*Adjusted to reflect the reverse stock splits effected in August 2019 (see Note 9)

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

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States Dollars – except share and per share data, unless otherwise stated)

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, 2019, 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 condensed consolidated financial statements as well as intermediary companies that are 100% subsidiaries of the Company that own shipowning companies.

As of June 30, 2019, the Company was the owner of 50% of outstanding shares of the following companies.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States Dollars – except share and per share data, unless otherwise stated)

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, 2018, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 28, 2019.

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, 2019 are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2019.

On August 22, 2019 the Company effected a 1-for-20 reverse stock split of its common stock. There was no change in the number of authorized common shares of the Company. All numbers of share and earnings per share amounts in these financial statements have been retroactively adjusted to reflect this reverse stock split.

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, 2018 which have been filed with the US Securities and Exchange Commission on Form 20-F on March 28, 2019. There have been no changes apart from the below to these policies in the six-month period ended June 30, 2019.

Adoption of new accounting standards

The Company adopted the accounting standards described below during the six months ended June 30, 2019:

Leases

On January 1, 2019, the Company adopted ASC 842. ASC 842 revises the accounting for leases. Under the new lease standard, lessees are required to recognize a right-of-use asset and a lease liability for substantially all leases. The new lease standard will continue to classify leases as either financing or operating, with classification affecting the pattern of expense recognition. The accounting applied by a lessor under the new guidance will be substantially equivalent to current lease accounting guidance. The following are the type of contracts that fall under ASC 842:

Time charter out contracts

The Company’s shipping revenues are principally generated from time charters . In a time charter contract, the vessel is hired by the charterer for a specified period of time in exchange for consideration which is based on a daily hire rate. The charterer has the full discretion over the ports visited, shipping routes and vessel speed. The contract/charter party generally provides typical warranties regarding the speed and performance of the vessel. The charter party generally has some 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 carry only lawful or non-hazardous cargo. In a time charter contract, the Company is responsible for all the costs incurred for running the vessel such as crew costs, vessel insurance, repairs and maintenance and lubes. The charterer bears the voyage related costs such as bunker expenses, port charges and canal tolls during the hire period. The charterer generally pays the charter hire in advance of the upcoming contract period. The Company determined that all time charter contracts are considered operating leases and therefore fall under the scope of ASC 842 because: (i) the vessel is an identifiable asset; (ii) the Company does not have substantive substitution rights; and (iii) the charterer has the right to control the use of the vessel during the term of the contract and derives the economic benefits from such use.

The transition guidance associated with ASC 842 allows for certain practical expedients to the lessors. The Company elected to not separate the lease and non-lease components included in the time charter revenue because (i) the pattern of revenue recognition for the lease and non-lease components (included in the daily hire rate) is the same and (ii) the lease component would be classified as an operating lease. The daily hire rate represents the hire rate for a bare boat charter as well as the compensation for expenses incurred running the vessel such as crewing expense, repairs, insurance, maintenance and lubes. Both the lease and non-lease components are earned by passage of time.

The adoption of ASC 842 did not impact the Company’s accounting for time charter out contracts as the treatment is consistent with prior policy. The revenue generated from time charter out contracts is recognized on a straight-line basis over the term of the respective time charter agreements, beginning when the vessel is delivered to the charterer until it is redelivered back to the Company, and is recorded as part of revenues, net of address commissions in the Company’s Condensed Consolidated Statement of Operations for the six months ended June 30, 2019 and 2018.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States Dollars – except share and per share data, unless otherwise stated)

Bareboat chartered in vessels

The Company adopted ASC 842 using the simplified transition method. Accordingly, comparative information was not adjusted and will continue to be reported under the previous lease standard. The adoption did not require an adjustment to opening retained earnings for the cumulative effect adjustment. The Company further utilized the package of practical expedients within ASC 842 that allows an entity to not reassess the following prior to the effective date (i) whether any expired or existing contracts were or contained leases, (ii) the lease classification for any expired or existing leases or (iii) initial direct costs for any existing leases. Additionally, the Company elected to not separate the lease and non-lease components related to a lease contract and to account for them as a single lease component for the purposes of the recognition and measurement requirements of ASC 842. Furthermore the Company upon adoption of ASC 842 assumed that it will not exercise the purchase options embedded in the lease contracts of the bareboat chartered in vessels.

