series of unsecured short term notes (the "Notes") with Kalani and Xanthe as follows:

Agreement date	Amount drawn	Fees	Interest	Amount settled	Amounts forgiven	Outstanding Amount	Maturity	Counterparty
February 6, 2017	3,500	210	22	(3,500)	-	-	May 15, 2017	Kalani
March 22, 2017	5,000	200	7	(5,000)	-	-	October 7, 2017	Kalani
March 28, 2017	10,000	-	24	(10,000)	-	-	August 25, 2017	Kalani
April 5, 2017	7,700	-	42	(7,700)	-	-	September 4, 2017	Kalani
May 15, 2017	5,000	-	28	(3,106)	(1,118)	776	August 23, 2017	Xanthe
June 26, 2017	3,000	-	2	-	-	3,000	October 24, 2017	Kalani
	34,200	410	125	(29,306)	(1,118)	3,776

As of June 30, 2017 the Notes outstanding balance amounts to $3,776 and is included in Short-term debt.

 

 

The proceeds from the sales of the Notes were used for vessel acquisitions. The Notes bear interest at a rate of 6% and carry customary covenants and restrictions, including the covenant that all net proceeds that the Company receives from the sale of any equity securities of the Company shall be utilized exclusively to repay any outstanding amounts under the Notes until the Notes are repaid in full. The Notes also restrict the Company from redeeming, repurchasing or declaring any cash dividend or distribution on any of its capital stock (other than any obligations to do so outstanding as of the issuance dates of the Notes), as long as there are outstanding amounts under the Notes.

On December 23, 2015, the Company entered into an unsecured revolving credit facility with Family Trading ("the Family Trading facility"), a related party owned by the Lax Trust, for up to $15,000 to be used to fund the Company's newbuilding program and working capital relating to the Company's operating vessels. This facility was repayable in cash no later than December 31, 2016, but the Company had the option to extend the facility's repayment up to December 31, 2017. On December 28, 2016 the maturity of the Family Trading facility was extended to January 31, 2017 and on January 27, 2017 the maturity of the Family Trading loan was extended to February 28, 2017 with all terms remaining the same.

On February 21, 2017, the Company amended and restated the Family Trading Credit Facility (the "Amended Family Trading Credit Facility") in order to, among other things, remove any limitation in the use of funds drawn down under the facility, reduce the mandatory cash payment due under the facility when the Company raises capital through the issuance of certain securities, remove the revolving feature of the facility, and extend the facility for up to three years. Additionally, the interest rate of the facility increased to 10% (from 9%) and the commitment fee decreased to 2.5% (from 5%). Further, under the terms of the Amended Family Trading Credit Facility, if the Company raises capital via the issuance of warrants, debt or equity, it is obliged to repay any amounts due under the Amended Family Trading Credit Facility and any accrued interest and fees up to the time of the issuance in cash or in Common Shares at Family Trading's option. Family Trading retains the right to delay this mandatory repayment at its absolute discretion. For the first six months after the execution of the facility, no more than $3,500 can be mandatorily prepaid in cash. Subject to certain adjustments pursuant to the terms of the Amended Family Trading Credit Facility, the number of common shares to be issued as repayment of the amounts outstanding under the facility will be calculated by dividing the amount redeemed by 80% of the lowest daily Volume-Weighted Average Price ("VWAP") of the Company's common shares on the Nasdaq Capital Market during the twenty consecutive trading days ending on the trading day prior to the payment date (the "Applicable Price"), provided, however, that at no time shall the Applicable Price be lower than $0.60 per common share (the "Floor Price").

Further, in the case where the Company raises capital (whether publicly or privately) and the Applicable Price is higher than the lowest of (henceforth the "Issuance Price"):

a.

the price per share issued upon an equity offering of the Company;

b.

the exercise price of warrants or options for common shares;

c.

the conversion price of any convertible security into common shares; or

d.

the implied exchange price of the common shares pursuant to an asset to equity or liability to equity swap,

, then the Applicable Price will be reduced to the Issuance Price. Finally, in case the Applicable Price is higher than the exercise price of the Company's warrants, the Applicable Price will be reduced to the exercise price of such outstanding warrants.

