Business Context and Reporting Period
This Form 6-K filing by TOP Ships Inc. covers the month of February 2020. The Company is a Greek foreign private issuer engaged in the ownership and operation of product/chemical tankers. The report details significant corporate actions, including vessel sales, acquisitions, financing arrangements, and equity transactions occurring between July 2019 and February 2020.
Key Financial Metrics and Transactions
- Equity Financing: Entered into an Equity Distribution Agreement on February 12, 2020, to sell up to $5.0 million of common shares via Maxim Group LLC. In September 2019, a public offering generated gross proceeds of approximately $10.5 million.
- Vessel Sales (Completed): Sold M/T Eco Revolution for $23.0 million and M/T Eco Fleet for $21.0 million in January 2020. Proceeds were used to fully prepay the ABN AMRO loan facility ($29.5 million total).
- Vessel Sales (Pending): Agreed to sell M/T Stenaweco Elegance and M/T Eco Palm Desert in February 2020, expecting a gain of $4.0 million to $6.0 million and net cash release of $9.5 million to $11.5 million.
- Acquisitions: Acquired interests in two newbuilding contracts (Eco Los Angeles and Eco City of Angels) for a total of $14.4 million from an entity affiliated with the CEO.
- Debt and Preferred Stock: Extended the AT Bank Bridge Facility Note maturity to March 31, 2021. Redeemed 21,825 Series E Preferred Shares for $25.1 million between July 2019 and January 2020.
- Impairment Charges: Estimated impairment charges of $5.5 million and $6.8 million related to the January 2020 vessel sales, impacting 2019 results.
Material Changes and Developments
- Asset Restructuring: Completed sale and leaseback transactions for three vessels (M/T Stenaweco Excellence, Energy, and Evolution) with Oriental Fleet International. These are accounted for as financing transactions, keeping assets on the balance sheet with a repurchase obligation.
- Stock Split and Listing Status: Executed a 1-for-20 reverse stock split in August 2019. Regained Nasdaq compliance in September 2019 but received a non-compliance notice on December 26, 2019, due to the bid price falling below $1.00. A 180-day grace period extends to June 23, 2020.
- Warrant Exercises: Significant cashless exercises of Traditional Warrants (1.25 million shares issued) and Class A Warrants (1.34 million shares issued) occurred in late 2019 and early 2020.
Outlook, Risks, and Management Commentary
- Financial Impact: Management estimates the January 2020 vessel sales will result in a loss per share of $4.20 for the year ended 2019 due to impairment charges.
- Liquidity Strategy: The Company is actively managing liquidity through vessel sales and equity offerings. The pending sale of two MR2 tankers is expected to provide significant cash release after debt repayment.
- Listing Risk: The Company faces the risk of delisting from the Nasdaq Capital Market if it fails to regain compliance with the minimum bid price requirement by June 23, 2020. Management is considering options, including another reverse stock split.
- Operational Outlook: Newly acquired vessels (Eco Los Angeles and Eco City of Angels) are scheduled to commence time charters with Trafigura for a firm duration of three years.
Investor Verification Checklist
- Verify the final closing dates and net proceeds from the pending sale of M/T Stenaweco Elegance and M/T Eco Palm Desert.
- Confirm the Company's plan and timeline to regain Nasdaq compliance before the June 23, 2020 deadline.
- Review the audited 2019 financial statements to confirm the exact impact of the $12.3 million in estimated impairment charges.
- Monitor the utilization of the new $5.0 million Equity Distribution Agreement with Maxim Group LLC.
- Assess the terms of the sale and leaseback financing with Oriental Fleet International, specifically the interest rates and balloon payment obligations.