The bareboat chartered in vessels, namely M/T Stenaweco Energy and M/T Stenaweco Evolution, have been bareboat chartered back for seven years at a bareboat hire of $8,586 per day and $8,625 per day, respectively. In addition, the Company has the option to buy back each vessel from the end of year three up to the end of year seven at a purchase price depending on when the option is exercised. Indicatively, if the option is exercised at the end of year seven, the purchase price of either one of the vessels will be $21,200. The Company enters into lease agreements for tanker vessels to support its operations. To facilitate compliance with ASC 842, the Company evaluated its existing lease arrangements to identify, track and record applicable leases. The implementation and adoption of this standard resulted in the Company recognizing right-of-use assets and lease liabilities for all of its operating leases on the accompanying condensed consolidated balance sheet as of June 30, 2019. The Company has no finance leases. The following table shows the impact of the adoption of ASC 842 on the Company’s current period condensed consolidated balance sheet as compared to the previous lease accounting standard, ASC Topic 840, Leases (“ASC 840”) as of January 1, 2019:

*The Company netted 5,277 which were previously recorded as Prepaid bareboat charter hire in the consolidated balance sheet as of December 31, 2018 against the Operating lease right-of-use asset upon adoption of ASC 842 on January 1, 2019. The Prepaid bareboat charter hire represented the unamortized balance of losses from the sale of the Bareboat chartered in vessels that were being amortized over the duration of the leases.

Operating leases for vessels are included in fixed assets, other current liabilities, and other noncurrent liabilities in the condensed consolidated balance sheets. Operating lease right of use (“ROU”) assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made to the lessor prior to lease commencement, less any lease incentives, and initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

The discount rate used to calculate the present value of lease payments was calculated by taking into account the original lease term and lease payments.

Finally all of the Company’s Sale and Leasebacks accounted for as financings have been re-evaluated under ASC 842 and the Company continues to account for them as financings.

Voyage charters

The Company entered into a voyage charter in the period under review lasting up to May 2019 and accounts for its voyage charter revenue under ASC 606. There were no voyage charters in 2018.

In a voyage charter contract, the charterer hires the vessel to transport a specific agreed-upon cargo for a single voyage, which may contain multiple load ports and discharge ports. The consideration in such a contract is determined on the basis of a freight rate per metric ton of cargo carried or occasionally on a lump sum basis. The charter party generally has a minimum amount of cargo. The charterer is liable for any short loading of cargo or "dead" freight. The voyage contract generally has standard payment terms of 95% freight paid within three days after completion of loading. The voyage charter party generally has a "demurrage" or "despatch" clause. As per this clause, the charterer reimburses the Company for any potential delays exceeding the allowed laytime as per the charter party clause at the ports visited, which is recorded as demurrage revenue. Conversely, the charterer is given credit if the loading/discharging activities happen within the allowed laytime known as despatch resulting in a reduction in revenue. In a voyage charter contract, the performance obligations begin to be satisfied once the vessel begins loading the cargo. The Company determined that its voyage charter contracts consist of a single performance obligation of transporting the cargo within a specified time period. Therefore, the performance obligation is met evenly as the voyage progresses and the revenue is recognized on a straight- line basis over the voyage days from the commencement of the loading of cargo to completion of discharge.

The voyage contracts are considered service contracts which fall under the provisions of ASC 606 because the Company, as the shipowner, retains the control over the operations of the vessel such as directing the routes taken or the vessel speed. The voyage contracts generally have variable consideration in the form of demurrage or despatch. The amount of revenue earned as demurrage by the Company for the six months ended June 30, 2019 and 2018 is $667 and $0 respectively. No amount of despatch was incurred by the Company for the six months ended June 30, 2019 and 2018.

Contract costs

In a voyage charter contract, the Company bears all voyage related costs such as fuel costs, port charges and canal tolls. These costs are considered contract fulfillment costs because the costs are direct costs related to the performance of the contract and are expected to be recovered. The costs incurred during the period prior to commencement of loading the cargo, primarily bunkers, are deferred as they represent setup costs and recorded as a current asset and are amortized on a straight-line basis as the related performance obligations are satisfied.