As of June 30, 2017, the outstanding amount under the Amended Family Trading Credit Facility is $2,958, excluding deferred finance fees of $511, and is included in Non-current portion of debt from related parties.  The commitment fees payable and interest payable are $40 and $23 respectively. Upon conversion of the principal, interest and fees outstanding as of June 30, 2017 at the Floor Price, Family Trading would receive 5,034,161 common shares.

 

 

During the six months ended June 30, 2017 the Company drew down and repaid the following amounts:

Date	Amount drawn / (repaid)
January 2017	(995)
February 2017	(3,036)
May 2017	(54)
June 2017	2,958
Total	(1,127)

The Company during the six months ended June 30, 2017 issued 2,590 common shares as payment for $1,198 of accrued fees and interest under the Amended Family Trading Credit Facility, that resulted in additional non-cash debt conversion expenses amounting to $842, included in Interest and finance costs in the accompanying Statement of comprehensive income/(loss) .

 

8.

Commitments and Contingencies:

Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, insurance and other claims with suppliers relating to the operations of the Company's vessels. Currently, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the accompanying consolidated financial statements.

From March 30, 2017 to June 14, 2017 the Company entered into a series of transactions with a number of entities affiliated with Evangelos J. Pistiolis that led to the purchase of 50% interest in two newbuilding vessels (Hull No S443 and Hull No S444) and 100% interest in one newbuilding vessel (Hull No 2648). As a result of these transactions, the Company has remaining contractual commitments for the acquisition of its fleet totaling $60,140, including $13,708, $14,455 and $31,977 pursuant to newbuilding agreements for Hulls No S443, No S444 and No 2648 respectively. Of these contractual commitments, $11,975 is payable in 2017 and $48,165 in 2018.

The Company accrues for the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. Currently, management is not aware of any such claims or contingent liabilities, which should be disclosed, or for which a provision should be established in the accompanying consolidated financial statements.

 

9.

Common Stock, Additional Paid-In Capital and Dividends:

A discussion of the Company's common stock, additional paid-in capital and dividends can be found in the Company's annual financial statements for the fiscal year ended December 31, 2016 which have been filed with the Securities and Exchange Commission on Form 20-F on March 14, 2017.

Reverse stock split: On May 11 and June 23, 2017, the Company effected a 1-for-20 and a 1-for-15 reverse stock split of its common stock respectively. There was no change in the number of authorized common shares of the Company. All share and per share amounts, as well as warrant shares eligible for purchase under the Company's warrants, in these financial statements have been retroactively adjusted to reflect these reverse stock splits.

Series C preferred convertible shares: On February 17, 2017, the Company completed a private placement of 7,500 Series C shares for an aggregate principal amount of $7,500 with Xanthe. The Series C shares are convertible at the lesser of the following two prices: (i) $1,125.00 and (ii) 75% of the lowest daily VWAP of the Company's common shares over the twenty-one (21) consecutive trading day period ending on the trading day immediately prior to such date of determination, but in no event will the conversion price be less than $0.25. The Series C shares may not be converted if, after giving effect to the conversion, a holder together with certain related parties would beneficially own in excess of 4.99% of the Company's outstanding common shares. Holders of Series C shares shall have no voting rights. The Company at its option shall have the right to redeem the outstanding Series C shares at an amount equal to 120% of the Conversion Amount being redeemed. The Series C shares shall be subject to redemption in cash at the option of the holders thereof at any time after the occurrence and continuance of a Triggering Event. A Triggering Event includes, among other things, certain bankruptcy proceedings, the delisting of the Company's common shares from Nasdaq, failure to timely deliver common shares upon conversion, failure to pay cash upon redemption, or failure to observe or perform certain covenants. Further, at any time after the tenth business day before the first year anniversary of the issuance of the Series C shares, the holders may require the Company to redeem all or any number of Series C shares held at a purchase price equal to 100% of the Conversion Amount of such shares. The holders the Series C shares shall be entitled to receive quarterly dividends at a rate of 8% per annum payable in common shares, except that any dividend not paid in common shares shall be payable in cash. Capitalized terms are defined in the Statement of Designations of the Series C shares. During the period ended June 30, 2017 the Company issued 6,502,660 common shares upon the conversion of 2,815 Series C shares and 243 common shares as a commitment fee pursuant to the Series C shares sale agreement.