Other Comprehensive Income: The Company follows the provisions of guidance regarding reporting comprehensive income which requires separate presentation of certain transactions, such as unrealized gains and losses from effective portion of cash flow hedges, which are recorded directly as components of stockholders’ equity.

Derivatives and Hedging, Hedge Accounting: At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy undertaken for the hedge. The documentation includes identification of the hedging instrument, hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting exposure to changes in the hedged item’s cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to determine whether they actually have been highly effective throughout the financial reporting periods for which they were designated.

Contracts which meet the strict criteria for hedge accounting are accounted for as cash flow hedges. A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability, or a highly probable forecasted transaction that could affect profit or loss.

The effective portion of the gain or loss on the hedging instrument is recognized directly as a component of “Accumulated other comprehensive income” in equity, while the ineffective portion, if any, is recognized immediately in current period earnings.

The Company discontinues cash flow hedge accounting if the hedging instrument expires and it no longer meets the criteria for hedge accounting or designation is revoked by the Company. At that time, any cumulative gain or loss on the hedging instrument recognized in equity is kept in equity until the forecasted transaction occurs. When the forecasted transaction occurs, any cumulative gain or loss on the hedging instrument is recognized in the statement of income. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to net profit or loss for the year as a component of “Loss on derivatives”.

Accounting standards issued but not yet adopted

The FASB has issued accounting standards that have not yet become effective and may impact the Company’s condensed consolidated financial statements or related disclosures in future periods. These standards and their potential impact are discussed below:

Fair Value Measurement Disclosures — In August 2018, the FASB issued ASU No. 2018-13, "Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU No. 2018-13"). ASU No. 2018-13, which is part of the FASB's broader disclosure framework project, modifies and supplements the current U.S. GAAP disclosure requirements pertaining to fair value measurements, with an emphasis on Level 3 disclosures of the valuation hierarchy. ASU No. 2018-13 is effective on January 1, 2020, with early adoption permitted. The adoption of ASU No. 2018-13 is currently not expected to have a material impact on the Company's condensed consolidated financial statements.

Financial Instruments - Derivatives Held or Issued (subsequent to the adoption of ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities): In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities.  ASU 2017-12 amends the current hedge accounting model and requires certain new or modified disclosures to enable entities to better portray the economics of their risk management activities in their financial statements.  For public business entities, the amendments in ASU 2017-12 are effective for financial statements issued for fiscal years beginning after 15 December 2018, and interim periods within those fiscal years.  For all other entities, the amendments in ASU 2017-12 are effective for financial statements issued for fiscal years beginning after 15 December 2019, and interim periods within fiscal years beginning after 15 December 2020.  Early adoption is permitted, including adoption in an interim period.  The adoption of this ASU is not expected to have a material effect on the Company’s condensed consolidated financial statements.

Financial Instrument Credit Losses — In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses" ("ASU No. 2019-05"). ASU No. 2016-13 amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU No. 2016-13 is effective on January 1, 2020, with early adoption permitted. We are currently evaluating the potential impact of ASU No. 2016-13 on the Company’s condensed consolidated financial statements.

At June 30, 2019, the Company had a working capital deficit of $40,074 and cash and cash equivalents of $2,654.

The Company expects to finance its working capital deficit with operational cash flow, debt or equity issuances, or a combination thereof and other sources such as funds from the Company's controlling shareholder and CEO, Mr. Pistiolis, if required. If the Company is unable to arrange debt or equity financing, it is probable that the Company may also consider selling a vessel. Therefore, there is no substantial doubt about the Company's ability to continue as a going concern, within one year after the date of this report. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities, or any other adjustments that might result in the event the Company is unable to continue as a going concern.

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

The Company's vessels have been mortgaged as security under its loan facilities (see Note 7).

On January 30, March 13, April 5 and May 9, 2019, the Company took delivery of M/T Eco California, M/T Eco Marina Del Ray, M/T Eco Bel Air and M/T Eco Beverly Hills respectively from Hyundai (the first two vessels from Hyundai Mipo Vinashin and the second two vessels from Hyundai Mipo Dockyard).

(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, 2018 and 2019 are as follows:

On January 2, 2018, the Company’s board of directors granted to the Chief Executive Officer a bonus of $2,250 respectively, to be distributed at his own discretion to other executives.