 

 

 

 

Series D preferred shares: On May 8, 2017, the Company issued 100,000 shares of Series D preferred shares (the "Series D shares") to Tankers Family Inc., a company controlled by Lax Trust for $1 pursuant to a stock purchase agreement. The Series D shares are not convertible into common shares and each Series D share has the voting power of 1,000 common shares. The Series D shares have no dividend or distribution rights and shall expire and all outstanding Series D shares shall be redeemed by the Company for par value on the date the currently outstanding loans with ABN Amro and NORD/LB, or loans with any other financial institution, which contain covenants that require that any member of the family of Mr. Evangelos Pistiolis maintain a specific minimum ownership interest (either directly and/or indirectly through companies or other entities beneficially owned by any member of the Pistiolis family and/or trusts or foundations of which any member of the Pistiolis family are beneficiaries) of the Company's issued and outstanding common shares, respectively, are fully repaid or reach their maturity date. The Series D shares shall not be otherwise redeemable and upon any liquidation, dissolution or winding up of the Company, the Series D shares shall have a liquidation preference of $0.01 per share.

Common stock purchase agreement: On February 2, 2017, the Company, entered into an agreement with Kalani, under which the Company may sell up to $40,341 of its common stock to Kalani over a period of 24 months, subject to certain limitations (the "Common stock purchase agreement"). Proceeds from any sales of common stock will be used for general corporate purposes. Kalani has no right to require any sales and is obligated to purchase the common stock as directed by the Company, subject to certain limitations set forth in the agreement. In consideration for entering into the agreement, the Company has issued $606 of its common stock to Kalani as a commitment fee. No warrants, derivatives, or other share classes are associated with this agreement. As of June 30, 2017, the Company had received proceeds (net of 1% fees), amounting to $29,306 and issued 2,090,961 common shares, out of which 3,628 shares refer to commitment fees. The Common stock purchase agreement does not determine a fixed price for the issuance of shares, therefore the number of common shares that are going to be issued under this agreement cannot be estimated. During the six months ended June 30, 2017, the Common stock purchase agreement was amended four times in order to increase the amount of the offering and the commitment fee.

Warrants: During the period ended June 30 2017 the Company issued 1,429 common shares upon the exercise of 274,265 warrants. As of June 30, 2017 the Company had 2,399,141 warrants outstanding relating to the follow-on offering of June 6, 2014, which entitle their holders to purchase 17,081,886 of the Company's common shares at an exercise price of $0.35, as it may be further adjusted. Furthermore the issuance of the Series C shares constituted an issuance of Variable Price Securities (as defined in the Warrant Agreement) and that, pursuant to Section 2(d) of the Warrant Agreement, each holder shall have the right, but not the obligation, to, in any exercise of warrants, designate the Variable Price (as defined in the Warrant Agreement) at which the Series C shares are convertible, namely the lesser of: (i) $1,125.00 and (ii) 75% of the lowest daily VWAP of the Company's common shares over the twenty-one (21) consecutive trading day period ending on the trading day immediately prior to such date of determination, but in no event will the conversion price be less than $0.25.

10.

(Loss)/Earnings Per Common Share:

All shares issued (including non-vested shares issued under the Company's stock incentive plans) are the Company's common stock and have equal rights to vote and participate in dividends and in undistributed earnings. Non-vested shares do not have a contractual obligation to share in the losses.

 

For purposes of calculating diluted earnings per share the denominator of the diluted earnings per share calculation includes:

·

any incremental shares assumed issued under the treasury stock method weighted for the period the non-vested shares were outstanding,

·

the potential dilution that could occur if warrants to issue common stock (see Note 9) were exercised, to the extent that they are dilutive, using the treasury stock method,

·

the potential dilution that could occur if Series B convertible preferred shares were converted, using the if-converted method weighted for the period the Series B convertible preferred shares were outstanding,

·

the potential dilution that could occur if Series C shares were converted (see Note 9), using the if-converted method weighted for the period the Series C shares were outstanding,

·

the potential dilution that could occur if the outstanding balance of principal, interest and fees of the Family Trading facility were converted (see Note 7), using the if-converted method,

·

the potential dilution that could occur if the Company completes all sales pursuant to its Common stock purchase agreement, using the if-converted method, and

·

any shares granted and vested but not issued up to the reporting date.