(b)  Central Shipping Monaco SAM (“CSM”) – Letter Agreement and Management Agreements: On March 10, 2014, the Company entered into a letter agreement, with CSM, a related party affiliated with the family of Evangelos J. Pistiolis, which detailed the services and fees for the management of the Company’s fleet.

The fees charged by and expenses relating to CSM for the period ended June 30, 2018 are as follows:

  

For the period ended June 30, 2018, CSM charged the Company newbuilding supervision related pass-through costs amounting to $386, that are not included in the table above and are presented in Vessels, net / Advances for vessels acquisitions / under construction in the Company’s accompanying condensed consolidated condensed balance sheet.

On January 1, 2019, the Company terminated the letter agreement with CSM without incurring any penalties.

(c)  Central Shipping Inc (“CSI”) – Letter Agreement and Management Agreements: On January 1, 2019, the Company entered into a letter agreement with CSI, a related party affiliated with the family of Evangelos J. Pistiolis, which detailed the services and fees for the management of the Company’s fleet.

For the period ended June 30, 2019, CSI charged the Company newbuilding supervision related pass-through costs amounting to $463, that are not included in the table above and are presented in Vessels, net / Advances for vessels acquisitions / under construction in the Company’s accompanying condensed consolidated balance sheet.

(d)   Contribution of Series E Shares to Family Trading Inc (“Family Trading”): On March 29, 2019 the Company entered into a stock purchase agreement with Family Trading pursuant to which the Company exchanged the outstanding principal, fees and interest of the Further Amended Family Trading Credit Facility with 27,129 Series E Shares (defined below, also see Note 7 and 12).

(e)  Charter Party with Central Tankers Chartering Inc (“Central Tankers Chartering”): On September 1, 2017 the Company entered into a time charter party with Central Tankers Chartering, a related party affiliated with the family of Evangelos J. Pistiolis, for the vessel M/T Eco Palm Desert delivered from Hyundai in September 2018. The time charter was for a firm period of three years at a daily rate of $14,750 with two optional years at daily rates of $15,250 and $15,750 respectively, at Central Tankers Chartering’s option. The time charter carried a 1.25% address commission payable to Central Tankers Chartering. In April 2019 the Company terminated the a time charter party with Central Tankers Chartering without incurring any penalties and entered into a time charter agreement with Shell Tankers Singapore Private Limited (“Shell”) until September 2020. The time charter with Shell consists of a fixed amount per day plus a 50% profit share for earned rates over the fixed amount.

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

Future minimum operating lease payments:

The Company's future minimum operating lease payments required to be made after June 30, 2019, relating to the bareboat chartered-in vessels M/T Stenaweco Energy and M/T Stenaweco Evolution are as follows:

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States Dollars – except share and per share data, unless otherwise stated)

The discount rate used to calculate the lease liability was 9.09% (same as weighted average), which was the rate inherent at the lease at the lease inception. The weighted average remaining lease term on our chartered-in contracts greater than 12 months is 32.1 months. The cash paid for operating leases with terms greater than 12 months is $3,115 for the six months ended June 30, 2019.

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

Time Charter out contracts:

As of June 30, 2019, 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 Bulk A/S, three vessels (M/T Eco Revolution, M/T Eco Bel Air and M/T ECO Beverly Hills) under time charters with BP Shipping Limited, two vessels (M/T Eco Palm Desert and M/T Eco California) under time charters with Shell Tankers Singapore Private Limited, one vessel (M/T Nord Valiant) under time charter with Dampskibsselskabet Norden A/S, one vessel (M/T Ecofleet) under time charter with Clearlake Shipping Pte Ltd and one vessel (M/T Marina Del Ray) under time charter with Cargill International SA.

Future minimum time-charter receipts, based on the vessels commitments to these non-cancellable time charter contracts, as of June 30, 2019, are as follows:

In arriving at the minimum future charter revenues, an estimated 20 days off-hire time to perform scheduled dry-docking was deducted for vessels scheduled to undergo such dry-docking within their respective time charter period, 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.