 

 

The components of the calculation of basic and diluted earnings per share for the periods ended June 30, 2016 and 2017 are as follows:

	Six months ended June 30,
	2016	2017
Income:
Net income/(loss)	290	(5,838)
Earnings per share:
Weighted average common shares outstanding, basic and diluted	11,422	337,138
Earnings/(Loss) per share, basic and diluted	25.39	(17.32)

For the period ended June 30, 2016, no potential dilution that could occur if our 5,273,820 warrants outstanding as of June 30, 2016 to issue common stock were exercised was included in the calculation of diluted earnings per share, since the warrants were not "in the money". For the period ended June 30, 2017 no dilutive shares were included in the computation of diluted earnings per share because to do so would have been antidilutive for the period presented.

 

11.

Financial Instruments:

The principal financial assets of the Company consist of cash on hand and at banks, restricted cash, prepaid expenses and other receivables. The principal financial liabilities of the Company consist of short and long term loans, related party loans, accounts payable due to suppliers, amounts due from/to related parties, accrued liabilities, interest rate swaps, convertible preferred shares and warrants granted to third parties.

a)

Interest rate risk: The Company is subject to market risks relating to changes in interest rates relating to debt outstanding under the loan facility with ABN Amro Bank, NORD/LB Bank and Alpha Bank on which it pays interest based on LIBOR plus a margin. In order to manage part or whole of its exposure to changes in interest rates due to this floating rate indebtedness, the Company has entered into three interest rate swap agreements with ABN Amro Bank, another interest rate swap agreement with NORD/LB Bank and might enter into more interest rate swap agreements in the future.

b)

Credit risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions with which it places its temporary cash investments.

c)

Fair value:

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short term maturities. The Company considers its creditworthiness when determining the fair value of the credit facilities.

The fair value of bank debt approximates the recorded value due to its variable interest rate, being the LIBOR. LIBOR rates are observable at commonly quoted intervals for the full term of the loans and, hence, bank loans are considered Level 2 items in accordance with the fair value hierarchy.

The fair value of interest rate swaps is determined using a discounted cash flow method taking into account current and future interest rates and the creditworthiness of both the financial instrument counterparty and the Company and, hence, they are considered Level 2 items in accordance with the fair value hierarchy.

The fair value of warrants is determined using the Cox, Ross and Rubinstein Binomial methodology and hence are considered Level 3 items in accordance with the fair value hierarchy.

 

 

The Company follows the accounting guidance for Fair Value Measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities;

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data;

Level 3: Unobservable inputs that are not corroborated by market data.

Interest rate swap agreements

 

The Company has entered into interest rate swap transactions to manage interest costs and the risk associated with changing interest rates with respect to its variable interest rate credit facilities. These interest rate swap transactions fixed the interest rates based on predetermined ranges in LIBOR rates. The Company has entered into the following agreements with ABN Amro Bank and Nord/LB Bank relating to interest rate swaps, the details of which were as follows:

 

Agreement Date	Counterparty	Effective (start) date:	Termination Date:	Notional amount on effective date	Interest rate payable
June 3, 2016	ABN Amro Bank	April 13, 2018	Ju1y 13, 2021	$16,575	1.4425%
December 19, 2016	ABN Amro Bank	December 21, 2016	January 13, 2022	$20,700	2.0800%
December 19, 2016	ABN Amro Bank	December 21, 2016	August 10, 2022	$19,450	2.1250%
March 29, 2017	NORD/LB Bank	May 17, 2017	May 17, 2023	$21,139	2.1900%

The fair value of the swaps was considered by the Company to be classified as Level 2 in the fair value hierarchy since their value was being derived by observable market based inputs. The Company will pay a fixed rate and will receive a floating rate for these interest rate swaps. The fair values of these derivatives determined through Level 2 of the fair value hierarchy were derived principally from, or corroborated by, observable market data. Inputs included quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allowed values to be determined.