Details of the Company’s credit facilities are discussed in Note 9 of the Company’s Condensed Consolidated Financial Statements for the year ended December 31, 2018 and changes in the six months ended June 30, 2019 are discussed below.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States Dollars – except share and per share data, unless otherwise stated)

* M/T Nord Valiant is part of the ABN Facility security parties only in 2018

As at June 30, 2019 the applicable three-month LIBOR ranged from 2.50% to 2.60%.

As of June 30, 2019, the Company was in compliance with all debt covenants with respect to its credit facilities. The fair value of debt outstanding on June 30, 2019 amounted to $273,917 when valuing the Cargill, BoComm and CMBFL Sale and Leasebacks on the basis of the Commercial Interest Reference Rates (“CIRR”s) as applicable on June 30, 2019, which is considered to be a Level 2 item in accordance with the fair value hierarchy.

A. LONG-TERM DEBT

ABN Facility

Tranche C of the ABN Facility was fully prepaid on January 17, 2019 using $18,550 of proceeds from the BoComm Leasing Sale and Leaseback (see below).

Alpha Bank Top-Up Facility

On April 23, 2019, the Company entered into a credit facility with Alpha Bank for $1,500. This facility was subsequently drawn-down and applied towards capital expenditures under the Company’s newbuilding program. The credit facility is repayable in 8 consecutive quarterly installments of $187.5 commencing in July 2019. This facility is secured by way of a third mortgage over M/T Stenaweco Elegance.

The facility principal will be added to the principal balance of the Alpha Bank Facility for all covenant related calculations.

The facility is secured as follows:

The Alpha Bank Top-Up Facility bears interest at LIBOR plus a margin of 4.25%.

As at June 30, 2019, the outstanding balance of the Alpha Bank Top-Up Facility was $1,500.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States Dollars – except share and per share data, unless otherwise stated)

AT Bank Bridge Note

On January 28, 2019, the Company entered into a credit facility with AT Bank for $10,500 for general corporate purposes (the “AT Bank Bridge Facility”). This facility was drawn down in full and the proceeds were used to repay the AT Bank Second Predelivery Facility. The facility was repayable on February 28, 2020. The facility contained restrictions on the Company from providing guarantees other than for financing of new vessels and from paying any dividends or distributing any of its capital or redeeming any of its shares.

Furthermore the facility prohibits the Company to pay any principal, accrued fees, interest or commitment fees relating to the Family Trading Facility. Finally the facility also contains some restrictions in the use of proceeds of future issuances of capital and incurrence of unsecured debt.

The facility is secured as follows:

The facility bears interest at LIBOR plus a margin of 6.00% and a commitment fee of 2.25% per annum is payable quarterly in arrears over the committed and undrawn portion of the facility, starting from the date of signing the commitment letter. On March 22, 2019 the AT Bank Bridge Facility was converted into a note and its maturity was extended to March 31, 2020 with all other terms remaining the same.

As at June 30, 2019, the outstanding balance of the AT Bank Bridge Note is $10,500.

B. SHORT-TERM DEBT

AT Bank Second Predelivery Facility

The AT Bank Second Predelivery Facility was repaid on January 29, 2019 with part of the proceeds from the AT Bank Bridge Note (see above).

Alpha Bank Predelivery Facility

The Alpha Bank Predelivery Facility was repaid on March 13, 2019 with part of the proceeds from the Cargill Sale and Leaseback (see below).

C. LONG-TERM DEBT FROM RELATED PARTIES

Further Amended Family Trading Credit Facility

On March 29, 2019 the Company entered into a stock purchase agreement with Family Trading whereupon the outstanding principal of the Further Amended Family Trading Credit Facility amounting to $24,744 and all accrued interest and fees under the facility amounting to $2,385 were exchanged for 27,129 Series E Shares (defined below) and the facility was terminated (see Note 12). The Company accounted for the termination of the facility as a debt extinguishment and in performing the extinguishment calculation, the Company followed the provisions of ASC 470-20-40-3 which states that if a convertible debt instrument containing an embedded beneficial conversion feature is extinguished before conversion, a portion of the reacquisition price should be allocated to the repurchase of the beneficial conversion feature. Under the current accounting standard ASC 470-50-40-2, the extinguishment of related party debt is considered a capital transaction and accordingly, no gain or loss on extinguishment is recognized in the statement of comprehensive loss but it is recognized as a capital contribution in equity.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States Dollars – except share and per share data, unless otherwise stated)

D. FINANCINGS COMMITTED UNDER SALE AND LEASEBACK AGREEMENTS

Cargill Sale and Leaseback

As at June 30, 2019, the outstanding principal balance under the Cargill Sale and Leaseback is $31,860.

BoComm Leasing Sale and Leaseback

As at June 30, 2019, the outstanding principal balance under the BoComm Sale and Leaseback is $45,223.

CMBFL Sale and Leaseback

On April 5 and May 9, 2019 the Company took delivery of the M/T Eco Bel Air and of the M/T Eco Beverly Hills respectively. On the same dates, agreements were consummated for the sale and leaseback of the vessels, with CMBFL Leasing.

As at June 30, 2019, the outstanding principal balance under the CMBFL Sale and Leaseback is $91,412.

Legal proceedings:

Various claims, suits, and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. As part of the normal course of operations, the Company's customers may disagree on amounts due to the Company under the provision of the contracts which are normally settled through negotiations with the customer. Disputed amounts are normally reflected in revenues at such time as the Company reaches agreement with the customer on the amounts due.

On August 1, 2017, the Company received a subpoena from the U.S. Securities and Exchange Commission (“SEC”) requesting certain documents and information in connection with offerings made by the Company between February 2017 and August 2017. The Company provided the requested information to the SEC in response to that subpoena. On September 26, 2018 and on October 5, 2018 the Company received two additional subpoenas from the SEC requesting certain documents and information in connection with the previous subpoena the Company received on August 1, 2017. The Company provided the requested information to the SEC in response to these subpoenas. The SEC investigation is ongoing and the Company continues to cooperate with the SEC in its investigation. The Company is unable to predict what action, if any, might be taken by the SEC or its staff as a result of this investigation or what impact, if any, the cost of responding to the SEC’s investigation or its ultimate outcome might have on the Company’s financial position, results of operations or liquidity. Hence the Company has not established any provision for losses relating to this matter.

On August 23, 2017, a purported securities class action complaint was filed in the United States District Court for the Eastern District of New York (No. 2:17-cv-04987(JFB)(SIL)) by Christopher Brady on behalf of himself and all others similarly situated against (among other defendants) the Company and two of its executive officers. The complaint is brought on behalf of an alleged class of those who purchased common stock of the Company between January 17, 2017 and August 22, 2017, and alleges that the Company and two of its executive officers violated Sections 9, 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On August 24, 2017, a second purported securities class action complaint was filed in the same court against the same defendants (No. 2:17-cv-05016 (JFB)(SIL)) which makes similar allegations and purports to allege violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. By order dated July 20, 2018, the court consolidated the two actions under docket no. 2:17-cv-04987 and appointed lead plaintiffs for the consolidated action. On September 18, 2018, the plaintiffs filed a consolidated amended complaint. The amended complaint purports to be brought on behalf of shareholders who purchased the common stock of the Company between November 23, 2016 and April 3, 2018, makes allegations similar to those made in the original complaints, seeks similar relief as the original actions, and alleges that some or all the defendants violated sections 9, 10(b), 20(a), and/or 20A of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. All defendants filed motions to dismiss the amended complaint on March 25, 2019. Plaintiffs filed a consolidated opposition to Defendants’ motions to dismiss on May 24, 2019.  Defendants filed replies in further support of the motions to dismiss on June 28, 2019. By order dated August 3, 2019, the court dismissed the case with prejudice. Plaintiffs filed a notice of appeal on August 26, 2019. The Company and its management believe that the allegations in the complaints are without merit and plan to vigorously defend themselves against the allegations. By letter dated January 2, 2019, certain co-defendants in the class action litigation (Kalani Investments Ltd. (“Kalani”), Murchinson Ltd. and Marc Bistricer) requested that the Company indemnify and hold them harmless against all losses, including reasonable costs of defense, arising from the litigation, pursuant to the provisions of the Common Stock Purchase Agreement between the Company and Kalani. The Company acknowledged receipt of this indemnification request by letter dated February 20, 2019, and reserved all of its rights.

Other than the cases mentioned above, the Company is not a party to any material litigation where claims or counterclaims have been filed against the Company other than routine legal proceedings incidental to its business.