 

Warrant liability

 

The Company's warrants outstanding as of December 31, 2016 and June 30, 2017, are recorded at their fair values. As of June 30, 2017 the Company's derivatives consisted of 2,399,141 warrant shares outstanding, issued in connection with the Company's follow-on offering that closed on June 11, 2014, as depicted in the following table:

 

Warrants Outstanding December 31, 2016	Warrant Shares Outstanding December 31, 2016	Term	Warrant Exercise Price*	Fair Value – Liability December 31, 2016
2,673,406	3,381,791	5 years	$1.97	3,222

* Applying the Variable Exercise Price as applicable at December 31, 2016

 

 

Warrants Outstanding June 30, 2017	Warrant Shares Outstanding June 30, 2017	Term	Warrant Exercise Price	Fair Value – Liability June 30, 2017
2,399,141	17,081,886	5 years	$0.35	1,397

* Applying the Variable Exercise Price as applicable at June 30, 2017

 

Fair value of financial liabilities

 

The following table presents the fair value of those financial assets and liabilities measured at fair value on a recurring basis and their locations on the accompanying consolidated balance sheets, analyzed by fair value measurement hierarchy level:

 

			Fair Value Measurement at Reporting Date
As of December 31, 2016	Total		Using Quoted Prices in  Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Other Unobservable Inputs (Level 3)
Non-current asset		300	-		300		-
Non-current liability		3,563	-		341		3,222
As of June 30, 2017
Non-current asset		202	-		202		-
Non-current liability		2,028	-		631		1,397

 

 

The following table sets forth a summary of changes in fair value of the Company's level 3 fair value measurements for the six months ended June 30, 2017:

 

Closing balance – December 31, 2016			3,222
Change in fair value of warrants, included in the consolidated statements of comprehensive income/(loss)			(1,679	)
Adjustment for cashless exercise of warrants, included in Additional paid-in capital line item of consolidated balance sheets			(146	)
Closing balance – June 30, 2017			1,397

Derivative Financial Instruments not designated as hedging instruments:

 

The Company's interest rate swaps did not qualify for hedge accounting. The Company estimates the fair value of its derivative financial instruments at the end of every period and reflects the resulting unrealized gain or loss during the period in Gain/(loss) on derivative financial instruments in the statement of comprehensive income/(loss) as well as presenting the fair value at the end of each period in the balance sheet.

 

The major unobservable input in connection with the valuation of the Company's warrants is the volatility used in the valuation model, which is approximated by using 2-year weekly historical observations of the Company's share price. The annualized 2-year weekly historical volatility that has been applied in the warrant valuation as of June 30, 2017 was 169.16%. A 5% increase in the volatility applied would lead to an increase of 8.2% in the fair value of the warrants. The fair value of the Company's warrants is considered by the Company to be classified as Level 3 in the fair value hierarchy since it is derived by unobservable inputs.

 

Quantitative information about Level 3 Fair Value Measurements
Derivative type	Fair Value at December 31, 2016	Fair Value at June 30, 2017	Balance Sheet Location	Valuation Technique	Significant Unobservable Input	Value December 31, 2016	Value June 30, 2017
Warrants	3,222	1,397	Non-Current liabilities –Derivative financial instruments	Cox, Ross and Rubinstein Binomial	Volatility	104.70%	169.16%

Information on the location and amounts of derivative financial instruments fair values in the balance sheet and derivative financial instrument losses in the statement of comprehensive income/(loss) are presented below:

	Amount of gain/(loss) recognized in Statement of comprehensive income/(loss) located in gain on Derivate Financial Instruments
	June 30, 2016	June 30, 2017
Interest rate swaps- change in fair value	(156)	(388)
Interest rate swaps– realized loss	-	(234)
Warrants- change in fair value	1,376	1,679
Total	1,220	1,057

12.

Mezzanine Equity

A discussion of the Company's Mezzanine equity can be found in the Company's annual financial statements for the fiscal year ended December 31, 2016 which have been filed with the Securities and Exchange Commission on Form 20-F on March 14, 2017.

 

 

 

The following table summarizes the activity in mezzanine equity since December 31, 2016:

Series B convertible preferred stock	Total
Balance December 31, 2016	1,741
Conversions of Series B convertible preferred stock to common stock	(1,372)
Balance June 30, 2017	369

During the period ended June 30, 2017 the Company issued 23,331 common shares upon the conversion of 1,660 Series B convertible preferred shares. As of June 30, 2017 there are 446 Series B convertible preferred stock outstanding, pursuant to conversions of Series B convertible preferred stock to common stock from February 6 to June 30, 2017.

13.

Investments in unconsolidated joint ventures

On March 30, 2017, the Company, through its wholly-owned subsidiary, Lyndon International Co., acquired a 49% ownership interest in City of Athens from Fly Free Company, a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $4,200. City of Athens is a party to a newbuilding contract for the construction of Hull No S-443, a 50,000 dwt newbuilding product/chemical scheduled for delivery from Hyundai in January 2018. Furthermore on March 30, 2017, the Company, through its wholly-owned subsidiary, Gramos Shipping Company Co., acquired a 49% ownership interest in Eco Nine from Maxima International Co., a Marshall Islands corporation and wholly-owned subsidiary of the Lax Trust, for an aggregate purchase price of $3,500. Eco Nine is a party to a newbuilding contract for the construction of Hull No S-444, a 50,000 dwt newbuilding product/chemical scheduled for delivery from Hyundai in April 2018. On June 14, 2017 the company acquired an additional 1% interest in City of Athens and in Eco Nine for an aggregate consideration of $157, increasing the Company's interest in both companies to 50%. On June 3 and May 1, 2017 the Company advanced $1,495 to City of Athens and another $1,495 to Eco Nine respectively to cover upcoming newbuilding installments. Finally fees and costs related to the investments amounting to $353 were accounted for as part of the investment.

On June 30, 2017 the Lax Trust sold its 50% remaining interest in City of Athens and in Eco Nine to Gunvor S.A. ("Gunvor"), a non-affiliated company and on July 7, 2017 the Company entered into a joint venture agreement with Gunvor. Furthermore upon both vessels delivery from Hyundai, each of the two vessels will enter into time charter employments with Clearlake Shipping Pte Ltd, a subsidiary of Gunvor, for three years firm plus two additional optional years. The Company's exposure is limited to its share of the net assets of City of Athens and Eco Nine proportionate to its 50% equity interest in these companies. Generally, the Company shares in the profits and losses, cash flows and other matters relating to its investments in City of Athens and in Eco Nine in accordance with its ownership percentage. The vessels are managed by CSM, pursuant to management agreements. The Company accounts for investments in joint ventures using the equity method since it has significant influence but not control over the investment. The Company is obligated to contribute funds for yard installments in relation to the construction of the newbuilding vessels of the companies, as needed and proportionate to its 50% equity interest in these companies.

A condensed summary of the financial information for equity accounted investments 50% owned by the Company shown on a 100% basis are as follows (in thousands):

		June 30, 2017
		City of Athens				Eco Nine
Current assets			37				37
Non-current assets			4,740				3,136
Current liabilities			-				-
Long-term liabilities			-				-
Net operating revenues			-				-
Net loss			(2	)			(18	)

14.

Subsequent Events

On July 12, 2017, the Company entered into a note purchase agreement and issued an unsecured promissory note to Xanthe in the principal amount of $3,060 for a cash consideration of $3,000, with a mandatory redemption no later than November 7, 2017.

On July 17, 2017, the Company signed a commitment letter with AT Bank for a senior debt facility (the "Senior Facility") of up to $23,500 to fund the delivery of Hull No 2648, due for delivery in the third quarter of 2017. The Senior Facility remains subject to the agreement and the execution of customary legal documentation. The Senior Facility will be payable in 20 consecutive quarterly installments of $325, commencing three months from draw down, and a balloon payment of $17,000 payable together with the last installment. The Senior Facility will bear interest at LIBOR plus a margin of 4% and a commitment fee of 2% per annum will be payable quarterly in arrears over the committed and undrawn portion of the facility, starting from the date of signing the commitment letter. On the same date the Company signed a commitment letter also with AT Bank for a senior debt facility of up to $8,993 for the pre-delivery financing of Hull No 2648 (the "Predelivery Facility"). The Predelivery Facility can be drawn down in five tranches to finance in full the last five pre-delivery instalments of Hull No 2648 due for payment between August 2017 and May 2018 and will be repaid from the proceeds of the Senior Facility on the drawdown of the latter. The Predelivery Facility will bear interest at LIBOR plus a margin of 8.5% and a commitment fee of 4.25% per annum will be payable quarterly in arrears over the committed and undrawn portion of the facility, starting from the date of signing the commitment letter.